tv Bloomberg Markets Americas Bloomberg December 14, 2018 1:30pm-3:30pm EST
he said it was an honor to be considered for the job but told president trump that the job is not right for him right now. christie had reportedly been the president's top choice. prime minister may giving two messages at the european union summit, first that the e.u. has made a legal process that the so-called northern ireland backstop won't be and e.u. concessions won't be enough to satisfy parliament and calling on serious talks to begin soon. in sweden, a second crucial vote is lost putting that country closer to a snap vote trying to find a way out of impasse. it was rejected as the four-party central right opposition. on the sixth anniversary of the sandy hook elementary school
massacre, students were sent home earlier due to a bomb threat. that mass murder back on 20 mber 14, 2012 killed first graders and six educators. educators. a new building has been built at the same site. global news 2 hours a day followed by more than 2,700 analysts in more than 120 countries. welcome to "bloomberg markets: americas." >> here are the top stories we are following from around the world. red friday.
volatility continues to grip as u.s. stocks facing risky gains. >> china's trades and takes more steps on cars and corn. wild year. we'll explore the year's biggest disappointments. the major averages. there have been days of massive swings, although the close tend not to be the previous day close and we are seeing the pattern play out. and wait until the comes true. the dow went down 1.8%. johnson & johnson taking a beating and nasdaq is down 1.6. dollar index is strong. the euro and the british pound experiencing some weakness today. >> this is the time of year where we look at the forecasts
the way the margets are going. take a look inside your terminal here and what you are looking at that, the extent to which stocks have not kept up with strategist's expectations and u.s. stocks falling quite short. now take a look at another read of expectations for the year ahead. this is readers of the plog and the expectation is for e.p.s. estimates. but you can see there s&p estimates kind of stalling in 2019 and seeing a 5% gain seen down the road for 2019. but if we go by what we saw this past year, the strategists are not always right. there is an awful lot of uncertainty and not all of it has to deal with the individual companies. it is very focused on politics and geo politics and yet more
drama from inside the white house and outside this week between cohen and now who will be chief of staff to president trump. we are learning that it is not likely to be governor christie. lots of unknowns with the markets to wrestle with. >> we are getting it trickling out, the white house still has a trade war. china taking steps to diffuse steps on corn and on cars as well. u.s. economic policy coverage in washington joins us with the latest. we just had a conference from secretary mattis and mike pompeo. we already something to work on, sarah. what does it mean going forward? is it going to be a game changer? >> we have a few gestures from china that have come out in recent days, soybean purchases from the u.s., they are going to
try to restart those and potential roll back on u.s. cars. these were retaliation, that china had put in place after the u.s. put tariffs on chinese goods starting in july. july. by most measures, this probably won't be seen as giving huge concessions. this is going back to square one where they were potentially at the start of the year. what the trump administration is looking for wider structural changes to the company. the sides are still talking, this isn't the grand deal that the trump administration will hand to americans and say, look what we got from china. >> there are reasons for optimism after the g-20 in argentina which is sige this issue around the justice department, the canadian department and how much will that factor in here.
is it possible when dealing with china to keep these two things separate? >> the visit here today is how this is a political issue even though at a press conference, they are trying to keep it a political. the fact that china has detained these two canadians and the prime minister is saying this is the reaction to the arrest of the c.f.o. it's very much in the political realm. canada is caught in the trade war between the u.s. and china which shows the ramifications can't be contained to the two countries. it quickly spirals into a much bigger issue and we are starting to see that playout and the extradition could take years to get her in the u.s. trump says he might stop that to get a trade deal.
you can see where an issue will be at the forefront of this trade war for the months to come. >> i want to point out there is a news conference going on right now. t is the same news conference. and they are still talking about some political matters and trade matters. who holds the cards now? >> in the u.s.-china trade war, the trump administration really still is the one that has a few more chips at the table right now. obviously the tariffs, the escalation of tariffs that were supposed to take effect on january 1, the rising of the rate from from chinese goods that is off the table until march 1. i think they won't hesitate to make an escalation to put these tariffs into place if china doesn't give them what they want
to see. from that point of view, the u.s. does hold the cards but the china is seeing a slowing of its economy and might have reasons to make a deal itself. so we'll have to see how it plays out. >> that press conference going on. the subject of the c.f.o. came up. and mike pompeo says the detention of two canadians in china unacceptable. that makes a first formal global response. but china is not linking the two that the detentions are linked. we are watching the u.s. markets here. negative session on the day. some big names moving lower including johnson & johnson. but across the board, you are seeing weakness on the broader
s&p 500. but bowing is planning to open a plant in china, also trading weak. so, jim, let's talk about what markets need to absorb. it would be lovely and perfect if you could look at the fundamentals, but it hasn't been that kind of market for some time. what do you tell people what they should be doing? >> we have lower to go. i believe that the problem the markets have, the central problem is that we are worried at the same time about weak growth and maybe continued overheat or pressures or inflation. and typically, we are worried about one or the other. earlier, we were worried about the second coming of the great depression and more recently, this last year or so, we have been dealing with overheat pressures, the fed tightening,
but in the last couple of months, we have a lot of individuals worrying about recession and if the fed will continue to raise rates. that combination narrows the path tore the stock market. the only solution here is to go lower and scare investors, the fed enough that they give up on their fears of re-inflation and focus on fears of recession. if we don't have recession, perhaps we could have one more run. but i think we will have to go lower and create more fear before we get to that point. today, we were looking at the 2581 low on the s&p earlier this year and that could come into focus today or next week and see if that can hold. >> what does that advice mean then?
>> i think what you want to do is stay and risk assets or be in the more defensive areas. i would diversify more broadly. we have done some of this. sector-wise, they have done well as of late but the utilities and staples and farma, low volatility. stay away from economic sensitivity and away from the popular fan names and i would want to do some things. cash would be good in the portfolio. the fed will give you 2.5% next week and take advantage-f there is a deeper correction or broader panic you have liquidity to go after other people's panic cells. commodities. maybe like the energy stocks that offer dividend yields.
i would move away from the united states. i think the united states is kind of the last one yet to collapse. i think emerging markets have been outperforming while the u.s. has suffered a 10% market correction. and i think i would be more inclined towards those international marningts. hedge fund-like approaches, you could consider for part of your portfolio. you may give up upside in a rally but won't come down as much overall. i would call it defensive diversity and then if we do collapse and don't think there won't be a recession, you could be aggressive one last time. >> you mentioned the 2581 low. the market could hit that again but then hit higher? >> i think we are potential testing, we are going to fail it
and probably will go lower and if we break that low, then i think you are going to see more of a panic, this calm sort of correction that we have been through and people are calling it a buying opportunity. you will hear a lot of calls for bear markets and people moving up their recession calls. and that environment i think may be the end. but if we avoid a recession, that could be one last great buying opportunity for one last run in this bull market. the real decision will come at that point, is this correction like 1987, not in magnitude but in character, where you had a correction and scary period and then two years of the bull left or is this 2007 where this is the start of the bear market? i would lean more towards the former, but we'll have to see. we will break that low. >> we are seeing some into gold.
and that's a factor of many things going on. would you recommend those? >> i like gold. i really do for a couple of reasons. it's different from commodities. gold does well if the overheat pressures remain but it does well if panic emerges. i think another big factor that you bring up that the dollar is just way too strong. it is becoming a major weight on u.s. economic growth and if the u.s. economy slows which i think it will probably under 2%. the dollar is going to come down and put a bid into gold and commodity prices. >> i want you to share some of the art that you do. if we see that big break on the downside and not headed into a
recession and presents a buying opportunity, what makes you say this is a bigger downturn. 1987, not e metrics, 2007? >> that's the big call and i'm not superconfident about that. we just had a weird recovery and it could end in a weird recession. the traditional things surrounding are not there. we have a strong consumer balance sheet with big gain in house hold net worts and low debt and high liquidity. the corporate sector has pockets but large debt service is low and liquidity is strong. i don't see the private sector balance sheets that would suggest recession and we still have a rising leading economic indicator. there are not the pogget of excessively bad behavior that
you normally see 10 years into an economic recovery that require liquidation. maybe private equity is too popular but there isn't the excess that requires recession. and interest rates are not up that much. the real fed's rate is positive. so i think the odds are we will get scared about recession and we are going to convince the vast majority and have a revival and maybe the recovery goes on for a couple of more years. that's my guess. >> thanks for your time. coming up, turned out to be a big day. 2018 -- ♪
> this is bloomberg markets. > investors are smiling with the closing of 2018. this as other big firms folded and some remain pending. let's bring in ed. and 43,000 deals but how many were massive deals and what did 2018 end up like? big is kind of a mixed deals going through. fox, disney and collins and
united technologies and large things that people expected to close. that said, there is quite a lot of pain and has come in the form of unprecedented action. hat happened with qualcomm where you had the chinaes equivalent blocking those two deals. it was a quite a tight spread. and the other is much smaller is delaware calling for change. that was the first time delaware ever blocked a deal. that was unexpected and saw pain invested in that stock as well. >> another deal we could point to that has gone wrong, hydro one looking to acquire that and interference by the government in canada saying that a regulatoryor wouldn't approve it.
are we seeing regulatory interference? >> it is a scene that has come into play not in places where you would expect like in the u.s. where we have an aggressive administration. we are seeing it in china, germany, u.k., they have all interseated in deals. and now canada. and there is globalization of a lot of industries and there is an increasing sense that china and the extent to which it is invading in other areas of technologies that governments, companies are concerned about it. so you are seeing more deals blocked on that basis. but it's hard to say it's an aspect of trade war or reflective of those tensions or something longer term that will become a standard part of the market. >> more so in europe where ansactions were down 11.4%
versus north america where they were up 11%. do you have concerns? >> i think europe is always playing a different step. and u.s. traditionally leads the world in terms of pure volume and the deals. we will see more deals in 2019. in the u.k., once it pains a clearer picture, you will see a pickup in assets. but, look, what should they thrive on is complexity. where there is complexity, there is a wider investment. hey are not good at investing. alpha with te the the albatross. >> final verdict on the merger?
>> i think if you are in the wrong situation to say you got plone up, that said, the stock played out. >> thanks so much. and quick look at the markets, we are seeing continued weakness across the board like dow industrial component and johnson & johnson down 9%. but teches and financials across the board, we are seeing weakness in these markets today. this is bloomberg. ♪
very high end ferrari compare. the bottom line is classic cars overall. karin investigators may want to look at this. ferrari is the place to be. >> some other places. this is an interesting story. space is a great place to go and investing. . d marilyn monroe markets are falling off, down 1.8% for the dow. 1.6% for the s&p. this is bloomberg. ♪
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michael cohen telling abc news trump was concerned about how this would affect the election. cohen adds "no one should believe the president's denials." >> the people of united states themerica, the people of world do not believe what he is saying. the man does not tell the truth and it is sad that i should take responsibility for his dirty deeds. the white house is responding, blasting the media for taking michael cohen seriously and "giving credence to a convicted criminal." president emmanuel macron says tohorities are working identify how the suspect in the christmas market attack was not stopped before he committed the violent attack. he had been on a french intelligence watchlist for extremism before he killed four thele and wounded others in attack. police failed to arrest him earlier in the day, lebron telling reporters in brussels that france should "draw from the consequences of any police failures."
are onfrance, police guard as thousands of protesters take to the streets ahead of what authorities expect to be a fit straight weekend of violent protests there. last weekend, police arresting more than 1000 people in the french capital with 130 others suffering injuries. president of chronic knowledge and he is partly responsible for the anger behind the antigovernment protest. he has announced a series of measures aimed of improving the spending power of french workers. back in the u.s., retail sales are doing better than first expected. all sales of over of more than 2% in september. rises at the pump offset sales from holiday shopping. retail sales were up one half percent. atbal news, 24 hours a day tictoc on twitter, powered by more than 2700 journalists and analysts in over 2100 coun -- 120 countries.
this is bloomberg. caroline: it's 2:00 p.m. in new york, 7:00 p.m. in london. live from bloomberg's european headquarters, i'm caroline hyde. scarlet: and i'm scarlet fu. caroline: volatility continues to grip markets. worries about global growth ring an end to a rocky week. and investors looking ahead to next week's fed decision as economists dial back the number of fed moves in the months ahead. 's legal lows trump from his past threaten to bring turmoil to the white house. all that and more, coming up. scarlet: first we need to take a look at the markets. two hours to go before the end of trade and all three indexes turning negative for the week. we are just off our session lows as well. the dow was the worst performer,
off one .9%. you can see a couple of big cap names, including apple, declining, at a seven-month low today as analysts cut iphone sales estimates. 500 -- s&p caroline: and the s&p already below one of the lowest levels. -- cosco, big moves as well. we broke the numbers yesterday and it seems as though the market is seriously underwhelmed by it. scarlet: writing pressures due to cost is the story there. you're getting a bit for safe havens like longer data treasuries and dlc as well as the yen. let's take a dive into the action with our markets reporters. taylor, what are you watching? you just said we are going into safe haven assets, putting pressure on the leveraged loan market, which is what i talk about -- talked about today. this is taking the level back to the lowest since october 2016.
a lot of the volatility is putting pressure on a lot of these acids ever since the peak in october 3. this is also after mutual funds this week recorded their biggest outflows ever. billion, and some etf as well. what that means is it is translating clearly into underperformance recently, i have charting that i have a chart on the leveraged loan market. is global high-yield market only off about 1.5% over the last few months. just as concerns ramp up about global growth and transition into some safe haven assets, that is putting pressure on some of the riskier assets such as the leveraged loans. romaine? huawei i want -- romaine: i want to go into the hospital stocks. the set up are 2019 for a lot of hospital stocks will be tough given the elevated valuations. it downgraded universal health and reiterated the cautious view
for community health as well. hda falling as much as 7% today, universal health down most since july 2017, and this is significant because this is the first major downgrade we have seen for the health care sector and specifically the hospital stocks. this was the right spot for most of the year. it outperformed the s&p 500 for the first time since 2014, when they got the boot from the affordable care act. if you look at the hospitals index in the broader health or space in general, up about 24% since november, outperforming the s&p by 19 percentage points and even above the other else be -- the other s&p health care indices. it has dropped about 24% but is still up on the year. it is fading fast and a lot of this has to do with concerns that the ability to get new customers in the door as well as the pricing may have to deal with in regards to medicare and other payment systems is not going to be as favorable as it was in the past.
and i want -- lisa: and i want to take a big look at the analyst that heading into 2019. if you take a look at economic data, it looks like the u.s. is a little bit brighter. if you look at u.s. economic surprise indexes, coming to us i citi, almost flat. not to positive or negative. analysts are getting it right. but for the board and look at what is going on in europe. not so great. there has been a sharp drop-off in the expectations missing. there have been increase expectations missing the actual economic data coming out of the eurozone. we got that this week as well with the slowest growth in the euro region since 2014. it speaks to the angst in the world and frankly, one of the least determined that heading into next year will be u.s. trade continue to be triumphant, or will we see the extra yield and returns move overseas to
europe and beyond? caroline? caroline: french pmi looking pretty brutal. a great breakdown from lisa and our marketing. thank you. and the u.s. is looking to diffuse trade tensions come but one lawmaker says much more need to be done -- needs to be done to level the playing field. >> we are looking for long-term solutions from china. they have made a few small gestures but we need long-term solutions, and we need access to their markets like they have access to hours. we want free and reciprocal trade policies, but you are right. this is a huge issue back home for us. caroline: we are joined now by the managing director at moody's directors service, and someone who has been commenting on the trade tensions between u.s. and china. not too optimistic longer-term for what china can do to alleviate the concerns at home. i'm interested in some of the data we are hearing about around the world. how much, trump says, is to be
blamed on his tariffs policies? of the data you have seen in china is related to tariffs, but the slowdown has been a long time coming, since 2016. we have gotten used to a world where growth was accelerating in momentum everywhere you looked, and the growth is now peaking for a variety of reasons. part of it is interest rate increases, part of it is fiscal stimulus waning in the u.s., and then there are the trade tariffs. that is largely in china, i think. ofrlet: this is a chart global manufacturing pmi, the blue line is the eurozone and there is the big leg lower. china and yellow, struggling, just above the 50 line, which marks growth versus contraction. the u.s. still holding on. caroline: the u.s. really continuing to outperform. but will the u.s. continue to outperform if we don't see any alleviation to the tariffs? it hurts at home just as much as it does in china. >> indeed.
we would like to see the u.s. continue to outperform, but not by the gap we have been used to in the past. it will slow down, and part of the slowdown will be because of tariffs. you're seeing this affect manufacturing, the steel and aluminum tariffs that have been in place for a long time. you saw the agricultural sector now partly alleviated with the news we have on soybeans and even corn, but you will see the sector -- not just on output, but incomes that feed into output as well. other areas like consumer goods, we import a lot into the u.s. from china. if the tariffs policy stays in place, it will have an effect not just on our conception, sentiments, things like that, but also weigh on growth in the future. scarlet: what type of economic slowdown is being priced in right now in equities versus your fixed income world? i think the market is well aware the fed has been raising rates for some time. this year was exceptional for the u.s.. either you saw growth that about
3% for the year as a whole, and i think retail sellers are also expecting growth to slow down, so i think the migrated slightly higher, two point 5% the next year. there is an awareness that growth will slow down. the risk is that some people are talking about recession, which we do not see coming in the u.s. as of now. scarlet: what would happen to happen -- what would have to happen for there to be a stronger conviction in a recession scenario? hire effect on consumption and investments would have to be much stronger than we are seeing at this point. this is also the hardest to protect, financial volatility. charts were up in the leveraged loan markets, and we know that corporate leverage is very high in the u.s. at this point. if it was something that affected that market and had a contagion effect on the investment scenario as a whole, that would be a risk. it stands, do you think there is a concern weighing on credit in particular where we might he some falling
angels, and in particular a spiral going on in the high-yield sector? is that overdone, do you think? >> there are two different parts to it. one thing is true, the proportion of companies that we rate are now rated high-yield or higher than they used to be from the share of the total corporate debt market. there are more than the number of issuers rated high-yield than before. at the same time, in terms of standards, leverage has gone up but so have profits. if you look at interest coverage -- not just affected by the revenues, but the interest rates prevailing, the metrics are just as strong as they were in the past. sheth, thank you for joining us. apple is on track to close at its lowest since april. a warning on iphone sales. calling for at cut to executive bonuses at citi.
our top: time for calls, let's look at some of the big movers on the back of analyst recommendations. first up we are looking at apple, the price target cut to $280 a share from $290. this amid the miss on iphone sales. we are down 2.5%. procter & gamble up, the price raised toe from -- $161 per share. of only about 1/10 of 1%.
and cisco downgraded to neutral from buy. analysts cited the company shares are trading at the highest multiple since the ssio -- recession. scarlet: president trump meantime cannot seem to out run his past. his former adviser an attorney michael cohen taking responsibility for the crimes, but also saying the president knows the truth. bloomberg's investigative legal reporter greg farrell joins us now. when we talk about what the president is dealing with your, there is a lot of development. for those who have not followed every single storyline, what is the most worrisome for the white house? greg: confirmation of evidence that came out in new york, that these payments orchestrated by michael cohen and the national enquirer publisher to keep women silent were not just a personal matter involving trump wanting to keep this stuff away from his wife, it was a plan hatched with trump at the table within a
month of his campaign being launched. this will undercut any claim that this is not a campaign finance violation. so you have people now saying well, maybe it is a meyer crime -- a minor crime, not a major crime. it some big knowledge meant by some people, like rudy giuliani, this can be interpreted only as a crime. caroline: we have heard president trump come out swinging, saying this is just to embarrass him. the mueller investigation as a witchhunt, cannot be put to bed? greg: right. we are a year and a half in and we have a substantial amount of evidence, including what michael cohen delivered, that there were negotiations, conversations about a proposed moscow tower well into the trump presidential campaign. we have not specific revelations from michael flynn, but the fact that general flynn was very helpful with the in russia --
with the russian investigation. it is not a question of whether or not there is something there, i think mueller knows what he is looking for. whether orhing, and not something is there, he is on his road to determining it. scarlet: he has a direction end of half. what does this say about how far along bob mueller is in wrapping up his probe? the white house has been calling up this probe to be wrapped quickly. do we have any sense of timing? are we in the first third of the game or the middle third of the game? greg: two ways of looking at it -- wrapping up means totally shutting down, wrapping up means you have done the investigation and are putting together the case. we are in the latter stage, and that can take months. drain thet want to ocean and look under every rock. he has identify the areas he needs to focus on. just the fact he allowed michael flynn to be sentenced and the fact that cohen himself took a sentence means they have extracted what they think is more than enough value from these guys to go ahead with the case as he sees it. caroline: greg, always good to
get your perspective and show us the wood for the trees. let's have a look at all things markets, because we are once again heading towards a brutal and to the week, down 1.6% on the s&p 500, the lowest since april, all main 11 interesting -- industries on the lows. the dollar's higher against most of their currencies. check out what is happening to the pound. down .5%, sliding off the european leaders. theresa may is pleased to help something through pilot on brexit. inrlet: a lot of red, both the u.s. and overseas. for the u.s., these losses are the worst in five weeks. a clear trend here. caroline: from new york, this is bloomberg. ♪ is bloomberg. ♪
caroline: it has been a rough year for banking stocks, to say the least. the us and the about hundred banking index falling 16%. the bloomberg markets team talked about the reasons for the downturn with senior bank analyst mark mayo -- mike mayo. he says now is the time to invest through the pain. when thanks will suffer the yield curve flattens is the perception, so we hear yield curve flattening, don't open banks. we also hear it is late the cycle, banks do not do well late in the cycle, therefore sell banks. the reason that is wrong is due to the three c's. is first, cost control better than it has ever been before for u.s. banks, especially over the next two years. so a strong or weak top line, we grow costs below revenue. the second is credit quality, which we think remains pretty good over the next year or so. the third would be capital return, the dividend yield from buybacks are at record levels.
at least the large-cap banks can buy back stock at cheaper valuation. earnings should be fine. offact, during this period underperformance, do you know what has happened to the consensus bank earnings forecast for the past year? it has gone up and for the next year, it has gone up. so the bank stock prices have become disconnected from the bank fundamentals, and eventually stock prices follow earnings. 25---ne: city down bonnie: that he down 31% year to date, only jpmorgan has managed to stay in the single figure decline. what do investors have against investing, particularly given everything you are saying. bee: we think this will similar to 1994 and 1995. in 1990 four, sentiment was incredibly negative and the flattens -- the yield curve flattened and
everyone ran for the hills. 1995, the fed was done raising interest rates and you had 1995 and the next few years, that if it's of cost -- benefits of cost control and decent credit quality. so even if bundles will rule out here. vonnie: there is the potential that the 1mdb scandal is weighing on sentiments. and city does need to rein this and. how might it, given the specifics? mike: for the bank industry as a whole, the theme is simple. recession, in a increases. then the stocks will be even cheaper ahead. bank stocks are trading close to recession levels, even without a recession. when it comes to citigroup, some companies specific concerns there. the cfo presented last week and missthat citigroup will its efficiency target by nine basis points. we do not think they should miss of a basisillionth
point. that equates to $70 million. the need to reduce executive bonus compensation, and they should do it. the five top executives at citigroup, do you do how much their bonus was last year? $70 million. no bonus for the top five executives of citigroup if they need to meet their efficiency target. to do it other ways when it equates to 1/5 of one percentage point. mike: -- vonnie: but the top five it investment bankers, not the top 25 across-the-board? mike: you can't take it further down, but the days of making shareholders at the group suffer to the benefit of executives at citigroup are over. look at the stock price for the past 10 years. you know i have been on your show and been very visible about citigroup for the past decade.
time is up. if it has to be taken out of compensation for top affect the -- a top executive, so be it. and the back from institutional investors, the largest owners of citigroup, have been universally supportive of this view. scarlet: that was mike mayo, senior bank analyst from wells fargo security speaking on bloomberg. a quick check on the latest business flash headlines. by the housing slowdown are signs of a housing slowdown are creeping into the metro new york market. home buyers are pulling back after getting slammed from costly hits, including price --,s, caps on property tax and mortgage rates. some homeowners say it is a great time for buyers. and lvmh agreed to by the operator of high-end hotels and new york's stay in 21 club. the owner of louis vuitton will pay $2.6 million in cash for belmont. and miners in canada's frozen
north have unearthed the biggest diamond ever found in north america. almost is 552 carrots, three times the size of the next largest found in canada. this was found due to eight joint venture between rio tinto and dominion diamond. i don't know, i still prefer the white diamond. aroline: if you can just find chicken egg sized white one, that would go much better with us. it is amazing, and all the credit to canada for it. there you go. and on pace for another decline in stocks for the week. this is bloomberg. ♪ or the week. this is bloomberg. ♪ place, the xfinity xfi gateway.
and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. >> let's get the first word right now. here is what is happening. chris christie has taken himself out of the running to be white house chief of staff. in a statement, the former new jersey governor is saying he is
honored to have been considered, but is informing president trump this is not the right time for him or his family to take on the drop -- take on the job. christie had reportedly been the top pick to replace retiring general john kelly. theresa may launching a rescue forhin -- rescue mission her brexit deal. eu leaders meeting in brussels showing little interest in resolving maze break the impasse for her, saying the u.k. parliament must make up its mind first. a group of countries appealing for what it calls an ambitious outcome at the un's climate talks that would pave the way to curb global warming and protect the world's most vulnerable nations. ministers from 40 countries are making that appeal during talks in poland today. they want delegates to support a scientific report calling for keeping global warming at no more than 2.7 degrees fahrenheit during this century. ease making efforts to trade tensions with the u.s..
beijing will remove the retaliatory 25% duty on american-made cars for three months. the next move may come from the white house. the trump administration is expected to announce today it is delaying tariffs that were due on new year's day. bloomberg has learned the chinese will resume buying u.s. court and have once agreed -- once again agreed to buy american soybeans. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. caroline: from bloomberg's world had in new york, this is bloomberg markets: the close. i'm caroline hyde. scarlet: i'm scarlet fu. just as it happens, there is a lot of red.
someine: risk off and concerns in particular about growth, whether it is in china or europe, for some of the economic data coming out of the u.s. is better than expected, now down only a percentage point. the s&p 500, a similar move over the course of the week. we are overall once again seeing that's the s&p 500, we have not seen at this low since april. every single industry group is currently lower. for more, let's get the viewpoint of michael o'rourke, down by one percentage point on the week, two percentage points on the day. are we getting the capitulation? michael: the moves like in johnson and johnson today, where people are throwing away blue-chip companies that are somewhat old stories. you are seeing some panic set in, but in the same respect you are seeing something like procter and gamble. i do not think we are there yet,
but people are starting to get a little more worried out there. scarlet: what amazes me though is that the same data points, whether it is about companies or economic data from overseas, three months ago or four months ago would not have really shocked investors at all. they would have continued hitting u.s. stocks higher. the day, they are all inclined to take a glass half-empty kind of approach. sentiment has changed completely. talk about how the divergence trade has turned into the convergence trade. michael: a lot of this has to do ofh the massive amount liquidity central banks have pumped into the global economy in the past decade, then you have something like the ecb today saying ok, we are ending our asset purchase program. expected, the pendulum shifting the other way with balance sheet normalization all that liquidity served as a lubricant to the
global financial market and then you have things popping up like trade wars, which are new it isons, and again harder for the markets to digest and work through this because they do not have that extra throughy to power them the bumps in the road and now investors have to make hard decisions. caroline: how important is the fed next week on the back of this? know, it will probably be the biggest event next week as we go into the holiday. the expectation that they will hike 25 basis points. in the end i think this will be viewed as a positive, because everyone expects the fed to pause at that point and take a fresh look and let the data come in early next year, and also see how far we advanced in these trade negotiations with china. i think it is actually going to be -- you might see a relief rally coming out of the fed rate hike. see how it will plays out.
michael o'rourke, thank you so much for giving us your perspective. we know investors of all strengths are perplexed by a convergence of forces. rising rates, trade wars, and global populism as well. but in the rarefied world of ultra high net worth individuals, diversification does not mean passive index funds or a 60-40 allocation. here with more is bloomberg reporter suzanne woolley. art, and magic mushrooms as possible investments. let's start with cars? suzanne: ferraris specifically. ferraris have over performed the s&p 500 over the past decade as well as a broader array of classic cars. one of them sold this past million,r about $48.4 a car owned by a tech executive. this is one of only two dante gto. a rare 1952 ferraris are like the gold standard of the car market.
caroline: and if you want to own one of these exclusive cars, you have to earn it. suzanne: it was the dealers that had to dole out the cars to their favorite client, but ferrari is saying this new car, you have to be part of their motorsports program, raising to buy it. caroline: so like a loyalty. scarlet: you have to start that investment pretty early and make your connections. talk about some investments that could be grown? psychedelics, magic mushrooms? suzanne: that is one of the more curious one. -- a are some investments company in the u.k. called -- pathways, with large clinical trials out now that are using traditional therapies with a compound of the active ingredient in magic mushrooms to treat people with treatment
resistant depression, addiction, eating disorders. is rare to find a for-profit company doing that, but there has been a real resurgence of scientific research into using hallucinogens for legitimate purposes, and it is still not legal here -- scarlet: not mainstream at all but still out there. and the founders may be founded in their lives, and are looking to synthetic so-called magic mushrooms. let's switch gears and talk about -- not only is crypto tax software a startup that people might be interested in, but warehousing. talk to us about good old-fashioned warehousing. suzanne: right? it proved to be a play on amazon for one wealthy investor. he owns warehouses in northern 53% of sellers on amazon's platform are third-party vendors.
guess where they are? many of them are in his buildings in northern new jersey. now that amazon will have a satellite office in long island city, his warehouses are already increasing in value. caroline: that is a very smart alternative investment. how long has he owned it? did he get this ages ago? he started buying four years ago and he said the values have gone up significantly since then. scarlet: there are also a slew of other investments as well. art investment, the list goes on. it is a pretty incredible read. suzanne: it is amazing where you can put your money if you have enough money. thoughtful, intuitive, and a little more alternative. well forlley, covering bloomberg news. , we will be looking at johnson and johnson. defendls lining up to them. that's next, this is bloomberg.
for today's bond update. lisa: there has been a lot of volatility in the equity markets have well of the credit markets. one theme i am hearing across the board is like civility from active managers. the either want cash or some way to get in and out of markets quickly. a lot of them are turning to derivatives to trade broader
credit markets instead of cash bonds. take a look at credit derivative indices. this year you can see that volumes pop up during these periods of value to the. -- volatility. this is tied to the broader reddit index. the orange line is the eye tracks europe. it has been picking up both in october and november as credit sold off. the interesting thing here is that more investors turned to credit default swaps, fewer investors are turning to cash bonds and trading volume in high-yield debt so far this year in the united states has fallen to the lowest level in's 2014. they have been steadily falling. this has to do with the fact that markets have shrunk a little bit, but also has to do with the fact that a lot of trading has come around -- new issuances and debt sales, and there has not been as many. as a result, trading has fall and down and there are potholes,
so you are seeing prices of particular bonds falling dramatically. as we head into a more volatile year, liquidity is on the forefront of a lot of people's minds. it has faded away over the past years. what's ahead at the forefront, they are turning increasingly to credit default indices if they want better returns. caroline: lisa, thank you. time for our stock of the hour. from credit to stocks, johnson & johnson facing the most severe drop in over 15 years. this comes on reports that the company has known for decades that is best this was present in its baby powder. for more, we are joined by romaine bostick. first of all, is this new? there have always been legal issues swirling around johnson and johnson to a certain extent, but this is hard-hitting. this document that
reuters claims to have, it has popped up in a variety of lawn suits -- losses. johnson & johnson is saying their big powder is safe, asbestos free, they have all of to prove it, and they called the reuters report " one-sided, false, and inflammatory." but there is a broader issue here that this is not going away. gettinge been sued over this for years. they had a huge judgment against them in st. louis, which they are appealing, which was about $4.7 billion, and a couple other judgments where they have lost but are also appealing. this has a potential to become a bigger liability should gain life, no matter what the details. scarlet: and legal liability is really the concern here. what our analyst saying? if this is a known saying, this was essentially a legal problem for them, how are they squaring
this? have a lot of analysts defending the stoxx. the narrative is the same -- either we already knew this, or even if people did not know about it, the liabilities will not be as the veer is the market is pricing in right now. this is the worst drop we have seen in the stock in quite some time. it is a huge component of the s&p, the fifth highest waiting in the s&p, ninth highest weighted in the dow. i want to point out that one whilet did point out that he does expect the litigation and potential liability to be lower than he expects, he think this will be an overhang on the stock. public perception and investor perception do not match up with what may be the reality in johnson & johnson is. and as michael a record saying, in this market it is unnerving when you see this much movement on perhaps what is deemed old news. this could be a sign of sentiment out there in general. romaine: and keep in mind this
was bringing closure to this. the idea that the number of lawsuits will be rolled down, there would be some degree of settlement. the idea with the new documents are public revelation of these documents could add more fuel to the fire and could treat you -- trigger new lawsuits, which is where you are seeing a lot of the nervousness. scarlet: and health care is the one of -- is one of the best-performing sectors on the year, so this might be an excuse to pull back of it. caroline: a great perspective on that particular stock. is thele, health care worst performing industry group on the s&p 500 today, up by -- off by 1.95%. money is moving into the havens, into the yen and the pound up by .5% now as it looks like the european leaders are not going to throw theresa may a bone to get her deal through parliament.
caroline: let's check in on the falling markets today because it is a down day to finish off the week. maybe getting a bit risk-averse into the weekend, the nasdaq off by more than two percentage points. tech seems to be leading us lower in terms of benchmarks and industry groups. johnson & johnson also lagging, but this is an all world selloff. the all world index off by 1.6%, so clearly risk aversion hitting. france's looking ugly, china looking pretty bad as well, the euro down by .5%. caroline: what about diversification? scarlet: -- scarlet: what about diversification? caroline: not there anymore. along ends to a licensing battle between apple and qualcomm.
this underscores the importance of the chinese market and also points out qualcomm's crucial role as a technology provider to chinese companies such as huawei xiaoming. trip -- two traders at barclays were dismissed several years ago after running up $966 million in losses. announcedl motors last month that the layoff might not be as bad as originally projected. 2700 jobaker says limitations will be saved by adding jobs at other u.s. factories. gmsident trump has hammered over the closures. that is your business flash update. talking as you are just about, economic data and it is global. not just the selloff in the
u.s., but what has been happening as the trading day began in asia. the red vertical line shows when asia opened for trading, and then you move on to the green vertical line that has been europe open for trading and a big leg lower. here is the big one, when the u.s. opened for trading. it has been down ever since. strategist macro joins us now to get a tour around the world and the data points out of asia and europe are certainly helping set the tone. yours and yours some or. the bad today out of china is worse than you could think, aftere chinese officials, the record low retail sales number, stated that this data has not been impacted by the trade wars with the united states. so what has been going on for the past six months is not in this data. what we saw as a run-up in chinese data, exporters and importers getting ahead of the terrorists and now this number -- ahead of the tariffs and now this number is showing the
selloff with the trade war yet to impact china's data. caroline: but we are looking at china lifting tariffs on autos, buying more corn. do you think this is a mark of desperation to a certain extent? >> i think it is a bit of a capitulation, and trump is tweeting and saying see, our trade wars hurt the economy, which not yet but might be likely. trying to be china get ahead of its of it. they want to make a trade deal, but from sources i talked to in washington, trump is also desperate to make a trade deal. both sides want to come together, but the question is will they? scarlet: all three indexes are now down by greater than 2%. we only have about an hour and seven minutes to go before the close. this is a sign of people not wanting to be long before the weekend, because anything can happen, or long perhaps during a critical week next week when the fed meats. meats, most of
the folks i talked to think the fed will hike despite what is going on because data has been strong. the potential is there for a government shutdown on friday, and this one could be longer. most of the government will be funded. they have passed some of those laws? >> it is a sentiment effect that will weigh on markets and what was hoped for was the infrastructure spending that would come together with losey and trump in next year is not going to happen right now. they are fighting like adsense dogs and the overall picture of 2019 is starting to fall apart -- they are fighting like cats and dogs and the overall picture of 2019 is starting to fall apart. today, we are rising a little bit. how are you seeing people he dge? is it is getting out on the sidelines and going into cash? >> from what i have seen today, all alerts are in the euro-dollar futures, the 5-year
note into 10-year note. it looks like a lot of people are moving into bills and bonds and out of equities. aery once in a while there is big volume move, and they are all driven from the buy side. so these are buyers taking offers and trading futures. trading isw much there going to be over the next two weeks? we are at the end of the year, next week is critical with the fed, and after that you will be sitting on your hands, i'm assuming, until the end of the year? >> people are just covering until the end of the year what customers want to do. there are not proprietary trading positions being put upon. it is not usually a good idea to start the year with a position from the prior year in things like fx and such because you immediately get back to market on january 1 and do not know what is going to happen over the turn of the year, and could hole. off in a
fored to do it every year, some reason. it is not a fun thing to dig out of. so traders do not want to have to dig out of this mess. i would like to get a look at things with fresh eyes coming into the new year. scarlet: we are looking at the market with fresh eyes as well, with the dow and the market off by more than 2%. thank you so much. across the board, red. at the bottom of the screen, one is gaining is longer data treasuries. that is up by .6%. on the new york stock exchange, five stocks are lower but everyone is higher, a 5-1 ratio. searching for safe havens, the yen gets a bit. this is bloomberg. ♪ s a bit. this is bloomberg. ♪
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but has told president trump this is not the right time for him or his family to take on a job. a social democratic leader the nationte as struggles to find a way out of impasse following the election. on the sixth anniversary of the sandy hook elementary school massacre, students were sent home early today due to a bomb threat. decemberng place on 14, 2012. downchool has been knocked and a new building has been directed at the same site. pictures ind
, on facebook, it may have been viewed more than intended. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. >> 3:00 p.m. in new york, 8:00 p.m. in london. >> this is bloomberg markets the close. >> two slide as volatility continues to grip markets. tonwhile, investors looking
next week's decision as economist dialback in the year ahead. toand the president appears victories. trade all that coming up. >> we have entered the final hour of trading. above 2600. there it is. the dow jones average, only to members -- two numbers are higher. the entireing down health care sector as well. the best performing group of 2018 >>, still >> up today. you see -- this is the best performing group of 2018. against all the
currencies, not just the yen. isn'tve to wonder, why that doing more for oral -- oil? let's take a deeper dive in today's action. we will start with taylor. i am starting with the financials. they have had a rough year. all of the stocks in the on track forexes its worst losses since 2011 and despite this, you are hearing analysts at wells fargo said they are pretty constructive on this sector. he says we are getting procession like prices, but without the recession. there still should leave room for earnings in 2018 and 2019. interestingly enough, we talked about the large caps, but there are some analysts coming out and saying that the regional banks actually looks really attractive
as well from a valuation perspective. shares and slowing are more than factored in here. not, the onlyor sector that is performing worse than financials is the automotive sector. we have china basically saying it is going to remove the retaliatory tariffs for 90 days, but then you have data falling and that you have this out of deutsche bank which you can read one way or the other. automotive stocks performing worse now, just about the same as financial stocks on the year. i wanted to take a look at the european sector because we have a much bigger basket of companies and auto-parts makers.
if you put up a chart, all the socks, you would see the same thing. take a look at some of the declines we are seeing. some of them are pretty severe. and vallejo really hitting hard down this year. that is the french auto-parts maker. and new omissions rules coming out of europe also weighing in on that. saying thereey are is some hope for restructuring, , particular the one that have already embraced a taunus vehicles. >> u.n. taylor have been gloom and doom and i'm going to look at a hotspot spot in the markets
and that is private equity. they have announced buyout deals so far this year some of the fastest pace since 2007. it has been steadily climbing and this year, they feel they have taken off the course. private equity firms feel they work. there is a question. this sounds like a hodgepodge, there is a question because up until recently, valuations were considered very rich, very high and so you have private equity firms with tons of money that are buying these other companies at very high price. what will come next year, especially if the private equity ?irms make it on the promises a thing to watch heading into 2019.
>> we thank you and the entire team. is a bloomberg opinion columnist. the selloff that we see is actually a harbinger of concerns when it comes to fundamental businesses through the >> i think that is the thing to take away. the thing you are hearing a lot, we are expecting 12% growth on the s&p this year. the thing to realize, the stock market is what tells you things are in trouble, not the other way around. it is not that earnings are down and prices follow. >> you are saying you cannot wait for evidence, the stock market is sending a pretty strong signal. there are a lot of metrics you could choose. >> that is where the difficulty is. when you look at the market
relative to various earnings, there is a huge divergence among them, which is not always the case. that, it sounds ok. when you cyclically adjusted earnings, it jumps up to 29. that is divergence. >> we can see about 10 at the moment. >> it has rather -- really been that high. what that tells you is there's a lot of rooms for earnings disappoint and if it disappoints, the stock market goes a lot lower. >> i am thinking back to february of this year and then we went to new highs. feel that this is ringing the alarm bell question mark >> there have been five corrections. we entered corrections last
friday. there have been five of them and in general, i think a correction does not tell you a ton, but once you are in correction land come up you have to keep an eye on the market. wait, i think you have to be a lot more word about what it is telling you. i would say now is i would not freak out, but i would keep an eye where the market is going. if it drops, than i think it might be telling you something. >> you can look at earnings. in terms of inside the market, where do you expect parts of the market to show the damage first? on ending to -- interest from other companies. is it going to be health care, and [inaudible]
i would keep an eye on tech. one of the ring that marks this is that earnings have done great , but it has not been the banks. some of the sectors have really weuggled and so this that have seen over the last eight or nine years has not come from banks, it has come from tech. it has to be the sectors that have one big and that is why i would keep an eye on tech. to why break it down this is what fundamentals will do? is it because people are selling because they can tell things will get worse and fundamentals will catch up? every time you have done this before, it is usually shown in the data later.
>> the market is a magical thing. heard thee have experiment of the jar of jelly beans and no one gets it right, but the average of everyone guessing turns out to be pretty close. theink that is why when market goes down considerably there is information. >> that makes place -- make sense to everyone. thank you so much. you'll want to check out the latest column which is called sounding the alarm on earnings. coming up, theresa may returns home from brussels and the handed as frustration grows. we will take a look at what could happen next.
facebook says a software bug gave outside developers access users.ions of photos by adobe takinges of a tumble. their cops -- cautious it could impact earnings. still, stock remains up by 30%. those are your social climbers. the battle over brexit rages on. meanwhile, negotiations with china seems to take a pause. title -- quite a lot to get through. what isart with happening over across the atlantic. eba of showing on twitter and thingse seemingly that
have been pretty acrimonious. >> it did not look like they had a fun time or she had a fun time. she has to come back empty-handed. -- looke two ways to do at this. maybe she is running out the clock and she will say you have a choice, my way or we crash out. the problem for her is there are a bunch of people in parliament who want to crush out, so what do you do? the other vaccination is maybe .he is setting this up people are beginning to talk more more about that possibility and think we either reverse deal orr you want my you want the hard brexit. i don't think he will get too
many voting for a hard brexit if it is properly explained, but they might want to accept maze deal. >> a little bit of cliff diving or looking over the edge. >> there is not a majority of any kind of brexit. let's talk about u.s.-china trade. the president says he wants concessions from china. if on getting this right, we are basically back to where we started before president trump tariffs.osing >> we are not even back to where we were when the tariffs began. we still have tariffs on chinese goodsand the rest of the that have tariffs on them, they -itbuying all this corn
isn't that much- --, but they are still exposed to tariffs. on the other hand, it shows you that maybe the markets want to go down because of the two china theies today, they chose one that china is slowing down and that will be bad for the world instead of maybe the good news that the two sides are talking and there is a little bit of superficial progress at least. >> trump was crowing that the economic power of tariffs. >> it probably did not effect consumer spending. consumer spending was the worst since 2003. tariffs could get worse. it is having effect -- an effect on china. >> next week, you will be headed to washington to cover the announcement.
everyone is talking about a dovish hike. what does it look like? rates 25 basis points and then jay powell suggests they are going to do very few in 2019 and maybe there is some cautious language. risks if thehe market got this long -- this wrong because they have been really down back. >> there is a good chance they are wrong, but it will not cost anybody it is they have plenty of time to ramp up again. one thing we are forgetting is what we are doing is slowing down from where we were towards the tax cuts. it is not spectacular growth, it is potential growth and it does not mean we are going to have a recession. your earnings may be pressured by margins, but it doesn't mean we will be holed up and blown
away. you cannot predict a recession. we did a survey that showed economists expect that the fed will only do to rate hikes for september. this is how much the survey is worth because we get a strong run of data. if we see the data is slow down, then we will take it back to one or less, so at this point it is impossible to tell. i can expect anyone at wall street to know. >> not all data points are created equally. bloomberg'se, policy correspondent. he will be heading to washington next to cover the fed's decision. asked the dow off -- the dow off or hundred 92 points. healthier stocks doing the worst. worst, j&j the
>> time now for options inside. joining me from chicago is dan with kkm financial's. i like your comment, you said you were a little bullish on the beingials, talking about on pace for the worst losses since 2011. >> i said i'm overly bullish, but trade i will highlight. the fact of the matter is we have seen the damage in the financials amplified. they have caught the brunt of this and i think if we do see chanceto 2019, there's a for a little bit of a bounce because that sector has been beat so much, so i'm looking for
a reversal on that type of trade. >> walk me through the trade. a what i'm looking at is march risk reversal. his find -- it allows me to put into the a half.ound 23 and down 3% before i get long and i have the high side to participate with the upside. >> it was interesting because factor, butechnical there is also a lot of fundamental issues going on and the fundamentals are pretty supportive. are the moves we are seeing more on the technical standpoint or financial standpoint? , nation ofit is it
both and psychological for that matter because the expectations have shifted now, so you are seeing the rate for directory built into the pricing. the tariffs are having an impact and also the idea there will be a shift in the rate trade -- rate for directory, so that pushes financials lower. i think banks are still in pretty good position so if we can get through this technical and psychological damage, there are still a foundation for the markets to rally because the levels have gotten so low, i want to look towards the countermove. >> we want to talk about the s&p as well. that is breaking through 2600. what do you make of that? >> that is again technical and psychological. we might go and test the lows we saw in february.
we are holding 2600 on the s&p 500 am a but we are going to close lower than the closing lows in november. i think from a technical standpoint, that is a short-term negative. it looks like this further downside. >> thank you. we will get you back on. dan of kkm financial's. >> let's have a look at the markets. the nasdaq still trading low. we are seeing significantly -- significant declines almost to the tune of 2%. the lowest since july 2017. this is bloomberg.
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buyleesa.com today. you need this bed. >> hello come everybody. let's get to first word now. special counsel robert mueller says a white house injury with former national security advisor michael flynn lied to internet agents was conducted properly. he is saying that the claim that it was deceptive is wrong. he is preparing to be sentenced after pleading guilty to lying to investigators back in 2017, telling a judge that investigators lured him into a false sense of security. british prime minister theresa may launched a rescue mission for an ailing brexit deal today, after the european union rebuffed her request for a