scarlet: good afternoon. : new home sales tumble falling at the fastest pace in four years. we will look at what is behind the slide. examines itset sales goals. lew'swater jack expectations for the g7. scarlet: we need to look at today's activities. need to go over to julie hyman. julie: we are seeing a bounce in stocks from the lows of the sessions here all major averages are still lower, but a dramatic

pairing of the losses which, not that long ago, were lower than 1%. we did get the weekly crude inventories report. distillate, hope that there will be a future drawdown in crude as well. we saw oil prices move lower after that. ago -- and ahile little while ago, moving to unchanged. the other market movement of the day has to do with the british ground -- british pound. it is moving lower compared to the u.s. dollar. volatility surrounding a possible u.k. exit from the euro. if you take a look at the

history and look at the range of the pound in previous times of 2008,ng crisis, 1982 and that is what some traders are looking at as guidance for what could potentially happen this time. alix: let's check in on the bloomberg first word news. mark: chris collins of new york and duncan hunter of california are now on board. hunter says we don't need a policy hawk as president. we need a leader. democratic front-runner hillary clinton hopes to advance or leave on senator bernie sanders end. mrs. -- on senator bernie sanders this weekend.

texas's highest criminal court the charge against rick perry. the charges involved perry publicly training and then carrying out a veto state funding for public corruption prosecutors. loretta lynch is defending the government's push to unlock an iphone used by one of the san bernadino shooters aaron lynch -- shooters. lynch said there's plenty of precedent for third parties to aid in the search for evidence. apple will tell a judge this week that the dispute should be handled by congress, not the courts. u.s. of brazilian and health workers are banding together to determine if the zika virus are causing babies to be born with a birth the fact

affecting the brain. it is one of the epicenters of of zika andutbreaks sufferers. , i am news 24 hours a day mark crumpton. scarlet: there are signs of inflation may be picking appear in the u.s., keeping the prospect of a hike in march on the table. again, are moving from extraordinary accommodation in this economy to something more neutral. the fomc said it will do that in a very gradual fashion. so for me, when i look at how the economy is performing and i

am looking at the consumer, at the labor market, we are at 4.9% unemployment. inflation looks to be stable. and moving in the direction of meeting the fed's goal. it definitely should be on the table for consideration. : our guest might disagree. is march on or off the table? for the fed,k march is still on the table. i don't think the fed should have moved in december and following up in march doesn't make much macroeconomic sense. but from the models they are using come in terms of the concept of the labor market tightening, based on declining productivity, i don't think there are real inflation pressures out there. i don't think it should move again. but in their mindset, it is up to debate.

scarlet: it's likely they may bring in more inflation data into the discussion. what about the data we are getting today? home sales down 9.2%. services, pmi also coming down below the 50 mark. how does the full into their conversation? the home sales numbers came out yesterday and they validated a big up to movement we sign the month of december by holding relatively flat area it was at -- relatively flat area it was at 0.4%. flat.ding relatively it was at 0.4%. there is a that much real disposable income out there. but for those people who are in the market for buying a home, and existing home is much more competitively priced than a new home. : you mentioned you do not

really see any signs of inflation, which is why you think the fed shouldn't have moved and shouldn't move in march. why not? we have seen better data. steve: again, the problem is we have seen better data in terms of the inflation numbers moving towards the direction of what their target is. but they have never quite gotten there. just because we see a temporary upward movement in inflation, it doesn't mean it is sustainable. alix: but do they have to get their? steve: we do have to get to that point, yes. it is hard to get earnings to grow in an environment where you have 1% inflation. and any little trip up in growth easily puts you into inflationary bias and that is what the fed is ignoring. scarlet: what is dragging inflation expectations lower is crude oil. alix: that is true.

steve: certainly, crude is a very important component of this. when you look at the broader base beyond crude coming out of the industrial materials have gotten in. we have gotten a bounce back in the last couple of months -- a couple of weeks, we should say, against a week about drop. we have to see if this is more sustainable. i don't think any of them are sustainable. that is one of the real problems. just because you get to burly back to 2%, even if you get there, it doesn't mean you are going to be able to sustain it. scarlet: let's look at oil as a leading indicator for investors. first, we are headed for a global recession. then, no, we are all good. go back to what it was. all of this is being driven by the price of oil. why are investors fixated on the price of oil on whether to take on risk? inve: a lot is happening terms of spread environment, especially in the high-yield

space, which is highly dependent on the perceptions of oil company credit based on the price of oil. in addition that there is a letter concern about the restructuring of energy-related loans by banks. there is a fear, if you end up with a substantial additional drop in oil, let's say $25 a barrel on a sustainable basis, then you could have some credit-related problems popping back into the economy. the death of the downturn are we just experience in the financial crisis was a credit story. blackberry -- people are very sensitive to the credit story. alix: does that happen, the scenario you just described? steve: do you think we get down to the $25 barrel in crude? if the fed raises rates in march, it is something we have

to consider is a realistic probability. against my backdrop, if we managed to avoid that, if we don't get there, we could be in an environment where we have $30 barrel oil on ongoing basis. scarlet: thank you very much. coming up in the next 20 minutes, target took on walmart this holiday season with more aggressive sales. but did they cut prices to much? to buys now the time european bank stocks? scarlet: and jack lew giving bloomberg and exclusive review of this week's g-20 meeting and tells us why this is not a moment of crisis for the global economy. ♪

al:ix welcome back. let'st: that had that -- head back to the markets. , net income down 14% but still more than double what analysts had been anticipated. $1.60 a share. shares are surging by 13%. costs.pany reduced manufacturer modules were lower than anticipated and it raised its forecast for margins. so those shares are rising. chesapeake energy having enough eight today. that doesn't happen -- having an update today. that doesn't happen very much lately. it announced it will be paying off its debts next month and

that has alleviated concerns. that has -- this has been a very volatile energy producer. is the second-biggest natural -- natural gas producer in the united states. target and tjx, target coming out with sales estimates. it seems to have happened at the expense of margins cutting prices on toys and offering free shipping on some online items. at tjx, we have seen off-price retailers do better. in particular, is still comparable sales in the fourth quarter double what analysts were estimating, of by 6%. it appears that increases happen across the board. different brands and home goods and tjx canada. deeper look at the target. scarlet: target inevitably as compared to walmart, but they tell different stories about

retail. target posted sales growth that talked analyst estimates, gaining 2%. target is the subject of today's "the numbers don't lie." line, hade white trailed walmart from 2008 to the middle of last year when it finally took the lead. the convergence this year came up walmart as a defensive play. traffic,omes to retail target is outperforming its peers. hass in north america dropped off at least the last three years. target is a different story. what is it doing to buck the trend? is increasing its capital spending on technology. it devoted mother and half of capex budget.it's capex

it would appear that target is finding a way to fend off amazon, which has been adding a drag on most retailer sales and same-store sales for target have recovered. prices, customers coming back from the infamous data breach, and wellness will bring back target to target. target projects earnings of five dollars $.20 per share to $5.40 per share. more insight, we will binder. dan you have a hold on target for three years. at this point, what would make you change it?

dan: we like the name is a trade on the print because we thought guidance would be better for next year. a lot of that upside in the guidance is tied to share buyback and a sold their pharmacy business to cvs during proceeds will -- to cbs. -- they sold be their pharmacy business to cvs. usededs will be internally. comp store sales are fairly anemic. you have to factor in next dance growth in the coming year. growth -- gross margin pressure was evident in q4. there are still headwinds. i know it was a great: things can go right, but it is fairly

valued at $78. the analystve meeting next week and we will stay tuned for what they have to say then. word down 60ins basis points compared to last year. is it better than a walmart in charge better than because of the tarjet factor? dan: target is generally a little bit higher than walmart. but when you factor in the 5% royalty art which you can get canugh it or debit, they actually at times be lower than walmart. walmart and target are very competitive with amazon. i think they are trained to keep pace. it was interesting to see walmart ease up on pricing this holiday and target went at it more aggressively.

walmart, store sales were relatively flat. target came in at the upper end of their flat. but really at the cost of margins. so you have to really strike a balance. we are neutral rated on it. we look forward to hear what they have to say at the meeting next week. pretty: they are all promotion happy, walmart, target, anyway look at. do we ever start to see margin expansion at these retailers? dan: i don't think you are going to see gross margin expansion of any significant amount at target. i don't think that is really in their longer-term plans. didn't really comes down to promoting smartly -- it really comes down to promoting smartly. walmart made it pretty clear that during this period of heavy investment, they have to let gross margin of or the bottom line would be more devastating in terms of results. but i think that is temporary.

you will see them step up their level of rice investment in the back half of 2016. scarlet: good stuff. thank you so much. hold rating on a target. alix: our banks a tactical by rather than a strategic one? the bank selloff could be overdone. that's next. ♪

crude its overdone as you see in that chart. alix: here is the church used to make the case. we brought in abigail doolittle as well as well to round out this conversation. first up is a chart that shows a widening gap between european bank stocks performance, which is any much as you expect, down, down, down, and some leading indicators. it takes an average of u.s. and european lead indicator to you can see they are holding up much better than share prices. is primus line european u.s. lead indicators --

is pretty much european/u.s. lead indicators. abigail: i'm skeptical on this call overall. it is dangerous for analysts to say we are having a tactical by opportunity in a dangerous environment, but not recommending them over the long-term. i would say, when we look at this one chart of the european cds versus equities, what happened this year, interesting, is that the equities sold off well before the cds blew up. and pass crisis situations, it will be cds that will skyrocket before equities. this may suggest there is near-term situation in banking were there could be the trade . but again, i am a little skeptical. alix: we have cds spreads we

don't normally see you and you have banks tracking the oil rise, which, again, is a little bit unusual. this does not count the last few days we have seen in selloff in oil. european banks talks falling much more than the oil price, which is also unusual. is, you have a fall in oil, which could hold -- hurt your nonperforming loans. that could lead to inflation expectations and rising credit spreads and bond yields, news -- which could all be a noose around the bank's neck. you are pinning a lot on the price of oil as well. who really knows where oil is going to go in a month versus next year? you could have a lot of loans on your books that can help offset. scully: you look at charts all day long. scarlet: youck --

look at charts all day long. you were struck at how people go out of their way to make these calls. abigail: yes. he is making the idea that we see a near-term break on oil and the banks will come back up to meet oil. when i look at that chart, i see a strong downtrend in oil and the possibility that oil can keep going lower and banks, too. scarlet: still ahead, what will we see out of the g-20 summit later this week? treasury secretary jack lew told us what to expect. ♪

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obama says, in the weeks ahead, he will fulfill his duty to nominate a supreme court justice. thepresident made cotus blog.t on s republicans say the next president to decide. speaker paul ryan told reporters today that lawmakers have the votes to block the president's plan and overwrite any veto took close guantanamo bay. and ensure that the prison remains open. the united states and china are close to agreeing on new sanctions for north korea. both countries want to punish the north for recent nuclear test and long-range missile

securityich violates council resolutions. haveit's public schools reached their borrowing limit. that means officials will not be able to take on more debt to pay bills when money runs out in april. michigan lawmakers are working on restructuring some of the city's $2 billion in obligations. global new story four hours a day powered barry -- powered by our 2400 journalists around the world. : policy makers from the world's biggest economies are gathering in shanghai this friday for the g-20 meeting, finding solutions for global growth taking center stage. u.s. treasury secretary jack lew at a conversation with he might nott outline the specific goals.

: we take the commitments we got in the last , for countries to refrain from competitive devaluation, and push it a little bit and have that be some be that is heard -- something that is heard outside of the meeting room, but to reassure the world that it can be taken seriously by the 20 largest economies. taking the about less communicated and marking it up? : the weakness in demand globally cannot be solved by just looking to the united states. i think we are doing pretty well. they think we are doing pretty well. but you can't count on the united states providing all the demand for the world. cannot be the consumer first and last resort. there has to be more.

countries with big economies, regions with economies, they need to use policy tools so that, when china looks at what it can do, it looks at how it can stimulate consumer demand. in a country like japan, where there have been two decades of slower negative growth, they are careful not to make the mistake of stopping the economy with fiscal policies that put the brakes on, instead using policy to drive things forward to fiscal policy cannot drive up -- cannot solve all the problems. real a tory,s it's sun's markets, some is structural reform. addressed.to be by fiscal and monetary policy are important tools. when used against her, it is powerful. that combined with shared information about his change rates, having a clear understanding that it is acceptable to target exchange

rates to gain unfair advantage outside of your country, that is a beggar thy neighbor strategy. that is a question of who gets more of the existing high. pi it doesn't grow the pie. e. they want to make clear that -- there is a lot of speculation in the world that these conversations could lead to different kinds of decisions, underscoring that that is an important principle. i think it is pretty important. sayingwe hear economists the problem is really a demand problem at this point. what could be done? to you hope this communique or the agreement at of the g-20 has specifics about how global demand could be stimulated? : there are general

principles that apply in different countries in different ways. and there's always a lot of the words.about no country wants to sign on general words that it will be behaving inconsistently with with. -- inconsistently with the so getting some meat on the bones is important. i don't think this is a moment in time when you are going to see individual countries make the kinds of specific commitments that have been made in some other context that has been marked by real prices. this is not a moment of prices -- of crisis. you have real economies doing better than markets think in some cases. you have the future that could be in the last very much by the kinds of policies i'm describing . the idea is how do you avoid having things go to a place that

you don't want them to go. that is a different conversation then what do you do when you're in the middle of a full-blown crisis. the only time you see communiques with that kind of detail is once you've gotten beyond the point. john hoping the kind of conversation i'm describing actually moves the dial. let me put it this way. if the conversation were to go the other way and you were to see some reticence to make a commitment to refrain from competitive evaluation and not take a little bit of a step further, that would be a cause for real concern. if one country were to move in that direction, there is a triggering effect. that would be a bad thing for the economy. it would grow the economy for sure. and it could lead to a very negative ramifications, both economically and geopolitically. i think this is an important moment. these kinds of principles really matter. there is no substitute for seeing your counterparts

face-to-face and talking to them. david: and the world will be watching to some extent. investors will be watching. are you concerned that expectations may be too high about what the g-20 can deliver as a practical matter when it comes to growth? : don't expect a crisis response in an on crisis uncrisis an environment. are in a crisis, you do different things. then meetings during the financial crisis had a different character. i had conversations with counterparts that had the sense there are serious attention given to how to address the materials we're discussing. and by having this conversation, we can have better outcomes. does that mean that we will have how each country will be doing? you rarely get that kind of

insight. but it is on -- but it is not reasonable that getting out of this we will have a more reasonable understanding of what the future may look like. and that is an important thing. you look at the world's reaction to the policymaking in china over the last two months or the last months, since august, it underscored how communication was he -- communication of policy is critically important to have the market and other counterparts around the world know what you intended what you can be expected to do. it is not just a problem, a challenge in china. it is a problem as each of us undertakes policy and these meetings are a chance to work through some of those issues. x: that was arduous of interview with secretary jack lew. ♪

rami: the nasdaq. his losses but it is now -- the losses.as pared its taking a look at a few movers, it is an earnings story here as first-quarter revenues came in different than expected. the biggest supporter for sales

came from mobile. 61% of all visits came from mobile. amazon is also announcing its partnership with southwest airlines. instead of using a credit card, you can login while in the air and use a form called pay with amazon to order wi-fi and movies. amazon is down 20% year to date. if this can help amazon do a bit of a turnaround this year. scarlet: you are watching bloomberg. alix: this is your global business report. scarlet: saudi arabia standing firm on announcement it will not cut oil production. iraq says it is sticking to

production fans. says bostick was found in snickers -- mars says plastic was found in its snickers. scarlet: looks like a talk in the cut of production was just that, talk. relief rally, food is down. iraq is now saying it will maintain his lands agreed upon back in january. -- >> we are maintaining our plans. we are not doing something surplus. our plans were decided in generate 2016. we are me -- in january 2016. remaining with our plans.

airbus tells us the company is forecasting stable earnings this year, even in the oil climate. even at $50, $60 a barrel, i can tell you these new aircraft make a difference. we still see airlines looking for the new generation airbus. scarlet: mars is recalling canned of bars in 55 countries after a piece of plastic was found in a snickers bar. to as traced back

production site in the netherlands. facebook "like" button is getting more attention. users now have five more choices. facebook is releasing alternative buttons globally as it works to become a destination from -- for more than just like updates from fans. scarlet: stocks have been bouncing back from their worst january in years. alix: corporate buybacks. situation isl about a month or so companies report earnings. there is a blackout restriction on repurchasing shares. of hearingthe month

has been generally a stronger month. if you look at the seasonality pattern of ross the year, you find that months when companies can repurchase shares is usually a stronger month, mark barton only when there is -- more importantly when there is macro negative news. in this case, it was about what happened in china, concerns about falling oil prices. nath february, when companies have been repurchasing significant amounts of stock, the author jason's -- the authorizations are at high levels. that is a key dynamic in the market from the money flow perspective. >> you talked about the economic surprise indices and gauging those are the key economic indicators you look at? >> we think about employment. we see unemployment has been falling clearly.

consumer confidence remaining pretty high. auto sales,djusted retail sales broadly speaking, the housing market. all of these metrics we look at as a source of -- none of the data has led to the run up in the last two weeks. it is all basically buy back to >> the issue -- by back. >> the issue fund managers are facing is talk about recession. theou have the view that data would suggest the economy is growing and 69% of the economy is the consumer, then you focus on issues related to the consumer. those are your key drivers for what is happening in the world of the consumer. clearly, the industrial side, the economy is in a difficult position, particularly if you think about the oil price.

oil price hasin led to a declining capital spending by companies, reducing the amount of revenue for companies in industrial areas are the materials sectors, which are providing the services. that's hard. that is a challenging economic environment. but that is 12% of the economy. 70% of the economy is in other areas and that is pretty strong. as a result of that, we look at what is driving earnings. those are generally led by other sectors and that is why earnings are likely to rise this year. costin.at was david crisis. south africa in the finance minister unveiling a budget today. but is it enough to keep its most developed nation from falling into junk status?

scarlet: south africa is fighting its way out of debt. it didn't convince traders that the nation. move -- that the nation could reverse such a move. erik schatzker went to cape town and interview the cio of future growth about what a debt downgrade would mean for the country. pravin: we had the disaster in december were the resident what overboard in his political aspirations. they're doing everything they

can to get on the right path of a three-year of you. on the revenue side, you can raise taxes, get the revenues up during but on the expenditure side, it is a lower -- a slower process. my get tells me they will lean heavily against the downgrading and do everything they can to stop it. : debt to gdp has doubled since 2009. does the president understand the indications of this crisis? andrew: it is hard to tell. in many countries, it is always the department of treasury versus the politicians. he who holds the purse strings all the a lot of power. we witnessed a real realignment . they went to the constitutional court and agreed to pay back a lot of the money. whether the president it's it or not, it has always been a

consensual, aligned organization. my guess is the anc is very much aligned. they understand that, if the cost of that goes up 200 basis point, they cannot run the national health program. they get it. i believe treasury has always gotten it. erik: is the downgrade priced into markets already are not? andrew: we had 200 basis points in two days. that is the market rebelling against zuma's actions. if they cling to power at all costs, brazilian style, yes. i think the downgrade is already priced in. if you look at south africa's yield, it is downgraded already.

the reality is that foreign investors hold about a third of rand. on balance, they will be net sellers. 200 basis points may be over the cause -- the course of the cycle. cheap.he rand is are foreign investors missing out on an opportunity? andrew: the rand is cheap and ought to recover. the big issue for the downgrade -- we are looking at very poor growth prospects. the commodity cycle, global 1%wth, we are looking at sub growth rates and some people consider it recession. i don't buy it. a weak currency should imply higher growth. i'm kind of inclined to believe in higher growth.

it still goes to the question on whether the south african bonds .re a buy otherwise, the yields are not unattractive. 10%, inflation at 6% in the long term, not a bad yield if you can take currency volatility. erik: the rand has been on a five-week volatility. andrew: if i had to make a choice, i would probably be a net buyer. i thought the rand had done most of the work before the blowoff in december. we have been having a bear market in the rand since 2012. net net, i would totally be a was erikx: that schatzker speaking with andrew

kanto -- andrew canter. up, the head of u.s. equity and quantitative strategy will join us for a deep. on the markets. will we approach bear market territory? ♪

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

from bloomberg world headquarters in new york, good afternoon. i'm scarlet fu. alix: i'm alix steel. u.s. stocks have her nude selling in global equities. markets are down for the second session after financial shares slump. scarlet: bernie sanders is leading calls to break up the banks but jpmorgan ceo jamie dimon says that would be a bad idea. why he says bigger is better. for: investors hoping kolmar markets in 2016 may be disappointed. theuk's potential exit from european union and uncertainty around the presidential election will only make things worse. want to go to, we the markets desk where julie hyman have the latest, and that means tracking oil prices. there has been a dramatic

turnaround in prices today. at goinge a faint higher and then came back down and then decidedly moved higher i will go. -- a little while ago. we got the weekly inventory report showing a build in inventories but a drawdown in other types of refined products. oil has turned higher, up by .75%. take a look at the bloomberg. this is the weekly change in crude oil inventories. you can see the take-up for the second week. then look at gasoline inventories and the decline we have seen. i believe we have a chart of that as well. we see the decline in inventories and gasoline, which implies an increase in demand, and also implies that eventually you may see a drawdown in crude inventories as well. as a goes, so goes the rest of the market.

the s&p 500 has not turned positive but has definitely bounced off of the lows of the session and paired its declines considerably. all three majors we have seen a similar trajectory today. all three were down more than 1% earlier this morning and now have paired those games back. api: we can all thank mthe with the inventory numbers yesterday. julie: it is fascinating that we keep on seeing a reaction to that week after week and then we get government numbers that contradict. alix: so what has not moved today? still seeing stocks down. they had not recovered entirely. still some groups under pressure. notably, industrials are lower, general electric, boeing are heavyweights after disappointing news on the earnings front from airbus.

asset managers are also week today. black rock, franklin resources. we talk about the big banks falling, but these companies have been suffering as well. .ame goes for the brokers morgan stanley, schwab, morgan's dax -- goldman sachs all down. alix: thank you very much. scarlet: let's check in on the first word news with mark crumpton. mark: the nevada republican party says last night's caucuses set a record of more than 75,000 voters attending the event. that is more than twice the 33,000 who caucused in 2012. democrats have seen stronger turn of numbers. they reported more than 84,000 caucus-goers last saturday. the obama administration has been tacit about heading of potential fraud in the affordable care law. that is one of the findings in a

report by the gao. the report was obtained by the associated press. the gao stopped short of alleging widespread cheating but says the administration has struggled to resolve eligibility questions. secretary of state john kerry and russian foreign minister sergey lever up spoke about the syria.d cease-fire in the two discussed the coordination challenges the country's face ahead of a cease-fire that is scheduled to take effect on saturday. appeals committee is reducing the ban on outgoing leader sepp blatter from eight years to six years. it will do the same for uefa leader michele platini. an internal briefing reviewed by bloomberg news reveals the hopefuls are being asked to praise a fair and transparent election process, among other things. airlines are not taking any

chances with a midwest storm. a have canceled more than 900 flights going in and out of chicago today before any snow started falling. forecasters say up to 18 inches could fall in the great lakes region. global news 24 hours a day powered by our 2400 journalists and more than 150 news bureaus around the world. thank you. turning back to the financial markets, oil is the leading where risky assets and stocks go. paring their are losses as oil turn positive, even as strength persists. alix: our next guest says that we will have to come to terms with low oil after all of that excess supply. david leibovitz is with j.p. morgan asset management. david, do you think lower oil prices have been priced into the market? david: we are getting there,

people are coming to terms with the fact that there is too much supply. oil prices are going to be lower for longer. in, that gets fully priced you will see the correlation between equities and oil prices begin to break down, or at least revert to where it has been historically. about this, how oil prices should be reflecting theexcess apply close to demand out there, but it has become a proxy for global demand. alix: you could make the argument that a shale well is much more of a detriment to the global economy than someone buying an iphone. david: with respect to the u.s., if you look at oil imports as a percentage of imports, it has come down. that means when oil prices fall, there are ramifications for the here as well. it is a blessing and a curse, we have developed shale and fracking. both upsides and downsides. we are more dependent, but we

are more at risk when prices take a tumble. scarlet: so we are adapting to a new paradigm? yes, once we factor in the prices will be lower for longer -- the u.s. is now the largest producer of oil in the world. this will characterize the next couple of years. in the meantime, you have noted that markets have divorced themselves from the underlying economy. chart that showcases how main street versus wall street expectations are in opposition. the green line is the citigroup economic surprise index which shows data coming in we could than expected. the white line is the university of michigan consumer sentiment. consumers assumed to be holding up. why the gap? david: i think it has to do with expectations. consumption look great, sentiment was high for a few years, but markets have now hit a bit of a stall. much more important for

the stock market than it is for the underlying economy. people need to understand the lower oil prices is a net positive for consumers. whether that money is being spent or saved, that is irrelevant. more money in people's pockets in consumption economies is definitely better than less. alix: when we did see that rally, some said that that was truly to do with buybacks and nothing to do with economic data. what do you think? david: investors are looking for high-quality names that will provide them with protection. what is most important to me is we need to see earnings growth coming back. everyone is talking about energy and mining. if you are going to exclude pieces, you need to exclude them from the pies -- price index. scarlet: but we have been doing that for years. after the financial crisis, we were talking about earnings ex-

financials. alix: and how can you divorce the two when a lot of banks have energy loans -- there is some contagion that we cannot ignore. david: i think this is what you have to employ active management. this is where stock pickers should be performing. scarlet: speaking of how expectations are driving the market, why was there so much optimism built into tomorrow's g-20 meeting? a sense that there might be an agreement reached for a one time yuan devaluation and that was all the problems. where is it coming from? david: i'm not sure. these one time things will not solve the problem. this reminds be of europe five years ago. we need to think about fundamentally what the issues are, and employ the necessary reforms to make sure they are not issues down the road. alix: great to see you, david. up, jpmorgan ceo

jamie dimon says bigger is better. he believes his bank is not too big to fail and cannot explain why. and that is worrying investors. many executive still remain skeptical on oculus and whether the technology can deliver real returns. scarlet: one analyst says the assident election presidential election will keep stirring the pot this year in the markets. ♪

alix: welcome back to "bloomberg markets." i'm alix steel. scarlet: i'm scarlet fu. alix: time to get a look at the biggest news in business right now.

to keeps struggling their bonds from falling to junk. the outlook for the rating is negative which means more downgrades could be ahead. moody's is the last of the ratings company to strip brazil of its investment grade. scarlet: facebook is replacing the like button with other options. and they started making other responses available in these countries, calling them alix: reactions. in jd power has identified the most dependable auto brand. thaneport questioned more 33,000 owners of 23 model year issues they have had over the last 12 months. the least dependable, dodge, ford, and smart. owners of those vehicles reporting the most problems. i love those smartcards, you can park them anywhere.

jpmorgan is trying to escape the market clouds. ceo jamie dimon answered questions from analysts at the banks investor conference. alix: mike mayo was there and he is with us this morning to explain his questions to mr. dimon. >> my question was why is it good to be a big bank? the presidential candidates, you have the movie and the public still dislikes a big banks. why is it ok to be a big bank? 787 is ar was because safe airline. i thought he should've elaborated on that more and could have given a better answer. i think he struck out on the answer. the priord say in seven hours of the investor conference was that, number one, they have so much capital, $350 billion of capital to absorb losses.

that is a time the level of their actual energy loans. he mentioned consistency. jpmorgan has some of the consistent -- most consistent earnings of any of the banks in the last decade. they are holding cost controls consistent but they have a $9 billion technology budget, -- stephanie: i'm so confused. you are the debbie downer when it comes to banks, but you are singing their praises. a month ago, they had $5 million extra for oil reserves. they certainly messed up there. stephanie: how is that a mess up? were behind in their conservatism and now they are ahead. i heard you earlier say that oil is down 8% the last couple of days. that is a tough spot to be in. now they are ahead of that, they have call center control, they

have the foundation. manydid say long-term times yesterday. short-term is tough, long-term is good. from thisne away company doing better, whether that is oil, stocks, or capital markets. stephanie: when jamie dimon says that he will be buying his stocks all week long, you agree? >> absolutely. we have had a top rating by since august. before that, i'm not sure i ever had a top rating on a jamie dimon company. let's head over to the markets desk where julie hyman is looking at the auto companies today. julie: ford and gm are falling today. to do with a call from an influential auto analyst at morgan stanley. he says the automaker's profits are more at risk under recession scenarios than the automakers

have estimated. first, take a look at the stocks, both of which are declining. auto suppliers are declining as well. starting to see a ripple effect in today's session. take a look at the bloomberg. i made a chart of seasonally adjusted auto sales, the rate going back 10 years. this is the recession where we saw the auto sales numbers dip to around 10 million. saw jonas says that if we this number fall back to 13 or 14 million at an annual pace, we could see profits be put at risk, but the automakers have said it could fall to 11 million or even lower before you would see a chunk taken out of their profits. interesting discrepancy here between these two estimates, and that explain what we are seeing in terms of the stocks, even though we are far above both of

these levels. so this would be under a hypothetical recession scenario. in terms of movers, we have to mention avis budget. the company forecasting 2016 earnings that trailed estimates. it blames it on currency exchange rates as well as increased spending it is doing to improve customer experience. scarlet: how do you improve a customer experience when you are a rental car company? julie: pay the people more, maybe better offices. still ahead, virtual reality. a new frontier for businesses. why companies, not consumers, are starting to adopt the new technology. avis maybe? ♪

scarlet: this is "bloomberg markets." i'm scarlet fu. alix: i'm alix steel. facebook invested in

oculus, many remain skeptical about the tangible impact of the technology. cory johnson and carol massar are on bloomberg radio with more. carol: thank you so much, we welcome everyone on bloomberg television. carol massar along with cory johnson. we want to talk about augmented in virtual reality. bill briggs is with us from deloitte. we have been talking a lot about it from the radio today, folks on from carnival using virtual reality to give you doors is under different crews lines. it is more than just games. then the next six months, consumer angle will be covered. a lot of entrance coming into the market, but how is it used beyond entertainment, communication? how do we use it for health care, marketing, field service? -ificationenterpris

that will be driving the consumer use in the next six months. there are questions about how much people can tolerate it, whether it is too exhausted. i wonder what the business implications could be. firsto you imagine the business implications for virtual reality could be? >> we are seeing a lot around training and education. how can we simulate an industrial company having a machine that might take up an entire room and the safety element is important, how do you get people up to speed to do servicing around it? may be presentation, customer service, things that takes reps to be able to do. you can simulate that in a controlled environment.

it could ramp up the education and entertainment. industries? overall mantra is every company is a technology company, so we are seeing it across the board. training,il and gas, manufacturing, different use cases and financial services. when you move into augmented reality, how do we do customer augmentation service out in the field. it's an interesting mix. carol: caterpillar was using virtual reality to get a feel of what the cockpit feels like, how it would work. who is going to be the biggest players, facebook, do we know yet? one of those players, you would have to say, will dominate the ecosystem. tipping point, we see pretty

bounded use cases. you have immediate volume where you can wait for the products to had a, -- i wish i crystal ball to say who to bet on. carol: any idea when that tipping point happens? say we are seeing these investments already. andbeautiful thing about enterprise inns, we don't need to have the multiplatform workout of all of the potential uses that it could go to hear for the enterprise, we just need how do we make our people out doing service on an oil rig better. that is something that can justify the investment as we wait for the broader market to mature. carol: imagine virtual reality and run working together. >> one of the trends we have is

about autonomic platforms. we see more and work becoming automated and it plays directly into this. business?reimagine and there is one take away from the report is that every company is a technology company at its core. cory: does the expense matter? factyou talk about the that flight simulators cost millions of dollars each, maybe this will end up being a lot cheaper for companies that are doing things -- >> both sides of the equation, right. driving experimentation and exploration today. the overall impact of value makes it a no-brainer. carol: companies have been reluctant to do capex in a volatile environment. will they see the opportunities here and spend? it is a combination of how we retool the underpinnings of i.t., how we get more out of the investment from the past, and

how we can get more from augmented reality. carol: something we will be .atching very interesting. bill briggs, thank you. thank you so much, carol massar and cory johnson. alix: still ahead, bob diamond weighs on the issues that barclays may face in africa. ♪

alix: from bloomberg world headquarters in new york, welcome back to "bloomberg markets." i'm alix steel. scarlet: i'm scarlet fu.

let's begin with the first word news with mark crumpton. president obama says he will will fill his duty to nominate a supreme court justice to replace the late antonin scalia in the weeks ahead. he spoke at a white house for run a short time ago. >> the constitution says that i candidates for the supreme court when there is a and that the senate exercises its constitutional role in advising and consent. i will do my job. this comes after republicans on the senate judiciary said they will refuse to hold hearings even if the president nominates someone. they want a nomination to come from the next president after the november election. donald trump has picked up his first two congressional endorsements. chris collins of new york and duncan hunter of california are now on board. not need a we do

policy watch her president, we need a leader. he previous he supported jeb bush, who jumped out of the race last weekend. hillary clinton hopes to advance her lead on senator sanders this weekend. polls show she is leading by more than 20 points heading into the south carolina primary. a big loss for the senator may make it harder for him to recover. spacex will attempt another launch today, the second of 2016. the company is looking to put a boeing broadcast satellite into high earth orbit. it will send television broadcasts to customers in india, indonesia, and the ,hilippines on behalf of ses the european satellite giant. alix: thank you. earlier today, our bureau chief

jason kelly spoke to terra firma capital partner chairman and cio guy hand in berlin. scarlet: jason began asking about the overall mood of the conference. of 2007, ins me munich, around november, we had the biggest conference we ever did. of course, that was followed up by the crash. that thespeech saying bankers would go back into their baskets, like dogs, and received dog biscuits. i still have dog biscuits. i will probably eat them one of these days. >> are you expecting more biscuits in the next couple of years, how volatile is the market? >> very. it is not really underpinned by any real look fundamentals -- any real fundamentals. it will flow around based on news that happens. >> how do you, as a private

equity investor play that? isn't that good for business? >> for our portfolio business, volatility is very difficult. even if you take a business as local as our garden center business, we import a lot from china, most of them coded in dollars. so the products are coming in more than expensive. on tou cannot pass that the consumer. from the business point of view, volatility is not good. from an investment point of view, it can be if you are lucky. there was a deal at the end of did 85ar where we million, somebody else bid 84 million, and we both decided we cannot close by year-end. the seller said that we needed to close and settled for 60. the buyer benefited from the volatility and the fact that the seller was trying to clear their books of an old deal in an old

portfolio. >> what about financing deals? we have heard some bleak pictures from your private equity brethren. can you get financing for deals if you want to buy something? quality, you can. the cost is not a lot higher. is lower, so you can borrow less. the biggest question is it has to be real high-quality. if you have something you are ,elling, which is first class then it can get financing and be sold at very high prices. in fact, higher than in the last year. but as soon as you move into anything mediocre, way down in terms of financing. if you have something that is poor, nobody wanted at the moment. do you feel like you will be able to sell some of the things that you have talked about is there a market out

there, willing buyers? >> definitely willing buyers, yes. you have something where you spent several years affecting. that is very sellable. work in progress, nobody wants to pay for it. >> what is the mood for investors? better than 400 limited partners, sovereign wealth funds that you rely on for funds. what are you hearing from them? of not are scared investing because they are suffering from either negative interest rates are getting no return. but there also scared of investing and looking stupid in a years time, if the markets are way down. fear, unhappiness. it is a very scary market. speaking of something that is pooping the market, talks of the brexot. you have been in favor of

staying. -- brexit. how do you feel about that now, have you look at this as the rhetoric heats up? >> i think it will be a close call. it was looking much more likely that the book would be to stay before boas entered the arena. he is somebody with an enormous and not of energy, and incredible self promoter. the risk for the camp that wants to stay in his that boas galvanizes the lead cap, acts as a figurehead, and you end up with a population voting like an boas, andvoting for not thinking about the tragedy that would happen it in europe. >> how much would it affect

ipo's, m&a, leading up to it? >> i think it would affect it more, in the same way that the u.s. election will affect it more as a gets close. it's a very scary year. you have the risk that the u.k. leaves the european union and you have a u.s. election where trump is continuing to defy expectations and people in europe have no idea what that would bring. in france, you have the rise of le pen. around the western world, you have a tremendous political uncertainty. the only place which seems certain is russia with putin. scarlet: that was guy hands speaking with jason kelly. applesoming up next, is battle with the u.s. government a help or hindrance to the brand's reputation?

we should point out, that was bob diamond speaking with jason kelly. actually, we are going to bob diamond. we are going to get this together. we have a conversation that erik schatzker had with bob diamond in cape town. >> barclays is a terrific platform. 11 countries, top three in nine or 10 of those countries. ,arclays has done well particularly in getting synergies from clients, synergies from products. the credit card technology that was developed in the u.k. has come to africa, as an example. they have done a terrific job connecting corporate in the u.s. and the u.k. who have business in africa here. >> you make it sound like a business they should want to keep. >> the question is what is the problem you are trying to solve. it is not his barclays africa a terrific business, it is, is a

global bank headquartered in the u.k. the right owner from a capital point of view. lisa: is it? i think today the best model is a regional model, not a global model. the issues of berkeley face around their african ownership is the regulatory requirement to hold 100% capital when they have 62% economic ownership. it is a tax on the global balance sheet as opposed to just a domestic balance sheet. some of the impact on the earnings -- the last time i saw barclays africa earnings it was a pretty good standalone business. youu are building -- erik: are building a regional banking tot here but it is hard persuade investors about the opportunity. only measuring by the stock

price, of course. the enthusiasm for anyone with a medium to longer term of you for investing in africa has not really changed since we began investing here. the majority of our investors have either held a position or added to their position notwithstanding the headwinds of the commodity cycle, taunting pulling back a bit. bit.ina pulling back a the demographics, the business orientation, all continues to be positive. erik: you almost bought the zambia bank when the currency was tanking, yields asserting to record highs. you have an appetite for risk. were are you going next? .> well, we did buy that we hope that it closes in the next couple of weeks. we think that was a good opportunity with a weaker .urrency and lower prices

this was a time when we like to accelerate our investing in africa, not pullback. erik: you have the capital to do it? >> in seven countries today, ideally in 10 to 15 key countries. one of the country we are in today, nigeria, we are not at majority yet, so we have more investing to do. we believe this time is very good. alix: that was bob diamond speaking at the bloomberg africa business and economic summit in cape town. does apple'sng up, battle with the government help or hinder its reputation? he has held positions at pinterest and other areas. now he is getting into the smart technology clothing game. scarlet: and concerns around chesapeake energy. the stock is surging 20%. what is behind a turnaround? ♪

scarlet: welcome back to "bloomberg markets." i'm scarlet fu. alix: i'm alix steel. back to the markets desk where julie hyman has the latest looking at the winners in the rarely. julie: we've been talking a lot about chesapeake energy. there were concerns about its cash position but it seems to be alleviating them after some extent, they said they would be paying down have a billion dollars due in debt. it had signed agreements to divest 700 million dollars in gas fields and other assets. 200 totial estimate was $300 million. she near energy has been on a run as exports began the first exports scheduled for today of lng. shares have been doing

well as of late and rising again today. we are hearing some earnings reports from paris companies. i think that should be the chemical company, although the defunct circuit city is apparently also rising. also seeing first solar game today after that company's earnings were double what analysts were anticipating. echostar, i did not even know this company was still around until my producer suggested it to me. a producer of satellite quitman is up 10% after their earnings were up. animation, that company's earnings also coming in ahead of estimates. they have been shifting their strategy away from the films to some extent, more targeted with their films, doing more tv rollouts for netflix among others. that strategy appears to be bearing fruit. remember, dreamworks laid off a

number of people last year. lions gate is rising as well in sympathy, having its own share of troubles. echostar, i have not heard that name in a long time. scarlet: it feels very 2005. thank you. apple's recent hard-line stance on encryption could possibly hurt the company's popularity. scarlet: not only do they risk a debate before judges, they are also susceptible to a setback in public opinion. selena wong has been writing about this. beyond the legal applications, what is at risk? publice is at risk of opinion. they are in a vulnerable spot because either way they go, they will be alienating a group of people. if we look at the most recent surveys, the public is pretty evenly split on what apple should do, but that may change closer to the election cycle. it will be embroiled in his political debate. if that does happen, it may be

hard for apple to stay away from a lot of hatred and anger. it certainly does not look good for them to be in -- unpatriotic in this case, where they could be providing some really important information for a terrorist investigation. alix: on the flip side, how might this conversation be benefiting apple? >> there are some good business reasons for them to be doing this. the fbi coming out and saying they cannot hack into apple's iphone because it is so well encrypted, that is some great pr. tim cook is probably when the options and thinking, i will forgo some consumers who will be upset for all of the great press this is getting abroad. scarlet: a lot of debate generated with all of this, but politicians are surprisingly not jumping into the fray. donald trump is, but he is that most politicians. na: apple's reputation is really helping them in this case, a much loved and admired

company. to attack apple, you are at of being anti-tech, anti-progress. we are in an era where politicians are falling over themselves to say on the most innovative. definitely a risky step to be against apple. alix: how does apple get out of this? it is still early and will be a lot of development coming out, but they could be able to come out unscathed on both sides. if they end up complying with the government, but in the process, they do it kicking and screaming for the sake of their customers. there could be a case where they do unlock the phone, but if they ,o, it would be very publicly so that they can see this is a very narrow case, very narrow reasoning. in that way, they can please both sides. at this point, it is too early to say what will happen. scarlet: so they do it but they are dragging with a lot of resistance.

like appleis almost picked this site, this statement. that would be the perfect situation. wong, thank you. alix: coming up, a split-second can mean millions won or lost to a pro athlete. that is why many are turning to technology for an edge. scarlet: we will speak to the coo of one company looking to cash in. ♪

alix: welcome back to "bloomberg markets." i'm alix steel. scarlet: i'm scarlet fu. hundreds of college football players are showcasing their talents to nfl teams this week in indianapolis.

it is the annual nfl combine. they will be evaluating how quickly the athletes can run, how high they can jump. with so much at stake, athletes and teams are turning to technology. alix: mark cuban roast they spoke about this. just fitbitsom with basic sensors, blood pressure monitors, basic things that now everyone is trying to to new types of sensors. measuring the blood in the arm, whatever it may be. alix: one company is doing just that. athos make clothing with sensors that athletes can see how they are performing. joining me now is the chief operating officer don faul. a lot of activity in this space, a lot of people wearing -- getting into the wearable sensor market. what differential product? >> thinks for having me, great to be here. athletesfocused on

reach their fitness goals by helping them train more effectively. we build smart apparel that has smart center that truck muscle activity. for any workout you can see in real time if you are using the right muscles with the right or at the right intensity. we are the only product in the marketplace that can do that. scarlet: your shirt or shorts will cost $99 each, requires a sensor. that is great for players, but what about aspiring players and high schoolers, it is not cheap. who are you targeting? >> any athlete who cares about their fitness, whether you are training for the combine, a high school player who wants to make the team, or somebody like me who want to be able to chase his kids around the backyard without getting injured. our products are transformative. they're the only products that help you understand how to train more effectively. the we think about opportunity that we provide, we , there is not

another piece of apparel that gives you insight into how you train more incorrectly -- impact fully. out four times a week and i don't know if i could've for $300 to monitor my training. what can you do to bring those costs down? now we are focused on delivering an amazing experience, that we can help transform people's fitness and their health. we think that is deeply meaningful for people. if you look at the number of folks that spend money on personal trainers, trip to the gym, it is the meaningful. we you will be spending our time making the product more accessible. a number of things that we're doing to make the cost come down on the garments, so you can buy anything from athos at a comparable price from another fitness company. you worked at facebook and google appeared one of your investors talked about how they want -- how you want your company to be the next nike.

what are you bringing from your previous jobs, what are the best practices you are bringing to monetize this product without compromising privacy? >> absolutely. we are focused, in much the same way we were focused at google and facebook, focused on transforming the experience for users. in much the same way that facebook transform the way people can indicate, we want to change the way that people get healthy and fit. the technology we are building, we think, will fundamentally change the way people think about their fitness and health. the first thing we are focused aboutwe are all delivering an absolutely amazing experience to the users, so when they workout, they would not think about working out without our product. we believe we can deliver an incredible product that teaches people to reach their goals. we will have a ton of opportunity. the company raised $51 million to date, just raised $38

million in series c funding. talk about your outlook for funding private versus public. focused on00% delivering and ms. experience to our customers. we were fortunate to raise money and that gives us the opportunity to take the amazing feedback we are hearing today from athletes and continuing to invest in the product. as we continue to do that, we will have plenty of opportunities to continue to grow the business. scarlet: don faul, thank you. alix: coming up, a short seller will be our guest, talking about the state of activist shortselling. he may have some new ideas of his sleeve. 3:30 eastern time on bloomberg. ♪

>> welcome to "bloomberg markets."

carol: from bloomberg world headquarters in new york, good afternoon, everybody. tracy: u.s. stocks pulling back from earlier losses while crude is also erasing a plunge of 3%. the market strategist says you should -- the company abruptly terminating its call. royal bank of canada has passed goldman sachs to become north america spiffed largest tank -- fifth largest bank. tracy: julie hyman has the latest. julie: we are still down on the major