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tv   Bloomberg Go  Bloomberg  August 24, 2016 7:00am-10:01am EDT

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biggest decline in two months after first-half profit tumbles 66%. alix: ems falling the most in three weeks. jonathan: from fear to fear of missing up. the economy appear susceptible to a pullback. welcome to bloomberg . david westin on occasion -- on vacation. the message from the market -- release the speech. it seems to be the only thing everyone is waiting for. alix: release the speech so we can get some direction in the market. yesterday you had that weakness. now no one knows where the dollar is headed. some currency stronger, some of are weaker. we have got a get something going. jonathan: stocks go nowhere and trading range is high. you wonder what the catalyst
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will be for a breakout. we are talking about friday. alix: how the project on the downside when the defensive stock is already that defensive? we're going to discuss oil's bl ull market with ed morris. he is bring his new call on oil. yes, we have a little bit of strength in europe. here futures are stronger but again, lack of conviction. jonathan: stocks go nowhere. put that in a headline. that is the story with the ftse softer. the s&pby 2 points on 500. no big moves. euro-dollar, one word, stable around 1.12. dollar oscillating throughout the last 24 hours. the dollar index was up for a fourth day. then we rolled over. been a choppy few hours of trading. if you look commodity markets, there is a theme.
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the pullback continues on crude. it resumes down by 1.7%. copper getting interesting, racing the gains for 2016 so far. we have the import data out of china on copper. injectingows, uncertainty into commodities. yields, the focus throughout this week, five-year yields. we're up a basis point on that trade. yesterday the big question was the front end of the curve, there was demand ahead of the speech friday. alix: does jackson hole matter for the short end of the curve? we'll be tackling that as well. over the next hour, we will go around the world for a coverage of stories from italy, just outside rome to johannesburg, south africa. we want to start with the top stories of the day. we've been digging into glencore's earnings. richard jones in the city. here in new york, danny berger
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at the lack of movement and stocks. before janet yellen speech. metals and mining talking about glencore. profits fell 66% but there was debt reduction. what did the market take away? >> the stock is down almost 6%, much more that it's peers. the bottom line numbers were ok. the market was expecting a significant fall in profits. but the story that has gained traction is they took a charge from hedging some other coal ou t. that's significant volume. the biggest coal exporter. price in.d that and they had to book a charge of $395 million. they say it is not a big deal
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but optically it is not a great look. the perception have glencore has been that they are traders, they have the best line of sight into the future outlook for commodity prices. for this to happen, it's got noise around it. alix: this was not a result of a bad trade. they said, this is what we had to do. from a fundamentals perspective, we put açai the hedging, is this the worst it is going to get? jesse: it seems like that. if you look across their peer group, all have reported low profit levels in the first half. we've seen a rebound and a lot of commodities, iron o rere and copper being the exception. zinc has really quite a bit. the numbers that came out this tocking on earnings, s prices much higher than what they were reported in the first half. it seems as though this could be
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a trough. thequestion is around sustainability and whether we are stagnating for some time at these price levels. alix: thanks very much. talking about glencore. when you have a metals rally, you bring back on the mines you help prices rally. a catch 22. jonathan: alix with glencore, te goal was to get the debt down. and management have done what they would do -- they said they would do. the next leg of the story, do you get an earnings recovery? for analysts and investors, that is the big one. for investors in this wider market, has been a weaker session for e.m. the head of the speech on friday. i want to bring in richard jones. we've seen me inflows into e.m. it has been the reach for yield story we have talked about for
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years. have we in jets it a little bit of uncertainty into that trade for the next couple days at least -- have we injected a little bit of uncertainty? richard: everybody is focusing on what chair yellen is going to say and that includes the developed markets and the emerging markets. one thing that has been interesting and this has unraveled the past couple days is the weakness in the south african rand. we have fallen for a fourth day in a row. of has latest bout been germant abouth nervousness about thea finance minister gordon being summoned by policet. yesterday we had a 3% fall in the rand versus the dollar. in the short-term, this is really driving investor anxiety in that story. one of the things that i read on the terminal today was that citigroup is now moving to a neutral rate to overweight in south african bonds. we have seen those 10-year yields spike 40 basis points
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today. jonathan: at the back end of last year, we had three finance ministers in south africa and four days. so importantis he financial markets as the finance minister? richard: i will quote from the citigroup note. that citigroup said they do not think there is a candidate that could replicate gordhan's calm ing effect. i guess it is the calling affect and the feeling that they have a steady hand at the helm. of course, this is introduced a bunch of uncertainty. you can see why investors are nervous at the moment. jonathan: richard jones of bloomberg first word fx strategy. a busy man this week. i want to bring in danny bergen on the quiet, the columnist we are seeing in equities. hominy days has it been -- how many days has it been since we have not seen a 1% move?
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>> how calm is it? the vix is floating around 12. that makes this the calmest august since 1994. there is not that much in the market that can move stocks now. it is quite, it is the summer, in the dog days with traders looking to friday to see what yellen is going to say. below the surface, they are things bubbling. you'll recall that early july that low vol was the trade to be in. these passive flows were going strongly into there. we have seen a shift so etf's that cover momentum, they have seen $400 million of inflows since june. so, little bit of a change. when stocks are not moving, where do you go? you go to more momentum stocks, we can maybe eek out gains.
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jonathan: a debate for us over the next three hours. thank you. the markets, futures marginally firmer. let's get stuck in. alix: what's moving in europe, you have to look at wtp, hitting a record high. profit up 15%. organic growth is accelerating. that weaker pound from brexit helping the company. they get 30% of their revenue from north america, 29% in asia. u.k.actually 14% in the a positive brexit company story. also, taking a look at samsung. there is so much demand for his galaxy 7 phone it had to delay its release, because there is just not enough supply to meet it. we look at preorder customers getting her phones by the end of august. ls momentum for the
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company. it hit its all-time high on august 18. the continue demand it is seen for its product as compared to apple. rounding out with tesla. be increasingll its range, adding speed. it is its fastest car in the world. you want to upgrade it? it is $20,000. let's get an update on headlines. emma: thank you. central italy has been rocked by an earthquake and 38 people have been killed. the magnitude 6.8 earthquake was centered 27 miles from the town of riatti. rescue crews are searching collapsed buildings for victims and survivors. the italian government says relief efforts are being hurt by damage to radio and satellite links. turkey has launched its biggest
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operation against islamic state in syria. tanks crossed the syrian border and were being assisted by u.s. special operations. turkish planes joined coalition air force is to pound islamic state positions aimed at stopping syrian kurds. north korea has successfully launched a missile from a submarine. kim yong-nam and's military conducted the test. u.s. and south korean forces are engaged in annual war games there. news 24 hours a day powered by more than 2600 journalists and analysts and more than 120 countries. this is bloomberg. jonathan: thank you. coming up on the program from -- the fear of missing out. has the markets optimism shifted to greed? up next, ubs's equities and derivatives strategist. from new york, to our viewers worldwide, this is bloomberg. ♪
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alix: this is bloomberg . a 6.2has been rocked by magnitude earthquake. 37 are dead. there are chief is on the ground and joins us over the phone. can you give us the latest of what you're seeing? alessandra: thank you for having me. the situation has improved somewhat. rescuers are working very hard to pull people out. there still thing to be a lot of people under the rubble. the death toll probably will rise. the situation is still chaotic for people living here. this is a small town, 2000 people. the earthquake is hit in an area with a lot of small-town.
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it is hard to gauge hominy people are hurt and where they are because there are maybe 100 people living in one part of the amount. it's hard to know exactly where these people are. alix: we are looking at incredible pictures. thank you, our rome bureau chief. we're looking at live pictures and we will keep you updated on any news. jonathan: absolutely to the markets we go now with the s&p 500 near record highs, yesterday tlosing for the 32nd straigh session without a move. joining us is julian emanuel ubs strategist. julian, the markets action or lack thereof. i want to bring up the s&p 500 and overlaid is the moving average but you think we are susceptible to a pull back the magic 2051? is that what you are expecting? expecting that. it is amazing that particular in this kind of calm we have seen
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in august that investors memories are very short. ago, in fact,year maybe to the day, that the dow jones opened down 1000 points in the wake of the china fx devaluation. we had these extreme dislocations in etf markets. all kinds of very, very odd behavior and pricing. and this is something that this is a new world. we had a volatility spike in january and cover. we had -- january and february. referendum. this is a more uncertain world and we think volatility is about to revert once again. alix: back in april, you're also calling for another decline in markets. n't seeing the kind of m&a we were seeing. we didn't get that kind of washout. why is it different this time? julian: it is not different this time. what we were looking for was a pullback.
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we got that pullback into the referendum. we were pretty aggressive about recommending to be buying the pullback and that served us very well but the point is is that now you have gotten to where you are 18.3 times 2016 earnings, with politics ahead and the u.s. and in europe and essentially earnings that are forecast but the reality is we zero had two years of earnings growth. we think you're going to need to see those earnings materialize to keep the markets moving. jonathan: the equity market in the u.s. has caused the mess unloved bull market in history. i want to talk about toppy markets with you. if i am very confident markets are not going to go down, i'm going to start doing some crazy stuff. maybe am going to start writing puts aggressively. i'm going to take the cash. are you seeing more of that behavior? julian: we have. weically, the put selling
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have seen this summer as part of the search for yield. as we know has been very intent literally since the paper tandem-- the taper tantrum in 2013. it began with partnerships bought for yield and then unsuspecting investors found out that there was a correlation to oil prices. what we have seen over the last couple months is that the more defensive sectors such as consumer staples and utilities have started to underperform overvalued. are so that is very typical late cycle behavior. but this search for yield has now moved into emerging markets. we haven't heard clients justified buying emerging markets on the basis of yield since th the late 1990's. alix: timing this is going to be near to impossible. but what we can talk about what the aftermath looks like. ppinesso see a to reversal, we have a rally into
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bonds and stocks. what does that washout look like? to look like going the volatility spikes we have seen for the last couple years. we call them potholes along the road. alix: like last august? julian: it might not be quite that volatile, because the surprise that we got out of china was so intense and unexpected. but we know wahhat the uncertainties are, fed policy, politics here and in europe, and we do not token, expect that degree of volatility. but it is sort of a reassessment. and it will be a buying opportunity with that sort --jonathan: alix and i have been looking at what some people refer to as calm markets, tight trading ranges. do you consider that calm or a lack of conviction? julian: it is calm. if you look at it, the calm has extended to treasury markets as well. we have been stuck in a 10-year
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yield range between 150 and 160 for the same amount of time we have an calm here. and the interesting thing is going back to investors memory, this is actually more typical for august. it's just the last two years that you have had these disruptions. but this really is more typical. the flip side of that is that greater volatility in september and october is also more typical. jonathan: when summer used to be boring. julian emanuel, ubs strategist staying with us. coming up, overall buyback activity remains near record highs. s&p hasly 25% of the new or extended buyback programs this year. what does that say about signs of toppiness? this is bloomberg. ♪
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alix: this is bloomberg .
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25% of the s&p announced new or expanded buyback programs this year, and that pushes buyback activity near an all-time high. julian emanuel ubs equities strategist is still with us. inn we see this toppiness buybacks, what does that say about where we are in markets? julian: traditionally it is said you are approaching the top of the market. the reason it may be different this cycle is two fold. one, cash on a balance sheets amongst the s&p 500 continues to be near all-time highs, which basically tells you there has been prudent management of resources in the post financial crisis. the other aspect of it is in a zero interest rate and violent, it makes sense to buy back your stock. you are not being rewarded for curve.ut on the risk you are being -- are putting the burden of the cash back to the investor. doathan: for any guidance,
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buying,k to insider when the management stop buying their own stock? we saw that in february and from jamie dimon from jpmorgan when stock at the bottom of the market. julian: insider buying, there are signals like that that are intended to reassure markets and did have that effect in february. that is age, difficult type of trade type of activity to really get clear signals on generally. lection flexion -- infelc points, the smart people by at the right times. alix: you mentioned that companies have so much cash on their balance sheets, but companies are using debt to fund buybacks. they are building up their leverage to do that. julian: which is why we discriminate between and the
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market has discriminated between rewarding companies that use less leverage to buy back their shares versus those that borrow more. that's what we've seen. indexp buyback generic has underperformed the s&p 500 just because there is a growing discomfort with the use of debt. jonathan: pessimism, toppy markets, what is the trade to express the discussion of the last 10 minutes? julian: hedge yourself into these events, whether it is jackson hole, the fed meetings in september and throughout the balance of the year, and politics. we think it makes sense to sell upside calls which are expensively priced at buy a put spread to finance it. zero cost. essentially what it does it gives you protection for 7%
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downside which we think is a distinct possibility and get you back into the market around the lows of the u.k. referendum. low.ix is too low for us. jonathan: julian emanuel, great to have you with us. coming up on this program, glencore. remember that last year, what a low. too lowmove. today, the biggest a klein in two months after reporting a 66% plunge in private. we breakdown the results next. from new york city, for our viewers worldwide, counting down to the fed chair's speech, days away. this is bloomberg . ♪
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alix: this is "bloomberg ." street.30 a.m. on wall here is what you need to know. at least 37 people are dead and more than 100 injured in italy
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after a 6.2 magnitude earthquake struck this morning. most of the damage was in a small mountain town and caused many buildings to collapse. the prime minister will be visiting the area today. glencore reported a first half profit -- the worst since going public five years ago. it has forced the company to make cuts to its balance sheet. they have widened their reduction target and plans to trim darling. and the ramp fell to the lowest level against the dollar. that is our news that the south hascan finance minster received correspondence from a special police unit according to a treasury spokesperson. that came after reports that ordered was to receive a warning statement about possible charges related to tax evasion units. that is interesting because we continue to see a selloff in bonds and weakness in currency
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that this is a specific story. jonathan: we have talked about political risk in a and people not taking note of it. he had the impeachment in brazil , the coup in turkey. and now this with the finance minister, the face of stability for many investors. for global markets right now, you know when you are waiting at the air or to and it is really boring and you want the plane to take off -- that is like markets right now as we await the most important woman of the world. that speech comes on friday. futures ahead of that are slightly positive. equities churning in europe oscillating around unchanged with the ftse 100 -- sensitive to everything that comes out. down .1%. thehave been whipsawed in fx market over the last week but today it is a stronger dollar story. we have euro weakness at the top. 1.1262. back to
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what you are seeing -- each as a class has its own story. brent crude down by over a full percentage point. copper erasing all of the gains for 2016. trade data out of china -- copper imports there are at a 17 months low. the bond market we go -- five years a lot -- today, five year yield about one one .4%.nt to as we wrap up market action, to your point, the reach for yields and the blindness to risk, that is a big discussion point. alix: political risk front and center in south africa. article,mberg news
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saying the threat that the finance minister will no longer be able or willing to continue his position is now real. expect further volatility today and the risk bias is now clear. joining us now from johannesburg, amogelang mbatha joins us now. we do know in the latest developments with the firm is that an auditing has confirmed that it is conducting a forensic probe into deals that were commissioned while the minister was the head of the south african revenue service. revenued up the tax agency between 1999-2009. these reports coming after he was summoned by the special police unit to answer allegations that he established a road unit to spy on companies and politicians. that is due to happen on
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thursday. alix: we have seen the market reaction. , being theordon finance minister, why is he so important? amogelang: this is the man who steered south africa through a recession and has been at the forefront of a campaign to engage with business and agencies to possibly save credit ratings downgrades to a junk status. invested inors have a lot of trust in him. so hearing that he could possibly be arrested or not be be finance minister by the end of the week is unsettling for the markets. was ann: this embarrassment at the end of 2015. markets were whipsawed by political risk. there is a question in the markets today -- there is president summa whilst this is happening and why isn't he coming down and giving his support to the finance minister?
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what is the commentary around the president at the moment? amogelang: what we do know is that the cabinet announced earlier this week that the president will be heading up the committee to overhead the turnaround for some of the cash strapped entities. that includes the electricity provider and the main provider of south african airways. that hepecifically said wants to change the board of south african airways. the chairwoman of south african airways is a close associate of the president. analysts coming out strongly move could beis an attempt to really increase the political interference with regards to the state owned enterprise. alix: what can we expect in the next 24 hours? amogelang: in the next 24 hours, last night -- spokeswoman says
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isis observing, it's and consulting with lawyers. tomorrow morning he is said to meet with police units to undergo questioning. we are not sure whether he will remain in custody or not that that is a development we will be keeping a close eye on. alix: unbelievable developments coming from south africa. mbatha.g's amogelang jonathan: glencore suffering the biggest decline in two months. one of the world's largest reported thes worst profits since listing in london five years ago. the stock is up by over 100% year to date. alix: you would not have expected that, necessarily. you would not4th, have expected that rally with precious metals. jonathan: if you times that right, you did well. wrathall.g in jeremy
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great to have you on the program. debt, it feels like a story. they have moved the goalposts, we have seen a big rally in the debt. then break -- i can bring 2023 yield up. my question to you would go as follows. when did this become an earnings recovery story and less about it being a debt cutting survival story? are we at the turn yet? this becomes an equity recovery story when we see a convincing rally with the copper price which we have not seen this year. have lost all the gains for 2016.
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it is the basis of the whole company, the history of the whole company -- it has been difficult and they get on the wrong side of the trades. that is getting better now. the outlook for that business tells us that it is good and be proof for the pudding will be in the eating. emma: just -- jonathan: just to wrap things up. the equity has doubled. the debt has recovered. what is the by call on glencore at the moment? we see that in the equity markets today. what is the by call at the on,nt for glencore, based looking at the performance of the company. ?ooking at the likelihood copper price is picking up. cover price is a very good
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indicator on the general state of health. i don't know-- whether they are a strong sector yet. jonathan: jeremy wrathall, great to have you with us. a fascinating story over the last 12 months. this. concern in real concerns about the future of this company. they came out with a plan, we will cut debt in half. c.y hit a, b, but it still remains. alix: there were credibility issues too. a cut their dividends. their credibility issues with the minors that they have to win
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back the market as well. and with copper turning negative for the year, there you go. how many times have we heard a company say, the dividend is safe and then? alix: many times. the scale yellen tip or will it be a nonevent? brett ryan gives us his preview next. this is bloomberg. ♪
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jonathan: this is "bloomberg ." i am in the hewlett-packard green room. coming up, merrill lynch. ♪ here is your bloomberg
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business flash. -- it has agreed to buy will pay 725 million dollars. after zeneca could also get $850 million depending on how well the drug cells. earlier this week, pfizer agreed buyay 14 billion dollars to medivation. -- record annual profit. cut thousands of jobs and dropped unprofitable breaks. that is your bloomberg business flash. alix: thank you. yellenhe title of janet speech on friday. "federal reserve monetary policy toolkit." it is more a question of what the fed can do in the next downturn. joining us now is brett ryan. a recent fed paper talked about asset purchases -- that will help the fed in the next
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downturn. willie here more of that on friday? will: yes, i think you hear more about what policy looks like, going forward. and i think they will lay out the rationale for a near-term rate hike. howink the thrust will be is monetary policy going to operate in a lower world. alix: it seems like the market will not get what they want on friday. jonathan: are be going to play the game that we got at the back end of last year, a dovish hike? brett: i hate to use the phrase but you will probably hear more about it in the sense that whatever the outcome is of the september meeting, stocks will come down. it just depends on how much in the long term the stocks come down. so what we're hearing from william, dudley and stanley ascher over the past week,
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lot of those themes will be encapsulated in the speech. a lower potential growth rate and a lower potential stretch rate. alix: yesterday we learned that banks requested -- you don't see that. they are not going to just agree with the committee. how does that resolve itself? brett: we are seeing a very to buy the effort option analogy for september. -- whetherld love to they are in a hurry or not, they want that option available. jonathan: if you want to buy option analogy do need to have credibility. lefthave no credibility with maybe the exception of the fed chair but we have not heard from her. the viceven have chair, stanley fischer, say it
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is on the table or signal that by saying they are near the goal and yet the market is saying -- not buying it. so what changes friday? brett: i think the market is saying now, not buying it. brett:however, the employment ns next friday, it becomes a different story. the market probabilities don't seem that high for september. they are in a tough spot. they have had a lot of things that have got in their way with respect to their plan so i don't think they have lost their credibility. in ank they have operated consistent manner. however, if they keep saying that -- if the labor market does ok and no other cracks in the system then yes, they are forcing their own hand. alix: will the fed had to shift their focus to more inflation rather than employment as we get near full employment?
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that brings up the question of do you increase the inflation target? is it 4% now? jonathan: it is an argument i don't get. i understand if you take it from 2%-4%, you will raise my inflation a tatian's because you will remain dovish but my question is, does that really credibility? why does that change the consumers but if you're about anything? brett: for a company planning its business investment and pricing strategy and you are managing to the 2% number that the bank will keep a lid on or will you manage it to a higher level? perspective, with gdp, it certainly does boost mainstream, overall. because they will invest in assuming a higher inflation rate. alix: thank you so much, brett
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ryan. there will still be uncertainty and future of how then do they deal with the next downturn, when it comes. that is a pivotal issue. a higher assuming inflation target is one thing but actually believing they can hit it is another. and i would say investors have been incredibly rewarded over the last year to fight the fed in more ways than one. we will continue this conversation, taking you to the bu market. market. the bull this is bloomberg. ♪
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alix: this is "bloomberg ." we keep hitting record highs in the s&p that there are 21 reasons to be bullish according to bank of america. i picked out three of their
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reasons that will slow down the stock rally. many times monetary and fiscal easing are mentioned in articles on the terminal. the white line is this goal, the orange line is monetary all the way back to the early 1990's. at the end of the chart is a huge spike in fiscal easing. you have not seen that many searches for fiscal easing since 2009-2008. bank of america says that might not happen. if you are betting on fiscal stimulus, that could be a mirage. and that is a risk for the markets. the other one they are looking at is the economic surprise index is rolling over. versus the s&p, the blue line. you see the decline in march and the economic surprise, you saw a decline in the s&p. subsequently, back in june, you did see and other decline in the
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s&p. we are starting to see another rollover of the surprise index yet snp is that record levels. so the data keeps his appointing, will that feed through into stocks. to do withe has fundamentals. the white line is enough percentage of banks that are tightening lending standards and the orange line are delinquencies that we have seen for loans. the number of companies that are now looking at tightening aboverds has increased to 0%. the axis line is over here. it has been increasing and the default rate has been picking above up, 1.5 percent. fundamentally, the default question we have been hearing in ae high deals market, this is highlight of three things that they say in their notes. if we keep seeing default when you have so much money in the investment-grade markets, what happens when the faults are triggered? what kind of washout? jonathan: and how correlated are
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the individual asset classes to the fixed income to the core? we will continue that coming up in the next hour of "bloomberg ." ed morse joins us with his new call from -- his new call on accrued. this is bloomberg. ♪
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alix: digging for profits.
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shares of glencore suffering the biggest decline in two months after the first half profits tumble 66%. jonathan: expectations for a u.s. rate hike grow ahead of jackson hole. alix: the fear of missing out. moreequity markets has fear and is susceptible to a pullback. welcome to "bloomberg ." we are live from bloomberg headquarters. david west it is off this week. , i love that idea. oute is the fear of missing on a rally that seems to keep elevating. jonathan: on the trading floor there is fear of falling asleep with a lack of rising action. a slow churn. we are sitting here waiting for the speech on friday and then everyone will see what happens. alix: how to you buy protection into that?
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particularly if you have been rotating, leaving very little room to maneuver. jonathan: low volatility and summer -- how it used to be, when you could take a vacation and go away for a couple of weeks and the numbers would be the same. alix: it feels like it is this week. how to discuss all that, protect yourself, as well as other commodities with ed morse. he is bringing to us his new call on oil. but first we check in with the markets. , can i sayepy rally that in europe? jonathan: you can say that about futures. flat of about .1%. down about .1% on the ftse. buttive reaction on the dax it was such a chart morning in europe. down and, down, up,
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that story continues. and the consistency has been dollar strength. quickly --ty market the bloomberg commodity index capturing the commodity comdex -- commodity complex. in two percentage points. yields are unchanged across the curve. more supply will be coming later. alix: flat is the yield curve theme. over the next hour we will go around the world with bloomberg's team covering stories. from italy to south africa. but we want to start with our top stories of the day. digging into glencore's earnings. richard jones looking at the .elloff in currencies
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i want to start with glencore, metals, mining and agriculture. joining us now from london -- what was the biggest take away from glencore's first half of the year? >> the biggest take away has been that they are still reporting a pretty big loss and they are taking more aggressive steps to sell assets. a gold deal came out early this morning and it is the ongoing picture that yes, we are back from the brink. he crisis is over. but at the same time, the story is difficult for this company. question is when they will return to the dividend policy. >> right. quite a surprise. they have been hinting at it. the story for mining companies has been cutting dividends. a bit of comfort to
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say now we will bring them back. but, you know, i think overall in the mining industry, it is still a story of cutting back or getting rid of dividends. question is yes, it might be over, the worst but then you have to actually grow. and how do you do that in a sluggish growth environment? jonathan: you are at the mercy of commodity prices which are out of your control. that is the big story in the mining complex. the big story in markets over the last six months -- the volume has been turned up on the reach for yield. i'm rubber in 2013 when it was foron reach -- un reach yields. a little bit of uncertainty injected into assets. what do you make of it? >> i think we have a bit of
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uncertainty across developing markets and emerging markets. the big story today out of this part of the world is that we are .atching the south african rand which is falling for the fourth day in a row. reports been driven by a in south africa that the finance prime minister has been summoned by the police. we have seen south african yields spike. and this runs counter to the story that we have seen out of south africa for the bulk of this year. the rand is still the best performer in emerging countries versus the dollar. so it will be interesting to see how this story develops. whether it is a short-term drama. jonathan: one of the stories has been to go into e.m. to get diversified assets. what is the story there now?
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richard: i would say that you cannot really remove the correlations out of the emerging markets because emerging markets serve as a proxy for looking for yield. if you go into developed markets, you are looking for riskier assets. emerging markets fall into that same sort of grouping as what you have seen in developed markets. credit, equities and things like that. i think janet yellen speech on friday will be interesting for the near-term direction. up until now we haven't shifted the dial that much. maybe friday might be the game changer. jonathan: richard jones, from london. the capital of the fx market. dani burger, stocks reporter at bloomberg joins us. quiet, peace, is it a sign of calm?
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calmni: -- tainly dani: it is certainly calm but even though it is calm there are all lish signs in the market. hadtf that tracks momentum $400 million of inflows since july. and that is the biggest amount of inflows over such a. of time -- over such an amount of time. they are gains and this momentum irms that we will go higher from here. jonathan: -- said the signs of topping us and calm but perhaps there is over reach. people are getting confident becauseo write puts
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they are confident the market will not go down. we are seeing also a movement away from low volatility stocks. something that was popular. julian emanuel's call that perhaps we are headed for a correction, people are certainly not positioned that way. a national survey of active investors, the most bearish on there net long market, 36%. the most bullish they have been since 2014. aren't the bears positioned for a correction quite well. we will see how that plays out. jonathan: dani burger. they do so much. being punished at the bottom of the cycle with february lows. still bearish and got slapped around. bears,ook at the bond slapped around for years.
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you cannot believe in the rally in the the bond. we are starting off with express. weaker margins, weaker sales. down 20%. it sees full-year, sales down to single digits. by 200 basisff points and more discounting was needed to meet the sales target. watch that stock today. -- this winning the first round over a patent case with job own. -- with jawbone. a hearing in is front of the entire trade commission. -- the disposal of unicredit stake in a polish bank will help the capital raising needs. unicredit has also been talking about offsetting nonperforming
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lows. more positive on their ability to do that. on what isn update making headlines outside the business world. emma: an earthquake has rocked central italy, turning small mountain towns into rubble. at least 38 people have been killed. the earthquake was a magnitude of 6.20. rescue crews are trying to find anyone who was trapped. italy's prime minister plans to visit the area today. turkey has launched the biggest operation against the islamic state in syria. turkish tanks crossed over the syrian border assisted by u.s. special operations forces. turkish warplanes joined coalition forces. the defense is aimed at stopping syrian kurds. weapons expensive u.s. system ever is coming up short. according to a memo, the
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pentagon says the lockheed martin jet program is riddled with deficiencies. problems involved software, warfare and the use of weapons. the next president will have to decide whether to move the jets to full production. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. this is bloomberg. jonathan: thank you. coming up, have the low rates made the markets too complacent? our next guest says volatility is about to reemerge in a big way. find out why and when, next. this is bloomberg. ♪
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jonathan: from new york to our viewers worldwide, this is
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bloomberg. many looking ahead to jackson hole where the fed will send a signal, perhaps, to the next rate hike. we are joined now by amy wu silverman, who thinks the markets are currently too complacent against potential major news. amy? summer. the quiet churn. complacency? look, everyone has seen the same stats. volatility at five. we know there is the potential for a september hike. we know a momentous u.s. presidential election is ahead. complacency is the wrong word, i would say an easy calm. uneasy calm. people are wanting to buy more
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puts. so there is a bid to the downside even in this low environment. i think the problem is -- and i think you are seeing this in is a question of timing. and it always is. people know there is a storm ahead but when? alix: the question is, what do you buy when it does happen? if you are typically in equities, may rotate into utilities. but they have already been paid up. you can't go into treasuries because they are a lot more volatile than equities. where is the best place to get the safety? amy: the trade-off is always -- of course you should buy protection to hedge. to keep rolling it and rolling it and nothing happens, you have still lost. so you have to do something that cheapens it.
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so we talk about put spread structures. put, but youg a are doing a spread. something where the structure it self -- yes, you are getting a trade off in terms you will not get the catastrophic loss hit but you are still at least going to get some kind of downside. alix: so basically it is about the arm. jonathan: you want to take options on financial. amy: a lot of this is on where options are cheap. financials is a good one. financials has underperformed the rest of the market. options are quite cheat. the skew is extremely high. if you look at that, you can buy calls. rotation intoa the sector and you get the bid
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from volatility -- another thing you can do is called a risk reversal. even more leveraging that idea and the final thing i say is with option prices that cheap, think about stock replacement. instead of owning the stock, you keep the leverage but you take advantage of off to an -- of option prices being low. heights it an actual from the fed or is it an external event like brexit? amy: what amazes me are the days before brexit. we saw a big spike in volatility and then brexit actually happened and it blew my mind. and what happened after that? nothing. amazing. -- we were thinking there would be a new fed regime and in actuality what has happened is that there is now
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one put transfer to another. if you think about this time last year, how many hikes were repricing in? four. jonathan: the other question we have to ask -- we know all about the put -- is there a janet yellen call in there? at the market gets too far and comes out the other side and gets hawkish on the back of it? -- this ispossible just anecdotal from speaking with clients but in terms of september, ahead of an election, it is typically a difficult time to do anything. and janet yellen has been very aware of what the market will do. even more so than other fed chairs. so there is that. i would say certainly, but you have not seen that price at all within the options market. alix: i'm glad you brought up
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the election. we will have a new regime change in the white house and we are not seeing any kind of volatility. the dollar-peso on your bloomberg and even that was not elevated. why is that? it is whatk part of people believe will actually happen. you look at the polls right now and they are saying ok -- the polls are saying landslide to clinton but we also know that what the polls say -- similar to brexit -- isn't what will actually happen. so i think what will actually happen is similar to brexit. you will see the volatility pickup but it will be much closer to the election. and wait andait wait until the election actually happens. jonathan: i pulled it up quickly. dollar-peso. you see a bit of a pickup. amy: i love how the dollar-peso is a signal. jonathan: my question to you
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would be -- there is one thing that a lot of people have talked about. around that.gy what would you look at around the election? i've -- i don't think it has to be that complicated. i don't think you need to go into -- i am totally biased, i work in equities, obviously. but i don't even think it has to be that complex. the correlation across the board is nearly one. so don't think too exotic. correlations are so high. silverman, and equities derivative strategist. up, south africa reeling after an investigation into the finance minister. this is bloomberg. ♪
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alix: south africa's rand plunging to a three-week low. follett t -- volatility picking up upon news that the finance minister is summoned by police. vincent cignarella joins us now. we run into emerging market currencies and then you have a political event risk and all of a sudden, you see a decline in the currency. vincent: yes and what is making it worse is that there are certain asset managers who are now stepping into the emerging market space. and they can't find it anywhere. when you take an inexperienced manager or a manager inexperienced in emerging markets into that volatility, it ends badly. year, whenme of liquidity is low, it is even worse. jonathan: we can talk about them
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being emerging-market tourists but at the end of the year they are smart individuals who are well aware at the risk. one of the risks is what happened with the finance minister. the news in the last 24 hours is that it has gained more momentum. but the story has been out there for a long time. the risk hasn't been priced, maybe that is the bigger issue at play here? i think the tourists are not pricing them at the same way. vincent: political risk is hard to price. some people are saying this is the president trying to gain control of the finance ministers house. basically having a puppet in office. and finance markets do not like that type of result and they don't like uncertainty. does to your point, this have broader implications to the budget. of the ability of south africa to keep its credit rating.
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that was something that south africa was struggling with no matter what. so the idea being that there are broader implications than just this one instance. if they do get their credit rating cut -- vincent: one of the things people can cross their fingers for is that when yields are so high, we know that there are risks out there. we do expect the potential for those risks to take out currencies. the level that it would turn on profits. and that is where the complacency comes in. much that they are not gauging risk but the extent of the risk. jonathan: to wrap this up, ahead of jackson hole, rate risks is theback into play, condition in play anymore in the market? vincent: i don't know. i think people are sitting on
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their hands right now. i don't see the rate risk that everybody else sees with janet yellen. i think this will be an educational speech. fedwill tell us when the exits and leaves the bond buying program, how it will be done. she will give us hints as to how that goes down. that into an idea as to when they will raise rates, i think the market will be disappointed. , thankincent cignarella you so much. jonathan: the market just wants a date. wouldn't that be great? vincent: if it were only that easy. jonathan: this is bloomberg. ♪
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alix: this is "bloomberg ." move thiss on the morning, starting with samsung. adjusting the release date of note 7.
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if you preorder one you won't get it until the end of august. samsung did hit an all-time high august 18, a little bit of pressure being eased. lots of demand, not enough supply. -- it gotg a look at $17 million in health payment funding to advance the zika virus test. it also makes tests for ebola and hiv. the government will pay them up in stages. la-z-boy, a similar story we have heard across the retail world. missing earnings and revenue, inconsistent foot traffic. same-store sales down. they were up yesterday because they had a killer new home sale but it is not translating into new sales. it is a soft market and a calm day but you are consistently hearing retail with weaker traffic. home,an: if you buy a new
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you get a new la-z-boy? alix: yes, don't you do that? jonathan: matt miller, he has five. in equity markets, a little softer on the footsie in london. minors are listed on the footsie. we have the underperformers in london versus the out performers on the dax. the underperformance is because of the stoxx 600, basic resources is underperforming. the leading loser. the copper complex. .75%. price down by crude retracing some of the big gains we saw last week. 49.30 is how we trade on rent. we have a marginal stronger bloomberg dollar index up .1% but it is not stronger across the g 10 space.
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very split and choppy out there. in the bond market, two-year yield, robust demand going into the auction that we saw. higher than the average of the last 10 bottoms. speech ahead of the big on friday that you might have heard about with fed chair janet yellen. the market.p let's get to the headlines outside the business world. italy has been rocked by a powerful earthquake. at least 38 people have been killed. the magnitude 6.0 earthquake struck and a number of small mountain towns have been collapsed. the italian government says really -- says relief efforts are being hurt by damage to satellite links. the syrianks crossed border in an offensive against the islamic state.
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turkish warplanes joined coalition air forces to pound islamic state positions. this is also aimed at stopping turkish kurds. u.s. planes and special operation forces are helping the kurds. north korea has successfully launched a missile off a subway for off its coast. south korea said the missilenory flew several hundred miles towards japan. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. this is bloomberg. alix: thank you so much. now to a morning meeting for a look at what key banks are looking at today and commodities under the microscope after glencore posted the worst half year profit since listing in london five years ago. he company is widening its debt plan. joining us now is ed morse. superstar. how alix that is not
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steel introduces me, ever. alix: it's true. i'm biased. ed morse, superstar. it seems like they are calling the bottom in commodity prices. things will get better from here. is that what you see? the bottom and february. it has been noisy coming through. it is a supply-side story. every commodity has a supply-side story. some of them are transparent, others are up to spirit -- obtuse.are u alix: when do projects that percent years ago, mine and delay the rebalancing and when do rebalancing start happening? there is a lot of demand -- it is a china demand story, a global story. haveis why copper prices
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gone nowhere. we have had a huge surge in supply. country, peru, not known to be a major supplier and copper is lurching towards a balancing point. it will be sometime between now and 2018. we expect a couple thousand dollars to bounce in copper. guys who have production shut in can benefit i that by bringing it online. jonathan: that is quite a bounce. what do you need to get it there? ed: you look at global demand growth. and where demand has gone. it is just not going to be enough to balance the market. inventoryave a lot of ahead, you don't know if it will q3 2017.q1 2017 or you will have some projects coming back but it will probably not be enough to get us into an
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oversupply market by 2018. china.he wildcard is 17 months low but exports are really high. they are still churning out copper production. does that wind up putting on the heat like the glencore's of the world? they will be losing market shares to the biggest buyer. be a timing issue and glencore certainly has a role to play in a bunch of markets. the zinc market will be more telling. the zinc market has been the opposite of the copper market, prices have gone off the roof so far this year. we just raise our outlook for think. len core is sitting there with 500,000 times the capacity that can be brought back into the market. they would be due -- they would be doing very well by that if they can time it right. jonathan: why hasn't it happened? the easy way to define the
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market is oversupply. if you told that story in a bar and you said that about zinc, you would be wrong. we have had a huge run-up in the price of zinc so why hasn't the supply come back on in a material way? because there is uncertainty. you don't start a project unless you are certain you will profit by it. a temporary phenomenon -- the best example is thermal gold. china did a curtailment. the export market wasn't ready momentume underlying is not sustainable. it is not sustainable in iron ore. there is too much supply that could come readily back into the market if you have a price jump but that is not the case in metals. we have not seen an increase in production.
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it will be a deficit story for the last half. alix: if you have a declining or grade you will not get the juicy supply you need. you revise down the third quarter and fourth-quarter forecast -- i have a chartier that encompasses what is happening in the oil market. the white line is the rig count and then crew production. reduction is starting to stabilize and inch higher. is this one of the reasons you had to downgrade short-term? ed: actually, that was not based looking atgo traders that chart and deciding oil production in the u.s. is going to surge. it has to do with a lot of factors that are overblown by the trade. goings a market that is into balance. we have two in balances at the moment. we have a huge oversupply in crude inventories.
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you have an oversupply of inventories which are lo not seeingyou are readily what is happening in the rest of the world. we believe crude oil inventories are pulling down and yes, today's fall in prices was a result of the api data released. alix: like you say, that is the u.s., you are talking about the more opaque areas. ed: floating inventory of crude has been down almost every week since the first week in june. at the end of q2 we saw a draw, globally. saudi inventory, they publish them with a three month flag. that is a big chunk. market isou that the really moving into balance, and above and beyond that, we are underestimating what the new
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working inventory number is. be an importero of crude but we are not an used to of crude as we be. if you are a coastal refiner, you have inventory on land and and yourt to the api also have a pipeline of inventory on transit on ships at sea and you don't report it to anybody. it is not on your books. but as we have moved to a big ,mporter to a minor importer online inventory has to grow at it has to grow by 100 million barrels above where the norm used to be. so a lot of that is the rebalancing of the u.s. market. in the world of fx, you have a central banker who awbone the market. then they need to follow it up at action.
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the greatest central bank at the moment is opec. but just like the fx market, they have to follow it up with something. are they going to follow it up with anything? notthe big central bank is opec. the big central bank is saudi arabia. at they said in 2014 at 2015 repeated it at 2016, we are no longer the central banker of oil. we will be steady-state. so the new central banker is the u.s. -- the u.s. is not quick to respond. there is no spokesperson. we are not one big oil company, we are a thousand oil companies that are in practice with one another. so it is a new world. and the guys who benefited by the old world don't want it to die. jonathan: my question would be, why is the market still trading
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on the old governance and not what is actually happening? we literally saw this back in april -- police he a washout when september comes and goes and there will be no freeze? ed: i think there is a potential washout. ministers of energy from around the world -- the algerians have a good reason to hype this. they have been suffering by low prices. production is sliding and they need higher prices. venezuelans -- that is what they are talking about. making noise, we can freeze production at the same time iraq says, our production will go up. so i predict there will not much be happening by a result. the thirdoil in quarter. thank you so much for joining
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us, ed morse. superstar. central: know your banks. coming up, soaring to a four-month high. the airliner reporting record profits and the first dividend since 2009. we hear what the ceo has to say about those results, next. this is bloomberg. ♪
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jonathan: this is "bloomberg ." i am here in the hewlett-packard enterprise green room. coming up, dan suzuki will join this program. ♪ emma: here is your bloomberg business flash. atst-half profits fell 66% glencore.
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glencore was hurt by lower prices for national and coal. last year, they rolled out a rescue strategy that included scrapping dividends and selling $2.5 billion of stocks. shares have doubled this year. pfizer has agreed to buy astrazeneca's small molecule unit. --razeneca could also get up could also get an additional $850 million depending on how well the drug cells. pimco concerned about a slowdown in china's real estate market. they are turning cautious on chinese property bonds and has reduced the exposure. last week, china said new home prices rose in fewer cities last month than the year before. that is your bloomberg business flash. this is bloomberg. alix: today in tech go we look at tesla's announcement that
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they are getting bigger upgrades. a more powerful battery that will make it the fastest accelerator in the world. it will extend the range of the on one to 350 miles charge. stock spiked on the news but came back down shortly after the announcement. musk said the future was possible in the announcement. >> [indiscernible] a front trunkas and a rear trunk. -- to be theties fastest car in reduction? of any kind? i think this is really going to send a great message to the public that sustainable transport is the future. staying on transportation, qantas airways climbing as much reported record profit
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for the year and announced the first dividend since 2009. it closed well off the session highs. >> very excited about the future. inre is so much opportunity the pipeline for us with the and the of the 787 changeover of network internationally, the growth in japan planned and the growth in vietnam planned. and the loyalty program. i have always said that if i am i will continue in this role and nothing has changed on that. >> we will talk about the opportunities in a second that i want to get a handle in what has been returning to profit. would have helped here, certainly and how much support did you get with your joint venture with emirates? >> there are a lot of factors
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that helped. the biggest factor is the transportation -- the transformation program it has delivered benefits and without that, we would not be delivering these record results. the has helped international business, a record profit, the partnership with emirates and american. the has helped to restructure our business and allowed us to focus on growth in asia. fuel has helped but airfare has continued to come down and i have said over the last decade, on average, airfares have come by 30%-40%. so airlines have to father -- airlines have to find other ways for profit and our transformation program has been key to that. >> yields have been under pressure and they will continue
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to be, no doubt. but they are somehow cushioned by the fall in fuel. what price are you hedging at at the moment? is this the right time to be hedging, looking ahead to the next couple of years? really good at picking the right hedging policies. not all airlines have benefited from the fall in fuel prices because of the hedging positions. we don't try and predict where the fuel price is going to be. what we do is give ourselves a protection and then a worst-case situation on fuel and allow ourselves to dissipate if fuel comes down. alix: that was the qantas airline ceo. battle of the charts is next on bloomberg. ♪
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jonathan: from new york to our
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viewers worldwide, this is "bloomberg ." the time of the morning when i get to pretend i am in charge. lisa, you will kick things off. lisa: i want to look at how investors around the world are squeezing the yield of everywhere they can find around the world, particularly the u.s. looking at net japanese purchases of agency debt in the u.s. this is mostly debt backed by freddie mac, sallie mae. the net purchases has risen to the highest levels since 2010 with almost $10 billion net purchases in june. in june, they were net sellers -- it has become harder for them to capitalize on the higher yields in the u.s. due to cross currency risk. it is a compelling trend and it
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has been steadily building. alix: more risk in the market. a continuing theme. jonathan: big investors, some pension funds, writing puts, to try to get some kind of income because they are not getting it from traditional fixed income. alix: and you need the return. sometimes you don't have a choice. i am looking at oil and the repercussions for the market. the line is the white line, the blue line is the s&p. emergingw line is markets. as you can see, a tight correlation at the beginning of the year when we hit the february low. there was a correlation. even as close as june when you saw oil come off a bit. you saw all three other asset classes come down. the idea is that oil is leading the direction of stocks and of the emerging markets but that
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similarity is now diverging. here you have oil starting to roll over. the white line. you have emerging markets following it, the yellow line. but the s&p are staying higher. what does this tell us? does it tell us that the correlation is broken? does this mean the bloomberg high-yield index and smp could be headed lower, if oil continues to be weak and soft after the bull market? onathan: a couple of things the table. i am giving this to lisa abramovitz. it comes back to the yield story. yield. saying, reach for what we have seen in the last 24 hours, the finance minister of south africa being entangled in an issue he doesn't want to be involved with. the reach for yield and being blind to political risk.
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lisahen fixed income that comes on the program to talk about all the time. to have aou continue rally in hike yields, despite underlying fundamentals like oil being weaker, but you don't care and you want to the yield, that poses a risk. jonathan: i think alix steel is saying, my chart is better. if i come back bruised, you know what happens. lisa gets the win. there thisill be friday, live coverage from jackson hole where janet yellen will be speaking at 10:00 eastern. this is bloomberg. ♪ handyman, go to ang
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angie's list. ♪ >> we are 30 minutes from the
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opening bell in new york. a very happy wednesday. we await two more days, taking the podium in jackson hole. have a lot of action or movement in this market. >> 49 hours away from something happening, maybe. everything trending, a tight trading range. i've got to say, is it calm or convictionk of because nobody has visibility out there. i'm leaning towards the latter. lot of callsave a coming out that the market is too complacent, it is too tawpie. .e will see downside zuzuci equity bank of americak of will join us. bulls shouldy the be up. >> 21 charts coming up.
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i'm looking forward to this already. happening here on bloomberg go. marginally positive. in london.mance driven by what's happening in basic resources. at the bottom of the pile in terms of industry bridge is resources. what's happening in the commodities space. of 1%mplex down by a half catches by the bloomberg commodity index. story in there as well. well.na story in there as softer in the session. commodity market, that's the story. market. the bloomberg dollar index up two some strengths percent. one yields at the long end of the treasury curve. point.t a basis at the front-end. two year notes have stayed very
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anchored. an auction ofin two years. yields spin to the floor. flat, flat, flat, what we've been seeing for months. front end.the individual names that are moving. got to look at w.p.p. a profit up 10%. . big winner last quarter gets about 37% of revenue in north carolina. actually only about 14%. golden coming out with a note quiteg the results reassuring, raising its growth estimate for the company. story when itnt comes to express. cutting its forecasts. dropping 8%. margins were down 200 basis points. couldn't market down close enough to make -- clothes enough higher.the sales also rounding it out on tesla,
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company announcing a new battery will increase its range, increasing speed. first electric car with a range of over 300 miles on one charge. upgrade though if you own the car, it's $20,000. if you don't and you're it's $10,000. one potential stock to watch as well. for more on what's happening in markets abigail joins us from the nasdaq. a coupleoking at stocks ask checking into it. -- and checking into it. >> yes, into it shares are trading lower in the premarket. this after the tax and financial software company gained a fiscal first quarter view below the streak. believe they will make perings between 1-3cents share. they see revenues for the fiscal first quarter being below consensus by as much as 4%. this follow as very strong fiscal 2016, strong fourth
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quarter report. morgan's stir ling out outy says it's unlikely to be repeated. on the news yesterday that the new drug application for ovarian cancer was put on -- accepted by the fda for priority review. set for next february, and these biotechs, they really trade off these binary events. yesterday on this news late in the stock fired up by 27%. shortf this could be a squeeze. >> good perspective. thanks so much. and now mark barton joins us. euroe looking at the stocks. there's a bit of movement to the lotde in europe, but not a of conviction, similar to the u.s. >> you said it. aheadtwiddling our thumbs of the big one in jackson hole.
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on the stock 600. chart. the can these are the 19 industry groups. higher. i'll tell you why in a second. monthly moveverage in europe's v stocks index. is the movement of the index itself, purple is each month, average monthly performance. as you can see right now we're at the lowest since march 2015. volatility as we await yellow on friday. w.p.p., the world's big ad company. biggest slice since 2011. the shares today hitting a record high. big rise in first top earnings up by 15%. by 12%.lf revenue up brexit hoping the currency company got and the a boost ahead of euro 2016. england didn't do well in that tournament. getting back to the basic
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materials companies, looking at glen core, shares down by 5%. you know the commodity trader, today, 66% down in the first half. you know why. prices.mmodity on the plus side, net debt declining to $23.5 billion. reduced its debt reduction target. hoping borrowings to $16.5 billion. offering in the full year. thet of a carrot there for shareholders. 118% since january january. >> this stock market then, a higher to it. are we in for an elevated risk for correction.
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there are 21 reasons investors cautious about u.s. stocks. here's the chart we're going to begin with. consensus estimate versus your estimate on the s&p 500. yellow line for bank of bank of america. you see the consensus forecast. trading through that. what gets us from blue to yellow? >> i think it's all about expectations at this point. so just as we overshot to the downside in the february, we're overshooting to the upside here. if you look at positioning and expectations, they're the of what you saw in february. if you look at short interest elevatedhich is at levels going into february, now is at very low levels. lowest you've seen in a year. cyclicalshows the positions highest since 2011. data exposure for fund managers highest levels since 2008. positioning is not going to be very supportive. expectations, one thing you can do in the
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bloomberg terminal is do a news the termrch for "fiscal stimulus." in july over 180 individual stories mentioning fiscal stimulus. that's the highest since 2009. expectations are super high. our economists have done the analysis, and they estimate for u.s., adding 10 basis points for growth. that's a lot upheapingses. that's -- expectations, and globally by the globa way. >> that winds up bringing stocks down with it. that the risk that you see with a fiscal stimulus if it comes through? potential.that's a in the near term and the market oriented.e short-term in the near term they will focus on growth. my view is the expectations are too high. so i'm less worried about the fiscaloaring from a stimulus perspective, especially
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because i think that will disappoint. see a backup of the rates, that's one of the concerns. >> let's talk about economic surprises because one of the cases over the last few months was this continuation of upside surprises until recently. >> and we have that chart. the u.s. line is economic surprise index and the blue line is the s&p. a decline like in early march of 2014 and in 2015, you did wind up seeing some kind of reaction here in the u.s. stock market. rollover in u.s. economic surprise index. are we getting better at forecasting the economy or is this a legitimate downturn that market is not reflecting? >> i think it's a risk that going tosurprises are start disappoint. if you look at july, the shift the first toe from second half. it went from yield stories to reflation type stories. so you saw technology and
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industrials and materials all way in the in a big second half. i think a lot of that was driven by the growth surprising to the upside. the chart, it's been rolling over for three or four weeks and of crushing the zero point. we'll see growth start to surprise the downside, which people worried. i don't think people have woken the fact economic surprises have not been as good as they have been. news is seeing the bad good news story develop as well. if i take that and then take the fiscal stimulus chart as well is the story actually that people negativee that the economic surprise will equal fiscal stimulus but they just get it, and those charts reconcile in a way to become a .areish outcome >> i don't think it is. people have got their hopes up around what the politicians have saying. and that's really what's driving
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it. so you have these tax cut proposals and you have infrastructure spending proposal. that's what's getting people bulled up. the latest at commentary, some of those politicians are backing off the stimulus they're looking for, which i think will continue. especially if you consider what get a splite congress and what they're actually going to deal with to .et through >> it has to do with the search for yield, foreign investors the u.s., reporting the high yield market regardless fiscalher we get stimulus. regardless of the u.s. index. best performing sectors in the first half were telecom utilities. performanceat the in the second half, those are sectors. performinforming i think basically you have to with on what's happening interest rates. they are in the downside for the first half of the year and now they're moving higher. that's one of the reasons we're
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cautious. you have had this 30-year tailwind for equity markets, if tailwind is becoming a headwind, then that story's a bit over. >> 21 reasons to be barish. >> now for an update on the news outside the business news we go to emil ema. killed int 50 people a powerful earthquake in central italy. 6.0 quakeude destroyed small towns. looking for survivors trapped in the rubble. major escalation in turkey's involvement in syria. crossed theoops border in an offensive against islamic state. war planes joined coalition air forces. stoppingse is aimed at syrian curds.
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helpingns forces are the turks. >> a new report says many donors the clinton foundation met clinton while she was secretary of state. more than half the people outside the government who met her during that time gave money to the foundation. the clinton campaign calls the report a distorted betrayal betrayal. >> global news 24 hours a day by more than 600 journalists and analysts. this is bloomberg. >> thank you very much. still ahead on the program, making money isn't enough for black drop. getting red of several ets this month. and will u.s. home prices faster thanrise inflation. outlook forn housing. in the markets then, 16:25 from open.sh futures marginally negative. there's your headline. from new yor new york city, this
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bloomberg.
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>> nickel is down slightly and this is a chart that tells a very interesting story. you to david wilson at to us.up for showing it premium.ickel prem the cost you pay to get the metal when it's high. means there'sr it a surplus of the metal or more need.ou might the white line is the price. premia is seen is the down in china by 33%, yet prices year are up 16%. this doesn't really jive with what we're seeing in the markets. the philippines has an
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environmental law that shut in eight lines, and that's caused in part the big rally in nickel prices. in actuality that's 3% of global production. much production that has been shut in. which is why you've seen the come down. premia tells you the market is not tight. expecting tightness in the future. saying nickel could follow those premia prices lower as we roll forward. the other commodity in focus, today.wn for another 1% what is leading the bears this time? >> well, first of all, you have the fact that the iranians, it's mixed talk. they say they're going to stick with opec and cut production, but then they're building new facilities to hold future production. what you saw yesterday in the
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bounce was the shorts reacting a fiona.tropical storm now that it may be moving north a bit, that has gotten that off the table. so the shorts jump back in thatight and you see they're reacting right now. >> we have the daily numbers at 10:30. we're all looking for the inventory numbers. but u.s. production has finally started to increase. how much is that going to weigh on the market today? >> i think it's going to weigh a were going toe watch the draw or whether or not todaye a draw going into on the e.i.a. report. draw or it'set a more than what's expected. that's going to say we're only nibbling at what's enormously historic supplies in cushing around 521 million-barrels. i'm not seeing the catalyst for the bulls unless we can see a big draw on that number today. >> what's the downside target? >> now you're going to watch that 47-11.
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look for a downside target around 46, 50, to break that privet pivot around 46.50. >> thanks very much. john? >> thank you very much. coming up we'll continue the commodity conversation with london trading. we'll have details on their strategy coming up next from new york. this is bloomberg.
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>> starting tomorrow we'll begin jackson holehe economic summit. danny youngto the speech friday.d
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>> that is exactly what's going happen. glencore reported it's first 66%, worst down by since listing in london in 2011. billio any led by the billionaire. plans to trim it's borrowing. to bring in linn thomas london. in the last 24 hours what have welearned about glencore didn't know yesterday? >> mainly a story we've heard before. prices are still low. the company is trying to cut debt. even though things are getting better and they're implementing this turn-around story, at the a badime you have fundamental picture for commodities. >> going forward in terms of yes, their de debt is better, it slowly.ucing the cycle has turned. but that's different than wanting to grow the business.
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>> and that's why i think you see the shares down. the stock has doubled and how on thate can you go with just cutting costs and selling assets. at some point you have to really want the business to get better share an increase in the price. >> a lot of that is out of their control it seems. ist is in their control asset sales to some extent. they've widened the debt target again.ught it down what are they going to have to do to achieve that and how well are they on track to achieve do about aet out to year ago? >> i think it seems like they're really well on track. was a surprise gold deal out of australia this morning and in the earnings release they look, we're making progress on a number of sales of other assets. so they do look like they're going to meet those debt targe targets. forhank you very much aining us from glencore, senior independent nonexecutive director at glencore. muchlencore story was very
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about solvency it seemed about year. point last big pileup in terms of equity deferment and in the debt as well. the question is on the table. you have cut debt, trimmed cost. earningso see an story. >> part of the earnings story glencore is within the trading unit for oil and coal, down 47%. us is dan from bank of bank of america maryland, senior equity us.tegist still with when you look at the glencores minors,orld and the big what is your take on the commodity producers. the actual stock. a buy now? >> i would be more cautious on those guys because my view on our outlook on the metals barish side. i think it's great that some deleveraging their balance sheet. i think the credit fundamentals market overall are quite
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weak. while no one cares about balance sheets now, i think that will into the fo foray. >> doesn't that bother you when someone says we don't care about balance sheets? the reasons we're barish, it's led by the weakest lowest quality smallest cap and junkiest stuff out there. made sense when coming out of february when people thought we were going into recession. i think that no longer makes at these levels. >> it all makes the dividends more important. big oil was able to sustain them, but by the expense of cash flow. they're borrowing to do that. they don't have enough money from their projects in order to those dividends. why do you want to own a company that does that? some balance sheet at point more important? >> it is extremely important and well.vidends are as one thing you have to think about when investing is the
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of dividendty stocks. a lot of oil players with strong paying out of are their balance sheet now. if you believe oil prices are rally as our analysts do, i think those earnings will able toand they will be sustain those dividends in the future. 50% next june. that's the case those divisions should be fine. >> the opening barrel coming up go.loomberg the cash open, three minutes and 45 seconds away. largely unchanged much of this session. the s&p going nowhere. that's the story of last month. this is bloomberg.
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♪ >> from new york and u.s. bloomberg.this is 21 seconds away from the cash open. softer on the dow. doing nothing on the s&p 500.
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minorerformance, it's a story. basic resources in this session at the moment. earnings from glencore and the commodity complex as well. new york, switch on the board, just quickly. there's the state of the other classes. .he yen a touch firmer nowhere, 1.54% is your year.on a u.s. ten coming into 47.31, down by 10.64%. quiet and silent and calm .s we wait >> will they or won't they. what would you say on friday? into just a few seconds the open. thedow up by 0.100% so is nasdaq and the s&p relatively flat. oil has been rolling over a bit ahead of inventory numbers, so
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can the s&p sustain that. want to look at the year that happened. remember last august, the u.n. devaluation, disney warning on espn as well as their revenues. decline inther market. high, despitecord the fact that there's been 32 days that we have not seen a s&p move. it is the longest since 2014, i think. so the idea is that we continue but there's no, volatility. there is no movement. we are seeing a bit of movement pick up in the commodity market. i was mentioning oil as a down stocks.drag oil continuing the slide, up by 1.5%. inventory the numbers. a.p.i. came out yesterday and said there was an inventory week.last we'll see if that continues to weigh on the markets. a rate hike is coming. and copper down again today. copper at as of 17-month low. china's also exporting copper
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and producing copper. adding to the oversupply on the market. in terms of individual names we have the earnings stories for you. dicomindustries saying that from one of its newly acquired networks will be lower than they thought. it is down because of light revenues as well. boy down. missing estimates and expecting com saleswer and lower. >> weaker earnings picture. s&p 500 still near record highs. that closed for a 30 second straight session without a 1% move. the longest stretch since september 2014? .> uh-huh >> joining us around the columnistgo table, mike rigen. front of a this in series of guests as the streak as built up.
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conviction? of complacency? i don't know. what does the chart tell you right now? one thing you have valuations that are sort of keeping a lid on the market from getting too high. said, looking at some of the biggest question marks facing the market. a lot smaller recently. whether that's right or not is be seen. but people are pretty confident in the interest rate outlook. one's really expecting september to be an increase. maybe one at the end of the year path upward next year. and u.s. election is another source of volatility a lot of times. and people are pretty confident in what the outcome's going to be there. clinton appears to have a pretty commanding lead. i don't think anyone's expecting shift in the senate or republican power. market seems to be comfortable with the unknowns. and i think that make as lot of people uncomfortable, because really a lot of people could be
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there is ag foot if surprise, if there is a disappointment going forward. you look at some of the theections we've had over last few years, it's really been stuff coming from out of the surprises that caused it. whether it be the brexit vote, china's devaluation last year. so people seem to be comfortable anything like't that in the cards. maybe the pain could be worse if there is some kind of shock, rates, it be interest elections or anything else we're not talking about. >> the question then becomes for safety. go you had an interesting article that said you had such a runup stocks.tility they're very expensive. that's where you go. treasuries are very volatile. premium in the negative. so what do you do if you're out?ng for a rift to come >> i think there's a lot of cheap ways to still get safety in the market way. ways that noassic one is doing the right way is to go high quality.
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up the quality chain. lot of people sort of equate low beta with high quality. quite different. so high quality is quite cheap and has a historical record of outperforming when volatility goes higher where beta is to do these low volatility prices. there's also cheap places for defense as well. if you want to play the yield story, telecom is a way to do it. market as a higher year -- has a higher yield and ratio.ayout trades at discount for the some of the best fundamentals for this earnings season and most earning seasons years.e last couple >> interesting. we have had some guests come on about going back up the capital structure, improving the quality of the underlying assets buying. now we're talking about actually playing quality back to healthcare. for the politics that's why this sector has been beaten down to
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and underperforming, is the policies. news is price bad thin here. if you look at the fundamentals and the impact of some of the pressures that you're likely to see, i think a lot of that bad news is price thin. so the health care fundamentals continue to be very good. i think the discounts of the market is completely unwork it the -- unworth it given the fundamentals. >> if we wiped up getting -- wind up getting this selloff thinking is going to happen. what ends up happening to that oftor that has a lot volatility of late and is so expensive. >> it's an interesting rotation been going on. the question is what would be the catalyst to cause a correction. if it is higher interest rates, then you have to wonder if these dividend sectors will be the outperforming sectors they are in corrections.
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they usually are. consumers, faithfuls, utilities, that sort of thing less thant beast fall the market turn of correction. and noth value there, all defensives are overvalued. so maybe it's the other sectors this time and the high dividends, your consumer theles, utilities represent sort of -- aren't the sort of safe haven they were. one ofnt to bring up your charts. i just wonder what the sector stories are out of this chart. you have the net percentage of banks tightening standards, and climbing. you have the u.s. delinquency rate for loans. what's this chart telling you right now? >> i think that the fundamentals in credit are weak and getting weaker. tightening in the markets. we have gotten to the point in the cycle where credit is no longer a tailwind and will be a headwind going forward.
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one of those things that isn't a problem until the market decides it's a problem. us.it concerns that's why we want people to be staying away from these highly because thates will come back in the picture at some point. in liber creepup playing a role? think into some of the indications of tightening. those spreads can widen out a bit more before they start to tighten due to sort of factors going on in that market now. i think above and beyond that weakening ofg a fundamentals and a tightening of credit. saw that picture with seenquencies going up, you subprime delinquencies going up, and subprime in the energy market. seeing it all around and slowly starting to creep higher. >> as we keep talking about the yields, at what point to fundamentals, results
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matter. is there a number where people say, oh, i would rather take on than risk? >> i think that's a great question everybody is struggling with. >> is there a way to get that -- that default rate up 1.5%? one of those things that doesn't matter until the market decides it cares. factors here is that the markets expectations and confidence is going up on a daily basis based on this idea is going to get better. if that gets into question, debt astart questioning well. if it starts going negative then people start to come back to the credit tightening and fundamentals are weak. if you exclude the fx story which has been a tailwind to the we're looking at constant growth worst since 2014. good.damentals aren't at the same time we start a segment by saying stocks are at
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a record high. before the bubble bursts and everyone goes back to programs like this and segments and we get lines like balance sheet doesn't matter. thisjust screams that isn't going to end well. what are the best dividends out there? very barish, went out there. seen the bad capitulation yet? >> i don't think we've totally seen it. remember we had a story a few bloomberg, good bears are hard to find. i think that's the story. report showed mutual fund at a multiyear high. one of the interesting points we've been looking at is short on vices futures is isremely -- vicks futures extremely local. betting that a lot of this volatility will stay. seem like people could be on the wrong foot if there's
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a surprise that could shake up.gs >> dan, great to see you. thank you for coming in. maryland, of america, senior equity strategist. good to see you. housing demand has been responding to the amount rulow barring -- ultralow barring cost. yesterday's home sales. we'll look at that next. this is bloomberg.
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♪ >> this is bloomberg go. .'m alix steel coming up later on bloomberg market. a renaissance macro research research for jackson hole. >> from new york state, this is bloomberg.
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the market we're about 14 minutes into the session. tenth of 1% ona the dow. and on the s&p 500. 30 second straight days with a 1% move to the upside or the downside. longest streak you have to go back to 2014. london,arket over in underperforming down by a third of 1%. mining story. glencore earnings down the first halfr versus the previous period in the previous year. and the commodity complex is softer as well. by 0.300%. with go into the nasdaq abigail. >> what a difference a year makes. year was the big black china selloff. we have the nasdaq sharply from over that time period on that day last year, it as much as 8.8%, closing
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3.8%. up 6.6% since that time period. all newy they put in an inter-day high. turning to another anniversary of sorts, we have the shares of apple trading mildly down. this on the five-year anniversary of c.e.o. tim cook. over that time period the shares of apple have more than doubled revenue.arnings and question is whether or not the company can offset the declining growth in the iphone sales for software and services, basically expand the ecosystem. of intuit are down 3.8% this after the company offered a fiscal first quarter view below consensus. fiscale earnings in the first quarter coming in between $0.0-$0.0 per share. thinks it's he unlikely to be followed again this year alex.
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>> thanks so much. abigail joining us from the nasdaq. innew home sales exploded july surging by more than 12% to 654,000. best level since 2007. samesting home sales, a kind of surprise in about 15 minutes. joining us is steven stanley, economist from stanford, connecticut. are we going to see the same listingstrength in the of home sales? >> you know, i don't know that we will. we got a big pop in existing home sales in june. so if we could sustain most of that in july, i think i would be pretty happy with that. of is it sustainable seems to be the question coming out of big home sales yesterday. 12% something we're going to get in august, september, october? >> you're not going to rise that a sustained period of time, but i think the rising trend in home sales is likely to continue. we've seen very strong demand and lot of the folks in the us the main telling
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constraint to home sales is just a lack of supply. builders canent put more product on the market, are going to snap them up. >> yesterday weighing in on the housing market. take a listen. >> we're not in a boom right now. a strong, solid, improving real estate market. mortgage money is not easy. builders are not building too much spec inventory. buyers coming in who are investors. steady, now this is a solid market, but it doesn't market of the mid-2000s. listen to doug, one of the things i picked up, just the one line "mortgage money is not easy." is that what you think too? >> obviously the bench mark compares to is during the housing boom in the
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mid-2000s. compared to that certainly not. on the margin things are getting easier, and again we're seeing improvement. he's right. you look at the level of new of housing the level starts, a lot of these indicators. the levels are certainly not to normal nor the peaks of the last decade. >> as housing keeps increasing. we looked at residential production 6%. these killero have numbers. the q2 number wasmber was a lik a little fluky. broadly it's nice because housing is a boom-bust type sector and what we've seen a slow and steady improvement, which means you should continue to have room to improve in terms of the gdp numbers for housing for the foreseeable future. looking good. other things looking good. okayish.oking
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what does this mean for the federafederal reserve? we finallye, when get that speech. >> i think the signs are gathering that they would like thisve, at least once year. but i think more likely december than september. inflation numbers are really the big reason why they've been so patient. are going tobers start to tick up going forward, but we're not quite there yet. a i think we are going to get move before the end of the year, but i'm leaning more towards than september. >> do you think friday will be more academic exercise for janet young. think she starts to outline, toss the markets up like we've heard from dudly and fisher. >> it's interesting. the topic of the speech is more academic and long term in nature. dudly,ou said, we've had williams, fisher, all being very explicit about the near-term policy outlook, and i think markets will be very disappointed if she doesn't
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weigh in. she's got enough experience and knows savvy that she she's going to at least say something about the near-term outlook. >> yesterday we had eight of the 12 governors proponing for a july.nt increase in does that kind of lay the groundwork for some kind of hike? economicore job owning.s -- job >> several months ago it was 4 and then moved to 6 and now to 8. a growingere's consensus on the committee they would like to move. at the same time there's a very y.cal dovish monard so those folks going to need to convinced. i think as we continue to get decent data over the next few months, i think finally they convinced that we will get a move before the end of the year. youteven stanley, thank very much. you're going on vacation on
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friday. exactly the same right now as when you left. >> we'll hear from professor yellen at the university of the federafederal reserve. as opposed to the chair of the federafederal reserve in controf market. that's what people want. investors when i say "people" of course. the marketot what are betting on. >> they want conviction, lea maybe.hip anding that program, mark david, what's coming up. >> the housing chat you were just having. releasedhome sales literally in nine minutes. of the u.s. home builder will tell us his outlook for the u.s. housing market. for story. the company foregoing future revenue growth in order to pay down its debt. a big chat with him and max mim portfolio manager at union investment. they hold glencore bonds.
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for them. profit fell, but they will cut year tobt holdings this $16.5 billion. it's going to be all about yellm. and we'll ask him. professor yellen or the feds chair yelling. can't wait for that chat. >> looking forward to that. bloombergtion here on " go." after 22 minutes into the continues.ocks churn from new york, this is bloomberg.
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♪ >> this is bloomberg go. coming today, 10:00 a.m. eastern going to get you u.s. existing home sales for july. h.p. the bell we get reporting earnings. earnings story is not over. >> it's not. finally we can say all eyes
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hole.kson tomorrow coverage of the economic symposium starting eastern.00 a.m. we'll have federa federal resere presidents on bloomberg tv. it's not friday. thursday i'm getting ahead of myself. that encapsulates the federal reservefederal is dopsco. you have the fed forecast and market price down at the bottom. every quarter they come out with a summary of economic projections and the dots come down towards the market. watching who. the dots watching the market or watching the dots. >> you can make the same argument for the neutral now, which they keep bringing down. it's at 3%. zero for that. a how much lower can they rate it. have short volatility on the short end and then this
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consensus at the long end that rate is going to keep coming down towards the market and then keep coming down. a guest atd with bank obank of america, we're goo hiketo talk about a dovish all over again. you might hike in the short-term, but at the long end the destination is not going to be that high is it. otherding opportunities than the search for high yields, do we see a washout. question. pivotal will it mean anything? >> 26 into the session here's wrap. from new yor new york city, from bloomberg go, this is bloomberg.
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david: i am david gura, in for vonnie quinn. barton.am mark this is bloomberg markets on
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bloomberg television. ♪ david: we will cover stories out of turkey and rome in the last hour. standing by from the national association of realtors. >> they came in at 5.3 9 million, against an s met in a bloomberg survey of 5.5 one million. of 5.57 reading meeting. this is -3.2% against an expensive -1.1% fall. let's go to the bloomberg terminal. i will show you what is happening in terms of the overall look in terms of sales over the past seven years. here we are

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