tv Bloomberg Markets Americas Bloomberg March 13, 2019 10:00am-11:00am EDT
and 30 minutes into the trading day in the united states. from new york, i'm vonnie quinn. guy: from westminster in london, i'm guy johnson. welcome to "bloomberg markets." vonnie: it is all about the votes this week. there was a vote yesterday, defeat for prime minister theresa may. there is another vote this evening, and we may see more this week. we will talk in detail about brexit in a few moments. first, let's take a look at where we are market wise. .5%.&p 500 up today the 10 year yield reached the 260 mark overnight. it is back to 2.62 now. boeing seeing a tiny bit of a come back here. it dropped 11% over the last couple of sessions. getting aorporation
bit of a boost after goldman sachs upgraded both carnival and royal caribbean. a big focus on the u.k.. as you say, another brexit book today -- brexit vote today. that we willng in see a likely extension of the brexit process. that is certainly being priced into the pound. rally.ontinues its trading. where we are the pound goes up, the ftse normally goes down. the ftse 100 today actually trading reasonably in line with its peer group. statemente the spring , a skinny budget effectively, from the chancellor of the
exchequer. vonnie: let's get to the markets now in bringing the chief u.s. equity strategist at citi. what are you looking at when you come into the office first these days? is it boeing? is it brexit? guest: actually none of the above. we are looking at credit conditions, earning revisions trends, investor sentiment. news, these blips in aren't really market drivers. they are things that capture a lot of headlines, but if you are the investor you're supposed to look at the signal, not the noise. we put out over the weekend a bear market indicator checklist. only about 20% of them signaling caution, not even danger. 1990 we had 69% of them suggesting problems, 89% in 2000, 50 5% in 2007. in all three of those previous
instances, the majority of the factors were in danger or extreme zones. it is not just the aggregate number of what percentage it is, but also a little bit of a qualitative distinction as well. we are not really seeing things that would indicate a terrible market out there. we do think sentiment is much more neutral. people have missed this rally to some degree. our target for the s&p, we are getting close. we could overshoot, but we are a little more worried about the second half. vonnie: so everything we would talk about the rest of the show about is really watercooler talk, and you are keeping your eye on the fundamentals. where is that pain trade going to be felt? guest: we think cyclicals could still trade somewhat higher. the economy went through a bit of a rough patch around trade fears around the fed. proceeded.se were
context, i would expect some of the typical's to keep trading up -- the cyclicals to keep trading up. again, i thing investors really don't believe in the cycle, and you still have some opportunity there. , brexit looks like it is going to be on pause for a little while. the ecb is stepping into support european growth. european equities looking credibly cheap right now. are they cheap enough to want to buy? guest: our european strategist will tell you yes. sentiment is horrific, but we also hear things like europe is investable from clients in the sense that they would like a in themore clarity japan-ification of europe.
this is why everybody keeps looking at brexit. is this going to be a problem that potentially spreads to other countries that might want to leave? certainly the eu doesn't want anybody to leave. it essentially would destroy the experiment. i think this is a problem. it is cheap, and yet people need some confidence, and there is nothing coming out of europe that really generates that kind of confidence right now. the -- has thees chinese equity market rally got legs? guest: again, i'm going to have to defer to our strategists who cover those regions. our emerging market strategist believes there is opportunity. stocks are cheap. there is growth. they are doing a lot in terms of stimulus to generate growth. there are green shoots that people will hope turn into more sturdy plants. there have been some challenges around the more capital sensitive and trade oriented
parts of the economy because of trade sanctions, and it is reverberating into places like europe, which is very export sensitive as well. vonnie: what about u.s. gross and how that might change over the coming six to 12 months -- u.s. growth and how that might change over the coming six to 12 months? what are the biggest risks? guest: we wrote about this in early february when the survey came out from the federal reserve board looking at can dust real -- looking at commercial and industrial lending activity. just the corporate sector. we saw a significant tightening of money standards in the fourth quarter reported in early february. economics to lead activity in the u.s. by nine months, which mean we might see some sluggishness developed as corporate decision-making gets affected by that cost of capital with a lag. if that is the case, you are likely to see some data we
getting in industrial production, capital spending, and even margins. right now, consensus bottom up estimates for the fourth quarter up almost 10%. we would argue that profit margins have some pressure given this lead indicator. that is what i mean by looking through the noise and looking for the signals. what has worked over the years? this is one of the ones that has worked consistently for about 15 years. case, theat is the market is basically pricing in the fed on hold, and possibly the next move as being a cut. are we done with this tightening cycle? what does that mean for equities? guest: our economists believe there is still the likelihood for rate hikes. we think inflation pressures are building on the wage side, but rate hikes have an enormous implication.
if that tightens up, the fed might have to react again. i am not sure the fed is as dovish as people think they are. they are watching for the things they have to watch for, and i suspect that we get this kind of growth first before we have some problems late this year. our sense is you get a trading high that goes beyond our 2850 target, and then we probably pull back a bit as people start to worry about the economy. vonnie: tobias, we have to leave it there. citi's chiefich, u.s. equity strategist, thank you. here's kailey leinz. taylor: former trump campaign chairman paul manafort is in another federal court waiting to hear his sentence on conspiracy charges, this time in washington, where he pleaded guilty to two conspiracy counts. he could get up to five years for each count. last week a some pathetic judge gave him less than four years in prison when he could have gotten
a sympathetick, judge gave him less than four years in prison when he could have gotten 24. in a college eggs missions -- call it -- in a college admissions scandal's, coaches were reportedly paid bribes to admit students that did not play the sport. in 2016, voters in california rejected a ballot measure that would have repealed the death penalty. newsom has said capital punishment does not deter crime and is applied unequally. in venezuela, protest fatigues may be setting in. a rally for opposition leader juan guaido drew a small crowd. millions of venezuelans are still struggling. a nationwide power outage has choked off water service
and disrupted business. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. guy? guy: thank you very much indeed. coming up, parliament confronts a new deal brexit. we are going to discuss the road ahead for the u.k. with the chair of the u.k. treasury select committee. this is bloomberg. ♪
we are seeing a third day of bounce here in the united states. let's get the details from app guilty little. abigail: take a look -- from abigail doolittle. abigail: take a look. for each of the major averages, the third update in a row. for the dow it represent's second out of the last eight days. we have solid gains for both the s&p 500 and the nasdaq. the best three days since the beginning of february. it might be just a rebound to last week's selling action, the worst week of the year, and confirming the fact we have haven bonds pulling back, with the 10 year yield backup one basis point. the s&p 500 back about that 2800 level. let's see a chart of this. the sellers and the buyers are really in a battle over the last year. you see this range between 2600 and 2800. the 200 day moving average recently has been a bit of a battle line as well. this big uptrend has been
reversing nonetheless, trying to take on that 2800 level. now we really need to see the s&p 500 l above 2816 to show that the buyers are in control. as for the stoxx helping out on up 3%,, take-two , cvs health up% 3.7%. the analysts liking the retail. on a global basis, higher in europe, but asia not so much. take a look at the shanghai composite in the asian session. lots of volatility there over the past few days. big moves up, big moves down. on this day we have u.s. stocks trading higher despite those in china. guy: the british parliament is going to have another vote this evening, this time on whether or not the u.k. should leave i.e.ut a deal in 16 days,
the no deal option. we are joined to discuss this by nickymorgan -- by morgan, chair of the house of commons treasury select committee. what is your central case at this point? i think what will happen -- guest: i think what will happen is no deal on march 29 will be taken off the table, and that is what the motion says it is not clear if no deal in its entirety -- motion says. it is not clear if no deal in its entirety will be taken off the table. it is only a motion today. that means you've then got to take the actual date out of the legislation, and that is probably'next weeks battles --
probably next week's battle. guy: this effectively signals a managed no deal brexit. in my correct in that? as a remainder, why? guest: i think we got to have a resolution to this. we've got people who are spending days camped out here on both sides of the brexit debate. the country is pretty stuck, very divided. i think the majority want us to get on with it. potential've seen tariffs schedules being published if there was a no deal. we've got to find a way through this now. the euwanted to rein back -- wanted to remain in the eu back in 2016. -- these of emmett today house amendment today, a plan b, says if there is no deal, we
should pay for a transition period. there's a lot going on on the eu side for a no deal situation. if you stitch all of those together and have time to put them in place, you could find a way through this no deal process. it is not going to be easy, though, and the better thing would be to have an agreement in place, which is why i voted for the agreement last night. vonnie: what is the best possible outcome that is even on the cards at this point? i think that the prime , the best agreement possible outcome is that we do get the draft withdrawal agreement approved, that actually we are able to look again at the reassurances that mps need in order to support that, or alternatively, we are going to vote tomorrow on whether the article 50 period
should be extended. i am not sure that gives more certainty to businesses, but it does avoid us leaving in a matter of a few days' time without enough preparation being in place. the house of commons has got to decide what we are going to do. vonnie: that's fine, but really this would just be an interim effort to keep the effort that was going nowhere going. how do you solve the next part of the problem? what ash backstop, divorce actually looks like? guest: the irish backstop issue can be resolved. firstly, i think everyone hopes we will not need the irish backstop because we've negotiated the future of the relationship. the first part of the house cover mise has been working with government to -- house compromise has been working with the government to identify other proposals of checks and processes to avoid checks at the border, which is what is so
controversial. you've seen today into government publication on what would happen in the event of a no deal that they do actually have a situation where they can avoid checks at the border. so it is possible. it is a temporary situation, and that is what would happen. we've said there's a longer-term solution there towards a mutual agreement. i've just come from the house of commons chamber. statementscussing the from the house on the outlook of the economy. obviously everyone is talking about brexit, but secondly, week early can't get a handle of the economic outlook because the brexit situation has been resolved. when we go to the eu summit, were they going to say? guest: i'm not entirely convinced there will be a majority for any outcome. at the end of the day, that means the government has
♪ vonnie: live from new york, i'm vonnie quinn. guy: and from westminster in london, i'm guy johnson. this is "bloomberg markets." vonnie: boeing has lost about 10% of its market cap in the last two days as airlines reconsidered $55 billion in orders. democratic senator chris coons spoke with kevin cirilli about concerns surrounding the company and the faa. i am confident in the faa and the end up the new professionals who investigate accidents, but i am concerned about news that broke last night that five different american pilots had self-reported concerns about the safety and
operations. i am hopeful that the faa is going to quickly make a decision to ground the planes and speed up their investigation, but to make sure it is thorough and complete. kevin: you have legislation that would really impact to the agriculture sector in terms of the president's trade policies with china. a lot of business leaders and farmers looking to get relief from tariffs. talk about what your bipartisan legislation would do. sure,oons: one is to make with senator james lankford, there is an appropriate process for those seeking relief from tariffs to come in and make their case to the u.s. trade representative office. another is to say if we are in this trade war with china, let's not stop without guaranteeing access to the chinese market for american poultry. both our states are big chicken exporters. lastly, i am working with a bipartisan group of colleagues to make sure we understand the
challenge, the threat that china poses to us, our economic systems come our values and way of life. mr.n: i was shocked by hehthizer's testimony that was not sure whether tariffs would be lifted between now and xin the president and decide to meet. today ins can you take order to try to get that exemption? for the third round of tariffs in place, there is no set of exceptions in place. my larger point here on the u.s./china trade fight is i hope the president, heaven taking us -- having taken us this far, getting uscept not
things in terms of research that will give them a leg up going forward. i want our chicken export markets reopened. i want the soybean farmers to have their market reopened. but let's not stop this trade war for minor or to bury concessions. that's make sure we get something big. kevin: i do want to ask you about another prominent delaware politician, former vice president joe biden. speculation is that he will make his decision within a few weeks. i know you speak with him regularly. where is he at on this particular moment? sen. coons: i am very optimistic joe biden is going to run for president. i am all but certain he's going to. i know this is a big decision. our president is known for being personally aggressive, difficult, demeaning to his opponents. the way he conducted himself in
the 2016 campaign would give anyone with a family they love hesitation about diving into this fight. but joe is a fighter. he gave a remarkable speech yesterday to a national organization of firefighters, and it was a reminder of just how well he connects with and understands the people who put their lives on the line for us every day, who do a difficult, dangerous, dirty job. everyone knows our communities rely on firefighters. joe is the kind of person who can remind us that we are a great country. we don't need to be made great again. we have people who, through their service and commitment, have made us great, and he will inspire us and how to move forward together. ♪
right now, wti trading at 5775. anye numbers just about do second. from the department of energy. bill,s looking for a 2.57. we have a day -- a drop of 3.8 signaling barrels. a turnaround for crude oil inventory. the department of energy reporting a drawdown in the the of march 8 of 3.8 signaling next 3.8 -- 3.8 6 million barrels. positive oilof refinery positive position. barrelsbuild of 383,000 in terms of inventories. wti is up 1.9%. just close to $58 a barrel. tpg -- equity firm
charged in a conspiracy for admissions to one of the most k-swiss of colleges. this is a phenomenal story. we are seeing names we know from the finance world and the hollywood world. this is been going on for a quarter-century. , athe man behind the scheme college counselor in california, was in court yesterday pleading guilty. we know from the indictment about what his scheme was. coaching out -- coaches and dealing with tests. having people take the test for them. hiring proctors. accepting bribes to change answers. it moved onto sports. alping students try to find way in through lower profile sports teams like water polo, soccer, or tennis. creating fake profiles.
coaches were bribed at schools like stanford. the sailing team coach. and, at yale. are any of the high-profile parents involved in this potentially facing jail time? what is the legal risk they face? >> the next step is a hearing in boston on march 29. the parents have to figure out, are they going to plead guilty? do they fight the charges, do they plead something lesser? some of the state -- some of these people have big jobs in their professional circle. what happens to them? are they considered fiduciaries. ? -- ofs the head of a look a large law firm. vonnie: the people we know who are getting all the publicity, the head of the group that was inng this, he has turned
evidence. does he get away free? >> i do not think that is likely. he was a cooperating witness. i would guess that would help in whatever sentence he gets. we are talking about bribes. this was a rico statute, that is usually referred -- reserved for things like the mop. it will be interesting -- the mob. will be interesting to see. he ran this charitable foundation. the parents were writing checks to his foundation. they were getting tax deductions. we will see what happens with the irs and what else comes through this. does this undermine the credibility of the colleges involved in their admissions process? >> they are going to have to look harder, especially when dealing with athletic recruits.
the coaches, traditionally at schools like these, they have good working relationships with the admissions department. a couplesay we need slots for these positions. the other thing that was surprising is that these coaches who were bribed, they would go out of their way for these kids. the kids would not play on the team. if you are a coach and you are expected to produce a winning team, it is not in yourself interest. of course you're getting bribed. if you look at some of these teams, the water polo team at usc was apparently a team that won a lot of jam egypt. -- a lot of championships. it is surprising. vonnie: we will await further elements. no doubt there will be some even that parents are in custody. now with guy. guy: here's kailey leinz. british prime minister
theresa may is not giving up on her brexit plan. parliament will vote today whether to leave the european union with no deal in place. the other option is to delay brexit. u.s. aviation officials versus the world. the faa is standing by it's called not to dump really ground to boeing 737 max -- not ground the boeing 736 max -- 737 max. boeing will send the voice recorders to europe to be analyzed. business equipment orders rose. the broader measure looking for all of the global goods. that --seen as a sign
the parent of united airlines has ended a multi-year search by deciding to say -- to stay in chicago. we agreed to spend $500 million renovating a tower. united will extend the lease by five years. , 24 hours a day, on air and on tictoc and twitter. this is bloomberg. brookfield has agreed to buy -- up 11%.aktree is investors are loving the deal. what makes oaktree, which is primarily a credit distress fund, an ideal fit with brookfield? >> you hit the nail on the head. these are two different private equity firms.
they are very long-established and successful. they are leaders in their field. bringing them together produces not only a more diversified business, which is what you want in these companies because one down, you might want to make money on real estate. it creates a goliath of a company. currently, blackstone is the world's largest alternative asset management -- manager. this catapults the companies that have been large but not quite the stature of blackstone into a new arena. they are now to be reckoned with more so than even before. is this a late cycle move? cycle, butate in the it is interesting. private equity is operating today in its own rhythm.
has been for the last year and a half at near record levels. the leaders of the firms are bullish on the next few years and what they can do with their capital. if you are a distressed credit fund, you are anticipating what is going to happen if economies move into recession. if you a private equity by up shop, you've -- by out shop, you are looking at prices falling. late cycle, absolutely. at the same time, these firms are positioned well to take advantage of it. vonnie: how will they best use each other? the bill is so active and so focused on every thing. same with all of the brookfield principles. look at they do together? >> it is interesting. they say they're going to operate these companies independently. , they arement teams going to stay in their own positions, running their
company. they are going to try to keep the juice, the operations, the strategies moving ahead. they can ultimately benefit quarter to quarter on the earnings side. i think that is what investors are looking at. guy: is there a back office advantage? the firms operate in different areas in the private equity world. pickup could they get off of that? are there synergies? >> in most nominations, management finds ways to shape costs. -- in most combinations, management finds ways to shape costs. this was not driven by cost-cutting. this was given by brookfield wanting to get, to adopt a credit business.
ies we tend to see in big deals, there will be adjustments in the back office. i do not think that was the motivation. vonnie: vince continues to report on this. we will have updates threat today. coming up, we are going to be speaking with the man from prudential. the ceo is going to be joining us. that is next. this is bloomberg. ♪
westminster are taken over by brexit. normally we would be down here talking about the spring statement. the economic forecast. a man who works with the chancellor, john glen. he joins us now. good afternoon. in terms of trying to break would have a net -- what happens next, how impossible is it? >> we have seen the forecast. it is a modest reduction. japan, italy,han and germany. we are mid table in the g7. there is uncertainty around -- the uncertainty around brexit is not good. guy: your predictions are what. >> our productions are based on what we get from the oer. they are assuming we will deliver a smooth brexit. that needs to be delivered.
the fundamentals in terms of the economy dealing with the deficit and the amount of headroom available for the chancellor to make spending decisions are there. we are ready to do that. but we have got to do is get through this fiscal period. what is the major concern your clients and constituents are asking you? the whole country needs clarity. they want us to deliver on the 2016, to leaveof the european union in an orderly way. that is the critical challenge over the next two weeks. vonnie: has anyone modeled out what that is. -- what that is? issue, securing an
ample mentation period so that we have an amount of time to transition -- and implementation. period. that will be best achieved over the 20 months up till the end of 2020, which is what was sent out. to get to that point, we have got to get to the withdrawal agreement. that is the challenge we face over the next fortnight. guy: thank you for joining us. the economic ticket terry to the treasury. let's talk about one company having to deal with the events surrounding brexit. michael wells is ceo of potential. he joins us now. mr. wells, good afternoon. are you ready for a no deal brexit? parliamentarians are voting on it today. >> we are. we built our model on the assumption that we would not know the shape of brexit.
the only -- forfeits of our earnings are outside the u.k. our business most impacted by brexit would be european sales of energy prudential. we have replicated its funds in luxembourg. it is strategic -- it gets us strategically closer to our european clients. we are ready. guy: the chairman of the royal bank of scotland was talking about the fact that fish rather than finance seems to be higher in mind when it came to be the -- when it came to the briggs issue. would you agree? >> the chairman is also the chairman of our risk committee. naturalthat city's
capabilities, i think give it natural momentum over the discussion. there are strings the city has that can be negotiated before or after. the relevance of london as a financial market, the rule of law, the depth of markets and talent, you have seen since the announcement, that has not been eroded. if it has, it is barely at the edges. the timing of the negotiations and the impact on the city can wait a bit if they need to. there is some clarity. clearly the government has to solve the big issues. industry by industry have to wait for their return. vonnie: you say you have built your model on the assumption we will not know the fate of brexit. what is the strategy, the medium-term strategy for credential. -- four prudential. >> the key for us on the strategic side, the profitable growth you saw in today's numbers. without the capabilities we need
to compete with current challengers and new challenges. on the strategic side, the largest thing we are doing is separating our u.k. prudential businesses away from our international businesses. that is quite immaterial move for a 107-year-old firm. that is not brexit related. businesses have all grown in side in different characteristic. it is a move we have done with or without brexit. vonnie: who do you consider to be your immediate competitors? >> aia in asia is probably our closest competitor. the u.k. businesses are unique in that they have attributes noticing a competitor has. in have a good fund complex mmg. products at eight and a half-billion pounds of inflows last year. gives products from annuities to the historic
backlog to just about every wealth product including some that competitors cannot replicate. their position is unique. guy: you say the big strategic decision you have made is to go through with the merger. some of the comments i read earlier on from some of the analysts suggested they are still light on the details for how that is progressing. are you on track? is that delivering what you would expect in terms of the timeline? >> we are on track. there are -- there is some material stuff left. as the hired mike evans chair of the new mng prudential. he and john fully are assembling the nonexecutive directors. there is some work to do. the lens is quality, not time.
a disproportionate amount of the work is accomplished. we are very happy with where we are having announced a year ago we will get this done in a timely fashion. guy: the chinese equity markets have bounce back very strongly that have bounced back very arongly on what looks a low base and a change in the way the chinese authorities are viewing the market. that is producing quite a lot of volatility over a one-year period. as an effective asset manager, are you comfortable with that kind of volatility? are you comfortable with the way the chinese are managing the market? >> i am. it is a developing market. in terms of an equity market. the nature and structure of the individual stocks, ownership percentages, these are changing globally. you have your different voting
shares and rights appearing in the u.s. and western markets. it is a maturing market. it is maturing quickly like everything in china. in shanghai, we opened up our fully --are that -- re: spring team is one of the largest asset managers in asia. the direction of travel is strong. vonnie: what are your clients bringing to you as major concern? >> mostly, it is political. we are disproportionately dealing with middle-class client. -- middle-class client. s. most middle-class consumers cannot tell you the gdp in their country, but they can tell you if they are confident on politics. if they are confident on the field of the economy.
they do not put a number on it. our business is a risk off product. we are benefactors of this. you asked about china, with all of the political noise around china and u.s. trade. our sales in china in the fourth quarter were up 27%. vonnie: congratulations. michael wells, credential u.k.. thank you for joining us. this is bloomberg. ♪
$58. what is the tradition -- the introduction? >> when you look at the crude oil inventories, you are looking at a lead from -- this style of surprise from this particular data set. the other point to make is from a price action perspective. we are breaking out in typical fashion. crude oil falls, it is typically consistent. sideways go -- rallies go sideways. we are breaking out of one of the sideways candles. jumpy, we got a pretty big , what you do not see with a 24 hour nature of the crude futures. we got a little bit of a gap up. that was kind of simultaneous. we about 45 minutes earlier than the eia figures. this is all bullish. later in the week, we got that iaea report and opec report.
the opec report was much more widely read. this also tends to lean a little bit more aggressive on the demand side. basically, bullish is what i mean by aggressive. the iea is the other way around. vonnie: we have to leave it there. guy: coming up next, for our audience, balance of power with david westin who is going to be joined by the former u.s. transportation secretary, talking about mowing and the ethic -- talking about boeing and the faa. this is bloomberg. ♪
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david: from bloomberg world headquarters in your, i am david westin. -- in new york, i am david westin. and even less uncertain brexit. and another jail sentence for trump campaign manager paul manafort. from washington, sean diamond on where we are with trade talks in china. it seems even less certain than it was yesterday. >> this was a week we were supposed to get some degree of certainty from brexit. theresa may had hoped her deal would pass yesterday. of course, it was defeated a second time by the stomping -- numbervotes, eight of votes. it is not quite take it off the table. that is the default under the u.k. law. if a deal is not reached or some kind ofay