>> from bloomberg world headquarters in new york, good afternoon, i'm scarlet. alix: and i'm alix steel. stocks inching higher. there is a report after the close. pickup in chinese industrial command is increasing the price of commodities. oil reaching a four-month high after a meeting. alix: interest heats up for yahoo! uk's daily mail includes the wide group of suitors including telecom and verizon for preliminary offers. we are halfway through the u.s. trading day. we had to the market desk where julie hyman has the latest. we are four hours closer to the start of the earnings season. julie: as people get close, maybe they get my -- more nervous. alix: is the kickoff really

official anymore? scarlett: i don't know. wednesday is official because j.p. morgan is reporting. julie: whether you are talking about alcoa or the banks, there is not a lot of optimism when it turns to earning broadly with energy or financials. we have seen a pairing of gains today as we have gotten deeply into the session. the s&p 500, if you look at the intraday move we have seen, it has been moving from steadily lower, a leg up in the past few , downs, but none the less sharply from the highs of the session. let's take a look at the s&p 500 profit estimates and the change we have seen in estimates. this is the change that we get quarterly. we are talking about a 10 percentage point swing in these estimates overall. the estimate is for earnings to fall 10% in the quarter that we are about to learn about. definitely a lot of pessimism going into the season. the caveat we always talk about his companies tend to be by a

high rate. as always, it will hinge on not just the reporting's but what they are saying about the coming quarter. >> the two things that are front and center our oil prices and the dollar for companies. today, a solid rally across the board when it comes to commodities. julie: let's start with the dollar to look at the relationship between that and commodities. we are seeing a pullback in the dollar down .4% against a basket of currencies as alix says. this will be a centerpiece of what companies are discussing in the commentary. how much does currency play into some of these weaker earnings that we might get in the coming season? the dollar is lower today. that is one of the things that is helping commodities. even as we see a change introductory for stocks -- in trajectory for stocks today, that is not the case with other assets. if you look at gold prices and what we have seen throughout the session, we have seen them

climbing steadily up 1.2 7%. oil prices have also been .tronger today as we get closer even though we have not seen a lot of change in positioning among the various opec nations on whether or not they will freeze production. nonetheless, oil is higher together, -- higher today, almost 2%. >> thank you for that snapshot of the markets. >> let's check in on bloomberg first word news with mark crumpton. mark: donald trump voicing his displeasure over the election process for presidential nominees calling it, "corrupt and crooked." this has the republican front-runner inches closer to a contested content -- contested convention. he says the person who wins the most vote in the primary process should automatically be the gop nominee. president obama will meet with federal reserve chair janet yellen to discuss the longer-term economic outlook. the white house says the oval

office meeting will focus on the state of the american and global economies as well as wall street reform. vice president biden will also attend. treasury secretary jack lew says the u.s. does not plan to change rules limiting business transactions with iran. during an event with the council on foreign relations -- foreign relations in washington, secretary lew discussed whether iran would be able to have dollar denomination. >> they complied with the nuclear agreement, therefore, sanctions are lifted. that is a process that is becoming more and more clear. we will keep our part of the bargain. the u.s. financial system is not open to iran. that is not something that is going to change. mark: earlier this month, marco rubio and mark kirk cosponsored a bill that would, "prohibit a iranian access to the u.s. financial system and the use of off shore dollar clearing." they used parachutes to airdrop food

aid to a syrian food a -- city that has been under seasonal -- since march of 2014. 22 pellets drop sunday were collected in a town in eastern syria. it was enough to feed 2500 people form one month. more airdrops are planned. news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i am mark crumpton. >> thank you so much, mark. earning season unofficially kicks off today. it is not looking pretty right now. let's check this chart showing expectations for earnings from now until the fourth quarter. right there, that orange line for first quarter 2016 way at the bottom. as you go throughout the year, he gets higher. we are focusing on that orange line. alix: joining us from san francisco, heidi richardson at black rock which oversees $4.5 trillion. looking at that chart, are we in the worst of earnings season right now? is this the trough?

heidi: if we look at earnings, they are likely to be disappointing. the estimates are we haven't seen earnings this low since 2000 nine. i think there could potentially be a light at the end of the tunnel given that oil prices have come back up. energy prices less stressed. the dollar is not as weak as it has been -- not being as strong as it has been showing weakness this year that could potentially help earnings moving forward later on in the year. scarlett: the trend has been for the last couple quarters to look s&p 500 earnings and back it out the energy company results because it makes it look a lot different. there is a huge bifurcation between what s&p results look like without energy. is that still instructional? heidi: i think it is. if we look at taking out energy, we see some impact, particularly on these big exporters. some companies that derive a lot of their owners like technology from outside of the u.s..

i think that weakness will potentially play out in a positive this year. alix: the other thing that has been puzzling in the last couple of weeks has been the lack of volatility in the market. you have expected volatility for so long that hedge funds are getting crushed as we enter the worse for earnings season. what is your expectation for volatility? heidi: i think you will see volatility pick up. x, thelook at the vi long-term average is 20. we are trading around 50. we will see a picking up. investors have been thinking about ways to mitigate volatility as we move forward. closer to the election, you will see even more volatility. scarlett: what we also need to talk about is can the impact of yenyoung, the strengthening , global equities, where they grow through all of these different levels from 1.1121.08, repercussions throughout the

market, the ripple effects? chart, etfe a cool go, a function on the bloomberg terminal. it is a great way to illustrate how bad it has been. the two largest scenes, the dx j, the hedge play for japan, and the wj, both have seen a combined year to date outflow of all $6 billion. flow 16 billion. these numbers, heidi, or bananas. heidi: if you think about it, investors have been investing in japan for the last three years. opportunities now, they are coming back to the u.s. and looking for opportunities and high-quality investments in the u.s.. with all been on a, the negative interest rate, with abenomics, investors are getting's cautious. with the yen so strong, going from 120 at the beginning of the year two 107 at one point today,

they are worried about the earnings on companies in japan moving forward. if foreign investors like black rock pull out of japan and they lose the fate of foreigners, does that mean the end of abenomics? heidi: i think they have a strong domestic environment. you have seen a shift investor attitude. they are embracing the idea of ownership and equity. i think you have some balance without. scarlett: when they have money leaving japan, you said it was going to the u.s.. we have seen a lot of money come out of europe, as well. is that valuation or fundamental play? heidi: valuations are still somewhat rich compared to areas like japan were it is trading at half the price of the books to the u.s. marketplace, but with the selloff we saw a earlier in the year, there are some valuations. what investors are looking at right now are quality names. companies that can increase their dividends and grow their dividends and have high quality

down sheets. they are scared for the opportunities moving forward. >> if you look in dividend payers versus non-dividend payers, how would you pull that in with quality companies that you want to pursue in this environment? heidi: i like quality in the sense that people are looking at smart data and the quality factors, i think, are checked it. payersook a dividend versus dividend growers, i prefer dividend growers. those companies sustainably grow their dividends in this market environment. particularly if the fed raises prices. alix: what about elsewhere? we have seen money go into emerging markets. where is the money going that is not in the u.s.? heidi: we are seeing risk on traits moving back in. emerging-market equities and debt in the local currency. we have seen a lot of fluid going into that particular region. ,ith signs of improvement people are embracing is this

potentially a time after five years of being out of emerging markets to start building positions to get back to a benchmark? >> what is the metric, the acid cost to guide were the other acid costs -- asset costs go? heidi: we will be watching the cautiously. we're were looking at technology in particular. some of the valuations in technology. the dividend strength. the cash and balance sheet. watching those earnings and the potential with the ease up on the dollar and the dollar strength, seeing what happens with technology. >> think you so much. heidi richardson, u.s. investment strategy for ishares at blackrock. >> coming up, look at the stock chart. finally surging after falling 50% this year. when we reveal the mystery stocks next on bloomberg market.

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alix: you are watching bloomberg markets. scarlett: when you do have back to our markets were julie hyman has the check on individual movers and the big reveal of the mystery stock. alix and i both voted fitbit. down 40% year today. there is concern about how the company is doing. that concern may be alleviated to some extent after the big decline in a stocks. the stocks getting a pop. morgan stanley analyst katy huberty riding in a note that perhaps management will increase

quarter -- year and guidance. she is doing channel check the show demand for some of its new products and also that they beat expectations and that managements march shipment report may be conservative. we are seeing shares bounce by 6% today. by context, by the way, the stock is quite heavily shorted. its is short.of you probably assume there is short covering going on. isthe same time, huberty writing about gopro and says those results could come in below expectations. her checks on gopro sales indicate a drop in demand. she says enthusiasm about the action camera category continues to decline as the upcoming hero five might not be enough to revive that demand. though shares down by 2%. a different analyst then morgan undery is talking about

armour, slowing sales at the company. saying the company's wholesale closing sales are down 2% in the fourth quarter. women's apparel, in particular, down by 7%. those shares off by 4.5%. under armour, by the way, we get the full reserves -- results on april 21. alix: still ahead on bloomberg markets, the world's largest listed hedge fund business gets into real estate. we will have details from man group president duke alice next.

♪ alix: this is bloomberg markets. i am alix steel. time for bloomberg business flash good looking at the biggest business stories in the news right now. goldman sachs will play five point. -- $5.1 billion for its handling of securities. it involves allegations that loans were not properly vetted before being sold to investors as high-quality bonds.

it is its fifth multibillion dollar settlement reached over u.s. banks over subprime mortgages. after michael pearson failed to appear for deposition. the senate special committee on aging last week said it -- it plan to start legal proceedings against pearson who is leading valeant. he is under subpoena to appear before the committee. alix: under armour shares are lower after morgan stanley returned growth concerns. and analyst says the company's wholesale clothing sales fell 2% in the first quarter. under armour is slated to release earnings on april 21. that is your business flash update. scarlett: the world's biggest listed hedge fund business is expanding into real estate. man group retain $500 million in surplus capital to fund potential acquisitions. alix: on bloomberg this

morning, the president talked about the firm strategy. >> the strategy of the firm is to keep adding investment teams to diversify the list of offerings we have to be clients based on what clients are looking to do. the moment,at clients are absolutely against investing in bonds. people having yield -- a need for yield. they are looking for something with the old, with stability, with long-term confidence, but not bonds, particularly government bonds lower we are. where we are. this is the end of the real estate spectrum. it is not the highly leverage restructuring stuff, it is there to give long-term investors a yield like return. >> how big do you expect this to be for man group? how much money do you expect to raise for real estate investing? luke: we don't have a target. my experience is every time you set target in a financial business, you do stupid things.

we never set size goals. it is the high-quality teams. we are very happy to get them on board. we will take a long and steady. as i said earlier, it is a five-year decision, not a i've month decision. >> he will set a goal that you will set a limit? 4 billion is your largest? >> we need to make sure that they are only investing when they can find quality returns. >> real estate is huge. are you talking about commercial real estate? are you talking about residential? luke: this is particularly about high-end commercial real estate indirect buildings in this case. this team is very much about helping clients by actual buildings. rather than looking at -- >> in the u.s.? globally in looked the past. i leave him to comment on where he things the best value was at the moment.

>> luke, at this point, surplus capital of the group, potential acquisition, is it easier to set it up in-house or to acquire the fund if you want to push further into real estate? luke: we try to be very disciplined about new teams and acquisitions. everything has to meet three criteria. the first is we have to believe in the returns and that those are attractive returns for our clients. the second is we have to find people who believe in the same things we believe in. importantly, we have to be disciplined on price. acquisitions and mergers the work is because they make deals based on overaggressive assumptions about the future. we will continue to be very distant on price. we are in to hiring teams or buying businesses. >> given that you are thinking about investment properties, where's the money coming from? is a china and other foreign countries? this is -- if you take the

real estate offering, it is about going back to our core client is which is a pretty global client base. it is very much at the larger and of the institutional market. that is where we have our core client base. a lot of our largest clients do six or seven things with us. this is just bringing in another thing to them to look at on the menu. alix: that was luke alice on today's rumor go. another place to park your money, brazil and greece. u.s. investors often make the mistake of investing in the u.s. only. he talked to bloomberg surveillance. >> u.s. investors almost always allocate way too much to the u.s. the global market cap is about half in the u.s. most people have given a speech. we asked them, it is around 70%. it is a very active bets.

tom: i want to be a yield hog. as you write, you want to pick up 7% foreign debt. do i want to do that? >> we like equity and foreign markets. we are value investors. most of the world equities much cheaper, much of the bonds, much higher yielding. that is particularly in merging. for the stocks, it is both about an emerging, looks great. valuations are reasonable all the way down to the cheap stuff. /e ratios around nine for the cheapest bucket versus 15 on average. if you're looking at bond yields, around seven -- around 7% versus the global average around 3%. talking about foreign and developed markets which are around 50 basis points? francine: you call them for an bonds, but when you look at europe, is any value to be made?

there is financial repression. that is hurting bond yields across. 70% of the world's debt in five countries, u.s., france, germany, the u.k., that bucket yields around 50 basis points. those are the ones you want to avoid. you want to avoid those. historically, all of the research shows if you invest in the highest yielding bucket, what is calmly known as kerry, that adds two percentage points a year to a global bond exposure. getting away from high debt issuers to some of the markets that are scary -- you just listed on the intro what is going on in greece and brazil right now. historically, that has been a great pickup in performance for not a lot of increase in volatility. francine: are you saying you are buying greek bonds? as a european, that would be surprising. we don't exactly know what the endgame is there. meb: we own a broad basket of the 25% of the highest yielding

bonds in the world. both foreign and developed. we own greece, also russia and brazil, mexico, and columbia. those sound scary, but if you look at this year, for example, the tide is changing. a lot of those markets are having great performance. you can close your eyes, close your nose -- hold your nose, and only securities long-term, it is a great place to be. >> he was speaking earlier on bloomberg tv. much more coming up. on the other side of the break, we speak about risks to banks and oil companies as lending to energy companies gets underway. ♪

alix: live from bloomberg world headquarters in new york, i am alix steel. scarlet: i am scarlet fu. this is bloomberg markets. let's start with the headlines from bloomberg word news. mark crumpton has those.

mark c.: thank you. international for over the recently published panama papers continues with david cameron lawmakers. he says that even though he has released six years of tax returns, other ministers should not be required to release there's. -- theirs. mr. cameron: we should think carefully before abandoning all taxpayer confidentiality, as some have suggested. mark c.: mr. cameron has been under pressure after his father was revealed -- trust hillary clinton more on a number of issues according to a new full -- poll.

when comes to who americans trust on the economy, mr. trump and mrs. clinton were even. 54 bar association president are urging republicans to consider president obama's supreme court judge nominee, merrick garland. republicans say they have no plans to move forward on judge garland's domination. half of theays u.s. approves of president obama's job performance, the first time that has happened since 2013. a survey shows an up big across a number of issues, including the economy. 54% characterize the economy as poor. just wanted 10 republicans express a positive opinion of the president's job performance. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world.

i am mark crumpton. scarlet: thank you so much. if the recent surge in oil prices the real deal? the rate of 53%. are we headed back to $30 per oil. that is what one person thinks. >> we think the fed might tighten once this year. large, monetary policy around the world is as easy as it can be. that means more money gets printed. we don't think that generates more economic growth. we think it creates an illusion of liquidity and an illusion of being able to sustain things. encouraging.hat for example, we are singled doing quite well for the past

quarter or two. for example, it is an alternative to buying into the quiddity. >> how worried should we be by that equities have risen from the february lows? we have seen money move into these havens like gold, the yen, and the g-7 sovereign bond index , a lovely index. what does that tell us? it is the haven markets that will continue to rise? >> if you look at g-7 sovereign bonds, half of them are yielding zero or less. give greatot long-term investment. it may be ok to park there temporarily. i think someone talked about the long run impact for interest rates rising, and that means capital gains on

bonds. that means you are booking at 1.75% for 10 years. that is nothing to crow about. the outlook for bonds longer-term is certainly negative. frankly, given how weak the economy is, and how weak earnings and profits are, probably i would disagree with bill in the short term. bond yields are likely to stay low, and get even lower before they start a secular rise. >> i want to get your take on the price of oil. we have come from $.6 to roughly $40 today since the lows in february. to think we are -- you think we are heading back to $30. why is that? >> i have been wrong for the last eight weeks or so. but i got wrong is there is to,ting storage available

meaning right now, the global oil producers are producing more oil that we consume. we have already filled all the on land storage, and made the mistake that that would glut,t in an immediate and downturn in prices. there has been a rebound. having oil sitting around in the high seas, waiting in takers to be used is not a long-term plan for success. ultimately, all those inventories, on the floating storage has to be worked off. the only way can get worked off if this prediction -- if production dramatically decreases or consumption rapidly increases. i don't see that happen. certainly not in china, europe, brazil, africa, or even the u.s.

a 1%e kind of looking at gdp growth, which is not speak to strong oil consumption. alix: that was former pimco money manager. speaking of oil, it is make it or break it time for oil companies that have a lot of debt. things are now deciding how much to lend energy companies based on their reserves and current oil prices. things are not looking good for guys. the borrowing base has been cut by 23% on average, more than double what we saw in the fall. one texas-based regional bank has 10% of its profile in energy. the ceo joins me now from houston. very good to see you. very timely. how much do you anticipate cutting your borrowing base on average this time around? >> first off, it is nice to be back with you.

varies are seeing is it widely. it depends on the company, the geology, where they are operating. some cuts are as low as 5%-10%. we saw one that was closer to 30%. it is all over the board. alix: in terms of your exposure, you have midstream, python guys, and service companies. how much of that is junk rated? >> very little. we do see stress, company violations, companies out of formula, but we have a great group of management teams. i'm impressed with what they have done to be sure they can free pay the bank. we have a good group of borrowers, and are expecting our results to be manageable. it is stressful. .lix: absolutely the question every earning six and -- earning season for banks

is have they put enough money aside to deal with the default? we look at the big guys, and energy exposure, up to 45%. how do you deal with losses? >> for the banks, the energy profile is small, to present-3%. some numbers are significant, but relative to their capital and earnings is manageable. the regional banks have more stress where it is a bigger part of their business, true in our case. some of the analysis i'm seeing done by third parties are 5%-7%g for emt lasses of 5%-7%.es of with that, in book six regional banks' earnings would be exposed 15%.t 10%-50 alix: for you, how do you manage

the potential losses? your company with that? >> the first thing is we remember that these clients are our clients. we tried to take a collaborative approach where we work through the problems and understand the challenge. the question is how do you get the company where it needs to be in terms of proper capitalization? there is a lot of money out there looking to invest in the space in this time. it could we an introduction to what could be a good equity partner, or in other cases, a detailed collaborative effort. that we are in a manageable range. it will go up. companies are having a tougher and tougher time with the low prices, as repeated previously. a lot of it will depend on what happens from here. prices will continue to improve. we will see the companies come off the watchlist.

alix: today, we heard from chesapeake, therefore billion dollar credit line will not be cut. they don't have to undergo it is staggering to me given the amount of debt they already have. if you look at the bloomberg to put it in perspective, you see here the debt they already have. the blue is the market cap. why would banks do this when that?is so much dept >> i'm not familiar with that company. i cannot speak the physically. like us, many banks are trying to look through the cycle, understand what is on the other side. if you have not planned to reduce expenses, and can operate in this environment, there is every reason for the bank to work with them. alix: you don't want them to

default or go bankrupt, right? >> of course. it is in everyone's best interest that an orderly resolution is brought forward. more times than not it is outside of the bankruptcy system. alix: we have oil now training around $40. what is your call for this short-termckle >> calls are challenging. i will play this. the supply numbers could come down much more quickly than what people have thanked him. i think long-term, this is good business, but challenging when the prices are the slow. globally, the prices come down 59%. the well has run dry. drilling, prices will improve. as my friend says, you have to be present to win. it is about the quiddity, the

balance sheet management, and getting to the other side. good "staying alive" a theme song right now. scarlet: coming up next, the parent company of "daily mail" says it is in the bidding for yahoo! ♪

abigail: you're watching bloomberg markets. i am abigail doolittle. let's look at the text out -- tech stocks moving higher today. one is yahoo! "daily news" is said to be in talks to buy yahoo!

this follows the news that verizon is likely to go forward with its potential bid for yahoo!. all potential bids are due for april 18. investors are encouraged by the bidding interest. apple shares have pushed back on the 200 day average, something that is typically bullish, but we could potentially see some downside for apple. i am abigail doolittle at nasdaq erie now, more bloomberg markets. you are watching bloomberg. i'm scarlet fu. alix: i am alix steel. this is your global business report. here is what we are watching. scarlet: in london, primus or

david cameron talked to parliament about his offshore investment. standard chartered is looking to sell assets in asia. scarlet: plans for the world's tallest building. so-calledt with the panama papers. the prime minister of the u.k., david cameron, faced lawmakers after a week of scrutiny, forced to acknowledge the he profited from off share investments. : mr. speaker, we are taking three additional measures to make it harder for people to hide the proceeds of investment offshore, to make if that people can no long get away with it, and investigate wrongdoing. scarlet: he released six years of taxes. sources say a deal could

this week.lier standard chartered is looking to sell asian assets as the lender since 1989.rst loss the bank is looking to selloff part of its portfolio in africa and the middle east. that is according to people familiar with the matter. in dubai, plants up and announced for a new tower that could be weaker than the world's tallest building p construction is scheduled to begin at the end of june. bloomberg quick take. tax inversions took center stage this month when the treasury secretary revealed new rules against them. their taxcan lower bills -- here is the situation.

more than 50 companies have reincorporated in the tax company since 1982, including more than $.20 to does and 12. a lot of drug companies are doing it, and ireland is a popular home. pfizer wanted to become irish by allergan. it was stopped by the treasury rule. here is the background. the corporate u.s. tax rate of 35% is the highest in the corporate world. the u.s. is also one of the few as companies that makes companies pay that on all of their worldwide income. one perverse result is an independent u.s. company can end up paying more taxes than an identical u.s. company owned by a foreign parent. a change in address does not mean a real move. madeury new rules have

investments less attractive. neither democrats or republicans like aversions, but they disagree on what to do about them. republicans called them the inevitable consequence of a failed tax system. the parties disagree on some many other things, there is little chance that the bill will actually pass congress anytime soon. that is your global business report. for more stories, visit bloomberg.com. ♪

scarlet: this is bloomberg markets. i'm scarlet fu. for hockey fans, this wednesday marks the start of the next season. the playoffs. unlike most financiers, our next spent time in the nhl.

we look at your take on the playoffs, but i want to get your take on what you have done since retiring in 2003. he went back to school as a nontraditional student. what prompted that move? >> i was finishing my undergrad degree, and it was something i always wanted to do. little most of these are lost when they get done with their playing career. for me, you feel old as an applet, but young as a person. a perfect segue into the rest of your life. you get your degree, and go on. scarlet: he focused on politics, economics, and environmental policy. what prompted that? >> i think a broad-based liberal arts degree is a good thing, i could have stayed 10 more years, for you aren't a don't, you want to get on with

your life. i had interest in the environmental world. scarlet: where are you investing right now? is only in north america or has it broadened beyond america's? >> it is only north america. abiding company. .-- a lighting company scarlet: what is the best opportunity now, or what opportunities are there given the fact that we have had a collapse in commodity prices and global slowdown? >> it means two things. thbecause energy prices are lower, that hurts us, but in the short run. people who run hospitals, they will not get more profits,

unless they start squeezing how much they are paying each year. this is operating costs, maintenance. this is about efficiency. if you can eliminate waste from any part of your company, you are doing better. scarlet: can you talk about how demands for these kinds of investment opportunities have evolved over the past decade? we know a lot more about environmental awareness that we did 10 years ago. >> i think no one wants to be too far ahead and take on technological risks. if you own this building, you say you want to be as cutting edge as possible without taking risks. 80% of buildings here in new york city will be here for the next 20 years. that infrastructure is very old. this is particularly true of the energy sector. the lighting, the transmission, the energy systems. all of these things have to be upgraded. fromhings prevent people doing it. one is a nisha, another is capital. word gets out that there is not

a lot of risk. scarlet: you had a lot of access to guys in finance, on wall street. did you leverage that into your career? >> yes and no. not to the extent that i wish i would have, but the reality is to have a career, and focus on that career. i don't want to have a foot in each world. i tried to squeeze as much as i could out of that career, in terms of being professional. on the flipside, we are in new york. tremendousemendous opportunity, and people are willing to help if you asked the question. scarlet: i have to ask about the playoffs now. the maple leafs and the canadians among the most popular, moneymaking franchises, but they are absent. is that good or bad for the sport? >> it is bad for the people

canada. they are really passionate about the sport. it is good for the companies making it in the united states. it is not just canadian teams there. i think the sport in canada is quite healthy. it has never been better in the united states. the reality is the game is very healthy. scarlet: very quickly, your career in sports has also allowed you to move into private equity and charity. great cycle challenge is a great thing. we are putting money into children's cancer research. it is an excellent thing. i'm proud to be part of it. scarlet: thank you so much. ♪

scarlet: from bloomberg world headquarters, good afternoon. here is what we are watching this hour. u.s. stocks paying their gains on speculation that the fed will not raise interest rates anytime soon. mcdonald'sstors -- stocks down. first, we want to head

over to the markets. julie hyman has been tracking the moves. julie: take a look at the bloomberg. earnings expectations have not been strong, but maybe they bottomed out. happened previously in 2002 and 2009. upgradinghat analysts rather than downgrading. we have the s&p 500 rated average gain both of these are bouncing in a small way, so that could reflect pullback with this 10% for the quarter that is about to be reported.

quarter that is about to be reported, alcoa will kick it off after the close today. the stock has been strengthening throughout the day and is a five 4.5%. banks will be the other big theme of the week, followed by bank of america and wells fargo on thursday. all of these are higher despite the fact that there's not a lot of options heading into their earnings report. it does seem as though the market is finally starting to come around to the idea. we're not seeing much movement in the 10 year today, but we have been watching the breakeven. we are seeing an uptick closer to that 2% target and closer to

the cpi as well. that core number is forecast to come in at 2.3% year over year. at the same time, we see a higher level of shorts in the treasury market. we are seeing the highest number of shorts in treasuries going back into november 3. a reflection of the idea when we may see rate and inflation expectation. scarlet: we will talk a little bit more about rate and expectations. alix: breaking news on tesla. the tesla company is rate calling model x vehicles because of some issues with the third row seats in terms of a seatbelt issue. the company began delivering and you cann number still use your model x.

a little bit of a delayed reaction, but it ticks lower. it has paired some of its games and has -- paired some of its gains and was up as much as .2%. now currently of as much as 2%. alix: the recliner in the third row seat accidentally slips. let take it to bloomberg first word news with mark crumpton at the news desk. mark: corrupt and crooked, that is how donald trump describes the selection process for presidential nominees. he told a rally in rochester that the person who wins the most votes and not the most delegates should automatically be the party's standard error wonads that we should have

it along time ago. mr. trump faces the possibility of a brokered convention in cleveland. haverters and opponents gathered to highlight differences over a new state law limiting antidiscrimination policy for lesbian, gay and transgendered people. both rallies were held near the old state capitol grounds near raleigh. foreign ministers from the group of seven industrialized nations are meeting in japan, calling for a renewed push for nuclear disarmament. also on the agenda, terrorism. the group's determination to defeat islamic state is unwavering. : all the g-7 nations remains dead past and united in their commitment. i would call it a resolute commitment, a strong commitment daeshrade and destroy through the coalition and we are committed to using the tools to

confront this scourge. he also visited the memorial to the hiroshima atomic bombing seven decades after the u.s. used the atomic bomb and killed 140,000 japanese. today's visit makes secretary kerry most senior american official to travel to hiroshima. global news twice for hours a day powered by our.400 journalist and more than 150 news bureaus around the world. let's get back to the markets where something odd is brewing -- the disconnect --ween stocks and bonds relative new highs by the s&p 500 and the new depths by 10 year yield. alix: the head of global rate strategy at td securities is here to explain. all have been named research team for the past

couple of years. explain the diversions. i think the guest: fed has changed its reaction. let me try to explain. the fed is extremely dovish. but is that because they are getting concerned about u.s. growth or are they looking at something else? ,e are going to get inflation which has actually been taking higher for several months. basicd has said their economic outlook is unchanged, so then why the dovish leaning? i would argue that they have changed what they look like. i am arguing that they are actually looking at global factors. is that one third employment, one third inflation? how do they way it?

given that the u.s. outlook seems ok, but risks are rising to the downside, the global factor is more important. u.s. cannot be this island of asperity, the fed cannot be the only central bank trading rates. lookthey are telling us is for longer. the market will have a price on the most likely outcome. not -- that is why we have seen credit and equities do well. i think this diversions is not that different from qe. they were fairly low and

are telling us it is a different set of parameters. doesn't that come with its own separate set of risks? -- howh more investors much more compensation investors need to take on to own long-term treasuries? the lower it gets, you don't care. forward? risk going big tug-of-war a right now. it lets economies run a little hot and should make economies go up. the 10 year germany is very close to zero. bondu've got low global

deals, that pushes the premium lower, even in the u.s. as these readings continue to pick up higher and the fed ignores it, i think we have seen it. deflation is much harder. i don't think the fed wants to go down to negative rates, which is why they let the economy run for a while but ultimately, i think it will ride and there's a huge gravitational flow from bond deals. you were in asia explaining things to your clients abroad. what is your take on what the central banks are doing? in the u.s., a lot of investors were very surprised by the fed. rate continuest to decline and inflation is taking higher. i think people were very

shocked. in asia, i think they are looking at the global backdrop and saying how is it the u.s. can be immune to the strong dollar? in asia, they are not fighting the fed at all. coming up, out, has a bit of an identity problem, something the company is hoping to finally fix. what investors hope to hear in its latest earnings release, next.

alix: you are watching bloomberg markets. time to head over to the markets desk where julie hyman is looking at metals. julie: gold is higher.

call raisingth a its forecast for gold by 9%, looking at an average of 1250 an ounce. that will have a strong second half of the year. , rbc is making a call on specific miners, saying we could see pullbacks in may and june and they recommend buying ahead of seasonal strength from august to september. you can see the stocks rising today with gold being higher, s.t hurting matter the rise in gold mitigating any negative effect in those downgrades. ahead of earnings, analysts say freeport mac moran and century aluminum first

quarter's will be stronger than estimated because prices have rebounded from where they were when they initially made its ,odel, so we see freeport century and newmont rising into the day's session as we get into earnings season. alcoa set to report earnings after the close of trading today and the company struggling with its identity. a senior analyst for metals and mining joins us from princeton. it identically tracks the minor etf and wants the downstream .usiness is this the moment where we see that shift? guest: the company has announced they are going to split into two companies. the new one everyone is getting

excited about is a business that sells into aerospace and, most excitingly, automotive. switch allng to their trucks over to aluminum and that is creating excitement and they are trying to focus on the new business and forget about the old business which is getting destroyed by the chinese. scarlet: what will you be zeroing in on to determine whether they are successful? guest: i want to see how they are going to split up these companies. alcoa has a lot of debt and they are going to try to shove as much old that as possible and leave the new one with asthma -- with as little to try to expand and get into some acquisitions. number of companies have tried to split off the business and the old one did not do so well.

a lot of people are trying to figure out what will i be left with at the end of this split? is it interesting at all? the aluminum price is that problem. something very strange has happened which is a different price in china for aluminum versus london. prices in china have been rallying while the metal exchange prices have been flat to falling. why is this happening? guest: china has been really interesting. and they was so bad ran their inventories down so low that when we come into a seasonable part of the year coming of a lot of people buying because they expect the chinese to devalue, so they have been moving their money into the metals and buying it ahead of when prices rise cousin they devaluation. scarlet: is the movement of the asset the way the -- the way

that copper has become? they are definitely using aluminum for a carry trade. they are storing it and it's not being used in any uses. that the downside is producers are now making more money for what a produce and the going tohey are restart the production they have shut in and this chart shows that rise in profit ever since november and december of last year. guest: you see the restart of old aluminum facilities. they really want new electrical systems, so every power plant is attached to an aluminum smelter. they use a process that's far cheaper and they are really driving the bus as far as aluminum production. it just kills companies like alcoa. scarlet: does china use aluminum the same way the u.s. does?

is and demand the same thing? guest: they use a lot of their aluminum for the grid. electrical wire is replacing copper and is the number one difference. scarlet: thank you so much. the bloomberg intelligent senior analyst for metals and mining. coverage of full various sectors and companies. , negativel ahead rates are getting negative reviews. we have one had fund president weighing in on that debate, next. ♪

scarlet: this is bloomberg markets. alix: where does the world largest listed hedge fund see some opportunity?

hopefully it will be a stop again so we can concentrate on stocks as opposed to that egg shift in momentum we saw in the first quarter, otherwise it continues to be a cpas toironment for the take advantage of what is going on in the macro picture. diversification -- should we be looking at the ones where the expectations are low? everybody is used to the earnings management that goes on, so it is not absolute lows and absolute highs. things where the market will be

punishing things heavily if they are missing and we've come back quite a long way. that means there's lots of room for pain on the downside. >> people are talking about a real recession coming off the back of it. does that resonate at all? we have clearly got a lot of pressure on earnings, particularly on markets generally and the real answer, if you make the banks look miserable, that's really bad for confidence and really bad for borrowing. you get a weakening of economies. we have to get confidence back into the banks somewhere and you can see the markets leading the world down.

the negative rates are awful for japanese banks. >> just on the banks, and annual letter to shareholders saying it's not good and the negative consequences are there, but you protectdraw a line to currencies or the opposite to weaken them versus a big negative interest rate policy in the eurozone. do you have to draw that line? individual central banks can achieve things different than you can a big economy. the problem in japan is the central banks of gone to a negative rate, but there's no chance the banks in japan are going to give negative rates to their clients, so you immediately set up that problem. you are looking at rates and see 50ther you get to borrow at

basis points or zero, that's not going to change your actual investment decision. negative rates create concern about confidence and core confidence is always bad. david: christine lagarde admitted that negative interest rates are bad for the banks. does that tell us mario draghi in going wither that approach? it's encouraging banks to make loans. guest: it is clear that what he tried to do was to do something to support the banks in the most direct way he could find. at some point, they will all end up buying shares in banks to try to support them, but the reality think negative i rates are a flawed policy for big economies, bad for confidence and bad for the banks. i was talking to someone at the bank of japan when i was out

there and they are seeing lower demand and you've got negative rates, i'm not sure i want to our over me in the current environment. still ahead, chesapeake energy getting some relief. we will look into the company's debt load after the break. ♪

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headlines on the first word news with mark crumpton at the news desk. to health immigration care to nominating supreme court justices, americans trust hillary clinton more than they do donald trump according to a new associated press poll. when it comes to who americans trust to handle the economy, mr. trump and mrs. clinton came in about even. trump says his children will not be able to vote for him in the upcoming primaries. the reason, they did not register in time. basis that she says his children feel guilty and were unaware of the rule. he did provide further details saying it's fine. the international uproar over the panama papers is entering week number two with david cameron facing lawmakers over his ties to offshore tax havens. the prime minister has been under pressure since his father was identified as a client of a law firm that specializes in helping build -- helping the

wealthy build tax havens. the government in brazil is hoping to prevent violent clashes as congress holds boats on the impeachment of the president. house could vote in less than a week. for a four hours day powered by our 2400 journalists in more than 150 news euros around the world. moving: among the stocks today is chesapeake energy, shares jumping by the most in the s&p 500. alix: our energy analysts has been covering the chesapeake saga and joins us from princeton, new jersey. not only did therefore billion dollars line of credit get cut, but it got access to $2.5

billion. what does chesapeake avenue to do to get this kind of cash? chesapeake energy at line in place and the company says they are unwinding that credit line and would take the collateral they have alleged there and move it over to support this current credit line. from 4ccess was cut billion dollars to $3 billion until they pledged more assets as collateral. also issue another $2.5 billion of additional debt. it is important to point out that that would be subject to retain meant from the credit facility. the banks would get repaid first from the value of the collateral pledge. what can we learn about they were able to accomplish and extrapolated to other companies? guest: to the extent they have

not pledged assets as collateral, that's one way. or to pledge to get additional borrowing capacity. some of the bigger companies, size does matter. the smaller guys, probably not so much. scarlet: as the stock has gone from $30 in the second quarter to four dollars currently, how has the investor base changed? guest: from a debt standpoint, it has gone to distressed fund investors and people who tried to make their living off of loan to own. i can buy it at $.20 on the dollar and get at it at 30 or 40 or $.50 on the dollar. one interesting angle worth pointing out is just a big debt exchange in september, the

second lien bonds are trading around $.50 on the dollar. this new capacity, the company has said they are focused on trying to manage the debt maturities and you have about $2.5 billion of debt maturing and they have that capacity and try to use it for another exchange. the first lien debt might be easy to do. alix: this speaks to a larger issue that we have been waiting for bankruptcy by default as they cut to oil and gas companies, but this shows banks do not want that to happen and tol do whatever it takes keep certain companies in business and not have a huge wipeout of oil and gas companies.

don't the banks really want to be the bad guy and a probably recover more of their money through a gradual workout process where they can drive the process. if you just put the company into bankruptcy, you lose control. we have seen in some cases over the last couple of months work companies had their borrowing capacity cut to something below what they had outstanding. they find themselves in a position where they have to pay down some debt in the next couple of months. have a goinganies concern qualification in the year-end initials which basically means there auditor does not think there's a good chance the company will survive for the next 12 months. in many cases, that causes a default in the credit line. you see a lot of amendments and waivers going on starting to cut back capacity outside the borrowing base redetermination process.

we have to leave it there. thank you very much. canadian pacific railway shares continued their march north after abandoning the bid for norfolk southern. levied fromtion was just about every major player, the railroad itself, the department of justice and many rail customers. pamela richie joins us now. what does canada pacific do now? pamela: most of the options are looking rosy. according to bloomberg intelligence, it's definitely a possibility. maybe buying smaller pieces of norfolk southern or other companies or perhaps looking at csx. they seem to think there's definitely a chance that there will be m&a in the future.

the distraction of this bumpy and and taking a run norfolk southern is gone for now and it seems to be all systems go because that distraction is removed. scarlet: what does the company do in the meantime? do they look at their share buyback program? : almost across the board. they are expecting a large buyback to get going in earnest. 2.8company put aside billion dollars for share buybacks and that program was moving in earnest. they did a lot for 2016 in the midst of this merger discussion and had about $1 million earmarked for share buybacks. that is expected to get higher whether it is city looking at how much leverage they might thew at it, he brings number to about $3 billion put toward share buyback.

and there is the story of pershing square and what they might have to do to get their own books in order. pacific,9% of canadian so that enters that overall picture. thank you very much. we will hear from the ceo of canadian -- of canadian pacific at 2 p.m. eastern. ahead, investors are loving mcdonald's. but wall street analysts are not falling in love. not even a little bit. why the disconnect? ♪

scarlet: this is bloomberg

markets. the past 12 months have been bv for mcdonald's. if you look at the price since the ceo took over, have climbed 30%. alix: yet mcdonald's still cannot get respect from wall street. why the disconnect between investors and wall street analysts? guest: it may not be a bad thing. everyone loved valeant last year. a lot of analysts were burned and it didn't do anything for four years. while much of the sector really ripped. part of that is mentally it's tough for them to back the company again so early in the turnaround. andher part is analysts investors live in new york and they are eating healthier and eating antibiotic free beef and eating at shake stack -- shake shack instead of mcdonald's.

but shake shack itself is only u.s.ng at 450 units in the . in terms of middle america, a lot of them may be less concerned with antibiotic free eve and organic produce. even if they are, they may be less able to afford paying the higher prices for those items. scarlet: when you talk about same-store sales, it is positive get the caution from analysts suggest it is not sustainable. is this turnaround sustainable? guest: the concern is they have picked the low hanging fruit and the all-day breakfast was a no-brainer and that will boost sales for about a year and then we will see what happens. went down that path, there was a lot of opposition. andemained aggressive

tested it a lot of restaurants and rolled it out. has beenthat he aggressive, whether with price point or new items and all-day breakfast, it's a good sign that maybe they can continue their momentum. if you are an investor, you are looking at a dovish fed. is it possible investors are reacting to these macro fact or's? be.t: it could i think more so is the fact they are turning around the sales, that they are starting to gain market share back and get aggressive with price point and the fact that they have scaled enables them to source projects cheaply. equipped tos best do well in this type of environment. scarlet: thank you so much. as far as the burger wars are

concerned, shake shack wins in my book. alix: julie hyman has the latest on stocks moving on analyst calls. julie: let's start with energy and talk about valero. credit squeeze downgrading valero. say the stock has factored in the earnings weakness for the quarter. one factor is the difference between crude oil and the refine products. there's a structural concern in diesel cracks that might continue for some time. the main reason to sell refiner holdings is not necessarily the seasonal trade, but the likelihood of recession and valero shares are pulling back. bm oh capital is upgrading that on commodity prices and valuation. they will benefit from improving

oil and gas rises and the shares are up 5%. other restaurant stocks to look we see positive catalysts for the company's sustained sales momentum at burger king and those shares are higher. one analyst at credit suisse looking at an attractive valuation seeing potential sale-leaseback and finally, brinker, that view increased with analysts there saying the third quarter was help by higher-priced sizzling steak and the reward loyalty program. sizzling steaks, i don't know where that rates. i am a filet mignon girl. judge me. scarlet: the bloomberg businessweek conference is

underway in chicago to talk about design innovation. alix: cory johnson is there right now. when you think about design, you are probably not thinking about being at the website of a company where you are trading stocks and the pain that is to manage. when you think about sign, it seems it is essential to rebuilding a new stock brokerage or you. guest: it starts understanding how we can take positive trading stocks and get at the essence of it. what are the numbers you need to know when you are actually buying and selling stock and fit that on to interface the size of a business card. a really big business card. it took a lot of user research inking about what consumers are actually doing as opposed to

what we have been trained to assume. them because trade there are so many variables -- what range i was trying to do with the size of my actual order, i feel like consumers don't always want that. guest: i think it comes down to thinking about the 95 use cases and holding that an taking the extra 5% because where the complexity is, keeping that available. thingsne of the very few the retailer wants. ,uest: that includes stop limit using margin accounts and things like that which we do not put in the direct use of buying stocks. the 95% is i want to buy this

stock and how can i do it in three or four taps? you are sometimes looking at odd lots -- not 1000 shares. what is the average number of shares customers by question number of shares customers by? or fiveen shares here shares their. how does that work in terms of cost? it was a lot more expensive back in the day than it is now. guest: it actually does not make a difference for us. one reason it took a few years to get the product out there is we wanted to make sure our cost for transactions were basically zero. clearing and execution. if it is all of those things, it doesn't make a lot of difference. what do you charge the customer? guest: zero. a badthat seems like

business model. where does the money come from? thet: margins and taking cost the majority of consumers have and try to make that as low as possible but will continue to make money off of rhenium services. cory: and you are launching in china? guest: yes. it is a exciting market and we think there's a huge demand for trading u.s. stocks. we've told our customers in the u.s. that we were coming to china in the middle of last week and we've had about 10,000 people -- cory: chinese people want to trade u.s. stocks. we think the u.s. market is interesting because there are a lot of chinese investors that want to put money in the u.s., but it gives them direct access. there's a lot of major chinese companies either listed or cross listed on the new york stock exchange at it is a mobile app so it is to use.

cory: thank you. the ceo of robin hood. they are designing jackhammers across the street. they may need some more work. thank you very much. scarlet: coming up, we will explore the delicate balancing act fed has in measuring u.s. wage growth and inflation.

alix: this is bloomberg markets. scarlet: tepid wage growth continued to weigh on fed officials looking for any substantial sign of inflation. alix: on friday, we talked about this with the man who wrote the book on inflation and we asked about the fears of the downside risk to inflation. guest: one reason the fed has been fairly patient is because

wages have not appeared to be rising very much. even though wages follow inflation, they are not rising, the idea that inflation will become self feeding is hard to get terribly concerned about. is there a difference between good inflation and bad inflation? some people say that inflation is central bank induced and good inflation is aggregate demand induced? guest: at the end of the day, i don't believe a lot in aggregate demand induced inflation. money chasing too much money in the system is the cause of inflation. if you have really good growth, it will take any amount of money and defuse that and cause less inflation. if you look at aggregate demand induced inflation, look at the 70's. look at japan where you have

growth that is very weak and in the 70's in the united states, you had quite a bit of inflation. on the other hand, you've got horrible growth in japan and yet nowadays you have positive core inflation. for years and years, you had a little deflation but not horrible. of aggregaten demand and inflation only hold that low levels. joe: some critics of the fed say the mistake is this phillips curve flame -- phillips curve framework. it sounds like you are pointing to the 70's example and pointing to japan now you are saying it's not that clear there are any real connections between a solid health economy.

guest: he didn't say inflation was, economists said it's kind of the same thing. if you look at wage growth, you can get a really nice connection. it's when you try to them -- try to put that into inflation caplf and saying the output is related to actual inflation, that is a little weak. joe weisenthal is joining us now and we are going to continue the macro discussion today with andrew limit. i'm excited to have him on today. he has a four point plan for federal form. there's been a lot of talk in recent years about reforming or auditing the federal reserve and he has put forth an idea he thinks is a middle ground, aiming to increase transparency in how fed governors are elected and who owns the federal reserve. that is unusual

because the fed is segregated from the government. it's not like that in other countries. joe: it is unique in the united states of being a qualified public entity owned by the banks andit has a public mission there's a role for congressional oversight and appointments. that intersection of being a banking and the in public entity makes it a lightning rod for criticism. scarlet: and we will get out color results as well coming up at 4 p.m.. and we are talking energy credits. see you later. you can catch all of our guests on "what'd you miss?" we will be talking more about inflation. ♪

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>> welcome. >> i'm dave gura. end $27 billion bid. to canadian pacific ceo hunter harrison next. >> then earning season kicks off today. being forecasted the worst ones since the financial theis, u.s. stocks are in green. is that the next flag of the bulls market. announcing today its recalling over 2000 model suvs. what it means for the brand and future selling power. hours from the closing of the trading. >> we seen storks sort -- stocks fall off. early strong start. then paired