tv Bloomberg Markets Americas Bloomberg March 18, 2019 10:00am-11:00am EDT
>> it is 10:00 a.m. in new york, 3:00 p.m. in london. i am vonnie quinn. guy: i am guy johnson. welcome to bloomberg markets. vonnie: a lot to talk about today, including the latest brexit developments. breaking data on u.s. housing. there has been some weakness. today, the national index of homebuilders coming in at 62, just shy of the estimate of 63. last month was also 62. there are some signs of weakness. the s&p 500 is up 0.4%. it is that it's such an high. boeing is having -- it is out of high.on boeing is having an impact. a study with beneficial results for that company.
the dollar index is 1.2. it is down for its sixth session in seven. a little weakness today. sterling is 0.5% weaker today. we are seeing euro strength. we are watching sterling. guy: we absolutely are. we are seeing a bid helping out the euro. up 0.2%.stocks are we saw the breakout friday in u.s. assets. we will talk about that. the cable rate is lower today. we could get news in the next hour or so as to whether the third attempt by theresa may's government to deliver victory in her brexit plan is going to go ahead. we will find out that news in a moment. sterling is on the downside. it is looking very tough for theresa may to get that across the line tomorrow. looking across the banking
sector. cyclical stocks today, commerzbank is up more than deutsche bank. both are higher today. commerzbank around 6%. deutsche bank around 4.5%. these two banks have thrown in the towel and decided the only way forward is to merge. vonnie: we are going to make and green. boston.s us today from a lot on our plates today heading into the market sessions, the fomc, the possibility of brexit moves. what is highest on your priority list? brexit is highest because it could be the biggest turning point we have had since the referendum. that will primarily in fact the u.k. economy. -- impact the u.k. economy. it probably will not impact the
u.s. or china. we are not expecting the fomc to do anything. supposedly to the deadline for brexit. what happens between now and then? it seems like theresa may is trying to get enough support to pass this deal. she is looking at a long extension of article 50 to galvanize people into supporting the deal. if we have a long extension, that gives those that want to to negotiateime that. it is not clear she can get support to pass for deal. they might have a vote on tuesday. if she doesn't have the support of they won't have that. currently it will come down to the dup. there is some talk of financial onentives to get the dup
board. it will also come down to the tory party. there are some real unknowns. i want to break news we are watching here that relates to easyjet. withdrawing from the bidding process for the italia.carrier also suggesting that the u.s. delta airlines is getting closer to investing 100 million airlines into that troubled italian carrier. we have are you talking little bit about brexit. to an extent are negative rates responsible for the deutsche bank and commerzbank merger? questioning whether negative rates have affected the transmission narrative. megan: when you are reading articles about the merger, it seems everybody is blaming
negative rates for it. i don't think that is the whole story. i think negative rates have been difficult banks. this raises an interesting implication about negative rates. when i asked bankers what they are going to do in the next downturn, they think negative rates are on the table. i think if the ecb starts raising rates, that the beast and you would -- that would be ive.ulat guy: what does it tell us that these two banks have not been able to find a way out of their troubles? what does it tell us about what is happening? these two banks only have one solution, basically to merge. we were meant to have a banking union. that has not happened in any meaningful way yet. we have not had any cross order mergers. megan: we have a loose thinking adoration -- banking federation
in europe. it is all political. not all countries are the same size. everybody has different rules. this is coming down to whether the german government is willing to maintain its stake in commerzbank. and also whether germany is willing to incur the job losses. some reports of up to 30,000 people laid off due to this merger. that is difficult politically at a time when the political center is not holding. as is coming down to politics. yield: the u.s. 10-year 5.961. does it stay at these levels? is the fed comfortable with that? megan: it could go a little higher. not significantly so. i think we are stuck lower for
longer. the fed does worry about it. if they want to hike again, and i think it will, you have to worry about converting the yield curve. the yield curve inversion has picked it seven under the last seven recessions. you could argue it is so flat because we are issuing so much end andthe short deflation is the last tail risk. it is not a deflation of growth prospects. most think if a yield curve in asion results and in -- recession, they will probably make it happen. continues withly a little wind behind it, how does that embolden the hawks
when it comes to the fed? megan: if equities continue to rally, financial conditions ease. if you look at the reasons that jerome powell said the fed was causing, it was global growth, china, financial conditions. chinese growth should look better. brexit is still a mess, but that is a second order issue. i think these crosscurrents will look fundamentally different. the second half of the year, if rally,an equity market we will be having a different conversation about what the fed is looking at. i think there is room for more rate hikes in this cycle. one or two. greene coming to
us from boston. let's check in on first word news. kailey: in the netherlands, dutch media reports at least three people were killed in a shooting on a tram, possible terror attack. the shooting took place in the city of utrecht. in new zealand, the prime minister cabinet agreed to overhaul gun laws. they issued a crackdown on semiautomatic weapons. rateealand's gun ownership is one of the highest in the world. saudi arabia is opec and its allies need to stick with cutting output until at least june. they met in azerbaijan over the weekend. here is the saudi oil minister. >> until we see it hurting
consumers, until we see the impact on everybody, we are not going to change is. -- horse. ourse. unions haveoyee announced their opposition. there is speculation that he thousand positions could be cut -- 30,000 positions could be cut, one out of five of the global work. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. guy: thank you. what is coming next, boeing feeling the heat with its 737 max may have been flawed. this is bloomberg. ♪ bloomberg. ♪
guy: live from london, i am guy johnson. vonnie: from new york, i am vonnie quinn. this is bloomberg markets. there seems to be a rally across the board. abigail: we have stops mainly higher across the board. the dow, the s&p 500 higher. the s&p 500 is up 0.4%. the german dax is down. the rally in china continues with optimism. there has been some volatility. let's take a look at an 11 day chart. we have the fed decision on wednesday, continued decision around brexit.
last week the best week of the year for the s&p 500. rocky period.at let's take a look at some of the big movers. edwards life science higher after they put out positive data. wells fargo is said to be close to selling their retirement plan services to principle. boeing continues to fall around that 737 max 8. look at this, facebook down for a third day in a row, down 2%. about privacy. we have had outages, the retirement of chris cox. the difference between facebook and the s&p 500 over the last year. this is last february.
that trade of volatility having the possibility of government intervention in big tex. last year, we had that disastrous quarter. facebook is the tell. huge divergence. lastly, facebook on pace for its worst week of the year. the s&p 500 its best week of the year. facebook could be a leading tell on the s&p 500 or maybe facebook will lift s&p 500 higher. guy: quite a decent spread. thank you. boeing shares trading down today. thedevelopment shows approval process for the 737 max may have been flawed. let's think about this story and how it is going to impact boeing's recovery from the 737 max issue.
faa andblem with the boeing being too close together areis that likely to me we going to see any changes to the max? are we going to have to see a recertification of the airframe? closeness and cooperation of boeing and the faa in certifying the plane and boeing taking over in some places, it will mean they will have to meet a higher threshold to get the airplane back in service. it will affect their ability to get it back in service. it may take longer and require more testing. it opens them to liability from customers who have had to ground their fleet. vonnie: heightened scrutiny from whether boeing had
too much input. what a lot going to take on that role? >> it appears in some cases the regulators deferred to boeing. some of the areas i have seen where they deferred, there were ranges boeing was going to come back to, sort of like elevator deflection. the rangers were wider when the airplane was finally certified. faa saying they were not aware of these. i think there's going to be a little back-and-forth on how involved boeing was and how much the faa gave to them. it is going to raise the threshold on getting this airplane back in service, which is bad news financially for boeing. guy: could this have an impact on any other airframes? financialspact the around the 797 and the launch date around that?
think because this is the most recent airliner that has one approved, and the last would be the 77, my guess is there is not this issue around other airplanes. faa scrutiny on , that probably increases the scrutiny. the changes are not a lot on that airframe. when it comes to the new middle-market airframe as boeing calls it, we think boeing needs to build a new narrowbody. the wings are too low. you cannot put bigger engines underneath it. bigger engines are driving efficiency and the airliner world. i know boeing wants to launch the nma midyear this year, but unless that is wrapped up in a
narrow body fix, they may have to look at an all new 737 because the characteristics here are not perfect. they are less stable than the previous one. they have try to push it through the faa process to get it approved. boeing -- boeing is said to have 5000 orders. how does this affect it? >> i think the backlog right now is 4000 airplanes. that will be a lot of the major operators around the world, ryanair, southwest, united, american, really big operators, a lot of customers. there is a lot of follow on. they would expect this airplane to be in service for 15 years or something like that. that 4000 should not be all the
sales. anotheruld probably be 4000 sales they expect to get from the airframe. the challenge if they have to modify it and make it heavier and less competitive against the a380 would hurt it. vonnie: that stock having another down day. raise $2.1 billion in its ipo. more on that next. this is bloomberg. ♪ ♪
news. alan krueger has been a contributor often on this program. a lauded of served in the administration, served on the board of uber, was at the forefront of labor economics. the gig economy was his thing. guy: he was part of the economists that focused on the impact the labor economy was having. he served in the obama administration. roadgularly crossed the from academia into the various administrations. i think it is an incredibly sad day for the world of economics.
he was certainly one of the greats. his research was highly regarded. as you say, in terms of where we are now, what are we going to talk about next? t.'re going to talk about lyf he was part of the academic research behind those projects. madison professor of political economy who passed away over the weekend. thanhoping to raise more $2 billion in its ipo. what is the valuation like? what are people saying about this? bek: it looks like it could $19.6 billion. it is another higher range, 21 to 23, which could be the enterprise value. ution.is a lot of dil
there are all of these stock grants to employees that could affect how we think of it. islooks like the filing looking at 19 put $6 billion. guy: trading on five times sales, it could be six or seven times. others this saying about companies coming to market? >> i'm interested in how it trades. we've had the excitement from private investors. we will have to see how much above it can go. fundamentally how receptive public markets are to accompany this. to $2.2nue doubled billion. if you look at the top line, it ana cool great investment in industry that could transform transportation.
if you try to figure out the actual cash flow, you will have trouble. how those groups of investors evaluate the company will be super interesting. vonnie: thank you. thank you for that. cut a little short on the news that alan krueger passed away over the weekend. great friend to bloomberg, appeared on all of the shows across bloomberg radio and television globally. alan krueger passing away. this is bloomberg. ♪
kailey: in the netherlands, at least three killed in a shooting on a tram. nine others wounded. police say it is a possible terror attack. the suspect is described as a 37-year-old man born in turkey. resumed hisump tweet storm on general motors today. for a third day and a row, the president called for the company and united auto workers to reopen a factory in ohio. he told the automaker instead it should close a factory in china or mexico. the president also said he asked the ceo to sell the place. senator kirsten gillibrand of new york has joined a crowded field running for the democratic presidential nomination. she said america needs a leader who makes big, bold, brave choices. she positioned herself as a leader of the me too movement. obama economic advisor alan
krueger has died, a longtime economic advisor at princeton -- professor at princeton. 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. you.e: thank markets are holding steady today at the start of a busy week. joining us with more is bloomberg's stocks editor dave wilson. the s&p 500 is holding up again for another monday, up 4/10 of 1%. where does this end? dave: that is the big question. at the end of last week we got above the highs we saw in october, november and december. people were talking about that in technical to return -- technical terms as an area of resistance. go?much further do we as you suggest, it is only about 100 points away from the record in september, so we will see if
there's enough momentum in stocks to get there. guy: what do you do if you are a bear?do you fault ? do you go all in? give me a sense of the strategy some people will be think about. dave: it is probably going to take patience. you seen such a down move at the end of last year and such a rebound back from that. this is a mini version of that in the last week or two. it really becomes a matter now of how far down is down in terms of earnings. you look at first quarter forecasts on the s&p 500, analysts anticipating you are going to see decline in profit, possibly another when the second quarter. at what point do you get the evidence to suggest that indeed that is going to happen or perhaps be worse than people are anticipating? if you are a bear, that is what you are presumably hoping for at this point. vonnie: why are people worried about lower per dissipation in the small-cap range? dave: simile because using about
smaller -- lower participation in the small-cap range? people want because to get in, but don't necessarily want to stay in. they want to have stocks they can get out of if they need to in a hurry. that tends to be the bigger companies. that is the sort of thing that if you are really looking for signs the rally is going to have staying power, that you pay attention to. guy: dave, is the fed a risk this week? it seems to be no, but i am wondering whether people trade cautiously in advance of it in case that pale risk of a hawkish tone comes through. dave: you certainly have enough back-and-forth with the fed and policymakers, i understand why people might want to sit things out in advance of the rate
decision coming wednesday. you do have that perhaps as something that would hold back trading until at least we have arguably a confirmation of the policy shift that really has gone on for the past several weeks with the idea that the fed may be kind of throttling back in terms of raising rates and cutting its balance sheet as well. vonnie: are things to bloomberg's dave wilson for keeping an eye on all things markets. guy: coming up, russia's win. decision onfers the extending output cuts. more on that story next. this is bloomberg. ♪
♪ guy: live from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. ."is is "bloomberg markets it is time for your latest bloomberg business flash, a look at some of the biggest business stories in the news right now. it is the biggest deal ever in the international payments sector. fidelity international payment services has agreed to buy worldpay for about $40 billion. the buyer is offering a mix of cash and stock. the combined company will have revenue of about $12 billion. apple has come out with new versions of the ipad. the ipad air measures 10.5 inches and starts at $499. the new ipad many is 7.9 ash mini is 7.9d inches and starts at $399. the first female superhero movie
from marvel is still packing it in "captain marvel" took in $69 million over the weekend to lead the box office for the second week in a row. globally it has grossed $750 million. that is your latest bloomberg business flash. guy: let's turn our attention to what is happening in azerbaijan in baku. saudi arabia's oil minister says opec and its allies have a lot markets.alance oil anne-marie is live in baku. reporter: it is increasingly looking like the russians are the ones that are setting the agenda. just last night in a last-minute
private press briefing, talking about they have so much more to do in terms of the cuts. inventories are building in the u.s.. we would have to make a decision coming up. it was clear that he said there's more work to be done to clear this glut, while the said weoil minister need to wait and see. he said the market is looking stable, a good price right now for consumers and producers, and we need to see what develops, especially when you are considering supply-side with the sanctions on iran. scrap they said they will the april meeting and there is only going to be one in june, so it increasingly looks likely they are listening and taking that q from alexander novak. i think it makes much more
sense to start discussing in may or june when we actually have a lot more clarity on the state of the market and how all of these uncertainties are playing out. rie: novak looking for more clarity, so that april meeting is off the table, and deciding whether or not to extend these cuts the rest of the year. they will make that decision in vienna, but in june. vonnie: the rest of the opec members seem pretty committed. saudi arabia the kingpin almost. saudich does still control the dialogue? annmarie: they are the defective leader of the opec, while alexander novak really is the leader of the left side, the alliances. that is why the two run this monitoring committee together. of course, the saudi oil minister has so much sway, and
they make clear in his closing remarks today that they've done it in the past, and we saw this last year, that they can move on either side of the equation. if they are seeing a supply crunch, they can pump more. we saw this in the lead up to when we thought the u.s. was going to bring irani and -- iranian exports to zero. right now the saudis are producing less than 10 million barrels a day, so they are trying to clear this glut. at any moment, they are saying they could ramp up if we were to see any supply constraint. guy: bloomberg's and marie marien -- bloomberg's ann hordern joining us. vonnie: the former obama economic and pfizer alan krueger -- economic advisor alan krueger has died. he served as the chairman of the council of economic advisers, and since the late 1980's was
professor at princeton, the james madison professor of political economy. alan krueger was 58. we are joined by peter coy and michael mckee, both of whom knew turface or kruger over minute -- new professor kruger over several decades. peter, he was obviously known as a labor economist, among other things, and it great work from terrorism related economics to the gig economy. what are your best memories of alan? peter: he had a stellar career. he was the chief economist in delivered apartment under president clinton, the head of the council of economic advisers under president obama. labor economics was his specialty, but i would say what he is probably most women but for is his work on the minimal wage, finding that contrary to what you will find in any economy 101 textbook up until his work, it is not true that
raising minimum wage necessarily kills jobs. he looked across the border between new jersey and pennsylvania as the natural experiment. one raised minimum wage, and one didn't, invest food. he found they did not have -- in fast food. he found they did not have the expected effect. that research and following research to corroborate and extend it helped make the case for the higher men, wage we are seeing now in states and cities across the country. vonnie: a lasting legacy, and those studies and equality in america. michael mckee, he was counselor to tim geithner in the financial crisis days, before he became part of the obama administration. he was counted on widely for his research and expertise. michael: and he identified a lot
of the issues in labor economics before they became part of the mainstream conversation. he did his work on the minimum wage, laying a foundation for what ended up as a broad increase in minimal wage around the country. most recently, he had done work on the gig economy and individual workers. in recent months he had been doing a lot of work on the opioid epidemic and how it affected workers and the labor force and the overall u.s. economy in showing it had a greater impact on the economy then perhaps had been expected, which helped drive the focus in andress on the whole issue helped some of the additional money that has been spent on that program trying to help people in the crisis. so he's had an enormous effect. i think the biggest thing i would also say about him is for somebody who had such an oversea effect, he was perhaps one of
the lower key economists. he did not engage in a lot of histrionics. he was just one of the nicest people you could meet. vonnie: we can attest to that because he came in here so money times over the years, and was absolutely wonderful. michael: he was a regular. one little known fact about him was that he was a high jumper on the cornell track team. he graduated four years after i did, actually, so we have that in common. he was a guy who knew a lot of journalists. he was a long-time columnist for "the new york times." he was the kind of guy who would help you through understanding a story, as mike said, in a low-key way. he just had a book out in rockonomics." he was a longtime fan of rock 'n' roll. guy: picking up on that, the
book was out. nobody saw this coming. was there any indication that he was unwell? when did you guys last see him? peter: i don't know. i wrote him last week to interview for a story and didn't hear back. that was the last i knew. michael: i had not talked to him in about a month, and i had no indication there was anything wrong. nobody i know did. everybody in the economics profession and journalism is shocked at this point. the lastings of legacy, as you guys have already pointed out, the impact on the minimum wage is clearly probably one of his biggest impacts. as you say, that is likely to be a longer lasting legacy. in terms of who's picking up behind him in terms of studying around that sort of space, is there a circle around him that was working on some of this research? as we move into 2020, inequality
hooks like one of those great touchstones a lot of politicians are going to try and use. who else was great in this space? was he the absolute forefront of it? any other economists around him? peter: i think it was an issue he was heavy into back in the 1990's, and then he sort of ceded it to other people who came along. he moved on to other interests. you have people on the other side who do believe them enema wage is harmful -- the minimum wage is harmful. there has been very little research about the impact of the minimum wage as high as $15 an hour. most of the work was done on changes much lower than that. , sibleyn't know yet because we don't have the data, how much there will be in effect from these very high numbers. michael: david card is an
economist who worked closely with him on this research, and david has continued that. somebody that people have been watching. and of course, thomas piketty and his famous tome a. couple of years ago it has become -- tome a couple of years ago. it has become a mainstream issue, and it will be interesting to see in 2020. far in terms of how progressed we are in understanding the economics around the gig economy, we've got lyft and plenty of others coming through. how did his work impact our understanding of how business is like this are going to impact not only day-to-day life, but the broader kind of structure of the labor market? peter: it is hard to know exactly because it is an evolving area, but what he tried to do was categorize gig workers and show who they were and what they were trying to get out of there gig economy work.
the idea that these were people who were sort of off the books, and sort of on the books. there obviously was a lot a focus on that for a while in terms of whether or not they were contractors and how they should be paid by the companies. he definitely contributed to that. his findings were never really conclusive. he did show that they didn't make as much money as people thought, and obviously did not have benefits, but he also noted that many of them were choosing this kind of work. the last i talked to him about it, he was saying there is still a lot of work to be done in that area. peter, let me ask you, 40 years of students have been put through princeton under alan krueger. what were the classes that he would teach, and what can we look forward to as his lasting legacy for all the students that passed through under him? peter: i am not sure what he was assigned to in any given year,
but i know he was assigned to intro macro. ben bernanke was there, of course. a lot of people still there. paul krugman was there until recently. it is a strong department, and he was integral to it for a long time. labor economics is a specialty of princeton. vonnie: our thanks to both of you, peter coy and michael mckee , friends of alan krueger, the noted economist and princeton professor. our condolences to the family. sad news being announced by princeton today that alan krueger, former chief economist at the labor department and james madison professor of political economy at princeton university, passed away this weekend.
focus. joining us from the cme is the president of blue line futures. we are headed towards $60 a barrel. do we reach $60? guest: $59.60 is a target of hours. up here we are going neutral. $60 is overhead resistance. a lot of the news came last week with saudi arabia cutting production, as well as exports. they say they want production to stay well below 10 million barrels. we have to see further support of risk sentiment to take this thing higher. i don't think that may have been right yet, but we certainly aren't going to fight it here either. well.ne $1.90 as vonnie: just a brief question on the weakness for the u.s. dollar, we are seeing a six-day of weakness in seven.
is there anything we should see in this, or primarily other currencies right now? guest: the dollar is weaker ahead of this fed meeting. the fed is dovish, and we expect them to stay dovish. i would keep a very close eye on the currency this week. if they confirm with the dot plot that they are not going to hike this year, as well as a time table to continue unwinding that balance sheet, we could see the dollar selling off further. there's a huge short position in treasuries. a small long position in gold. a three to one leverage position in the euro. i think a lot of this gives you the opportunities in the market to see gold higher, the euro higher, as well as treasuries go higher if the fed sibley confirms their dovish rhetoric. vonnie: our thanks to bill baruch, president of blue line futures. guy: time now for the stock of the hour. prada in hong kong of have dropped to their lowest
level since 2016. joining us is taylor riggs. china to blame, i understand. taylor: yes, this is all coming from china. about 22% of the revenue comes from asia, their second largest market after europe. about all of 2018 concerned a slowdown in the chinese consumer really affecting hong kong spending, as well as a slowdown on the mainland and some of the impact it's had on their sales. that unexpected profit miss citigroup was saying came in so bullish, too bullish, into the year has translated down to the bottom line. it really did start on the top line as well. interestingly, 77% of their sales come from leather and shoes. that's as fell 1%, so big market for them. leather only growing 3%, so started getting hit on both the top and bottom line. really you can always blame the chinese consumer, i guess. vonnie: and the chinese consumer
had a lot of issues with u.s. fashion houses and italian fashion houses this year. what about peers? prada wasn't able to give her a from their peers. others like gucci -- able to differentiate themselves from their peers. others like gucci made adjustments, so that was why they struggled a bit. vonnie: coming up, "balance of power post quote with david westin. -- "balance of power" with david westin. that is next. this is bloomberg. ♪
headquarters in new york, i'm david westin. welcome to "balance of power," where the world of politics meets the world of business. cirilli inkevin washington. reports boeing should have known about the 737 max 8. kevin, let's start with you at the white house. there's a feud between the president and general motors and the uaw. what is this all about? trump president reiterating his criticism of general motors to shut down that lordstown plant. as many as 70,000 workers impacted by -- as 17,000 workers impacted by that. ohio is a key battleground state. gm are trying to put pressure on uaw, but the back-and-forth between the progressive union, as well as the ceo of general