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tv   Bloomberg Markets  Bloomberg  February 16, 2016 10:00am-11:01am EST

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brendan: good morning. i am -- i'm in for betty liu all week. russia and saudi arabia freeze oil output in january levels. the market is struggling off of the first significant -- we will look into why. also, it used to be they can't miss recession predictor. be skeptical of the signals you get from the yield curve. high drama out of the high court. how the death of antonin scalia will have a huge impact. housing data. julie hyman has the latest. it is a reading of 58,
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below 60 estimated by analysts. that is a nine-month low for that reading among u.s. homebuilders. we are seeing potential buyers staying away here. we see progress in the real estate market. this is a stutter with in that. this is typically not a big market moving number. we are seeing the rally in u.s. stocks that does remain intact at this present time. particularly buying in asia and initial buying and oil, though that has faded to some degree. take a look at the imap on bloomberg here. a rebound in information technology. thingsbeen one of the that has held back stocks this year. financials are coming back as well. if you look at the angst, we are seeing a rebound continuing today building on friday's
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gains. a back-to-back rally for u.s. stocks. goldman sachs and citigroup also building on friday's gain. i mention oil prices. let's look at oil now. we have seen the rally earlier --ay on the city to for decision to freeze production by saudi arabia and russia. we will talk more about that in a moment. were hopes, at least. how realistic is another question, but hopes there would be a production cut. it means oil is not holding onto the gains. brendan: we are looking at a two-day rally. does that mean we have found the bed? the senior equity strategist over at wells fargo was out saying perhaps we have seen signs of what she is saying is capitulation of the markets. has perhaps found a bottom. one other chart she is looking at is investor sentiment, news
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iiter sentiment as measured the association of investment advisers here. this and bullish sentiment in white here. was lowerh sentiment before market bottomed in 2010 and 2011. those are lower now, lower than in the two times we saw the market bottom and then rebound. in other words, it could be a sign that we are starting to see capitulation. the top line is the s&p 500. she is looking at some technical levels and other things pointed her in that direction. thank we will head over to the first word news desk with vonnie quinn. that -- et's keep some headlines, new satellite photos show china has expanded island building activity in the south china sea. it shows a base under
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construction. asian leaders in southern california. the u.s., and taiwan, among those who complain about china's actions. mr. obama will hold a news conference today. duringe will be provided what did you miss. the islamic state facing a major budget crunch and struggling to meet expenses. inasked residents black-market american dollars and released detainees for the price of five 200 -- other measures have eroded from their finances. bars and energy drinks. tragedy and russia. at least six people are dealt -- are killed including two children. the government released drone footage of emergency workers. of a five-story building came crashing down.
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an investigation is underway to determine the cause of the blast. crash inon train southern germany last week was caused by human error. 11 people died and four were injured. the single-line track 40 miles southeast of unit. pope francis is in mexico where he announced the exclusion of indigenous people. the pope has two the city in an area played by gang violence. global news 24 hours a day powered by our 2400 journalists around the world. brendan: we will get to the big story right now. saudi arabia and russia agreed to freeze oil output at current levels. prices initially gained but then back down, the s&p fluctuating negative on the day. joining me to explain the deal
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alix steel. look at that. we can call ourselves what we want. deal, pseudo-deal, where are we? alix: it does not mean it cannot become a real deal in the future. in saudi arabia. already freezing production at current levels. plus, cutter would have a difficult time ramping up reduction anymore. in essence, they are agreeing to something that already happened. facto, they have to freeze it. that is why i am saying state deal. the materials are happening in the margate. the real test can come in the summer were saudi arabia ramps up consumption to meet domestic demand. when it does not, that is on the freeze could actually mean something. it will not really work
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unless we had other major producers participating. iran and iraq are the ones we're waiting for. >> iran has said they will not freeze production until they ramp up to presenation levels. a want to export 1.5 billion barrels per day by march. iraq has not said it had -- it would cut back at all. why would they want to do that when they neither money? brendan: let's look at the terminal. there is a function. if we jump into the terminal, we can look of the dashboard of where we are. i will click on something you alerted me to earlier today, the total crude oil production out put. what we are seeing is a little bit of a flattening just barely in the last month. is that significant? is a little lower
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by a couple hundred thousand barrels per day. we wind up having an oversupply of 2 million barrels per day. the stock gold for the first quarter was over 2 million barrels per day. a lot of oil needs to be taken off the market for this to mean anything. get thee hike would shale producers in the u.s. back to work him because they can say, great, i can hedge now. my breakeven is better now. that is another risk. saudi arabia will not want to do that. brendan: on the desk, we will take a look at more oil. mike, you know, alex just called this a fake deal. is it a fake deal? mike: i agree because expectations were that russia and saudi arabia would not increase outputs anyway.
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saudi arabia and iran and iraq and russia. iran and iraq only meeting tomorrow. there is no sign iran will do anything. they put out some signals today but they have been saying in the last month or so, we are going the other way. the market has been chattering about this for a month. the market wants to see a cut. this could be bearish. it does seem like the first step is to figure out how to talk to one another. are we looking at the possibility that saudi arabia are open to communication channels and have recognized they have the same interest in this. is that something? mike: there was a high-level
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delegation during 2015 from saudi arabia and russia, going over next month. russia has softened their position a little bit. they would not even consider you having a discussion. have signals you are willing to talk about. brendan: to the point just made, we're looking at how do u.s. producers respond. if this even achieves a basic floor on pricing, that is good for you as producers. mike: a floor at 30 give or take would still cause steep budget cuts among u.s. producers this year. the issue is almost the other way. hypothetically, say we get a 5% cut talked about a couple weeks
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back, i do not think that will happen but hypothetically, if it at 50 andill be back heartbeat and in a couple of weeks, i would say. then it will not go down this year. brendan: the medium-term outlook for the price of oil, and did that affect that all? mike: medium-term being a few years out? forecast:m now the that based on brent. global rebalancing is on the way. stretchmaybe a bit of a . >> that is something we will be doing for the next two hours. is your focus on demand and not supply? mike: we want to keep our eye on
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the ball with demand. still supply side, specifically the u.s., that is key. do you have to focus on politics more than you used to? always focused a lot on politics. company by company, on equities research side, really, what do the spending cuts really mean, that is a level of detail we have always gotten into in the past. i am curious about opec. will we ever see opec again? mike: i think we do. first, we get rid of the overhang. as the markets tighten up, that is the queue for the saudi's and start spending again they want a goldilocks world of 70 or 80 and do not want to go back to 100.
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brendan: mike is the head of oil research globally. much more coverage of the story throughout the day, including an interview with jeff, head of commodities research at goldman sachs coming up at 4:00 p.m. eastern time right here on bloomberg television. ♪
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brendan: justin anson and skill -- justice antonin scalia's's unexpected death shifts the balance of the supreme court. let's ring in greg, who has covered the supreme court for 18 years. he joins us now live from washington, d.c.
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>> i was taking my son to basketball rises and then everything changed. i want to talk about what is in the president's right now. it is unlikely he will state who but who do nominate, we think is on his short list given the restrictions? greg: i think it is a complicated choice. it could be someone who ultimately ends up basically as a sacrificial lamb. people the president will probably be considering at least in part include a lot of the younger judges he has that on a federal appeals court. isudge here in washington born in india. , he is in california black, also in his late 40's, he will be on the list as well.
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president wants to compromise, a judge has been on the court much longer, and then there are out-of-the-box nominees like the attorney general, i do -- loretta lynch, someone who has been talk about a good deal. she would be the first lack woman on the supreme court. brendan: these are people who have all been confirmed by the senate in some way before. the politics are important. greg: they certainly are. they had a benefit with the thele i mentioned, at least ones nominated recently, that they have invented, and christina was confirmed unanimous we by the senate and obviously went through a difficult confirmation process and got through. and know what they have they know these people can stand up to a senate hearing. i have heard a lot of people talk about -- who seems to be the top of everyone's shortlist. but his record on the d.c.
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not one of a is flaming partisan. he seems to be more of a consensus type candidate. is it possible to describe him that way? based on what we know. there is's -- there are some things that make the democratic race skeptical. he has been a business lawyer, he represented exxon. he was supported in the obama administration, so that is an indication this administration has some trust in him. walk me through the precedents of nominating the supreme court justice in the last year of august. differently.ed is there such a thing as a
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president not nominating last year or it is the basis? time the last -- the last we had a vacancy on the supreme and nomination that could be made, was back in 1968. someone then, there was still in place. earl warren would not move until a consistent -- successor would be formed. find a time where, on election day, new president was elected with a vacancy on the supreme court, and that was abraham lincoln. we are low on time but i want to take a look at the docket. what is the court looking at right now? forecourt means they cannot set a nationwide precedent but they can confirm
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conservatives want the court public sectors workers do not have to pay for union representation, that they have a free-speech right. it looks like the court would say that here that will be a huge decision. it is hard to count to five votes there. other cases that could be affected include the power plant case when the court eventually takes that up, probably next term. they have abortion and affirmative action and immigration. a lot of cases could be affected. there has been a strategy i heard thrown at the which is that they have been very eager to move cases through the courts to lose on the way to get that 5-3 supreme court it are any of those that kind of strategy right now that might have backfired? do not know they will backfire in the sense that, for
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example, in the union fees case, it right now looks like a four-force it. if true, that would mean basically nothing changes. so they tried and it did not work here there are other cases where conservatives might well lose. the abortion case, just as -- on abortion clinics, the result of the case may not change. it just may be instead of a five-or decision for abortion rights, and a end up being a 5-3 decision. washington.g in plenty is still to come on that issue. we will continue to come back to you and we will hear more later on this story one president or you can a press, watch on bloomberg television radio and at bloomberg life go. stick around after the presser. lumber politics team will talk about bernie sanders on with all due respect.
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brendan: time for the bloomberg business flash, a look at some of the biggest business stories in the news right now. an audacious idea. city analyst say they should by aig and turned into a lab for innovation. aig's eeo compared his company to google and that the insurer may sell or spinoff off some of its units. phasing out its universe tv service and pushing customers to sign up for directv. at&t has quit holding, part of the plan to compete with pay-tv. property developments are calling it a one time -- once-in-a-lifetime deal. three properties located in an area of rockland in high demand, one right next to the brooklyn bridge. the buildings may bring up to $900 million.
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wet is your business flash will head to julie hyman, who has a check on company movers. julie: i mentioned stec is coming back today to tell a look at a couple of examples of that. this group is also one of the big reasons stocks have underperformed this year. they are widely held and have been dragging down on major averages. also, we are looking at some of cornell companies, looking at earnings and raising its forecast for the full year. it has been seeing issues in his turkey segment and it says the turkey production is on pace to norma -- normalized levels to the end of the second quarter. strategic$190 million capital investment plan. those shares are also on the rise. meat companies are doing well today and we're looking at the drugmakers today. bristol-myers could gain 25%.
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the company is unfairly weakened recentbroader selloff in months, the company says. it also announced a collaboration with the cancer if it to on drugs. also, it is said the fda has approved two supplemental medications for hepatitis c. other -- of those shares are rising. brendan: you sent me down a rabbit hole. i'm looking for various ways you can prepare spam on the internet. will sendecipes and i them to you. still ahead, the health of the housing market. we will look at how housing is holding up. ♪
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vonnie: three americans inducted in baghdad last month have been freed. reportedly handed over to the u.s. embassy in baghdad. iraqi officials said they expected one of two powerful shiite militias was behind the kidnapping. former president george w. bush is campaigning toward jeb in south carolina. mr. bush did not mention donald trump by name. he did say that the loudest person in the room is not always the strongest. a planned parenthood clinic reopened in colorado springs about three months after a gunman attacked. three people were killed, nine others were wounded. in the case calls himself "a warrior for the babies are co- getting rid of mosquitoes spreading the zika virus, one of those, genetically -- genetically modifying the male mosquitoes.
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this has been criticized in the past. the missing malaysia jetliner is missing a milestone. weeks from becoming the biggest unsolved mystery in a most it decades. the hunt may and in the indian ocean in june. discovered was thousands of miles from the search area. the -- i am vonnie quinn brendan:. recession obsession. to be easy. all you had to do was look at the bond market. investors are thinking the bond market is not doing what it used to do. here with me is the bloomberg news treasury reporter. hello. the yield about curve. looking at this article, let me
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see whether i understand it. the yield curve is flat and gives us no information therefore whatsoever. a step back. the yield curve for years has been the best single predictor of where the economy was heading. what people are saying now is that that has changed. it has changed because of central-bank policy. it has changed because central banks have kept rates at zero for so long. then you get inflows from foreign investors. factors helped keep treasury yields very low. people are saying the yield curve will not invert. before a recession and since the 1970's, the yield curve has inverted. shorter term yields move higher than longer term yields. people are saying that will not happen because of where the fed funds rate is for an extended time. brendan: it used to be the basic
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yield curve looks like this. if it is inverted. shorter term yields move higher than longer-term yields. brendan: if it is flat, could that mean we are just going to be in a low growth environment for a long time? susanne: and that is what people think. they say the yield curve is flat and it is not indicating recession. people are saying, because it is not adjusted, for fed funds being so long -- so low for so long, that is why it is showing a flat yield curve. bank of america says using an internal model it uses to adjust to the nominal curve, bank of america is saying it is inverted. a likelihood of a recession in the next 12 months. you have got bank of america saying this. td is using their own variables,
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saying there is a 50% chance. at 10% andt jeffries goldman at 18%. you have got all of the wall street analyst ratted just, these are the experts and they are not agreeing on whether we will see a recession or not simply because the yield curve is not doing what it has traditionally done. brendan: we have got a function on terminal that does a far better job at my inadequate to human arms. the yield curve, if we are theng forward over time, yield curve is slowly flattening but there is not that much movement at all. if this is what is going on, one of two things is possible pair one is low growth and the yield curve is right. the other is they are no longer sending us useful information. td andformation is jeffries, what are they looking at, what are the indicators? susanne: they are looking at financial conditions.
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they are looking at what equities are doing, they're looking at junk bond deals. they're looking at how the market is looking at the fed market rate. we are using all these different, in addition to the labor market indicators. this is how we are seeing. brendan: how important is the collapse in inflation expectations? when we are looking at the yield curve? it should also be we are look working for a low grade environment. that is where we look out in the future. the yield inflation , it has close to record lows are that is what the fed
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has traditionally looked at to gain inflation expectations. people are saying, if we see this, we have an issue here. the fed may not meet its 2% inflation target and that as through what other people say could be a recession mold and recessionary conditions seeping into the broader economic outlook. expectationsation in the fed is something we hope to hear more about this week when we look at the minutes. thank you, suzanne. fascinating. still ahead, i'm speaking to dave, the cofounder of international real estate company re/max. ♪
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brendan: there may be a bright spot despite the mayhem. week, housing gator with the homebuilder sentiment. sales report shows stronger sales than usual. for a closer look, we will bring of re/max cofounder who joins us from the office in denver. we got nahb data out this morning. it missed expectations. >> i don't think so. that is pretty seasonable. i think that will pick up dramatically in may and june. brendan: i want to talk about the difference between renting and brought -- renting and buying in america. is actuallyp declining. we seeing credit conditions are showing a lot of the credit
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activity is showing toward multifamily rental dwelling and when you look at the housing data, do you see long-term section -- a secular shift away from buying houses and holding them for 30 years? think so. it is a short-term phenomenon. all surveys show most people would like to own a home if they can. there is a lot of economic circumstance that has really put that off for a lot of people. brendan: fannie mae said they're building the headquarters. they are referring to it as a millennial observation deck because they are so desperate to figure out what millennials are doing to you really do not see in difference generationally the appeal of buying and holding onto me home. >> the appeal is there. from 32%les, down
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figure in the market. -- they have not got the financial wherewithal to buy it yet. brendan: when they look at millennial's, one of the discrepancies we are seeing is the school is just higher than it used to it we want to talk about rates right now, 3.91%. the median right now for new mortgages, the lowest for new mortgages. given all of the fed prognosticating we do here, what do you see out in the field? -- extend for a while and the future yet? >> lower rates are going to continue.
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all.d no impact at it does not look like it will change for the foreseeable future. the problem is we do not have adequate inventory for people to purchase the property they want. brendan: i appreciate hearing that because i have to disclose that the greeley's are refinancing. i appreciate that. i want to talk about central big -- central bank policy. talk a little bit whether or not we are seeing the housing market respond. >> i do not think the housing market is responding adequately yet. people are very frightened. they do not understand 300 point swings day in and day out in the stock market. it makes them has an eight --
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hesitant in real estate or anyplace else. want to talk about real estate in the united states. it is hard to figure out what is going on in sharp -- in china. whether or nots the one is leading china and housing in united states. anecdotal or is there something there was talking about? >> it was quite a flight to invest money throughout the rest of the world, especially north america. that has dropped off dramatic in the last 60 days. the chinese government was encouraging it for a while. however, they are quite concerned about using up all their cash, they drop off pretty dramatically. brendan: one of the things we saw was that money that ran up the housing saw the economy to the extent a lot of extra money
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and extra labor went into construction. we are now enough years out of the crash that we have a look at the future. >> unfortunately, it is not big enough. gooders know they have a profit. whether it is a $200,000 house or a $1 million house. in the last few years, they have done a lot of construction of multifamily housing. they lost a lot of their labor force. they lost a lot of the land they had an gearing backup and getting new apprentices that come back in the labor force is one of the things holding it up now. probably one million new homes per year in the next 10 years. demand is there. we just do not have the capacity to do it. brendan: write that down and put
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it in your twitter feed. thank you, david, cofounder of re/max. time to get you caught up with action all around the world, starting with asia. chinese shares jumped the most in three months. china's banks have expanded balance sheets progressively in january with the broadest measure of credit jumping to a record. julio -- julie worked -- from hong kong. demand inery fueled january with aggregate financing lifting to a record $525 billion. also rising to a record $385 billion in the month, well above estimate and strong figures were held by banks in the 2016 lending targets. switching current -- currency lines and bond issuance.
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lending will translate into a pickup in overall lending growth. chinese commercial lenders rising 51% on the year. we will head to europe now where mark barton sees a rally in european stocks ending as global growth concerns drag banks lower. mark: as our friend in hong kong was telling us on the news, ever since the details of the oil production, the market has been drifting lower. now down about .6%. the biggest two-day gain since 2011. the stoxx 600 rallies by 6% in the last couple of days. , look atg today media oil and gas up as much as 6%
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earlier. now down by half of 1%. of feary was moving out or pain bond market initially when equities were rising. still, money is moving out of the bond market. that is a rarity. normally they are using it inversely. and is a german yield curve the 10 year yield last week on thursday following to the lowest level since april last year, just creeping up a little bit since then. it was initially a day where we have appetite for risk for that has come back a little bit. brendan: perfectly good opportunity to say the word -- frome a little sleepy here our presidents' day holiday. wake us up. what will happen when european markets close? mark: that is a big story. we will speak in london and in russia, talking about the political angle.
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it is great. the first significant cooperation between opec and not opec. inflation data. we have the biggest increase in a year. will --f executive, we learn more about that cut to --k yesterday, announced its one for you, brendan, today. the future of yachting with charles. what is the future? i will defer to you on that? brendan: give me a raise and i will tell you. nasdaqest live from looking at two movers, starting at amazon, apple gale, what are you seeing? up on thehe stock is news the company is acquiring -- acquiring -- this is the fourth day in a row amazon is up, looking at a
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rally, but it comes and contest with more than 30% decline. this is somewhat of a bottom in 2011 and 2014 on a similar technical setup to the pace of the decline may suggest more downside is ahead. take a look at another one of the big movers, another one of the big percentage performers, tesla, shares are up. car for ais $500 per topps beat of six miles an hour. this news comes on the heels of the better than expected guidance for the tesla model s in 2016, but with a high support ofhe buying the last two years, it could prove to be a brief, bullish pause. back to you. a tiny tesla. you have my attention. thank you. still ahead, banks are tapping
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the agencies to step up monitoring of workers. can the move present -- prevent the next libor scandal and avoid billions in fines? ♪
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brendan: dozens of intelligence agencies to step up. john deitch recovers the banking industry for bloomberg news and joins me now from london. is an amazing story. walk me through first what it is former cia agent are doing and banks. thing they're doing is
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applying the techniques they ind in original roles intelligence and law enforcement and they are playing that, whether it is to the financial industry, monitoring electronic committee to, whether it is going through voice calls, but yes, they are going through and analyzing whether it is manually going through or trying to find and inconsistencies. and yes, they are applying that to the financial field. ,rendan: this is data mining something government agencies have been perfecting for years. john: yes, and what they are doing, it is complementary to it they were doing before. this on the technology side, this stuff has its roots, you know, the department of it is antechnology, obvious pickup for them. tell me what exactly
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are the behaviors they are looking for. if i'm sitting in front of a massive data set and i want to make sure there is not another london whale, what sorts of deviations from the norm standout? techniques ishe they try to a step -- to establish a baseline. to see what is normal, in terms of messaging, in terms of behavior, like in an outcome a number of e-mails sent, and they look at the outliers, things that stick out for some reason. there can be more sophisticated things. on the technology side, we had suggestions that they might look at things like, is the trader using someone else's phone? that oneggested approach could be to look at inflection in the voice, analyzing the tone of voice. is the traitor
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whispering? it sounds silly but some people suggested to us that could be valuable information. timean: you take a lot of to decide how this could influence behavior in the banks. what is it like to be a traitor subjected to this kind of scrutiny? my colleagues did great research and great reporting on this. it does sound like it can foster an atmosphere of insecurity. we also talked to other experts that said the big brother mentality is not great. it is not necessarily the kind of atmosphere everyone wants to foster. i am sure it varies from firm to concernse paranoia and raised. brendan: are these the ones that have gotten burned the most in paying fines over the last five years? everyone is looking at this. we included a story.
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they hired at least 350 compliance officers last year. contrast obviously with banks across the board cutting back in other parts of their business. doing this.lly all it is hard to save anybody in particular is out in front on this. it does look like everybody is looking at it and it sounds like they have to. brendan: ok, john from bloomberg news in london. thank you. fascinating article. coming up, a rebound for european stocks once again proved short-lived. energy stocks followed the boosted oil as russia agreed to freeze output and we will dive all into volatility in the next hour of the european flows. oil and the ecb coming of next. ♪ we live in a pick and choose world.
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barton. this is the european close. ♪ take you from new york to london to moscow in the next hour. here is what we are watching. the oil markets delivered this verdict. russia and saudi arabia not doing anything to drop up rises. mark: inflation u.k. rises to the highest level in a year. brendan: anglo american is selling off its units. we want to hear from the company's ceo. we are a half-hour away from the close of trade. tell us about it.


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