tv Bloomberg Markets Bloomberg February 9, 2016 10:00am-11:01am EST
betty: from bloomberg world headquarters in new york, i am betty liu. we are half it hour into the trading session. stocks are trying to make it back into the green as global equities near a bear market with volatility near a seven-year high. ranking stocks are getting hit. one of the banks getting .queezed is deutsche bank co-ceo john cry on is trying to reinsurer investors it can pay back its riskiest debt, saying the lender is rock solid. to investors believe it? president obama releasing his last budget proposal of his presidency. 6 budget books were hauled into congress. they say they won't consider the $4 trillion plan. straight to the market desk
where julie hyman has the latest as we are coming back from some of the early losses. there has been a lot of volatility. a lot of bouncing around. it looks better than yesterday with the nasdaq positive and bouncing back after having led declines. the s&p turning into the green. the dow remaining lower as investors are concerned about global growth, and watching what is going on around the world. look at the landscape of the various sectors. is lower, telecommunications as well. financial is weak. materials and consumer discretionary are rebounding. so are the saying stocks, we have been watching the big cap technology companies leading losses, they're bouncing back. not huge gains, but not
negative, which is more than we can say for the selloff. netflix seeing a boost of 5%. alphabet -- all of them gaining. betty: they could be better, but not everything is sunshine and roses. julie: the banks are showing weakness. banks in the u.s. are lower. the bank of america taking higher while bank of america and wells fargo not down by that much. thank you weaknesses can be found in european banks. many of them trade in the united states. deutsche bank is trying to reinsurer investors. that is falling flat. barclays is also feeling the pain. looking at the s&p bank market it is in a bear market. the nasdaq is close to a bear market. from last july, this index is market. entering a bear that is one of the areas that is not recovering.
oil is another area we are watching that has been announcing around after we had the iea raise its apply forecast. it dropped lower and is now .ecovering 8/10 of 1% i want to look at the 10-year where the yield has continued to fall. 1.74% is the lowest in about a year. we are seeing some signs of caution on the part of investors. .etty: thank you julie hymen at the markets desk. less chicken on first word news with a courtney donohoe. : all eyes are on new hampshire. voting is underway. big breaks for the republicans in new hampshire. polls indicate trump should easily when. cruz, john, ted kasich, and jeb bush.
bernie sanders's favored to win the democratic race. he leads hillary clinton by double digits. we will have a two-our new hampshire primary special on "all due respect" at 5:30 eastern. we won't know who wins until november, but the democrats are nominating the race for campaign cash of based on acres compiled .y bloomberg news hillary clinton has raised more than bernie sanders, marco rubio, and ted cruz combined. sends a $4bama trillion budget to capitol hill today filled with items the republican majority in can -- and congress will reject, like the tax on oil. president's budget may influence the race to succeed him. bernie sanders and hillary clinton may be challenged to
embrace or reject mr. obama's strategies. 150 were injured and nine were killed when a train crash in southern bavaria. the accident site is in a remote area, making rescues difficult. three hours after the crash, people were still trapped. global news, 24-hours a day, powered by our 2400 journalists around the world. betty: thank you. to the global fears in the markets. investors are reaching for safe havens. including gold, which is at an eight-month high, even though goldman sachs predicts the gains won't last. oil resuming its slump after the international energy agency said the surplus will only get bigger than previously estimated. for a look at those commodities we have james steel, the hsbc , and oururity analyst
u.s. energy analyst for big commodities. with you on gold. goldman sachs is saying, forget about it. with the fed raising interest rates three times this year, gold won't see this rally extend? history ofook at the the fed over the last four tightening cycles going back many decades, cold weekends going into the tight ink cycle, but when it occurs, it has a tendency to gain. betty: why? james: like it's our anticipatory. if you sold in anticipation of rate races, you would begin to reverse your position when the rate rises start. betty: what is the case for gold other than fear? there is a longer-term fundamental issue, which is the shift in physical demand.
not investment demand, but physical demand into the far east and india. when you drop below $1100 am a you get an increase in the price-sensitive buying. that has been putting the floor on the market. below $1100. below 1000 percolate $500. we have central bank buying and less recycled in the market. depending upon your long-term year hours, for this is that the dollar will weaken a little to the euro, that would give you a bullish gold outlook. bullish on oil. what about this report from the iea? >> in a quick snap, the world is awash in crude. this is nothing new for the market. isy did say that the iea, it
unlikely oil prices will see a short-term significant rise in price. the supply side, opec continues a produce 3 million barrels day. iraqis increasing. iran is increasing. in 2016, the hope is non-opec countries will reduce supply by 600,000 barrels. the demand side, we see weakness. demand growth was 1.6 million barrels a day. in 2016 they estimate it will be 1.2 million barrels a day. where's the difference going? betty: we have a 500,000 barrel surplus? that gap is going into oil storage. in the u.s., you are seeing storage your all-time high levels. how does this resolve itself?
low prices. they will have to work its way through the market to actually create a balancing price. that is lower. gold willf curry said not continue to rally and that oil will fall to below -- to the lower 20's because of the capacity issue. let's listen to what he said. based upon the cash-cost. when you breached storage capacity prices have to spike below cash-cost because you have to shut production almost immediately. for us to nail that number perfectly is difficult. i wouldn't be surprised if the market goes into the teens. peter: that is possible. betty: what happens when the tanks reach capacity? are at all-time levels for storage. moving into the refinery
maintenance season, they use a lot of the oil in storage and will shut down for maintenance. it is a regular routine. that is coinciding with storage at all time levels and might put pressure on pressure prices. the likely that oil production shuts down in terms of these marginal plays is that they are below cash-cost. there is nowhere for the oil to go. for production to halt, it needs to fall below the cash-cost, $15 to $20 a barrel. betty: james, on gold, the fact that central banks seem to be you have the bottom -- a negative interest rates in japan, negative in europe, may be negative here -- that is bullish for gold? james: we are in a heavy risk environment right now. what is different for gold versus last year or the year before is that during previous
money tendeds the to bolster the dollar going into treasuries. a higher dollar is bad for gold. that offset the safe haven buying going into gold last year or the year before. this time the money going into u.s. treasuries is feeding more into bullion. that is helping the dollar as a safe haven. i'm not saying it will continue forever, but it is now. that is the key element for supporting gold. on the oil front, i mentioned that generally speaking there is a positive correlation. lower oil means lower gold because of disinflation until you reach a point where low oil might be destabilizing. buyingu get safe haven back into the cold market. the relationships don't always hold over time.
remains rocksolid given our strong capital and risk position." the german finance minister revealed confidence in the tank earlier today. >> do you have any concerns on deutsche bank? >> no. i don't have concerns on deutsche bank. that did help deutsche bank recover from some of the losses. michael moore covers the major banks for bloomberg news. is this some sort of 2008 banking crisis brewing? what are people saying about deutsche bank? fear is part of the that deutsche bank will have to have another capital raise. that is what investors are concerned about. john cryan has canceled the dividend for 2015 and 2016 in an effort to build capital. they're going in with the better capital position that they had
before the financial crisis. betty: how much money do they have? what did they disclose? michael: 1 billion and payment capacity. one billion euros of payment capacity in 2016 for this specific kind of capital instrument. they are called at-1. have 4.3hey will billion is their estimate. they will have to make a 350 million euro payment in april. they say we have one billion, that is more than enough. that is the argument they are making. the longer-term fear is that deutsche bank over the last five years, their net profit is basically zero. they have had a lot of legal costs. people are concerned if that continues are they able to build the capital base internally by the war going those dividends
and building the capital base? john cryan is saying we will have more legal costs, but we put that in our plans and could move forward. he said in the past that we don't need a capital raise. betty: it seems in the markets, when you look at my bloomberg, you will see the trade in credits flop, which is what you buy to protect against a default . they're gone up for eight days for the senior and junior debt for deutsche bank. are we anywhere close to indicating a crisis point for deutsche bank? michael: we are starting to approach that level. it is not 2008 on that sense. you saw something similar in 2011 where there was a lot of concern about the european sovereign debt crisis. some u.s. banks had to reinsurer
investors, that bank of america raise money for warren and set our capital is strong. you have seen fears buildup and banks try to reassure investors and say, we are fine and have plenty of money. that is a similar thing. betty: it feels like deja vu. michael: if you are deutsche than doubledore this year. that is certainly a reason for concern. that spilling over to barclays and bnt? michael: deutsche bank is the outlier in terms of the stock valuation, the cds levels. their following a trend. cds is going up, stocks have fallen quite a bit. it is not deutsche bank alone, but they are the standout. betty: charles peabody this morning talked about deutsche bank. charles: we don't have a formal rating on deutsche bank, but my
guess is the shareholders face some sort of dilution in their capital structure. betty: additional capital raising, right? michael: shareholders that have been holding on for a while looking for capital return, they don't want to see another deluded offering. betty: michael moore with bloomberg news. we'll keep developing the deutsche bank story. still ahead, full, live coverage of janet yellen's testimony before the house financial services committee. that is tomorrow. before the senate banking committee on thursday. both days that is 10:00 a.m. eastern time. it will be must watch television. ♪
♪ betty: welcome back to bloomberg "markets." i am betty liu. we are almost one hour into the session. we had briefly turned green on all three indexes. the dow has turned lower off 33 points. the s&p is holding on to some gains, as is the nasdaq up almost one half of 1%. tomorrow morning, janet yellen will testify before the house financial services committee. coverage starts on bloomberg television at 10:00 a.m. wall street time. what does the market need to hear? that was posed to the cofounder of aberdeen asset management. i think we have to get away from the fear of relying on the
central bank and get back to the ies earning money. is ans why i think this important turning point as far as emerging markets are concerned, which have started relatively better here that is where the growth will be in the next five years to 10 years. stephanie: except for the fact that emerging-market corporate's are tied to commodity prices and more lever today than before the financial crisis. overweighthave an position in india that is leading world growth at the moment. the companies are well managed. the low oil price does them good. their gdp is growing faster than china. 5%? they are seeing the benefit of oil. that is where they were. they were a massive importer of oil. that has been a huge benefit and
probably added 1% to gdp in india. the difference between china and india is that it is easier to china.ney in india than it is easier to find companies with good corporate governance in india than in china. china is coming. we are excited about the middle-class wealth growth. it will be a massive driver of world growth in the years to come. at the moment it is difficult to find companies with good corporate governance. play the: how do you market? investors are being bled dry. defensively.vest hopefully this is a turning point for fund managers like ourselves, and emerging-market managers like ourselves. hopefully these are the first signs of a recovery in those two sectors.
that is a relative recovery. we are still losing clients' money, but not as much as developed markets are. betty: that was the ceo of aberdeen asset management's .peaking on bloomberg now the business flash. the biggest stories in the news. aig plans to exit half the hedge funds in which they are invested according to those familiar with their portfolio. they're holding more than 100 funds and plans to cut that to 50 or fewer trade aig reports earnings on thursday after the bell p or to a former j.p. morgan chase manager was fined $1.1 million are not telling authorities about concerns he had about the bank's activities in the london whale case. the head of cio international failed to inform regulators about concerns about this in the portfolio, which
later became known as the london whale trade. fourth-quarter earnings in line with estimates helped by last summer's acquisitions. last year cbs bought pharmacy locations inside target stores. is your bloomberg business flash. still ahead, viacom's vulnerability and disney's dilemma. media, money, power, earnings -- after the break. ♪
the conference call. the ultimate arena for business. hour after hour of diving deep, touching base, and putting ducks in rows. the only problem with conference calls: eventually they have to end. unless you have the comcast business voice mobile app. it lets you switch seamlessly from your desk phone to your mobile with no interruptions. i've never felt so alive. make your business phone mobile with voice mobility. comcast business. built for business. ♪ betty: live from bloomberg world headquarters in midtown manhattan you are watching bloomberg television. i am betty liu.
nato is considering a mission to monitor refugee traffic. the alliance and defense ministers will discuss the proposal. syria has driven thousands of refugees toward turkey. in hong kong, lunar new year celebrations turn to violence in a clash over it illegal food stalls. rex were thrown and fires set. -- bricks were thrown and fire set. .4 people were arrested calling for a cyber security action plan. it is included in the budget sent to congress today. it is to modernize systems to keep them from being hacked and getting people to secure online accounts. congress wants to know how the richest u.s. colleges are spending money. 5665 it schools have been --
private schools have been e-mailed. detroit school teachers are ending the sick out to focus on walk ins. teachers are reporting to work early and discussing issues. the stick outs have caused hundreds of schools to close in recent weeks. global news, 24-hours a day, powered by our 2400 journalists around the world. let's go to the market desk where julie hyman has a check on some of the movers. julie: so much for the little bit of a rally we had today. we are trading lower. particularly in the s&p 500. it is energy stocks to claim, even though oil prices are higher. energy incks, big cap
particular, are not getting a lift. we also heard from companies reporting earnings that i want to mention on the move. in the manufacturing sector. goodyear tire has a volume of 7% year over year as they raised their buyback authorization. a maker of household fixtures coming out to beat estimates as well thanks to a demand for plumbing products and cabinets. maker emission systems has a total revenue growth of 5% first quarter, excluding currency. there are a lot of companies struggling with currency. 21st century fox is coming out cutting its fiscal 2016 profit guidance because of the strong dollar, even though it's underlying business metrics look relatively strong.
viacom, taking the reins as chairman, failing to ensure investors chose domestic advertising down 4%. revenue at paramount pictures down 50%. segments thatv carry viacom, little changed from a year earlier. betty: no good news on any front for viacom. that stock is taking a big hit. the newly elected chairman gave his boss a shout out during an earning conference call this morning. ,> i want to thank my colleague mentor, and friend who is listening on the phone for his vision, guidance, and which will -- all of continue to energize us with sumner as our chairman. to be the executive chairman of viacom and will do my utmost to drive via come's
operations forward and restore stock to its proper evaluation. man was elected last week receiving back there from .edstone, but not his daughter no one understands this rivalry better than our next guest. he just published a piece in "vanity fair" saying that it is taking and anna nicole smith turn. .et's start with the you this is about the drama in the boardroom? has the confidence of sumner redstone, and no one else, according to stock prices. >> here's the support of his board, which he has worked to cultivate. tellingly, he doesn't have the daughter. sumner's this is where he takes a complex term. was unanticipated.
at some point you know that sumner is ailing and stepped off the board at cvs. a little surprised that he so effortlessly was able to turn it over to philippe. if it everbate happens will be the next step. ofsumner dies, the future cvs and viacom is in this air revocable trust of seven members of which philippe is a member and shari is a member. no one really knows what the contents are. there are seven people on the trust and you need for votes or five votes to get things done. why would anyone be in the stock given that?
paul: viacom has had its struggles. it is the blocking and tacky -- blocking and tackling. it comes down to their ratings. what it takes to turn around the isience of cable networks investment in programming. this has stumbled time and time again with ratings. investors are saying it is time for the company to invest in their programming. betty: at one point, mtv was such a hot property. so was comedy central. paul: there's always one big cog in the machine that isn't working. recentlyther mtv, e -- it was nickelodeon. the younger voters tend to go to netflix and hulu. it comes back that if you put on
compelling programming, the audience will come back. while everyone else is investing like crazy -- it is almost worse. the quick they had on comedy central, a lock on late-night tv focused on younger viewers. ago, jonjohn oliver stewart go. how do you do that in one year? is still a redstone controlled company. fully is one of his chosen lieutenants. shareholders have been the one that i've had -- the ones that have had to pay for it. philippe got a $57 million pay package. betty: what is his total compensation? having led by a column?
hundreds of millions of dollars? >> yeah. the generals are among the best paid. betty: now that there is this drama, and has been, between shari and philippe, how does this resolve? we know we have the revocable trust? >> nothing needs to happen. even if sumner dies, nothing needs to happen. betty: there's no way to reverse this decision? the decision for what happens bs after sumner dies, there is no way to reverse it. investor inactivist viacom. published a 99-page report. stake. such a small
a lot of investors aren't happy for good reason. we saw what happened with the stock today. you so much. paul sweeney of bloomberg intelligence. another mover we are paying teslaion to, shares of have fallen to a two-year low. they are concerned cheaper gas is hurting demand for elon musk's electric cars. tomorrow, a look at the shares. ♪
able to pay its upcoming debt. peabody golovin charles joined tomene -- keene and francine lacqua on bloomberg "surveillance" to discuss a big banks. >> i'm not sure i would buy deutsche bank, but financials by is almost -- it really looking for an excuse to be concerned. interest rates are down. i think charles hit the point correctly that people are probably overly concerned about the negative impact of oil on banks. now is probably a good time. tom: what is your single best buy? >> i like citigroup. tom: why? >> i'm buying value as opposed to rates. stable.ue is
some things that have buffeted for the last couple of years, are starting to change. the dollar, which has been a head when to book value growth is weakening against some currencies, not against the asian. emerging markets are starting to outperform developed markets recently. the commodities complex is axing better. copper, precious metals, and oil is finding stability around 30. peabody is buying citigroup. i am in all. francine: when you look at deutsche bank, does it survive, or are they about to get a new shareholder in the form of the german taxpayer? >> we don't have a formal rating on deutsche bank. theuess is that
shareholders face some sort of delusion in their capital structure. the other question is, what is the value are looking at in terms of an earnings recession? a deep valley or wide in terms of time? time is the issue for banks. markete you along on the ? do you have an enthusiasm for equities? >> we did a research report that if you buy stocks when the vix is over 25, you get a better return. ofty: that was jonathan bell and peabodygolub speaking on bloomberg "surveillance." joining us is bill cohan, who has written about wall street tanks and has worked there. what you think about what he said about deutsche bank? bill: it is a fascinating situation. john cryan is decrying the
banker pay and trying to do something about it, which, obviously, generally speaking, is out of control. betty: there is a headline that ubs is going to freeze their investment banker salaries. bill: he was taking the lead, which is a problem. places,rs flee to other he could be in a death spiral in terms of his and estimate rank. he now has the issue where the cvs has spikes and he is talking about making payments. it is a big problem when bank ceos talk about that. seen this movie before. we saw it at bayer and lehman and almost at morgan stanley. you can't imagine it happening at deutsche bank, which is the national champion.
correct in saying that there is going to be a big shareholder potentially and a german government. betty: short of that, isn't it easier to believe these guys given the capital structures that have been put into place in european banks and in the u.s.? the leverage ratio is a lot lower. bill: and capital is much higher . it is frankly unthinkable that they would default on their debt. deutsche bank. when you start talking about it, it almost doesn't matter. after be careful, because when you talk about these things a run on a bank can happen and it has nothing to do with solvency, it has to do with their liquidity. ofyou take short-term lines liquidity out, and i assume even
deutsche bank has short-term lines of liquidity to fund themselves in the short-term -- we and they land long know that is a recipe for disaster. betty: do you see earnings recession in the banking sector? that, especially wall street banks in this country, are in as best of a been in that they have years. jp morgan chase has record earnings and wells fargo is close to record earnings. what is going on? sold, raws been materials they get for free, and there is less competition. the real economy is improving. i think big banks in this country will be fine. in europe, it is a different subject and they are in a meltdown. betty: jamie dimon, lloyd blankfein, what do you think they should be doing looking at what is going on in europe? bill: trying to take advantage
of the situation from their competitors. it won't be hard, i don't think. they: we have a story in next hour about what wall street bankers are going to do with their bonuses. bill: with their diminished bonuses? their mortgages. i am not a ferrari-buying type. so good to see you. let's go to mark barton where shares are falling for the seventh day as banks are sliding . we were talking about the european banks. mark: since you left the lancer reality on thursday, when you went off into the distance, the stoxx 600 has stalled by -- has fallen i 6%. 6% decline since thursday night.
we are down to the lowest level -- octoberer 2014. we haven't risen. hasek resources, and -- basic resources, it has not made a difference to the european banking industry. the euro is the haven of choice, along with the yen. mr. kuroda and mr. draghi are finding it difficult to the base their currency. is the difference between the italian and german 10-year yield. the spread is the highest since july of last year. we have yields rising in the periphery. many are saying, will we have a replay of the 2012 european crisis? we will speak to our guests of that -- about that. betty: what is coming up in the london close?
mark: the head of ciba will talk euro and yen. ministeran finance talks to john nichols. he expect the italian debt to decline and there will be a turnaround for the big market. and they fear that is spreading around the european banking industry. our man from bloomberg intelligence will talk about the if there is one. the cost to the economy. the battle of the charts with joe. on how to spend our bonuses these wonderful experiences. how was the super bowl? amazing. not so great for the panthers, but it was amazing for anybody who was there is a spectator. i've something for you and will bring it to you next time. mark: i'm looking forward to it. is it a cup?
betty: you'll have to wait. abigail doolittle has the latest. we have turned decidedly lower? we open slightly lower than were up half a percent on a recovery in big tech. now, we are back down as amazon has turned lower. one stock that is opened and , even asigher is tesla brian johnson reduced his price target to 165 from 180 and reiterated his underweight rating. he said expectations on fundamentals need to come in to check. intense selling pressure and a shortage of 30%, today's bounce might just be a brief reprieve. betty: more ahead on bloomberg
♪ in the nation's first primary is underway. donald trump tweeted that the polls are showing that i am the best to win the general election. for the latest political news, let's bring in steven yaccino from manchester, new hampshire. what are the polls saying about who will win? n: donald trump is probably right. i went to a trump rally. it was a blizzard and he packed a large chunk of an arena. lots of people showing up for donald trump. we expect a lot to show up today . he is leading by wide margin.
the question is, how much he will lead by when the voting is finished. betty: how critical is it for him to win by a large margin? donald trump has been ahead here for so long, especially after his second-place finish in iowa, he needs a big win. is the margin is small, or if someone else passes donald trump, that is an expected, but if they pass him --it is an expectations game. trump could see that not as the win he was looking for. , a win is a win, and he will talk about that win. there are expectations hillary clinton will shake up her campaign staff. will that happen after today? pushed they campaign back against that narrative
yesterday, saying they would take stock on their campaign. the clinton campaign is doing soul-searching. they will be reevaluating their strategy going forward, and some of their messaging. what that means for the staff is unclear. betty: thank you. our bloomberg news politics reporter. all due respect" will have a two-hour special on the primary. that begins on bloomberg television. ♪
london or the rest of this hour. mark, and a few hours, president obama will release is 2017 i just. $4 trillion. we will bring those headlines and a. first, let's talk about european shares. stocks sharing for a seventh straight day. that is the story. the european close starts right now. betty: we will get back to mark martin in a moment, but breaking news right now. president obama officially releasing his $4 trillion budget line for fiscal 2017. joining us now from washington, bloomberg's angela who covers the white house. i'm looking to the headlines right now. give us the big numbers first. angela: $4.1 trillion budget which is about what we expected. it is not a surprise. the white house as ruled