tv Bloomberg Markets Bloomberg February 3, 2016 12:00pm-2:01pm EST
good afternoon. i am scarlet fu. alix: i'm alix steel. new concerns about the u.s. economy weighing on stocks. markets paring their losses as oil prices rebound. scarlet: wells fargo settling a long-running dispute with the government. alix: the bank of england was not expected to raise interest rate but that was before the bank of japan went negative with theirs. so come all bets are off. first, we want to check in with julie hyman for a look at how the markets are doing on this wednesday morning. give us a sense of what the pressures are. julie: all bets are off with regard to direction. having a volatile session here. a lot of different elements.
we had an employment report that came in ahead of estimates had of arthritis government jobs report. -- ahead of friday's government jobs report. we have oil prices we are watching, german two years going more deeply into negative. all of that equaling a mixed picture. the dow holding up relatively well even as the s&p and nasdaq discontinuedline to decline -- continue to decline. an equal amount of green and red on your screen. financials now down 1.4%, leading the losses today along with technology. material is doing better today. energy helping lead the gains today as well. look at oil prices. a building inventories that was almost double what analysts had been predicting.
we are seeing crude oil jumped, now up 6%. there was a story this morning saying the year-end forecast for oil prices is to be at $46 a barrel. as supplies eventually get worked down. that is having an effect on energy stocks. you can look at it over the course of the session, the s&p 500 in the index -- energy index having a similar move. alix: how is the volatility of a rate hike affecting everything else in the markets? i was surprised to see that -- you go out to february of 2017, you don't even get a 50% chance of priced into futures at this point of an interest rate increase.
you see the collapse in expectations, there will be an increase. the paradigm, the sentiment is changing over what the fed is going to do. take a look at the 10 year. the yield on the tenure at 1.85%. still at extraordinarily low levels here. alix: good stuff. scarlet: let's check in on the first were news this afternoon. mark: thank you. hillary clinton's move last year to lock in fundraising alliances with 33 state democratic parties is paying off handsomely. has already added $27 million to the mountain of hard money she has already raised so far. bernie sanders has inked one such deal, mounting just $1000. the hotter it gets, the better the mosquitoes aren't transmitting zika virus. -- are at transmitting zika
virus. scientists say you cannot just blame one thing for an outbreak. it is too early to link this one to climate change or any other single weather event. sweeping legislation being unveiled thursday would spin off the u.s. and traffic control system into a nonprofit corporatizatiion. the new measure back right bill shuster would force carriers to refund baggage fees if luggage arrives too late. president obama preparing to give remarks at a mosque in baltimore in just a few minutes. you are looking at a live shot there. the president's first visit to a mosque on u.s. soil. we will carry the president's remarks live here on bloomberg television.
global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. on the german 2-year note falling below minus zero -- -.5% today. germany is not alone. japan, switzerland, france, all negative as well. scarlet: let's bring in lisa abramowicz. howlook at this in terms of this affects the way people invest in bond funds. some exchange traded funds that invest in european sovereign bonds or bonds other than those in the u.s. typically charge a fee of about 0.35%. that is typical. how do you factor that in when you've got average yields that are plunging?
the average yield on a five-year in germany and france and japan had all turned completely negative. if you are looking for safety, at what point are you not getting it at all? it creates a conundrum that has never really been there before for bond investors. alix: is the plunge a demand or supply issue? lisa: it is certainly both. is incredible and it been questions about whether governments can or want to issue enough securities to meet this demand. this is being driven by policies that are saying we will do whatever it takes, we will buy as many assets as we need to. even buying exchange traded funds. european central bank considering adding to stimulus and they have had a negative deposit rates and last year. japan adding potential fuel to the fire with negative exchange
-- scarlet: how do investors profit then? you are looking for only price appreciation and a fixed return. lisa: correct. it is mind-boggling. comee are paying a premium up more than 100 cents on the dollar for bonds that they will only get paid back at 100 cents a dollar if they hold them to maturity. they are destined to be money losers unless you are hoping for bond yields to go even more negative, which is a completely negative view of the world. that means deep depression conditions. alix: the fed is going to be raising rates wherever one else's cutting them. -- where everyone else is cutting them. perhaps we will see negative
rates for three months. lisa: correct. they said this is not our best scenario. is the fed considering -- stan fischer came out and said this week, he doesn't think negative yields have been remarkably effective. he cited the denmark example. it is so interesting to me -- is there enough data out there to really assess the efficacy of these negative rate policies? which country is he pointing to? it's not like europe is out of the woods yet. this is uncharted territory. the bank of japan making extreme moves following the ecb and other central banks in europe. there is a big divide. lisa: some people say they are inflationary. the only argument i could see for why they would be inflationary would be if it is
basically depreciating the currency, which is what japan was time to get at. the weaker your currency, the more you have export power increasing trade. when every nation in the world is engaged in some kind of currency war, it is not effective. scarlet: lisa abramowicz, thank you so much. you can read her column on the bloomberg terminal. alix: president obama preparing to give remarks at a mosque in baltimore. the first visit to a mosque on u.s. soil. it is a deliberate rebuke to republican presidential candidates who they say have stoked islam the phobia. you will carry his remarks live on bloomberg television right after this quick break. ♪
alix: welcome back to bloomberg markets. time now for the bloomberg business flash. the biggest business stories in the news right now. the weakness in manufacturing may be related to other parts of the economy. services expanded last month at the slowest pace in two years. american companies added a better than hundred 5000 jobs last month. that is according to the adp research institute. better-than-expected 250,000 jobs last month. shkreli's e*trade account may have fallen below -- it wased amount once valued at $45 million, mainly in the form of pharmaceutical stocks.
shares of the drugmaker plunged after his recent arrest. that is your business flash update. scarlet: the very definition of a vicious cycle. let's head over to the markets desk. individual company movers, ez, yahoo! anddel a alumina. ndelez coming out with fourth earnings that missed analyst estimates. the maker of a lot of different foods, including oreos much right income. yahoo! falling after coming up with earnings that beat estimates saying they will cut 15% of its workforce. decline accelerated after we spoke with marissa mayer this morning. investors not terribly happy with the direction the company is going. umina's earnings also missing
analyst estimates. we are watching pc related -- thatdown today should be hpe. stocks decline after citigroup cut its estimates for pc sales this year. looking for a decline at 6% instead of 2%. the banks are also declining today. they have been trending lower. i looked at the yield curve which has been compressing. that has been bad news for the banks, having implications of their net interest margin. you are seeing big cap bank's have been having a weak start to 2016. alix: hard to get excited about
the markets when financials are not participating. thank you so much. scarlet: staying with the financials -- alix: wells fargo hangout $2.2 billion -- paying out $2.2 billion. they will finally be resolving those claims. scarlet: they are the last of for banks to settle the lawsuit after being sued by the fha. put this into context for us. they initially decided to fight the fha rather than settle. was it worth it? >> $1.2 billion is a big number. maybe not. what wells fargo was arguing with that an earlier settlement that included the big five banks did not allow the fha to follow on with this lawsuit. they were trying to squash it, they had some battles in court.
ultimately, the judge decided this case could go on and they settled. interesting for wells fargo. stanley has done this a couple times. this is the first time wells fargo has done it in a couple years. 3/10 is not a huge amount. wells fargo and their investors are happy to get this out of the way. less is there anything related to these claims that they still have to face? >> i don't think so. are of the mortgage suits sort of out of the way and have been settled formal billions of dollars. -- multiple billions of dollars. investors are still pursuing lots of them against lost of these banks arguing that they bought that bonds sold by these banks during the crisis.
in terms of u.s., doj, many of them are out of the way. scarlet: there's a statute of limitations expiring as well. years under a federal statute. i think that means there is another year or so for the u.s. to pursue these cases. scarlet: another story that caught our eye, wells fargo has not denied talks with credit suisse. >> there was a report this morning that wells fargo was in talks to buy credit suisse investment banking businesses, may prime brokerage, maybe their debt trading businesses. it surprised us a little bit. it is not usual that you see a company come out on the record and deny rumors, but they did.
alix: we've seen wells fargo in the past putting more money into its investment banking unit. it is not in the investment banking unit. what does it want to be in five years? >> they want to see their investment banking business bigger than it is now in five years. the way they do that, they would like to say and history shows that they are pretty disciplined about that. the people they bring on, the businesses they bring on, they try hard to make sure the culture fits. sometimes companies talk about that and they don't carry through on it. throughrgo have carried on that. it has been pretty slow, pretty steady. they have not taken on real risky businesses. some of those cs businesses don't look like they would be a good fit for wells fargo.
they had a chance to build those capabilities in the last couple of years since they built it up. they have chosen not to. buythem to now go and separate parts of that, it would be a little strange. scarlet: does wells fargo want to expand to overseas and get that exposure from internationally? i get the sense they don't want to based on things in the past. >> they do. the u.s. is only so big. the u.s. economy is growing faster than some parts of the world, but not as fast as other parts. look at them in five or 10 years, you would see them being in more places internationally than they are now. the do have an international division and they've been growing that. it is pretty slow, pretty measured. they are following their u.s. clients as they buy companies
abroad or open a businesses. it is 2% or 3% of revenue right now. alix: as we see other big banks dump their investment units, do we see more m&a from wells fargo this year? >> we will see more m&a from banks in general this year. the european lenders are getting out of lots of businesses. b of a see jpmorgan, hiring people, teams. wells fargo made a name for themselves by buying asset portfolios from european lenders. loansought $15 billion in over several different transactions. they do look at distressed assets coming out of the european lenders. there may be some more of this this year. scarlet: wells fargo coming out
billions of dollars represented at this table. scarlet: the former aig chairman will be honored. he's book with betty liu about the markets and more. -- he spoke with betty liu. has been ae of oil big overhang on the markets. the political situation around the world is an overhang on the markets. we have new events that have taken place. fairness, it appears to me that the u.s. is about the same. we sparked the problems. that has beenum filled by other countries. that makes the world even more dangerous. that is a concern. the markets reflect all of that. it is a trading market pretty you buy stock in the morning and sell it in the afternoon.
to the markets make sense to you anymore? >> no. >> ok. >> you are rolling dice right now. i don't roll dice. >> you build businesses. >> we make long-term investments. we are investing in china. >> you mentioned last time argentina, to bang. -- last time argentina, too. >> i'm very impressed with the new leadership. to 30 days, we've done more unravel what they've done in the last 12 years. there were farmers who produced products to be exported. they have no foreign currencies coming into the country.
things like that. all the ministers i met with first-class. all ran their own businesses. it is a very wealthy country. >> are you looking to put investment dollars in there? >> absolutely. alix: still ahead, the bank of england is in the spotlight. the central bank will make the: interest rates tomorrow. and atential brexit recovery that appears to be losing steam. ♪
news desk. mark: syria peace talks are collapsing before they even got started good opposition groups are threatening to pull out unless russia and syria quit bombing rebel-held areas. united nations mediators are overseeing the process and they hope for a nationwide truth bit michigan governor rick snyder wants to use $30 million to help residents of flint pay their water bills. the governor will offer details of the plan to help residents hit by the city's led-contaminated water crisis. it would cover utility bills for what is for cooking, bathing, drinking, and washing hands. a hearing is underway on capitol hill about the water crisis. it appears the white house bid of senator rand paul is coming to an end. the kentucky republican is suspending his campaign days after getting just 4.5% of the vote in the iowa caucuses. senator paul is up for reelection to his senate seat
this year. bill cosby is back in a pennsylvania courtroom again today. his attorneys are trying to get the sexual assault charges against him dismissed. a former prosecutor said he gave an unwritten promise of immunity to cosby during a civil lawsuit. the to meeting is charged with driving and violating a woman at his home in 12 years ago. president obama is set to deliver remarks at a mosque in baltimore. it is his first visit to a mosque on u.s. soil. we will carry the president's remarks live on bloomberg television. dayal news 24 hours a powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. back to you. alix: thank you so much, mark. scarlet: tomorrow the vacuuming than will release its interest-rate decision and monthly monetary policy summary along with a crucial inflation report. alix: thursday. scarlet: right now the consensus is the boe will leave rates
unchanged, although some are wondering if it will move to cut rates at some point. alix: signs that britain's economic recoveries losing steam and a decision by the bank of japan to introduce negative interest rates has private spec elation about will there be similar moves in the u.k.? here to help us assess that out as a man who has been part of these kinds of decisions, danny blanchflower, economics professor at dartmouth a formery and member of the bank of england's monetary policy committee. thank you so much for joining us. this is an just speculation. traders are starting to price and the rate cut between now and 2017. do you think that is a possibility? danny: well, i've been saying for an awfully long time that rates are not going to rise, despite what the governor said. he said in the summer that the rate rise was going to come into sharper relief at the end of the year.
that certainly didn't happen. the markets also don't think that the rate rise will come. could theion then is could b cut come? the vacuuming that has more room to move -- the bank of england has more room to move. the reality is that we are in basically currency skirmishes around the world and the the ecb,central bank, the swedes from the swiss, all have negative rates. my expectation is probably that the next move will be a cut. it will not be a cut to negative but that may come down the road. if you go to the bloomberg terminal and type in rate, which then he mentioned his half a percentage point. five years, same thing. in 2008t last cut rates
and has kept it at this half percentage rate, record low during this time. alix: if we do go into negative territory for england, to the negative rates work? is it inflationary or deflationary? danny: well, the ideas that you are carrying on the way you would normally by cutting rates with the intention that it would actually try to create some inflation. very hard to argue it is deflation. i've seen no evidence whatsoever to suggest that. the brief problem, as a good empiricist, is we don't have a lot of evidence yet because there is papers out by people who think we can civilly cut to negative and that will have still elusive effects. the expectation, i suspect, will be that if we go to negative we will a company that by more quantitative easing and the bank of england will do different kinds of quantitative easing. it is not limited like the fed is. you cannot separate what the
quantitative easing is doing from the negative rates did to argue it is deflationary is misguided. thelet: talk more about options to boe has that the fed doesn't have. danny: well, it has options in terms of what it can buy. it is not restricted by the congress as the fed is. congress says you can buy treasuries, mortgage backed securities, and short run munis. the bank of england is not restricted at all. we did buy corporate bonds. we talked about buying all kinds of things. the bank of england today has permission from the chancellor of the exchequer to spend and by 10 billion pounds worth of nonconventional things. i could literally be anything that corporate bond fund infrastructure bonds, even a discussion in britain about to be -- about qe. some people have actually talked
about doing helicopter money. all options are on the table. it is not restricted in the way that the fed is. it gives it more options, and it has bought corporate bonds and y oneght -- they could bu exchange, infrastructure bonds, bonds of small firms to all of those things are possible. professor, when you said the negative rates are inflationary, that is quite a controversial statement. in order for the u.s. dollar or for the sterling to depreciate, it has to follow consulting else. --every other central bank he has to fall against something else. if every of the central bank is in negative territory are we in negative territory are we insensitive de facto currency war? danny: well, that is right to use the word "w -- well, that is right. you used the word "war."
i used the word "skirmishes." always trying to play the bigger your neighbor game. that you are trying to get a relative advantage. if everybody cuts together, relative things don't change. if you change and the others don't respond, you keep doing that. obviously from that is having an impact on the united states, who come in my view, made a major error in december by raising rates and paying the consequences today. tilde lee has recently been saying could put -- phil dudley has recently been saying. for the reasons that you second they get an advantage against you and you think, goodness me, i've got to go back and reverse that. scarlet: it goes on and on. danny: it goes on and on. scarlet: talk about the brexit and the fear that u.k. will leave the european unit plays into market expectations and how they have shifted over the last six months. is absolutely it
clear that the bank of england would be sitting, looking at what is happening, and the resulting political conversations going on between the british government and its european partners, and the talk about when will a vote,. what form of referendum will it be? what is the deal that the british government has negotiated? clearly, in that race uncertainty, the bank of england will be very wary of stepping in and making matters worse. it might have to counter that uncertainty, and when i say uncertainty, what would probably mean is firms are going to be investing less come activity is lowered from hence the justification why they perhaps need to boost things more. but the concern will be this hard certainty and firms are going to sit there and say, why would i be investing now if there is a possibility that the u.k. will not be in this european market? uncertainty is bad for monetary policy makers and will make them err on the side of
scarlet: and we're looking at the luxury market. alix: first, let's start with japan could just days after surprising markets by taking interest rates below zero, the boj governor says if that doesn't work, they will look for something else. >> as we have more monetary policy options now, we won't hesitate to add more stimulus to achieve the inflation target. in terms of the timing of the additional easing, we will continue to examine the economic condition and risk factors and make a timely decision. chemet: it is official, china is offering to buy syngeta. chemchina's chairman says it will bring solutions to china's partners. the price and oil prices forced swedish expiration and production company to book impairment charges.
but the company's is optimistic that volatility will slow down and the second half of the year. first half of 2016 we will see volatility in the market, until the oil side of supply-side will settle. my views that in the second half we are probably going to see some improvements and that is mainly due to the impact we see on investment in the industry. lenovo is feeling the pain from falling demand for computers and smartphones. revenue fell 8% last quarter. lenovo gets half of its revenue from computers. saysuxury goods maker lvmh watch and jewel sales rep phil but still were more than expected. it is now time for the bloomberg quick kick from where we provide the context and background on issues of interest. today's topic to come within south america, argentina is known for writing its own rules.
a new government has taken over and thrown at the previous playbook. he was one in us president in december and quickly took action on promises that were meant to jumpstart argentina's ailing economy. the first of his living currency controls. central bankers have put up after the move. there is back up for you. argentina has seen its fair share of economic whiplash. in the 1980's and 1990's, the government was unable to rein in spending and borrowing soared. a recession in 2001 cause argentina to declare the largest debt default in history. a new government in 2003 was able to ride the commodities boom and dig the nation out of some of its debt and free up money for spending in the public sector. all of that has ground to a recent halt in years but there was another debt default in 2014 and in january, macri restarted
debt talks, and the publication of new economic data has been suspended, and macri ordered an overhaul of the institute that is attractive criticism in the past. borrowion could in the global markets and investors are eyeing its large reserves of shale oil as well as gas. that is today's "quicktake." scarlet: this has been your global business reported for more stories, -- global business report. for more stories, visit bloomberg.com. let's get to the nasdaq with abigail doolittle. downil: the nasdaq is 1.5%. we are halfway through the trading week. let's look at the top performance and worse performance on the week. amazon shares are back in the bear market, down more than 8% this week. investors seem to still be selling the company's we can
disappoint fourth quarter reported last week. morgan stanley said 9% of the company's cloud-based service revenue could be at risk if apple leads. just recently the stock fell well below its 50 having a moving average in what has been a very bearish technical set up in the past. amazon selling may have more to go. taking a look at a leader, gilead shares of the top point track on the nasdaq this week. up about 3%. on a big percentage move. the company's big bottom line, $12 per share, makes the stock look like a value name. like so many other stocks this year, gilead is well below at this point support of last year's lows suggesting that more pain from biotech may be ahead. thank you so much, abigail doolittle from the nasdaq. alix: we are watching stocks right now, looking at the dow is
alix: welcome back to "bloomberg markets." i am alix steel. scarlet: i'm scarlet fu. china's central bank plans to loosen rules on when foreigners can bring money in and out of the country. grants quotas for money brought into china for investment in domestic stocks and bonds. alix: it signals intent to open tournament -- commitment to financial markets to foreign investors despite recent turmoil in exchange rates. how significant is this move actually? we want to bring an end to current, who joins us now. >> it is producing of again, china signaling to foreign
investors that we welcome your capital and you can move into the tope freely because stories capital outflow and they're very concerned that the volume of capital is leaving the country is putting pressure on them to clamp down on money that is leaving. on the foreign side of things, hey, you can move your money a bit more freely, but we need to see when they implement this. scarlet: i have a lot of questions for you on that but first let's define capital outflow. is it clear that china will not buye in and blindly treasuries? enda: great question. capital outflow versus capital flight. a record $1 trillion left china last year. some of it was payoff. some of it was for m&a. some of it was people trying to get into hard currency. that is because there is in a my motherof china currency depreciate and the wealthy chinese are the big companies who do not want to be left holding a weaker currency and that is what they are trying to swap it out.
to make the broader point, not all capital flight, but some of it is. and capital outflow would be, for instance, the government giving the one inside its borders and looking to invest its own project rather than buying treasuries? what they are, doing on the other side of the ledger is selling treasuries, burning reserves to keep the flow on the yuan. they need to keep a base under the yuan to offset the capital outflow. that is what is putting pressure on the reserve. so if you wind up having foreign investors able to move their money more freely in and out of the country, what kind of risk is that those? you might get it in but it leaves quickly. something we talk about is how investors might not understand the chinese market. enda: that is entirely correct, and that is where hot money enters the equation could china wants to attract foreign capital. it wants to internationalize its currency. it wants tourists to withdraw money from atms.
part of that process, it wants foreign money and people to invest in china. that is where they are saying, hey, we have this turmoil going on in akron, but you who like to test going on in the back on, but you had to -- all this turmoil going on in the akron but you have to move your money in and out. scarlet: is this good news for chinese stock and bond prices? enda: it depends on how you want to read it, right? there is a view that the stock market is disconnected from the underlying economy but the economies showing signs of stabilization. and yet there is no circuit breaker in terms of risk sentiments puts the chinese markets like the stock markets and the bond markets. it will take more than this to inspire confidence in investment opportunities, i guess. alix: when we get the news that chemchina will be buying syngenta $443 billion come that is left in money leaving china.
what you chinese officials have to do to compensate in the short-term? enda: coming after a record year for our lead the last year, $60 billion total last year, that is a positive china story. china wants to grow -- alix: doing financial rejiggering to compensate for that? enda: well, even if they do, this is the thing they want to encourage. they want to buy ip around the world, they want to buy technology and manufacture and produce for themselves, and this is but a deal value chain for just part of the whole value isin for china's -- this part of all value chain for china's economy. scarlet: chinese leaders next week -- chinese new year's next markets will be close but do expect them to do more before the markets reopened? enda: they are already acting and the central bank has been popping in record volumes of
liquidity, pumping billions into the banking network to make sure that the people going on holiday and of coursends they want to make sure there is enough money the system to offset the capital outflow kit they are already aggressively getting ahead of the chinese new year. talkingsterday we were to two people going like the bull bear on china but they were not debating the difficulties, they were debating what the solutions are. the pboc and the government will be able to pedal what is happening, that is the bull case could otherwise, things are so much worse that the pboc cannot do anything. enda: the wild card is the yuan. they let the currency depreciate. that triggers capital outflows. it is global deflationary force. it hurts foreign companies and earnings in china, etc.
there is another scenario, central case scenario, where china muddles through. ofy looked through a period stability and look to keep the currency relatively stable and stability in the stock market and look to start regaining confidence among global investor base by trying to get the economy back on the table by targeting especially consumption side of things. measurestimulus that that drug consumption and retail . -- that promote consumption and retail. the wildcard is exchanging capital flows. scarlet: do you see the pboc returning to conventional rates, cutting interest or are they going to continue to target the currency? enda: i'm not altogether sure if they are targeting the currency -- scarlet: that is the view from eric nelson. enda: correct, an entirely fair view. the problem is being criticized
for not expressly stating the exchange rate -- yesterday they a whole toolbox of options. -- yes, they have a whole toolbox of options. they could take other measures to try to get credit flowing through the economy. problem is they are not getting much bang for the buck could we have had in the past year. we have had 6 rate cuts in the past year. alix: thank you so much. what a pleasure to have you here, and th -- and the current -- enda curran. scarlet: coming up, the annals to predict currently predicted the -- the annals to correctly predicted the selloff.
scarlet: from bloomberg world headquarters in new york, good afternoon. i am scarlet fu. alix: i'm alix steel. stocks struggling for direction in choppy trade. the dow coming back from a triple digit loss as oil prices rebound. scarlet: comcast actually added subscribers last quarter but the cable industry's troubles are far from over. alix: marissa mayer makes the case for yahoo's future but investors are not buying it. scarlet: we want to go to the markets desk where julie hyman has been tracking the back-and-forth in major indexes. julie: we have had this bouncing around on all the various elements affecting u.s. stocks, from economic data to oil prices to earnings. the dow is holding up the best of the three major averages. dividend boost. we are seeing boeing, for example, rises, exxon mobil
rise. the s&p and the nasdaq in particular are feeling the pain today. take a look at the bloomberg terminal. we have information technology stocks down among the most in the s&p. that explains why the nasdaq is doing so poorly today. anancials also declining as continue to see the yield curve narrow. materials and energy stocks to invest, along with utilities from interesting enough. where do we stand for the year to date for the major averages? the nasdaq remains the laggard on that basis as well. we have really seen big cap technologies pulled back, down 11%, as the s&p and the dow are down 11% each. one of the worst performing groups on the year has been transportation stocks, but they are actually rebounding to some extent today. if we take a look at transportation and utilities shares, what we have been seeing, the transportation average rebounding today along with utilities at the same time. we've seen a divergence of more in these 2 groups. adjusting that they are going in
the same direction today. alix: what is puzzling to me is that commodities are going the stock market and i, for one, am really perplexed about oil price action. julie: it is perplexing because we have this inventory build it is the highest since babe ruth was hitting homers in the bronx. alix: hard to find anything bullish in that report. julie: he says it is more about the currency action today. maybe that is indeed what is going on here. we have seen crude oil not just up but up a lot. 6%. gold futures higher. copper futures higher. on the flipside, the currency front of the equation, you are seeing weakness in the u.s. dollar today. the euro is surging against the dollar by more than 1%. the dollar's reasoning versus the yen as well. just a lot of dollar weakness. mixed economic data but is exciting market did a lot of weight to the isn services report which came in worse than estimated. 1.9% drop in the dollar versus the japanese yen. when you are trying to grasp for
straws, that is the currency straw, the one we have got today. alix: fair point. thank you so much, julie hyman. scarlet: let's check on the first word news. mark crumpton has our headlines from the news desk. mark: now. sub is saying he was robbed. mr. trump -- now donald trump is saying he was robbed. mr. trump says that ted cruz stole the iowa caucuses. among his complaints to what mr. cruz said about trump's positions on abortion and obamacare. trump called for a new vote or for cruz's went to be nullified. the french government is calling an end to the three-month state of emergency, in effect since the deadly paris attacks in november. it requires parliaments approval. argentina is reporting a second case of the zika fibers. the patient is a 68-year-old man who was infected abroad. he was known to have recently traveled to venezuela. last week, a colombian woman who
lives in point of cyrus was infected with -- who lives in buenos aires was infected with zika. robert pierce has pleaded guilty in louisiana to a weapons charge and has agreed to a sentence seven years and one month in imprisonment. it is another step towards durst's extradition to california, where he is wanted in the death of a friend in 2000. he will not immediately be sent to california until at least after the sentencing. former president jimmy carter says a scan conducted last week found no sign of cancer doctors discovered last summer. the president of the united states making his first visit to a mosque in this country. he is at the islamic society of baltimore. let's join the president live on bloomberg television. president obama: 10 for your example, your devotion to your faith, your education, your service to others, you are a
inspiration, you're going to be a fantastic doctor, and isis suspect your parents are here -- where are your parents? good job, mom. [applause] she did great, did and she? - didn't she? she is terrific. for everyone at the islamic society of baltimore, thank you for having me today. i want to thank muslim american leaders across the city and the state and some who traveled from out of state to be here. i want to recognize congressman john sarbanes, who is here. [applause] as well as two other great and proud congress, muslim americans, congressman keith ellison the great state of minnesota. [applause]
and congressman andre carson from the great state of indiana. [applause] this mosque, like so many in our country, is an all-american story. you up and part of this city for nearly half a century -- you have been part of this city for nearly half a century. of have served thousands families, somewhere been here for decades, as well as immigrants from many countries who work to become an american citizens. a lot of americans have not visited a mosque. to the folks watching this today who have not, think of your own church or synagogue or temple. thomas like this will be very familiar -- a mosque like this will be very familiar. this is where families come to worship and expressed their love for god and each other. there is a school where teachers open young minds, kids played baseball and football and basketball, boys and girls. i hear they are pretty good. , meet,uts, girl scouts
recite the pledge of allegiance here. with interfaith dialogues, you build bridges of understanding with other faith communities, christians and jews. there is a health clinic that serves the needy, regardless of their faith. and members of this community are out in the broader community working for social justice and urban development. as voters, you come here to meet candidates. as one of your members said, just look at the way we live. we are true americans. say ourwords i want to words that muslim americans don't hear often enough, and that is thank you. thank you for serving your community, thank you for lifting the lives of your neighbors and keeping us strong and united as one american family. we are grateful for that. [applause]
this brings me to the other reason i wanted to come here today. i know that in muslim communities across our country, this is a time of concern and, frankly, a time of some fear. like all americans, you are worried about the threat of terrorism. on top of that, as muslim americans, you have another concern, and that is your entire so often is targeted or blamed for the violent acts of the very few. muslim american community remains relatively small, several million people in this country. as a result, most americans don't necessarily know or at least don't know that they know muslim person. hearresult, many only about muslims and islam from the news after an act of terrorism
or in distorted media portrayals , in tv or film. all of which gives this hugely distorted impression. and since 9/11, but more recently since the attacks in paris and san bernardino, you peopleen too often conflating the horrific acts of terrorism with the lease of an entire faith -- beliefs of an entire faith. and recently we have heard an excuse -- inexcusable political rhetoric against muslim americans that has no place in our country. no surprise, then, that sets and harassment -- threats and harassment of muslim americans have surged. here at this mosque twice last year, threats were made against her children -- your children. around the country, women wearing the hijab have been
targeted. we have seen children bullied, we have seen mosques vandalized. sikh americans and others who are perceived to be muslims are targeted as well. i just had a chance to meet with some extraordinary muslim americans from across the country who are doing also support. some of them are doctors -- doing all sorts of work. some of them are doctors, some of them are community leaders, religious leaders. were doing extraordinary work not just in the muslim community but in the american community. and they are proud of their work and business and education on behalf of social justice and the environment and education. i should point out that they were all much younger than me. [laughter] which is happening more frequently these days.
and you couldn't help but be inspired hearing about the extraordinary work they are doing. but you also cannot help but be heartbroken to hear their worries and their anxieties. some of them are parents, and they talked about how their children were asking, are we going to be forced out of the country? are we going to be rounded up? why do people treat us like that? conversations that you shouldn't have to have with children, not in this country, not in this moment. that is an anxiety echoed in muslim americans from across the country. to me andeople write say i feel like i'm -- "i feel like i'm a second-class citizen." write and say
"my heart cries every night thinking about how our daughter school."treated at a girl from ohio, 13 years old, told me "i'm scared." a girl from texas signed her letter, "confused four-year-old trying to find her place in the world." these are children just like mine, the notion that they would be filled with doubt and questioning their place in this great country of ours, and a time when they have enough to worry about -- it is hard being a teenager already. that is not who we are. we are one american family, and when any part of our family starts to feel separate or second-class or targeted, it tears of the very fabric of our nation. [applause]
the president of the united states speaking at the islamic society of baltimore. the president saying for those americans were never visited a mosque, "think of your own temple." synagogue or bloomberg news washington bureau chief megan murphy is standing by. the political calculation here, it cannot be overlooked. absolutely not. this speech is twofold, what the president is doing today. stande actually wants to with the muslim community and address these concerns of islam a phobia, which of really gripped the u.s. again after paris and san bernardino. he also really wants to hit back and republicans on the campaign trail who have made this the central issue of that campaign, candidates like donald trump even candidates like jeb bush, candidates like ted cruz referred to how to vet muslims coming into this country. he is playing a twofold game. if you listen today, what he is
emphasizing is this one american family, when american community. that is the message he wants to get out today. mark: that the administration field the need to let muslims in thatorld no that -- know the message is not at war with islam -- united states is not at war with islam? megan: that is absolutely the strategy. he has taken a tennessee over combating i guess time of heat has takenting -- he a ton of heat over combating isis in the middle east. what he wants everybody to know right now as well as our allies abroad is we are just as much a player as they are and he will do everything he can to prevent that kind of extremism and support the community in the u.s. mark: megan murphy, thank you so much. the president of the united states speaking at the islamic society of baltimore. mr. obama noting the fears and concern in the muslim community,
but he acknowledged that the entire muslim american community is often blamed for the acts of a few, and he did, as megan alluded to, point out some of the harsh political rhetoric against muslim americans, the president called that speech, quoting here, "inexcusable." back over to you. scarlet: we going to take a quick break. when we come back. that's when we come back, the charts you need to see and when the s&p 500 and shanghai composite may falter next.
the bull market in 2000 and it had all the markers of the secular bull come in terms of valuation, extreme high i'm the unemployment rates. if it walks like a duck and quacks like a duck, it is a duck. looking at the secular bull market that began in the late 1940's, it had those markers. by that basis, i think we are in a secular bull. sometimes when you use that terminology, it sends a message that, oh, it is a great environment, of every year. the crash of 1987 was within a secular bull. 2011, to the extent that this is a secular bull. that is the best bet at this point. we in a tough case. phase howout a tough do you explain the correlation between the oil markets on the stocks? are they worried there is something more to it than supply? liz ann: i think that just like
the high correlation right now between the s&p 500 and the shanghai, first of all, correlations are up across the board and that has a lot to do with mechanics of the market and momentum and strategies being paramount among all strategies. that is a piece of it. both the message from china on oil and the correlation in the market has to do with is this sending a signal not only about weak economic growth, but does oil or percent what subprime did back in 2008? tom: interesting. you are the first person i heard say that. you track oil prices on top of the market adx index -- from what i understand, it has a starring role in the movie "the big short." tom: ensco say, the next movie is "the big -- i was going to say, the next movie is "the big brent." liz ann: the difference between 2008 and now is the consumer was long -- they benefit from oil. liz ann that was
saunders speaking on "bloomberg surveillance." alix: it has already been a tough month for stocks. scarlet: our next guest have seen this coming. demark predicted a bottom in the s&p 500, followed by 5-8% rally in which happened since he joined us on january 20. alix: thank you so much for being here. you correctly predicted the bottom and the subsequent rally. what is next? 5-8 we announced the percent rally and we did see through last friday, really monday, intraday on the s&p -- seven point% -- 7.47%. we are teetering at a very important inflection point, just -- ine were on january 20
fact, just at the same time i was on tv, we called the likely market bottom at that time and it occurred and this is good timing as well. , 1893 -- weclose are hovering around that. we are trading around that level. if we were to break that level on the closing basis and that open tomorrow lower, the market could open severely to the upcoming weekis to two weeks and we could see the market unraveled quickly. when you say you expect the u.s. stock market to resume its decline and it will unravel quickly, give us a sense of the speed of the unraveling, speed of the decline. tom: last november that return negative on the day of the high. we used our indicators in tandem with one another and we stood as a gps forecasting the market. we go into a lot of detail.
we concentrate on minutia and we take from the fractal level all the way expanded to the long-term perspective. sometimes our indicators are very exact, and other times they are less exact as far as timing they are pretty correct as far as price objectives. onare very confident 1770-1780. off the lowest january 20, the 1-3-week rally. 7.7% advance. we think the decline could accelerate but it has got to meet certain criteria. like i said, tomorrow, following through tomorrow, it could happen within two to three weeks. alix: two to three weeks? tom: it going. we keep updating our perspective as we move along every day. scarlet: tom, very quickly, before you move onto the chinese market, if we get to 7070 to 1780, that would be back to
levels last seen in february 2014. is there seasonality to the selling that we need to be michael of? -- mindful of? tom: i did say last time i was on the air, 2008-2011 most of unsoldsalted -- severe conditions. we will feel a lower low that while we recorded january 20. as far as seasonality, we really don't follow seasonality. we look mostly at price relationships. seasonality is helpful but we don't really rely on it much. alix: you were bringing it up china. the shanghai composite hit the 2638 intraday level on january 27, close to your downside target. do you feel like the selling their is over? tom: not quite there. when they made the shanghai ,omposite, the enterprise index we had severe downside projections and they have almost been fulfilled. but we are very, very reliant
upon the timing models we have. we are looking for 3-4 successively, not consecutive -- 3-4 successively lower closes to identify the bottom, and in the terms of the shanghai composite, i,20-2540, in the case of hsce we think we are going to see them. we have been stubborn all the way down despite people attacking us and saying that we would be wrong. we did identify the december peak to the day in the market. we are very confident it is going to happen. like i said, we are asked in the covenant are wrong. we have not been correct -- most of the time what we are extremely confident we are wrong. we have happened correct all the time. we are anticipating a big upside move in the chinese market. scarlet: before that happens, those three successive blows need to occur. what happens when the market is closed for a week for the chinese new year? do you need to fall then what happened overseas as a result?
-- full in what happened overseas as a result? tom: no, holidays and weekends, we obviously ignore that. our model exists only depending on trading days. what we follow in the market during the day, we want related to other markets that are not treating when there is a vacation during the chinese markets. alix: we have about 30 seconds. what is the upside potential for the s&p when we do wind up getting that low? tom: well, there is still potential today. if we were to close above the close four days ago in the s&p futures, we could go back up to friday's broad index in the nasdaq and the other market. we could go to the high we recorded on monday. we don't see much upside potential here. we will probably recover 40%. scarlet: thank you so much. tom demark joining us from scottsdale, arizona.
topic of debate among investors is the question of whether profit margins have peaked, and goldman sachs came out with a report detailing the bull and the bear side of the market. we bear is really, look, have over a week demand, a lot of capacity in the market, and therefore margins are going to have to fall. of course the bull cases you have ongoing consolidation in industries, lots of synergistic opportunities, and colonies continue to cut costs. all that keeps the floor under margins. alix: what is so impressive that goldman's note is it's profit margins expand while the global margins are slowing and that could blow up capitalism as we know it. scarlet: you have got to question how efficient is capitalism.
york, welcome back to bloomberg markets. mark: senator rand paul is defending his presidential campaign. the kentucky republican taking the action after only 4.5% of the vote in the iowa caucuses. -- suspending his presidential campaign. john kasich says he is also ready to drop out of the republican presidential race if he gets smoked in next week's new hampshire primary. inwill talk with him later manchester. , we'ree don't do well not going to be dragging around like some band of minstrels that cannot beg people to come to our shows. we will make a hard choice. i think we will do very well. we are not going to drag this out. after placing eighth in the caucuses, he thinks
race now reset in new hampshire where voters are not swayed by what happens in the hawkeye state. he says his fundraising has improved and his point numbers have been rising in new hampshire. plenty of finger-pointing in the lead contamination crisis in print, michigan. the chairman of the house oversight committee says it was a failure at every level of government that led to the crisis. an official with the epa says the crisis was avoidable and state officials resisted calls to deal with it. state officials are blaming federal regulators. still helping to feed one in seven americans. more than 45 million received foodstamp last october. that month. was 5% the last time joblessness fell to that level in april of 2008, 28 million americans used food stamps and the program cost less
than half of what the government paid out last year. global news 24 hours at a day powered by our 2400 journalists in more than 150 news bureaus around the world. oracle has also been going through a lot of changes. right now, there is no exception. we discussed how and why the current transition from one set of software to the clout presents such a huge opportunity for this company. >> in the industry, it is a big show. over the next 5-10 years, you will see the majority of i.t. shift to the cloud. as an, we look at it opportunity. the fact that we have such a strong base, it will be important to make those two worlds work together. for us, building a whole new cloud stack of capability from
applications two platforms to infrastructure that can work with that on premise base, a huge opportunity for us. >> cloud contenders say they don't have to work together. start over with cloud-based software, whether it's customer relationship management software nothy for newer companies start with a slate clean? >> when you talk to customers, you get a different answer. customers have a long set of capabilities and applications now on premise. have to run their businesses every day. the bulk of the work is moving to the cloud. you will have to get applications that work together, the ability to share information . it becomes a key advantage. most of our competitors are either purely on premise or purely cloud.
the fact that you can bridge those two worlds, they have to coexist. that is a big advantage for us. they are charging by the feed or by the day or by the hour. you guys have a different pricing strategy. how do you make that work in cheaper transitioning software looks like? opportunity to pay by seat or to shut something off when you don't need it, to get a variable price, i don't say that is cheaper, but it allows you to have better control of your costs. world, we love the cloud we love the on premise world. both business models are extremely attractive for us. -- we have invested in
driving our cloud stack. that's what we are focused on now, that transition to cloud. scarlet: that was cory johnson speaking with oracle's ceo. alix: cable operators in an intense battle over customers as ministering services like are given a lift. scarlet: the stock is trading higher as a result after comcast added 89,000 subscribers last quarter. by more, we are joined michael couric -- mike mccormick. e: there is an important component to look at. the telecom operators argue focused on video. re defocused on video.
verizon files is adding few subscribers, focusing more on broadband only, younger marketplace. the cable operators benefited from a lack of progression. alix: the customers seem to be paying more. comcast, the average bill was $144.90. what is giving comcast that pricing power? >> prices go up. the costs associated video continue to rise. comcast is primed to increase 10% next year. that result in higher prices for the video component. you are also seeing major improvements in networks. you have higher broadband speed, more and more streaming needs at home. alix: nothing annoys me more than whatever -- then when i log into netflix and i can get my shows.
-- can't get my shows. the themes arey fairly familiar. moment was last summer, in august, when disney reported results highlighting some subscriber issues at espn and the stock tumbled 9.2%. have the familiar themes evolve since disney first spooked the markets? mike: there is a view that we have court cutters, people disappearing into the ether. we have a very serious courts tealing,-- cord s password stealing issue. espn says the ratings are fine. what does that mean? i have young teenage kids, they
don't pay for anything. the thing about disney, there ata point saying there's 30,000 subscribers using one password on espn. you will see continued share loss. scarlet: hbo has had in the past that they don't mind people sharing passwords. better predict get addicted when they are young, they pay when they are old. i've spoken to people getting old and have no intention of ever paying. thank you so much for joining us. , yum! brandsng up has released earnings today. what to expect after they post the results. ♪
scarlet: this is bloomberg markets. yum! brands is set to report earnings after the close delivered at the company will spend much of this you're getting ready for its split. the move to carve out the china business from everything else will represent their biggest shakeup since their own spin off from pepsi years ago. it is all about china where young has been moving -- yum! brands has been losing market share. the prescription is to focus more on china where most of the restaurants are not franchised like here in the u.s. the move could boost yum! brands value by $7 million. the competition as hurt their same-store sales and margins in china. countryble sales in the rose 1% in december. pizza hut saw a huge drop with
sales dropping 11%. the company has about 5900 restaurants in china. here is how the new china unit will look. kfc will contribute three quarters of the operating profit. he's will make up the balance. yum expects this business to deliver 15% eps growth. its profits will also feed into the other company called the new yum! brands. this business will target 15% sure how to return made up of 13% eps growth and a 2% dividend yield. new yum! unit and the brands generated at least $6.5 billion in sales in 2015. yum will be reporting earnings after the close today. m is down by about 2% and change over the past year. all in all come investors pretty lukewarm on yum! brands performance. for more on the stock, let's check in with julie hyman.
julie: i'm looking at it from the stock perspective indeed. shares falling along with the rest of the market. down about half a percent. the shares have fallen over the past year. not a huge decline, but a decline nonetheless. if you look over the past year, that performance is better than a bloomberg index of american restaurant peers. the index and green had fallen more than yum! brands. i'm looking at analyst recommendations for the shares. there is a lot of beige on this chart. most analysts are advocating a hold strategy on yum, waiting to see what the spinoff is going to yield. i wanted to look at how other restaurants have performed over the past year and what it says about what restaurants have done well and what have not done well.
the index is down 15% over the past year. , bigof the performers companies like starbucks, mcdonald's, domino's have done well. there is room for outperformance or there has been in this particular group on the downside. we have noodles and company and the smaller operators on the downside. chipotle on that list as well. the talk about brand has been doing heavy lifting as of late. same-store sales growth have been pretty steady. -- taco bell brand has been doing heavy lifting as of late. we will talk about chipotle as well, but i wanted to start quickly with yum! brands. what is the number one thing you are looking at? >> there is always a close look at everything that happened in china. that will continue. we'll take a closer
look at what is happening in the u.s. talk about has been a bright spot for a few quarters. it gets buried in the bigger company. when they break that off, that will be a bigger deal for them. once they split off, that becomes a bigger part of that company. alix: college for me was all about taco bell love. scarlet: i don't like taco bell or chipotle. the company has seen sales fall apart. when you look at the results, what have you learned? there is a fear factor right now. they say they have a clean bill of health. they obtained their supply chain. -- they have tightened their supply chain.
people are staying away. ,hen you look on the revenue there is a huge slump we saw in the recent quarter. alix: over 2000 locations, how many readers have they sold a day desperadoes have they sold a toburritos had they sold a day? >> per restaurant per hour last year was almost 85 burritos. in the fourth quarter last year, it was 70. a pretty big slump. scarlet: to what extent does talk about benefit? -- taco bell benefit from chipotle's problems? >> sales were down 30% in december. people are eating lunch somewhere.
you start to get results from the first quarter, you will see some bumps. bullet has been a growth story -- chipotle has been the growth story for a long time. alix: four chipotle to get them back, they have to have more food regulations for their stores. which means profit margins will shrink. they were ok in the last quarter. how much did they make per burrito? >> their operating margin is now down under 20%. they used to be a model of the industry. everyone marveled at their throughput and economics. the question is what the steady-state is if and when they move beyond this. scarlet: what are the best practices that chipotle
generated during its growth years that he really saw other companies try to pick up and emulate? >> the customization was a big thing. everyone wanted to copy that. transparency is a buzzword for millennial's and restaurants. the way they move people through the restaurant has been a key for them. they serve premium ingredients. -- gettingd to have people in and out of the restaurant very fast. speed and customization. they now have this criminal investigation they have to deal with in california. >> on tuesday, we got the announcement the cdc had declared all clear. they thought maybe the worst was behind them. then, they announced the criminal probe has expanded in california. we don't know what exactly they're looking for. it reminded people that there is still headline risk out there forward for chapala.
alix: welcome back to bloomberg markets. it is time now for the bloomberg business flash. american companies added a better than expected 5000 jobs last month according to adp research institute. -- better than expected 200-5000 5,000 jobs. scarlet: halliburton preparing to propose to package asset sales to ease you competition
concerns -- eu competition concerns. its ownton will offer after the eu pushed back the deadline for reviewing the deal by 20 working days to june 23. mark zuckerberg now the world's fourth richest person with a $50 billion fortune. he has pushed ahead of carlos slim and jeff bezos. shares of facebook at 9.5% this year despite gloom across the global equity markets. that is your business flash update. scarlet: marissa mayer has been under fire for months now, lots of scrutiny, but that did not stop her from unveiling a new turnaround plan for the company posting earnings last night. alix: emily chang asked her about the course she has set for the company. >> what is good for yahoo! is
good for me. there is no personal interest separated there. we want to see the best possible future and the best possible outcomes for yahoo! emily: given the job cuts and cost cuts you have needed to make to attempt to get there, how are you dealing with the drop in morale and productivity? marissa mayer: when i look at yahoo! in the we have a lot of people here who are confident, they like our brand. we focus is on products really believe in and love and people are really excited to work on. there's always going to be some in as with morale complicated situation like this. i really believe in the resilience of the people here at yahoo!
missione in their because it is a shared vision we have built together. emily: there are concerns that you overpaid executives tuesday and overpaid media personalities in an age where companies like buzz feed are paying their content craters almost nothing. does your model make sense? marissa mayer: there's been a lot of media reports that have been inaccurate. there are some perceptions out there that are not quite right and i don't want to drop any in particular. the perceptions of what we paid or overpaid for various things are just that, misconceptions. when i look at yahoo!, it is a three-legged stool. there is informed, connect and entertain.
each leg provides a fundamental element to our business. we have focused on discovery, search is a key part of that. it is really lucrative overall to our business. munication drives a lot of frequency. -- communication. what differentiates us. people come to yahoo! because of those personalities and because of aggregation and personalization. all of those work together to create a true digital network. that is ultimately what makes sense for us to invest in original perspectives and high-quality content. one thing that draws people to yahoo! and differentiates us from other search providers. scarlet: let's get a check on the markets right now. we've been seeing an up-and-down day when it comes to the equity indexes. but now, everything to the downside with the dow off by 64 points, s&p losing 1.1% as well.
oil a big driver here of what is moving. alix: the opposite, because oil is up. scarlet: we're going back to normal correlation. alix: the inventory data seems really bearish. production overall was down but marginally. she'll was pretty much flat and inventories are continuing to build. tomorrow, t boone special gueste a on bloomberg at 9:20 a.m. new york time. you don't want to miss his call on the oil markets. ♪
good afternoon. appeared morea volatility slamming the stock market as stocks recover from the earlier losses as oil climbed and the dollar weakened. wells fargo, bank of america and citigroup all getting hit. concerns about the global economy and oil weakness needs a tough outlook for financial giants. betting on jebs cuts and possible asset sales to turn around the company. -- a job cuts. first come let's head to the markets desk where julie hyman has the latest. seen all this bouncing around in today's session. that is continuing right now. all three major averages now lower. the dow was higher not that long ago.