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tv   Bloomberg Markets  Bloomberg  February 19, 2016 12:00pm-2:01pm EST

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from bloomberg world headquarters in new york, good afternoon, i am alix steel. here is what we're watching at this hour. mexico had a shock interest rate hike this week. the rallybanks say will be short-lived. can the currency survived the plunge and oil prices? be prepping the company for its sale. they say the board has formed a committee to explore its options. it will consider options from potential buyers. oil prices fall below $30 yet again. a record inventory in u.s.. talk of producers to freeze output level. from more -- for more on today's activity, right to the market desk were julie hyman has the latest. a repeat of yesterday, looking for direction. julie: looking for direction here today, we seem to have found it from oil prices.
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the nasdaq has actually been leading today. that is a bit of a switch. technology has been going in the same direction as other averages but an exaggerated move. a different scenario memo we have seen recently. the s&p and dow remain lower and they remain lower than oil prices peered yesterday, we saw stocks drifting lower even as oil held up well. a different story today. if you look at oil, we're seeing it down 4%. it bounced off the bottom, but still below $30 a barrel. oil stocks are weighing on the major averages. we are seeing a lot of big percentage declines among the energy producers. southwestern energy company particular, down 14%. murphy oil, devon energy, a lot of these energy companies have come out in the past week or past couple of weeks talking about various ways to raise cash, whether it is sharing -- selling shares, cutting
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dividends. that has been weighing on them, also. alix: a lot of these guys reporting earnings next week like southwestern energy. aside from oil, we had some kind of move in inflation they got economists all excited today. by that, i mean joe. [laughter] julie: exactly. and other economists, too. i am sure. data, consumer price index. that came in better than estimated, particularly when you look at core numbers including food and energy. this had an effect on interest rate expectations. here is w.a.r. p looking at interest rate probability. november meeting expectations and the increase we have seen recently. you can see the 10 year as another expression of this although the 10 year has been seeing less movement today. it is up one take at this point. 1.75% in terms of yield. the yield curve, we have been
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watching that and seeing a continued flattening of the yield curve, interestingly enough. this looks spread between the two year and the 10 year all the way back to 1991. these red bars of the recession. when we see the flattening of the yield curve, that tends to pre-stage a recession. there is debate going on about whether that would happen at this time. finally, a quick check on currencies. we have been seeing weakening of yenu.s. dollar versus the in particular. people have in buying the yen all year as a perceived area of safety. the euro strengthening versus the dollar. the pound, very little change. alix: let's check in on bloomberg first word news. more from the news desk. had to news about the islamic state where the terror group is turning its attention to libya. -- an apparent islamic
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state training camp. u.s. officials did not identify the leader or area in libya where those airstrikes were conducted. last week, president obama directed his national security team to bolster counterterrorism effort in libya. envoy forpecial serious as peace talks will resume in syria next week. turkey had identified cross-border shelling on the predominantly kurdish militia. a few differences between the two sides made worse by increased aerial bombing and wide military by syrian troops and their allies under the cover of russian airstrikes. zika is a threat to brazil's future. those words today from brazilian president speaking in the city of petra li na today. he said the british government would -- the brazilian government would dedicate all resources dividing the virus. more than 500 cases of a rare birth defect likely linked to the virus. brazil is also investigating 4000 other suspected cases of microcephaly.
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pearlist taking photos of harbor spotted a helicopter flying nearby when the chopper .uddenly lost altitude it then current landed in the water. the tourist stopped coming and jumped into help. all five people on board made it out, that one passenger, a 16 euro boy, is hospitalized in vertical condition. harper lee, the author of to kill a mockingbird, died. the story about racial injustice in an alabama town sold 10 million copies and become one of the topmost works of fiction ever written by an american. it won the port surprise last year. .he sequel was released -- it won the pulitzer prize. harper lee was 89. global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. mexico's surprise rate hike this week giving the peso a boost as the central bank had hoped. morgan stanley saying mexico's
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current plan is destined to fail. are they right? for manager at black rock where he runs the emerging market allocation fund. he is also the former deputy finance minister for mexico. thank you so much for joining us. is the plan destined to fail? >> there are elements related to the credit dynamics and mexico because of have an effectth on public finances. what you have was the central bank and the ministry of finance acting together to address any potential concern on fundamentals. ultimately, currency dynamics should be a function of fundamentals. one fundamentals are strong, currencies do well in the opposite happens when fundamentals deteriorate. the issue with currency is the of the perceived as one
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most liquid and emerging-market currencies. it may be the case that it can be used for other things. the plan of changing the intervention pattern and leaving the possibility of doing discretionary intervention precisely tries to break that .ycle that makes the peso all in all, it was very refreshing to see an orthodox dose of economic policy in a well coordinated manner in a world in which negative interest rates are becoming -- alix: you will have the central bank on the one side trying to support the peso and get speculative out of the market and the market on the other hand wants to short the peso as a process that -- proxy for risk. what do you do as an investor? >> we need to separate the announcement. one has to do with preparing the economy better for a complex external environment.
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of thiswhy the timing go policy, that is the right medicine that an economy needs in these deteriorating environment. basically,r hand, mexico has been doing aprils has been doing-- a rules-based approach great that was not working. that is why it was taking away. as an investor, what you want to publicis the effect on finances and credit worthiness of the country. the policy reaction function has. as an investor, this is what you want to see. repairing the economy better for a difficult environment. not only that, during that in a courtney to manner. not many places in the world in which you see these types of courtney did announcements by the central bank. alix: to your point, the market was pricing and a lot of risk. charting mexico versus brazil
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five-year credit faults swap. i found it to be interesting that right around the middle of february if i consume in here, there was more risk pricing in mexico than there was in brazil which is looking at the biggest recession in 100 years. as an investor, what do you buy? gerardo: when you look at the world of emerging economies, dominated concerns on china, global prices, and on slowing overall economic activity globally, you want to think of where you have a strong policy reaction function. alix: which should be mexico. gerardo: you want to look at places that are away from china brother than closer to china. you want to look at places that the dependency of oil dynamics is lower. mexico takes all of those three boxes. oil dynamics are relevant only for public finances but not for the economy as a whole.
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i would say if you add to that the reforms passed through congress in the last couple years, mexico is one of the most attractive emerging economies out there. alix: many of emerging market managers have been saying for a long time. is the exception of the past six weeks -- it has been a rough go. the mexican stock market. in the last year, it did not hold up. when will we see that trickle through? gerardo: ultimately, you have to believe that fundamentals will be the determinants of asset prices over the medium term. the problem is you have a dominant of oil and oil dynamics across financial markets. you have a lot of uncertainty of china and policy responsible on china and the dynamics in china that have been, again, becoming the dominant factor. because of that, it is not clear
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the role of fundamentals over the short term. this type of policy, reminding investors that, of course, the environment changes. then you have to adjust the policy accordingly is something that is right possible. alix: it sounds like what you're , a repricingying of assets, that mexico is well-positioned and this may be a good time to buy. gerardo: mexico is one of the nicest stories out there in the because it has a strong macro fundamental. it is a stable country and one that has reform momentum going for it. that is true for the medium term. you're talking about equity markets. havey markets in mexico some problem of representation of the economy because those sectors are going to be charting the next wave of growth in the country. bonds. do
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mexico has one of the deepest and most developed local emerging bond markets out there. that is certainly one of the most attractive investment possibilities in the country. alix: thank you very much for joining us. the portfolio manager for black rock emerging right -- markets group. coming up in the next 20 minutes of bloomberg markets, yahoo! bringing in a new team to export strategic options amid increasing pressure from investors to what is in store for the yahoo! ceo? talks still underway between david cameron and top eu leaders. we will bring you the latest from brussels. is history repeating itself for oil? we will look into how this route is different from the bus to that we saw in the 1980's. thehat the bust we saw in 1980's.
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♪ welcome back to bloomberg markets, i am alix steel. let's head over to the market desk where julie hyman has a look at company movers. a hodgepodge. julie: most of them downers. you know how we are talking about valeant every other day? we haven't talked about in a while. down 6%. it was initiated with an underperform rating at wells fargo. unansweredying there questions about companies accounting methods and it's strategic direction. board hase valeant made decisions that puts it at significant business and reputational risk. he wrote that in a note today. he also said that an enormous amounts of market value has been destroyed by this team. ceo of then, the company, is still on medical leave. those shares are selling off in the wake of that note.
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age,king of analyst cover best buy is falling after goldman sachs downgraded it. there will be strength in tv cells that will benefit best buy, but that will be more than offset i-8, "sluggish wireless market," and he is looking at a price point of $33, above where it is right now. it is a neutral rating. finally, looking at the rail car makers. charity -- trinity makers. a forecast below estimates. it reflects weakening in the industrial economy that began affecting business in late last summer. it is placing a high priority on cost containment. those shares plunging 24%. pressure ong some rail car makers. green buyer down 9%. yahoo! shares are trading up today after the company
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announced it has hired financial advisors to explore is strategic options. marissa mayer's spoke to bloomberg west anchor emily chang about her companies obligated situation. -- complicated situation. >> management and board are very aligned. i will say yahoos situation is collocated. i think that is obvious to everyone. particularly with some of the trend assets we have in both yahoo! japan as well as alibaba. plus the quarter. that said, that is one of the reasons we need to have a somewhat complicated solution, a somewhat collocated pass forward. alix: what does the future hold for yahoo!? uscover yahoo! are joining from the san francisco bureau, brian, what is different today that was not there yesterday for yahoo!? brian: that was a big question.
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when i was looking through the release. at some level, a high level, this isn't that new. essentially, strategic alternatives. we get some news, there is a committee that is being formed looking at this and taking an aggressive -- or at least a stance on, we will look at options. we also know goldman and others will be helping on the actual advising. that was somewhat new. the big announcement came about two and a half weeks ago that yahoo! was willing to look at strategic alternatives. back at lead to a sale. versa myers is trying to do three things at once. she wants to spin off alibaba, turn around the company, and explore strategic options. how do you do three different things? brian: something she has been tried to do for a long time with yahoo! it is complicated there. they have massive stakes in asia that are frankly much more valuable him at least alibaba,
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then the core business. she has always had to juggle this. it is coming down to a fork. a couple months ago, she backed away from doing another way to separate from alibaba and it didn't work out. she is going to do yet another reevaluation. it is par for the course for yahoo! at this stage. alix: where does this leave a storyboard proxy battle? brian: we hear things may be heating up there. that is not good news former sf. it is another headache. -- it is not good news for marissa. she will have to make her case even stronger. we will see what happens. her frustration that things haven't been happening and haven't been happening fast enough. alix: any word on the buyers and who may be explored on the outsourcing of strategic options? brian: we know verizon has signaled they could have interest. we have seen some private equity
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firms. yahoo! has a lot of users, it shared with ainds big swath of the consumer internet community. there are some real things there for a lot of folks to look at. you can imagine those bankers that were hired that we heard about today, they will be busy. alix: to be sure. bryan womack in our san francisco bureau. still ahead on number of markets, the brexit talk in brussels. find out what the greeks are demanding and how that might impact the resolution.
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♪ alix: welcome back to bloomberg markets. i'm alix steel. david cameron's negotiation with fellow eu leaders are grinding
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on for a second day with no breakthrough inside for the so-called brexit deal. talks carried on through last night and they stretch their tonight and perhaps the weekend. >> i was here until 5:00 this morning working through this. we made some progress. there is still no deal. after i had -- as i have said, i will not only do -- i will only do a deal if we get will britain needs. we will get back in there, do more work, and i will do everything i can. alix: ryan chilcote is in brussels with the latest. yesterday,d i spoke you said cameron wanted to be back at noon for the u.k. to sell the deal. now the greeks may have thrown a wrench into this. what happened? ryan: you couldn't make this stuff up your david cameron not going to get back in time to announce a deal today. first it was the eastern europeans, then it was the french, then the belgians, now it is the greeks that have objections to this deal. we are making our way around europe, if you catch my drift. the greeks are concerned about
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the refugee crisis. hundreds of thousands of refugees from syria in their country. some of their eu counterparts have been closing off their borders, leaving the greeks to deal with that refugee crisis on their own. the greek pride minister has been saying i want to help the u.k. with a deal, but i also need assistance. according to a couple of people we have spoken with that have been in the room, even threatening to scoffer a deal. >> the main problem at the moment is the greeks are starting to threaten this issue and they want to have a not close borders. >> what is the probability of a deal on the u.k.? >> if the greeks stick to that veto, it is finished today and we have to come back. if the greeks do not follow up there, the deal is possible and we are quite close to the. ryan: the greeks have told us
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they would not veto any deal. nonetheless, the dinner got pushed back through the course of the day. now, delegates meet at 8:00 p.m. in about an hour's time. they have all been told we should make sure they have hotel rooms this evening. this could go on. alix: what is next? ryan: they belgium right minister said there is no other option. if we don't get a deal done today, we probably won't get a deal at all. they just have to keep negotiating. theoretically, they could come back later this month or next month. there is a feeling in britain and throughout the eu that the longer they wait, the greater the brexit campaign. the greater the resistance of the british people to being in the european union, and the more likely it is that they will vote to exit the european union. there is a real sense that they have to bridge these differences. the german chancellor has gone involved and is now shuttling
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between all of them. the germans say they are not getting any hotel rooms. they are planning on leaving. at this optimistic that dinner they can cut a deal. i have been here for 48 hours and we haven't seen it yet. alix: thank you very much. ryan chilcote in brussels. still ahead on bloomberg markets, the recent plunge in oil has many people speculating that we are just seeing a repeat of the mid 80's collapse. we will talk to one expert who says this time, it is very, very different.
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♪ alix: from bloomberg world headquarters in new york, welcome back to "bloomberg markets." i am alix steel.
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let's start with the headlines. more from the news desk. first, we go to washington. dignitaries will pay tribute to the late justice. the president and mrs. obama will pay their respects this afternoon. the funeral is tomorrow. recent polls show that hillary with bernieied sanders on the eve of the nevada caucuses. hillary clinton has had some last-minute campaign events. donald trump as a big week going into the republican primary. the big fight will be for second place between ted cruz, marco rubio, and jeb bush. respect comes from south carolina with special guest, trey gowdy. the international space station just got a little tighter.
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launched aauts trash. filled with harper lee, the author of "to kill a mockingbird," died. she was 89. the novel was published in 1960. lee did not release another novel for 55 years, then, last published.uel was again, harper lee died at the age of 89. global news 24 hours a day, .owered by our journalists alix: is it back to the future for oil? oil pricesying that today is replaying the bust we saw in the 1980's. and over supply led to a supply
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and prices over four months. saudi arabia fought for market shares. our next guest says, not so fast, this is different. of gashe former head at hsbc. he joins us from london. can you explain for us? >> i think the first thing to say is that action on climate a fallingl involve demand, particularly for oil. i say that because oil is used in efficiently around the world, beginning with personal transport. i think the reason that saudi arabia decided end was enough because they could see a they could face the wasre whereby 2050, demand
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.0% below current levels, an you are suddenly faced with a decision do i accept the market share or do i cut steadily. that is what was happening about the 2014 oil crash, saudi arabia was losing market shares. you solve brazil rapidly rising. you are saying a new generation of oil projects in canada. alix: in this article, you oil is seeing now is similar to coal, where you had coal prices around $120 a ton slipping to $40 baton, and staying there. do you see something similar to oil? >> we have already see oil prices stranded by the collapse
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in oil prices. you have seen some companies cancel developments that are already underway. hitl took a $200 million on a canadian project they developed, and no longer will. we need to make sure that we have a price where he is our oil assets that are developed, and the non-opec acid stain the ground. you are goingore to see prices -- they may not stay current levels, but they will certainly be levels way below the assumptions of the pass for five years. alix: in your article, you also talk about the fact that the naysayers would say, look, there
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has not been the kind of international agreement to combat climate change that would oil as itthe same to would to coal. a slight change in the demand dynamic could really recapping wreak havoc. crash, it was caused by opec putting extra oil on the market. very, very small shifts in the supply-demand balance can cause very violent moods in oil prices. alix: in terms of what would offset oil -- we all have cars that we drive. using the rise of the hybrid vehicle, a larger cars, is enough to offset the cyclicality
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that we see in oil that could in theory help oil. >> if you look at directions on how you get on to a two degree is half -- in, it that, hybrids clearly play a role, substitution, using alternative energy and substitution also plays a role. other one is you have to accept that locally we drive cars that are too big, and we don't need to. continued government measures to put taxes on gasoline, mandated energy efficiency cars, fiscal incentives, and hybrid all play thele, i think, in turning demand down. alix: the one thing that stands out to me that is different from coal is you have state-owned oil companies.
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saudi arabia has a huge amount of money invested in oil. will they let the oil world, innocent, completely change, like you are talking about. >> i don't think they really have a choice. if you think, most of the demand around the world is not in producing countries. identification -- by definition, countries.nsuming the united states, japan, europe. none of those are major producers of oil. if the measures in paris are seen through on a national basis , you will see oil fall. at that stage, saudi arabia has asked the question, joint cut in mind with that profile or do i assume that non-opec members will cut production? history says that non-opec unlikely to cut
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production. i think saudi arabia has no for oiliven the outlook demand to make sure that they keep their oil price competitive to make their low-cost oil the one that stays in the market. outweighs thee market share, in essence. last question, and quickly. our investors prepared for this? >> the ones that i speak to are aware it is an issue. i do not think they are factoring it in to their investment approach. i think most are looking at the current price and try to work out what level it might recover to. alix: right, versus cole, where .e saw bankruptcies aplenty thank you so much, paul. much more coming up on bloomberg markets. we will be right back on the other side of the break. ♪
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♪ abigail: welcome back. i met the nasdaq. let's look at two stocks. online research firm precious this is rare. basically saying short of stock. they list a few reasons for being bearish, including that the stock is grossly overvalued, it has reached at saturation point, and new stores are cannibalizing existing stores. stocks are down sharply from the peak last year. shares are up after the world's exceededhipmaker
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expectations. his is seen as a forward -- all of this has been bullish. this is now up slightly. i'm abigail doolittle at the nasdaq target site -- market site. now, more bluebird markets. -- bloomberg markets. ♪ alix: you are watching bloomberg. i am alix steel. this is your global business report. here is what we are watching. it is day two of the european union summit. we will bring highlights from german chancellor angela ma merkel. another term at the imf.
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the new challenges. first, let's start with the european union summit in brussels. negotiations with eu leaders are grinding on for another day. angela merkel has been front and center of the talk and offers her insights. not all thosekel: around the table had it so easy to agree. there is a will. what has also come out is this question of the closing union is one where there are very different opinions around the room. far one wishes to advance to ever close the -- so much benefit higher than the opposite. we have tried to compromise their as well. all countries around the table face it clearly that we wish to
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be ready for compromise of membership. alix: china's central bank is taking action on banks. it recently went on a lending bid. it will buffer against future loan default. regional banks are said to be the primary target of the action. this comes after report shows that banks doled out a record amount of new loans in january. aristine lagarde has won second term as the tractor of the international monetary fund. she originally to the position in 2011. she explained the challenges ahead. christine lagarde: we clearly understand the multiple layers transitions through which the chinese economy is going, and will continue to go, if i'm to read the various interviews that have been given recently, and the conversation that i have had premier le
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those transitions are not going to be a walk in the park. there will be-- difficulties on the way, turbulences. alix: the head of norway central bank has stepped up his morning in the excessive use of the country's oil income. he believes the norwegian may have -- norwegian government may have to withdraw billions of dollars. it is the highest inflation rate in the world. venezuela. meanwhile, the economy shrank 6%. the president announced a package of measures to combat the plunge in oil prices. that is the global business report. for more stories, visit yesterday, right here on bloomberg television, my colleague and i sat down with peter fisher. hated negative
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interest rates so much. peter: i think it is important to separate how monetary policy works. there is the monetary channel, credit, we can grow credit, or we can make people richer. i kind of get it on the exchange rate. if you are little country like switzerland, sweden, or denmark, and are trying to avoid your currency depreciated, you try to put negative rates through to avoid the capital inflow. you will probably avoid a further appreciation. let's be clear. negative rates for the fx rates is a race to the bottom for competitive devaluation. international monetary fund was established to prevent us from doing that again. what we did in the 1920's and 1930's that was such a disaster. if you think every country would
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devalue the country with negative rates, think again. it is only working because the u.s. still has positive yield some other places are trying it. maybe it works for little countries. i don't see it working for they countries on the exchange rate channel. joe: why does going negative on the short end imply change in prices? peter: the question is can the andercial bank drag along changed deposit rates. people talk about the central bank putting in negative rates bigo, the fed decides how the balance is. if you are jp morgan and take your money from the fed, where do you put it? you put it in another bank. it is a closed system. the commercial banks are unlikely to be able to pass it along, in which case, you just
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cut the yield curve. the me tell you story. think about this. it is 1992. the u.s. economy has a very slow recovery, and i want to assure you alan greenspan went to bed every night saying, thank you, the, thank you for this curve.p yield in 2002, he went to bed every night saying, why, lord, why are you giving me this conundrum, don't you know it is harder to stimulate credit? in 2012, they lost their mind and celebrated each time the curve flattened. the credit channel is one that negative rates is just not going to work. alix: it is not like banks are killing to and interest margins before that. in theory, if demand does pick up, like larry summers was
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hypothesizing, can you make of up for it? ther: if i pass along deposit rate and is negative, my balance sheet strength. i can't win. bee: markets don't seem to particularly enthused or working particularly well, in terms of generating inflation. on the other hand, there was a good market reaction to that. why do you think they are getting so interested in that these days? peter: i don't think they want to admit that they are running out of ammunition. in order to have credibility, they have to say things that don't have any credibility. i think they really lost their heads here. they really want to present the face that they are still in charge. alix: that was blackrock senior director peter fisher speaking joe yesterday.
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we will tell you about the hedge funds --
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♪ welcome back to bloomberg markets. i am alix steel. a search may be over. in fez there are hedge funds that will actually pay you to own one. here to explain is eric balchunas. explain. eric: this is a rare case where the little guy makes money off the hedge fund. eds are allowed to lend out up to 33% of the stocks they have. that is a side business. in some cases, in the market, especially in small caps where you can get a higher rate to let
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them out to hedge funds, hedge funds love to short cap the small caps. what you see in terms of small-cap etf is the etf are o -- it is beating the index by seven index points. normally, it would like by the exact amount of the expense ratio. maybe it gains a point through good passive management. the fact is it is 20 base points, the amount it costs. it gains the 20, and gives you seven over that. not only is it free, it is paying you to own it. ann you think about how etf should be measured. and, the vanguard total market, this one charges five points. you get free tracking there. the reason that does not go as much a small caps is it only has a little bit of small-cap. it really depends on how much you can get for lending up the
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stock. the smaller the stocks, the higher the state. alix: they are using the stocks them cheap's, making or free to own for me. eric: right. alix: i have to think, the etf performance might not be that great. that's absolutely right. right now, it is down 17%. alix: not great. eric: traditionally, over the long-term, if you look at the past five years, it outperforms. right now, biotech is so hot that it is beating the index. over the long-term it is still trailing. littlees, it can get a
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hot and a bad way. solar stocks have this where it had so much revenue, it had to issue a big dividend. there are cases that it can get really hot. buffers if you're etf's down a lot anyway. the fact is that for most market, it helps consistently. alix: last year, the short getting hammered. eric: if the market keeps go up., the stocks will people will play the momentum the other way. that is why if you -- go back to biotech. it will ask a start outperforming its index more more the worse it does. yes, you differently see, this year, in particular, there are a you want tole -- borrow more and more. inx: the most dangerous etf the world. the millennials are actually into. what is it?
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eric: i am stunned by this. the top 10 stocks that millennials like. number five, after disney -- disney, facebook, is crude oil. it makes no sense. alix: triple leverage? eric: this thing is 10 times the s&p.y of here, we have millennials to are known for being anti-wall street, good index investors, and clean energy going crazy with this leverage oil edm. it makes no sense. alix: thank you so much. coming up in the next hour of bloomberg markets, it looks like tech companies have prevailed
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york,it is 1:00 in new 6:00 in london, and 2:00 in hong kong. welcome to "bloomberg markets."
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from bloomberg world headquarters in new york, good afternoon, i'm alix steel. here is what we're watching here when times get tough in the markets, investors rush into defensive stocks but suddenly they are the most expensive in the s&p, so what do investors do now? apple is getting more time to argue against a court order that would force it to break into the iphone of the terrorist shooter. how far the fbi will go in funding the company. borrowers in countries with weak currencies are struggling to repay debt. over to the markets desk where julie hyman has the latest on stocks. seeing a drab ending to the week. it is an up week for stocks, but we are seeing a mixed picture as there is more of a drift in the market. the nasdaq leading the gains continues a cap
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bounce back. the s&p and dow remain lower. course of the day, we have a tight trading range. we recovered some of the early losses but it is still very tight. yesterday was the smallest trading range of the year, today the second smallest. this is an index that we created that measures the point swings. this is year to date. yesterday we saw the smallest in 2016 and today is the second smallest. we are searing a tightness of and it again on pretty low-volume for the major averages as well. alix: we are also waiting for the baker hughes oil rig count number, 541 last week. has not come out yet but that has been driving, in some part,
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the direction of crude. julie: we saw the weekly inventory numbers driving -- it looks like it might be coming down. in the meantime, prices are still below $30 a barrel, down 3.5% today. the oil inventory number yesterday because of the shortened week, and that is pushing pressure on things. here is the rig count. , it looks like. as you pointed out, that is a lot higher than it was the prior week. it had fallen to 439 and now we are seeing that bounce. am i looking at it on my terminal? i am not seeing it yet on this index. we will have to keep you posted on that. it looks like this could be bad
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news for oil prices. alix: the rig count did fall 26% over the week. gas is down of oil, as well. julie: i was looking at the total rig count, thank you. a little confusion. bottom line, the count fell, and that is the lowest it has been in quite some time. me we have gas per one dollar seven two cents is what we are seeing right now. pressure on the oil markets and then some gasoline. a bit of a delay, but we finally got it out. 541 total.own from thank you. now let's check in on the first word news. ramy inocencio has more. peace talks to
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resolve the crisis in the country will not resume next week as planned. this comes as turkey intensifies cross-border shelling on area dominated by mostly kurdish militia. russia has called for a council meeting over the deteriorating situation. cameron's negotiations with european leaders build into a second day. discussing brussels u.k. membership. eastern european leaders do not like his demands for welfare curbs on non-british citizens. france has a plan that would protect london's financial industry. two suicide bomber's hit a market in north cameroon killing 22 people. two others targeted a school in a nearby town. 70 people were wounded in total. attackers disguised themselves as food vendors in the market.
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a former cairo initial received honors at his funeral. he clashed repeatedly with the u.s.. the clinton administration blocked him from a second term. the author of "to kill a mockingbird" has died. harper lee was 89. that book sold 10 million copies and has become one of the most top works of fish and written by an american. sequel appeared under mysterious circumstances. alix: apple declined a federal judge's order to help the fbi bypass security protections on the iphone of the san bernardino shooter and ignited issues about privacy.
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in this comes less than a year after the white house revealed it would not force tech makers to install backdoors in their software. joining me now is mike riley, our cyber security reporter. it didn't look like u.s. tech companies have prevailed in the decryption the day last fall, but the government had a plan b. what was it? mike: they were doing a little dance which turned out to be premature. we should've expected that, given accessing this encrypted data is going across all sorts of confusion lines and is a real priority. around things giving, the national security council, the , they getcommand together and discuss the memo. this is an urgent problem. we are going to throw all the resources of the government to solve it. is,rtunately, the problem
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easy to use applications that encrypt communications through apps, basically, it's a way to allease budgets, direct sorts are resources of government to solving this encryption problem. what they are going to do is workarounds. you do not have to crack encryption, if you can find other security flaws in technology that gets you the same data. effectively, we are seeing that strategy with the apple phone. they are not asking apple to crack its encryption. say, we spotted three other security flaws, and you are going to help us get the data through those. distinction from a backdoor which a be akin to a wiretap, for example. exactly. it is more like a skeleton key. when we serve you with a warrant, you give us information. apple spent a lot of time creating a system where they are
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saying we cannot do that. in a sense, the government outfoxed apple on this one. you created this system but there are other flaws which you can help us exploit to get the data. and they basically outfoxed them with the national security council memo that was part of the plan b. what is that? is anthis decision memo all hands on deck. another time this has been used s were a big problem in iraq. they wanted to throw a lot of resources at this. they created a decision memo that said everybody in the government has to look at the problem and start going in the same direction. the solution turned out to be a combination of new technologies that could block the explosives, and that her intelligence to get to cells. they are taking the same
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approach. let's figure out new intelligence capabilities that can explain different flaws in technology and get at the same data. so we don't have to worry about the fact that this encryption is getting easier to use, a terrorist could use it, get an a pp. we will find other ways to get the data. alix: thank you very much, mike riley. the tech community is rally behind tim cook's decision to fight uncle sam. emily chang had an exclusive interview with the new head of the google android platform. >> we focus on building secure products, but if requested or agencies, ofaw course, based on proper legal process, we will make information available to them. what we talking about here is a different scenario, in this case apple, is being asked -- it sounds like -- to help in
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hacking their product. i think that is a different scenario from the way things work today. i think that requires a lot of discussion and debate and important decisions. i have a lot of respect for law enforcement and of course, no respect for criminals, that is not what this is about. new is just a completely way of thinking about things and we need to debate that more. have some opponents out there that say this would be restricted to one criminal, and if it is going to save lives, isn't that more important? why would you put innocent people's lives at risk? area, and i think it just wants more discussion to make sure how is this going to work, what kind of president is this setting? more thoughtful debate is how they put it. i think that is warranted. was an android
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phone, what would you tell the fbi? >> hard to get into hypotheticals -- that is not the case now -- but our statement stands. i think we would feel the same way, which is, this is a different scenario now. let's think this through a little more and have that debate. thisward snowden has said will be the most important tech case in a decade. these are complex and important issues that you are dealing with and that you have the power to control as the head of android. privacy, which i think everyone agrees is important. it is easy to talk about these cases in general terms, but the specifics to matter. i'm not familiar with the specifics of the san bernardino apple situation, so it's hard for me to comment on that. but it feels like an important area that requires more discussion. alix: that was the new head of
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android and google. you can catch the entire interview on monday beginning at 6:00 new york time. we will be right back. ♪
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alix: welcome back to "bloomberg markets." i'm alix steel. let's go over to the markets desk were in julie hyman has a check on the company movers. looking at a technology stock that speaks to some of the strength and the nasdaq. applied materials coming out with sales predictions for the quarter ahead of what analysts were looking for. people tend to see their orders as an indicator of future demand from chip makers. if they feel confident enough to
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place orders with applied materials, that means they are confident about future demand for their product. we are seeing shares go higher, other semiconductor equipment makers go higher as well. semiconductors themselves have been catching a bit today. another strong performer is united, the airline. the company boosting its buyback authorization and saying it expects to complete -- toelerate its authorization the end of 2016. a couple of different reports. data center knowledge, which is an industry newsletter, says the company is involved in talks with telecom companies who says they were interested in selling data centers. in addition, upgraded over at cowen. alix: thank you.
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what do you get when everyone wants the same stocks and they are all running into them and they are sitting at high p/e reissues that the every other industry? all of our resnick joins me now. we have seen a flood into consumer staple stocks. what kind of valuation are looking at for these guys? in 12 years for consumer staples. 21.3 times earnings which is pretty expensive for a sector that is considered defensive. the highest in 12 years, the group has been rallying, outperforming the s&p for 12 weeks straight. you see a lot of people trying to get defensive. if you are a fund manager and you can move to cash, maybe you could do that, but a lot of people have to stay within the equity portfolio, so they go defensive. utilities, telecom, in particular, staples.
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valuations aree getting elevated, it's creating a little dilemma that is interesting. what the dilemma boils down to from an investor standpoint is if you're going to buy defensive stocks, you should be convinced we are in a scary area in terms of recession likelihood, the stock market going lower. you are paying a valuation that is higher than everything in the s&p, except energy. you made a good point about the bond market. alix: to that point, come inside the terminal. and itoking at wb go, looks at the two-year yielding bond all over the world. you can see so many negative yields. nine countries have negative yields on a two-year time horizon. investors are totally willing to pay up for negative yield, so why not higher valuations for stocks? you can see bond
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investors are willing to take a hit to preserve most of the capital over a longer period. from an equity standpoint, it comes down to whether your fund can move into non-equity positions. it is interesting because it connect to a great story this morning about the top fund manager in the past year, past five years, saying he wants to move out of stocks and put them into cash. he sees valuations as being pretty high right now. alix: oliver renick, thank you. still ahead, yahoo! takes a step toward a sale. ♪
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alix: welcome back to "bloomberg markets." i'm alix steel. to be prepping itself for a possible sale.
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ceo marissa mayer issued a statement today saying the company has hired financial advisors and formed a committee to explore strategic options. the up on she repeated her stance, separating alibaba from yahoo! was necessary to maximize shareholder value. for more, let's go to radio. carol: this is the bloomberg advantage. someone who knows an awful lot about the media world is porter bibb. he is a partner at mediatech capital partners. nice to have you back. let me kick it up first with yahoo!. we spoke about this with emily chang. final chapter four yahoo!? >> definitely come in the waning moments of yahoos existence as an independent company. cost decision yesterday to bring in three bankers -- three, by the way -- carol: there are a lot of moving parts.
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porter: there are really three .arts, alibaba, yahoo! japan if you look at the market value and analyst perception and dissection of the value, those onlys are the really value. yahoo! as an operating company is worth zero. it will not sell for that, but that is the unknown. they will put it up for sale and there will be a lot of people isking for it because there still significant free cash flow, private equity will jump in. everyone is talking about verizon which makes sense. i would not be surprised if at&t did not decide, because there are a billion visitors and 28 million people using yahoo! e-mail. that is a huge cache of data for these telecoms. carol: do you blame her some are for not getting it right? producti do choose a junior's but not a manager.
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she kept on dumping new products into the pot but nothing worked. -- genius but not a manager. spending hundreds of millions of dollars on katie couric, david polk, all of the stars. carol: good headlines but nothing for the core business. oneer: the revenue is down hundred 82% from a year ago. carol: that is pretty dramatic. that is what you anticipate for yahoo!. talk about apple. in the news as of late. do you think they are going to win their case in the government? porter: who knows. this is a serious and unpredictable situation. the government's case right now, interestingly, based on a 1789 constitutional law called the law of written, compels third parties not involved in litigation who can contribute
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cts to the case to produce those. apple is resisting. my sense is this will go all the way to the supreme court. privacy, as we used to know it, is nonexistent. open information is the new normal. we are all subject to that. carol: are we comfortable with that? if you think about a company like apple, that is their value, some of it. porter: apple never advertised one iota of confirmed privacy to anybody using any of their devices. what they did was say we are going to make this user-friendly and efficient and affordable. carol: but wasn't it a given? porter: implicit but nobody ever guaranteed. now, the whole world is at risk because of terrorism, criminals, cybercrime
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. the government needs to have some tools to work with to be able to capture and reduce this problem. privacy will fall by the wayside. carol: let's talk about another media company in the news, viacom and sumner redstone. what happens after redstone? this is the great shakespearean drama of media companies. survivedllmann has sherry redstone's attempt to taken out of the chairmanship of viacom. he has no plan, no chance of saving the company. the stock is just gone through the floor. for --rey right now sumner redstone is no longer with us -- somebody will pick it up. carol: like who? porter: i would not be surprised if 21st century fox snapped it
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up. it is very affordable right now. the price is down 60% over a year ago. it has a lot of potential development properties that fox could do something with. carol: great stuff as always, porter bibb, thank you. running down the media universe for us. alix: thank you so much. we have some breaking news. icon enterprises may be cut to junk by the s&p, currently a rating of bbb-. the stock is down 44% in the past year. much more coming up. we will be right back. ♪
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alix: we have some breaking news. icahn enterprises may be cut to
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junk by s&p, currently with a bbb-negative rating. it did have it on a stable watch. some kind of a downgrade there. the s&p say they may be cut due to higher leverage and on declining portfolio values. the stock over the last year is down 44%. let's start with headlines and the first word news. ramy inocencio has more. we go to washington, d.c. because people are paying their last respects to justice antonin scalia. reposey is now lying in in a flag-draped casket. wifedent obama and his michelle will pay respects this afternoon. the funeral is tomorrow. the fight against the islamic state focused on libya today. and islamic state training camp and an extremist leader were targeted in the attacks today.
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last week, president obama did direct his national security team to bolster counterterrorism efforts in libya. the highest-ranking african-american in congress is endorsing hillary clinton. 's support comes a week before the democrats hold their primary in the palmetto state. and treyative clyburn gowdy will be the featured "ests on a special edition of with all due respect" tonight. joe biden says he has no plans to pick up a writ in the contest between clinton and sanders. in a joint interview, he says he speaks with both candidates and says he will ultimately support who wins the nomination. the vice president says he does not regret opting out of the race for the white house himself. harper lee, author of "to kill a mockingbird," has died, she was
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89. the novel was published back in 1960 and sold more than 10 million copies. last year, a sequel to the book was released entitled "go set a watchman," but that was shrouded in controversy, some doubting whether the author gave her consent. alix: thank you. prime minister david cameron and fellow european union leaders stepped up their efforts or break an impasse over reforming the u.k. membership in the block. to weisenthal and i spoke robert to dusky, a member of the house of lords. explained what is at stake if the u.s. -- the u.k. were to leave the eu. >> they want to keep britain in the they recognize if they left, it will be the first country to have joined the eu to have left
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it. that would be a big blow to the eu project. they are definitely prepared to make concessions to keep britain in, but then you ask the question, who are they? you have 27 decision-makers and they all have rather different interests. on the whole, governments are play acting a lot of time. people who come to do work are not interested actually in getting benefits. .hey're interested in work ok, we will restrict the benefits in the first year, the in-work benefits, get them increased, and people objecting to that. that is just barnstorming. it is not serious. ino not think it is serious a wider sense for britain either. the amount of money it would save by these sorts of restrictions is absolutely minute. the bureaucratic activity to
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enforce them is colossal. so he is barnstorming as well. undoubtedly, it is a point of popular excitement. so the cost savings are minimal, but on the flipside, how economic would it be for britain to leave the eu? we talked about the surging combo volatility, anxiety in the markets. what are the economic voteications if the brexit goes against cameron? robert: people are saying it will be more difficult to export to europe, the city of london may cease to be one of the world's major financial centers and other restrictions would be put on british economic activity. is hugelylot of that overwritten. a financial centers depends on the financial services it
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provides. london will not lose that as a result of an britain leaving the european union. will go onurse, it exporting to europe. there are hardly any external terrorist barriers. -- tariff barriers. what i think will happen if the britain goes, it will gain control over its own borders, as far as migration is concerned, and that is what cameron asked for but did not get. alix: earlier today, caroline hyde spoke to the polish finance ministers about last months credit downgrade, the eu summit, and the prospect of a brexit. >> we have a problem with the centralist tribe are by brussels themselves, so on this general restructuring of the union, we are ok. strong ande case is the certain hyperactivity
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represented by brussels and other politicians should be checked. we have points of difference and this is the rights of the migrant workers, citizens ,orking elsewhere in the u.k. here and so forth, and so it is clear that there will be differences between our government and the prime minister and brussels. i hope that a sensible solution can be worked out. thatat about the solution you want to come to with standard & poor's? i have forgotten this, actually. ourad hardly any affect on performance on international markets. >> it did on the day. >> of course. on that day we took a hit. but then we recovered and the , bonds were made.
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they were quite successful. they were highly oversubscribed just a few days ago. >> so the financial markets have recovered but still you have a + rating from standard & poor's pair what about the concerns that you are taking some significant action on your key institutions, increasing social spending, taking control of the constitutional court, public media, what about the central bank? our people worried about the independence of the central bank? the term of the office of the central bank expires in june. in due time, the house will appoint a new person. there is no real concern about the institution. adam?l it be >> that is beyond my powers. there are some names on the
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market, but there is hardly any generating pace behind it. the normal six-year term expires and a new person is voted into the position. with the constitutional tribunal, highly complicated case, highly debatable issue. the previous house voted in five new members in advance, because the term of these five persons expired during the term of the new house. so we believe they wanted just to lock the constitution tribunal as to control the agenda of the government. news we have some breaking right now, we have the mexican finance minister in a telephone interview with bloomberg saying the decision for the central bank to declare war on speculative shorts on the peso -- they can sell dollars in the spot market without notice and they raise the benchmark
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interest rates 50 basis point on wednesday, which was a surprise. saying hee minister wants to make it more expensive to shorten the peso. they have a full set of tools to intervene. the peso is very liquid and tends to be a proxy, risk in the emerging market, popular among short-sellers. he wants to make sure they prevent high-frequency speculation in a short printer of time to devalue the currency away from fundamentals. i want to focus more on fundamentals. we are seeing markets move due to this. the peso is strengthening against the u.s. dollar after his comments. he says further intervention on the currency market will be aimed at preventing inflation. we will keep our eyes on those headlines continuing to cross. coming up in the next 20 minutes, falling oil prices did not derail profits and what energy company. we will tell you why enbridge saw their fourth-quarter earnings rise. and a potential new reason to worry about banks.
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will countries with a weakening currency be able to repay the debt? and what can we expect from janet yellen and the fed? we will speak to alan krueger from princeton university. ♪
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alix: welcome back to "bloomberg markets." i'm alix steel. it is time for the bloomberg business flash, some of the biggest tories in news right now. chief christine lagarde was reappointed today to a second five-year term as managing director. the executive board which represents the 188 member countries said no one else was nominated to oppose her.
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she listed financial challenges from lackluster global recovery to dealing with financial hotspots, including greece and ukraine. fairway maybe on the break of default according to moody's. in new york grocer could be breach of their credit obligations. the capital structure is also unsustainable. analysts agree the company should shelve plans to expand beyond new york and concentrate on fixing their financials. the grocer has yet to report a profitable quarter. mark zuckerberg may have something explain to do when he returns to barcelona to the mobile world congress. appsom companies they say like facebook and whatsapp are eating into their bottom line. zuckerberg assured the blaster that he was building a profitable model with more subscribers for carriers. that is your business flash update.
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let's go over to the markets desk where julie hyman has a look at the days underperformers. we talked about the applied materials ripple effect on chips, we have a negative effect coming from deere. the company cutting their full-year profit and forecast. this is because it's clients are suffering. an interesting survey out from nebraska's creighton university, other bankestern and achieves saw their economies in recession as we have seen oversupply and over planting in some cases of crops, and of course, falling commodity prices. about 4%.own agco also trading lower today. we are also looking at fertilizer makers who have been falling along with deere.
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they are all under pressure as well as we see this ripple effect. then there is the oil related commodity selling today. big cap oil companies trading lower. exxon mobil, conical phillips. outside declines in southwestern energy. some saying the to keep -- the continued declines are raising of theseabout some companies balance sheets. southwestern trading down in the double-digit today. other companies like marathon also seeing sharp declines. as he pointed out, we have yet to get all of the earnings reports from these companies. next independent enps week, should be interesting. back to the news out of mexico, the finance minister says he has a set of tools to intervene. reporter booky with him on the phone earlier and she is here with the latest. what was your biggest takeaway from the conversation with finance minister? >> thanks for having me on.
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i think the most important thing that he said was that they do have an array of tools that they the peso,use to help bolster the peso, including monetary currency tools. they also said that supply is a key factor here. they surprise the market by coming out with these measures. they say there could be more, stay alert. that was the key point of the interview. that the peso is is very liquid and tends to become a proxy for emerging market risk globally. the idea is to weed out the shorts, high-frequency traders. did you get a sense of how extreme the actions may have to become in order to do that? on as they are focusing you said, high-frequency
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speculation that was devaluing the piece of -- peso away from the economy. they are also trying to make it more expensive to short the peso, which happens very often as a proxy hedge. they are aware of the problems and the measures are meant to address them. alix: of course, part of the measures on sunday were the 50 basis point hike -- did you get a sense that there was more to come on that level? there was none any specific signal that there would be more on that, but the fact that he said that there were tools in the toolbox, including monetary and currency policy -- monetary policy is rate hikes. he did not say that is definitely coming, but the fact that he mentioned those tools was interesting. seeing the peso gain against the dollar on this news. thank you very much.
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with a dramatic plunge in oil prices, many companies are under pressure. enbridge is reporting profit that rose in the fourth quarter. earnings per share were up 18%, but shares are lower today in toronto as oil prices resume their slide. pamela richie joins us now with the story. enbridge been able to sustain its earnings growth in this environment? likea: as you know, it is charging total fees for the liquid to go through their pipelines. those continue. production has certainly continued to increase in some places, from the canadian producers. has also happened is further capacity expansions have come online to the mainline systems for enbridge. all of that coming through to bigger volume. chargeve been able to more fees and essentially that is translated into their profit growth.
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they also beat expectations in the fourth quarter, so it is really a case of record shipments through north america. was interesting because master limited partnerships in the u.s. are also part of the transport business, and they have gotten totally smacked down in the last year. to your point, you would think they would do well. pamela: it is a symptom not only of multiple pipelines feeding into the mainline, but the company is structured in so many different pieces. looking at the share price in itself, we are looking at a company that essentially controls the overall system but ownership is scattered. the expansion story is an interesting one for enbridge because the northern gateway pipeline, the most famous of the ones they are trying to build, actually got approved by the previous government. the pipeline itself one from alberta to the bc pacific coast, west coast.
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no problem with the actual root of the pipeline, a few regulations they have to jump over on the way there, but almost immediately after the prime minister justin trudeau came in, he banned tankers from going up and down sensitive waters on the bc coast. even though the pipeline is set to go through the tankers out of the story, it's difficult. alix: thank you very much, pamela richie. coming up, more bank worries, details on the so-called dollar debt, and how it has played into the slide. ♪
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abigail: welcome back. one of top performers in a nasdaq 100, applied materials, this after the company boosted earnings and revenue guidance for the current quarter above analyst estimates. ceo gary dickerson said the strength is being driven by demand for new technology from the companies customers.
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applied materials is now flat for the year. taking a look at our story stop, yahoo! shares are higher after the company formed a committee to explore strategic alternatives. this follows months of pressure from investors to boost the stock, profits, and the company's announcement earlier this week to streamline content on the company's website. for of changes ahead yahoo!. the stock has changed quite a bit as well, up 200% from when marissa mayer took over from -- in 2012, down as much as 50% from the peak back in 2014. thank you so much, abigail doolittle. it has been a tough start to the year for banks. as you can see, european and u.s. banks shares have been down sharply and much of the decline reflects the turmoil in oil and a downturn in china.
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there is another big reason, banks lend a lot of money to borrowers in countries with weakening currencies, and they are the restart -- struggling to repay the debt. the total amount of my to borrowers outside of the u.s. pasturope grew 57% in the six years, $12.7 trillion. so what does that mean? i want to bring in mark whitehouse. how did all of that debt happen? mark: essentially, this is an illustration of how capital flows work in a integrate world. when the fed and ecb the wood rates, this drove a lot of lending outside of the u.s. and euro area. nearly $13 billion worth in september. a little more than that, half of that, is bank loans. in rest is -- the rest is debt securities, which may also be on balance sheets. alix: you call this the precursor to a financial crisis. can you draw the line for us? mark: when the lending is
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happening, it looks like a win-win. the borrowers get lower rates than they would in their own currencies. but the currency risk is all on the borrower. now with many currencies falling against the dollar and the euro, we are seeing what that means. cost ofl currency paying that debt is going up, which tends to trigger defaults, debt downgrades. see here brazil, russia, turkey had the most exposure to that. mark: as a share of gdp, yes. it also complicates the fed's job. alix: so what does this mean for the fed? mark: when they raise rates, they are tightening financial conditions in other countries like was ill, turkey, russia, at a time when their economies need the opposite. this limits their central bank's to manage their economy and these problems tend to flow back
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to the u.s. and europe through the banking system and financial markets, as we've been seeing. alix: so what should be done about this, what is the solution? mark: one solution favored by economists, such as kristin forbes at m.i.t., those that study financial contagion, tougher limits on leverage. this makes borrowers less able to get overextended, and makes banks better equipped to absorb losses. alix: thank you so much, mark whitehouse. we have breaking news on apple, the u.s. has filed a new request to force apple to comply with that warrant. we will be watching that headline as it crosses. ♪ . . .
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>> it is 2:00 p.m. here in new york, 7:00 a.m. in hong kong,
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a.m. on the west coast. welcome to "bloomberg markets." ♪ i am matt afternoon, miller. when itthe tea leaves comes to the fed rate hike. and price gains brought to a grinding halt for oil. yahoo!he pressure for investors intensifies. we will look at what the future holds for this internet darling and its ceo. first off, let's head over to the market desk where bloomberg's julie hyman has the latest. jules? julie: shouldn't you have said


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