welcome to bloomberg markets. from bloomberg's headquarters in new york, here is what we are watching. we haven't seen oil the slow in him a seven years. credit gets crunched, and other high-yield fund announces plans to liquidate. and a historic climate change deal, we will figure out the winners and losers. half an hour into the trading day. remy has the latest. human for last week we had a pretty volatile week from four from the past five days, decidedly down. alls&p 500, the nasdaq are in negative territory. earlier today was the pre-markets, and open into the positive. if that is any sign we will see

more volatility today. the s&p did fall nearly 4% last week. stocks are heading for the worst since december. i want you to look at the imf function area this is a look at the performance at the s&p 10 sectors. we are seeing an acceleration of declines. seven of we are seeing the 10 sectors in the negative surprising that energy is down 7/10 of 1% because of what is happening in the oil price. >> the biggest story of the day here. what are we seeing in the oil markets? >> basically we did see oil fall below five dollars per barrel. talkingpped positively, about volatility for a hot second, now it is trading down

again. row, butecond day in a off of its lows. the crude is at its lowest level since february 2009. natural gas. down 6% right now. we saw its lowest price since 2002. this is because those weather forecasts keep talking about warmer weather because of el niño happening in the pacific ocean. is up sixr yield basis points. equities push into positive territory. sinces the biggest rise december 3. >> thank you so much. let's check in on the first word news. vonnie quinn has more. vonnie: the kremlin is not commenting on an ejection report saying there is no terrorism in

the crash of a russian airliner. she says is no hint of a terrorist attack but does say the investigation is now done. a branch of islamic state claimed responsibility. down -- planewent went down on october 31. a bus crash in argentina killed 41 police officers. the bus went off of a bridge and plunged 65 feet into a ravine. 19 people were rescued. the -- creditors will counsel 8.5 billion dollars over new interest in exchange for cuba's promise over the next 18 years. 18 nations will try to speed up the pace of a mission in the new climate change deal. the u.s., germany, and japan are among those developing the carbon market.

making it the world's largest. and serena williams is sports illustrated sports person of the year. the tennis superstar is honored on her own by the magazine in 27 years, the first one to ever done that. including the australian open, twoch open, she came within matches of the first grand slam in 27 years. you can get more on these and other breaking stories at the new bloomberg.com. i am vonnie quinn. >> the market is also focused on the med -- on the fed this week. raising benchmark interest rates for the first time in more than a decade. let's bring in carl. good to have you with us. is this all but a done deal?

>> unless there is some spectacular blow up in the market with a geopolitical event, the fed is ready at last for lift off on wednesday afternoon. >> looks like probability of a move is 76%. pretty stable. decay sol see a slight that a rushed toward 100%. that is him uncertainty over what is happening in the markets , geopolitics, terrorism, etc.. >> the -- take me to the conference room and d.c.. will they be getting attention to what the pace rates may be going forward? boards principally about whether to do it? thehis is about post-liftoff pace. the fed has really struggled to get the markets focused on that as opposed to the lift off. collectivereathe a sigh of relief to change the direction of the conversation. they will be careful how they

signal that slower pace going forward. through thevenue is plot, that signals 125 basis points of tightening. they will cut that as much as in half. toaddition they are going have to provide some clarity on where the next hike is going to come. indicate theys think that next is coming at the march meeting. i think it could be later given did oil prices, also the ongoing disruption in the financial market. >> remind us how you or frontier this is -- how new a frontier this is good yes they are exercising caution that there is a lot of concern how this might playoff. >> is not new territory, because --ot of central banks try to they know the fed is successful and don't have to backtrack or add additional can't --

additional quantitative easing. inexpect it will be the case the next three-year timeline. >> we could see this return. failure to launch. how do you sustain rates on paper? what were they due to keep that happening? anthey would be moving as excruciatingly slow pace. janet yellen has told us time and time again the best insurance to having to cut into the future is keeping rates lower for longer. the new york fed has sent the same thing, talking about letting the economy run hot. some real inflation pressures, which i don't think we will see in the near to medium term, the fed moves at this slow pace. the economy continuing to expand. that should hopefully mean the fed can avoid backtracking. the fed is going to be closely attuned to the dollar, the strong dollar is

clobbering exporters. that is all reason to be moving slowly. economist -- >> our chief economist. trader of $35 per barrel for the first time since the financial crisis. pledging to boost speculations. opec members will exacerbate the global supply. joins us intelligence now, we saw this low. >> this is a function of elevated inventories across the petroleum value chain. if you take a look at crude over the u.s., 33% above the five-year average. that is an and norm us amount of stuff in stores we have to get through. also above average. without this oversupply

this demand coming on through. you have these wider imbalances globally and in the u.s.. >> a focus has not been announced on the u.s.. how does this shakeout? do we see slowdowns across the country? >> we have production will above $9.1 billion barrels per day. cut, over aa 50% 60% cut in prices and an extraordinary amount of capital removed the industry year over year. this resiliency of supply is something we have spoken about into late 2015. 2016 the tables may turn as hedging becomes more of an issue. liquidity is there. see the the company same cost concessions, these unit costs they saw in 2015 at 2016. >> let me ask you about iran. iran is saying these new sanctions plan to flood the

market with a lot more oil. is that all but guaranteed? -- itremains could -- in remains to be seen how quickly they can bring storage back into the marketplace. -- atthey are producing their height it was roughly 3.8, 3.9 million barrels per day. they are a very strong producer and they can bring into the markets a lot of out put. maybe in 2016 you see half $1 million barrel per day increase. that capacity will weigh on the market, it will govern the price response of the marketplace. >> what have we been seeing in natural gas as well. m a similar dynamics regionally. you have a flood of out put from the basin. you have the shale plays producing an enormous amount of natural gas. the base of roughly 75, 76 per day. will likely continue

because of the economic advantage they have relative to other plays in the united states. >> we appreciate it. energy analyst here bloomberg intelligence. coming up on the next half-hour, domino effect for junk-bond ands, re-freezing reduction using capital partners, liquidating its entire portfolio. we sit down with bloomberg -- he sits down with bloomberg exclusively. iss climate change policy back on the table, but a big question is how will the nations enforced this new agreement. the stories and more coming up.

marketsad back to our

desk where we check on some company movers. >> i'm looking at analyst calls in the retail as well as the tech space. gopro shares are plunging. 12.5%.own by morgan stanley cutting its price target by nearly in half. analyst expecting high inventory next year, as well as a slower opportunity. shares are down 69%. mattel are going the opposite way. mattel is a 3%. graded its rating to outperform and raised its price target to eight talks. this could be over sales for the new barbie dream house. the 12 month target price is $33 per share.

coaches trading higher today. raising its call to overweight by neutral by first pointing to the signs of near-term improvement thanks to new products, as well as a better allen's of price point. -- better balance of price point. this a stock is down 19% year to date going into today. walmart also on the move. also up by half a percent. named it the top low oil and gas price idea. it's -- thathat lower income consumers will stand to benefit from the lower gas prices we talk about there. and it is a fleet of transport vehicles that come up to about 6650 trucks.

you have to think about it, it is pretty much a no-brainer. the selloff in the high yield that market shows no sign of letting up. it comes days after he announced a credit mutual fund overhaul redemptions. capital partners have liquidated its entire portfolio you joining me now is christine harper to talk about this. christine: it is a good question. it is a fund that has sold all of its assets. they were a hedge fund. they were basically set up in 2009 to trade in the high yield .nd these credit indexes those markets have been a lot quieter than in 2009. in part because it was a one-way trade for a long time.

they were down a little bit. the reason they are closing is because they had one big redemption request in october, and they realized it wasn't going to work for them, so they decided to return all their money to investors. they can't return all their money to investors. gates to tellese investors to basically hang on. if we are not going to do a fire you, we are going to get your money, but it is going to take time. third avenue are trying to find out if they can. >> before i ask you that, we have a bit of tape akin august addressing some of the concerns about the sector market. >> it is a change evolving in the market every day, and people

are learning how to adjust. there will be a lot of winners and a lot of losers. the most important point is the opportunity it is creating, because this location and prices are exacerbated by what is going on. >> alluding to difficulty in the space. happenedirroring what a few years ago. >> that is one of the big questions everybody has. funds that got a bit risky. or is it something that is going to ripple out in parts of the southern economy or other parts of the financial sector? no signs that was happening, but people remember back in 2007 a few funds have problems and a few banks have problems. are working very hard to try

to figure out what happens next. the character of the high yield stress investor is like david bars. whenever they see prices they want to take that risk. be successful and make you money. the problem is when nobody wants what you got and you want out, that is not a good place to be. >> you were talking about how things have changed in terms of regulation. there's a lot of risk associated with this sector. >> it has grown enormously. it is a lot bigger than it used to be. the fed is pushing down interest rates on everything that was deemed as a safe investment. for ways they can get more return on their investments. thinking this will be ok. always looking for an opportunity to move on their returns.

it really does tend to turn like what we saw on 2008. it becomes very illiquid. regulation has reduced the willingness of the banks to go in and take chances. in some ways that was by design. they don't want to have the taxpayer pale -- taxpayer bail them out. we will see if the banks take them to the risks themselves. , on the road of recovery and an exclusive interview with the royal bank of scotland.

time now for the bloomberg business flash, taking a look of the biggest business stories in the news right now. takeover offer probably won't be better than the one that is on the table. this comes from the china resource in my conductor. last month oh m agreed to by fairchild for $2.4 billion. john corporation has agreed to be bought for $15.4 billion in cash. such as k2brands skis and yankee candle. you can get more business news of bloomberg.com. the height of the financial crisis, the royal bank of scotland is still on the road to recovery. he has limited thousands of jobs and shedding assets. bloomberg spoke to him about the banks commercial loan book. >> our exposure is a lot lower today than it was seven years ago.

that will be address the next couple of years. that could be an issue in the stress test taken at the end of this year. i would be a bit more comfortable if i could have less exposure. parts ofe been selling their book and there have been strong buying positions. think we will be in a very strong position, especially from the commercial real estate. it has been a mess of change in this organization. >> everybody passes the stress test. there was a line in there for you have done some actions with citizens and capital. short in some parts of the assessment.

can we identify? can we identify where you were short? >> we still have some large areas of litigation. the big one sold off in 2015 and 2016. we dealt with the foreign exchange issues. we have the security issue in the u.s.. we don't know how big it is, but we six -- but we suspect it will be a big one. is overind of numbers $30 billion mortgages that were sold. is that what we have to prepare for? we have to prepare for the worse case scenario, which could be $13 billion. >> the next part of the issue is how big is that number? the analysts got through a big

number. our own internal work and say what could be the worst case situation? i want an incredibly strong bank here. i never want to see the obvious go through what it went through on behalf of customers and behalf of their shareholders. one of my hallmarks has been billed capital. you have a very strong capital base. been --what we have they contact the litigation. we will see those items through and finished. . .

live from bloomberg's headquarters in midtown manhattan, you are watching "bloomberg markets."

vonnie quinn has more from our news desk. ie: u.s. officials have insisted that there are no credible threats, but the san bernardino shootings have risen concerns. tosident obama will travel the pentagon. ted cruz is leaving and i walked 41 days before the caucuses there. in iowa 41 days before the caucuses there. among democrats, hillary clinton nine-point lead over bernie sanders in iowa. and chris christie will be back debate tomorrow. based onthe decision polls.

closing arguments today in the freddie gray case. former police officer william porter is charged with manslaughter and other counts. held threebeing years to the jason is the new town massacre. this is the first time the anniversary has fallen on a school day. -- vigils are being held three years to the day after the new masker.newtown you can get more on these and other stories hours a day at the new bloomberg.com. david: thanks so much. it is time for a bloomberg quick take. i'm alix steel, here with the bloomberg quick take to keep you informed. today's topic is the climate change pact. it is the biggest step yet to stop climate change, agreeing to an ambitious deal.

here's the situation. a hugel calls for investment in reducing the output of greenhouse gases damaging the earth pro atmosphere. this year is on track to be the hottest on record and rapid industrialization means the world is unlikely to meet the goal of limiting the temperature rise to two degrees celsius. the first such agreement since the kyoto protocol. the last such push for a deal in copenhagen was back in 2009, and that ended with legally-binding targets. the private sector has been making strides to reduce greenhouse gas omissions. homeowners are taking advantage of energy-efficient technologies and the cost of her new mobile

energy has fallen. rising consumer awareness and pressure has provided momentum for the global deal. the next challenge will be spending. according to the international -- international energy agency, it will require trillions of dollars on spending . but after this historic deal in paris, policymakers must decide who will pay for the portion to cleaner energy and how to quickly replace fossil fuels with renewable technologies. that's today's bloomberg quick take. .or more, visit bloomberg.com david? to flag a note from the white house where president obama expressed appreciation for china's role in finalizing the deal. that after a call with chinese president xi jinping last night.

the world bank president says place fors a great investment. >> we have two main deals in geothermal energy, around hydroelectric hour. i think there will be a lot of economic, investment opportunities for the private sector. david: let me bring in matthew chiefll, bloomberg's business correspondent. good to talk to you. many leaders were making a pledge beforehand. how involved were they in the summit? they wereguest: certainly present. this was an incredible outpouring for some kind of deal. the joke was the climate summit ds the new. posts -- the new avos.

world leaders are the decision-makers in the end, but it certainly gave them a tailwind having big chief executives from big companies saying that they want to see change. you say big chief executives from big companies. walk us through who are the winners and the losers of this. fossil fuels are not going away. oil andll be lots of gas used in the world in the next 40, 50 years. but we will see a gradual and not so gradual shift from capital. if you're in the coal industry, you are an enormous loser. if you are making solar panels, things are definitely looking up. david: a lot of activists say that this deal did not go far

enough. but so much is inchoate. you look at businesses, how far out have they drafted plans and how will they react to the plan we saw unveiled this weekend? far out indeed, david and you have seen big companies, big american companies be quite proactive, kellogg, monsanto, all of the big oil majors were in paris making the right noises at least to one thing that has helped them and this was alluded to in the previous segment, there have been incredible advances around wind, efficiency, smart grids, electric cars. makes it much easier to put your money where your mouth is, if you like on these pledges, because they do not cost much and they may save for making money. at david: -- david: is that the difference you see between this conference

that just wrapped up in the one in copenhagen a few years back? matthew: i think there were a lot of differences. everyone was praising the fairly energetic diplomacy by the french to bring everyone from the table, which apparently was somewhat lacking from denmark when they hosted the conference. but, yes, these technological thences from scientists in private and public sector have made these innovations much more economically viable than they once were. they take away a lot of pain. they take away a lot of excuses. i think that was a huge difference from what we saw in copenhagen. david: last question -- we talked about the role that the u.s. had bringing china to the table. talk about the diplomacy , otherken by the u.s. countries to bring corporations to the table. matthew: there have been

enormous efforts in a number of countries. we saw in france a big push to bring french companies along with these policy commitments. in the u.s., definitely, i think the white house in particular was very proactive reaching out. we saw from president obama the so-called clean power plant that a number of big corporations signed up to. i think that's very interesting of what we see in congress and the u.s., congressional republicans doubting the science, which is very remarkable in this day and age. it's interesting to see large inpanies, many of them based red or purple state saying that they will ignore this debate in congress. that certainly gave president obama a lot more confidence. david: coming up on "bloomberg qualcomm seeing its

worst decline since the financial crisis. harrison opens up about his pursuit of norfolk southern. he says he will not pay more than $100 a share in a bloomberg interview. ♪

david: welcome back. this is "bloomberg markets." the supreme court says directv can avoid a class action lawsuit in california over early termination fees and go to private arbitration hearings instead. the price of gas is expected to soon drop low two dollars. aaa says the average rice for a dollarsationwide is two

two cents. cheaps have not been this -- guess is not been this cheap start of the recession. a man seen with police after he disappeared. his country says he is assisting in a corruption investigation. you can always get more business news on bloomberg.com. investors are focusing on the for the sentiment fourth quarter in china. we have this from hong kong. business outlook for the next three months worsened. among a large manufacturers, the figure came in at 12, while non-manufactures stood at 25. but thet estimates, business outlook worsened. in china, we have seen , clearing thewth

way for the federal reserve to hike rates. industrial output saw the greatest of this year. shery ahn, hong kong. david: mark barton is looking at the drill down in energy today, mark? certainly am, david. you said it. mining energy companies leaving the the client. look at this though, david. old mutual, an insurer based in south africa until about 15 years ago, moved its headquarters to london. last week its shares were hammered. the rand plunged. you know what happened to the rant today. its biggest gain in years. look at the pound -- falling

against the dollar and falling against all major 16 of its peers after the deputy governor of the bank of england said she would proceed with caution when considering voting for a rate hike. she said wage pressures are not at strong enough to justify wage increase. but there was a small caveat, david. misjudgedarkets have the delay until the first move comes. markets indicating the first type will happen after january 2017. that's probably too dovish. economists are going for the third quarter of 20 16. i'll see you in about 40 minutes. david: filling in for betty, i immediately thought about attila the charts. i have enthusiasm to win. abigail doolittle is at the nasdaq. she is looking at apple. abigail? apple under pressure.

morgan stanley saying that iphone sales will drop in 2016 for the first time ever. jpmorgan has an interesting set saying the, and apple supply chain shows signs of early weakness, and the fiscal second quarter consensus estimate seems unrealistic. it has been a very volatile year for apple with the stock trading wings, but amazingly the stock is flat on the year, doing nothing for investors. one thing we know that apple is bringing today though is weakness to the nasdaq composite. friday, we talked about the technical advantages of the nasdaq composite. this is thought to be a bearish signal. the last time it closed below that level was right ahead of last monday.

we could see significant volatility ahead. you very much, abigail doolittle, joining us from the nasdaq downtown. qualcomm is said to be suffering the chip business from the technology licensing unit. is a split really what they need? alex sherman joins me now. our sources are indicating it's probably not all that likely. the board has not made a decision, so we do not know for find out but we will this week. this is the climax of a search that has gone on for months, really since this summer, after qualcomm had an activist investor come in and suggest, hey, look, we want you to do this review and figure out if splitting your this is make sense. qualcomm has an interesting business -- basically a licensing business that generates royalties from chips

used in smartphones primarily at this stage, and other parts of the phone, too. globalm has a large combination on a lot of different licensing technologies for smartphones, and then they chipmaking business. neither business has been doing particularly well. the market is not valuing this company as high as it used to, in part because of regulatory concerns. basically, they say the licensing is to dominant. you are charging too much. they came to an agreement with china that mollified one concern. some investors think if you split these up, the regulatory overhang will come off and you will have better performing businesses. these twore are

discrete components. in actual fact, how difficult would this be? would be difficult and it may not be best for qualcomm. the way things currently work, the licensing business, where the majority of the profits come from, more or less subsidizes the manufacturing business. to bring in money from the licensing business, you then use more chips and then in theory it works in this virtuous cycle and for decades that is what qualcomm has done. but if you look at shares, they are down 65% or so. there has been a lot of confusion. i think the market thinks in the company will not split the business and that is not helping shares. in the long-term the company probably feels this is the best way, so they -- but they have to do something.

david: it seems like this is the latest of a string of clarion calls for companies to split now. this is very en vogue. alex: you are right. it is very en vogue for an activist to jump into a technology stocks and say, split the company. we saw that with ebay, yahoo! in that is different these businesses clearly work with each other. even a, i guess you could say ebay and paypal worked with each other, too. always leave a came to the conclusion that those businesses were better off split. idea.ot a ridiculous the fair though is both businesses perform worse long-term if you split them, and i think qualcomm probably will go down the road of saying, maybe we should get bigger through a merger or acquisition

and that may be what we see in 2016. an important programming note -- bloomberg will begin its special coverage at 1:00 eastern and have extensive coverage with special guests on fed day, this wednesday, on bloomberg television and bloomberg radio. ♪

david: welcome back to bloomberg television. i'm david gura.

norfolk southern has rejected its latest takeover offer. erik schatzker sat down with the canadian pacific co -- ceo before the latest objection. sit down would love to with norfolk southern. at this point, they refused to sit down and talk to us. i think the next 10 days will bring a lot of action. : how so? -- erik talk: now it is time to turkey. they will have to talk to us or we will have to take a taxi. if they refuse to engage in the conversation you want to have, if the ceo does not talk to you, what does that mean for your tactic? their: they have done polling, we have done our polling. i think they are a of a view

that if they're going to wait us out, we will wait a long time. can we find tune offer? there is wiggle room or it but then we have to go to the shareholder, leave them out of the process, and see what the shareholder says. very you raise two important points. let's deal with them one by one. hunter: sure. erik: there's not a lot of room. how much is there? hunter: it's very limited. weare very close to where think -- look, we are not in love with this deal. we cannot lose sight of who we are representing here, and that is cp shareholders. we are not going to dilute their positions. erik: because you are already giving nor fiction -- norfolk southern shareholders 77% of the company. a point were will be

are quickly approaching where we will say that is all there is. if they do not want to accept the offer, then they have got the alternatives. already 47%you are on the equity side, with the exchange ratio proposed thus far, does that mean any improvement in the offer would have to be in cash? hunter: that is what you hear from the market. there are mixed messages always. they want it both ways. they want cash to redeem if they tod to, so it is hard to get the real facts. but i think that we are to a they want cash for the shareholder, but if you listen, they will say cash does not matter, the price does not matter. it's to me seems a little awkward -- erik: when you listen to norfolk southern? hunter: when you see the ceo

save price does not matter, i'm trying to think what does. -- save price does not matter, i'm trying to think what does. it's hard to interpret what their remarks are. david: that was erik schatzker with hunter harrison at harrison frill worst farm in west palm e farm-- harrison's hors in west palm beach, talking turkey. brent at 6.33. i will be talking to the head of global commodities at citigroup at 2:30 p.m. eastern right here on bloomberg television. ♪

it is 11 a.m. in new york and midnight and hong kong. welcome to "bloomberg markets."

from bloomberg's headquarters in new york, good morning. i'm david gura. countdown to the fed meeting -- waiting to see if the fed raises interest rates were the first time in almost a decade. it is donald trump versus the super pac's, and he is winning by a landslide. its secondfrica has finance minister in less than a week and the brand sores. 90 days into the trading day, so let's go to the market desk where ramy inocencio has the latest. accelerating losses, off session lows for the past half hour or so. the s&p 500 is down by a quarter of a percent. the nasdaq is down by 4/10 of a percent. volatility is the name of the

game. in pre-markets we saw a positive pop go negative. stocks are headed to the worst december since 2002. we did and four of five days .own, the s&p following 4% let's dive into the bloomberg terminal. i want you to look at the imap function and the performance of 10 sectors. we see seven of the 10 sectors down, energy paring losses from earlier, materials down the doubt -- dellre, upontu don't -- dow and down. we fell below the $35 a barrel mark on oil this morning.

we are now in positive territory. up half a percent. crude -- still at its lowest level since february 2009. brit crude at its lowest level since back in 2008. natural gas is something we have to talk about. that is near session lows, lower for a fourth day in a row. 5.5%.early we saw the slowest intraday price since 2002. the reason, of course, that warmer winter weather we are seeing, even today. 60 degrees in new york. all of that from el niño. of course, natural gas is up, definitely feeling those effects. kinder morgan, the u.s.'s biggest pipeline owner down, your to date 5%, southwestern energy down five and two thirds percent.

david, interestingly oil is up, but we will see if we can hold on to that. ramy inocencio at the markets desk courtney donohoe has more from our news desk. courtney? president obama will give an update today on what the u.s. is doing to fight islamic state. u.s. officials have insisted there are no specific credible threats to the country, but the san bernardino shootings have raised concerns about a potential attack. at obama will hold a meeting the pentagon and traveled to the national counterterrorism center on thursday. in baltimore, jurors will hear closing arguments in the freddie gray manslaughter case. a police officer has been jerked with his death. police say the officer denied him medical care in the police wagon. officer's attorney says he did not know that freddie gray was injured. ad cruz has jumped to

10-point lead in iowa. according to the bloomberg politics-des moines register poll, ted cruz leads donald trump, 31% to 21%. ben carson is in third with 13%. meanwhile, the poll shows that hillary clinton has solidified her lead over bernie sanders in iowa. -- the democrat 9%.s bernie sanders by a previous poll measured the toact if joe biden decided run. and another poll shows that two thirds of the voters in new york state see fantasy sports as a legal camp lane. that draftrt ordered down and sandal be shut in new york.

our first wordat news. you can get a look at these and other stories 20 hours a day at the new bloomberg.com. i'm courtney donohoe. david? david: the market has grown hypersensitive in the days leading up to the fed decision. avenue management froze redemptions. here to break these down, lisa and our guest. thank you for being here. what set the stage for we're looking forward to wednesday. i assume you are of the camp thinking this is going to happen on wednesday. what you thinking? it is bigger than the initial height, which is fully discounted in the market. to a -- everyone points 25-basis point hike. nobody knows what it will look like, including janet.

i think she will say it will be data dependent, because the fed has been pretty inaccurate, like most economists on the outlook for inflation and that will be a big determiner of what the path is going to be. that is one of the headmans. but you mentioned that there are a number of headwinds. we had the junk bonds implosion which started in june and is accelerating on the downside as we speak. slide in crude oil, which has crashed and continues to be driven by excessive supply of oil. we have china's deceleration. monetaryivergent policy. we have the fed removing the served as ahich has

floor on the market. lisa: it's not like they can put the punch bowl back at this point. let's say the fed does not hike. let's say the surprising market and say, we are keeping it at putat it's not like they the punch bowl back and everything goes back to the party. it's over. you can look of the bear markets. people are clearly where the credit conditions, the credit cycle has turned, credit conditions are deteriorating and this has nothing to do with the fed rate hike -- martin: you're absolutely right. and credit conditions are tightening. high-yield spreads are at pre-recession tight levels. and it has been driven, as you know, by energy and other materials and commodities aunging that accounted for big portion of the high-yield market, but it has spread beyond that and we know the manufacturing sector of the economy is in a recession and that is a big piece of the high-yield market.

david: you are laying out a number of these headwinds. you were showing me something on the terminal. i will give everyone a look. people mention the word contagion, a scary word. where do you see things failing? lisa: you are looking at the daily and weekly flows into and etf's, is about $860 million withdrawn from jfk, state street's etf in the last week, the biggest high-yield etf unlike black rock -- all of that from friday alone, right? this is a leading indicator. are an found that etf's indicator of investment sentiment. as much as they were initially thought of as retail investment, they are usually for a sophisticated investor who is looking at an etf.

pretty sophisticated view of market high-yield and it is negative. who is going to come in before it gets down to $.50 on the dollar? is going to come in? debtave the big distressed specialists, but no incentive to come here now. if oil prices do not rebound, if the commodities continue, if growth does not meaningfully put makehat is the caveat to these companies come back for high-yield, and all of those investors who have come it already to get higher yields in the wake of easy money policies, they do not have to suspend, right? they don't have the money anymore because they may be

seeing losses that give them the feeling of feeling poor on paper. the not going to put their money back in. this is what people are looking at train to figure out what is the next shoe to drop. martin: i fully agree, and i would extend that to illiquidity in high-yield debt and the dislocation with mutual funds that barely have redemptions to the need for liquidity. you've got to run on your mutual fund, such as they had at the funds that closed down. who do you sell. then you can't redeem. let me ask you before i let you go -- facing all of these headwinds, what are you telling us? martin: number one and we have been saying this for the last few months, this rally after the a 20% 24 selloff, we had

selloff in the market in a rebound that took us close to the same time, credit conditions were deteriorating in all of the areas we discussed. we have counseled our investors to because it's and focus on the preservation of capital. as a hedge fund we are running a very low net exposure. we have hedge strategies. we are keeping dry powder and telling clients to take dry powder to take advantage of bond sellers that will provide great opportunities in the devalued situation. in the equity market, there are a number selling off indiscriminately because current numbers are so high, everything is selling off -- good, bad, indifferent. that is where selectivity and concentration of , bigconviction companies

share buybacks, transformative acquisitions, that is where opportunities arise. anything you want to add? lisa: it's not a lehman brothers moment. i do not want to sound histrionic. this is not bear stearns. it certainly bearish for the near term. you, lisank abramowicz. the gaslight column. and just a reminder -- bloomberg will begin its special coverage at 1:00 eastern on bloomberg television a bloomberg radio, including red chair's janet yellen -- said chair janet yellen's conference. coming up, republicans and the super pac money machines. and an interview with the ceo of the royal bank of scotland. he says the investment bank will return to profit within seven years. financeshould run the

ministry of south africa? we take you to south africa for an update. ♪

david: good morning. welcome back to "bloomberg markets." let's go to the markets desk with ramy inocencio. apple one of the biggest laggards of the day. ramy: yeah, you can see shares down just over 2%, off session lows -- obsession high-spirited shares fell to the lowest level in two months, down 6% in december and we are only halfway through and on pace for its six monthly loss in the past seven. j.p. morgan analyst marcy chang

sees weakness in the production supply chain. morgan stanley predicts that sales will have the first-ever decline, which will be really interesting. that drop could be as much as five .7%. barclays being more bearish on apple, cutting their price target to $150, down by five bucks. facing headwinds as well. today we will look at semiconductors. look at this. sky works was down earlier only 4%. it is accelerating losses down 5%, 3%, down nearly 4% now. it and seagate already cut by half this year, down by 48%, and switching gears slightly in the taxpayer -- micron also making

tech news. it is down by 3.2%. it had been down by 2%. accelerating losses here. to buy after a bid -- awhen he is chipmaker a chipmaker. -- taiwanese chipmaker. notd: donald trump will like these numbers. ted cruz is taken a double-digit lead in iowa for the first februaryn caucus, 21%., leaving 31% to ben carson is in third with 13%. let me ask you -- polls change. the nature of bowling is a changes and we still have upwards of a month. why is this one so important? will see if this is

a turning point, but this one is important for cheetah reasons. for two reasons. ben carson past donald trump in iowa. then he dropped and trump is back in the lead. this is different. ted cruz beats donald trump not caresn the issues like he about you, he is the temperament to be present, but he be trumped and categories we did not expect -- will deal better with congress, has more experience, still has the values, but would be a better commander-in-chief area these are the harder issues voters are now looking to cruz and saying that he might be better than trump. the second reason is that there is a huge jump for cruz, 21 points in a month and a half or so. what we are seeing is when you second choices, donald

supporters, a lot of them would go to ted cruz. if you asked the same question about ted cruz supporters, not as many go to trump your if they are split between trump and carson at other people. these solidification of ted cruz is a front runner seems to be more solid than we have seen in the past. david: what can you generalize about those who backed donald teddyand those who back cruz? if you could do a venn diagram, where is the overlap or is there much? steve: a used to be easier. you used to see trump supporters were less educated, more working class. those are gone in this poll for the most part. z are pretty even on the way they divide up the people they are attracting. donald trump proudly, unabashedly runs his campaign

out of his own pocket. he does not have the super pac. have super pac's begun to play in this race? forink of what they have jeb bush, but that does not seem to be deploying. steve: they were deploying, but it is not working. there was a narrative going into this race that super pac's were unofficial extensions of the mainigns, where the operatives that they could drive the conversation from the outside. it just has not been happening. jeb bush is the perfect example. they have spent so much money. up.numbers have not gone they have gone down. there are super pac -- my colleague mike binder has a piece of out about this today -- they are the fumble -- they are befuddled. they don't know how to spend this money.

they feel like getting in the race, they may not move the needle much, but they will hang on and deploy at the end when everyone is ready to make up their mind. david: republicans have a debate tomorrow night. you are headed there. talk about democrats. when you look at hillary, bernie sanders, martin o'malley -- how close is that race? we have a new bloomberg politics poll out on this as well. we saw clinton at nine point ritchie has extended her lead in iowa. for a while, we have been seeing signs that bernie sanders is focused on new hampshire. he is doing a little bit better there. in iowa, clinton has retained the lead. she is not out of the water yet. there are signs she is still vulnerable. if not iowa, around the country. bernie sanders these are in issues like cares about you, fights for the middle class.

they think he would be better at reining in wall street, and honor and trustworthy is a number clinton struggles with. besides cares about you, thinking about how that person might govern, interact with congress -- maybe we are getting closer to framing this in a different way? steve: -- steve: voters make up their minds, especially in these early states, very late in the process. case thatalways the iowans, new hampshire writes in particular decide in the last week, the last month. a month before these folks get to vote. we could see movement before then. david: steve, thanks a lot. still ahead -- the old capital, build capital. of ross.he mantra

a big story in the european close. ♪

from: we are moments away the european close. bloomberg's mark barton will join me. mark joins me live a look at what is on tap. mark question mark -- mark? mark: david, minutes to go. the stoxx 600, biggest drop in a over twoe lowest in governments. we will talk to the rbs chief executive, ross mcewan. he says the investment bank will return to profit in four years. he says the hard work of reorganizing is almost done. my colleague has done a great interview. do not miss that. david, what a few days it has been in south africa with the after the south african president sacked his

finance minister. he basically nominated a guy no one had heard of. he sacked him now. fromt a guy that was there 2009. an astonishing move. and the battle of the charts, david. you know the responsibility is resting on your shoulders, because i gather they brought out a heavyweight --mike mckee. david: yes, they have. i have never had that much responsibility having to pick between him and you. mark: the closes next. stay with us. ♪

david: welcome back. markets are finishing the day. let's bring in mark barton as we wrap up trading in the next 30 minutes. mark: energy and mining

companies fall ahead of this week's reform meeting. the european close starts right now. ♪ david: we will take you to johannesburg in the next half hour. kick us off. mark: pre-fed jitters? were rising for the first 3.5 hours and then oil companies started falling and resource companies started climbing as well. , we had mining stocks sinking in the biggest fall since july. falling for the fifth consecutive day. since we hit a three month high on november, the stoxx 600 has fallen by 8%. throw into the mix the news about