good afternoon. here is what we are watching at this hour. >> in the united states we've 26 million people who do not have enough financial credit history to qualify for a loan. in her interview on bloomberg television. hear what he has to say about the reforming of the banking system. samsung appointing a new mobile boss following two years of poor results. does he face an uphill battle? automakers used early holiday deals to keep sales churning in november and more incentive could break a sales record for the year. for more on today's activity let's head to the markets desk where julie hyman has the latest . julie: interesting that this rally is happening after we got worse than estimated economic data.

manufacturing according to the institute for supply management rising --, contracting by the most since july 2000 nine because we did see an unexpected contraction in that manufacturing number. despite that we are seeing a rally. hits in the session took a but still holding up relatively well. everything that we here between now and the next fed meeting effects what it will do beyond that meeting. i know this is one of alix's mipr's. this looks at the forward rate curve and interest rate swaps in that market. we are seeing a gentle curve although it is a slightly more aggressive than it was historically. with every piece of economic data that is a little more

negative, we are going to likely see the expectations for the pace of interest rate increases to get a little more benign and indeed that is what the fed has told investors as well. alix: also what is interesting in terms of what is leading stocks is the momentum, not those related to the fed but the stocks elected poor a lot of money into, i like to call them fangs. julie: it was google and now it is off of that. we talk about these momentum stocks. thestocks are also tied to cyber shopping. period we have seen over the last couple of days. facebook, amazon, and for that, i'll give you pathways to shopping. over that cyber five-day period, overall sales were up 21 -- 24.1%.

google posting a gain of about 20% in sales over that time. this momentum appears to be helping momentum stocks. alix: thank you so much. we want to check in on first word news this afternoon. mark crumpton has more. mayor of a district in istanbul says a pipe bomb went off near metro stop, injuring five people. bomb disposal units have been set to the site. the cause of the blast is still unknown. one person, slightly injured. that contradicts reports from private news agencies that one person was killed in the blast. president obama is trying to cool off that heated dispute the between russia and turkey. mr. obama met in paris with dogan.h leader er >> we all have a common enemy, that is isil. i want to make sure that we

focus on that threat and i want to make sure that we remain focused on the need to bring about some sort of political resolution in syria. the diplomatic crisis erupted when turkey shutdown a russian warplane. a little more than two weeks after the terror attacks, man valls urgeduel tourists to visit paris and spend money. the convicted boston marathon bomber are seeking a new trial. three people were killed and more than 200 injured when two bombs exploded near the finish line in april of 2013. dzhokhar tsarnaev was sentenced to death for his role in the attack. that is a look at our first word news. even get more on these and other stories on the four hours a day at bloomberg.com.

i'm mark crumpton. and u.s. u.s. treasury agency for international development is hosting a financial inclusion forum in washington today. u.s. treasury secretary jack lew spoke exclusively to bloomberg's economic correspondent brendan greeley made his case. >> one of the things that needs to happen is it needs to be simple and inexpensive for people to get connected to the system. we have heard through the panels to open a bank account and to get access to financial services. here in the united states we are 26 million people who don't have enough financial credit history to qualify for a loan. greeley joins us now for more on the interview with treasury secretary jack lew. brendan: we talk a lot about the challenges of financial inclusion. it's not just a feel-good issue. 7.7% of households in the u.s.

do not have access to a bank account. 45% of those households do not use payday lenders. there are challenges in figuring out the answer. his credit more important for underserved families or is it a basic savings account? we talked u to some people today who are helping open credit unions in the mississippi delta. checking and transfer services. jpmorgan announced an initiative to provide credit -- basic checking and service initiatives . jpmorgan announced an initiative to provide credit. we talked about a lot of private initiatives. he pointed to one example which is long-term savings account. the administration has a program that will allow you to mimic what you might get through an employer. when we are looking at basic financial services, a checking account, small loans, those are still coming from the private sector and the secretary is erding private sector

commitments. did the treasury secretary say anything about dodd-frank? brendan: one of the things we have been hearing is that small banks are constrained by dodd-frank. the rules are written for larger banks. smaller banks are looking for relief from that. aasked him whether that was possibility of changing dodd-frank with the administration. the answer was a pretty unqualified no. i don't know whether we have that quote or not. he seemed unwilling to budge. he did say there is a problem with regulators now, trying to figure out what the definition of small is. a bank with $100 million and access -- $100 million and ts.e he said laws, statutory changes can add some clarity on how we define things but it was a small

crack in the door. he has wooden -- he has written up beds for not changing dodd-frank. alix: you spoke to the paypal ceo. what did he say? brendan: there is another challenge to getting people into the financial system which is, what is more important, brick-and-mortar locations where you can exchange cash or the digital technology that is enabling cash transfers to be cheaper and easier? i asked him that question. isowell is best paypal working with lenders to start offering loans. working to establish lines of credit for its own vendors. this is what he said about the compromise between a physical presence and digital transfer. >> zoom is a perfect example of combining the best of mobile technology to do international

remittances. it goes directly into a bank overseas so that somebody, if you're sending money to a loved one, you can instantaneously, instead of waiting three or four , takewhat it is typically that money from an overseas bank account. this combination of using electronic means to move money and physical distribution to take out cash can be very powerful. standard forgold getting people into the financial system was developed in kenya which used a lot of agents to exchange cash and get them into the financial system through digital transfers on their phones. we are starting to see some of that technology here. some of those ideas adopted here. dan schulman said they are thinking about working with companies to think -- the teller at the retail store as the same as a teller at a bank.

we are still very much in some ways lagging the developing world in getting people to use digital technology to save money. alix: not to mention the fact that regulation will lag any technology. it seems like this is a new frontier of payments where regulation is not equipped for it yet. brendan: that is true. the former heads of central bank of kenya is here and that is so the kenya had to deal with. if you have a digital account for transferring money back to your family in a village, if you load up a balance on that account, all of a sudden it is a savings and the technology company has become a bank. how do you figure out how to let a mobile company act as a bank without becoming a bank? dan schulman was hesitant to say bankpaypal would ever be a . they are focused on transfer and credit which is where a lot of the commercial activity is going. brendan: nonetheless alix: --

nonetheless, blurry line there. next 20 minutes a bloomberg markets, samsung is giving its mobile business a makeover, replacing its top executive. how can new leadership pull the company out of a smart phone slumped? rmorgan stanley downsizing. that might be good news for goldman sachs. sales churning toward a record pace in november. we will tell you some underlying weakness. ♪

alix: welcome back. it is time for the bloomberg is

this flash. spending in the u.s. is rising falling inction, factories. construction spending climbed in october to the highest level in eight years. buyers and renters who held back are seeking new homes and federal projects boosted the totals. factory activity fell last month of the first time in three years . analysts say the strong dollar and low oil prices are hurting new orders. contraction territory for the first time in three years. jimmie johnson will not be going public. the ceo says he spent two years talking to bankers and decided he is not a wall street guy. has the best tuna sub ever. another 73 companies are planning to reduce emissions in an effort to combat climate change. the companies include amazon, jetblue airways, dupont and

brings the total to 154 companies. you can get more business news at bloomberg.com. julie hyman has a check on company movers. julie: speaking of food, although not tuna subs. campbell soup is where we are starting. the stock was up graded to buy from hold. it is trading around $53. this has partially to do with acquisitions campbell has made of more gross oriented brands. analysts argue campbell has been shifting products toward faster growing segments of the market. campbell is trading at its highest and 1999 today. .ooking at monsanto that stock upgraded from overweight to neutral at atlantic. analysts say that negative

sentiment on the agricultural sector has provided an attractive entry point. still a robust growth story at monsanto. in downgraded to neutral -- new mining upgraded to neutral. -- downgraded to neutral. target for cutting the shares to $20 from $23. shares are trading below that. yum! brands upgraded to outperform. analysts say the thesis is investors are getting more excited about the company ahead off ofimpending split its china business. the china business has suffered for various reasons over the past couple of years and also pointing out taco bell sales in the u.s., relatively strong. shares up 2%. alix: thank you.

i am also hungry. samsung is giving its mobile business a makeover, naming a new smart phone boss and a management reshuffle. phone shipments facing a second straight annual decline. joining us to discuss is cory johnson joining us from san francisco. walk us through the changes we have seen. cory: i think the big change is a result of what is going on in the mobile headset business. shin walking out of the job. copsee a dramatic decline particularly at the high end for samsung and their galaxy phones. they make a lot of low-end phones. -- if yout basis look at the last two quarters, you have seen an improvement in that business. a lot of the sort of long view of this does not show the

business he is walking away from has been doing better at least for the last 26 weeks. that bodes well for his successor running that smartphone business which is so important to the conglomerate that a samsung. alix: basically like 60 businesses rolled into samsung. it is really controlled by one family. this is the choice that is now taking control. talk us through the significance of him this decision. cory: what we have is a wholesale reshuffling as the new generation steps up to run the business. i think for a lot of reasons i'm a good and bad, we look at the smartphone business. i think that is also the biggest lever where you can see the big change in the business. the big decline because smart phones have gotten more difficult. it is also the place where they can most rapidly see big improvement. for that reason it is worth looking at the smartphone business and look at what they can do with the galaxy product

line. one of the things they have done well is to get it markets where competitors have not gotten the shelf space, the brand recognition. samsung has built something they can repair. you have seen that in the results that have come through the last couple of quarters. there is reason to think things might get better for samsung really fast. this new generation may be taking over at a time when things are poised for the opportunity for success. competition against the iphone got worse. the iphone got a lot bigger, helping them succeed, helping apple succeed in markets. like china. we saw a lot more dollar value happening on the iphone with their bigger format phones. we have seen that for demographic reasons but a lot of e-commerce happening on the iphone despite their longer history with larger sizes. that is one thing samsung will

have to work through as they think about what they mean in the ecosystem of global smart phone growth. alix: thank you, cory johnson, bloomberg editor at large. banks across the board are cutting fixed income staff as revenues plummet. oldman sachs, standing firm. we'll talk about their strategy, next. ♪

alix: a dreary day in new york. .elcome back morgan stanley joined a handful of other firms when it announced a slew of job cuts its fixed income division after years of revenue declines and insufficient returns. goldman sachs, not budging even though it saw a 34% drop in its bond trading revenue. .oining me is mike reagan what is goldman waiting for?

compared thefo has credit trading cycle to the m&a cycle. he said everyone thought the m&a boom was dead after the financial crisis of 2010 and here we are back. it has come back in full force. m&a is at a record this year. looking at credit-rating the same way. revenues are down for pretty much every bank. goldman had a 34% drop in fixed income currencies and commodities trading. it's hard to say exactly what's behind that. none of the banks disclosed too much about line of business. alix: it is hard to know if it is one big trade that went badly , some sort of structural issue in the market. it is hard to get to the bottom of it. mike: not a lot of transparency in that revenue line. hearndo leaks out and you -- you see volumes down in this product are that.

-- or that. fixed income trading is in a slump. goldman, from what they have said so far -- this is all based on comments they made at investment conferences and on their earnings conference call. they seem to want to ride out the slump and they think as other banks cut back, morgan stanley announcing it will cut 25% of its fixed income and currency traders, they think they can ride the storm out and at the other end of it be intact to gain market share. that seems to be what their plan is. would it be that surprising for them to come out and here they are laying off bond traders? not that surprising. alix: what kind of market share can they wind up pursuing in terms of not only the traders they can access but in terms of market share? mike: i think the big question is whether this slump is a cyclical slump or if it is something more permanent. there are reasons to believe that it could be more than a normal cycle.

fixed income is going through the same transformation equities went through. much more computerized trading. this last quarter, a lot of the blame was placed on clients not trading as much as they would. alix: is that what we are looking at? mike: that is -- alix: 185, is that the billion dollars the market would be? mike: the pool of revenue for all global banks in fixed income is projected this year to drop to about 65 billion. ,t was much higher than that closer to 150 billion in previous years. these banks are fighting for a share of a much smaller pool. will it bounce back to those peak levels or is it a structural change? biguterized trading is a

deal. interest rates stuck as low as they are for as long as they are is probably not helping anyone out. -- they reduced a lot of their inventories to pump up their capital ratios to comply with new rules. a lot of different pieces at play. once it all plays out and we see rates go higher and the banks all reach the capital levels and see if clients get more involved in trading again. we will see when the fed raises interest rates. alix: everyone will say. section.ast commentary coming back on bloomberg markets, we are talking about cars kicking into high gear. ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. alix: from bloomberg world headquarters in new york, welcome back to "bloomberg markets." mark crumpton has more from our news desk. mark: president obama says

russia is starting to realize that the price of backing syrian --sident besar allah shot bashar al-assad is get into high. -- is getting too high. >> the russians have been there for several weeks, over a month. reportersir-minded who looked at the situation would say the situation has not changed significantly. mark: u.s. officials insist president assad can play no role in syria's future. suspect secured a hideout for the terrorist to plan the attacks in paris. the man is believed to up in an intermediary with the person who is the only person facing

charges for the attacks. the worst pollution of the year forced some parents to keep their children at home. a attendance was optional today at primary and middle schools. city officials in beijing imposed limits on factory output. nearly half of u.s. households only use cell phones according to new federal statistics that show more people are cutting the cord on land lines. only about 8% of households have just land lines. about 42% have both. that's a look at our first word news. you can get these and other stories at bloomberg.com. alix: auto sales fell 25%. elsewhere in the car land it has been a stellar month. fiat chrysler says it's auto sales rose 3% in november. ford and gm reporting higher sales even though they did miss estimates. thanks to a strong economy, the

industry is set to log its best november yet. here to talk about what is driving the strength is carl brouwer and our own matt miller joining us in studio. carl, is this all about trucks? car sales over the last two years have been stagnant if you strip out trucks. strugglingales are but they are struggling in the face of extremely robust truck and suv sales. the overall market is looking at potentially a record number for 2015 of somewhere around 17.4 million new vehicle sold. matt: when carl and i say truck, it does not mean ford f1 50's. what a lot of people think about as a car is actually considered a truck in counting these numbers. like suvs as well. jeeps for example.

alix: this is a result of lower gasoline prices as well. we are not going to have lower gas forever. matt: it is not just lower gasoline prices. i think carl has studied this a little more than i have. americans are buying trucks for a number of reasons. they have had the same car for 11 years. that is still the average age of a car on the road. andncing is super cheap leasing is also easier than it has ever been. number three, the trucks we are talking about are getting 46 miles per gallon and that is the pickup trucks so you have suvs that are getting upwards of 30. what i'm struggling with is it seems to be based on trucks and suvs and light vehicles in addition to that the demand for auto loans is actually added lowest level since 2011 if you dig within the fed's official load survey --

loan surveys. are we at peak car right now? karl: also there is a low default rate on the loans as well which is good. i think we're at a point when everything has come together. we have got low prices of fuel. easy financing. pent-up demand. you have a great set of cars that get relatively high fuel efficiency, even in trucks and suvs. i don't see this situation changing much. i think an interest rate hike could slow things down by don't see there being a drastic shift. matt: i don't know how demand for auto loan slows. over $1 trillion in auto loans for the first time ever. alix: it is still at 3.3%. reserve senior loan officer -- matt: i actually -- the interest

hendrixstion from joe at ford. us and to what he told me. >> if the fed raises rates, it will have a big effect for 2016. over the next several years we could seasonal affect this -- could see some affect. rates rise byt half a point over the next couple of years, it will not have a big effect on the industry. matt: what do you expect the fed to do over the next year? >> we are expecting a quarter point move. after that we expect another quarter point move. we think 2015 -- 2015 will be pretty benign when it comes to interest rate growth but will start to see growth and we are predicting a strong industry in 2016. matt: there was a fed report on the new york fed possible long that said interest rates will -- automakers on

dealers on both sides. it costs them interest to hold inventory on their lots and it also will be more expensive for consumers to get loans. it could be something the new pushes autog says sales down 3% and change. alix: look at this as being the nadir. lower yen ande the higher u.s. dollar and you can see what we are buying due to the fx rate. karl: we are seeing the sales of suvs across the board both the mastech and import all selling well. -- both mastech and import -- domestic and import, all selling well. chevrolet with equinox. honda is doing great with the hrv. ford is doing good with the explorer and expedition.

everything the suv -- does not matter where it is coming from. they're doing well across the u.s. alix: i'm confused as to why ford stock is not killing it. matt: that is a darn good question. i would love to ask carl that. car sales have been doing better and ford has been keeping costs down. it does not seem like there is an end in sight but i know that some analysts are saying that we may be at peak auto if not this year, next year. karl: i think we could be at peak auto next year. the numbers have been flattening every year. we have been growing from 2010 until now. every year they kind of growth last. we were coming back from a low number in 10 so that extreme -- that explains initial growth. now we are going to see who is disciplined and who isn't.

how many manufacturers will be able to say, the market is slowing down and that is ok and how many will say, we have to beat numbers from last year which hurts profit and revenue. the next 12 months and beyond will be interesting. alix: i love that you brought up incentives because bernstein had a note out saying, are we at peak car profitability. look at the incentives of chrysler. they have been rising for the last few months. you need to incentivize when you have cheaper japanese cars. the auto demand next year. and we see peak profitability? matt: the japanese and chrysler have been the biggest perpetrators of massive incentives. chrysler is 13%. toyota is about 14%, as is nissan. it is only ford and gm that are holding in single digits. we are seeing them around 6%. karl: which is fascinating. for decades, who were the

biggest perpetrators of the over incentivized, keep the cars going, keep the assembly lines moving. this discipline we are seeing is quite impressive and if they can maintain that, even in the face of some share loss, they will maintain revenue and profit numbers and i think long-term that is smarter especially in the face of peak and some slippage. alix: we have the profitability issue, the demand issue and you see the potential for gm and ford to come out on top citing those problems? karl: i think that they know that long-term it is better not to chase the ball give numbers. better to maintain profitability and they have learned that overtime. thankfully, everyone got a reset with the whole downturn. the ability to be profitable even at lower production numbers exists like it did not 10 years ago or even seven years ago. gm and ford, if they position

themselves well, they can maintain great profitability in slipping volume number. matt: how much is protectionism helping those companies? i was talking about the fact that foreign automakers don't bring foreign pickup trucks into the u.s. market as much. thelovin reminded me of tax. volkswagen cannot make a truck overseas in the u.s. market because it would be too costly tariffs.otectionist karl: that has been in place for decades and it will be interesting to see if that gets removed. there has been discussion about removing that. it hits home for the domestics. there is a lot of incentive for them not to let that shift. there is also a lot of discussion on pulling that out as part of the free trade world. matt: we keep seeing u.s. carmakers move smaller car production overseas. if you wondered why.

, on the one hand it is lower margin but on the other hand it would be difficult for ford or gm to produce a truck in mexico and sell it in the u.s. karl: that would not help them at all. at the same time, mexico has such great trade agreements with the rest of the planet. when you move production, even though a truck would be harder to get into the u.s. profitably, it's easy to send throughout the planet somewhere else and have lower barriers and if you build them in the u.s. alix: great conversation. matt miller, always a pleasure. karl brauer, thank you for joining us. coming up, american drug companies. merck ceo says the pfizer shows theeal challenge the industry faces. blue crest capital management announced it will stop managing money from outside clients. why did the firm decide to become a private investment partnership?

manufacturing dropped to its fastest pace since the recession. ♪

alix: you're watching bloomberg. this is your global business report. brazil's economy has contracted for the third consecutive quarter as the mastech demand slows. the ceo of mark is calling out the u.s. tax system. why does he think the current system does not hold up? the largest test -- largest banks in the u.k. past the stress test results. let's start on brazil. the largest economy in latin america reporting gdp strength

contracting 1.7%. brazil has been experiencing political deadlock and a deficit . the country now faces the threat of more sovereign downgrades the junk. merck is taking aim of the u.s. tax system. kenneth frazier says pfizer allergan deal signals the challenge is to stay competitive globally. >> the u.s. tax system is not competitive in a global sense. we have to come up with a tax system that allows u.s. companies to be in competition globally for talent, investors, ip assets and everything that makes this industry run. i think that deal should be something that serves notice to policymakers that good american companies feel no choice what to do things like tax inversions to remain competitive globally. alix: all seven major british banks have passed boe stress

.ests two of the banks, standard chartered and royal bank of scotland fell short in at least one requirement. the commodities route continues to pose risks. the ceo of a de anza says prices are not at the bottom but there are factors that are emerging that make metals attractive to investors. >> everyone expecting interest rates to go up. the dollar is strong. chinese slowdown some oversupply and the uncertainty about when rates will go up and what will that mean to the u.s. dollar and his u.s. dollar of that are investment vehicle is leading to lower prices. alix: 73 more companies are joining the climate change fight. among them, amazon and dupont, promising to cut emissions and water use. 154 companies have signed the pledge. that is your global business report. for more stories, visit bloomberg.com.

let's go to abigail doolittle live from the nasdaq were she is looking at win in today's session. abigail: wynn resorts trading higher today. it has been a difficult 2015 for this stock and company shares are down more than 55% on a string of quarterly misses blamed on weakness in macau. that weakness continued into november with the government of macau saying casino revenues were down 32% year-over-year, more than expected for the 18th monthly decline in a row. investors are looking past those numbers, perhaps two or 2016 and the prospect of a return to growth for sales and earnings. another stock trading higher is american airlines. a bumpy ride for the stock, down about 20% year to date perhaps on a decline in revenues. today, shares are enjoying a bounce. one piece of uncertainty has

been removed with american airlines passenger service workers approving a new five-year contract. the union says this result in an immediate pop in pay. alix: abigail doolittle joining us from the nasdaq. coming up, a shift in focus for a major hedge fund. blue crest says it will no longer manage money for outside clients. we will have the inside story. ♪

alix: welcome back. i'm alix steel. big news in the world of hedge funds. the crestatt who runs

capital management says he will return outside client money and turn his firm into a private investment partnership. he will focus on managing his own wealth and that of his partners and employees. now? this is not the only one, a macro hedge fund closing. >> a tough last few years for blue crest. i think if they were making money, i would speculate maybe this would not be a decision on the horizon. michael platt is saying the new structure will allow him to take more leverage, allow him to make more money and that regulations are harsh. you spend a lot of money on compliance, dealing with investors. who needs the hassle? that said, they have lost money recently and it has been a tough time. alix: this is a quote from mr.

platt. he says "everyone knows that the landscape has changed. we want to position ourselves to be free to adapt to the environment such as it exists. ." does that signify that they made bad bets? is it a structural shift in the industry? simone: they were one of those funds that was hurt by a bad bet on the swiss franc. they kind of came back from that. it has been several years. their first losing your was in 2014. i think investors are a little bit more demanding about what they want. half theed more than oldest hedge funds. really there is a lot to deal with. the firm is down to a billion from 37 billion.

-- 8 billion from 37 billion. alix: so interesting to me breaking down blue crest stock holdings. we see a lot of hedge funds say things like, it is hard to play the big macro game this year. there have been some really big macro trends that have played out. the long u.s. dollar. for hedgeso hard funds to be able to deliver the kinds of interns investors are you still? -- are used to? simone: some of it might be bad decisions and exposure. this is the environment they have been asking for for a long time. solving the comes up a lot, volatility. should bethink you able to play that as well as any volatility. there is not this upward force of qualitative easing anymore. alix: it seems like you also said you were looking at lower fees and higher costs. can you talk about what he was

referring to? simone: i think he is talking about higher costs for investors. a lot of investors, if you are not delivering great returns, they are demanding that you lower your fee. you have a lot of infrastructure as well. he is talking about higher costs in the compliance end. blue crest had an internal fund that just staff was invested in that investors did not know about. last year, that was part of the reason they saw some outflows. that could be a reason they are higher cost at blue crest. also, just dealing with investors is difficult. alix: talk about the aggressive growth. he is looking at expansion plans. cutting back on headcount or anything. what is the next step? simone: he says he wants to make his firm bigger and better than ever. he thinks managing his own money and maybe that of employees really nimblea

fund. that remains to be seen. while on some level firms like .72 have maintained the staff or large certainly there are family offices out there. will this make you a better investment shop? alix: it depends how you quantify. simone: it depends on if you are making money are not. that's what feeds growth, new employees, new investment. if you make money, great. there is nothing to stop them. alix: you look at the world of hedge funds and that is what you report on. what are the other hedge funds that may or may not be at risk that have not closed as major funds? there have been a handful of funds like fortress -- macro funds that shut down after one big your losses.

most of them have been -- one big year of losses. most of them have been a slow death. three years of mediocre returns. it is hard to guess who will shut. a few outflows. certainly there are a lot of players in the margins having a hard time staying afloat but those are smaller guys. it is an open question. alix: thank you so much. simone foxman of bloomberg news. much more coming up. puerto rico makes it in time. the commonwealth will pay over $350 million it owed in debt payments but is it out of the woods? ♪

alix: welcome to "bloomberg markets."

from bloomberg world headquarters in new york, good afternoon, i am alix steel. here is what we are watching at this hour. u.s. stocks are starting december in a pretty strong fashion, but will a fed hike sour the mood among investors? has made allays it payments due today. as many as seven ubs traders may be the first to face sanctions in a currency rigging scandal. the hammer could come down by the end of the year. let's head to the markets desk where julie hyman has the latest. we continue to hold onto this rally. julie: and oddly in the face of manufacturing numbers that came in worse than estimated. it's the biggest contraction

since 2009. the major averages do in deed remain higher. it's not only a rally. it's a broad-based rally. it is largely stronger on volume we has in recent days as well. all of the groups in the s&p 500 are higher. health care is doing the best. that is in part because of barclays technology. consumer staples and consumer discretionary each up about the same, about .8%. it's interesting that we got the data but stocks are rallying. is historically the best year for stocks. alix: you have to show you on the good stocks. just stocks. its asset classes. julie: right. you don't often see stocks and bonds going up in tandem. , this is a market that seems to be affected by worse

than expected manufacturing data. the yield is down 2.51%. we know investors are scrutinizing every economic report and trying to extrapolate what the fed is going to do. the read on this report seems to be that the fed will raise the rate. but it will be gradual. that something federal reserve officials have said repeatedly. the big economic news of the week will be the jobs report on friday. i also want to take a look at gold. had seen the gold rebounding from a big monthly drop in november. but in the past half hour or so, we saw it turn lower. finally, looking at the u.s. dollar, it had been at a seven month high, but it is coming off those levels. are seemingstocks to shrug off the economic data, we are seeing other asset classes reacting to it.

interesting. to thank you so much, julie hyman. let's check in on the bloomberg first word news. of a districtr and is stumbles as a pipe bomb went off near a metro station, injuring five people. bomb disposal units have been sent to the is stumble municipality -- is stumble and isality -- istanbul a pallet he, metro was halted after the blast. obama is challenging republicans who have fought most of his environmental strategies. he says the united states will meet its commitment to reduce pollution. president obama: climate change is a massive problem. it is a generational problem. it is a problem that, by

definition, is just about the hardest thing for any political system to absorb. has not been decided how much the u.s. would contribute to a global climate deal. in london, the house of commons is expected to vote on expanding attacks against the islamic state in syria. that has led to a split in the opposition party, whose leader opposes the attacks. other senior party members are in favor. the european union today unveiled new aid packages to syrians in the refugee crisis. help 1.5 will go to million refugees in turkey, lebanon, jordan, and iraq. turkey is now housing more refugees than any other country in the world.

these andt more on other breaking story story four hours a day at the new bloomberg.com. from the first word desk, i am mark crumpton. in the u.s.cturing unexpectedly fell in november at the fastest pace since the last recession. with the index falling to its lowest level since 2009, does the fed wind up taking this into consideration as they weigh an interest rate hike later this month? the bloombergside terminal. i charted this going back five years. was q2 queue.e the red circle was operation twist in 2011. the green circle was 2012. my take away is the eye a some did a lot better when the fed eased, and now we are talking about tightening.

marion, what do you make of that versusu see the ism other easing? >> first, it was a disappointing number, but it is only one number. we feel as long as it doesn't continue to weaken that the fed has been sickly -- fed has basically backed themselves into a corner. they no longer feel it is an emergency. there is a good shot they will raise rates in december. the key is they will do it gradually. i don't think this one data point is going to discourage the fed from raising rates. alix: only five indices reported broad, which speaks to weakness in the industrial sector and the strength of the u.s. dollar. manages the said -- fed hiking without creating an

inflow into the u.s. dollar? >> first, it's going to be like the twilight zone, moving into another dimension, because we are beginning to raise rates while europe and japan are still easing. current these trade on that currencies trade on interest rate differentials. the fed understands this. this will stimulate currency. i think this is well understood. i think what is also interesting is that a lot of our manufacturing companies, when we look at earnings this year, even though they are multinationals, that is where the pockets of strength have been, even though we have a dollar that has been gradually rising. i think if the dollar gradually rises, our companies can do well. it's when currencies don't get a adjust.o we have never found a correlation between a

strengthening dollar and strengthening small-cap companies. alix: interesting. sort of aing recession and process but not in the economy. how does that wind up shaking out? come inside the bloomberg terminal. the s&p is a near a record high. we are looking at a negative earnings growth for the last few months. this comes to me from chase at bloomberg. how do you recognize -- reconcile these two things? look at growth versus value. when earnings become scarce, growth outperforms. we have seen growth outperforming. it is really paying attention to what you own in the market. our sense is that growth may outperform as we enter 2016, but those talks are getting very expensive. the question is when does value begin to outperform growth.

when earnings become abundant, you get a cycle in value. what is interesting is the two pockets when you look at the indices that make up value. one is financials. the second is energy. alix: financials obviously geared toward the fed. do you need stabilization in oil or a rally in oil? >> stabilization. other trend we have seen for a while now is a rush into companies that have the buybacks and dividends. they have done well versus the s&p. how long do you think that will last? >> it's interesting. this is a factor that has been working for years. it is not a new phenomenon. share buybacks have been very important. dividends are important to the consumer. it's not showing that you beat the market if you own them in areportfolio, but we

encouraging clients to buy large-cap companies that have the ability to raise dividends. for those clients that need current income, we are telling them to look at telecom. believe it or not, telecom has gotten very inexpensive and has some of the highest yields in the market. one stock is yielding over 5%. alix: sprint? >> is at&t. i am not necessarily directly recommending it, but the dividend yield is high. we prefer growth as a whole. what is interesting is the sector in itself, telecom, when you look at the large ones paying out dividends, they are actually cheap. alix: the other thing we see in the market is how drastically under-owned the market is versus developing markets. we see so much flowing into this developing world. do you see that trend continuing? some point do you say you

know why? the value is actually going to be in emerging. >> our global fund manager survey confirms what you are saying. the market is weak, emerging markets. but we think it will continue to outperform. particularly with the fed raising rates. in 2016-2017, we think there will be a very significant buying opportunity in the emerging markets. that be based on the easing we will see from central banks? craig's you already have valuation. they have been cheap for a while. it's a matter of getting growth back to those markets. if you can get growth back, you will get earnings. we don't have the earnings right now for the emerging markets. they are slowing down. at the same time, we are's seeing better earnings in the developed markets. particularly japan. alix: and they have a lot of

dividends. they are putting a lot of money into the stock market. thank you so much. pleasure to have you as always. next 20 minutes of bloomberg markets, volkswagen getting hit hard. salesrmaker reporting falling 25%. we will break down those numbers. and puerto rico avoiding defaulting on its bonds. it is making all sensible and interest payments due today. what is next for the beleaguered island? be another blow to crude? we have the forecast. ♪

alix: welcome back. time now for a look at some of the biggest business stories in the news right now. the emissions scandal seems to have rocked volkswagen sales. they felt when he 5% in november. the automaker -- sell 25% -- in november.

jpmorgan says it is planning a venture with a p lender to small businesses. -- peer to p are peer lender to small businesses. jamie dimon talked about it today. we can extend our services and good policies, all of these things can actually help quite a bit. , bank oft month america ceo brian moynihan said big banks are scrambling to help pe businesses, including er to peer. jimmy john's will not be going public. the ceo decided he is not a wall street guy. get more business news at bloomberg.com.

let's head to the markets desk where julie hyman has a check on industrials, really lagging the rally today. julie: we can blame it today specifically on bank of america, which downgraded these stocks. notches to $90. he says the truck market in the u.s. is weakening even faster than expected. analyst, that there will be a 17% decline in next year's north american class a production. that's one of the types of tracks that they make. referring to analysis by a currency strategist at bank of america, that he sees the remember currencyg -- wer declining in 2016. the global coal and industrial

metal outlook is "as bleak as ever" according to an analyst. a couple of interesting charts from bloomberg intelligence on construction equipment and machinery makers. value, at the enterprise we are looking at caterpillar and orange, other construction makers and equipment makers here in the u.s. in white. large discount because machinery makers have underperformed this year. alix: interesting, especially because of the inventory these guys have to deal with as well. good stuff, julie hyman. still ahead, puerto rico paid its debt today. what next? ♪

alix: welcome back.

puerto rico just avoided a default, at least for now. the island says it will make all principal and interest bond payments owed it today to bondholders. it also saved itself from potential litigation by investors since these bonds are backed by puerto rico's promise to repay. to bloomberg radio. >> thank you so much. this is bloomberg advantage on bloomberg radio. carol massar and cory johnson. michelle, we did get a headline about an hour and a half ago about puerto rico. they did make a payment. >> they paid the government development bank debt today. that's important because part of the debt was guaranteed by with full faith and credit. they made this payment to avoid default for now. it ain't over. michelle: they do face another due january 1.

>> and those payments are more likely to have gotten paid anyway, right? , in the sector they were likely to payoff off, this was probably more likely. michelle: today, yes. just given that a large chunk of central government was on the hook for the type of debt where, if they hadn't made the definitelyey're would have been some legal suits. carol: where are we now? what is next? i feel it this is a story that has gone on for some time already. creditors still need to be made whole. where are we? michelle: puerto rico continues to negotiate with creditors. it really wants to reduce its total debt load. they are hoping that investors will participate in some sort of debt exchange.

i said creditors need to be made whole. they want to be made whole. michelle: certainly, that is what they want. it's one of the reasons puerto rico made the payment today. in theory, creditors and investors would be angered by that. that might throw off some of these negotiations. at thisolds the debt point? michelle: it's traditional. mutual funds are still in there. franklin and oppenheimer hold roughly about $10 billion combined. thethen you also have hedge funds. they hold almost 30% of puerto rico's total debt. individuals that hold it as well. same time,he congress has been holding hearings on what to do to help the commonwealth. there is no consensus out there.

no overture to help out puerto rico. michelle: lawmakers are saying you guys need to show us some sort of change here. they point out that puerto rico has yet to release audited financials from 2014 for the year ending june 30, 2014. you have to go far back. they want to see more clarity, , solid numbers, coming out of puerto rico. --do they have more leeway to put it another way, is it less likely that debtors will be paid on general obligations? michelle: the thing about general obligations is puerto rico's constitution stipulates the general obligation bonds must be repaid before other .xpenses so, if you look at it from that

, and the bondholders is certainly do, they say look, this is the first payment you're supposed to make every month. ever were to go before a judge, maybe a judge would see it differently. maybe he would think wait a minute, the situation is so dire, puerto rico cannot live up to that constitutional pledge. it remains to be seen. carol: i think about what got puerto rico to this point and what could be done to prevent it in the future. is there something to get them being in thisy situation? michelle: the economy needs to start growing again. since been struggling 2006. for years, they would borrow to help balance the budget, so they were overspending. for puerto rico to get back on track, the economy needs to not be so, to

sluggish, and they need balanced budgets. they need to live within their means. for other jurisdictions, they need to abide by that as well to avoid getting into the same problems. carol: good update. michelle caskey, our municipal bonds reporter right here a bloomberg news. thank you. bloomberg radio. still ahead, opec ministers meeting in the nl later this week. will we see any policy changes? that and some strange bedfellows perhaps, next. ♪

alix: from bloomberg world headquarters in new york, and welcome back to bloomberg

markets. i am alix steel. mark crumpton has more from our news desk. mark: president obama is issuing a challenge to the world in the united states senate in the fight to slow global warming. climate conference today in paris, mr. obama said any deal to limit greenhouse gases should be legally binding. president putin is giving them the cold shoulder. by thected a call turkish president for a one-on-one meeting. he says after turkey shot down the russian warplane, there cannot be talk of a broad coalition in the fight against terror. the united states is expanding its special forces operation in iraq to help fight islamic state militants. secretary ash carter told a congressional committee today that troops will be able to conduct raids, free hostages, and gather intelligence. secretary carter says the forces

will also conduct unilateral obligations -- operations in syria. rahm emanuel has fired chicago's top cop following the release of video showing a white officer fatally shooting a black teenager 16 times. protesterseaders and have been calling for kerry mccarthy's firing. they also want an investigation into why it took more than a year to indict officer jason van dyke. a number of new cases of diabetes is finally on the decline in the u.s. there were 1.4 million new cases last year, down from 1.7 6 million. that is based on data from the center for disease control. it's unclear what is behind the decline. these andt more on other breaking stories 24 hours a day at bloomberg.com. from the first word desk, i am mark crumpton. alix: opec oil ministers are

preparing for this week's policy meeting and the anna. oil prices are down almost 40% in the past year. the record surplus persists and global producers are fighting for market share. -- any chance we see a cut on friday? >> nope. i don't think it is going to happen. the saudi's say they are willing to cut, but they are only going to cut if other people join, and when they say that, this is what they mean. the main rivals within opec need to cooperate with them, meaning iraq and eventually iran after they come back online, and their main rivals outside of opec, and that means russia. i cannot see any reasonable scenario where iraq, russia, and iran say sure, we will go along. alix: take a look at opec production.

they are producing over 31 million barrels a day. any chance we will see them increase their quota to make room for indonesia? >> they could increase their to make room for indonesia, but it would be meaningless. windowdressing. and the danger is that they get that message out in a confusing way. this iset is saying real. the bottom line is quotas are irrelevant at this point. alix: we just had a chart up showing opec is producing so much more than it did in 2014, 2015. where does it matter? >> opec and saudi arabia matter a couple years down the road as markets rebalance. it's going to happen slowly, but

it will happen over time. a couple years down the road, as prices start to move to the $75 range, if it is starting to look like prices are going beyond , and i could happen with all the price cuts we are seeing outside north america, then i more the saudi's play a active role. they will spend money to increase capacity. they don't want to see us go back to a $100 world. it didn't work out too well the first time. alix: why not? how much money do they have to pay -- make to pay for stuff? over $200. they need really high oil to run their country. >> with interesting is in the last three months or so, you has seen a fairly steady stream of stories starting to come out of in contrast to the

first half of the year where they are making budget cuts. they seem to be getting serious about it. i think the $103 that the saudi's need on paper is not -- that is based on if they keep budgets as is. i don't think they are standing pat with that. i think they will be trimming. i don't think they will trim to balance at the $50 crude price, but $75 may be where we are headed. alix: what is the key to why saudi arabia would not want $100 oil? >> we got too much supply and .oo little demand they were pretty much paying for and almost subsidizing all of their competitors, the u.s., deepwater, the canadian oil sands, and the rest of it. the big question is iran,

how much they can produce, when they will come online, the quality of oil. when you look at their production over the last 10 years, they have a lot of room to make up. what do you think? we see is that they get sanctions relief in the second quarter. that's an estimate. could be earlier. could be later. once they get sanctions relief, eachstart to ramp up quarter for four quarters. in other words, they take back 28 of the one million barrels a day. if you take a look at the market in general and what you would need to incentivize producers to meet demand, what about the financial slows? there are so many short positions right now. wherein -- went we see the short

covering rally? get u.s.we need to lift off out of the way first. it's a good question and hard to answer. clearly, it does represent some upside risk. that brings me to the other part of the market that is questionable right now. come inside the bloomberg terminal. prices currently are much the future.than in this has been the story in the market for years. what changes this? what are the lessons of contango? see big inventory drawdowns globally and, more specifically, within the oecd. that is the part we can actually ofsure, because for a lot the world, we don't have stats. basically, the way it has worked

52 years is when inventories drawdown, the contango gets shallower and shallower, and at some point, we .ctually flip it's hard to see that happening anytime soon. it might get a bit more shallow modestly. we see more balance than. alix: so, you basically need demand. is the market more supply driven or demand driven? alix: right now, i think it is more supply driven. a couple of days ago, the market was still hanging on. the data last month was a little disappointing. u.s. production dropped in september versus august, but not by much.

the market is still trying to figure out what that means. that is what is moving the fastest. the first half of next year, we have it at $50, then moving up to 55 dollars, $60, and we have it for dollars under. a moreo there is constructive, more positive view on the market then you would've had even six months ago is what it feels like. >> today in the last few weeks doesn't feel constructive. going forward, i think when we see the stock builds start to ease off, i think the market will take it as a positive sign. alix: you never know what the shortcoming rally will do. such a pleasure. thank you for joining me. mike whitner, head of oil market research. coming up in the next 20 minutes of bloomberg markets, aberdeen

asset management saw shares drop the most in three months as investors pulled out of emerging markets. the ceo tells us whether he sees heading into the new year. last year's global currency rigging scandal continues. seven at ubs traders are facing sanctions, making them the first individuals to be punished. jack lew weighed in on proposed changes to dodd-frank. we will bring you his comments. ♪

alix: time now for the bloomberg business flash. the federal government said construction spending climbed to

the highest level in eight years. renters are seeking new homes. factory activity falling last month for the first time in three years. analysts say the strong dollar and low oil prices are hurting new orders. chicago fed president charles evans admits he is getting nervous about the central banks meeting on december 6 teen. -- december 16. that he woulded prefer to have more confidence than he does today. he added it could be appropriate for the rate to be under 1% at the end of 2016. funded by coca-cola to combat obesity is closing shop after revelations about coke's involvement with the group. they are discontinuing havingons due to

suggested content for the website, and picked its leaders. you can get more business news at bloomberg.com. the markets desk, julie hyman has the latest. julie: i am looking at edison again today. it moves a lot, almost every day. is nota deal that happening. sun edison has been in a contract with another renewable energy company to possibly buy shares of a third company. it has decided not to do so. credit suisse saying today it's a good thing this is not happening. it removes significant overhang for the stock and would have represented massive dilution to the shares. they have been pretty volatile today. up by 9%.ow

in the meantime, one of the affiliates of sun edison is also balancing today -- bouncing today. at least it was at one point. is terraform global. if we could look at tear form power first, it's a little confusing because it has these affiliates. letter to the company, he s made ofacquisition late are only in sun edison's interests and will disadvantage its affiliates, including terraform power. he said the management shuffle that occurred last week creates obvious conflicts with its parent company. sun edison is in the process of buying a solar company. that not in favor of acquisition. we are seeing shares rise on speculation we may see further active involvement from tepper.

is the otherbal affiliate. these two companies were created to buy and hold the assets of sun edison that end up being renewable energy plans. one more thing i want to look at and explain why i talk about this so often. take a look at my bloomberg terminal. names in the top data the russell 1000. sun edison over the past year has been the most volatile and had the highest data, two times as volatile as the underlying index. this is my concern. alix: you have a reason to talk about it all the time. julie: it moves a lot. alix: thanks so much. it has been a tough quarter for one of europe's largest fund managers. they saw almost $19 billion of

outflows as investors pulled their money out of emerging markets. the ceo explained the with -- withdrawals earlier today on bloomberg go. this is a bloomberg exclusive. >> i think it is probably to be expected following the market and the sovereign wealth selling during the quarter. us,as really painful for but probably, with the benefit of hindsight, probably it is to be did. >> let's put it in perspective. you are one of the largest asset managers in terms of allocations. who sawnot the only one this. other managers did as well. >> i think there have been massive outflows in the quarter. i think some of the u.s. fund

managers have in outflows. thirdly, we have. certainly, we have. i think it is an industry issue rather than just an aberdeen issue. >> these are big numbers. you run a big company. are you going to have to downsize? >> i don't think so. we have to wait for emerging markets to come back in fashion. hopefully, they become so cheap sell expensive markets and buy the cheaper ones. certainly, in debt terms, emerging-market debt and local currency is now significantly isaper than development that developing markets government debt. there is huge -- than developing markets and government debt. there is huge disparity there. the end come for the outflows? >> we will know at the end of the quarter. certainly, it feels a bit better at the moment.

i have learned that there are many things in this industry and outflows ends to come at the end of the quarter. cautiousg to be very and wait until the end of january to make an announcement. >> to be clear, you cannot quantify the impact this has had on your overall firm? yes, i mean, it has been tough, clearly. in fact, the profits were up last year from the previous year, but i think next year is going to be the tough year from the first of october until september. that is when we will see the full effect of those redemptions from our funds. it is going to be a tough time for us, no question. that was martin gilbert, ceo of aberdeen asset management. coming up, i handful of ubs traders may be the first to -- a

handful of ubs traders may be the first to face punishments for their role in the asset management scandal. ♪

welcome back. seven ubs traders may be the individuals to face sanctions in the probe of the currency rigging scandal last year. a financial watchdog wants to make sure the individuals know they have something to individue lose from illegal behavior. keri geiger joins me now with the details. what are they going to lose? click it's difficult to you at this point. -- >> it's difficult to say at this point. earlier this year, seven banks lose from illegalpled guilty and paid clo6

billion in fines. we had a big massive wall street settlement. now people are asking about individual prosecutions and regulatory sanctions against traders. this is the first movement we have seen on individuals involved in the foreign exchange rate rigging scandal. this is coming from swiss regulators. this is not like prosecutions for illegal activity. it is like the sec coming in here. alix: so they could not practice? >> we are looking at regulatory sanctions. i think the big question is between swiss, british, and u.s. banks did, who at the such bad behavior or is going to be charged with things for causing banks to pay so much money in fines? that is the big question. allourse, prosecutors in three countries are under

pressure from public interest groups and lawmakers to push these. a little competitive between the three countries working on these. to go first.s somebody wants to arrest somebody. these, basically, wall street scandals were everybody gets in trouble at the same time. alix: so this with me first. then what happens? does everybody one -- so, the swiss move first. then what happens? does everybody try to one up each other? >> like in 2012 and 2013, we did see british traders get charged and convicted in u.s. courts. we also saw british traders get charged and convicted in u.k. courts. it is difficult to tell who is going to do what first. hopefully, with this particular scandal, there will be a little more cooperation. theory, is a, in

really big deal. in essence, they are trying to put forth a deterrent. if you do this, it is not just that your bank pays money. you are actually responsible. what this isactly meant to do. the department of justice put out a memo that told prosecutors if you are going to do big, corporate prosecutions like we saw with libor, we need you to find individuals that are responsible for this activity, and if you don't, you have to give your supervisor, the department of justice, a good reason why. there is so much pressure to say hey, the banks will pay the money and the shareholders will take the brunt of that, but what about everybody at the banks? you and i talked often about all of these things happening at different tasks and different have seen a, but we

huge number of prosecutions on the bank side. unless you see individual prosecutions, you will probably not see that activities stopping. next step? >> i think we have to wait to see what u.s. and british prosecutors do, if they make a move to arrest anybody at this point. that it's like the scandal keeps on giving. it is hard to see and end zone. coming up in the next hour, more from our exclusive interview with treasury secretary jack lew. find out what he had to say about currency practices, dodd-frank, and much more. ♪

>> welcome to bloomberg markets. ♪

david: good afternoon. jack lew says that the dollar will stay the world currency. auto sales are on track after the reported strong november sales and why art stocks keeping pace? and that european commonwealth avoid steve holding on its debt. it is waiting to file for bankruptcy protection. let's go to julie hyman. julie: stocks are coming off the highs of their session a little bit. we're seeing the major averages around half a percent each.