world, green around the world. china's economy taps the brakes. new data is weaker than speculated. good morning. ♪ brendan: welcome, i am brendan greeley. david and stephanie are on assignment. >> and i am cory johnson. matt miller has the latest. matt: bank of america and morgan stanley are out with their estimates. the $.32 estimate. morgan stanley beat on that

level. 7.7, $4 billion worth of revenue. that is a bit better than what we were looking for. bank of america is out with $.28. that is better than the estimate on the street. revenue was a bit off. billion. what else have we got here? we have a ton of earnings. fiscal came out with year 2016 outlook. they are down 10%. we were looking 5%-10%. they are not given a $10 billion market cap company. johnson and johnson came out with a chop cut announcements. 4%-6% job cuts. inwill cost $2.4 billion

pretax charges. so they are coming out with interesting news. shares are up 1%. the want to mention apple. goldman sachs put it on the conviction by list. goldman sachs says the guidance will be weak but the drop in the shares that we have already seen over the last 12 months is going to be enough to have priced in the week guidance. we will see apple grow at 3% this quarter. a drop of 2% next quarter. shares are up 1.73%. around the world we have rallies in stocks. we had them in asia overnight. these guys are going to take into the details. you had earnings up -- excuse me, equities up a cure up today and they continue.

gains they are of 2.2%. 29.97.il is that i am hearing that tilde is out. -- that delta is out. shares are down 1.3%. they came out with adjusted earnings, $1.18 a share. a slight mist there. i will dig through the numbers and give you guys the details as they come across. we also have alison williams here. a senior analysis. let's start with bank of america. the story before the earnings they really that needed to make sure they had all of their systems working, to make sure that they had actually consolidated since 2008.

is that process behind them? made progressave on cost cuts. costs are coming in line, it is difficult to tell with legacy costs and litigation but those have come way down. coming in much better than expected and it is a big focus for bank of america and for u.s. banks in general. they are position to get the most help from higher rate. obviously there is a lot of concern that rates will not rise as much as people thought. and the other thing that has been increasingly important this quarter is credit. to has been a lot of focus on energy, that is where we have seen provisions. but investors are worrying about , can this spread to other areas? >> talking about that, how exposed are they to the energy sector in credit? alison: it is important to keep

in mind that energy is less than 5% of the portfolio across all of the big banks. fargo has the least at less than 2%. they are increasingly putting out how important mortgages are to their portfolio. the interesting thing about the weakness that is provided by energy is that consumers benefit from lower oil prices. so in contrast to other issues, there is the offset. hopefully, we are seeing continued strength in the consumer portfolio. that will be a sign of optimism. i wonder, when you look at these results, they are different entities. is there a common theme? >> the common theme right now is the flatter yield search. it is difficult for financials

of large. this speaks to the interest margin. when you look at the broader portfolio allegations, investors prices in higher anticipation of higher rates. but unfortunately, financials have underperformed ever since they started increasing interest rates because it is difficult to make money in a surplus. cory: there is a lot more to come. >> it looks like morgan stanley is looking for opportunities to exit certain fixed incomes in certain sectors. fromseem to have benefited their decision to reduce the overall footprint with the fact that debt trading revenues are not coming back. do you think that justifies their decision? >> not necessarily.

i think all decisions are different and morgan stanley is more in investment banks than others. what i will say is that fixed income has been a difficult area over the last year. it depends on the exposures. they have had more exposure than they wanted. exposure. down that 16 comes dominating the investment landscape for years. now maybe it is time for equities to shine, knock on wood because that is my area of expertise. the long-term plan for morgan stanley has been to shift towards world market management. >> unfortunately, i don't have the morgan stanley reviews in front of me but i do think that wealth management tends to be more stable. when you look at the full trend,

you have seen that show up, even though last quarter was a tough quarter. you are seeing changes around that but they are relatively more exposed to equities. that is helping the overall bank. and in wealth management, they have targeted 23%-20 5% ratios in their pretax market and business. 23%.were at roughly i'm not sure if that held up this quarter. alison williams, thank you very much. we talked about oil, let's take it deeper. iranian oil has saturated the market. it is playing havoc with the markets. sam potter is in dubai. in the middle east, we suddenly

have this massive new source of oil, what is the reaction? amuel: yes, it has been torrid week for the mideast market. obviously we knew for some time that the iranian sanctions easing was on its way but i guess people like the fact. so after the weekend, we are three days into the trading week in the middle east. on the first day of trading, markets plummeted. it was a bloodbath. some of the biggest drops we have seen since the crisis, almost because the promise of iran is 500 new thousand barrels . , we are in the gcc still oil dependent. other news we have this morning is a download growth estimates for saudi arabia. is that something we will see all over the region? i think it is quite

possible. where saudi arabia goes, the others will follow. we had virtually no impact at all on the stock market, and the index was 3.8% up. so investors are taking this latest news in their stride and . think it was expected saudi's economic growth will be constrained. so all those barrels coming online are probably not good for u.s. traders. has been a strain for the last year-and-a-half. and the longer we delay, the longer we have to look at the oil forecast. and unfortunately, that means the longer workout is. cory: wells are still pumping. see atainly, we didn't

decline in production until last summer. so it feels like we have a long way to go before we can finally right side the oil complex. and i think that is the biggest factor in markets right now. samuel potter. thank you. coming up, china is the world focus. it is capping the weakest quarter of growth since the global recession. ♪

matt: --

vonnie: good morning. trimmed its world growth outlook for the year. down to 3.4%. a stronger dollar has slowed down u.s. growth. the imf report says 2016 will be a year of great challenges. the international agency says the oil but make it worse. oil markets could drown in oversupply. and demand for oil continues to slow. meanwhile, iran has started exporting oil again. naut is recalling vehicles. there filtering system needed adjustments. thank you.

global go, we are focusing on china. it is still growing but at the slowest pace since the recession. the news is boosting prospects for more stimulus and dow futures are up based on that news. with us now,s here give us the big picture. this is a new kind of consumer list growth. enda: good morning. i guess this is something for the rules. bulls. you can point to the pickup and services. that is what they want to do. they want to move away from a reliance on manufacturing to consumption and services. but there are disappointing aspects of today's gdp rate. it is the slowest quarter since the global financial crisis of 2009. theyhe reason is because

have cut interest rate six times, poured money into lending programs and credit programs designed to get the government spending, and the stimulus isn't gaining traction. and of course, there is skepticism. so today, there is a sense of disappointment. cory: nevertheless, the shanghai deposit -- the shanghai composite is up. what sort of stimulus might china carry out? well, this is an interesting question. if you consider the fact that they have cut interest rates to record lows, they have put hundreds of millions of dollars into the economy and have targeted local governments and they haven't got traction, what is next? has ballooned,a

they don't want -- so they start nudging towards what is in the toolbox. and that points to the currency. will the temptation be there to devalue the currency? there is a view that they haven't necessarily validated to the point so far that it will help exports. and we have to out, it isn't just about the exchange rates. it is about demand in markets. but you do wonder, going forward, if they won't be tempted by the toolkit. brendan: enda curran, live in hong kong. coming up, we will bring in louise keely. we also have gina martin adams .nd lisa abramowicz

lisa, i will start with you. out, wemes data comes ask if it is really true. what can we estimate the growth really was? lisa: when they looked at the estimates, it wasn't too much of a surprise. everyone was expecting us to come in under 7%. there is a question about what actual gdp growth may be. it is thus important what the actual number is. is slowing economy down and prospects are different from what they were a few years ago. but nonetheless, china remains second-largest

consumer economy. it is outputting larger than some whole economies. so even with them coming down to 6.9% or something lower, china still remains an important opportunity where companies need to have a strategy going forward. cory: we were just talking to enda curran and we were speculating about credit growth. do you see a stimulus that will work? louise: second-largest consumer economy. it is outputting larger than some the chinese government has lots of tools in its toolbox, just like every other central government. and executive branch of a government. when we look at consumption, there is still not only some of the monetary policy measures that can be taken, like he was talking about, the devaluation, interest rate cuts but there are also fiscal stimulations that can be done. once that can be directed at consumption growth. brendan: that they bring in lisa abramowicz. i thei'm wondering,

chinese sentiment. how much is this an indicator of investor sentiment, especially given the government intervention? louise: i think the rise in the dow futures and the rise in the stock market is of the thought that there will be stimulus in response to the official numbers that have been released. when we think about investor confidence and the overall economy, in particular the consumption growth, it is important to keep in mind that investors in china are pretty different than the consumer base. most consumers don't own equity. a lot of the investors in china are retailer investors. so when we think about investor confidence, and consumer confidence we are looking at two different things. i am standing in front of a bloomberg terminal and i have

graphed the gdp data for china. a sickly bloomberg intelligence has taken the nominal gdp growth and subjected the real gdp growth and what we're seeing is that it has been positive for most of the last 15-16 years because they have had drunk inflation but now we are seeing it below the zero level. his china going to be worried about this? deflationary pressure is present in many economies, including china. in china, it is a reflection in the decline in manufacturing growth and the transition towards services and consumption. so deflationary pressure is and itng to be watching is something that the private sector will be watching as well as the public sector. take the longer

term view that we are moving towards consumption led growth and sumer led growth, deflationary pressures can be a part of that. cory: insightful stuff, indeed. louise keely, thank you. futures rally this morning. we will talk about market strategy straight ahead. ♪

brendan: welcome back. lisa abramowicz and gina martin adams are here with us. gina, i read your note this morning. you see something encouraging coming out of a place where we never expect anything positive to emerge, washington, d.c. gina: our longer-term view is that the bull market is in tech.

but on the longer-term we see positive. this year, government spending is expected to contribute to gdp growth at double the pace of last year. so we are looking at segments of the s&p that has government expenditure which will not be cut even if the economy slows down. of the sales on the s&p 500 but nonetheless we have some in tech or air and space, serious industrials that have a time to government spending. revenue should go higher. cory: government hiring has also been up. gina: yes, it is a source of growth. -- governmentck cuts last but soda spending in the economic cycle. so you want to start to transition your folio.

so you do need to be aware of the political risk. and nothing is going to happen in the next year so that is good news. gina: exactly. the budget has been set over the year. maybe you have short-term stimulus. investors, if you are seeking stability it is a stable source of revenue growth. something to brighten your day. cory: happy joy. >> stability in washington? cory: you are watching "bloomberg ." ♪ the only way to get better is to challenge yourself,

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it is beautiful. >> it is indeed. people are putting on their scarves in capitol hill. >> let's get to the first word news from vonnie quinn. in dead, three americans missing in that dad have been kidnapped by militiamen. lived washere they continued -- was reported by shiite militia. control inserting the middle east this week. -- is making a five day trip to saudi arabia, and iran. he may also show china taking a more hands-on role in the syrian civil war. , thosedad, as we said three contractors have not been found. they were reportedly kidnapped. and searchers still haven't found any sign of 12 marines missing since two helicopters

crashed off the coast of hawaii. they have recovered three life arts -- three life rafts. daymberg news, 24 hours powered by our 2400 journalists. brendan: tom keene is now joining us from zurich. i thought you were reading the train schedule. what else are you reading? tom: i reading a lot of different things. the notes over the weekend were extraordinary in the clarity on oil, the polarity on china. there was a brilliant call from paul donovan. change inothing will 2016. we can all go home. "to paraphrase, markets can remain wrong longer than

investors can remain solvent. the only solution to this tricky to limit that i can see is to employ more economics -- more economists as quickly as possible. " tilt towards a more positive analysis that productivity is a little better than what the gloom would suppose. pointed outalso that the problem is that data is getting more revised and that know that. how can you wait for the revision when you know that everyone else is trading based on the initial print? it isn't always the markets trading but also central banks trading on it. you see mark carney talking today and the reality of central banks bouncing off each other. i really have no idea what we're going to hear in fed speeches in

the next two weeks as we bounce off the market activity in the last two weeks. cory: is adjusted in the note is that those speeches matter more, because it is a group that has differing opinions. tom: that is a beautiful point. a really big difference in all central banks processes from the days of alan greenspan. i remember lawrence myers wonderful quote where he talked greenspan putting them in the timeout chair because he got a little rambunctious. there is a lot more of the rambunctious us today. brendan: we have lisa abramowicz here, is there too much communication? lisa: i don't know. havegot to say, economists

gotten it wrong. they have gotten a lot things wrong. if there are more economists, it isn't clear that they would be getting it right. i have to wonder, is this tongue-in-cheek? take a view and try to be less quick to react? tom: brendan, i would defer to you because you spent a lot of time in europe on this. we talk about the short-term over the long-term where the long-term is a longer view. like apple computer courts, we wonder what the short-term or the medium-term or the long-term analysis on apple is. brendan: that is fair. reason why good managers who are trained in germany can't get mbas over here. it is a different way of thinking. what i'm thinking more of the difference between the economists and the fed right now. they are predictions -- their

predictions have been right in a way that the fed has not. tom: there is no question about that. -- you see that in the imf report. they nudged up. -- e thompson told cory: thank you very much. i want to talk a little bit of oil. tocor is raising the bid $12.4 billion. michael: in his head of research and development. an interesting time in oil right now. michael: look at what is going on in canada. the have western canadian select and crude. all of these prices are far below what we see for wti. $10 or $15 for crude.

the lifting cost, for the upgrade and innovative mining cost it is in the range of $20-$30. cory: so they are losing money on every sale? michael: right. and what you have right now is anddian oilsands limited they have had a lot of operational difficulties over the last two years and what is happening now is that there is a hope they can raise the operational effectiveness and eventually, they could come into a more degraded model. but we have the waiting for a long time for this shakeout to occur. the market has been so volatile and it is the issue of bringing prices down to the slow, it hasn't brought the opportunities. brendan: suncor is in a relatively strong position.

is it possible to describe them as doing well or are they doing less poorly? michael: they are best positioned than most of the canadian larger producers. but the broader issue that is going on right now is that the canadian suppliers are not adjusting to this lower price level. such an expensive process. so labor-intensive. just the cost of stopping and starting again would be so far above what they are willing to do, even if they are in the red. lumpy supply stack. and even though the prices are lower, we aren't seeing the adjustments we need. brendan: i want to better understand the word "oversupply oy." is it possible in the future to control supply again?

eventually, the oversupply dissipates. the oversupply is already building up in inventories. over the last 1.5 years it has 2 millionng up to barrels a day. we see that lessening over the course of the year. is any group of producers going to be able to pull together and have the pricing power that opec used to have? michael: no. it is unlikely that we will see the same kind of cartel we saw 1970's-1990's to come together and say look. in response to this supply shock -- it won't work. lisa: what is the price of oil that is baked into this? michael: we estimate that the

canadian off stand in some corp. was in the range of 50-55. that is crazy. who is predicting that oil prices will raise to $55 a barrel? tohael: what you have understand is that there is a short-term and the medium-term. 2016 will be an ugly here. morning,edicted this there will be a discrepancy between global supply and demand which will get worse before it gets better. but over the course of time between 2000 17-2020, isis will go back up. and the reason is that this is sowing the seeds of demise for non-opec supply. twond continues to increase one million barrels a day. they need to offset the decline.

a higher price, $55 a barrel or even into $70 a barrel by 2020. ,rendan: from the fed, the ecb are central banks losing control over markets? lisa abramowicz think so. we talk about that next. ♪

vonnie: welcome back. cutting the year

forecast after a drop in holiday sales. net earnings will fall about 10%. they are holiday sales fell about 5%. at cuts are on the way johnson & johnson. they will cut up to 6% of the jobs at medical devices, about 3000 people. about $2.4ll be billion pretax but will eventually save up to $1 billion a year. and american investors spent about $300 billion in chinese startups last year. it shows they are a leader in the technology industry. brendan: market expectations are moving out of line with the fed and ecb expectations. yuan is attacking its bearers wherever it can. we are joined by lisa

abramowicz. thething we have seen over last year is that central bankers are pulling on the handle, hoping to get the same result. it just is losing traction and you are seeing that across the world and i find that interesting. investorffecting sentiment. they're looking around, where is the fed push? where is the ecb push? it isn't working anymore. if you look at the 10 year yield, this year, yields have come down. even the two-year yields. despite the threat of a hike. and finally a hike. four the fed said maybe rate hikes this year but the market says, no way. has thea question of said lost control over u.s. markets to control where markets

go? not complete control but certainly some. brendan: it may be that we have returned to a time when central banks are not important. they used to do something in the background. and then they became the only policy makers. we turned to the central banks to do basically everything and in theeurope u.s., actual policy, structural policy and fiscal policy was stuck. so now we're back to the point there is diminishing marginal return on central-bank action. cory: in a world where the fed isn't the driving force, after that, anything is going to be. lisa: if you look in europe, i'm interested that portuguese yields have been climbing. have beengreek debt rising substantially.

-- has the client by more than 6% this year. people are losing faith that the ecb stimulus will continue to push investors into riskier areas. cory: you mentioned 6%. on the bloomberg terminal, in the month of a 0%ry there was probability of a hike fed but now there is an 8% chance. matt: your very own than a white. cory: a 6% probability of a cut? lisa: that has come down, it used to be a percent. brendan: what is fascinating to me is that all central banks continue to predict inflation that doesn't happen. model showed inflation magically

will get back up to the target of 2%, the arbitrary target, it will happen in a year. why? is there will be a return and it will be fine but that is not what we are seeing. i'm sorry, i am tired of hearing that it is oil. when you strip out oil, there isn't core inflation either. some officials have come out recently and said that they don't have a clear understanding of what actually causes inflation and what the dynamics of over inflation or. corey is exasperated. cory: gdp growth and inflation has been consistent. that is a fed prediction. that investorsis cleaned their confidence from central banks for years. he looked to central banks to provide them with a sense that there was a floor under valuations.

things couldn't drop too far. now, it looks like no matter how much money -- in china, no matter how much they liquidate their foreign reserve, and they are liquidating added frantic pace, it isn't working to stem the plight of chinese wealth from that country. it removes the sense that there is a floor and that is what is driving the markets. cory: thank you. we will do this later on the radio, i promise. bake earnings are out this morning. alison williams had a chance today a little bit deeper. what have you found? >> to key positives are wealth management targets are on target for the year. it was lower in the fourth quarter for 20% but that tends to be a seasonally weaker quarter. the other important thing for

organ stanley is the compensation ratio. you may revert that last year at this time they took a charge and said that they would increase the cash payouts of bonuses and they would make some changes that for this year will make it significantly bump up but it will help us in the years to come. so in 2014 pop, the ratio was 52%. acrossso set targets their businesses which resulted in a 46% expected target across the company and they hit that target. and what investors are looking at is cory: good news. news, but not so much for employees. brendan: you mentioned that their compensation ratio was inflated last year on a one-time cents.

i have drafted over the last few years and you can see that is true. they have come down substantially and there was a lip last year in the fourth quarter which is why we see a huge drop now. but the trend still continues to go down to 44%. the changes that morgan stanley made in 2014, we are seeing the industry go back a little bit too policy before crisis. so during the crisis when things were difficult, but a lot of the investment banks did was to increase the amount of deferred compensation, to pay less cash. while that helps in the current earnings, but it does is make the out here's less flexible. so if you have a tougher year next year, you have deferrals from the previous year. in -- which banks want to do is to keep their cost

variable. businesses can be transactional. they want to keep their costs similarly variable. so it morgan stanley they had a of 37%.f 30% -- they came in at 37%. and wealth management and investment management, they were higher so they will be targeting in those businesses. brendan: a word that they will lose about one quarter of their fixed income set up. that was alison williams. oil is up just a little bit. netflix is up next. ♪

brendan: welcome back. netflix is down more than 9% on the year. wealthy streaming service get a chance for investment redemption? fourth quarter results after the bell. i always turn to you to understand netflix. cory: have you seen boss yet? so good. brendan: we are behind in our household. have 43ansion, they million subscribers in the u.s.. how is that going to work? cory: a lot of the growth in netflix is about going outside of the u.s..

subscriber growth has been increasing because they have been adding customers outside of the u.s.. it has been about getting geographically bigger. but now, the tough job of infill comes in. they have gotten to all of the markets they are going to get to. a lot of people walked out of meetings with them saying that they have to get the content to grow. so the subscriber base is big because it has been growing internationally but the question is, where is the growth going to come from moving forward. what will it cost in terms of programming? brendan: exactly. content costs that they have committed to. how does that change as they move abroad? cory: this is one of the interesting things that they are contending with. i mention boss, a great show on amazon prime.

one of the most interesting things to me is the number that we will not learned today. you have to see the commitment and contingency that are off the balance sheet and the timebomb, they only put the minimum amount in their 10k filing or 10-q filing. that is welling over $10 billion going forward. brendan: you know what is always great? listening to cory johnson talk like the short trader he once was. cory: a recovering short seller. lisa abramowicz, thank you for your time. this is "bloomberg ." in real life. ♪

cory: big banks do better than expected in the fourth quarter. . knew it on iranian oil

around the world arising after being pounded for two weeks. ♪ ♪ cory: welcome to the second hour of a bloomberg. brendan: i continued brendan greeley. lee is with us as well. before we dig into oil and china and everything else, let's go to first word news. vonnie: the finance minister calls the euro threat bigger than the greek crisis.

some european governments are hardening their stance a -- against accepting help. in baghdad, the americans missing since the we can reportedly were kidnapped by hostels. in hawaii, searchers have not found any sign of 12 marines missing since two helicopters crashed. they have recovered for the life rafts on board but no indication that anyone had use them. matt: i want to take a look at the bank earnings we saw out this morning. morgan stanley and banc of america. withof america came out

good earnings but the revenue felt slightly short. it had a higher net interest margin than the estimate of two and 16%. as far as morgan stanley, it beat big time, for a sense on revenue. morgan stanley and bank of america both beat on earnings and they are rising now in the premarket. crude oil has come off its gains a little bit. you can see a gain of almost 1%. hovering near a 12 year low. it's a little bit of a rally this morning that has dissipated. in china and the rest of asia, gains overnight. the shanghai composite is up 3.2% after the gdp number came out. it was in line at 6.8%.

the stoxx europe 600 is up 2.1%. it has been beaten down and had a horrible day yesterday. theimap and it shows you what is moving and what we can expect this morning in u.s. trading at energy and i.t. and materials are the big winners. is at the least of the gainers are the defensive sectors. take a look at futures here and we are set up for a positive way after it feels like weeks and

weeks of losses. the s&p futures are up 1% and the dow jones contract is up to hundred 36 points. cory: let's stay with the markets. us and you have a bullish call on the year. we have started off the worst year ever been you can change your mind now why bullish this year? if they years decided on the first couple of weeks, then we are in trouble. cory: then we would have really long vacations. >> that's right, we could close the newspaper and a up and 12 months. i think things overhang the things thathey are reflect a lot of developments over the past year and a half, the strong dollar, week oil and as we get through 2016, a

different story will emerge. i think earnings which have been really hurt by this dollar headwind will start to become .ositive year-over-year brendan: i don't see what's going to stop the dollar. >> the dollar is still strengthening but when you look per share for the s&p 500, it's more dependent on the euro and the pound and the canadian dollar and the yen. the of the five are starting to become flat year-over-year. dollar had it was $10 and this year it could be only one dollar. that is a nine dollars swing on earnings headwinds. we have been talking about bush but polish is to depict 25 by the end of this

year on the s&p 500. >> stocks are up today after the terrible few days we have been having. is this a turning point for sentiment? to say how badd sentiment is, a lot of measures say this is multi standard deviation of negative sentiment. it must be the fourth lowest in history. every other time, we had a rally. people are extraordinarily bearish right now. >> that's right, and if you look it's just as inverted as it was in late 2014 and august when we had the vertical rally. our clients think this is a recession. we know no one is sitting here with big exposure because they think there is a recession. cheapard to distinguish

the recession from earnings recession. if the market turns, that should be a big catalyst. matt: a story we had this drop iscited the recent not that serious. this is that hundred week moving average. the 200 week moving average. we are still 5% above the 200 week moving average. fall if allrther to hell breaks loose, if the world stopped spinning. if it's a perfect storm. >> it's possible. i have seen this chart. it starts in 1996. you can even start it earlier.

times weoth of those went through the 200 week moving average were times when the u.s. was already in recession. you pull up recession shading on that, that's what the differences. if you have slipped into recession, i agree with you that there is -- >> agp recession, not an earnings recession. causedearnings recession by the dollar's no different than if you had a company that had good volumes but then they lose it all on fx. an 8% organic growth last year but it was zero because of dollars in brendan: what could possibly kill this thing of beauty? >> i think the biggest risk is a george soros comment. writes that the turmoil in financial markets leads to credit tightening which in turn

causes the economy to go into recession. what you want to watch is things like the spread and financial conditions. for the most part, that has not been a problem. things are not bad unless you are an energy producer. i don't think financial conditions art tightening in a way that would cause a recession in cory: matt miller is showing as you are right. matt: i pulled up the recession shading. you can see the financial crisis as well. the downturn here started before he actually had a recession. if this part turns red -- out that if you were on a lower panel and showed the 10 year, 30 year spread, it would have inverted. matt: he is challenging my acumen. >> i'm a huge fan of bloomberg.

it would have inverted of 11 months before the reddish shading started. cory: so we cannot have a recession? >> a long-term yield curve is not engineered by financial markets. it's really the markets conclusion about return on capital. if long-term returns are above 10 year return, that means you have not exhausted over capitalizing the industry. the long-term yield curve is steepening. steep and.t has i think we might be worrying about deflation because of oil but that's a misplaced concern. tion is the right way to look at this. >> we have seen pain in high-yield. we have seen financial conditions tightening. doesn't that were you? >> again, they are not close to

2011 levels. 2011 is a benchmark for perfect because we fell almost 20% and had no recession. we are not even seeing that level of stress develop. i am looking at the chicago fed's financial index and there has been an uptick. it's not close to 2000 levels. we not of the chin credit recession. -- we are not approaching credit recession. >> we cannot always be in moving. i think we are stagnant at the moment. i just think we cannot conclude because the market is really bad that this is a turning point. i find many clients have concluded that.

most are just choosing not to decide. they are choosing not to have a view. tom lee is staying with us as well as tracy alloway. a quick look at futures and i'm looking at the generic s&p 500 up a little bit. ♪ breaking down bank of america and the morgan stanley fourth-quarter earnings next. ♪

vonnie: welcome back.

the imf have -- has cut its forecast of saudi arabia because of the slump in oil prices. saudi arabia and growth was revised this year did this left the saudi's with a $98 billion deficit last year. invested $500 has million in cargo service lives and is found a cheaper way to protect itself from uber. they have acquired sidecar. it shut down its operations last month. it had shifted its focus to handling deliveries. cohen planssteven to hire more than 40 traders in london. he cannot manage money for clients until 2017 after in insider trading scandal.

it is a morning for bank earnings. the profit of bank of america jumped nine point 4% on fixed income and revenue clyde -- climbed five point percent. tracy alloway is still with us but we will bring in david hilder on the phone. let's start with morgan stanley that failed to meet its goals for revamping the first income business. how long will it take until thanks figure out what the new fixed income world looks like? >> for morgan stanley, it will take a few quarters. it would be more accurate to say that morgan stanley took a lot of actions in the to try to generate better return on equity in its fixed income businesses. i think we should not forget that morgan stanley's quarterly earnings report this morning is much better than what the

consensus estimate had been. the consensus estimate was $.32 per share and they reported $.43 per share. most of the excess over the estimate was in lower compensation in the institutional securities business. the earnings from the wealth management and retail brokerage business were more or less in line with my estimate. they paid people left in the institutional securities business to generate a better return for shareholders. ceo, james the gorman, will speak on the earnings call this morning and outline a further strategic and to increase morgan stanley's overall return on equity up to 10% from what was a reported 7% 2015, improving expense efficiency, generating more growth and wealth management,

and returning more capital to shareholders to reduce the equity base a little bit. >> speaking of james gorman, can we talk about his strategy of what came through from lower expenses, is there a limit to the cost-cutting he can undertake before he loses the support? >> i think that is a reasonable question. if you look around the street, you will see those kinds of cuts are taking place everywhere very visibly at morgan stanley because they have cut 25% of their headcount devoted to fixed income and commodities. goldman sachs is also cutting about 10% of its headcount in a similar business. i think you are quietly seeing other cuts at other firms at the same time. brendan: let's take a look at bank of america.

institution that has gotten all of its systems fixed and is now one national bank? >> bank of america is in a norm is bank. it has literally a coast to coast franchise. i think it has done most of the systems work and most of the integration work that it needs to do because it such a large enterprise. there will always be other things to do and i think the executives there would acknowledge that. quarter, they the reported $.28 versus a consensus of $.27 but on an operating basis, it's $.33. i think bank of america is showing that it can produce an from that return nationwide franchise and from its various large businesses. in the midste also of a massive technological change. banking andobile

how much of their customer base is moving to mobile as they reengineer their systems to respond to that. i think all of the bank ceos and their i.t. and marketing people have recognized that mobile banking has one of the fastest adoption curves of any new project in a very long time in retail banking. can look at various statistics on the number of mobile customers each large bank has. think anyone is blind to the attractiveness of mobile banking to a large number of customers, especially younger ones. in effect, there is a race and everybody is in it. will see over a number of years who is able to do the best to get their customers mobilized, if you will, and

generate returns from that. i don't think there is any mystery that that is something that is very important to keeping customers connected. earnings from the bank us so far, the season has been pretty good on the topline figures, but credit seen softness in loss. how concerned should we be? if that's your perception, you're not looking at the right numbers. it's better than it's ever been at the wells fargo charge of rate was 30 basis points which is the lowest in the bank's history. wells fargo has more than a $900 billion loan portfolio. it's the biggest in the country. credit quality across the banks is excellent. most of the measures of credit quality continue to improve in the fourth quarter such as charge-off rates or nonperforming asset percentages despite weakness in the energy

sector. at the very large, diversified national banks, energy loan of thee is perhaps 3% total loan portfolio and maybe 5-6% of the commercial loan folios in credit quality continue's to get better despite the obvious weakness in energy and energy related fields. cory: thank you being with us. big blue is reporting after the bell and they have not seen sales growth and 16 quarters. could this be worse? we will find out today can ♪ . ♪

cory: big blue earnings are out

after the bell today will it indicate a turnaround? ibm says they will shrink sales to grow profits which sounds ridiculous but that's what they will do. >> will they shrink sales of not so profitable stuff? cory: that's what they suggest if you look at the sales numbers, they are the bad. this is the 16 quarter without any growth and it has accelerated. brendan: if you wonder whether we can adapt, we are still here is what they say it is the culture there at ibm to change? cory: it might be but it's a question of the product line. butcells have been sliding you have not seen better profits. you have seen the worst profits. they like to focus on earnings per share but if you look at the actual earnings, there has been a slide in the profits and that has been dramatic. they have been able to buy back shares.

they had some really ugly quarters but with profits falling and sales falling, their software business is not doing well. is there isblem still a lot of hardware there withe are in a world companies dominating technology and telling companies you don't have to buy all the hardware that ibm is selling. are competing technologies that so you don't have to buy our hardware. brendan: hardware is a, a crummy business and software is increasingly free. tracy alloway staying with us and we will look at energy next. we'll talk to the man they call the oil rainmaker. ♪

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. are brendan: you are looking at a sunny and cold new york. this is lugar -- bloomberg .

they are at an undisclosed location in it topless. -- dav os. vonnie: he is trying to protect chinese influence. china ismay show that taking a more hands-on role in a serious civil war. the tollis documenting of the islamic state in iraq. 19,000 civilians have been killed in less than two years. more than 36,000 others have been wounded. another mass grave has been discovered. his first u.s. visits

and taking over last september. we are powered by 150 news bureaus around the world. >> the company is coming out and saying the earnings are going to fall 10%. matt: we are going with the top end of the range. with earnings this morning. take a look at the heat. they are losing shares in the premarket. this is a gain of two and a third percent. delta is beating on earnings. todman says it's going because the 12 sent drop, the disappointment in the outlook that apple released when it puts up earnings on tuesday will be

priced in already. if you can follow that logic. take a look at mcdonald's. they are getting a boost from the tig. this is appropriate right now. can see the rain in the premarket. aake shack is also getting boost from william blair. it's up 5% in the premarket. these are some of the stocks we are watching today. will be one of the deciding factors as it is every day. brendan: it's a little bit of green. you can't call it a rebound when we are below $30 a barrel. oil is down a 20% on the year. equityhe cohead of capital markets. he is called the oil rainmaker. we had barclays on earlier this

morning. pricef the oil deals, the baked in is $55 per barrel. when are we going to get there western mark --? >> we've got a big team of people on the energy side making these deals come to market. i think that's right. we've got an outstanding team. cory: lots of umbrellas. robert. not $55ctation that are anytime soon. investors expect lower for longer or even longer. when you look at oil getting back into the high 40's, that is the current expectation. that's what embedded in the capital raising activity that we

see. what we were talking about is the m&a view of it going back to 55. we are not seeing a lot of deals today. today arevestors sober about the commodity prices. i think people realize that the seeds of recovery have been sown. the u.s. has been remarkably and dependent. u.s. production is stubbornly strong. the positive over the long-term these companies is the winners are going to be remarkably competitive in the midcycle environment. oft's why we see a lot investor interest putting money behind them at this. cory: is grid count a meaningless number now. -- rig account a meaningless

number now? randy: -- robert: it is down by two thirds and i think there are a couple things. the rig count does matter. it matters in the long term. in the short-term, you've got a lot of wells that can be run on. in the mid-to long-term, that goes away. fracking wells that have not been frack before. brendan: why would we be willing to sell when the price of oil is so low western mark they anticipate they are not going to get those reserves out of the ground. maybe the political environment will change. al gore has been seen this for a long time. the you think that they are

looking at the reserves and taking we are not going to be able to get it all out of the ground western mark --? robert: i don't think that's the view of management or the market. this is a long road. for a new wave. we can somehow squeeze something out. that is what they believe. the bigger rig count, this selloff left. yellow is the department of energy department data. it is not affected by the rig cap. can you back to when we saw barrel at over $200 -- $100 barrel.

it did not affect total production that much. we have been fracking for a long time. horizontal drilling has been a big deal in dallas for a long time. let me just interrupt this conversation for a moment. on a different subject, carl icahn has put out another letter to aig. you can go to his website. is urging aig to break itself up. they should become smaller. he thinks they need to present a plan that shows a drastic shift to breaking down and commit to selling units and spin off non-core operations. just a quick note on some

breaking news. he tends to move stocks. up 1.4% inshares are the premarket. tracy: when you're talking to investors, what do you tell them to look out for? what is the one thing we can look at and see we are nearing equilibrium western mark robert: it's supply and demand fundamentals. if you take a look at the iran perils -- perils -- 1.5 billionand is per day. u.s. production is declining. it's easy supply not on the market.

you are in a year from the imbalance shift. that is interesting to equity investors. i did want to ask you about suncor. they have been after it. is that a good deal? robert: i should avoid commenting on other specific situations. these transactions are designed to optimize midcycle. m&a tough to evaluate any on a low point in the cycle. cory: are there some stocks catching with m&a happening? robert: there has been a renewed focus on when will m&a happen. in the upstream market, somewhat noted. -- somewhat limited.

great stuff. it's great to see you. over global growth and subsiding. ♪

vonnie: johnson and johnson will cut 3000 jobs in a reorganization of their medical the isis business. save $1eventually

billion per year. 5% last yearree tiffany is cutting its forecast after a drop in holiday sales. net earnings will fall 10%. their holiday sales fell 6%. a stronger dollar hit -- hurt tiffany sales overseas. delta airlines sales fell in the fourth quarter and it may fall more in the fourth quarter. bloomberg business flash. brendan: and edwards set down with him this morning to talk about concerns for global volatility. mindfulnk we have to be of businesses and be prudent with all the volatility in the

stock market. the inability of politicians to take positions and balance the economy. it's going to hunt this for some time to come. prices are very volatile. you benefit from some of that. what is the biggest benefit you can see coming through the week prices right now. upuc core operating profits 12%. part of that is the easing of the cost. you have to watch with the oil nationsany of the oil have severe tightening of their budgets as a result you see that in brazil and the middle east. our markets are more depressed. we have about 8% oil dependency.

-- 20% oil dependency. the beginning of these offsets a lot of the weakening of commodities. interest in the emerging markets, you still see inflation. we have 7% growth in the emerging markets. about half of that is inflation. we have weakening currencies. you have issues with pricing power in some markets western mark --? >> i don't think so. we have had a stellar performance in india. stock prices have been up again. we have a norm us pricing power with unilever. benefit of that focus.

we brought more focus to them. we are outgrowing the market. profitability increased. we have a consistency. it has been a tough year. leading in a second-year consistent growth. brendan: tracy alloway is with us. what i kept on hearing was unilever is in bed with the emerging arc it consumer demand. tracy: i don't think you are misinterpreting that. that is worrying. cory: they have seen some strong growth in the last year. you wonder what that's going to mean it going forward.

he is talking about acceleration of growth. brendan: he did not bring up india, which is an amazing bright spot. tracy: india is getting very competitive now. i wonder how much room they have to grow. brendan: it was just a year and a half ago that they were talking about selling to brazil, this great amazing growth market. not so much. tracy: my favorite is a story is june of last year when they sold century long bonds to investors. and it's been downhill since then. we saw a lot of investors who clamored for bonds. brendan: oil was where it was as well. now they can afford to get at it. of there are all kinds of

infrastructural and uric redick reasons. we cannot get to the bottom of brazil in the next 30 seconds. tracy is going to stay with us. ♪

cory: welcome back. matt: i am taking look at some of the indicators here. crude determines the direction the market moves. we had some decent gains earlier this morning around 6:00. we saw a turnaround in now we are still up about 7/10 of 1%. we are at a very low level.

the gains have come off a little bit. take a look at asian and european markets. they rallied overnight. consensus inthe the plumes are survey was 6.9% for chinese gdp. economists had forecast slightly lower numbers than that. 6.8 did not seem to discipline. it signals more stimulus is coming. rallied acrosss the board with asian stocks. take a look at currencies. we have the pound here, the lowest level since 2009 good as mark carney makes some comments, we see real pound weakness. 7500 gates were installed in center. brendan: they have done a lot of

things like that. he is going to talk to us about their next project. >> the art is extraordinary. i saw harvard business school talk about the way they finance their work. it's also financed. about this.o talk this is about 60 miles east. , there is a small island home to 2000 people. it's a population dependent on votes in fairies. christo got an idea. >> the project has another seven on up halfo get >>

of yellow fabric on top of 2000 this is the first budget he will do without his wife. she passed away in 2009. the floating there's will be in place for a limited time. they will disassemble it after about two weeks. this is a very precious time every human is unique in the world. was also unique is how these projects are financed. they needed to do things differently, out of necessity. collectors and dealers are slow pairs. we can't tell our workers that we cannot give them. 1982, they formed a

corporation good it's headquartered in delaware it sells art from the 50's to the present. each is a subsidiary for project. right now, he is working on it heof them are in -- or also buys back his artwork. guest owners of works of art. these projects often take years. it took before four years to get permission from new york to do the gates. easier asgotten you've gotten better known? >> no. never.

he keeps busy. he was days away from a trip to abu dhabi to work on another of the three projects are in he is 80. we asked him if he has more projects planned. >> we are very easily excited. we have a new idea right away. if i have a new idea, it will happen right away. i asked him if he still saw the regulatory side, he said yes. it's amazing how much energy he has for being 80 years old and how long these projects take. we talked about this project in italy, he wanted to do it in buenos aires and tokyo could not get the permission to do it.

you go through all of these players of bureaucracy and you connect with a personality, a mayor or a government says this is worth doing. you can wrap my island. brendan: the artist that endure understand the business side of what they do. thank you very much. that doesn't for me. we have much more markets ahead.

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from the opening bell. we're going to talk about bank earnings this morning. we going to talk about china and oil. iraqi civilians are being killed at the rate of 800 month. another mass grave was found in 19,000 died in a 22 month amount of time. the killing could amount to war crimes. refugees rose a bigger problem for europe than the debt crisis. things turned of violence in -- violent in the netherlands. the at a paris landmark.

the flames were doused. the hotel is being renovated. for used ingout hemingway. matt: morgan stanley and bank of america the earnings. morgan stanley beat on revenue. the shares are up in the market. itigger gain there because bank ofng for $.32 america was benign and we were looking for a seven. we are taking a at crude. we just turned down a oil took a leg down about one quarter of percent. that could continue in that

could change the way futures look. this is why we have gains in futures. the asian markets are up overnight. the slightly weaker than estimated gdp number out of implied that more stimulus is coming from the chinese. they were trying it overnight as well. the stocks are up 2%. we have live trading across europe up as well. currency is up to the see the pound at 140. that is the lowest level since the financial crisis. mark carney signals the anchor new england is away from raising disparity that has between what the that is doing and what they are doing on the continent. england will continue.

you get 117 and eight yen a for a dollar. now let's take a look at u.s. futures. we have gains across the board good it's not the strength saw a little bit earlier. on s&p futures. -- 11% on s&p futures. the nasdaq futures are up 1.2%. brendan: we're going to stay with tanks. shares are up in premarket sharing after both tanks the estimates. morgan stanley reported a fourth-quarter profit. it's legal costs shrank. paul goldberg is on the phone. every is going through a transition. how is morgan stanley weathering

its. paul: they have not been doing a great job over the past several years. they promise 10%. they have failed to do so. this year, the return is 7% are in even if you adjusted, it's just 8%. that is putting pressure on the stock. now, they are both up. this is partly because the banks of been doing a great job on cutting costs. paul: absolutely. they have done that reasonably well. one of the things we've seen from many banks is a shift toward wealth management. will that work out well for morgan stanley western mark all: i think it will.

they have been a really great job bringing in the wealth management. we think the wealth management working out. the risingissue is cost, regulatory cost. witha three or 25% range positives hilton footprint this is not much better than been giving out for. betty: i want to turn to bank of america. i'm looking at some of the numbers. credit losses increased. that had to do with some write-offs on energy. they could be building up reserves for their energy investments.

you think that's going to become a bigger headwind as we see oil prices tumble? paul: i do not cover bank of america. think it's going to be an issue. mostly for the money center banks and a smaller regional banks in the south. before the financial crisis, there was an understanding of what a bank was, bigger and bigger. there was confusion about what a bank is supposed to be. have we moved past that? two sets of thanks. it's more complicated to analyze and put into a box. we have the best loan growth since 2007. now we are ahead of. the fundamental business of

lending continues to accelerate. it's a little bouncy. there are the capital markets and investment management. both subsets are doing well. brendan: it sounds like you are saying that boring banking is not a bad ring to be in. ask you want boring. -- >> you want boring. betty: speaking of that volatility, it seems like a sure thing that the fed will continue this rate hiking cycle. you have people wondering if that is going to be as strong as they thought. how does that figure into your view on the banking sector? we do not think three or four rate hikes will happen.

it's only going to be less than that. that's the expectation is somewhat exaggerated at the moment. the capital markets, everybody was expecting the fed would bring or volatility. data --ng to help trade good jpmorgan's management downplayed the tension for the improvement. everybody was expecting. such ay not play in positive card as people expected. betty: thank you so much. paul goldberg on the banks. let's turn to the other hot topic. that's china. the world's second-largest full-yearvealed their growth numbers. the gdp slowed to 6.9%.

it was the slowest pace in 25 years. last quarter was the weakest since 2009. i want to bring you win. every basis point matters been you talk about china. they're almost near 7%. people look at that and said 6.9%, they will likely more stimulus into the economy. >> everyone is concerned about china. everyone knows both -- growth is slowing down and people are concerned about engineering a soft landing. the markets are starting to appreciate china generating a lot of growth in the global economy postcrisis. even if they can engineer the software landing, who is going to replace the gdp that is lost? brendan: one of the things we are seeing this running as they did not take their target. we are seeing green all over.

thate seeing green in shanghai. >> greed has replaced fear. at some, the markets of come down. those looking to get in think this is the opportunity. we see that in oil. oil has gone up a bit. going tohink there's be any escaping the fundamentals. i think everyone will struggle with the fundamentals coming out of china. china used to be a 9% or. 4% and we are a two. there is a slowdown globally. china you were at 4% with western mark --?

>> the u.s.. we are trying to get to one and eight. -- one and eight. -- 1.8. brendan: even our estimates of growth it may be a low the official numbers, those are better than what we have right now in the u.s. is can china continue to thrive at lower numbers? the entire society and government rests on this. iswith happening in china this massive transformation from exports to a domestic demand economy. they are at the bottom for the 20 largest countries for that. we are at the top.

consumption can't grow that much faster. china duces 30% of global growth. not global transmission. imports only 9% of the .8 they are going to go from to four point whatever. matt: can i show you a couple of things? the light line here is gdp. the official gdp number is coming in slightly under 7%. the yellow line his credit. consumer credit in china. you can see that it has come down. they have to buy a lot of stuff. continues to go down, if they can't credit to buy stuff, we have had to reverse this in order to get

growth. they've got to do something about that. consumption is becoming a bigger share. the question of the meanng is does this green that we are looking for or stimulus? >> it has been more credit growth. if there is more credit needed, it's available and they will provide your it weaken argue they have issues on the commercial side. they are going to have to deal with it. they have the blunt instrument power to erase the problem one more time. >> you are seeing contractions. all of thethat for emerging-market countries and did their gdp and ran that

chart, you would a contracting as well. i think that's a big issue. they are a lot. they over invested and overbuilt. that's all shrinking and contracting. -- they areree trying to manage. the australia. australia is a mess. 2012,ou think back to australia was fantastic. there exports were mostly industrial materials. that was going to china. us economy is effectively crashing. the housing market is. rebound away had from conception. same problem. betty: you are going to stay with us to the hour.

we will talk about china and the markets. another bold call from goldman sachs. the price of oil could go down to $20 barrel. ♪

vonnie: delta says the strong dollar is partly to blame for weaker results overseas. sales fell and the slump could last. tiffany is cutting its forecast after holiday sales slumped rid fall 10%.nings will

millions of twitter users lost service today. the glitch affected he website and will collapse. latest business flash. matt: we are taking a look at some the stocks that are moving. apple is one of them. let's take a look at crude oil. about 3/10 of 1%. it has come off the gains we saw earlier. it is 2932 a barrel. i will show you some stocks in just a little bit. tech related. i know you want to go into that. betty: a perfect segue. iran will add 500 thousand barrels per day. that could push oil prices down to $20 per date -- barrel.

i keep wondering about this bit we knew iran was going to come onto the market. is this a surprise? peter: this is zero surprise. we have known the amount of barrels. the question we have is how much immediate oil will come out of storage. how much will the have to discount that oil to regain market share? betty: what is the discount? .eter: we are going to find out brendan: we have known this for a while, yet we have seen the movement anyway. there is no new news.

this is not that they are seeing something new. peter: we need to pick attention to the negative feedback things are happening financial markets, , we sawtal markets reserves. the cracker. is going to is. we have seen lower oil prices. in terms of china, we can see demand growth. think you are makes a great point. why haven't the capital markets and more hostile to some of these energy companies as they try to refinance?

guest: they are pretty hostile. when you look at the high yield areet, 13% of the issuers energy-related. most of that universe is trading at $.40 on the dollar. the have come down quite dramatically. there is a tremendous amount of capital available to you have quantitative easing. you have qe coming out of the ecb and the bank of japan. you have all of these all caps on's that are trying to tackle the energy industry. it's not a surprise to me. i think the question is not how do you get to me dollars a barrel, how do you stay close to 30. there's just too much supply. if i were worried about

anything, it would be what win oil does not stay between 20 and 30. that is the thing to worry about. news seems to move anything. we are in a massive correction. everybody's memory goes back to 2008. they can't shake that. they are taking every reasonable concern and amplifying it and taking the dots way beyond where the fundamentals are. betty: thank you. stay with us. we've got much more ahead. futures are based on those numbers. at thisare higher point. up next, we will take a look at let's moving up and down. has promised us's

movers in premarket trade. ♪

brendan: matt miller is with us. he is been taking look at the market movers. given permission to give you a look at the tech stocks. goldman sachs said when apple puts out earnings, they are growth. say they had 3% that is tepid. because of the slump in the past year, this has been priced in. this is no problem. theiro have it on conviction. i wanted to show you a little something as far as volatility

where netflix is concerned. look at my terminal. representle marks earnings reports. these lines are standard deviations. tom keene would be so happy to see this. move five or six standard deviations away. they are down 10%. brendan: comment next, does the s&p have further to fall? what is ahead for the time being. ♪

betty: we are just moments away from the opening bell after the long weekend. global markets have been rallying and so have we in our futures market area --.

they are up about 1%. it looks like we will see triple digit gains in the market. there goes the opening bell. this is been the worst start ever. arc it in 2016. that is a record we did not want to hit. looking the market is for any scrap of good news and they may have found it in china. with much more on this, give us your take on how much we read into how awful it's been in the markets? guest: i think it's a good omen that it gets this out of the system at the beginning. got monetary policy where people don't know which way it's going to go. you could argue that either way

is wrong. you've got strong conviction that a recession is about to happen. i have left out the most important thing. candidate out there that says anything good for business. they won't touch the subject. betty: are you betting on a recession? guest: absolutely not. prediction for the s&p 500 for next year is it will close out at 2325. guest: i think that's aggressive. i think you need one of two things to happen. you need much stronger earnings growth. given the current macroeconomic bath are up in the data is coming through, i do see that.

been generated by quantitative easing. i don't see a recession. i think it's remote. i see equities going up from here. 2300 is aggressive. one of the things that janet yellen said is expansions don't die of old age. nothing is going to make this stop. brendan: what would kill it off? monetary tightening. there is nothing out there unless we have an ongoing rollover of this commodity crisis. i am happy the u.s. and europe are at the engine level and running the economy. i don't want to count on the emerging markets. the problem with oil and commodities, all of the bad stuff is shaking around. if that does spin out of control

, that would be a big problem. this could it continue to run? there is a possibility that the fed may raise rates and then have to get them. guest: i have a very simple answer. monetary policy is a fabulous break, but not a good accelerator. i don't think anything the fed does is going to change were we will be at the end of the year. aboutn: we are talking politics earlier. we do have a headline. this was the plan to allow buyers who entered without papers to attend college and big deal this has the in the were looking debates.

the supreme court has been willing to jump in on a number of issues. i think we will see that. betty: immigration, islamic state, terrorism, all of those issues have dominated the presidential race, not business. not economics. guest: they are not going to bring the subject up. brendan: the plant under review is not a path to naturalization. it allows them to get work permits. one of the things you were just talking about is this up. we had republican debate saying look at all the terrible things happening in the economy. you have obama saying let's look over the last seven years, we're doing well. guest: we are doing to be well. we forget that we are in a slower labor growth.

that has been a change for decades. i think this is reasonably good. ofst: there have been a lot monetary stimulus. stimulus, youscal don't have the acceleration. you have had inflation in asset prices and that's been deflating this month. up 157.he dow is we are seeing some nice gains. let's bring up that short -- chart this could allay the fears that somebody could have. this is the s&p. see from the left-hand side from 2009, look at how far this market is gone. blip, when you compare to where we have come smallit's remarkably

drop. this is a chart of the s&p since 96. the smoother line is the average. theidea is to show you that may have further to fall. see allg drops that you during recessions. is is it possible that happened here western mark we are still 5% away from the 200 week moving average. brendan: we are doing technical analysis on a world that is profoundly different. so many models are so hard to use. oil is different. matt: you will tom keene say we

have not had total catastrophe or capitulation. just because we had to have capitulation every time in the past, may best not going to happen this time. guest: we haven't had a real recovery. matt: why don't i show you stocks while i am already talking and on camera. , the doubt, the nasdaq are up. ins is the strength we saw futures this morning. we have seen a turnaround in some commodities. take a look at my imac. we can see which groups are gaining and falling. the red is energy. this is the leader of the pack. energy was the biggest gaining group. materials was the third biggest.

here we see consumer state's, these sectors that at the bottom of the pack in europe are at the top over here. that's very interesting because of what we saw happening in crude today. we sought crude up 1%. now it's down 1%. at 29.10 aading barrel. let's take a look at the 10 year. we saw investors getting out of bonds earlier. back little buying it. the yield is coming down. this is interesting picture of what happening in a transitional phase of the market. guest: i don't trust any

movement this short. someould be worried about the bigger factors and the biggest that could change is europe. europe is now the swing factor this year. if they swing more positive with us, i think we are in good shape. if not, we are back. brendan: the austrian finance minister said the refugee crisis is a bigger deal than the exit. populist politics on both better, itwill feel is worse back then. these are dramatic statement. not a single president was to say anything about making business better. . if you learn anything

this morning, read that. betty: it sounds like you are not that crazy about emerging markets. you just mentioned we have not had a real recovery. view, are the valuations stretched? they don't really reflect the fundamentals. guest: after this correction, i feel a lot better. it took three times longer than any other, this recovery. there thatthing out says we need to go to recession because we did in the past. betty: thank you so much for joining us. we live from the nasdaq. abigail: we have a nice rebound in big tech.

the company's outlook has greatly improved. the evaluation is more reasonable than it has been in past years. there's a chance they could move up as the year progresses. he likes that bigger than the other internet companies. the stock is down about 8% year-to-date. they have always to go. betty: ok's to go indeed. michael is staying with us. the pound has falling to the lowest level since 2009. we're going to talk currency and central banks. ♪

vonnie: here is your latest business flash. johnson and johnson will eliminate jobs are in it will affect the medical devices business and they will eventually save $1 billion a year. texas andections of progressive waste solutions are swapping stock. could be a number one on wall street. morgan stanley will be the top brokerage by revenue. when packageslose expire. brendan: the pound fell to the lowest level since 2009 after the bank of england signaled a boost to interest rates is still some way off. take a listen to what he had to

say. >> i said the decision as to when to start raising interest rates would come into sharper relief around the turn of this year. the year has turned. that is straightforward. now is not yet the time to raise interest rates. bob michael is still with us. i am looking at the terminal right now. there is only an 8.9%. earlier.sa, was on she said central banks have lost the ability to have an influence. steppedhink they have back and looked at the data and they haven't seen the recovery. we just talked about that. monetary policy does a lot of things. it makes the debt burden

sustainable. it has inflated asset prices. where has it generated gdp. i think he implied the fed has made a policy error. they were meant to be raising rates together. it was elton to the market. both economies look similar. housing markets looked similar. here is carney saying we don't have the growth. we don't have the inflationary pressure. we don't have above trend growth and we don't have inflation pressure. betty: we don't have wage growth either. brendan: when you look at the rhetoric around the rate hike from the fed, the same basic

arguments, we are not seeing growth or inflation, we are going to hike because one of things get work -- withwe are frustrated zero. there must be a reverse money multiplier as well. raising rates is still tightening policy. how will that affect the mario draghi says on thursday russian mark what you're looking for? bob: he must be more accommodating. he clearly disputed the markets in december. there was the expectation. they did not do a lot of that.

the markets have fallen flat. you're not seen the recovery. we talked about the risks. is facing one struggle after another. they need a favorable backdrop. i think he has room to indicate he will do more. brendan: what about negative rates. they have negative deposit rates. people are paying their taxes some because you can get return on liquid savings. is there more room to drive the deposit rate? bob: those are extremes. you are talking about minus three quarters of 1%. you're losing ground every day. countriestent, those

that is the frustration. is there room to cut rates off? i think so. they can force the banks to extend credit into the system. matt: very quickly, these are the life markets. oil is down 2%. we are to be minutes into meding and we're down below nine dollars. that tends to have a negative affect on stocks. we are seeing the gains dissipate. take a look at the major indexes. now we are up 94 points. the s&p is up half of 1%. inse gains are dissipating the face of oil that continues to fall further and further. i want to bring in my terminal.

let me bring you back from europe. s&p over the last years. i've slides where they were raising rates or doing any kind of action. there is only been a rate hike when we are in a recovery. i wonder what you think. is that going to stop us? bob: it is raising rates. when you look at a lot of the financial conditions, they have been tightening. orther it's the end of qe normalizing rates, you have seen the dollar appreciate.

you're putting financing stress on a lot of companies that were used to leveraging off those. everything is changing. i disagree that there is no impact. they are trying to normalize. we could go back through those periods and say the fed has not been trying to normalize. bob michael says a hike is a hike is a hike area --. thank you so much for showing up. thank you for coming in off the bench. betty has to go. bob michael is staying with us. we will take a look at some the highlights from today's program. ♪

brendan: welcome back to

bloomberg . we're going to take a look at some of the conversations. >> i think the common theme is the flatter yield curve quite frankly. importance of the margins. portfolioook at the allocations, there was a time of bidding on the financial rices. unfortunately, financials better perform. >> the biggest risk is a george soros comment here and the turmoil for an agile markets leads to credit tightening which leads to the economy to be in recession. likeant to watch things financial conditions. that's not been a problem.

>> the positive for these areanies is the winners going to be remarkably competitive in the midcycle environment. that's why we see a lot of interest behind them. to take ae are going look at the markets. we are looking at 28 dollars $.71. remember 2003.'t the affect this has had on the market is the big rally that we saw early has dissipated. we were up 200 and now we are up half that. the same is true with the s&p and the nasdaq. never 2003.ill

bob michael is with us. expansions do not die of old age. fed andneed to see the the ecb speak and calm the market down. just indicate that they are going to back away from aggressive tightening. immediacy will do what it's going to do and things will settle down. betty: thank you. fordan: that doesn't bloomberg . here are some highlights. ♪

betty: it is 10:00 in new york. welcome to bloomberg markets. ♪

betty: from bloomberg world headquarters in new york, good morning. we are about a half an hour into the trading session and stocks are higher after equities rallied around the world. we are coming off the highs in the session. stocks are about the most in a month. reporting its weakest full-year gdp growth since 1990, however the data exceeded the most pessimistic of forced -- of forecasts. they taught their profit forecasts, lots of cost-cutting going on in the fourth quarter for bank of america. let's head straight to the market desk where we have the latest on the markets and we are following this global rally, but not as strong as we thought. >> we are following it and offer what happened on friday when we saw that slo