tv Nightly Business Report PBS June 14, 2016 6:30pm-7:01pm PDT
this is "nightly business report." with tyler mathisen and sue herera. seeking safety. investors dump stocks and flock b as uncertainty looms over the outcome of the uk referend ju how worried should investors be? buckle up. while you may want to keep the money you're saving at the gas pump to hedge against rising rates. a new record is set for charitable giving. all that and more tonight on "nightly business report" for tuesday, june 14th. good evening. welcome. i'm sue herera. tyler mathisen is on assignment tonight. leave or stay? investors around the world are starting to pay close attention to those few words. as we've been reporting, britons
will head to the polls next week to decide whether the united kingdom should exit the european union. the markets have largely shrugged off that threat but that is starting to change. over the past few days volatility has risen and stocks have come under pressure as poll after poll show grow support for the leave campaign. and that is why stocks were lower again today. the dow jones industrial average average fell 57 points to 17,674. the nasdaq down almost 5. the s&p 500 was off 3. as investors flee stocks, money is pouring into relatively safe investments. so much so that the yield on germany's 10-year government debt fell into negative territory. the yield on the 10-year u.s. treasury hit levels not seen since 2012. let's turn to our two guests who have opposing views on how the u.s. economy will be impacted should the united kingdom exit the european union. paul christopher is head of global market strategists at
wells fargo investment institute and he says it will be negative for the economy and equities. while the chief economist at ihs global insight thinks that the impact will not be all that big. gentlemen, welcome, thanks for joining us tonight. let me start with you, if i could, paul. why do you think it will have a negative impact either on the markets or the economy or both? >> i think it's going to be a complicated divorce. one in which it will first of all push the uk into recession as investment there falls. it will also create uncertainties and falling confidence on the continent itself. that could undercut some of the progress we've seen in the economy there. i think it will at least slow europe and that will slow exports from the u.s. as well as revenues back to the u.s. from companies already operating there. >> you are not all that convinced this will be a negative event, why? >> let's be clear. i think it will be negative for the uk. i don't know that it will push them into recession but it will reduce growth quite substantially.
maybe only 1% growth next year from 2.5%. same thing for europe, it will cut their growth. the good news for the u.s. is we don't export that much to . they're a fairly small export market for us. but there will be a big offset in the sense that global interest rates including our interest rate will there will be a flight to safety in the sense of u.s. bonds, even possibly u.s. stocks, after the initial shock. i think there are negatives that will offset this export shock, if you want to call it that, which will be tiny i think in th >> polls can alw we saw that in the scottish independence vote as well. that's a caveat to this discussion. paul, if indeed we do see an exit vote, a leave vote, carry, there's growing concern that other members of the eu who have been under pressure -- greece comes to mind -- might decide to follow suit. is that a real threat? >> it's always been a threat, sue. but i think if greece is not
going to go and greece hasn't been pushed out yet, that's maybe the more important way to think about it, then it's unlikely anyone else is going to leave any time soon. especially if you try to leave the european monetary union, that's a little bit different story, that's a more tightly knit group. if you have to change your currency in order to leave the group that makes it more complicated to leave. >> does this complicate the already complicated election cycle? at this point, there are those who say that it would be a damaging situation for ms. clinton if indeed she prevailed in the electio >> i think you have to kind of separate it out a little bit. again, i don't think that the brexit as it's been called, britain leaving the european union, has that big effect on the economy or the u.s. electorate. i mean, frankly, i think the u.s. electorate isn't paying that much attention to this si i think it does have ramifications for the federal reserve.
i think if they decide to leave, i think this will put the fed on hold a lot longer than it otherwise might have been. so it will mean interest rates will stay lower longer for the u.s. which is not necessarily a bad thing for the economy. >> right. paul, would you agree with that aspect of it? >> yes, we would agree. we're only looking for one rate hike this year as it is even in the best of circumstances. we think if the britons vote to leave it could complicate matters further for the fed and we could see that pushed out a bit. >> do you think the market is overreacting to this? >> markets hate uncertainty and this is a huge uncertain event. so overreaction is perhaps too value-laden a word. they clearly are unhappy about this and don't fully understand all the ramifications. so i'm not surprised there's a fair amount of market volatility around this. once it's decided one way or another, i think the markets will settle down. >> finally, i'd like both of you to cast your vote, paul, would
you -- what's your handicap, are they going to stay or le >> i think they'll stay. >> okay. >> i'll agree with that. >> okay, on that note, gentlemen, great to have you with us. >> thank you. >> thank you both, gentlemen. the uk referendum along with concerns global central bank policy is becoming ineffective is causing investors to hoard more cash. the latest bank of america/merrill lynch global fund managers survey shows cash levels are at 15-year highs. despite all the concerns in the market consumers are still spending. retail sales, a key gauge of consumer spending, posted a solid gain last month. commerce department reported a .5% rise which was above expectations. households have benefited from steady job growth, reduced debt, and rising home prices. and prices for imported goods rose at their fastest pace in more than four years last month. that's the third monthly rise in
a row. most of the gains came from oil-related products whose prices have been climbing over the past few months. federal reserve policymakers today began their two-day meeting on interest rates. just a few weeks ago many thought a rate hike might be likely but a weak jobs report and increasing concerns overseas seem to have changed all that. steve liesman tells us what the nation's top economists, market strategists and money managers >> reporter: the cnbc fed survey shows wall street expects a more dovish fed pushing later the expectation for that next rate hike from august to september. let's also look at the outlook for interest rates from our 41 panelists from the street. 0.7% is the expectation for the funds rate in 2016. 1.5% for 2017. 2.2% in 2018. the long run they think the fed will settle at 2.6% for the long run. notice each one of these points is below where the average member of the fed is, we'll get
new numbers from them at the announcement at 2:00 tomorrow. how about the s&p, expectation is that we will recover, we have recovered the optimism we had before the market swoon in january and february. looking for 3.4% up by the end of 2016 to 2149 on the s&p. up about 8% to 2244 by the end of 2017 from the current rate of 2079. 28% say it's global economic weakness and tax and regulatory policies here in the u.s. rising interest rates 25%. protectionist trade policies 13%. first time we've had that on the radar. terror attack in the u.s., this was done before the events in orlando. register zero, and they have never registered high even after the terrible attacks in san bernardino. look for the fed to hold interest rates steady at the meeting when the announcement comes at 2:00.
for "nightly business report," i'm stevliesman. concerns over the impact of a so-called brexit on the u.s. economy continue to push u.s. bond yields lower. yields which mortgage rates loosely follow. with rates near lows that lenders are now more focused on credit availability, which has been tight since the financial crisis. the nation's largest lender convened a panel of experts to voice concerns and potential solutions in washington today and diana olick was there. >> reporter: a growing number of americans say they are considering buying a home. in fact, 40% of millennials say they probably or definitely will in the next two years. that's according to a new survey by wells fargo. the trouble, says the nation's largest mortgage lender, that is these potential buyers are misinformed about mortgages. >> we see three myths. one is that you have to have a 20% down payment, which we know is not true. there are programs which are less down payments.
number two that you have to have perfect or near-perfect credit. and number three that you have to have high income. >> reporter: wells fargo launched a 3% target loan backed by fannie mae targeting first-time home buyers. it's designed to be cheaper and simpler than the government-backed fha loan. he says in just a few weeks wells has seen strong demand and expects more. >> we think the next few years are going to be a period of high growth for new homeowners coming into the marketplace. >> reporter: because according to housing experts gathered in washington tuesday, since the recession, lending has been far too tight. if lending were back to the pre-boom standards of 2001 -- >> there would have been $1.2 million additional loans in 2014. clarl, $5.2 million additional loans from 2009 to 2014, with a more reasonable set of credit standards. this is something that we can do something about.
>> reporter: but former fdic chairman sheila behr argued the 3% down wells fargo product is deja vu all over again. >> you have that really, really low down payment, even from a borrower's perspective, you're exposing yourself to risk if home prices dip. wells' home product may help some but the trend toward easing credit standards appears to be tape early off according to a new report from fannie mae. 90% of lenders surveyed said they were keeping credit standards about the same. for "nightly business report," diana olick washington. still ahead, hitting the road. as americans drive more, they may be in for some unexpected sticker shock.
the obama administration was handed a major victory in its effort to increase oversight of broadband services. a federal appeals court ruled that the federal communications commission's net neutrality rules will remain in effect. that means phone and cable companies must treat all of the traffic on their networks equally. no blocking or slowing their competitors and no fast lanes for companies that can pay more. opponents of the rules plan to take their challenge to the su congress approved a $28 million shift in funding for the transportation security administration. the approval allows tsa to allocate more money to where it's needed most like day-to-day operations at airports, which includes converting more than 2,700 officers from part-time to full-tim the additional workers will
theoretically open up more airport security lanes and in theory ease wait times. the computer syste the democratic national committee were breached. according to reports a group of hackers linked to the russian government are believed to be behind that attack, the same groups that successfully penetrated the unclassified networks at the white house and the state department. the hackers gained access to the entire database of the opposition research on donald trump. it is one of the largest known breaches of an american political organization. defense stocks moved higher after the u.s. senate voted to pass a $602 billion defense authorization bill. this despite the president's threat to veto that measure. that sent shares of defense companies higher, including lockheed martin, northrop grumman, and boeing. john harwood is following the story from washington. what's in the defense bill that the senate passed today? >> reporter: most importantly is that $602 billion that you
mentioned. but there are also policy provisions that are controversial in some quarters. one would require women to register for the draft if we return to a draft, limiting the long prohibition or limitation on the draft to only men. it would prohibit president obama from closing guantanamo. it would reorganize some aspects bureaucratically at pentagon. it would limit the size of the national security council staff. >> those are some of the reasons the president has threatened to veto the bill. what happens now? >> what happens now is the house has passed a different version of the bill and the real negotiating is going to start on just what the final shape of this is going to be. we'll have to see how hard the white house hangs out with that veto threat and what is their bottom line? is it about guantanamo? is it other provisions like the limits on the national security council staff? all of that over the next few weeks is going to unfold between house and senate negotiators. >> speaking of national
security, the president met today with his national security team and spoke about security threats following the horrific orlando terrorist attacks. what, generally speaking, was his message? >> well, this was extraordinary, sue. in addition to giving updates on the fight against isis and the investigation into the orlando terrorist attack over the weekend, president obama fiercely went after donald trump's suggestions that muslims be barred temporarily from the united states and suggestions that as a group muslims need to be watched more closely. the president called those ideas unamerican, dangerous, counterproductive, they would enhance the recruiting of extremists around the world who would threaten the united states. you rarely see as much passion as you saw today from president obama in going after the ideas being spread by donald trump, whose name he did not mention. >> yes, indeed. very true. john, thank u very much. john harwood in washington tonight. synchrony financial warns of
steeper than expected loan losses sending a shiver through the credit card industry. that's where we begin "market focus." the largest retail store credit card issuer said it sees higher than expected loan defaults by consumers this year. the company sees charge-offs or the amount of debt that it's not likely to collect higher than originally thought. the news sent shares of synchrony to its biggest one-day loss since going public two years ago. shares fell 13% to 26.45. other credit card issuers like capital one, discover, and american express all suffered big losses today as well. citigroup is bullish on vonage. the bank raised its rating on the digital phone service provider to buy from neutral and it raised its price target on the stock to $8 up from $4.75. citi analysts cited a favorable risk/reward scenario with a revenue growth opportunity for the upgrade. that sent shares up more than 12% to $5.34.
ali bab bab sees a big jump in sales this the year expecting revenue to rise 48% as it anticipates benefiting from recent acquisitions and stock buy-backs. analysts were expecting a 40% increase. shares rose 3% to $77.77. and xerox has named a new ceo of its business process outsourcing division who will take over after that unit is spun off later this year. murray has been the ceo of i.t. services provider i-gate until october. shares of xerox fell more than 1% to $9.73. low gasoline prices and an improving economy are expected to fuel a record number of drivers on the road this summer. but they may want to keep the money that they save at the pump to start paying for riding insurance rates. mary thompson reports. >> reporter: u.s. drivers seen hitting the roads in record numbers this year. that means they'll be hitting their brakes and each other too.
>> people are driving more miles and they're getting into more accidents. >> reporter: more accidents mean more claims and that means insurers need to pass on the costs through higher rates. data from the insurance information institute shows spending on auto insurance is up 18.5% from 2009 to 2015. and if you're expecting a break this year, don't. april's consumer price index shows spending on auto insurance roseanne unadjusted and hefty 6%. a downside, says the insurance institute's james lynch, to an improving economy. >> when people lost their jobs in the great recession, obviously they stopped driving, their cars sat in the garage where they weren't exposed to accidents. and so there weren't as many accidents. >> reporter: other contributors to these higher rates are bad roads which damage cars, a higher number of which are new and more expensive to repair. the cost of treating anyone hurt in an accident on the rise as well. as for insurers, some are raising rates more than others. the increase reflecting the
number and dollar amount of claims filed by clients. allstate push including a bigger rate hike following an unusual uptick in loss trends last year. >> historically their loss trend has been 2% to 3%. last year it was over 9%. >> reporter: citi analyst says higher rates should benefit allstate in the long run. the rival progressive is being seen being hurt for foregoing larger than average rate hikes in hopes of attracting more clients. >> their business is skewing toward low profitability new business. so the reason for the sell there is i think margins will be pressured in the near term. >> reporter: rate hikes driving profitability for some while keeping the brakes on higher prices helping other insurers bring more clients along for t. for "nightly business report," i'm mary thompson. coming up, the fast-growing gaming industry is undergoing a massive shift and there's more competition than
here's a look at what to watch for tomorrow. as we reported, fed chair janet yellen holds a news conference after releasing the central bank's statement on interest rates. we'll get a fresh read on inflation when the government releases its producer price index for may and weekly mortgage applications are due out. that's what to watch for on wedn the video game industry is at a turning point. mobile gaming is more popular than ever and virtual reality is starting to go mainstream. nowhere is that more evident than at the annual video game trade show in los angeles. and that's right where we find julia boorstin. >> reporter: the video game industry is in the midst of
massive change. virtual reality and competitive gaming or e-sports is on the rise. as this year mobile gaming revenue is poised to overtake pc gaming for the first time. and new consoles are in the spotlight. microsoft announcing a slimmed-down console, the x-box 1f. a next-generation 4k console, project scorpio, which will support vr and launch in 2017. >> we feel great about this console generation. it's moving faster than the previous generation. we feel great about console gaming. i think hats off to sony and their progress. we're thrilled with our progress. x-box is selling more units than ever before. >> reporter: x-box is also facing more competition than ever from sony whose playstation consistently takes the lead in console sales. sony unveiling long-awaited details for playstation vr. it will cost $399 and will launch in october with 50 virtual reality games available by the end of the year. while consolemakers compete for customers by showcasing
exclusive video game content, this year the video gamemakers have pulled out of e3 with no presence on the convention center floor. instead tavis and electronic arts are investing in direct digital relationship with consumers with the likes of video game competitions, otherwise known as e-sports. electronic arts announcing it's putting $1 million in prize money toward an e-sports for everyone initiative. three different tournament levels from professionals down to communities organizing their own faceoffs. >> we're not focusing just on the elite levels of e-sports but competitive gaming overall for the entire community. i think we'll see engagement and increased profitability overall, almost immediately. >> reporter: the more e-sports events like these connect players to gamemakers, the more they can sell digital add-ons and content. the more the lines of ea and tavis can make sure they're in demand, no matter which consoles gamers buy.
the nation's largest banks collected more overdraft fees from customers in the first quarter than they did a year ago. "the washington post" citing new government data, reports that wells fargo saw the biggest jump up 16%. bank of america and jpmorgan, the country's largest bank, saw a 6% increase. the total amount collected by more than 600 banks during the first three months of the year rose to more than $2.5 billion. microsoft's $26 billion purchase of linkedin which we told you about yesterday has created a multi-billion dollar payday for linkedin's chairman reid hoffman. given hoffman's stock ownership his take from the all-cash deal could be nearly $3 billion. but with that windfall comes a big tax bill. hoffman would presumably be subject to both california and federal taxes. california taxes capital gains at a rate of 13.3%. combine that with a federal capital gains tax rate of 23.8%
and its tax bill could be mor than $1 billion. it's unclear which if any measures hoffman will take to reduce the amount he may owe. in the wake of the terror attack in orlando disney is donated $1 million to assist those affected by the shooting. donations will be matched dollar for dollar. speaking of donations, americans were more charitable last year than ever before. and it wasn't just the wealthy that donated. robert frank takes a look at america the charit. >> reporter: americans opened up their wallets for charity last year, setting an all-time record for giving. charitable giving hit $373 billion in 2015, according to the giving usa report, up 4% from the year ago. so where did all that money come prese from? individus gav the most, $265 billion, the rest coming from
foundations, estates and companies. and believe it or not, much of the giving in america is still in the form of $10 or $20 gifts from everyday americans. >> americans are incredibly generous. they care deeply about those causes that they want to support. and they want to make a difference with their giving, whether it's locally, nationally, or internationally with their giving. >> reporter: where's all that money going? religious groups dominate accounting for about one-third of the total. education ranks second. followed by human services which includes donations of food, clothing and shelter for the poor. giving to the environment and the arts also saw strong growth. but the fastest growth in giving is still in international affairs which includes overseas disaster relief, human rights, and medicine. the flow of dollars shows that today's donors see their charitable giving more as investments in solving social problems rather than just handouts. >> there's an opportunity for
them as they think about their giving, they're really to some degree investing in impact. they want to make sure that their gifts are making a difference. >> reporter: americans aren't just donating cash. with prices for fine art and other collectibles soaring in recent years, gifts of artwork and other so-called appreciated assets also saw strong growth. for "nightly business report," i'm robert frank. and that is "nightly business report" for tonight. i'm sue herera. thanks for watching. have a great evening, everybody. we'll see you right back here tomorrow. ramatic music)