tv Bloomberg Markets Americas Bloomberg February 11, 2019 1:00pm-3:30pm EST
presidencies the rally as less about winning over voters ahead of the 2020 election and more an opportunity to reshape the debate around his proposed border wall. fewrally will be held a hundred yards away from the el paso border fence. a virginia lawmaker is backing off plans to reduce an impeachment bill seeking the ouster of the states waiting black elected official. patrick hoped we get today that he thinks additional conversations me to happen before anything happened despite democratic lieutenant governor justin fairfax. she then your women have accused fairfax of sexual assault. he has vehemently denied the claims and called for authorities, including the fbi, to investigate. parliament is moving up a vote on proposed constitutional amendments that would allow the president to stay in office will be on his current term which ends in 2022.
the vote was scheduled for next week but will not be held as soon as wednesday. this comes despite concerns that egypt is flipping back into ism, eight years after an uprising ended hosni mubarak's nearly three decade rule. a strong storm in hawaii has knocked out power and flo roads and even snow. snow is not unheard of in madness parts of hawaii, but officials say the snowfall on maui could mark the lowest ever elevation snowfall in the state. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. it is 1:00 in new york, 6:00 in london, 2:00 in hong kong.
on vonnie quinn. welcome to "bloomberg markets." . vonnie: here are the top stories on the bloomberg and from around the world. u.s. stocks are mixed, the dollar is gaining as the u.s.-china trade negotiations get underway in beijing. the nobel prize-winning economist sees a possible recession. new york fashion week comes to bloomberg. that is all ahead. first, let's get into the markets. not much happening. waiting for china trade talks, positive news from the government shutdown. we don't have a lot of earnings today. that is the influx position and we are getting.
oil services sector, bill young performer, up 1.2%, even though we see mixed trading activity between brent and crude. increasing short positions on brent. increases with halliburton and conoco phillips. they came on with earnings. halliburton looking for international growth to accelerate. getco phillips looking to growth in conventional assets. some of the oil stocks we are seeing. have not gotten a lot of earnings today, but look at what we have gotten so far as we await about 16 companies expected. upward guidance divided by downward guidance. now at a ratio of .5, which means you are seeing double the amount of companies forecast lower guidance then they are up. falling below the long-term average in the blue line, 0.6%.
interesting that we are not getting that upbeat guidance on the for your basis on the earnings, at least as we see a few quarters ago. i want to touch on a couple stocks we are looking at. -- thatsuming gains should be ge -- resuming gains after three days of losses. -- norfolkuthern southern, their guidance is exceeding expectations. now looking at 5% annual revenue growth through 2021. vonnie: taylor, thank you. --s week put be criminal could be pivotal for the high-level talks between chinese and u.s. officials. it is not just trade uncertainty weighing on markets. we asked about the largest risks to the economy for the rest of the first quarter. >> i think it is china. if china goes wrong, the rest of the world takes a hit. >> i would highlight ppi in
china. if we see falling inflation start to trip over into deflation, markets will start to price in declining profits and rising defaults. >> it's all about the fed. they have done a 180 degree move in the next few months. will they revert back to a hawkish bias later in the quarter? i think it's possible. , thecreasingly, brexit term we hate to mention, is moving closer and closer as we get to that date. us is alec young, director of global markets research at ftse russell. you say a deal is already priced in, a u.s.-china trade deal. >> not fully, not to the extent a dovish fed has discounted to this point, but most people over the next few weeks have been the toward optimism on china trade.
we had some uncertainty creep in over the last few days. if we got a meaningful breakthrough, we could see some relief in the markets. for the most part, investors expect to see some progress announced. before the march 1 deadline. mean forhat does that your outlook, has it changed in any way? as the market pricing made a difference in what you are interested in? alec: it is a bit of a catch-22 with trade. deal, it a meaningful may get the fed a bit more hawkish than what markets are expecting right now. you have a major risk to growth on a moving off the front burner . conversely, if we don't get a substantial enough deal, obviously, there is risk to markets from that. it seems like it is easier to see negative outcomes based on whatever happens with trade, versus positive outcomes. vonnie: what would your base case before the federal
reserve's next move? do we pause until june, and then what? alec: markets are expecting they may will be done for the year, or certainly we would not see anything until late in the year. i think trade will be big on setting the tone. if we get a meaningful deal, markets will bring forward the next rate hike, probably push on any chance of a rate cut, which at this point is a jump ball. the bigger issue is the trend we are seeing with earnings. even though fourth-quarter earnings are coming in nicely in the low teens, fourth-quarter estimates -- first quarter estimates are flat. calendar year, about 5% for the russell 1000 large-cap space. but that is based on 10% in the fourth quarter. the first three quarters of 2019, the estimates are for earnings up 2%, 3%. stocksle, large-cap
trading at 16 times the estimate, so it feels fairly valued. times may not be nose bleed bubbles, but when you don't have a lot of earnings growth, it is hard to see a lot of upside from here. vonnie: where will that 10% come from? are we suddenly going to get a resurgence in the chinese consumer? alec: that is the concern. investors are also aware that analyst tend to trim the numbers as it goes on. the whole year is hanging on is really ambitious fourth-quarter number. we know companies tend to be to published estimates him about the estimates continue to come down. i think after this big move, 8%, 9% year to date, markets have gone quickly from oversold to pretty fairly valued. we may have pulled forward some of the returns this year into the first few weeks of the year, so it may be more of a struggle going forward. , what: in terms of flows
are you seeing for the russell 1000? relief after the big decline in december where markets rebounded. we are advising clients to be a little bit circumspect, not to expect, extrapolate best rock performance we have seen early in the year through the rest of the year. cash now has a real yield, return. the market is already up 8% this year. you can earn two, 3% in conservative low risk investments. many investors may choose to do that, rather than take their assets.with risk stocks are not as cheap and compelling as they were around the holidays. we have had a big move up, still some cyclical risks out there, so we would remind investors we are late in the cycle and we should bear those in mind. take someybe time to chips off the table. what about outside the u.s., would it be worth taking a punt
and using that cash elsewhere? alec: overseas, we have much lower valuations, higher dividend yields, and the earnings profile in places like europe outside of the u.k. is actually healthier than what we are seeing. earnings expectations are holding up. one concern we have overseas, more people are excited about the emerging markets because the dollar has stalled a little bit on this dovish fed outlook. people are looking to position long on dollar weakness. while we are green a more dovish fed does put the brakes on the dollar rally, we are not seeing a big dollar decline. growth and rates are still so much higher in the u.s. than everywhere else, the dollar is what pretty well vonnie: happens if we don't get the china agreement that the market is priced in? alec: if we don't get the chinese agreement, then i think
withoutar may not go up more fed rate hikes, but it will not go down a lot. growth and rates are still so much higher in the u.s. than europe or japan. even with a more dovish fed, the dollar is more attractive. has though the market gotten more dovish and priced out the rate hikes, the dollar is barely down, down 1% from its high a month ago. vonnie: alec young, thank you for coming in. coming up, we hear from nobel prize-winning economist paul krugman. why he says a recession in the u.s. is pretty likely. this is bloomberg. ♪
prize-winning economist paul krugman says with increasing headwinds in the u.s. come it will be a bad idea for the fed to raise rates. he spoke with bloomberg earlier in dubai. i wasn't really surprised, maybe the way it played out was a little more abrupt than i would've expected to see, but the fact is the fed's normalization of rates was never really very grounded in the data. it was always we need to do this to head off inflation rising above target. where was the inflation? it finally became clear there was not enough inflation, not enough and inflation signal to justify. meanwhile, you have some likely headwinds facing the economy. continuing to raise rates was looking like a bad idea. >> is it possible they could switch to cutting rates? is that the more likely option?
you say there are a few headwinds. --i suppose there is a trade europe is looking problematic, some blowback to the u.s. if that is going bad. china looks to be having a slowdown that has nothing to do with u.s. policy but that blows back to the u.s. a deteriorating environment, quite possible that that will end up cutting rates. cfos in the u.s. and an overwhelming majority believe a recession will happen in the next two years. is that something you see as well? >> i would not be as definitive but it seems pretty likely. there seemed to be an accumulation of smaller problems , and then the underlined backdrop is we have no good policy response. the fed cannot cut rates very ish, fiscal policy, there fiscal space if we were prepared
to use it, but it is hard to see this current leadership responding in any kind of nimble way. when you look back to the last crisis and compare it to the possibility of a crisis now, is the u.s. and world in better shape to withstand a crisis? >> we are clearly and worship. we came into the last crisis with interest rates clearly above zero, lots of room for interest rate cuts, not enough, but lots of room. we came in last time with public debt substantially lower than it is now. not a big factor objectively but a psychological factor. then we came into the last crisis with pretty remarkable leadership. -- i do enjoyo maligning government officials -- let's put it this way, our current treasury secretary is no hank paulson. probably do not have a crisis
of that magnitude about to hit ---- god help us if we do but we are in much worse shape to do with whatever comes along. to see thea chance imf report, downgrading expectations for global economic growth. what is the biggest risk to the economy from where you are sitting? >> i see you that he will. one of them is china. -- is two. basically inadequate consumption. it does seem to be finally getting closer to that point. the other is europe. experiencing as slowdown, close to recessionary levels already. vonnie: nobel prize-winning -- prize-winning economist paul dubai. speaking in still ahead, backstage at new york fashion week. we get an inside look at fashion
vonnie: this is "bloomberg markets." i'm vonnie quinn. new york fashion week has been ongoing the last few days. models for fashion has badgley mischka took the runway saturday. celebrating 30 years in the business. joining us to talk about the are designerson and cofounders themselves, mark badgley and james mischka. an absolutely beautiful collection, as it always is. 30 years, what is the secret to the longevity? longevityret to our is listening to your customers. we spend a lot of time with our customers in dressing rooms at trunk shows, appearances, and we always listen to their needs, it
is really about solving their problems. like you said, 30 years in the fashion business is an eternity. james and i come our collection has never been trendy, per se. sometimes it has worked against us. workedlong run, it has for us. we are sort of the turtle that wins the race. our clothes are somewhat timeless, always our quest to keep things modern, very of the moment. at the end of the day, our formula seems to be working. vonnie: you have just everyone from halle berry to taylor swift, on and on. we are looking at this season. it was inspired by the glamour of the 1940's, 1950's, and apparently the pallets of crohn's and forest greens of vintage mercedes-benz sports cars. why that particular theme the season? >> we actually pulled it back a little the season.
where therepring was color, diaphanous, huge sweeps and all of the silhouettes. this season is more of a laser focus. streamlinedare very . we just think that is the direction our customer wants to go right now. she is a little bit more tailored. it doesn't mean the fabrics are not just as beautiful, the beading is still a little more pared down, a little sleeker. vonnie: james, it feels like there are so many designers. is it different than it was, are there more designers, has it always been this way? >> looking at the calendar for new york fashion week, it used were six shows a day, and it was very genteel, you had one hour to get to each one. now there are at least two shows
every hour, all over town. fors much more complicated the attendees than ever before. there are so many designers out there, some you know, some you don't. it is a lot of information. them have notf had to spend cash in a way that you guys would've had to in the early days. they are making their names on social media. how do you compete with that? you brought back your hand in 2016. are you at a disadvantage almost? honest, i don't see how a designer does it today. it's always been a challenging business, it is a cutthroat business, it is a fun, glamorous business, but it's a lot of hard work. age, to me, it is daunting to see how a young designer can step up and make it happen. vonnie: do you need private equity money?
it feels like this is the only way that it can be done, couture can only be done with private equity money. a tremendous amount of investment in product, overhead. to make it happen, you do need deep pockets. when we started, it was a little bit of family money, some savings from us. very thinly capitalized. i think that is almost impossible to do today. vonnie: you have a new headquarters on sunset boulevard. moving from rodeo drive, congratulations on that. china, and stores in plan to have 30 or the end of the year. is china were luxury consumer will be? the appetite for luxury is tremendous. no sign of abating. obviously, some issues in the economy all around the world but china is where the luxury consumer is still consuming like
crazy. vonnie: a lot of the report that we got were negative on china, two luxury came' brands, they were positive on china. is that middle classes are rising so they can spend more? >> i think it is both. the middle class can now afford luxury products. they save a lot of money. they save their money and they want that one back, that one shoe, one dress. them a status symbol for and it is not as widely distributed as other products. vonnie: what about the united states, is couture still a possibility? >> definitely. them we are coming off of our best year in at least a decade. people are buying clothes again. it is ok toeeling invest in clothes again, especially ones that are timeless. >> we had probably our banner
year at retail this year. will nevert, couture be what it was 10 years ago. women shop differently, their priorities are different. want a specials piece in their wardrobe, but the world has changed. to the designers, cofounders of badgley mischka, mark badgley, james mischka. don straszheim weighs in on the u.s. and china relations ahead of the march 1 tariff deadline. this is bloomberg. ♪ this isn't just any moving day.
this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. immigrants from honduras and the pol have filed a lawsuit alleging the trump administration unfairly and did a program that lets them live and work in the u.s.
the suit alleges that the department of homeland security's decision to end the so-called temporary protected status for the countries was motivated by racism. the suit was filed on behalf of six immigrants and two of their american-born children. for senior russian negotiators will be meeting in an attempt to salvage talks over border security funding. and some republicans will try to hammer out a plan to avoid another government shutdown. the prospect of getting an agreement by friday's deadline seems to have faded over the weekend. without a funding deal, nine federal departments and agencies which then again, weeks after a record 35-day closing. secretary of state mike pompeo has raised concerns about china and russia's growing influence in central europe. his comments came in hungary, the first like of a european tour.
he met with hungary's prime minister and other senior officials to whom he stressed the importance of democracy and the rule of law as moves to counter chinese and russian efforts to pull hungary and other countries in the region away from the west. >> you need to look no further than ukraine, hungary's next-door neighbor, to see why this is needed. today i spoke with the foreign minister about the importance of supporting ukraine in its quest for sovereignty and territorial integrity. we must not let prudent wedges between friends and nato. officials who spoke on conditions of anonymity said secretary pompeo also pointed out central europe's reliance on russian energy, and the presence of the chinese high-tech telecom firm huawei, particularly in hungary. president trump's second summit with kim jong-un is less than three weeks away. since their initial meeting,
north has made little progress toward giving up its nuclear weapons. president trump says a halt to missile testing by the regime shows his plan is working, but it is unclear what the u.s. may have to offer in exchange for a long-term deal. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. shery: live from bloomberg world headquarters in new york, i'm shery ahn. amanda: in toronto, i'm amanda lang. welcome to bloomberg markets. we are joined by our bloomberg and bnn bloomberg audiences. shery: a round of u.s.-china turf negotiations kicking off in beijing. can a cup or handsome deal be
reached before the march 1 deadline? countdown to another shutdown. talks were done between republicans and democrats over immigration as the u.s. had stored a critical friday deadline. high hopes. post-legalization results this week. let's get you a quick check on the major averages. u.s. stocks mixed with the dow falling .2% after three sessions of losses. the s&p 500 is flat. 2708. we are seeing industrials led by railroads trying to pull the index up. utilities, energy companies leading those declines. the nasdaq gaining .1%. the dollar on a winning streak, the longest in two years, gaining ground for an eighth session. watch that strong dollar, we also think of
emerging markets. i have a chart that puts in perspective where that risk on trade in emerging markets is relative to the 200 day moving average. we gotrt of the year buying back into emerging markets. you are looking at the msci emerging market index. given how much the market is now driven by technicals and programming trading, you wonder where it goes from here. we are watching that pretty closely. one big influence on these markets and many u.s. stocks will be the outcome of u.s.-china trade talks. those talks are influencing the companies that do business in both countries. if you look at the terminal, you'll see that u.s. companies selling into china are still doing a little better than the other way around, chinese company looking to do business in the u.s. you wonder of course what will
happen over the long term if we see serious terrorist kick in in that market. shery: negotiations ongoing in beijing right now but worth pointing out, chinese stocks rallied again coming back from their lunar new year holidays, adding to that bullish start of the year. already recovering more than $380 billion in market value. very interesting point as we see the talks develop. amanda: we have the trade deadline march 1 ticking away, at which point the u.s. could .atchet tariffs robert lighthizer is morning that nothing is certain. of the star some guests had to say on bloomberg. >> making predictions is hard because it is really about the mind of one manned. there is no broad constituency, deep-rooted protectionist movement in the u.s., it is all just trump. >> it make sense to come to some sort of agreement. a little heavy on commodity
trade, light on intellectual property protection, but we will see some improvement. is thereal issue long-term technology side of it, getting the ip protection. this is not going to happen before the first of march. have some purchase agreements, which would be important, but to get to the structural issues of market access impediments, it may take longer. amanda: with us is the senior managing director of the china research term at evercore isi, don straszheim. let's start with how optimistic you are feeling. what is the low bar we have to achieve here to reassure markets? >> the low bar is that u.s. current law says that our tariffs on china will go from midnight, on march 1, unless there is a deal. president trump is the one who
will decide whether it is a deal or not. all deals are not created equal. that bar can be pretty low to get over, and i think we will get over it. shery: president trump concerned he -- confirmed he is not meeting president xi jinping before march 1. now we are hearing there could be a mar-a-lago summit. is it logical that we will see an extension of that tariff? don: it depends on how long it is. as you mentioned, a meeting in the run-up between president trump and north korea right before the deadline. they could perhaps say they are issues.ng if they move this out three month or something like that, that says to me the u.s. has violated the line in the sand that it drew, and that it would ugly for the markets, ugly
for the future prospects. shery: the big debate right now is who has more leverage going into these talks, the u.s. or china? this chart on the bloomberg show and i contraction of the chinese economy, including the official and pmi, and a satellite index which monitors facilities all across china through space imagery. a sickly everything in contraction. how successful has the president been on applying pressure on china to get more concessions? i think a lot of china's weakness is not due to the trade war with the u.s. but due to other problems in china. it is also true, over the last six months, china's economy has been hurt a lot more, broadly, then the u.s. that is not the right bar to measure. the question is not who gets hurts the most, but who blogs
first? amanda: we have seen a mixed picture across sectors in which companies are still selling well in the chinese market? luxury goods doing well right now. others seem to be stumbling. where are you positioning, keeping in mind there will be differentials on how tariffs play out? don: the consumer sector is an obvious one. china's consumer sector is growing rapidly. luxury routinely come in country after country, rose faster than the consumer come even within the consumer space. in the commodities area, i'm afraid it is not. they produce a lot, they buy a lot of commodities. if that production is down, that sector will not do as well. amanda: how are you feeling about autos these days, as it relates to the potential for more tariff tension? don: the worry is whether the u.s. applies this so-called section 232 national security
ruling to impose tariffs on autos from all over the world. that would hurt the auto sector in china a little bit. but that sector has been weak, likely to be weak in 2019. not strong in 2019. have seen some chinese moves including relaxation on foreign ownership in some sort or, some new ip laws. how honest and truthful are these laws? can we expect them to implement them, are they real changes in policymaking? don: i think they are, but only time will tell, frankly. 1,we have a deal on march the enforcement mechanism, washington's favorite word, is simply to set a variety of dates certain in the future in which the u.s. has to certify that china is playing by the rules, and china has to certify the u.s. is playing by the rules.
if those rules are being violated, it is over, and we will be back into the depths of the trade war, which is already several months old. donald straszheim, thank you so much. evercore isi. for more on the story, don't miss our interview with kyle bass later today. looking down the barrel of another shutdown. border funding talks broke out between democrats and republicans over the weekend. that is slashing hopes of a deal to be signed before the deadline. lawmakers took to the airwaves to weigh in. anything -- sign exceeds me, everything they put in front of him. there are something that we could not agree to. the government shutdown is still on the table. >> we have an obligation to protect our nation. as long as the goal post continue moving, we cannot lock in. >> the big problem here is this
has become pretty much an ego negotiation. >> negotiations are still going on. there are good people on this committee so i have confidence. we get a deal. i hope that we do. he is going to do whatever he legally can to secure that border. shery: let's welcome in kevin cirilli. we went into the weekend thinking we might get a deal today. then a vote in the house and the senate and on the rest of the week, so what happened? kevin: they were not able to come together. i spoke with a senior democratic staffer who said the hopes of getting to a deal are quickly diminishing ahead of that friday deadline, when lawmakers must pass a funding bill to avert another partial government shutdown.
the tictoc for the next 72 hours, president trump has two texas. inwill be addressing el paso a campaign style speech. several republicans are apprehensive about whether he will make an increasingly volatile situation even more so. meanwhile, over the next 48 hours, look to see if the democratic-controlled house of representatives tease of any type of vote or provides floor time for a debate on a partial funding bill. the final point i would make is the conference committee am a bipartisan, have in tightlipped about where things stand. you heard from mick mulvaney there on the sundays shows. the president is saying he is not going to be able to get on board with any deal whatsoever, but he very well could end up signing a partial government funding bill, and also pursuing a national emergency to get more money. bottom line, there is no deal now and it's incredibly
is opening an investigation into what happened. catch us up on where the bribery scandal sits and how it involves the office of the prime minister. >> this news of the ethics commissioner just came out. 2012,ase dates back to when it first surfaced. snc-lavalin said this has hung over the company since then, costing them time and trouble and money. they have been pushing for a remediation agreement, a kind of a plea bargain, where the company would admit wrongdoing, pay a fine. the canadian government rejected doing that, which brings us to the current scandal, which is whether to go pressured his that attorney general to throw snc-lavalin a bone, more or less. she has since been out of that job. that there isweek now this investigation into whether trudeau violated canadian ethics laws, which generally does not have a lot of teeth, i should add, by
potentially doing this. that being said, the prime minister said he never directed his then justice minister to do it. not a lot of facts coming forth. this company struggling with its business, at one point, taking a hit from this diplomatic spat between and the and saudi arabia. profit warning in recent times. the stock looked like it would close at decade-long lows. this is one of several thorns it is dealing with. has been lobbying with the trudeau government on this remediation issue for some time, repeatedly lobbying them. making no secret of it. the question that we are focusing on now is whether trudeau had been behind the applied pressure. that is the explosive case we are seeing, including some liberal mps breaking ranks to call for an investigation.
the saudi arabia tensions, which are also top of mind for the trudeau government, are taking a backseat to the other questions. not a lot of time but another political story with business implications. the leader of the opposition in alberta is voicing support for the energy sector. how meaningful is that given he is expected to win the next election? >> companies who want to build new pipelines may find jason kinney willing to help them. not all that different from the premier right now but he talks about reinstating support for an energy east type of pipeline to carry oil all the way to atlantic canada, shipping oil through hudson bay, through manitoba. i think they're looking at any way to get the oil landlocked in alberta. josh, thank you. coming up, aurora and canopy
amanda: opening the books on pot companies. durant and canopy growth, canada's two biggest companies, will report this week. it will give us a first glance at what recreational pot sales may look like. wednesday, the u.s. house financial services committee will hold a hearing on cannabis related businesses. with --e, let's start this is the first full glimpse of what post legalization looks like. a lot of excitement in the stocks. will they deliver what the market has priced in? >> great question, and we will get earnings from armor after the bell. can it on thursday. even though these are the first
results that will show the early stages of recreational sales in recreational use was legalized on october 17, we are still looking and very small revenue numbers. analysts expect canopy to report revenue of $80 million. by contrast, the company is close to $20 billion in market cap. aurora, 55 million. still quite small numbers on the revenue front but it will give us an early stage picture as to what recreational sales look like and the market share these companies were able to gain in canada. cost and cash flow issues have plagued the industry. what could we learn about the broader canadian market? >> cost will be an important one to watch, and also average selling price. we really don't have a basis for comparison for this quarter's numbers because these are the first recreational result from both companies. looking at their costs of production as they are scaling up the sillies at both
companies, the average selling price in the recreational market, which generally has been lower than the average medical price, and what kind of margins these countries are able to capture, will be important for stock performance. last quarter, we saw stocks decline pretty significantly. almost a sell the news situation. we will see if that turns out to be the case this quarter as well. amanda: there are those financial services committee hearings in washington. how important is that for that industry, or their cross-border opportunities that people will be watching? n early hearing about whether u.s. pace can open up to canadian companies. cache on been storing the premises or the homes of their owners, an ongoing issue for these companies. long as are saying as it doesn't get bogged down in the broader debate around legalization federally, is could
be a positive step for the industry. they predict banking services could open up for cannabis companies in the u.s. if not this year that by 2020 for sure. certainly, while this congress is in power. shery: thank you so much. the latest on cannabis stocks. amanda, this week we are watching china with the u.s. china trade talks ongoing in beijing. is thethe key questions strength of the chinese economy. we are seeing chinese shipments plummeting an estimated 20% in the 2018 final quarter. the key reason apple cut its revenue outlook in almost two decades was because of the china slowdown. really interesting to see what is happening in the chinese smartphone market. across we have seen that the board, a domestic contraction. the key will be market share gains. that plays back into apple's
needs for that killer device. as we heard from don straszheim, luxury goods still sell, you just need the right product. not seem tor does be doing what they expect. apple is number four in the market, trailing local rivals. as we go, you can interact with all of our charts that you have seen on the program and elsewhere at gtb go. -- g tv . from toronto and new york, this is bloomberg. ♪ i'm a veteran
spending. the white house says it will counter china's ambitions to dominate the sector. the orders did not outline specific funding goals. training forai future workforces that could see disruption because of the technology. the suspect in the pittsburgh pleadede massacre has not guilty to dozens of charges. he is accused of opening fire in october killing 11 people and wounding seven others. authorities believe he specifically targeted his victims because they were jewish. an international rights group is urging the united nations to investigate alleged violations by sudan security forces against antigovernment protesters. sudan has been gripped by nationwide protests since december. the demonstrations were triggered by rising prices and shortages but quickly turned to calls for the president to step down. human rights watch says video
footage shows extreme violence and shocking abuses against protesters by government forces. plans chanting " hundreds ofrica,' thousands of people poured out onto the streets of iran today the date of the 1979 islamic resolution -- revolution. the street was decorated with huge balloons as loudspeakers blared revolutionary and nationalist songs. denver is experiencing its first teachers strike in a quarter century. thes unclear how many of educators are taking part in the walkout over salaries. all denver schools remained open on the first day of the strike with substitutes filling in. the colorado governor says it will cost about $400,000 a day to keep the schools running during the strike.
global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. caroline: it is 2:00 in new york, 7:00 in london. i am caroline hyde. scarlet: i am scarlet fu. this is "bloomberg markets: the close." caroline: president trump travels to texas as congress remains at arts over immigration issues. another deadline approaching. robert lighthizer warns the deal needs to be closed before they ratchet up tariffs. brexit uncertainty drives u.k.
investment to the worst level since the financial crisis. all that and more coming up. scarlet: let's get a check of the markets. friday littleg changed, we are seeing u.s. stocks continue the trend today. the gains faded fairly quickly. among the advancers, energy stocks and transport. on the downside, transportation and utilities. caroline: pretty unchanged. the dow jones seems to be outperforming. on the upside is the nasdaq. the dollar cannot be stopped. scarlet: it is up every day since january 30. eight straight days of gains, the longest stretch in three years. a lot of talk about other central banks becoming more dovish and other currencies looking less appealing. i included morgan stanley because of the m&a. morgan stanley is buying the company for $900 million, the
biggest purchase in a decade. caroline: market reaction up 43%. scarlet: morgan stanley down for a fifth straight day. let's dive deeper into today's action with our markets reporters. abigail, what are you watching? abigail: you're talking about the dollar and the eight-day rally. here are the eight days. there are a couple of theories behind the strength. this one coincides with the fed's pause. it could be central to other central bankers that they will get dovish. the dollar would look stronger in relation. that is complicated. because be a haven bid considering we have emerging markets down. it looks like the dollar index will keep going higher. look at this chart going back to 2011. we see this long-term uptrend. when it goes above the 200-week moving average, we see it tends to go well above it, especially
a couple of years ago. backp of it last week -- above it last week. suggesting we could see the dollar index go back towards the and put pressure on commodities and risk assets over all. romaine: other conflicting signals out of the bond market with the global bond rally. we are sitting in about 2.66% now. a little reprieve. you could blame the fed or the economy. when you look at the market expectations for inflation, they are giving you less alarming of the signal. the breakeven rate on treasuries about 1.7%. that is down from 2.08% last quarter. you also have oil prices paring some of their gains. then you have the extra compensation people take on to hold 10-year treasuries.
that plunged during the december rally in equities but did not recover in january with a rally. that premium last week stood at -.06 8%. a lot of investors have been willing to get small yields to park their cash. some strategists say this is not a clear flight to safety. the next chart gives you a reason why. they are saying this is less about the view of economic weakness and more about the current structure of the market. they point you to the neutral yield would show -- which show expectations continue to make new highs when the term premium continues to make new lows. rather than looking at them less bearisht is a signal than if you look at them on their own. lisa: i want to look at u.s. debt, the $22 trillion of it we have. this is increasingly an issue as we talk about government
shutdown 2.0. this is the big debate that will be had heading into next month's debt limit. the blue line is the total amount of u.s. debt climbing. the last arrow is the last time congress discussed and pushed back its debate as far as the debt ceiling limit and how high it will go. that is coming up next month. this is a big concern as we talk about another government shutdown. take a look at what moody's analysts had to say. they warn a shutdown could have a more severe impact on output if it drags on beyond the march 1 timeframe. it would complicate negotiations over the debt ceiling. this is the real concern. if government is unable to come to some resolution on the wall or border security, what does that mean about the much more loaded debate about the actual financing and debt limit of the
united states? this is what a lot of people are keeping an eye on. caroline: a perfect place to leave it. thank you. framing some of the risks. the question of the day asks this. what is the largest uncertainty for markets for the rest of the first quarter? here's what some of our guests had to say today. >> i think it is china. if china goes wrong, the rest of the world takes a major hit. >> i would highlight ppi in china. i think we see falling inflation go over into deflation. there markets will start to price in declining profits and rising defaults. >> it is all about the fed. they have done a 100-80 degree move in recent months. will they revert back to a hawkish bias later in the quarter? i think it is possible. things more moving
as we get closer to that date. caroline: joining us is emily roland to weigh in. we heard china, fed, brexit. >> i already had my answer before i listened to everybody. i would say it is china. china continues to be the growth engine of the global economy. it feels like we wake up every day with a new negative data point out of china. this morning, it was the disappointing retail sales. we have seen pmi's below 50. that is feeding into the shifting down a gear of economic growth overseas. there is a big impact to europe. we've seen the data continue to disappoint. gdp data this morning. those are export-oriented parts of the world impacted by china. not to say the fed turning the other way is not another major risk. scarlet: when it comes to china, how much has changed since the
start of the year? when we look at the risky assets, they have kind of rolled over the last couple of days. it is not clear anything has changed much. >> we've seen a big shift in terms of the tone of the market over the last week or so. if you think about the lows on christmas eve, that big rally made up most half of the losses. i think investors are starting to take a deep breath and reassess where we are. you have seen the weird juxtaposition between where stocks having going and where the bond market is going. the 10-year treasury and u.s. equities up 8% or 9%. the two do not necessarily go together so that is concerning. caroline: where does the stock market go from here? with credit suisse saying let's take money off the table. in more of the cell the risk camp.
we are looking at an environment where economic growth has peaked. we are looking at an environment where corporate earnings growth has peaked. 2019 revisions keep coming lower. a few monthsard, ago, 10% earnings growth was expected for the year. that is down to 5.1% this morning. we are expecting negative earnings growth for q1. bigssumes we will get a pocket of earnings growth in the fourth quarter, which in our view assumes we will get a big pickup in economic growth. i think it is hard to square those things. we want to have a neutral allocation of risk assets heading into 2019. but we want to take the opportunity to pare back on risk and notch up in terms of quality. scarlet: what do you see in terms of recession? people are no longer talking about it happening.
yet, as you just mentioned, earnings growth and economic growth have peaked. how does it look the next couple of months? >> at the end of 2018, we were talking ourselves into a recession. markets started to price that in december. that was a reason we saw the correction. one of our favorite indicators to use is the leading economic indicators that accurately predicted the last seven recessions in the u.s. it is coming in and positive territory. it is coming in about 5% down from a peak of 7%. we would wait to see that trend into negative parent tory -- territory before we get defensive in our portfolio. we think it is ok to hold a neutral allocation for 2019 and ride out the recent volatility. caroline: give us one or two examples of neutral allocation. >> we were overweight risk assets broadly. that meant owning international, high-yield bonds, bank loans.
that was all in 2018. all of those we have taken down to neutral. we have added some fixed income. we like the risk return profile. we want to own some treasuries. for the balance of risk and reward, we think it makes sense to hold on to some duration. scarlet: thank you very much. coming up, the founder and chief investment officer of heyman. why he says president trump has china right where he needs it. this is bloomberg. ♪
government shutdown looms, we look back at the impact of the last one. january the worst one for ipo's since 2016 thanks to the partial government shutdown. she is the cohead of global venture capital at aberdeen investment. great to see you. we are supposed to get some mega ipo's this year. we had a slow or nonexistent january for ipo's. are we back to business for the rest of 2019? >> i think a lot of companies have signaled a growing interest interest ins -- exploring opportunities. lockdown lifted, for the time being, many companies are gearing up for ipo's. specifically some really big consumer branded companies like the right-sharing companies,
airbnb, pinterest. i think there is a lot of companies ready to explore the public avenue. caroline: when there are such well-known brands, do they become agnostic to how the markets have performed? is there a concern for ipo's with market volatility? when you are that dominant, does that not matter? >> i think volatility and trade tensions with china could have an impact. ultimately, i think some of the companies ready to test the waters have such strong consumer interest that in the past we have seen that translate into investor demand. we have not seen the likes of lyft in quite some time. extremely are
optimistic about the prospect for the 2019 crop of ipo's given the large consumer companies mature and on the cusp of ipo. scarlet: i'm glad you mentioned facebook. some thought it waited too long to go public. did some hold off for too long? think one of the changes we have seen beginning with the facebook ipo is that companies have elected to stay private longer. their interest in doing so has played a part in the rise of growth equity we seen targeting these companies. that began in earnest in 2014. now these companies are raising billions privately before they go public, delaying their ipo's. we have companies sometimes a decade or more old before they go public, but they are far larger enterprises at their
offering then they were historically. that benefits folks like us as institutional investors more than it did in the past when you had google that raised a modest amount of capital for going public. google, apple, and facebook have huge chunks of change to put to work. when you are looking at the other companies coming through to the public market, is the exit route always going to be ipo? could we see more m&a? >> with some of the regulatory implementations like the jobs act, companies have the ability to file confidentially. but many are still broadcasting their plans to go public. announcedyft both they are filing confidentially.
universityah valley has a dual mission mandate. a vocational school and four-year liberal arts program under one roof. it has one of the lowest tuition rates in the country. today, i sat down with the university president to talk about how the school is managing rising costs while also attracting a diverse student body. >> the majority of our students come from below median income families. we fund ourselves through a
combination of tuition and fees as well as allocation from the legislature and donations. we have a pretty active donor community. we try to not raise tuition at if we raise them, we are making sure our students can afford what they have to pay. scarlet: one thing you do to get affordable tuition is you keep your budgets transparent. you don't include a lot of big budget items like a football team. talk about some of the trade-offs you have had to make. >> we picked soccer or football because soccer is more affordable and is a great sport. we also ensure that whenever we have a new major or offer something new that there is market demand for it. scarlet: to what extended did you start with the goal of fostering diversity and determine what programs to put together to accomplish that?
do you work backwards or do you find yourself in a situation where the student bodies incredibly diverse and this is our calling card? >> it is more the opposite. the university -- university made the transition into a four-year university, we decided it was critical to have inclusion and diversity. the demographics of utah are changing. that goes back to the idea of giving a more level playing field. we have to give them education. 12% of the population of utah is latino. our latino population in terms of enrollment and graduation has increased. the last thing i want to mention is we have to find diversity expensively. it is not just ethnicity or religion or sexual orientation. we include mental health, global background.
it is very expansive. that is a pillar of our identity as a university. scarlet: you have the experience. you have done this at utah valley university. other schools want to accomplish the same thing. what tends to fall short of what people think will happen? >> what fall short is if you look for example at freshman and sophomore, that is a critical part when you need to support your students. you don't want a high attrition rate. you want to retain them from first year to second-year. what you also do not want to happen is not being able to deliver the gamut of education opportunities that you want to offer. it is everything from nonacademic degrees to associate degrees two masters degrees. that is not easy to do. that was utah valley
university. caroline: college costs rose $47 billion. that marks a night straight -- ninth straight record year. harvard raised more than $1 billion. i want to give you the stats. this is why my mind is blown. in the united kingdom, the entire university sector raised more than $1 billion for the first time in 2017. scarlet: that is quite the contrast. in the u.s., it is awesome for people to give back to the schools and tax-deductible donations. kyle bass is coming up. this is bloomberg. ♪ the latest innovation from xfinity
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comments. the minnesota democrat tweeted over the weekend that the american-israel public affairs committee is paying members of congress to support israel. forspeaker condemned omar her use of anti-semitic tropes and president -- prejudicial acquisitions. she is one of the first heat of muslim women to serve in the u.s. congress. president trump heads to el paso, texas, today. the campaign advisors says the president sees the rally is less about winning over voters and more about an opportunity to reshape the debate around his proposed border wall. the rally will be held a few hundred yards from el paso's border fence. theresa may will address the house of commons tomorrow although she was originally scheduled to appear wednesday. the british prime minister is trying to buy time to renegotiate her brexit agreement with the european union.
the vote was lacking the support it needs in parliament, but her government says it is not considering a key demand of the opposition leader jeremy corbyn. egypt's parliament is moving up a vote on proposed constitutional amendments that would allow the president to stay in office well beyond his current term which ends in 2022. the vote was scheduled for next week but will now be held as soon as wednesday. the develop comes despite the reassurancespt -- egypt is not slipping back into the same kind of rule. dayal news 24 hours a powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. ♪
scarlet: from bloomberg world headquarters in new york, this is "bloomberg markets: the close." i am scarlet fu. caroline: and i'm caroline hyde. we are about 90 minutes from the end of the trading day. scarlet: it is a political -- pivotal week for global trade. kyle bass, founder and chief investment officer at hayman, writes there is speculation trump has told his negotiators to get the deal done. that would mean for going an historic opportunity to come to a major restructuring of america's relationship with china at a moment when china is most inclined to agree to concessions. kyle bass joins us now from san francisco. great to see you. thank you for taking the time to speak to us. i want to follow up on the opinion piece that you wrote. you are saying the u.s. should not squander this opportunity
and leverage. do you see evidence it is getting ready to take the easy way out? >> i think you have seen multiple press reports talk about the fact that the administration has done amazing work in confronting china on many different fronts that the u.s. should be confronting china on. market declines in the equity markets, i think you see president trump now potentially telling his team to just get a deal done. i think that would be a big mistake given the amount of work his team has done in all the different facets of our relationship with china to date. i think doing a deal only on trade, trade is only a small part of the global resettlement of our relationship with china. caroline: what should be focused on for you to call it a success? where is the key negotiation you
want to see a deal done on? >> there are so many different fronts we need to be negotiating on. steal one, the chinese roughly $2 billion a year. it is somewhere in a category. you have industrial policy that circumvents wto rules with electricity and property and all the things they do on their industrial policy. then there assertive in the south china sea. they have given us another thing to think about with the internment of the one million plus uighars. there are so many different fronts we need to be confronting them on. trade is so small. i think trade is 10% or 20% of the argument. scarlet: that may be the case but involves a lot more people when you bring up geopolitics. thursday, march 1 deadline. what is the market pricing in
coming out of the discussions? >> what i see in the market is the markets got about an 85% probability a trade deal gets done. we believe depending upon how the wind is blowing that day and how president trump feels, that might be properly priced. if what happens is we do a deal on trade and we elect to defer or discuss much later all of the more difficult issues, then i think the administration gets a win and the markets rejoice briefly. when you look at the underpinnings of our relationship with china, it is at a very difficult place in historical terms. i think trade by march 1 may or may not happen. if the chinese are not willing to negotiate on the more difficult issues, i think like
heiser and his team won't engage in getting just a trade deal done unless president trump overrules them. say that we have a successful deal written out, how do you ensure the commitment remains to uphold what has been agreed? see the change exert it longer-term? >> this is difficult to cover in a few minutes in our discussion. the agreement needs to be measurable and are also need to be potential consequences for them not upholding the agreement. the old saying with china is look at what they do, not at what they say because they have said for a long time that they will follow policies they have not adhered to. it is import for any agreement to be measurable and also
punishable if one side is not uphold their agreement. that is the difficult dance we do with regimes like china. scarlet: you are a noted china bear. you mentioned in november increasing your short position against the chinese yen. why would beijing let it fall and risk incurring the president's wrath as china is negotiating on a deal? >> china purports to be the second-largest economy in the world with 15% share of global gdp. but if you look at cross-border currency settlement, less than 1% of the world settles in chinese currency. china is just a paper tiger. i think they have done so much thatin order to prop it up the funny thing is that we consider calling them a currency
manipulator on the weak sid. they have been intervening to hold her credit market together. pile of fxir true reserves worth? how much money do they have to defend their currency the they have to let it go? i think as china becomes more globalized and wants to become more of a real currency, today it is not a been a real currency being less than 1% of global settlement, then true economic forces will act on it. that is when you will see a reevaluation. caroline: what will be the tipping point? we do think that time will come? >> last year was the first year china had an account deficit, more money going out of china been coming in. i think they are so desperately short dollars that they need foreign direct investment to hold everything together given the extent of their credit position today. thatipping point will be
they have a current account deficit and are running a massive deficit. it is north of 10% of gdp. think about the u.s. we are now more than 4% of gdp and the alarm bells are going off. china is at 10% of gdp. china is starting to look like a traditional em problem. they borrowed $1 trillion in global markets. the chinese banking system is more leveraged than any system in the world. they are now running a current account deficit. reserves are dwindling. when you ask when is the time, i guess the answer is no one knows but it is worsening as we speak. scarlet: there's a bloomberg two companies that missed payment deadlines this month. that goes to the point about how over leveraging is a problem.
caroline: the concerning thing is that these are two highly indebted, big borrowers. how many defaults are we likely to start seeing? what default cycle are we anticipating from china and who does it hurt? >> china works in two world's. they work in their investment world. level,ntrol the price the printing press, and the narrative. china can control their domestic market. where you start to see defaults is when they borrow in dollars because they cannot manufacture dollars. you will start to see them defaulting on dollar denominated debts over time. when you look at the number of dollars, defaults in that is where they will have a problem. r&b theyat how many are printed since 2009, you
realize they have printed $30 trillion worth. they have printed like it is the national pastime. they have embarrassed the u.s., japan, and europe on the printing side. i think that will all come home to roast -- roost soon. scarlet: if it does, it would be a shock the central bank would need to factor in. in december, you called for a mild u.s. recession late in 2019. have you changed your outlook? is that still your best case scenario? >> i will give you a broader answer. if you look at asia and subcomponents of chinese production, four of the five of them are in negative territory. italy went into recession a week ago. germany's numbers looks like it will be in official recession in the next three to six months. the u.s. has this positive stimulus coming from the tax cut
that we believe had a $250 billion impact last year and will have another positive impact this year but next year it will only be $100 billion. the delta from this year to next is -250. i think economic activity will begin to wane in the back half of 2019. by the middle of 2020, we are most likely to be in the session. given the conflict between the democrats and republicans in congress, my guess is democrats will not let trump stimulate going into an election year. they are saying behind the scenes he is taking the economy hostage and they will let him shoot it. i expect the u.s. to be in a mild recession by the middle of 2020. in december, you said powell failed the emerging
markets may continue to hike. what score would you give him thus far? >> we had the worst december in stock market history. the market dropped at one point 16% a month. banks weree us insolvent -- the u.s. banks were insolvent, we lost a little more than 10%. we were down 16% in december. the reason i'm giving the central bank an f is look at what is happening in southeast asia and europe. the u.s. stimulated at full employment with our tax cuts. that stimulus is about to wear off. the last three recessions in the u.s., we have cut rates 500 basis points. now we can only cut them 250. a week or two ago, san francisco put out a white paper about the benefits of negative interest
rates. i hope that is not where we are going. we can only cut about 250 to be a zero. normalization should happened long ago, not now. they were really late in the cycle raising rates, and now they are stuck. when we get into even a small recession, i don't think we have the arrows in the quiver. let's hope we learn something from japan and europe about negative interest rates. they destroy the banking sectors and have not helped the economy whatsoever. i don't think that is the place we should go. i guess i'm telling you sometime in 2020, interest rates could be a lot lower than they are today. scarlet: when it comes to u.s. stocks, do you think it is more likely we will get a revisiting of the septembe highs or lows first? rejoice toets will the extent we get to a win on a
bloomberg commodity indexes higher. copper higher and so are soybean futures. let's put this into the perspective of the bloomberg commodity index over the last year. this is a one-your chart. this is a downtrend. this tells you sellers are in control. the index is down more than 13% even though it is up about 4% on the year. we do have the index back below the 50-day moving average. that is slipping down. that tells you the near-term technical are turning bearish matching the long-term bearish trend. we could see a 10% slide in the commodity complex. i would like to bring in steve of bank of america, merrill lynch. you have a chart emerging markets.
if the commodity complex does turn more bearish, it would be good for emerging markets. this chart is neutral to bullish. has been nicely is it held the broken trendline that goes back to 2011. the other thing that is significant about this chart is the s&p did hit a near you today low in december. when i look at this chart, i think we completed a double bottom off the lows above the 900 level. even given wiggle room, down to 1000. i think we could see this retrace much of the rally especially if we can start training above the 40-week moving average. , possiblybove 1039
1160 on emerging markets. abigail: it would suggest we are seeing a breakout of sorts. scarlet was talking about how we are on a stalemate on the date. here we go over to the long-term, another weekly chart. talk about what you see here. >> i like looking at weekly charts. it gets rid of the daily noise. today, we are getting a little bit of noise. secular is a rising 200-week moving average. we also tested it in 2016. that is important. this pullback resembles the 2016 pullback somewhat. i think in terms of price action, we may have done what we needed to do. 20% roughly drawdown for the s&p. maybe a little more time. i think that is where we are now. a logical place for a 16% rally
to stall on the s&p is right around the 200-day moving average that we did last week. it is not surprising to see the markets take a step back. abigail: we might stay sideways around that area, potentially moving higher? >> we could correct a little bit down toward the 2600 range which the s&p did break above. if we can do that, that would be the most optimistic scenario i can come up with. 2500 does not derail the message. i think it is building a base to get a stronger rally. that is what we are looking for. we believe in the secular trend. what we are seeing now is the correction of that. abigail: cautiously optimistic. thank you for joining us for charging futures. caroline: thank you very much. now onto our stock of the hour. it laid out plans for a more profitable future. it is relying on increased
efficiency. dave has all the details. >> this is all about what is called precision scheduled railroading. it is an approach to doing business the executive implemented first at canadian railroads and then at csx before he died in late 2017. the principles of his management have how luke tim -- outlived him. they have become the norm for almost all the biggest railroads. norfolk southern adopted them in october. the operating racial, what percentage they are getting out of every dollar in revenue. you want to see these numbers go down. they are talking about going down to 60% in the next three years. it is a function of adopting this precision schedule railroading approach to running physics. caroline: say that fast.
>> absolutely. it is all about trying to be more efficient, balance out the lows over time, make the most out of your railcars, out of your people, all the assets of the company, to be able to generate higher earnings. they are talking 5% annual revenue growth. we are talking about the top line, too. that is higher than analysts were anticipating. scarlet: thank you so much. from new york, this is bloomberg. ♪
price target was cut to $175 a share. analysts see headline risks rising with the lower fourth-quarter outlook. electronic arts traded to buy from neutral at bank of america/merrill lynch. the analyst citing the potential of the newly released video game saying it could be a competitor to fortnight. scarlet, i know you know plenty about the games. scarlet: everyone is try to be a fortnight killer, but there is only one fortnight. u.s. stocks near their session lows. that is just a .1% decline. the dollar now up for an eighth straight day. ♪
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"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. mark: i'm mark crumpton with bloomberg's first word news. immigrants from honduras and nepal have filed a lawsuit alleging the trump administration unfairly ended a program that lets them
live and work in the u.s. homeland security's decision to end the so-called protected status for the countries was motivated by racism allegedly. the suit was filed on behalf of six immigrants and two of their american-born children. a virginia lawmaker is backing off his plans to introduce an impeachment bill seeking the removal of the state's leaving black elected official. herick connor tweeted today thinks additional conversations need to happen before anything is filed regarding the democratic lieutenant governor justin fairfax. two women have come forward and accused him of sexual assault. fairfax has a humanly the claims and called for authorities, including the fbi, to investigate. secretary of state mike pompeo says america may be forced to scale back certain operations in europe and elsewhere if countries continue to do
business with the chinese telecommunications company while huaqei.ompany -- huawei. they are a sovereign nation. they get to make their own decisions. what is imperative is that we share with them the things we know about the risks of huawei's presence in their networks presents. actual risks to their own people, to privacy protections for their own people, the risk that china will use this data in a way that is not in the best interest. we have an obligation to share that information and will do so. mark: the united states has repeatedly accused china of using technology to pilfer trade secrets. china recently said it is totally unreasonable to make some of these accusations and that the u.s. is just trying to suppress a rising competitor. a strong storm hitting hawaii
has knocked out power, knocked down tree branches, flooded roads, and even brought snow. winds were nearly 70 miles per hour. snow is not unheard of in mountainous parts of hawaii, but officials say the snowfall on now we could mark the lowest elevation snowfall ever recorded in the state. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. ♪ caroline: it's 3:00 p.m. in new york, and live from bloomberg world headquarters i'm caroline hyde. scarlet: this is "bloomberg markets." caroline: time is running out to avoid another shutdown.
the president had to texas. a trade representative warns a trade deal with china is not certain before march 1. the u.s. is set to ratchet up tariffs. crunch time once again for theresa may as brexit uncertainty drags u.k. investment to a financial crisis. all of that and lindsey moore coming up. got plenty more coming up -- plenty more coming up. scarlet: we thought we were going to open higher and stay higher but that did not last. caroline: a stellar day. japan once again back on holiday. plenty to be digested. key is china and u.s. trade. scarlet: we will talk about that with kevin cirilli shortly. talking longer dated treasuries losing for the first time in days. you mentioned brexit issues and
the pound falling to the weakest level in a month. u.k. economies shrinking. caroline: 2018 gdp growth slowest in six years. the brexit ongoing shenanigans continue because theresa may seems to have brought forward her comments by a day to tomorrow. scarlet: does not mean it will get solved sooner. let's dive deeper with our markets reporters. what are you watching? abigail: stocks are not just stalled on the day. take a look at the one-year chart. actually it is a 13 month chart in a bloomberg. a strong sideways trend. a battle over the bulls and bears. the bulls were in control. the fourth quarter happened below the 200 day moving average on the big fed rally and the better than feared quarter that we just have reported. the s&p 500 now stalling below the 200 day moving average.
one reason the stall may intensify, the bottom hit to the overbought territory and is now trending lower. 55, it will tell you momentum is really diminishing and could point to another whipsaw back down. that would be consistent with the stalemate we had seen between the bulls and bears until there is a bigger piece of macro information to break this range. romaine: thanks. as money managers begin to question how long the run-up in emerging-market equities can continue we are starting to see a ton of retail investors poured into emerging market etf's. last week alone, we saw a ton of activity of investors flowing into etf that track developing nations. when you look at the main vanguard index, it tracks the flows going into developing nations. you will see we have the biggest inflows we have seen basically since 2011. the biggest weekly inflows since september 2011 to be exact.
this is a market cap weighted etf mostly related to china. 14% to taiwan and 4% to hong kong.you can say this is a pretty bullish sign . some people are taking a contrarian signal. a slowdown in lots of sectors of the etf sectors. keep in mind that when you look at this chart here, while we normally look at china and the big asian nations to hold up this etf, the biggest inflows were into mexico and chile. china is still the biggest in terms of a pure dollar basis, but the actual percentage basis fall about 32% in the most recent weeks. we are seeing similar situations play out at some of the other asian oriented etf. a lot of market strategist coming out and saying now is the time to be cautious. we had a spectacular run up. it tracks all the nation equities. it
had its best month ever in january in quite some time. over the past four or five days, we have seen it all. >> i wanted to take a look at the gut check of the bond market. take a look at it on a risk reward basis versus the s&p 500. this is what investors are earning over the s&p 500 earnings yield. you can see it has fallen to about its lowest since last october, tracing a lot of the selloff through the end of last year. this is raising questions of whether the bulk of the u.s. high-yield bond rally is already over. if you take a look at the return of u.s. high-yield bonds so far this year, it is tracked by the white line showing a nearly 5% return here today.the orange line is u.s. investment grade bonds returning about half that. huge rally here. a lot of people saying that perhaps this is run its course.
from here on out, coupon clipping, not necessarily a huge selloff. the bulk of the rally is over. scarlet: thank you so much. key lawmakers are reporting to meet in an attempt to avoid another government shutdown. let's bring in kevin cirilli to give us a status update. talks broke down over the weekend, but the two sides are not giving up yet. kevin: they are not giving up yet. they are huddling together the next 48 hours to try to play the situation out.tonight , president trump goes to el paso, texas, where he will be delivering a border talk campaign style speech that quite frankly according to sources i spoke with in the republican party is leaving people on capitol hill a bit apprehensive that this can add more attention to these talks. who exactly are holding these talks? it is a bipartisan group
including house appropriations committee chairwoman as well as kay granger and senator richard shelby and patrick leahy as well. according to richard shelby, he wants to shake things up. if you are looking at how the volatility might impact the next week look for a major clue over the next 48 to 72 hours. look at the house of representatives. democratic-controlled of course. trying to get some type of a vote on thursday or friday. my view is democrats are supposed to be having a conference in washington, d.c., which can make it a little bit more difficult for them to get a floor vote scheduled. but where there is a will, there is a way in washington. caroline: quite amazing as ever of course. i want to get your take because with kyle about the way forward on u.s.-china trade talks. here is what he said. >> i think it is important for
any agreement again to be measurable and also punishable to the extent that one side does not open their agreement. that is the difficult dance that we do with the regimes like china. theline: he waited on shutdown and is weighing in on the difficulty of negotiating with china. it difficult we. kevin: it is. he is framing out that how the world's two largest economies , it is notting this a major piece of trade agreement that would need to be ratified by congress like the u.s. ncl or nafta 2.0. week,cond half of this the u.s. trade representative and steve mnuchin heading over to beijing to continue to meet with their beijing counterparts to try to get to some type of framework agreement at of march
1. the president has said that that is when he is going to increase tariffs. the business lobby out in full force. the business lobby does not want to see that happened by march 1. as of now, president trump going to be in the neighborhood of china, but no plans to meet with president xi jinping. caroline: the controversy continues, both at home and abroad. thank you. coming up, apple will have a big problem in china. one research firm is drawing estimates on how badly they are doing with their domestic rivals. plus, an update from capitol hill as immigration could negotiations continue with another shutdown looming. walmart wants to challenge amazon on an untested dollar filled -- untested battlefield, advertising. ♪
let's talk financials now because deutsche bank is paying some of the highest rates banks, highlighting a key lender turnaround. here with more is lisa. lisa: this is the do list people talk about with banks, where their financing costs go up because they are not getting enough revenue. that means they are in the us a position to invest in their business. we take a look at the credit rating of deutsche bank, it really is on lower end up a lot of major european banks. three steps away from junk. you are seeing that reflected in cost that they are entering today. you can see it is marking three-year dollar bonds.
that is almost twice what other eu lenders are paying. even more than some banks in spain. have actually have to pay more. if you take a look at the credit risk as it is perceived in the market, you can see deutsche bank's credit risk is substantially higher than commerzbank, which is the bank that is rumored to be the candidate that the german government would like to see happen. you can see it has been steadily climbing the past few months. the key question here is deutsche bank as to raise a whole bunch more funding to create a capital letter. it is just, how much will it pay to do this? and how much will that erode further its worthiness, creating this unfortunately both events? that is something a lot of
people are watching. scarlet: thank you so much. let's stay in the world of banking because you wonder will it be prime real estate for m&a in 2019? bb&t and suntrust set the tone. explored latele last year. it gets our attention because the buyer was reportedly jp morgan. it?ery interesting, isn't the animal spirit is moving in the right direction when it comes to m&a. they explored a sale at the end of last year.it entered talks with j.p. morgan chase . the deal fell through sometime in december because they could not come to see eye to eye on price. this corresponded with the holiday stock market crash, which clearly did not help the conversations year. =--- here. caroline: what deal is getting done is morgan stanley picking
up an asset. in this quite ripe sector. matthew: morgan stanley have been signaling they want to do something in asset management. it seems to be them following through on it. they brought in a company that brings to them 3000 potential clients in the software and services sector. they do business with gm. that is a lot of potential sale leads. what you see between the deal that happened and that almost happened is financial services companies really showing a willingness to do deals right now. scarlet: morgan stanley had been on the prowl for any acquisitions because it is really busy fixing its existing business. what i'm interested in is the etf angle. wisdom tree has a huge etf business and j.p. morgan has been trying to get into that as with other big things but it has been late to the party so the only way to do that is to buy a businesses.
matthew: j.p. morgan chase i think started their first etf product in 2014. there is not a lot of stuff out there you can do to get etf through acquisitions. you cannot by blackrock. was the tree has about 60 billion in etf assets. it is a billion dollar company. it is a billion dollar company that looks like it needs a home. caroline: the animal spirits are there. is now the time to start selling yourself? some companies out there with pockets. matthew: financial services committees are showing willingness to do deals. yes, if you are sitting on a platform that is specialized that can help you aid if the disruption of technology right now, i would be thinking about getting off the sidelines. you got a couple of companies right now for sale. private equity companies they owned for a bit of time. they see a need to bring them to market now.
scarlet: thank you so much. you can check out his story on bloomberg. if you missed our earlier conversations, you can check those out on the bloomberg. we had our interview with kyle bass from earlier this hour. he and his colleague wrote a column for bloomberg opinion on china and what it needs to do for trump to get a trade deal out of the country. this is bloomberg. ♪
abigail: time now for options insight. joining me today is greg. thank you for joining us on mondays. we are still in this stall after the big rally ferociously higher in january, the best january since 1987 on the fed rally. stalling out a little bit.what do you think is next ? >> there is a lot of noise on the chart.
the focus last week was on the 200 day moving average. abigail: the daily chart. >> the chart i brought with me is zooming out, the weekly chart. what jumped out at me was there is a bullish signal. signal after making a 52-week low, some price confirmation. in other words, the burden of proof is on the bulls, not the bears. we want to see some confirmation quickly. we saw that last week. however, we did not see a higher close. sideways is ok as long as we don't make a lower low, which is why we are keying on the 2680 support level. abigail: in an ideal world, what would you like to see next? >> i would like to see us take several closes of the moving average. abigail: on a weekly basis? >> starting daily and weekly,
yes. abigail: let's bring in two options. you also have a fixed chart with you. what are you seeing here? is thestory in the vix price. the s&p 500 under its 200 day moving average, which is a bearish technical condition, but also, the vix is under the moving average of 16.5, so traders are saying the fix is underpriced. but the issue is ranges continue to contract. not a lot of volatility in this market. last week, we saw one of the four inside days. an inside day is when the high low range is inside the prior a range. abigail: that usually means volatility? it can but it is a red flag for traders looking to buy options. options cost money and the case of the market is not moving, the kerry can cost you.
abigail: let's bring the dollar into the conversation because it is on an eight-day rally. there are some say it has to be with the fed. other central banks might rise. maybe it is the haven bid. could that not pressure the rally? >> especially since a strong dollar weakens the s&p 500 relative to the other u.s. indices because it is more large-cap weighted. that is one of the reasons traders are looking at the s&p 500 more bearishly relative to the small-cap indexes like a muscle. -- russell. abigail: thank you so much for joining us for options insight. scarlet: thank you so much. let's get a quick check of the latest business flash headlines. goldman sachs no longer and i think on strategy for near-term returns. the bank is closing its
recommendation to buy stocks of companies with strong balance sheets. it held that position for the past two years. strategists believe's of the rate hikes should help companies with a week balance sheet. silverstein properties may build its final world trade center skyscraper before signing a lease for the building. the developer that rebuilt lower manhattan after the 9/11 terror attacks already started the foundation but did not continue without signing a company to anchor the space. the chairman says it may be wise to move forward on to our two now since it will not be completed for at least three years. toys "r" us is coming back. the company that now owns the assets says it will open 70 toys "r" us stores this year. they will all be located in asia and europe.the company hopes to open some stores in the u.s. by next christmas. some of the people who worked for the old company will return as well, including the former chief merchandising officer.
and that is your business flash update. that could get really confusing, then it disappeared in bankruptcy and comes back a different way. caroline: and comes back to europe and asia first. scarlet: and makes its way here. caroline: ghost of christmas past. let's look at what is happening now in the markets. s&p 500 in a black day. the dollar very clear in its direction. for eight straight days, we have been higher by 0.8%. the pound is lower against the dollar on the back of brexit concerns and the u.k. data. scarlet: for the quarter, it only grows 0.2%. we are monitoring the ftse as well. this is bloomberg. ♪
mark: i'm mark crumpton with bloomberg's first word news. freshman congresswoman elon omar has apologized for her tweet over the weekend that many including house speaker nancy pelosi found offensive and anti-semitic. the minnesota democrat tweeted today "my intention is never to open my constituents or jewish americans as a whole. this is why i unequivocally apologize." she added that "at the same time, i reaffirmed the problematic role of lobbyists in our politics." the suspect in the pittsburgh synagogue massacre pleaded not guilty to dozens of charges. he is accused of opening fire at the synagogue in