scarlet: welcome, i am scarlet fu. >> here is what we're watching. dropping below $29 a barrel at one point. but this is not a blessing to all. we will tell you what companies are vulnerable. sales may not be improving at why some people are bullish. stock markets and investors can count on a strong earning system to turn the tides. we will talk about which companies to watch this week. scarlet: first, we are going on to get a check on the markets. radiant as an seo the gains across the globe.

let's take a look at what is happening with markets across the u.s.. the dow is higher. the nasdaq is paring some gave up but only by about four cents of 1%. we did see this higher, the s&p was up by about nine more points today but as you take a look at my imap function, i want to show you that basically what we are seeing is a broad semi rally. aside from materials which are down by .4%. staples are up the most by about 1%. energy here is a flat. it was lower before and the reason is because we are watching what is happening with wti crude. let's take a look at what is happening with that commodity. earlier, it did go as low as

since, the lows was level 2003. we saw that happen before 10:00 a.m., right now it is down by about .9%. if we go back into my terminal, i want to show you basically what is happening with wti crude as well as the s&p. for the most part, we can see that they are trading in tandem, it is so closely connected. alix steel action as was talking about earlier, and now we are seeing the downward trend happening in the past 10 minutes. alix: what's interesting is that we have seen strength in rent, despite the fact that i romney and oil is coming on the market. ramy: one thing we have to remember is that wti was trading up so there is a back and forth between the differentiation of

that and what is happening at nymex. right now let's take a look at what is happening right now. in addition to that, it is interesting that it is streaming off the week china data. they're not taking that into consideration. alix: thank you so much. --rlet: let's check in the check in now with mark crumpton. mark: the u.s. supreme court has refused to take up a new challenge to the affordable care law. justices turned aside an appeal that says lawmakers used flawed legislative procedures to pass the measure. that has upheld the core part of the residence measure since 2012. obama's immigration reform is headed to the high court.

justices said they will hear a challenge to the program ordered more than a year ago that could spare up to 5 million undocumented immigrant from deportation. the challenge from 26 states claims the president by step congress. we will talk more about that with robert gates as he joins us on with all due respect. an official says refugees pose a bigger problem than the greek debt crisis to europe. a protest against building housing for 500 refugees turned violent overnight in the netherlands. right police were pelted with eggs and fireworks as they handled the crowd. marines offr the 12 the coast of hawaii have found only life rafts. there is no sign that anyone had used those rafts. the mayor of flint, michigan goes to washington today,

seeking federal help for the city's emergency water crisis. elevated levels of lead have been found in children living in flint. they want the government to declare it as a disaster zone, making it eligible for more money. global news, 24 hours a day powered by our 2400 journalists and more than 150,000 viewers across the world. back to you. scarlet: thank you. the international energy agency is warning that the global market could drown in oversupply on the market. crude prices are hovering around 12 year lows. guest predicted that it will continue to drive down prices but the question is, what countries -- what areas are most at risk? terry marshall joins us from toronto. this is a different ball game or $50 a barrel.

what companies are most exposed? to the separate sector companies that have challenged liquidity, companies that no longer has hedges in 2016 or companies that can't access capital markets. in terms of the overleveraged as you look the further down, the higher the probability of default. last year we saw 30 companies. those companies defaulted. we will see that number increased this year quite dramatically. barrel level of $29 a gives potential. alix: what has helped in the last year has been the cost of these companies. some of these have been pushed out. scarlet: they have been very

efficient at cutting their cost. is what didn't happen last fall or spring, it was anticipated. a lot of companies had hedge positions and the crudity positions that help them through this area. we did see a lot of exchanges where companies are exchanging notes for second grade notes. has to reduce debt and to some extent, those debt service costs -- they do get a better position with the capital structure. but those companies are trying to ride time. that is an environment that we don't see coming in the near future. there isyou feel like one company in investment grade space that could trigger some kind of panic? if they were to slip enough to cause the unwinding of the energy space?

terry: i don't think there is one in particular. you hope that if they are investec grade they are good for a while. investment-grade companies have good look what is he. so by definition, they can work through these environments. that being said, it is a brutal environment for all companies. thee have recently put expiration of production companies in north america under review for downgrade and we have expectations that we will see downgrades average more as we work through those actions. that i don't think we will look to one particular company to set the market off. investors have been concerned and stressed for a year now. .ver since the downturn started it was a year ago, last november. that was when opec may be harsh move where they competed for

market share. it has continued to slide my dramatically -- slide more dramatically. uprlet: cash dividends make 25 -- make up 25% of cash flow. terry: i would say they are a risk. companies are looking at the 2016 budgets. we have seen a couple of investment-grade companies that show their dividends may be at risk. it is a tough call to make but in this environment, i would expect that we would see more companies looking to cut their dividends. alix: how quickly can they be put back online when the nasdaq oil prices come? because globally, they have taped. terry: the rakes can be rocked back on, u.s. shale in particular. but that is part of the overhang

on price. as he let saw last june, when prices would up to $60, and then the price came back down -- this time, because prices have been so low for so long, they will be cautious. they won't do that until there a a comfort that we are in place that we will be in for a wild. alix: that was terry marshall. thank you very much. i have been waiting for the big redetermination. scarlet: maybe this is it. but so far, everyone has held on. hasng up, morgan stanley released profits. we will take a look at how lower oil prices are putting a strain on banks. alix: and -- cut interest rates to help an economy, can negative rates the next? donald trump drives

apple into the presidential campaign. what stands in his way? ♪

alix: welcome back. it is time for the bloomberg business flash. j.p. morgan chase winning approval for investor claims tied to the london whale. -- resolve accusations. the judge will hear from investors covered by the settlement before deciding whether to grant final approval. alix: a u.s. treasury official says puerto rico's economy is collapsing and they are in need of congressional action. thatsing -- a visit showed

their problem is $2.5 billion worse than estimated. the deficit will reach $60 billion within five years. scarlet: univision thinks comedy is serious business. onion.ng in the no terms were announced but the journalism website will play a big role in diversifying the audiences. bloomberg business flash. alix: the onion is pretty funny. let's send it over for a check on company movers. ramy: i want to head to the retail space. activistacy's, we have investor action going on. rising by about 3.5% after greenlight capital reported a stake in the department store chain. he says a private equity firm might work with a real estate.

value in terms of macy's land and buildings. the stock rose to as high as $40.01. let's head over to the tech space. twitter are what i want to look at. square is down by nearly 9%. the lowest intraday price since the first day of trading. it is the worst performer right now. it is near its session lows. it earlier forse about five hours, for some users around the world, there was some outages happening. .witter hasn't been doing well down by about 31% below its ipo price. delta airlines is going the other way. off after now, taking

the news that it says it will in costst $3 billion over the course of this year because of cheaper jet fuel. fuel is expected to cost one $1.20-$1.25 this year. the $100is now below mark and it hasn't been that low in years. you can expect that this is a boom across the board for all air carriers. alix: i want to point out that we have stocks moving off their session highs. the dow is now only up i-66 points. we are not in the negative territory but we are giving up some of the gains we saw earlier. scarlet: losing steam. thank you so much. bank of america and morgan stanley reported fourth-quarter

earnings today. higher equity trading, bank of 9.4ica saw profit of percent on higher fixed income trading. scarlet: open -- only morgan stanley shares are trending higher. joining us now is chris kotowski. heading into these earnings reports, you had noted that a lot of these estimates had come down. so the bar was lower for the banks to beat estimates. having said that, what has been the biggest positive surprise so far? not sure you can talk about a positive or negative surprise. we do an industry composite where we put together the whole industries p&l. from the two key revenue items, and heerest revenue income, they have been flat 17 quarters in a row. i kid you not. 17 quarters in a row we have had .lat income

it hasn't been a big surprise in this environment. as a margin, the fourth quarter trading numbers were thought to be dismal. and equities were ok. equities was up about 10% for the full year. about 10%come is down on the year. of the companies being slightly a first. no surprises. of prizes and reducing expenses has been a constant for the last six years. what is different now about banking ability to reduce prices? chris: there is bound to be pressure. for me, the greatest opportunity is bank of america. if you look at it, comparative to the big other footprint companies, j.p. morgan has been equal expense based as bank of $10ica and they have

billion more in revenue. compare them to wells fargo. wells fargo has $3 billion more in revenue and $6 billion less in expenses. and sometimes when we quote all of these numbers and the ratios, it confuses people but when you look at the dollars of revenue and the dollars they spend, clearly it is out of pocket. alix: what about the amount of money that banks have set aside to cover any losses in the energy sector? do you think there is more to come? is there systemic risk? chris: i used to cover the texas banks in the 1980's. five out of six of them went to zero. but, i would say what was different then is that at that time, the texas banks were distressed. thanks in the southeast of the northeast and the midwest were

booming. for the most part, we saw more people benefit from cheap gas then be hurt by it. the real estate boom coincided with the change in tax law and markets.yed i don't think we are in the same kind of situation. for some of the banks that we are operating in cash, it will be sad but probably not as bad as the mid-1980's. scarlet: thank you so much. chris kotowski joined us from new york. tomorrow is aead, key rate decision for canada's central bank. will we see negative interest rates? ♪

scarlet: welcome back. canada central bank will

announce interest rate decisions tomorrow. investors are expecting the governor to keep interest rates low after the collapse of commodity prices. scarlet: here is the governor speaking with bloomberg tv anchor pamela ritchie. it a wouldn't call recession, it is a mild for traction. it was a pinpointed thing. we can see other sources of growth continue to gather momentum. so it is a question of when they outweigh the negative. alix: with us now is pamela ritchie. hear exporters were rolling their eyes at that. what do they want to see? pamela: i will remind you first of where we said. that was the governor who set a month ago that they were reflecting back to this time last year when we didn't know it at the time but we were in the midst of two consecutive

quarters of negative growth. it was a technical recession. he cut rates at this time last year and shocked anyone and then in july cut rates again. we are at .5%. that is where interest rates in canada sit. the question is whether there will be a cut announced tomorrow. does canada need another cut? certainly have many shops that are calling for it. barclays is calling for it. little over 50% in terms of traders lining up for an interest rate cut tomorrow. i will talk about the exporters. exporters have said thanks, but no thanks. --y have seen below full they have seen the low fall. is an interest rate cut tomorrow, it will fall again quickly. in many cases, they are importing machinery from the united states and they don't

need lower rates. they is that you maybe think about a rate increase to get dollar security. so there isn't a full buy-in from exporters. what kind of potency will this have this time around. >> there are arguments for and against. it could stimulate the economy in a lot of ways. it could make us more competitive. but oil is doing a good job to bring down the loony all on its own. it is much more expected this time. it really shocked markets when it happened last year. so it had an effect on the currency, which part is canada and which part is the oil. they all fit together. at that timeda because it was unexpected. this is people lining up for an interest rate cut if not a

negative rate in the next year. there are a lot of people thinking the rate will come and it will take things lower. the question is, what do we replace the oil with? scarlet: thank you so much, that was pamela ritchie. to point out that markets are continuing to deteriorate. -- s&p is coming very front very close to flatlining on the day. scarlet: coming up, the imf cut its global forecast. we will find out which organization has the most.

when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business.

sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. bloomberg world headquarters, welcome back. i am alix steel. scarlet: i am scarlet fu. let's start with the headlines. mark: a new report says a budget

deficit will rise to $544 billion this year. this is an increase over previous estimates and much can be blamed on tax cuts and spending hikes that congress passed last month. the report from the budget office says that economic growth will be slower than previously forecast. the supreme court today refused to provide an arkansas law that largely prevented women from getting abortions after the 12th week of pregnancy. the rule can be squared with a 1992 supreme court decision that reaffirmed abortion-rights. officials say to people are dead and 18 others are hurt after a greyhound bus flipped on its side on a northern california freeway. the bus was traveling north on highway 101 in san jose around 6:40 this morning. the driver and 19 passengers were aboard the bus when it flip.

australia's prime minister is president obama's first visitor of the year. it is malcolm turnbull's first visit since he took office last year. you white house says discussions will focus on the islamic state and the pacific rim trade deal. global news, 24 hours a day powered by our way or hundred journalists. -- by our 2400 journalists. scarlet: thank you. the international monetary fund cut the outlook for the global economy today. issaid the slowdown in china hammering emerging markets. the director says major challenges lie ahead. >> downside risks to our central scenario have intensified. in our view, a focus on these risks are the main factor driving developments in the financial markets. we may be in for a bumpy ride this year, especially in

emerging economies. alix: joining us now is imf .eputy director of research thank you so much for joining us today. where do you look at the biggest risk. it seems like they keep mounting? >> thank you for having me. beennk markets have nervous over the past few weeks, undoubtedly. talk of a global recession is inappropriate at this stage. what we are seeing is a difficult time for emerging markets. and for developing economies. especially those that rely heavily on commodities for direct revenue. given how much these prices have declined. and this decline is clearly associated with, at least for

metals and other commodities, with developments in china, where the economy is slowing. and the parts of the economy that are slowing more are those that are more intensive. the federall in reserve tightening the foreign policy as well as the energy klein -- the energy declined with what china is doing at the moment. easiestnk the association is really the decline in commodities and the slowdown in china. as i mentioned, part of the chinese economy that is suffering the most is that associated with sectors that have been moving -- been booming. especially those with real estate, over the past few years. there is capacity and where spending is falling the most. those sectors are using a lot of that hases and

affected prices over the past few years. for -- -- in allthe u.s. reality, oil prices should be good for the u.s., we should be getting a boost. that we aren't seeing that. >> well, indeed. for the united states, it is an importer and declining oil prices is bad news for the energy sector but good news for consumers and other parts of the economy that use oil and energy as input. nettill think it is a positive for the u.s. economy and for most advanced economies that are net importers. you brought up china and what we have seen their with the fed raising rates. part of that has been the volatility. strengthened,has

china has been forced to devalue currency. the hue and was just included in your special drawing rights basket. are you concerned about the volatility there? clearly, volatility in a market that is the second largest in the world is a concern because it has a ripple effect on other countries as well. the key issue is really for chinese authorities to communicate very clearly what their foreign exchange strategy is going forward. and that should help remove some of the factors that are causing in uncertainty about the future direction of movements with the exchange rate. alix: would you be in favor of one big devaluation of the u.s.? yuan?the

that, if you look at the fundamentals of the chinese economy, if you look at the fact that it still has a sizable surplus, that it is benefiting in terms of its external accounts from lower commodities and oil prices, the case for a , in ourpreciation is view, just not there. the issue is, of course, is that tiedurrency has been closely to the dollar and the dollar has strengthened considerably over the past 18 months. but the authorities did announce that they would now target a basket of currencies which is a way to ensure more stability to our currency because it would be linked to a different set of trading partners, not just the u.s.. scarlet: as china has tried to

calibrate his response through reform, what should the response be through the united states and europe? another thought is that we will see consequences. >> the trade links with china are clearly there and it is there to the extent that there is a slowdown in the face of the growth of chinese imports? as we stock, ripple effects will be felt in chinese trading partners. they will be felt more strongly in other economies rather than the u.s. and the europe area. there are other economies that are more tightly integrated. but still, they will be felt. at the same time, we have other positives for both the united states and in particular the -- ine in commodity prices,

alix: when you take a look at the global landscape, manufacturing is rolling over. it is hard to get in. where would be the negatives from manufacturing and weaker industrialization's to the economy? see, we have to keep things in perspective. justacturing accounts for over 10% of u.s. gdp. so too has the manufacturing sector drive a large advanced economy by itself is quite difficult because it is not a sufficiently large fraction of the economy. having said that, we clearly very -- clearly worry because it is a sector that is particularly important and weakening manufacturing 10 show a

weakening in global demand and that is a source of concern. we have recessions in a number of large emerging economies. russia comes to mind. so there are countries that are suffering a very important downturn at this point. alix: thank you so much. drug -- the imf deputy deputy director. scarlet: coming up, apple is not having a great start to 2016. could now be the time to start buying? alix: declines for the third quarter in a row. we will discuss. when will he start to see a market rally? ♪

scarlet: you are watching bloomberg. alix: this is your global business report. scarlet: the imf has cut the global forecast. we will detail how big a role china plays in that outlook. alix: and thousands of cars are being recalled. what is next for the company? scarlet: and which company is cutting its global fee? where will whatsapp find its revenue? first, let's start with the imf reducing the global economic forecast. it is now expected to withstand 3.4%, down from 3.6% in october.

the reason is lunging oil prices and a stronger dollar. speaking at a press conference in london, the chief economist. >> in my view, the reactions are very extreme. for china, there are downside risks, as i said. but the recent date of release is in line with our expectations. there are challenges for the authorities to navigate. alix: china has made it official. at the slowestw rate in a decade. in line with government expectations but still, the worst performance since 1990. meanwhile, services became the biggest part of the chinese economy. has reported aer

significant increase in sales, but however, the ceo warns there could be tough times ahead. >> we are continuously lowering the global expectations. the minimum we can say is that it has become more volatile and i think it is what will see this year. alix: renaut is issuing a recall. this issue must be fixed and they are trading -- they are trying to avoid a crisis like volkswagen is facing. scarlet: whatsapp will drop its messaging fee. instead, facebook will test ways by allowingwhatsapp businesses to communicate with customers directly. this has been your global business report. for more stories, go to bloomberg.com. scarlet: let's go to abigail

doolittle, she is live at the nasdaq. viacom is the top performer here at the nasdaq today after the new york times or did that an investor is targeting the company. viacom is up this year, one of the few, and outperforming the composite index nicely but over the last year, shares are down sharply. or than 30%. some sources are saying that jackson is seeking a management shakeup and a move into digital to boost the stock. another share trading higher is tesla. it has been identified as the for 2016, saying shares could outperform nicely if the fundamentals remain intact. that includes hitting delivery targets. earlier this year, it said it offers four 2015 but they are low-end.

we are seeing volatility and investors are wondering whether they can turn a cash flow positive. alix: thank you so much, that was abigail doolittle. apple, sharesn to have tumbled nearly 12% in the last month. an analyst at goldman sachs says the pullback is python to purchase the stock. scarlet: let's bring in cory johnson. this is a case of apple traditionally giving conservative guidance and people have followed all of the supply chain checks to conclude that apple had a disastrous quarter. last week, there was a note out saying even cabdrivers are talking about apple's guidance for the first quarter. speak toachs did not the cap drivers although i encourage them to do so. but everybody expects this

be so weak that it is baked into the stock. it is why the stock is down so much. so maybe things aren't so bad for apple. alix: what do they wind up seeing? apple has obviously been hurt in international markets as well as depreciation that has made them raise the price. what does goldman sachs see? cory: they see a fundamental change. the bad news is in the stock already. but they also think that once the story is told on the conference call, some people will start to look at how the apple business model is working. they are not talking about new phones coming in the fall. but the notion of apple as customers buying music and listening and getting storage and doing also said things with

their apple service, in addition to that, new plans allow consumers in the u.s. to pay their carrier every month to make sure they get the latest iphone without worrying about the contract expiring -- with that, it will lock people into the apple business. this is a way of revenue flowing to this company even more. that is the new way of looking at it that everyone is comfortable looking at them as a hardware company. to that end, apple products are designed in california but not made in the united states. cory: as donald trump has pointed out. scarlet: he has said he will change that. cory: all politicians keep their promises. [laughter] cory: part of this is about guidance. one of the thing that apple does is over order.

the supply for the company often sees a pullback after the first hascorridor when a product shipped, particularly now when they are releasing products in more companies. they use to roll up haddix in companies over time. now, they are already launching in europe and china and in the u.s. on day one. that results in a bigger buildup of part inventory earlier on and a pullback later on 14 weeks in. that is what we will see. other headline news is that amnesty international is --ing the chinese companies wind up in apple's products could be using child labor. how seriously does apple deal with these claims? cook, ther tim company has really done a lot of

talking about what is happening and where their products are source. the way they generate power and from materials. many companies are talking of this and apple has been very forthright on this issue. scarlet: tim cook has tried to take the lead when addressing these concerns. cory johnson, thank you so much. alix: so good to see you. scarlet: you are here all week? cory: all week. i didn't radio earlier. coming up this could be the worst earnings season since 2009. ♪

alix: welcome back to bloomberg markets. i am alex deal. scarlet: i am scarlet fu. are expected to show a decline in profits for the third

straight quarter, he worst earnings season since 2009. does this confirm that corporate america has slipped into an earnings recession? joining us now is tracy alloway. alix: to that point, we say that every quarter. but now we are in some kind of profit recession. tracy: if you take the basic definition of a recession, two quarters in a row when you see a slowdown in growth, this would be the third. so yes. for thequestion though, wider economy, is whether you can have an isolated earnings recession without an economic recession. and that is still to be seen. what does history tell us? do we have any indication that we can survive long enough? i wish i had done some analysis before i came on here. but i would say it seems intuitively unusual to see earnings retreat to a significant degree without a

recession. that said, what is happening in earnings is different. drop is being fueled by the stronger dollar and lower oil prices. that is having a huge impact on companies in the energy business. so from that perspective, it is different. alix: we tend to see that in the high-yield market when we look at the spread -- energy, energy, energy. that it is not just energy. we are seeing this trust across all sectors. and wouldn't say that we have definitively faced the turning of the credit cycle. there is still a lot of debate going on in the market. we had morgan stanley earnings out earlier and the cfo was careful to say the only stress they see is in the energy sector. they haven't seen it spread. it for sure, we have seen weakness in the smp, even if you

look at non-commodities. scarlet: how credible do you find those claims by bank executives? energys a weakness in companies and then there is everything else. it is a good question. i'm trying to think of a way to frame this diplomatically. first portrgy is the of weakness. and the problem with banks is iten that when they take off is because they are forced to. inks have different methods to define losses. health and maturity, and agreeing to extend loans and rolling stuff over so it is difficult to isolate stresses. when you see stress and emerge, it is because it has reached a point where they have to to realize a loss. we are not at that point in other sectors in. a huge debate right now. alix: you have a huge podcast.

i listen to it every week. tracy: we are continuing the bonds we have david going . he securitized his music rights and he was the first to do that. and then we have -- i know. this episode is sponsored by the b. we speak to the father of the beige book. alix: fun facts, you have sold me on the beige book. scarlet: thank you so much, tracy alloway. coming up, wee are looking at the nasdaq in negative territory. ♪

alix: it is 1:00 in new york, 6:00 in london, and 2:00 a.m. in hong kong. scarlet: welcome to "bloomberg markets."

scarlet: from bloomberg world headquarters, good afternoon. welcome back to "bloomberg markets." i'm scarlet fu. alix: i'm alix steel. stocks paring their earlier gains. we will look at the bearish trends hanging over the market. scarlet: time on alex a pro independent candidate for president. and a turbulent start to the year of being blamed on oil and china but mohamed el-erian has another explanation. he will give us his take on the global stock rally. to go tofirst, we need the markets desk where ramy inocencio has been tracking the rise and fall of stocks. it looks like we are no longer negative when it comes to the nasdaq composite. ramy: we are dipping just into the green right now. all threek at how

major indices are performing. s&p 500 up by .25%. the dow jones up by a third. the nasdaq, flat for right now. interestingly, the dow had been hired by 130 points. we have definitely seen those gains pared off by 56 point here. it is stilld, positive for a lot of stocks across the board across the markets. take a look at the dow leaders right now. united health care still up by about 3% here. it is an earnings story. $1.4pped q4 estimates of -- $1.40, as opposed to $1.30. proctor and gamble is up 1.7% because of an analyst upgrade. stifel upgrading it to a buy from a hold. they expect png to gain market

share. finally, investors long on mcdonald's are loving it right now. 1.25% after bt ig upgraded them to a buy because of its all-day breakfast which was rolled out a couple months ago as well as its new offering of something called a pick 2 value package. in addition, other companies are getting a bob because of what is happening in china. first off, the chinese shanghai composite ended the day up 3.2%. baidu is of the most by 1.6%. good stuff, thank you, renewed in a sincere. -- ramy inocencio. want to get the

latest on the first word news desk. begin with the supreme court issuing a series of decisions. justices agreed to overview the presidents immigration plan. the high court also refused to take up a new constitutional challenge to obamacare. justices decided not to revive an arkansas law that largely prevented women from getting abortions after the first trimester. the united nations is documenting the deadly toll caused by the islamic state in iraq. the report says nearly 19,000 civilians have been killed in less than two years. more than 36,000 others have been wounded. yesterday, another mass grave was discovered. it from discovered october of last year. iran has transferred some of the

billions of frozen overseas assets. the move follows the implementation of the nuclear deal with world powers but ordinary iranians are still waiting to see how their daily lives will improve, and companies waiting to get financial access to companies worldwide. china is flexing its diplomatic clout in one of the world's most volatile regions. the chinese president arrived in as the firsttoday up of a trip that will also take into iran and egypt. he is trying to protect chinese influence that built up over iran during their long isolation. a fire broke out at a paris landmark today. firefighters quickly put on the flames on the upper floor of the ritz. of proust andgout hemingway first opened in 1898.

global news 24 hours a day from the bloomberg first word news desk, dr. you. scarlet: let's return to the financial markets. two-week start in history, the nasdaq rose 1% today. alix: our next guest sees more downside risk but says that a breather in the near term is possible. jonathan krinsky is with mk and partners. he is with us in stamford, connecticut. is this what we are seeing today, a bounce, but not able to hold onto the gains? exactly the full bounce we were looking for, but it goes to show you just how this market has changed in the last six months or so. after an 8% drop, you would have seen a gap of a run to the upside. change in sentiment,

but we think there is still the possibility for a bit higher on the bouts. the point here is, trying to much morebouts is difficult than playing the bigger trend, which we see as to the downside. scarlet: we have a chart that shows the s&p 500 over the past year and how we are at the 1870 level, finding some support. that triple bottoms in the s&p 500 are actually quite rare. the more times a given level is tested, the more likely it is to break. happen quites ar frequently. affect we are now back down to level now for a third time tells us that we may break it. we see 1820 as a quick stop, and then 1780 as our longer-term

target. alix: does that mean you are selling? jonathan: that is the name of the game, i think. for so many years, by the dip dipthe sentiment -- buy the was the sentiment. selling ons to be the rallies. the tougher question in our view is how high the bounce gets. scarlet: you have noticed the u.s. dollar is breaking out again, particularly when you look at a trade weighted dollar. jonathan: a lot of people look at the dollar index, which has been moving sideways in the past month. we have to remember that is weighted toward the euro and the yen. if you look at the trade weighted dollar, which is a more broad-based index, you are seeing the dollar breakout across the board. not many global currencies that

have strengthened versus the dollar. many have weakened materially in the past few months. we do think that the dollar index will probably follow suit, rather than rollback over. alix: thank you so much, jonathan krinsky. selling rallies, looking for a strong dollar breakout. coming up in the next 20 minutes, china's economy sees the slowest growth in a quarter century, unsettling investors around the world. are there signs of better times ahead? alix: solar power may be the future but the ceo of one our company says that funding is still in the stone age. scarlet: mohamed el-erian says there is a reason behind the global stock route which no one is talking about. he will explain. ♪

alix: welcome back to "bloomberg markets." i'm alix steel. scarlet: i'm scarlet fu. it is time for a look at the biggest business stories right now. madelight capital says it a new investment in macy's in the fourth quarter. that is according to a letter obtained by bloomberg. chipotle mexican grill says it will hold a national employee meeting next month and will close its restaurants on february 8 from 11:00 until 3:00 p.m. and the company will outline the steps taken to make ingredients safer. shares have been battered since an e. coli outbreak sickened people last year. revealingick costolo

his plans for the future, including getting you back in shape. he is launching a new startup that will be motivated to get users to work out. ventureslso join index to work with startups already in the firm's portfolio. let's go over to the markets where ramy inocencio has a look at the stocks moving on earnings today. health care and financial. united health care is up right now 2.7%. it has been up at this level for most of the day, as you can see. this is the united states biggest health insurer. it beat fourth-quarter earnings estimates. is growth and technologies. also offsetting a $720 million loss off of obama plant from last year.

another stock is bank of america. they are headed the other way, down by 2.25%. we saw this morning it started out in positive territory after it reported that it beat estimates for the fourth quarter on the order of $3.3 billion for the fourth quarter compared to $3.05 billion for the quarter. interesting knows about revenue falling. that is dragging down the stock, now down about 2.2%. edging just a, little higher by 1%. morgan stanley reported fourth-quarter profits that beat estimates on the order of $908 million. last year, they reported a loss of 1.6 billion dollars, so clearly a big turnaround year on year. versus beat, $.43

$.32. 3.3%.airlines is up by it says it will save about $3 billion in jet fuel costs for 2016 because of falling oil. in the past three months, they thought the price would be higher than it is. i was looking at the s&p airlines index. it turns out the entire index is up by about 1%. the pace of growth in china's economy is now the slowest in 25 years. china saw their weakest quarter since the 2009 global recession. scarlet: this is increasing pressure on taiwan -- china's government to prevent a slow down. it also create pressure for the new taiwanese president-elect. here to talk about the nuances is the class constant mary, the

director for the eurasia group. if she is a repudiation of the previous president, she is really between on the ties china and taiwan. what is her mandate now? all about domestic reform. taiwan has significant success and broadening its ties economically and politically with mainland china over the previous eight years but when you look at the domestic economy, now they are overly exposed to china. trade is not diversified and tsai is coming in to try to deregulate some key sectors in the economy. did,et: one thing that she over her predecessor, she said that taiwan begin 6% gdp, 3% on a plummet, and other goals. fell short of that.

now: will a china retaliate against taiwan, look under pressure does this put on taiwan? >> the immediate risk is rather limited. the team has been in dialogue and negotiations over the past few months to find a new framework for relations. that is the key issue. rejectsked jack's -- the guiding framework of relations up to this point. they are working on a deal. if that does not happen, we need to pay attention to the story. then the taiwan-china risk would go up. scarlet: how does taiwan fit into a chinese transition into an industrial to a services economy? taiwan had moved their manufacturing to the mainland. worrying story a for taiwan than it is an opportunity for china. a s era of complementarity

between china and taiwan are coming to an end. these companies are competing with high and taiwan companies, so this is one of the big challenges. it is reflective of where beijing is trying to go with their own economy. tsai is a technocrat, someone for whom politics does not come naturally, but has a global perspective. she got a masters at cornell, phd in law. how does she bring her strength to bear in her relationship with china? >> it will be interesting to see. she has long experience in negotiating trade and economic relations with the mainlanders. she has called herself the merkel of taiwan. i think she will put technocrats and even some officials from the ongoing party in senior spots in government.

i think she will try to have a good relationship with the mainland. pursues no way she could significant domestic reform if the relationship with the mainland is negative, and she understands that. alix: is there any credibility issue with china, that they have to do something specific to keep face? xi met with the outgoing president a few months ago, the first time since 1949. i think they had a strong signal that they are try to find a way to move forward. it will just be about the negotiations. scarlet: thank you for joining us. alix: still ahead, financing the renewable energy sector. ♪

scarlet: welcome back to "bloomberg markets." i'm scarlet fu. alix: i'm alix steel. solar power may be a modern concept but the ceo of the t rex

group founded the company because he found ways to finance renewable energy are still stuck in the stone age. scarlet: they hope to make renewing in renewables a major asset class. cory johnson and carol massar have more. carol: welcome to everyone from bloomberg television. this is the bloomberg advantage on bloomberg radio. we want to bring in benjamin cohen, chief executive officer at t rex group. he joins us in the studio. welcome. what exactly do you do? benjamin: we provide risk analytics in the renewable and solar energy sector. equity, debt, they all complex tax equity, which is the investment tax credit that has just been renewed by congress. carol: a real boost to those companies. what are the inputs into

such risks, sticking to solar? benjamin: typically, you have equity and debt. in solar, you can have the asset level, how much sun is shining, how much energy is being produced, then what are people paying for that. on top of that you could have debt, and then tax equities, so you have a completely separate piece of the capital stock. lastly, you can have bonds capturing those all the way up, and each needs to have risk analytics. cory: so you are not analyzing the value of the hard assets underneath it. benjamin: you can analyze the value from a pc perspective, but what investors really care about is what are the cash flows in what proved to of time, and what are the risks, and how do we quantify those? valuing things correctly. had the work that out before the

financing? benjamin: great question, and we have seen a lot of miss valuing of this stuff. which we sawdebt in the last six months traded down with the volatility that was commensurate with the equity volatility, when the assets should not have had that volatility. cory: the suggestion was that the assets were overvalued and the debt is not reflecting the risk. once the risk was better understood, the debt had less value, and maybe all along. benjamin: that could be true on the corporate level. their corporate assets on the whole, but if you look at bonds trading, sun edison debt that is backed by a portfolio of assets, how are they going to perform? if there is a power purchase agreement with an investment grade rated utility, your risk is paying for the cash flows that are already coming. carol: is a great timing for you

guys that the transparency has gotten better overall, in terms of renewable, alternative energy? benjamin: it is, but there is a long way to go. we are in the stone age when it comes to financing. thanks to come down companies like solar city, a few ipos last year. development has ramped up in a big way. but the last frontier is having finance commensurate with mature or in our opinion at t rex, could be even better. carol: is it mature? benjamin: it is not yet. david: what should be disclose that is not? benjamin: the rating agencies have put a lot of focus on rate risk. what happens if you have all of these pico scores, homes with solar on their homes doubt, but utility rates drop for a year, which they do from time to time. then are those going to be renegotiated?

the ratings agencies have identified disc as the biggest risk but nobody has quantified it. cory: because that would raise the company's cost of capital. correct, but are the market still needs to. you have issues like solar city week andut an ads last there was a 5% yield on the investment grade piece, 10% on the doublebb piece. cory: 10% yield, when even the -- which is to say, in the best scenarios, according to the bowls, solar city is break even, if not losing money, on every installation. benjamin: but they are also getting it back from the investment tax credit. they have this 30% lump sum they buy treasury, or it is paid for by the consumers when they are receiving in themselves. cory: it seems the other risk

there is that homeowners change hands every who years. benjamin: that is exactly right. will there be a renegotiation there? stuck toere is still calm people we have to go. benjamin cohen joining us here on bloomberg radio. thank you so much, carol massar and cory johnson. alix: still ahead, iran has oil markets spooked. we will tell you why, next. ♪

alix: from bloomberg world headquarters in new york, welcome back to "bloomberg markets." i'm alix steel. scarlet: i'm scarlet fu. let's start with the headlines with mark crumpton. mark: a new report says the u.s.

government budget deficit will rise to $544 billion this year, an increase over previous estimates and much of that can be blamed on tax cuts and spending hikes that congress passed last month. the report from the cbo also says economic growth will be slower than previously forecast. austria's finance minister calls europe's refugee emergency a bigger threat and the greek economic crisis. he says the eu should confront the issue with the same tenacity that was used to solve the greek financial situation. some european governments are now heartening their stance against accepting refugees after taking in more than a million last year. rival factions in the say they have resolved their differences. libya has been torn by violence since the uprising that ousted muammar gaddafi four years ago. the factions announced they will form a unity government.

talks between the rivals were brokered by the united nations. major league baseball has settled a class-action lawsuit over fans with game telecasts. the settlement offers a trial that was set to begin today. the case stems from their decision to bar teams from broadcasting or streaming games outside of their home market. details of the settlement are not available yet. dayal news 24 hours a powered by more than 2400 journalists and bureaus around the world. alix: what has the oil markets spooked? return of iranian oil, and it is the focus of today's the numbers don't lie. here are the charts that are boring the oil market. from barclaysus and points out how much oil is being stored in tankers off of the coast of iran. barclays has it at 46 million barrels. bey also say on shore could

around 30 and 40 million barrels. gettingts to minimize all the oil on the market, but nonetheless, that is a lot of oil to weed through. and it all comes down to exports, which is hard to track. fromost recent data comes the country itself. heyday, iran the exported about 2.4 million barrels a day. currently, you see a drop off in november, but as of september, 1.3 million barrels a day. iran really wants to export about 500,000 barrels a day, but nevertheless, it would still be well below the peak. barclays says iran may want to flex its muscles in the short-term, show the markets when it has got, and that would put downward pressure on brent. but the question is where all the soil will go in a world of oversupply.

in 2011, iran exported about a quarter of its oil to the eu, so it makes sense a lot of the oil would end up going there first. however, the real battleground is going to be in china. exports gof iran's to china but only makes up 10% of overall chinese import. so there is a lot of room for wiggle, so they have to compete with iraq, russia, and saudi arabia, which leads to the bigger question, how much will iran sell its oil for in order to steal market share away from those countries? is the official selling price of saudi arabia and oil to europe and asia. february,ght crude in and how much less iran is selling. about 80% when it comes to asia per barrel, four dollars less when it comes to europe.

so saudi arabia is competing quite a bit for market share. so will iran and that meeting the discounts in order to compete, and what kind of price war does iran want to get into? what does this wind up doing to prices? goldman was out again morning about $20 oil. if a lot of this iranian oil ends up in storage, that could push up the price, and that would mean $20 scarlet: yet again. a base caset is scenario, but is now popping up with more regularity. i wonder to what extent countries like saudi arabia, when opec members were meeting last time around, were thinking about the supply from iran coming onto the market. that was the backdrop all along. how much would i ran undercut everyone else. alix: iran has said please make room for our oil. saudi arabia, you cut your productions so that we can sell ours.

why would they take money off the table for them? so it was always a matter that they would pump no matter what. anything is better than nothing, but iran has come out and said they do not want to flood the market with oil, they want to do it in an orderly fashion so it does not have a huge downdraft on the price. nevertheless, this is coming online whether you like it or not. if the demand is not there and other supplies do not cut back enough, that is the $20 scenario, if it ends up in storage and no one is using it. will go onto floating storage, and that will push prices lower. scarlet: how credible are the comments out of iran? is that something that investors and traders say, we can take them at face value? tend to take when opec says with a grain of salt because it is all about saudi arabia, but you can imagine saudi arabia does not want $10 oil.

you do not see all of those tankers leaving the version -- persian gulf for asia or europe today. therefore, there is some credence to that slow but steady. overhang on oil. that is what we'll do it over the short term. scarlet: and it could come as early as next week. alix: they can begin exporting as of today. coming up, thinking of a secure password. the list of the top three breached passwords from last year. alix: netflix is aiming for worldwide domination. will the company's plans pay off? what investors should see when they report earnings later on today. scarlet: the supreme court will rule on the president decision to deporthe decision 5 million undocumented immigrants. how important this will be to the upcoming election. ♪

scarlet: welcome back to "bloomberg markets." i'm scarlet fu. alix: i'm alix steel. let's go back to the markets desk where ramy inocencio is looking a closer look at the momentum stocks from today. ramy: take a look at food and tech stocks. chipotle mexican grill. right now, they are on the downward trend, down 2.4% off the news that they are closing all of its stores on one day, february 8, for about four hours. the reason is they will be holding a national food safety meeting to talk about what it's doing to address that food scare that has been happening over the past few months, talking about how it's made ingredients safer, including its marinating process

in a farm to fork assessment and what may have made customers safe. tesla right stocks, now is up by about 1%. this is after a stifel analyst name the car company his favorite automaker stock. it haste, tesla said demonstrated it can jump from worst to first, and that same analyst saying that we believe tesla continues to hit targets, the giga factory coming online, and a new model in the spring, significant upside to the stock. interestingly, they reduce the stock target slightly. sticking to tech and going to netflix. netflix on the move higher by nearly 5.5%. since friday, it was down by nearly 3%, year today, 9%. now ubs says growth concerns are

probably overplayed heading into quarterly results, which will be out after the bill today. finally, shake shack. those shares are up by nearly 8%. --s is because william there william blair is raising his call to an outperform. he says earnings will probably exceed expectations. they are talking about how this lend asken sandwich may much as 100 basis points to the company. i'm not sure if you have tried it. scarlet: i saw the display but i had to go with the traditional hamburger. alix: thank you so much. turning back to the markets, overall, you are looking at volatility and turmoil not only here, but also in china. here to help us understand it is mohamed el-erian.

he joins us now from irvine, california. scarlet: thanks for joining us, mohammed. we appreciate you joining us. people are try to figure out what is driving the market selloff. a lot of talk right now from different corners -- jeffries saying that sovereign wealth funds, oil-producing countries have boosted their production, devalue their currency, and now we are looking at sovereign wealth funds releasing what they can and replacing the savings glut with an excess savings glut. i wonder what you make of this, this energy market margin call. there is some truth in saying sovereign wealth funds are no longer there to step in and buy when the market selloff. they are pretty special because they have what is called patient capital. they can underwrite a lot more volatility, and they simply do not have the same ability to come in. it is part of a much bigger issue, and that's a change in

the liquidity and volatility regime, which has change the attitude. it is no longer buying on dips but selling the rally. alix: what structurally changed to make that the case? themonths ago, it was buy dip. mohamad: central banks no longer have investors covered. either they are unwilling, in the case of the fed, or unable, in the case of china, to repress financial volatility. as that goes up, risk-taking goes down. second, the recognition that there is no patient capital to step in, and the broker-dealers are not willing to expose their own balance sheet to the extent they were before. it is the delusion of liquidity that we have had all over the markets. put together, not only do have increased volatility, which is here to stay, but you have the downward trend. scarlet: shouldn't other sources of capital replace those

traditional sources? there should be a host of options that can offer that kind of liquidity. mohamad: there will, but at lower prices. weree case, broker-dealers right in the middle of transactions. you are talking about end users, which move more slowly, and they cannot connected directly. broker-dealers still play a very important role. it will happen, we will get stability, but it will be at lower levels. you were talking about volatility, it seems to be specific to the u.s. if you come inside the bloomberg terminal, i have the vix index versus the euro dollar versus the dollar yen. you can see the move in the vix has been much stronger, meaning we have not seen these cross-border flows. what does this to you about our exposure? mohamad: you can either say the

vix is lacking or leading. i say both. certainly lagging segments that have been totally unhinged. if you look at the high-yield market, the oil market, the emerging markets, those are totally unhinged markets, where not only you have volatility but you have this concept of volatile volatility. is leading other market segments that still have not caught up to the reality that we have changed the volatility regime. scarlet: paul krugman wrote over the weekend about how oil has gone nonlinear. a 10% to 20% drop works in a very linear way, but a 70% drop has very drastic effects on produces extreme long linear behavior. it doesn't really show up on people's models. go through thee

risk selloff, are we seeing in terms of nonlinear responses? mohamad: you see it in the emerging world, very nonlinear there. even though there is value, very few want to step in. in other words, nonlinear means unpredictable. people do not like unpredictable elements. it also means the damage you create is no longer symmetrical. in the case of the oil market, the impact on producers, negative, immediate, the benefit on consumers takes a little longer to work through because consumers do not react that quickly. so you have this asymmetry in response time. all of which makes people want to reduce risk. it is not just a financial issue. if we're not careful, it can become an economic issue. alix: you have the rise of volatility, lack of liquidity in the market. what winds up happening now?

central banks cannot help us, do we just have to suck it up? mohamad: individual investors have to be sure that they have the resilience to navigate this, and then the agility to respond. good names get trashed and they create enormous value longer-term. in terms of where we go next, the bigger issue, this is something i have written a book on -- we are coming to the t juncture. nothing is predestined. if the policy response finally materializes and it goes beyond central banks, you can validate financial asset prices and take them higher. but if the policy response does not materialize, then we are looking not just at financial stability, but an even lower growth, but a higher probability of recession. iarlet: as you were talking, wanted to mention, crude oil sinking to their session lows.

$28 50 six cents, off by 2.9% right now. alix: why is this not 2008? mohamad: 2008 was scary because there was a payment in the settlement system. that was the most basic element. i trust that i will give you the money now and get settlement in 1, 2, or three days. banks no longer wanted to face each other, they no longer trusted the payment settlement system, which brought the whole system to a halt. we do not have a payment settlement problem. if anything, the system today is very strong and the banks are in better shape. so the risk has migrated outside of the banking system and gone elsewhere, so the shock now is much more financial volatility, lower risk-taking, but it is not the payment in settlement. scarlet: the counterparty risk

does not exist the way it did then. alix: unless you are a bank that has a lot of energy loans and are not diversifying. throughout the weekend, i was reading about how we are going to see another decline in the snp, short-term bounce, another selloff. doug ramsey coming without with a 10% klein call. what do you think? because there is a risk we have decoupled financial markets from fundamentals. those who were filling the gap, central banks, are no longer as effective or as willing to do so. so there is a risk of another air pocket, another 10% fall. that is certainly out there. as i say, we are now in uncharted waters because this volatility and liquidity change is something the markets have to price in. and price discovery takes a long time when you don't have broker-dealers who help you along the way. mohamed el-erian, thank

you for joining us this afternoon. author of the new book "the only game in town" which comes out later this month. live from the world economic forum in switzerland starting wednesday morning. don't miss our interviews with the biggest name in business, including the ubs chairman, the jpmorgan chairman, and blackstone chairman steve schwarzman, and marriott ceo arnie sorensen. all of that is tomorrow. a topt: netflix was performer in the s&p 500 last year. will its plan for growth sustain positive sentiment? ♪

alix: welcome back to "bloomberg markets." i'm alix steel. scarlet: i'm scarlet fu. netflix is betting big on plans for huge global expansion.

mother plan payoff? reports after- the bell. joining us now is porter bibb. netflix has built this incredible business off of increasing subscriber growth. every quarter, that is the number we fixate on. at some point, the music will stop and the market sees that it will be mature. porter: no more markets for reed hastings to capture. maybe china. inthe meantime --scarlet: the meantime, he has a lot to do. 140 countries where they do not have local content. they do not buy house of cards, or does the new black, they don't know what it's about. alix: what is the price tag associated with the local economy? porter: content costs are going

through the roof. they are making 31 new original shows this year mainly for the u.s. market. this is a daytraders delight. it is not a sustainable business model, and the little secret that he does not talk about, at $7.99 a month subscriber fees, most of us are subscribers and we do not bother because we do not miss that, and we keep going to it whether we look at it or not. refuses to release any audience figures or demographics of who is watching what. scarlet: so are you suggesting that he needs to do that soon so that he can bring in advertising? porter: either they need to keep raising price, which is a have started to do. a dollar in latin america and canada. soon in the u k and here. again. he also has to do something about advertising. has 70 million subscribers, and that is an advertisers dream

right now. alix: what kind of advertising model could work for netflix? not interrupting the shows, putting it at the front and the end. with the audience size and the demographics he has got, he is a serious threat to network and cable broadcasters. over thea lot of noise weekend about tv executives frustrated with netflix not disclosing any numbers. it does not rely on 18 to 49-year-old. that is what they claim, the secret sauce of netflix. andave better analytics demographics than anyone in the entertainment business. that's true, they had a tremendous cash of data, but i'm not sure that just because i might like a disney animated feature film two or three times every few years, that that is what i want to have a steady diet of. the entertainment business does

not work that way, it's unpredictable. scarlet: when you started this segment, you said perhaps reed hastings has to do something dramatic. takeover target perhaps? porter: the business model is not sustainable. cory johnson this morning on bloomberg go pointed out there were at least $10 million of off-balance wyatt -- sheet liabilities. if they are going to make 31 new originals, that will go through the roof. plus the competition is creeping up on them right now. scarlet: porter bibb, thank you so much. giving us the landscape of netflix. alix: we want to check in on the market. stocks at session lows. crude oil also turning lower. the nasdaq is negative. we will be right back. ♪

>> 2 p.m. in new york, 7:00 p.m. in london, at 3:00 a.m. in hong kong. welcome to bloomberg markets. ♪

>> from bloomberg world headquarters in new york, good afternoon. this is what we're watching this hour. the underlying questions over china's economy and the slumping oil remain in the background and bank of america falling the most after struggling to increase revenue. expense cuts have not gone far enough, some say. and could global expansion give netflix the boost it needs? bloombergo the markets desk. ramy: we have ended up near session levels, at session lows right now. let's together look at where we are right now. the s&p 500 giving up all of the games we saw earlier.