tv Bloomberg Best Bloomberg April 13, 2019 7:00am-8:00am EDT
>> coming up on bloomberg best, the stories that shaped the week >>. a lot of investors i'm talking to have questions about how real that order book was. >> the brexit click finger will last a little longer as the eu grants the u.k. longer time to seek a deal. trade tensions rise again as the u.s. and europe. >> under pressure.
uber officially files for an ipo. downside risks ahead for europe. rates can go either way. >> there were not nearly as dovish as some in the markets predicted. abigail: christine lagarde puts the forecast in perspective. >> moving from what we assumed would be synchronized growth to what looks like sink slowdown. abigail: it is all straight ahead on "bloomberg best." welcome. i am abigail doolittle. this is "bloomberg best," your weekly review of the most important business news, analysis, and interviews. let's start with a day by day
look of the top headlines. monday, investors looked with interest as the world's most profitable company took orders for its debut on sale. saudi aramco has received orders of $75 billion for its debut bond sale. it is one of the most anticipated of the year after major investors briefly shunned the kingdom after the killing of jamal khashoggi. at $75rs standing billion. that order book continues to build. yesterday we were talking about saudi aramco selling $10 billion. now people are talking about at least $15 billion. all that demand is starting to seep into pricing. that is where we are seeing amazing stuff. portion, year price guidance around 125 basis points over equivalent u.s. treasuries.
when the deal actually prices today, it is very likely the aramco bonds are going to come inside the saudi sovereign, something we rarely see in capital markets. >> saudi aramco issuing $12 billion of bonds in its debut. we have heard all sorts of superlatives. what does it say about the amount of demand versus what they went to market with? an incredible amount of demand. you have to ask yourself how this came to be. these banks that have a vested interest in seeing this go well, so they drummed up a lot of demand. it is effectively sovereign credit in a lot of ways. you have emerging-market sovereign buyers, and investment who are clamoring in.
that is a you get $100 billion in orders and yields that are lower than the sovereign spreads. the u.s. is proposing tariffs on a host of european goods, including helicopters, seafood, and cheese. the is being caused by what u.s. administration calls illegal subsidies on airbus. prepared toit is retaliate. this is $11 billion. it is a hefty number, but not huge. >> this will be about aviation, aircraft components. this affects the entire supply chain, but also cheese, wine. the europeans were not expecting this. it is a difficult time for them politically because of brexit uncertainty, the european elections, but also the european economy has slowed. they don't know what to do. >> under pressure. go, andegotiators, no
the parliament has expressed itself against negotiations under pressure. >> the eu is preparing retaliatory tariffs on the u.s. over boeing. >> the statement did together easily, but it did come together in the end. it comes at a pivotal moment for china. any edge that a country can get over another with china looking stronger right now, that gives it a leverage point in these talks with the u.s. vonnie: america's biggest banking executive testifying on capitol hill a decade after the financial crisis, gathering seven ceos from the biggest
banks with the title holding megabanks accountable. it feels like there might be something else in the offing for these lawmakers. lawmakers arecan a bit unsure about the purpose of this hearing because there is no major piece of legislation that is being discussed. from the democratic perspective, they say this is a long overdue hearing. the overwhelming theme from jamie dimon to david solomon is that the banking system from their perspective is safer. this is as economic forecasters are raising the specter of a looming recession. much safere banks and sound are in capital, liquidity, and recovery. there are things washington can do to police the banks in a smarter way. it was clear from the committee that they don't want these things to get much bigger or expand into new products at a time when they were just about ready to. the fed it released minutes
from its march meeting. policymakers last month grappled with significant uncertainties and persistently low inflation. if you look at the minutes, they were not as dovish as some anticipated. they were looking for another clue as to how long the fed would keep rates on hold. we got fairly straightforward minutes and no real justification for why they changed their view except that they did. they put everything on hold. the markets still pricing in rate cuts. the members of the fed saying they are open to raising rates again if they have to or want to. they are putting everything on the idea that we have risks on the horizon, and until we know what happens with those risks, we are not going to move. haveitain and the eu reached a late-night compromise on brexit. it is now tabled until october
21 with a progress review in june. theresa may must sell the deal to lawmakers. >> this is not a long delay or short delay. it is something in between. it is a delay of six or seven months until the end of october. important to not lose sight of what has happened here. we have a no deal brexit looming tomorrow. it is flexible, so it means the u.k. could leave before the end of october if the u.k. is able to get its act together and approved the legislation to do that. europeanhe end of may, elections, it has had to promise it will participate in those if it cannot pass a withdrawal agreement in the first few weeks of may. never say never in the brexit story. >> one of the most anticipated bond deals of the year.
saudi aramco bonds are sinking for a second day. it sold as much as $100 billion in orders early this week. what does it tell us about the significance of that massive order book? does that tell us that number does not mean very much? questions about how real that order book was. if you are seeing these bonds sink on their second day of trading, maybe there was not $100 billion of orders for $12 billion in bonds. uber has officially filed for ipo. giving the potential public market investors a first look at crucial information in the business. uber's offering is expected to thise largest in the u.s. year and the 10th largest of all
time. >> it is one we have been waiting for a long time. one of the surprises is how much ridesharing business this deal is. the vast majority of revenue comes from ridesharing concentrated in north america. the focus on is ethics, making the argument that this is now a con changes company. -- conscientious company. banks kicking off earnings season. surprisedo initially with its best first-quarter profit in five years. sentiment as turned negative. got thegs on the call wind out of investors sails. >> they are guiding down 2% to 5% this year. another thing that is not surprising is they did let go of
any kind of guidance related to the asset cap. the last of guidance they gave was that it would be through the end of 2019, suggesting as early as 2020. i think a lot of people think that is going to be pushed down. >> that is the big story of the morning. interest margins are up at jpmorgan and wells fargo. it was not the straightforward story across both banks. jpmorgan had healthy lending across consumer and commercial segments. wells fargo was not aas clean. points., s&p 500 up 19 abigail: still ahead, as we reviewed the week on "bloomberg best," christine lagarde explains the imf's gloomy global forecast. perspective on monetary policy.
ofaccount of persistence uncertainties related to geopolitical factors, the threat of protectionism, and vulnerabilities and emerging markets. jonathan: your take? >> boring meeting. boring news conference. a repeat of what we have had the last few months, leaving the cards open, and making us understand he has some ideas, and it takes time to get the governing council around. that is about reserves. netanyahu looks set to secure a fifth term as prime minister in israel after a bruising election campaign against his chief opponent gantz. with his right-wing allies, benjamin netanyahu has a clear path to forming a governing coalition. give us the key takeaways for a global audience. >> last night was a good night
for prime minister benjamin netanyahu. while his party seems like it will end up tied with his top rival, his party gained seats compared to its current standing in parliament, and his right-wing allies had a good night. most of them will cross the threshold to enter the next parliament. tot gives him a key path forming another coalition with his right-wing and religious allies and leaving him poised to having a fifth term as israel's prime minister. australia heading to the polls. elections have been called for may 18. looking to win an unlikely third term. how much of an uphill battle is this? >> it is certainly going to be a challenge. 47-53, has been behind in the polls for a number of years. has been governing minority for quite a while.
the government is in an unusual position. it will have to win seats to get back into power. scott morrison has held off as long as he could before announcing this. we know it would be may 11 or may 18. voters will forget all the dysfunction of the last few years. >> advances on the capital of tripoli even as the u.s. urges a political resolution. >> there seems to be an intensification of fighting around tripoli. the internationally recognized government has been moving more tripoli to try to push back forces. >> extending its rally to a
five-month high today as libya fights back against rebels advancing on the capital tripoli and raising concerns about supply disruption. how close are you watching the situation out of libya? >> we are watching north africa very closely because we see what is unfolding in tripoli and algeria. it is a minor supply risk at the moment. we have a spot price for this zero to three month period of time of zero to five. >> the u.s. and china seem to be ever closer to that trade deal with steven mnuchin saying they have pretty much agreed on enforcement procedures. he says they will open offices in each country to ensure the other lives up to the terms of any final deal, including binding pledges that would trigger retaliation if anything broke. are we really near a deal? >> we have set for a long time
enforcement would be a key test. to open offices in the u.s. and china is a firm step towards that. the u.s. would give china until 2025 to live up to some of the commitments, and then you would have an enforcement office in china and the u.s. to make sure both sides are living up to the deal. that is taking one part of the enforcement uncertainty off the table. this absolutely moves us closer to a deal. >> china's foreign currency holdings rose for a fifth month as lower government bond yields in developing markets left at valuations. can it last? >> there is obviously a pricing effect on this. the big picture is that china's reserves are on a pretty good streak at the moment. they are in a stable. word. .- they are in a stable period
spend down its reserves. we're nowhere near those conditions at the moment. reserves are comfortably over 3 trillion. consumer confidence surged in march. what is the key takeaway? >> it is about the full price component within consumer prices. you take cap consumer energy, you saw that takedown. baby that is what the central bank will be focused on. factory prices came in line with expectations, up 0.4%. commodity prices slightly higher. good news at least around the edges for corporate profitability. it reduces those concerns about inflation. that is going to be squarely in focus.
selectionld's biggest is underway. 900 million indians begin voting today across 20 states and a democratic exercise that will take six weeks to complete. in his reelection battle, narendra modi squares off. >> 900 million indians will decide the next five years. these elections will take place over seven phases starting today until the 19th of may. the results will be out on the 23rd. it is a humongous exercise. >> controversy over president trump's picks for the federal reserve board. republicanur senators saying they would vote against herman cain. he now lacks republican support if democrats unite.
stephen moore also getting congressional push back. >> appointing a political person, people based on their political views can be detrimental to the organization itself, the central bank and their credibility. it could be detrimental to the markets. it could create some instability if they bring somebody with political views and they just are making decisions trying to make decisions based on that. ♪
growth outlook, citing a bleaker picture in major economies. it sees the world economy expanding 3.3% this year, down from 3.5% is sought in january. christine lagarde fleshed out those forecasts in an interview in washington, d.c. from the moment, moving what we had assumed would be synchronized growth roaring a year ago to outlooks like a synchronized slowdown at the moment. trying to understand the root of that and identify the policy mix countries can apply to go back to roaring growth, which we are still hoping for in 2020 because we believe while this year will be 3.3% global growth, next year we are forecasting 3.6%. longer for monetary
policy. how much of a concern is it that they will have to roll back? >> they will probably have to roll back in a gradual way. gradual is a word that applies to fiscal policies. view in policy in our many countries could remain accommodative. we welcome the ecb and the fence recent -- fed's recent decisions. they will have to look at their balance sheets and start dealing with it. >> how dangerous is this fed?eying around with that tha ? >> they have a mandate which was given to them constitutionally or bylaws. beir mandate is going to
either price stability and unemployment, price stability only, generally around 2%. they have to rely on data, on theyrs, on hard data that collect in order to define what is best in order to deliver their mandate. i think it is a sort of healthy approach that will give them help allty and will economic agents anticipate what will happen and what they can do best, how they can organize themselves. abigail: coming up next on "bloomberg best," more compelling conversations. martin gilbert on the saudi aramco bond sale. nominee stephen moore and bob iger on the launch of disney's streaming service. bullish onis emerging markets regardless of
abigail: welcome back to "bloomberg best." i'm abigail doolittle. time to revisit some of the week's top interviews. we got plenty of investor perspective on saudi aramco's $12 billion bond sale. here is martin gilbert at the bloomberg invest conference in avid dobby. dabi. >> it looks as if it's gone
really well. >> as an investor, you seen plenty of bond issues. would you say this is something to buy more of in the secondary market on the reading of the data you have? >> i suspect it will be too pricey in the secondary market. i don't know. if i say to a fund manager to buy something, he sells it, so -- he will probably buy now rather than sell. >> you think you could cheapen up perhaps and the second market. >> i'm not sure. i think the demand is so massive that from what i read, it will go well. >> is this a seminal moment in society as a turning point in the society story? the aramco, sabic, and you can tack on the bond story. it's a big reason the market. is it a pivotal moment? martin: yes. aramco is a powerful company.
the way it has gone must be a real boost to their ambitions for aramco. abigail: one of the world's largest asset managers is urging investors to bet on emerging markets. in another exclusive conversation, david hunt told bloomberg why he is steering clients in that direction. david: we look at where long-term growth is, and we believe that the emerging markets are where most of that growth will come over the next decade. i spent quite a bit of time in asia. we absolutely are investing across the region. we think that most investors are not exposed enough to asia and emerging markets. >> long-term growth, sure, in emerging markets, but we have to get over some high short-term risk with the u.s. and china, with the trade talks. larry kudlow said things are getting closer. we haven't gotten a big break. what you looking for? david: the coverage of the china
trade talks does resemble a high drama television show. there is an enormous amount to discuss whether we get a deal or not. our view is that we will get a deal, but it won't matter very much. most of the work going on around tariffs is a very small part of the overall economic relationship between the two china.d we think it is highly unlikely that they really come to grips with the issues around technology, the support for state owned enterprises, and about the opening of the markets and cross-border m&a. those the most important issues to get address. we hope they use that momentum to pivot more fundamentally to these tougher long-term issues. abigail: the fed's march minutes showed that there is some uncertainty among fomc members about the central banks plan to
stand on interest rates and whether the next move should be a hike or cut. we come up with lyle brainard at the imf world bank meetings in washington. tom: are we going to give up our 2% rate on inflation? are we going to have a theoretical change to disinflation? >> we are extremely focused at the federal reserve on ensuring that inflation stays anchored at 2%. if you look at the way the committee has responded in recent months, with a wait and see, the pause on rates, the very flat path that is projected now in the median snp projections, that is all a recognition that we are committed to achieving and sustaining that 2% core pce inflation goal. it has been a big concern of
mine, and it will continue to be. here we are with employment consistently performing very well. yet, wage growth is muted and overall inflation is not consistently getting around that 2% target. we will be patient. tom: william lee of the milken institute is a guest who has never seen it like this. the polarity of market economists over one rate rise, two rate rises, or one rate cut, two rate cuts. give me the why on that. why are we having such a polarity of market economists? lael: i can't speak to market opinion. i can talk about how i see the outlook. the modal outlook is coming in about as i had expected over the last few months. we got some reassuring data on the labor market. payrolls are growing about 180,000 over the past three
months, which is a solid phase. that means we're continuing to see growth above potential. we have downside risk. policy uncertainty has been a big source of downside risk over the last several months. some of those seem to be dissipating. some of them remain. abigail: plenty of discussion this week about president trump's two presumed nominees for open seats on the fed board. one of those candidates, stephen moore, told "daybreak america" what he can bring to the job. >> i will bring a new perspective. one of the objectives i will have, one of my missions, is to open up the fed. i'll run on an agenda of transparency. why shouldn't bloomberg and c-span and others people to -- be able to cover everything they do?
what does there have to be this secrecy? i want openness. i will challenge one continental idea and democrat the fed, vucevic is wrong. i will challenge one idea that is an democrat the fed and i think is wrong. that's that growth causes inflation. the fed is afraid of growth. there is growth phobia over there. david: one of the main questions is the independence of the fed. you've not made a secret that you support president trump's approach to growth. is it justified to be somewhat concerned that having you there would undermine the church and state distinction between positive alignment and the federal reserve? stephen: i'm not at all embarrassed or apologist for what i've done for donald trump. he's had a phenomenal record on the economy. i'm one of the people that put this together. i am independent of him. i disagree with the monetary policies. i've been a vocal critic of the
steel and auto tariffs. i think he should be much tougher on government spending. i'm an independent voice. i'm proud of what we've done. i think that's a credential for me. abigail: this week, disney held its investor day, and the spotlight was on his highly anticipated suite of new streaming services. emily chang got more detail on the company's plans directly from ceo robert iger. bob: making them available at a price that makes sense, with a user-interface that is beatable, -- beautiful, that's why we feel confident this is a product that people will sign up in droves to have. emily: you have said you will likely bundle hulu, disney plus and when and what will drive that decision? robert: you can figure that we will bundle espn plus and disney plus fairly soon. i don't have an exact date.
we're launching disney plus in november. hulu, we have minority partners. everything has to be done with them in mind. bundling would be something we might take to the hulu management, but it would require the approval. we think there will be consumers that want all three. eventually we want to make it possible for consumers to buy all three. emily: will you be attempting to buy all of hulu? bob: we'll see. we've been in conversations about that possibility. it's early to speculate. emily: you gave up some partnerships. partnerships with netflix as a result of pursuing the streaming service. you mentioned some of your distribution deals. you talk about roku and sony. you didn't mention apple or amazon. why not? bob: the app will in all likelihood be available through traditional app distributors. apple being one of them. i'm fairly certain that if
workforce. vonnie: the french bank says it will cut 600 jobs around the world. the ceo is looking for ways to cut costs. 1200 positions at the banking and investors solutions division says about seven or 50 jobs appearing in france. is there any geographic relevancy to what is jobs are going -- to where these jobs are going? -- to where these jobs are going? >> trying to cut some overlap in the international consumer business. as far as the trading site is concerned, it is a pullback from rates. from prime services. vonnie: deutsche bank and commerzbank are said to be facing skepticism from members of the ecb in whether a combination puts the banks on a safer footing. what is the ecb concerned about? >> they're concerned about big banks. deutsche bank is the biggest
investment bank in europe. combining it with commerzbank, another sizable bank, would create the fourth largest bank by assets in the euro area. they want to make sure they don't get any bigger problems on their hands. they're always concerned about that case when they would have to wind down a bank. a bigger one is usually more difficult to wind down. they want to make sure it's safe. they want adequate capital buffers. there want to see a good business model before they can say they can go ahead with this deal. >> the latest attempt to revamp its international business was falling flat with investors who have been down bit on the stock from a relative to the global fears. why is numerous latest cost cutting effort fallen so flat with investors? >> the stock has fallen about 3%. the price book ratio is only about half the value of those assets.
the biggest differential with their peers in 20 years. clearly, investors are not impressed with last week's announcement. what they are looking out for, the analysts want to look at the pace of the job cuts and the cost cuts. and how it's going to affect revenue. >> the slowdown in the world's largest car market is showing no signs of easing off yet. auto sales in china continue to decline last month, dropping 12% to just under 1.8 million. we've seen a bottoming out of some of the chinese numbers, may be an improvement in some aspects, certainly when it comes to this data point, we are seeing things deteriorate. >> the uncertainty in the chinese economy crimping consumer sentiment and especially the auto space. the passenger car cessation of china said in the first quarter
-- first couple of months this year, car sales were the only consumer product segment that saw declines in sales. something is going wrong. we have a change in tax policies and import tariffs. that has dampened car demand. vonnie: tesla shares are down 3% on demand concerns. amid concerns that the company is tampering expansion plans with panasonic. >> i think it's a case where these are two companies who has have spent a lot of money on this facility for years. after the performance of the first quarter, you have to take stock of are those investments we plan to continue to plug into this plant, do those make sense? we had a serious fall off a demand for the model s and model x the first quarter. the model three did not live up to the performance it had to close 2018. you have a case where these companies are taking stock and taking a breather before they
decided to go further with more investment. pinterest is hoping to raise almost $1.3 billion in its ipo. the company is starting a roadshow to pitch to investors. this is the maker of online inspiration boards. how much can it monetize that? it is clearly doing pretty well in advertising so far, but is it really worth $15 to $17 a share? >> expectations have certainly come down over the past couple of years. part of the story here is that pinterest had raised a $12 billion valuation, and now it seems like it will be a $9 billion company. expectations have fallen. part of the challenge their alluding to is whether they will be comparable to a social media company. the amount they can get investors to buy. the story they want to tell, versus an unfavorable comparison
to social media companies. that will be a big challenge. >> amazon may be listening in to you as customers talk to your alexa. sources say the company has a team that monitors voice recordings captured in echo owners' homes and offices. why they listening in? >> they need data to make their service better. like google's voice activated software and apples, they rely on a ton of information on how people speak and they feed into this great big system that comes up with answers. somewhere along the way, somebody has to annotate that data. what did the person say? was this word correct or incorrect? humans are doing some of that work. >> the u.k. is joining a growing global backlash against technology companies. prime minister may's government is proposing fines and banning
social media platforms if they fail to curb illegal activity. >> a year after the cambridge analytica scandal broke, the governments are getting to a point where we are seeing some specific laws that are likely to go into effect, not just in the u.k., but australia as well. new zealand is talking about it. canada as well. it's standardizing an interesting legal position, where these companies would have a statutory responsibility to protect their users, rather than the world they've always operated in, which is that they are a platform. what users do to one another on our platform is not our problem. >> shares of wynn resorts fall the most in two months after crabtly ending talks with resorts. as soon as we learned about it, it was basically off the table. the reason win would want in
with crown is they were a bit to him didn't. >> they are 75% in vegas. the idea is they would diversify in asian exposure. it would also involve them getting involved in japan, which is another attractive gaming market. >> lg&h shares surged after what analysts are calling exceptional performance. they seem to do well on every front. the only real area of concern was the watches and jewelry? >> that is true. you saw that growth was very strong again for another quarter. this is at the same time investors have been very concerned about a slowdown in china. the slowing economic growth in china really hit sales at apple, bmw, and there have been a lot of profit warnings in recent months. so the fact that luxury fashion is doing well is a positive signal going into the reporting season for the whole industry.
$433eeing to buy -- billion. for $33 billion. it's a giant bet on shale. signaling the future of big oil over the coming decade. walk us through what this means for your development assets? >> we have a couple of entry positions with anadarko. over 75 miles of continuous acreage that runs across the delaware basin. that's the core of the permian. it will allow us to bring the things we have become very good at, factory drilling and the surface infrastructure, downstream integration to a larger portfolio and we saw this command is wealthy advantage. it brings together very nice assets and makes our permanent position even better. ♪
>> i want to show you this. gc3d is a function on the bloomberg, which is pretty cool. i put the u.k. sovereign curve here. you can take a look. one month out to 50 years. i put it year to date. you can see how the rates have come down, especially on 10 years down to 1% even on gilts. abigail: there are about 30,000 functions on the bloomberg, and we always enjoy showing you our favorites on bloomberg television. here's another function you will find useful. quic go. it will give you fast insight into timely topics. here's a quick take from this week. >> let's say you've given up
your law-abiding lifestyle to pursue a life of crime. you've just made your first big score, perhaps from selling drugs, taking a bribe, or other corrupt acts. you cannot spend it or deposit it in your bank account without attracting attention from authorities. that pesky money trail may serve as evidence of the crime. you need to get that dirty money clean. there are three steps to any money laundering scheme. first up, placement. where funds are move from direct association with the crime, then layering, or disguising the money trail to foil any authorities, and finally, integration where the funds are once again available to spend, without worry of being caught. what are your options? one option is forming a shell company. it's very easy and there are plenty of law firms that can help. it should take them only a bit longer than signing up for a new a mail address.
once the show company is set up, make up some fake transactions for goods and services that you paid for with your dirty money. suddenly, that dirty money is legitimate. it helps to find people in banking who don't care jury -- if you are a shady client. after the fall of the soviet union, launderers found out weak spots where oversight was poor. billions have been funneled through places in cyprus, malta and estonia and latvia. if you prefer to use the stock market, you can use mirror trading. in this method, you use your money to purchase shares, then you sell them abroad. functionally cancel each other out. but you have turned your money into clean euros. a same method is the back-to-back deal. a russian takes out a loan in one country, say austria, that was guaranteed by a deposit of dirty money in russia. she then defaults on a loan, the bank in austria seizes the
deposit but she ends of the proceeds of the loan, note strings attached. or maybe you'd like to visit casinos. you can mix dirty money in with clean. cash businesses like restaurants and casinos are attractive. you can make a few small wagers, then cash everything out as winnings. finally there is smurfing. you will not need anything blue to get your green. you hire a bunch of associates called smurfs, to individually deposit small chunks of the large hall in different accounts in different places. u.s. banks are required to report any transaction over $10,000, so you to find a lot of smurfs. there are lots of ways to launder money. unfortunately for you, there are no guarantees that you won't get caught. abigail: that was just one of the many quick takes you could find in the bloomberg. you can also find them at