tv Bloomberg Best Bloomberg May 4, 2019 7:00am-8:00am EDT
rosalind: coming up on "bloomberg best," the stories that shaped the week in business around the world. alphabet leading a parade of companies reporting earnings. are notinancial returns yet where we want them to be. >> the fed holding a meeting and patiently repeating its commitment to patients. -- patience. >> they are in a wait-and-see mode for the foreseeable future. rosalind: brexit talks continue. the u.s. and china holding another round of trade discussions.
>> jay powell was right. >> low unemployment, strong growth, and virtually no inflation. so, all of those phillips curve models should be buried. plus, expert perspective from the global conference. >> we are 10 years into an economic recovery. at some point, there will be a recession. >> economy is chugging along -- china is chugging along pretty well. policy should be relatively stable. it is all ahead on "bloomberg best." hello and welcome. i'm rosalind chin. this is "bloomberg best." your weekly review of the most important business news, and analysis from around lunenburg.
let's start with a day by day look at the top headlines. alphabet released quarterly results following earnings on facebook and amazon the week before. >> googles parent tumbled after first quarter revenue missed evidence. sales came in at $29.5 billion, ofsing wall street estimates $30 billion. revenue did rise. how would you characterize the threat of amazon and its agile advertising business? >> google has said they see it big,al advertising as a green field. they are seeing a lot of money moving offline to online. they were able to keep that number above 20% and rising. there was no clarity around the earnings call what the plan was to address that concern.
>> shares rising and after hours -- in after hours trading. revenue reaching a high of $11.5 billion. the biggest revenue driver remains the iphone. demand stabilized at $31 million. >> it is still huge. every time apple introduces a , it is going to be one of the biggest in the world. they have been adding these revenue streams. what was announced earlier this month, the magazine product, tv product, apple built this amazing ecosystem. all these companies started building businesses on top of that. apple is slowly trying to get as big a piece of that as it can. david: trade talks in beijing wrapped up today. treasury secretary mnuchin
called them productive. mulvaney was speaking a different tone. >> at some point, you realize we are close to getting something done so we are going to keep going. other times, you throw your hands up. >> bottom line, they are saying the same thing in terms of a timeline, we are going to get some type of answer within the next couple of weeks. sarah sanders saying the discussions remain focused toward making progress on structural issues and rebalancing the trade relationship between the u.s. and china. sources telling the financial times trump is dropping the cybersecurity demands in exchange for a trade deal with china. they characterize this as him
softening the administration's position. >> we are awaiting the third fed rate decision of 2019. officials expected to hold rates steady. there has been a lot of criticism from president trump to make a cut. >> we don't see a strong case for moving in either direction. >> they are in a wait and see mode for the future. i would be surprised if there is much of a move in terms of policy. perhaps for several months. unless you see a real change in how the economy is performing. >> i saw him walk a tight rope there. we saw a statement that underscores inflation, acknowledging it is below target. right back walked it and said, it is low. he laid out specific reasons why he thought it was transitory.
apparel prices that could play out the next couple months. that is why they are not ready to do a preemptive cut yet. >> s&p 500 coming off of record highs. we had a significant move during the press conference. it feels like the risk off mood caught the market. >> prime minister theresa may and her political rival jeremy corbyn are signaling they may be edging closer to a deal on brexit. theresa may is aiming to wrap up talks next week. either with an agreement or without one. it is super tuesday for the bank of england. ue a littlerecasts d later on. does she actually want to sign an agreement or get an agreement with labor? and is jeremy corbyn willing to give her that? >> she was grilled by rather skeptical lawmakers. she spent most of the session dodging questions about customs
unions. she was dropping increasingly obvious hints she is prepared to move toward something that might not be called a customs union. it could be called something new, imaginative terminology. the mood music is getting louder. >> you have some interesting language coming out. raising the growth forecasts. >> the committee continues to judge an ongoing tightening of monetary policy at a gradual pace would be appropriate to return inflation sustainably. -- sustainably to the 2% target. >> carney talked a tough game but the market saw through it. >> you are absolutely right. he did talk a tough game. he signaled there is one more
hike needed. they cut inflation expectations. i don't think the fed is confident in their outlook. i don't think many of the central banks are confident either. ,david: there goes another fed pick. stephen moore has withdrawn his name from the nomination process. this news came just a couple hours after he told us he was , quote, "all in." >> the situation today, i think is going to be different three months. i am not too concerned about this. david: this is two in a row. the same thing happened to herman cain. where is the vetting process? who is reviewing these things before putting names out? >> in this case of fed nominees, it does not appear there was much of a vetting process. we know the judicial nominees,
there is a long list of consistent conservative believers presented before trump. trump thinks it is very important to adhere to some of these names. it does not appear that is how it works with the fed at all. let's nominate him. >> there is a goldilocks jobs report. 263,000 jobs added in april. unemployment rate falls to a 49-month low. wage growth is there, but not where we expected. goldilocks scenario, equities continue their journey higher. >> jay powell was right. he said we should worry about the economy. honestly, this is not overheating. average hourly earnings, 3.2. this economy is chugging along nicely. at the same time, the unemployment rate is 3.6%. >> the bottom line is you are
getting blowout numbers on jobs like today. you have blowout numbers in first-quarter gdp. you have a blowout number yesterday with year on year productivity, 2.4%. you know how important that is for the health of the economy wages, and for an absence of inflation. what we are seeing is low unemployment, 3.6%. somebody told me it was though best since the late 1960's. virtually no inflation. all those models could be buried and we should look at a new world. people respond to incentives. that is what is happening. the economy is freer than 20 years plus. rosalind: rosalind still ahead n we review thet,"
rosalind: this is "bloomberg best." i'm rosalind chin. let's resume our roundup of the week's most interesting earnings reports. standard chartered was one of many european banks in the spotlight. the bank had good news to share with investors. >> standard chartered buying back ordinary shares for the first time in more than 20 years. the purchase plan comes weeks after settlement between the bank and u.s. regulators over violations of iran
sanctions. how significant is this? >> i am not sure any business ever finishes a journey. we have made strides forward, foundations, the -- in restoring the foundations, getting the business back to growth. the financial returns not yet where we need them to be, but the last quarter was further evidence we are making progress down that route. >> santander, spain's biggest bank, compensated for a more challenging environment. net income came in a little lower. i have got italy coming out of recession, germany under pressure. how would you describe the spanish market to me? >> the banking environment in europe in general is challenging despite continuing to grow our revenues and improving credit
quality and cutting costs. the conditions in europe and spain are clearly weaker than in latin america. we have a strong presence in high-growth markets and let america. -- in latin america. that is what what compensated weaker performance in europe. >> france's third biggest bank , socgen, has reported a dip amid continued trouble in its investment bank. after cost savings and 1600 job cuts. >> if you look globally at the industry, both this performance for the equity side is better than average. the situation in the first quarter in terms of client demand was at the beginning of the quarter the same order of magnitude with low demand.
at the end, we saw -- the situation in terms of volatility remains low. globally speaking, we are in theseith the markets in businesses. the biggest thing for me is our equities business is less volatile. which shows the resilience of our business model specifically in equities. >> bnp paribas bouncing back. a bid in fixed income. equities revenue slid more than the analysts had estimated. >> we have digitalized, created a joint venture capital market to really help people with issuance.
we helped bring investors together. when we look at equity, equity was a big impact by what we saw in the market at the end of 2018. customers took some time to come back into the market. when you compare the first quarter with the gradual pickup toward a strong first quarter, that is the evolution you get. >> hsbc shares have jumped in hong kong after the bank delivered first quarter profits comf that comfortably beat analyst estimates. >> we managed to moderate cost growth. we are continuing to invest substantially. investment in spain was up 15% year-over-year. a very good start in one quarter. sprinteased with the 6% we added today. >> danske bank says interest income will be lower in 2019
than 2018. denmark's biggest bank reported net income below estimates and the estonia money laundering case requires attention. you talk about net interest income being lower than 28 team. -- than 2018. put some sort of proportion around that for guidance. >> we expected it to be in the same range, given we had volume growth to offset the costs. what we are seeing is with the danish rate being lower for longer, we will not get the benefit from that. also, we are seeing funding costs have significantly increased in q1. we are guiding lower numbers within a range as well. >> china's five biggest banks have reported an increase in first quarter profits. what can we glean from the
report card? >> obviously, we have seen the slowdown in the chinese economy followed by stimulus. that is where we lead to the first quarter. it is having an impact on the big financial companies. mainly these big policy lenders where they have been encouraged by authorities in the government to lend to risk or small to -- riskier or small to medium-sized enterprises in the private sector. icbc, the world's largest banks in nonperforming loans -- $770 million. the biggest quarterly increase in three years. this is something they are going to have to tackle down the road. david: the pharmaceutical giant, eli lilly, reported earnings,
beating adjusted earnings per share. you are comparing apples to apples. >> it was a busy quarter. on one hand, we are accelerating the growth of our newest products. cls, an old standby, has gone on patent. that is a significant headwind. underlying growth was 5%. if we don't include the rate 7% on volume. almost 5% of growth if you take out cialis. we are pleased with the newest performance of our products which make up 40% of the company. we are on track to deliver on our midterm commitments. as well as our operating margin goals. boostlcomm earnings get a from its settlement with apple. investors look past that. i want to start with the
headwind that is removed after that payment from apple. $4.7 billion. how much of a headwind is now removed given that this is behind us? >> this is something many investors did not believe it was believe was ever going to happen. they were concerned if qualcomm was able to achieve a settlement with apple, it would be in apple's terms and come at a considerable discount. that's not what happened. that is really what they wanted to happen. david: general motors is falling after a slight miss on revenue as vehicle sales declined. some of that as i understand was the lyft investment. $1.41 eps, very much
>> you are working bloomberg best. many of wall street's most powerful players were in beverly hills for the global conference and bloomberg television spoke with them about issues of interest to investors. erik schatzker sat down with david solomon who shared his perspective on the state of the market and the economy. >> i think throughout the quarter, activity level improved , a speedboat in the fourth
quarter. government -- feed bump in the fourth quarter. u.s. hasmy in the continued to do quite well. as we move through the quarter, you saw more of a move back into risk assets, markets have performed well, as you get around the world, stimulus in china has helped see improvement in china. , lagging a little bit but the overall package, especially with the pivot central banks made into the end of the year and first quarter has been constructed for risk assets and client activity has improved. it is at a pretty nice level. >> how do you think that pitted and the results it has had in financial markets will influence the way central bankers think about policy going forward to the rest of the year and into 2020? >> policymakers had been clear
into medication with how policy looks -- communication without policy looks. >> you could make the case that in october, jay powell may have screwed up. >> i think the chairman is doing a very good job, a difficult job . as you translate forward, it does not look like there will be a lot of policy activity through the rest of the year and into 2020. the economy is chugging along well and policy will be stable. >> one of the places you see impact of stable policy is credit market, how would you describe the state of the credit market? >> constructive. >> money is pretty easy. >> pretty easy, but when you look at the big banks and their participation in the big scare credit markets, i do not think there has been a movement in credit standards. you are reading into, when we get out of the regulated institutions and into the shadow banking markets, we saw capital go in that direction.
less transparency around the activity and it is harder to see. that is an area to watch. >> problems? >> not systemic but it is an area to watch. when you think about that space, some capital is longer dated capital and not money that can runaway quickly. as those shallow credit markets grow, that will be something to watch and monitor. the regulatory environment has pushed more credit lending in that direction. that will be something to spend time looking at. solomon praised jerome powell. coming up, michael mckee talks monetary policy with the cleveland fed president and more conversations with the milken institute global conference. >> we are going to make mistakes
>> welcome back to "bloomberg best." i'm rosalind chin. more of our conversations from the milken institute global conference starting with jason kelly's interview with the blackstone ceo steve schwarzman. >> what is your one big takeaway from china right now? you have invested and done philanthropy there, what are people missing about china? >> they stimulated their economy like they said they would when the tariffs when in. i was therefore weeks ago, the people of the central banks were telling me that worked nicely
and now you are seeing the results of that. that is surprised. china's economy looks pretty solid. in the sixes, 6% growth. i think that would have surprised some other people, it did not surprise me. they have the ability, in china, to force money into the system to create growth. they are doing it and it has been successful. >> are you putting more money into china at this point as blackstone or investing more heavily? >> we just bought a company there. i think china is a harder place to invest for outsiders. you always have to be prudent and thoughtful when you invest. we are looking in the real estate area as well. happensepends on what
and what values are. >> the fundamentals are not improving. but they are not deteriorating as quickly as we might have been worried a few months ago. we should be concerned. france is going to a difficult time with the yellow vests. sentiment of concerns and questions of where we are going. storyexit, a never-ending of brexit or no brexit which has significant consequences on market confidence. >> does the yellow vests movement pose a risk, direct or indirect, to your business? >> yes, direct. inventory,cess to
delivery, destroying boutiques. , put that aside, it is an issue but it is how and why it started, a genuine all about purchasing power. we have been in a gray zone for many years. of purchasingoss power from households, that is a major concern. that is how the yellow vests movement started. >> for most of our businesses globally and in the united states, everything feels pretty good. there is no signs in front of us that we will have a recession but no one should forget that we are 10 years into an economic recovery at a some point there will be a recession. >> what worries you the most in
2019? warning signs. >> we do not see big issues in the economy. clearly, valuations are higher than they were 10 years ago, seven years ago, five years ago, three years ago, one year ago, in the stock market and interest rates look like they're going up but not at current times. those are the things that could disrupt the markets. when and how it happens, that and political issues. but we -- when we are investing into long businesses, as long as you pick good countries, you do not concern yourself with short-term. >> i am a big fan of free trade but it needs to be fair trade. the u.s. has to have terms of trade around the world that are trading -- our trading counterparts enjoy.
it has devastated one town employers where the employer has shut down. we did not think enough about job reeducation or helping people to move to other communities that would be adversely impacted by free trade. we did not focus on this enough. unfortunately, through history, we will make mistakes for the country. the key is how well we deploy our resources to address our mistakes. >> what do we do with communities where people are left behind by unfair terms of global trade? >> you try to create tax incentives to bring new employers to the region. if you are successful with that, that is a win. if you are not, you will have to encourage people to relocate. moved across the united states in pursuit of jobs and opportunities.
there is nothing wrong with having to make those changes in our country, increasing geographical mobility increases the flexibility of our workforce and opens more doors. forhat is a harsh message people in western pennsylvania or indiana, or, you know, in parts of ohio, for example, kentucky, west virginia. it is a really tough message. >> it is a tough message but i think it is important we have an honest conversation within the halls of washington about what we need to do to improve our country. >> the fomc left its main interest rate unchanged this week, the fed chairman emphasizes patience and grappling with conflicting currents and u.s. economy and on friday michael mckee spoke with the cleveland fed president and got more insight into the central banks outlook.
rate isnk our interest at a neutral rate, in the range of neutral, a good place for it to be, calibrated to where the economy is and we will watch the data and assess conditions going forward. i think we are in a good spot with monetary policy and, yes, inflation is a bit soft but labor markets are strong and we take a balanced approach and are in a good spot to wait and let the economy tell us how it is doing. >> has your view of how you generate inflation or the dangers of low unemployment changed? time lowered my star estimate, those are estimated and there are -- the longer we go on with the strength in the labor market, not generating as much inflation pressures as in the past, the more you recalibrate your estimate. i would not say my process has
election. >> the spanish prime minister will return after their election. with his left-leaning allies, the socialist leaders is close to majority but -- >> it was a comeback for him. we have seen this time and time this would be to the markets, something stable and investors would want to cheer thethis but the problem is, leader had campaigned on the fact he would not do a deal with sanchez. the second and more likely possible scenario for a government is him teaming up with the antiestablishment party. and they would not have enough votes. it would have to be a hodgepodge of other regional parties which would mean reaching out to catalonian nationalists. we have european union elections
at the end of may and we will not see a government take place for at least a month. officials manufacturing pmi slipped in april, barely making it above the 50 line. the data signaling the economic stabilization seen in the first quarter is still fragile. the factory gauges still expanding but at a much lower pace. optimistick like the , the green shoe we saw last month is starting to will. -- wilt. >> i believe the green shoots will remain and if there are signs they are fading, they will be reinvigorated because the number one policy in china is for the chinese communist party to remain in power and maintain social cohesion. the support, fiscal and stimulus support, it is important and i believe it will be successful. , a boardws in big oil
has decided it will have a conversation with occidental about their bid. they will keep the deal with chevron but they get might be the other bid is more attractive. what is going on? >> the $1 billion breakup fee with chevron may be affecting them. it is interesting to keep in mind that the occidental ceo said they had made three offers in the past which anadarko has said no to. they feel they would be a ticket -- better fit for the bigger giant, financially and in terms of cash investors are getting as the occidental offer is superior. >> warren buffett, the oil occidental,, chevron, anadarko, berkshire hathaway investing in the occidental side, i thought they had the financing lined up and they told us they did, is this cold water on that
>> we thought this was in the bag, this will be more expensive. there is a surprise but i think to the extent the anadarko board is considering whether the oxen isbid -- occidental bid superior to chevron will push them to say we do need to move forward with something with occidental. chevron will have four days to counteroffer. bayer's board is standing by the ceo after an unprecedented shareholder rebuke, 65% of investors voted to remove them over a takeover of monsanto which has given rise to a wave of u.s. lawsuits and demanded answers over the company's market cap. >> it was a rocky meeting that went on for 13 hours and investors eventually voted against the ceo. that is an president in germany
-- unprecedented in germany and they had an emergency meeting and had to do something, they came out in support of the ceo but ultimately we will have to see where the board goes. investors said they want a strategy review, they want them to look more closely at these demands. one of these a potential split up of the company, something bayer said they do not want to do or intend to do. attempt to get on the board of barclays, 87.21% of the shareholders voted against the bramson revolution. is this a confirmation of jes ,taley's strategy or a sense of we will give the new chairman a bit more time and edward will have to wait? institutionhe main must be willing to give more
trust to the new chairman. and to see how it goes in the next few quarters. they will decide what to do in barclays. the strategy is changing and now there is new management and a new chairman that is taking over today from the previous one. the next few quarters will be important for the bank. >> boeing is holding its annual meeting today with the recent 737 accidents taking stage of the conference. making progress on the path to certification having completed the engineering test flight of the software and the final technical flight test prior to the certification. >> the ceo doing the best job he knows how to reiterate safety and talking about the software updates are not saying anything about how the original software was flawed. tiptoeing the line. the concern is we're not getting any new information.
there was a question from one of the shareholders, why haven't you step down given you have betrayed our trust and the public? he said our focus is on safety and dodging hardball questions. >> a day after the boeing, airbus came out and smashed estimates and quarter one, their narrow body which competes with the 737 is back on track and they delivered 126 of them. can airbus take advantage of the boeing problems? >> it has been sold out, the productions line full which makes it difficult for airbus to capitalize because they do not have any space do get . -- to make new aircraft. but customers interested in looking at airbus as a replacement for the 737, could
it persuade them to increase production sooner than planned? >> tesla shares rallying on the electric carmakers plan to raise to billion dollars in debt -- $2 billion in debt. are these numbers in line with what people expected? he strongly hinted this in the first quarter earnings call when he said it may make sense. i think what he meant was it makes a lot of sense and we have a $2 billion in capital raised, i think the mix of stock and cash is probably welcome news for investors. this is something tesla -- they have a debt payment due in november and they want production up and running in china and do things in europe and work on the model y, the crossover suv which will be important for the brand. and thee cash needs cash burn has not been terrific of late. investors are happy there is
clarity and they know what the plan is. >> bloomberg has learned the telecom giant vodafone found security flies -- flaws in huawei equipment. which could6 bugs have given the chinese company access to sensitive user data. inafone begin a deeper probe 2011 and they found back doors were present in the italian access networks. >> in 2009 when huawei was trying to expand in europe, it landed a contract with vodafone for home internet routers and right away vodafone had problems with these routers and found vulnerabilities including backdoors that would have given unauthorized access to the customer's home internet environment, computers, and potentially the wider vodafone network. according to the documents, vodafone confronted huawei and ask them to remove the
backdoors, they agreed and voted found found they were not removed -- vodafone found they were not removed. >> a blockbuster weekend at the block office -- box office with avengers in gain setting new records earning $1.2 billion, the first film to make a billion dollars in just three days. it took a $330 million china, setting records there and domestically in the u.s. what is behind this -- these mega-numbers? a 22 moviethe end of franchise disney has been building up over a decade and the expectations behind it, they created compelling characters, that will be the last of this franchise. i would be surprised if we did marvel features and disney has a star wars film later this year. a good time for bob iger, the
ceo. >> commodities in the red, oil falling as much as 4.2% to a one-month low. is this a supply or demand issue? >> at one point the oil prices were down and the u.s. benchmark was down more than 4%, if it held, what have been the biggest drop this year. administration has continually said the u.s. will help offset the end of the iran sanctions and today we see the effects of what is happening in terms of real numbers, how much oil. ataker of a meat free mee with the best ipo the view since the financial crisis. is it that great your stock price has risen almost triple and you could have gotten more cash? >> we are focused on creating an
interest into the market that is sustainable if the right investors allow consumers who have been so supportive to our brand over the years. we built this brand with consumers over the last decade and i think less about the daily moves in stock and more about where we can take this company. we have an exciting future ahead of us and i'm looking forward to executing. ♪
maybe you will find a favorite. this function will take you to our quick takes where you can get context and insight into timely topics. here is one from this week. ,> decades in the making quantum computing is the technology that could make today's fastest supercomputer look like an abacus as teams around the world race to build machines with different approaches and what it -- while the technology is moving quickly to soon to tell when it will get there. this is your bloomberg quick take your your computer now processes information in bits that can represent two-state states, one or zero and quantum computers is quantum bits with can represent one or zero or both at the same time. this is called superposition, they can exhibit entanglement, a state in which a change to one changes the state of another and these properties let quantum computers consider multiple possibilities at once while a
normal computer plugs away at one possible answer at a time. >> if we figure out how to do these calculations, suddenly we can solve complex and unfathomably long calculations with a quantum computer that would take a traditional computer, no matter how good and fast, thousands of years potentially. hype arounda lot of quantum computers and researchers make incremental advances. they promise machines that can break the most impenetrable coded message and predict whether an diagnose and treat disease based on a specific patient's body, but there is a ways to go. >> it is difficult to make a difficult computers, the hardware for these and a lot of the research is in material science, figuring out what is the best hardware to use. there are different options, you do not just talk about traditional silicone chips in normal computers. >> manufacturers use tiny loops they usenductors --
twisting subatomic particles into a braid and many qubits can only exist under temperatures colder than deep space. a canadian company became the first to sell quantum computers but their usefulness is limited to certain math problems. ibm, google, intel, have built working quantum computers and microsoft is investing heavily and china is throwing hundreds of millions of dollars into the technology. >> anyone who knows the promise of the technology can get excited about it, even if it is many years away and it never works out the way theoretically it could, this is something people think is worth spending a lot of money on. >> that was just one of the quick takes you can find on the bloomberg, also you can find them at bloomberg.com with the latest business news and analysis 24 hours a day. thank you for watching.
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♪ carol: welcome to a special edition of "bloomberg businessweek." i'm carol massar. jason: and i'm jason kelly. we are in los angeles at the milken institute global conference. carol: it is an annual gathering of the most influential people in business, finance, economics, commerce, innovation media, and much more. jason: we sat down with people