tv Bloomberg Markets Americas Bloomberg February 4, 2019 10:00am-11:00am EST
york. 30 minutes into the trading day in new york. i'm vonnie quinn. guy: i am guy johnson. welcome to bloomberg markets. vonnie: stocks are mixed. bill gross retiring. we are talking about that. we have more high-frequency economic data. november factory orders were down 0.6%. that is better than the previous rating of down 0.2%. factory orders down 0.6%. are up goods orders 0.7%. mixed numbers, but the basic number is lower. in terms of markets, we are starting off at a slowly in terms of direction. there are plenty of positive stories. the s&p 500 is down just one
point. bid.board makes a we have been talking about the star board story. apple is higher 1.9%. jpmorgan out with the note today saying there are plenty of companies that could be potential targets for apple. guy: let's talk about what we are seeing on this side of the pond. european equities are a little lower. we have just moved lower over the last few minutes. the dollar is gaining traction. the euro is down 0.2%. it is dollar buying across the board. we are seeing weakness across the board for everything. the stock market is coming under pressure as a result of that. the bond market has turned around a bit. oil is under real pressure this afternoon. one stock that stands out in europe, wirecard, the troubled
company out of germany that has been battered after reporting from the financial times with a and from analysts and media basically fighting back strongly against that, making clear that it feels it will be cleared of all wrongdoing. the stock bouncing back. on,as up a lot more earlier but the market is now beginning to fade. vonnie: let's talk about all this. joining us is kristina hooper. clients through january, what has been the main concern on their mind? >> there has been a lot of concern on the u.s.-china trade war. where are we going? are we going to see things get better considering we have this march for deadlines hanging over us? vonnie: it seems like it is taking a backseat to earnings. todayle bit of a pause,
factory orders down 0.6%. what does that say about the fundamentals of the economy? generalows that in there is a mosaic. there are some areas that are doing better than others. we can look at the jobs report as certainly a very strong area of the economy, certainly consumers doing well. we are seeing wage growth. there are spots of weakness. the question is, is it going to get worse from here, or is it going to be relatively stable? a lot of that depends on the global economy and where we go from there. guy: good morning. the fed appears to be on hold. around to is coming the idea of being on hold for quite some time. are you a buyer or seller of the dollar? >> in this environment, you should try to stay away from the dollar. what we have seen over the last several years is that the dollar strength is really dependent on
expectations about fed policy. if we expect, which seems likely, that the fed is patient this year, takes its foot off the accelerator, we're likely to see other currencies show greater strength than the u.s. dollar, all else being equal. guy: the all else being equal bit is interesting. do you think other central banks can really do anything to tighten policy in this environment? i'm wondering if you expect anything from the ecb, the boj? if the fed is done, reasonably they are done. >> even if the fed is done, we have not necessarily heard from other central banks just yet. there is a fairly significant risk that we have a more hawkish ecb president when mario draghi's term and's in october. it is not just about central bank action. it is about expectations about
action. if there is expected a more hawkish ecb president, we could see the euro move up in advance of that. vonnie: what does that all mean for u.s. stocks? the bulk of your investors and the people you talk to are invested in u.s. stocks. we have seen a mixed earnings season. what you make of it? >> the earnings season has been relatively good. the question is what are we going to see going forward? what we have seen thus far from a lot of the earnings calls is that there is expected to be a continued modest deceleration, that there are some headwinds facing many companies in the u.s., strictly those that rely on multinational business. a lot is very dependent on where the global economy goes this year. that is one reason why we saw the fed say they are going to be
patient, that they may take their foot off the accelerator. a lot of the data in the u.s. is positive. the fed is reacting, at least in part, to global economic weakness. they said as much last week. vonnie: take tech stocks. can you take tech stocks as one bundle now because most of them if not important exposure to china? do we write them off? >> it depends on your time horizon. many of them look very attractive. if you have a long enough time horizon, this is a good time to invest. we did see a lot of issues facing the stoxx go away relatively quickly, for example if we saw fast resolution to the u.s.-china trade talks. guy: what is your level of conviction in these markets at
the moment? a lot of portfolio managers continue to worry about what is going on around them. you have talked about the fed, what is happening with the trade story, a macro story in europe that looks like it is slowing down, and we have brexit. what is your conviction in the direction of these markets? >> i think so much of the direction of the markets is dictated by the central banks. that is what we have seen for the last decade. if we have accommodative central banks, that provides a nice support system. that doesn't mean there will not be headwinds, but it certainly helps. i have a very high level of conviction over the long-term that investors need exposure to risk assets to meet their long-term goals. cycle going to be longer because of that accommodation from the fed? >> we could see the cycle
extended because of this accommodation. this has been an unusual recovery from the start. it began artificially. then it became much more organic. now it is being given something like a second life, and created byf energy further central bank accommodation. that does not mean that that has to cut rates. just staying on hold this year and offering the potential of tinkering with balance sheet normalization is going to be beneficial. vonnie: you have worked at allianz, i wanted talk to about ill gross' retirement. >>
with a storied career. hats off to him. i would expect that we will still see the fed raise rates this year. i know that is not perhaps a mainstream viewpoint. we could see the fed raise rates once or maybe twice. what we saw in the jobs report last week was that wage growth continues to be relatively strong. we could see a point, especially with tariffs impacting input costs, we did see a point where core inflation goes up, and the fed does not have the ability to be as flexible. certainly it now has the ability to be flexible. i would expect, and this is an educated guess, perhaps one rate hike, maybe two. we will wait to see how that happens. christina hooper, thank you. guy: let's check in with kailey leinz on first word news. >> a report today on chinese tech giant huawei trying to
steal u.s. trade secrets. the company ceo accuses huawei of trying to steal the smartphone glass he invented. >> they wanted to work with us on products. they would have been in contention. we are willing to work with any .ompany if you try to steal the technology, there is going to be recourse. scrappingssan is plans to build a new vehicle amid ongoingu.k. split about the country's from the european union. theresa may is expected to return to brussels to see changes to the exit deal. trying toors are figure out why a small plane fell apart and crashed into a
house. this happened in california. the venezuela national assembly leader one wide-out is picking up more support from europe. the u.k., germany, and france as thezed juan guaido interim leader of venezuela. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. guy: thank you very much. coveragess our special of president trump's state of the union address. that will be hosted by david westin tomorrow at 8:30 p.m. in new york or 1:30 a.m. in london. we will be talking about what investors can expect on border talks, trade, and the state of the union. that is coming up next. this is bloomberg.
guy: from london, i am guy johnson. vonnie: from new york, i am vonnie quinn. this is bloomberg markets. guy: let's check on those markets. abigail: not a lot of direction first stocks or even a risk tone off or on. basically neutral. now at session highs for the s&p -- nasdaq, up about 0.5%. noting the nasdaq up for the sixth week in a row.
the week is young. runs on track for the best since 2017. if we take a look at the imap, we will see why the nasdaq is doing better. 0.8%,now, tech is up followed by the communications sector. we see most of the sectors for the s&p 500 trading lower, and basically that unchanged number for the index. where we have strength in the tech sector, we have apple. up 1.9%, actually moving higher at 2.3%. apple put out that better than feared quarter recently. the momentum is caring, plus jpmorgan is saying the company might use its huge cash pile to namingther huge company,
netflix and activision blizzard as possibilities. let's see if they can carry the s&p 500 and the dow higher? vonnie: thank you for that. president trump is set to deliver his state of the union address tomorrow night. >> she is costing the country hundreds of billions of dollars because what is happening, when in, and drugs pouring you have people dying all over the country because of people like nancy pelosi, who don't want to get proper border security for political reasons, she is doing a terrible disservice to our country. vonnie: we are joined by kevin cirilli at the white house. the president continues to blame the house speaker in particular and democrats more generally for everything that is going wrong
in the country. do you imagine he will use tomorrow's state of the union address to do anything concrete about that? i am hearing from senior administration officials that tomorrow's address will be uplifting, unifying, striking a ton of bipartisanship, but with the caveat that democrats can either legislate or litigate, but it has to be one or the other. this comes as the president is going to be addressing divisive issues. he will be talking about the wall, and he will be talking about border security and trade policy, foreign policy as well. as lawmakers are hoping to get to some type of concrete deal by next friday. that is a week ahead of the deadline they have. next friday is the working deadline that they are trying to get to some sort of agreement on. guy: kevin, if he decides he is
going to use the state of the union to declare a state of emergency and focus on the wall, there is a lot of talk about litigation from the democrats. how would that work? what impact would it have? kevin: first and foremost, i don't think anyone is anticipating that the president tomorrow night will declare a national emergency. it will be likely they will try to get to some type of deal presented president trump in order for him to weigh the decision of whether to have a national emergency. according to the sources i have spoken with, it might be a false choice to suggest it is one or the other. legislation or declaring a national emergency. you could have a situation where the president signs legislation in effect to get some type of funding for the u.s.-mexico border and ultimately decide he wants to pursue other routes by declaring a national emergency
to get even more money. tomorrow night, the second point i would make more specifically, the present is that president is fully -- the president is fully prepared to go up against democrats. i think a lot of those battlelines are getting ready to be redrawn tomorrow. maybe by tomorrow night, there will be some sort of glimmer of hope that there might be some agreement. what could possibly work? there is all the talk now about changing language so something becomes a fence as opposed to a wall, or 13 miles of the terrain gets spent, and that is enough. is there something that would satisfy the president? has strangely enough become a political game of semantics at this point between republicans and democrats shifting how they are
communicating between what they want to call whatever border proposal they come up with. president in his attacks against immigrants aligning himself with the base of his party which has been reminding him that the wall is something he campaigned on and they are fully expecting. the president is in a tough spot in terms of being able to position away from what the base wants. democrats, led by speaker nancy pelosi, are not in a position where they feel they have to negotiate. there has not been as much pressure placed upon the democrats right now as many in the republican party would have hoped. thank you. looking forward to the fantastic coverage tomorrow night that is going to be coming out of washington. kevin cirilli, joining us from outside the white house. releasingd, alphabet its quarterly results after the
vonnie: live from new york, i am vonnie quinn. guy: in london, i am guy johnson. this is bloomberg markets. let's talk about google, alphabet. we are joined now by garrett reporterloomberg tech for his take on all of this. the facebook numbers kind of feel like what we should be looking at in terms of what is coming out of google. is facebook a useful comparison point? >> it is. facebook numbers were very good this quarter, pushing back against doubt that has accrued over the year. was a big quarter
quarter for them. amazon's advertising numbers, which you can deduct by looking ir their chart -- the earnings report, it was also a big year. it does bode well for googles advertising this quarter. revenue expected to be up 21%. it sounds like a lot. habett hope that has -- alp has always had this immense growth. advertisings to revenue, five quarters they have been able to keep up above 20%. if they drop below 20%, that is still a large amount of growth, but it would say growth is slowing down. what is going on, especially in light of amazon and facebook having such great advertising
growth? guy: what is the regulatory risk that still exists? google seems to have come off a little better than some of its peers, but only just. how easy is it for analysts to quantify the risk? >> it is difficult to quantify the risk. if you look at the numbers facebook posted last week, one could argue the risk is almost zero because the company continues to find ways to grow. the things that brought down facebook stock last year were not the regulatory things, although that was a big hit, but it came back, but it was more growth concern. there are still questions we are likely to have a major privacy bill in the u.s. this year. there will be a lot of wrangling about what that looks like and how harsh it is. if that does not come into effect because congress does not pass it, then a
different privacy law in california, which is much stricter, will go into effect. that will impact companies like google. vonnie: are there any potential bonds today? >> i'm sure there are many things we have not thought about, and another thing to look at is rising costs and googles margins and cost of money they spent two push their engine out to iphones. it is a lot of money. those costs have been rising. the stock is up 0.9%. thank you to garrett. this is bloomberg. ♪ ♪ this isn't just any moving day.
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first word news. virginia, governor ralph northam is meeting with his administration. northam is rejecting calls from fellow democrats that he resign. he says that is not him in the picture. the trump administration is sending 3700 more u.s. troops to the southwest border with mexico. they will support customs and border operations. sanctions the u.s. slapped on venezuela are having an impact on american oil refiners. they will not be allowed to complete shipments they booked before the sanctions took effect. in france, president macron's advisers are trying to persuade him of not holding a referendum
this year. it to put in and to the so-called yellow vests revolt. news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. vonnie: thank you. bloomberg businessweek has a report out today that schatz light on hauwei. fbi schatzker followed an investigation into huawei. he is here to tell us all about it. it is a phenomenal story. we want to hear about the sting operation. we want to know how this start up company knew there was something odd, that there was
perhaps a chinese company trying to discover their secrets. erik: that is a fantastic question. it is best answered by the ceo and founder of this company. i had the chance to talk to him about his company's interactions with wally. he explains -- with hauwei. the explains what happened. >> in sending some of our samples for nondestructive sampling as we do with other customers, we received back on the second round of samples that it had been damaged, in the sense that a large portion of the glass was missing and broken. after seeing this portion of the class that was missing, we realized this is not really something that could be done in shipping, but more so attempted theft of our intellectual property. he explains what happened and what kind of conclusion he jumped to right there.
they are developing a new generation of smartphone glass. they have developed the thin,logy to lay a micro let's call it a layer of diamond, on top of the glass. if he is successful, every smartphone manufacturer is going to want this. wasping the glass to huawei part of the normal set of business a company like his would do. it is just the sample that they sent out to huawei for testing, it was almost utterly destroyed. that led to the realization that something nefarious was going on. guy: we have seen the impact glasslla glass -- gorilla had. is it possible that huawei was after something more than just
smartphone technology? erik: it is certainly possible. what is it that huawei might have been after? it is possible that it was more than just smartphone technology. here is the ceo again. >> worst-case scenario, we have been publicly discussing some of the work we have been doing on the defense and aerospace side. it could potentially put them in the right direction in terms of what to optimize. worst-case. corporatee of espionage, giving them a leading advantage against samsung, apple. it is not good when the best case is corporate espionage. unlocking trade secrets for military operations.
the startup we're talking about has been adapting its technology for use in aerospace, energy, and the military. this is a controlled substance. it is not allowed to leave the u.s. if it had been in china before it came back damaged, that would be a violation of the u.s. law. what does this company do now if it suspects it has been stolen? do they change with a have been doing? do they have to wait for the fbi? clear by virtue of the fact that they were working fbi it fbi that -- with the that they were no longer operating in good faith with wally. we have yet to see where that leads. there are no conclusions. there are some positions. there are believes, but there
are no conclusions. there are no indictments. there are no charges. this is a live investigation. that is why the fbi and doj are not commenting. with have not had any comments from huawei. we don't know their side of the story as it were. as for the little start up, there are waiting to see if the federal investigation produces any tangible results of that nature. in the meantime, they are thinking of filing a civil suit in an effort to recover damages. vonnie: phenomenal. it will be interesting, this may be a test case for future instances of potential ip theft. thanks to erik schatzker for reporting on this phenomenal story. this offers of rare glimpse of the u.s. targeting the chinese tech giant. it is currently on your newsstands in this edition of bloomberg businessweek. exclusiveer bloomberg
now on the heels of the , billcement to retire spoke to tom keene. >> i woke up in the middle of the night to check asia and china. bowl ringsw super along the way to look at. it is time to enjoy myself and my family. tom: within this is the catalyst of outflows of funds. was it hard to manage given the repeated and chronic outflows you have seen over the last number of quarters and years? >> not really. half of the fund is mine. i have not taken any money out of the fund. others have, as you mentioned. i look back on it and the performance of the unconstrained fund in the last few years,
which has been unsatisfactory no doubt, but still positively positive and normal in nominal terms. what i would like to mention is i have managed some total return accounts were i am famous for janice, and they have outperformed like the old days, and go 100 basis points over. maybe i should have stuck to total return and then a little more constrained. tom: this is a very important point. mr. gross has a number of ideas going, including fighting the fixed income battles of mutual funds. i was speaking to john huddleston in los angeles. the unconstrained model, the prospectus model with this phrase unconstrained, what did you learn about the difficulties of this phrase unconstrained?
bill: unconstrained has come to mean basically go anywhere. the total return concept i developed was really developed on the concept of measured risk-taking. it is what i learned in the days of blackjack. you don't put a lot on the table. for the past three or four years, the negative trade for unconstrained has been germany versus the u.s. in terms of the spread, 10-year german bunds started in my portfolio at 190 basis points over, they are now 250 points over. which i been one in probably put too many chips on the table. ross on that was bill g the announcement that he is retiring. let's turn to peggy collins for the reaction and some comments.
definedss should not be by the last few years, but as someone who has had a 40 year career over which time he got a lot of things right. >> he would certainly like it that way. over the course of his career, he is a legendary bond trader. the last few years, he has struggled. up theo, where he built one ofeturn fund, he ran the world's largest mutual funds, a fund that was in most people's 401(k). he built up the whole active bond fund industry. vonnie: he made many of the decisions if not all the decisions that characterized that fund even if there was a committee. >> he was the face of it as well. one of the other things about bill gross, he became a star bond fund manager. he was on tv a lot. he wrote his monthly letters.
he was the face of the firm and fixed income trading for decades. unconstrained, he could invest in anything. he has a very big position in a single mexican bond. what impact could his retirement have on the market? >> if anything, people are responsible with their investments. he is turning over the phone to the team of people at janus that have been working with him on the fund. to your point about unconstrained bond funds, they came in both in the last -- vogue in the last few years after the financial crisis. when you can go anywhere, it makes it hard to pick the right that's. in the total return fund strategy, his goal was to take a measured risk. calls thatms of the work and those that did not, are there any that stand out? i always remember when he talked
about the guilt market being on a bed of nitroglycerin. turned out to be the wrong call. whichlso made -- took a dive last year. he put a lot of his personal money into the fund at janus. it reached two point $1 billion at the peak -- $2.1 billion at the peak. it was largely his own money at the end of it. vonnie: thank you. we will continue to watch the reactions to the -- bill gross announcing his retirement. guy: next, we are talking about ryanair, down 2.6%. taking a backseat role in the airline. we will talk about that next. the stock under a bit of pressure.
vonnie: live from new york, i am vonnie quinn. guy: from london, i am guy johnson. this is bloomberg markets. let's turn to ryanair. shares in the low-cost carrier lower today. ceo michael o'leary is stepping back from day to day management. we talked about how brexit could affect the company. >> in the event of hard brexit, our non-eu shareholders, which the u.k. will be part of that, will not have voting rights for a time, and will be forced to sell down to the eu nationals. of ryanair during
us earlier. joining us now is chris, who reports on aviation. this is a man you spent a lot of time covering, michael o'leary. me about the impact of michael o'leary stepping back from the frontline of running this company. >> he has been talking about doing it for a while. it comes as a bit of a surprise. we don't know if it is stepping back and taking a much more if he isole, or actually going to be very hands-on, albeit at a less operational level. that remains to be seen. vonnie: in recent times, his approach to being extraordinarily controversial has not been working anyway in this era of low fare airlines across the board.
that approach is not funny anymore, it is not different. >> to be fair to him, he has moved away somewhat from that. ofdon't have the tirade expletives we once used to see. he has somewhat modified his approach. he has gone out of the way to put the customer first, he says. where we are now with the airline is there is a confrontation with staff. that is quite possibly what underlies this decision to move upstairs and step back. they are about halfway through negotiation of their first-ever union contracts. there is a great threat that this will push up costs and derail the whole low-cost basis of ryanair. there has been an element of shareholder activism involved over the past year, which has suggested maybe michael o'leary is not the person to see this through. they also announced today that
chairman david bonderman, who has been around for as long as michael o'leary in that role, will stand down next year as agm. that could somewhat ease tensions with staff at this time. we have had a series of warnings from this airline in the way that operationally things are working at the moment. what seems to stick out today is that the guidance does not point to any material uplift anytime soon. >> that is right. there is overcapacity at a time when oil prices are trending higher or hard to predict. ryanair is in the thick of it. it has the lowest fares. there is not anywhere to go in terms of cutting without hurting margins. there is no real visibility into the summer, and expect the fair pressure to continue into 2019. vonnie: who is going to be the
face of ryanair now? >> we don't really know. they are searching for a chief executive for the main ryanair airline. i think we can assume that person will be, certainly, at the forefront of future campaigns. whether michael o'leary disappears from that, we will have to learn to live without his interventions, remains to be seen. they are searching for a ceo, one of the toughest jobs in aviation to answer to the person who turned ryanair into what it is. guy: big shoes to fill. vonnie. vonnie: we have a lot of news to parse today, including earnings and potential deals, activists taking stakes in companies and so on. .he s&p 500 is now flat the dow jones industrial average is down 0.2%. up 0.66%. is
vonnie: live from new york, i am vonnie quinn. guy: from london, i am guy johnson. this is bloomberg markets. let's turn our attention to futures in focus. thats falling on reporting u.s. crude inventories increased last week and american refiners cannot ship crude out of venezuela. this is the dirtier and of the
crude market. scott joins us now from the cme. i am curious. the short position in brent collapsed over the past few weeks. where do you see the market positioned at the moment? >> for the first time in a long time with wti in the states and the venezuelan situation, the market has taken a long-term view. wall street is all about what can you do for me this minute. the market has taken a step back. if we see this new regime come through in venezuela, they might go back to the way things used to be. tradinget is kind of like that is going to be what is going to happen. that is the research we have seen a us our desk, that things come if they go that way, there will be some short-term interruptions, there could be
issues in the next few weeks. if we get back before venezuela falls apart, that could be bearish. wti chart ishe worth paying attention to. one is an inverse head and shoulders from the nation we have been talking about and one from a cannot sea level. are investors paying attention to those? >> i don't think the at-home players do. there are some big traders that don't care what the chart says they just care what the shape says. this is more of a fundamental market than the head & shoulders or technicians would like to believe the things that stand out to me are supply. we have this slowdown. we have long-term goodness out of venezuela. it will be hard for oil to take off and leave us behind. guy: thank you very much for
joining us. scott joining us out of chicago. vonnie: time for our stock of the hour. shares of tesla are recovering after falling more than 3% earlier on news of an acquisition. elon musk shoring up the company's battery technology. >> this is their fifth acquisition since 2015. they are buying maxwell technologies, energy, storage, and power delivery to help them speed up charging times and potentially bring down battery costs. cost ever an issue when we talk about tesla. they have only just recently returned to positive free cash flow in the last couple of quarters. they are spending $218 million on this company, all stock. there will be a dilution issue. they did not want to get their hands into that free cash flow just yet. it amounts to about a 55%
premium to maxwell's closing price on friday. analysts say perhaps that is too little, and it could actually attract other bidders. guy: we will leave it there. emma chandra joining us with the stock of the hour. next, we will talk about how these markets are positioned in we have china, that is now in shutdown the rest of the week. it is enjoying the lunar new year holiday, the year of the pig upon us. we're counting you down to the european close. that is next. this is bloomberg. ♪ ♪
guy: from london.,on guy johnson . vonnie: this is the european close. littleuity markets are a on offer, we a few seen the london market turnaround little bit as well. this as the pound shoots higher. by stoxx 600 is still down .2% just .02%. wirecard making it clear the allegations could have been leveled at the firm. this comes after ftc reporting. the company believes it will be proved it to be in the right and will have been proved to have done nothing wrong. wirecard bouncing back quite strongly. earlier