tv Bloomberg Best Bloomberg May 19, 2018 12:00pm-1:00pm EDT
♪ julia coming up on ""bloomberg : best"," the stories that shaped the week in business around the world. it has been five days full of flashpoints, trade, diplomacy, and politics all causing commotion for global markets. >> there seems to be a three-dimensional chess game. >> the second round of a boxing match. >> we just don't know who is going to be -- -- >> we just do not know which is really important when trying to form a government. >> the ecb leading officials to discuss the path forward. >> i would take that as a bearish signal to the u.s. economy. >> we are going to look through these transitory movements and look at where inflation is going.
>> we will give additional guidance. julia: plus, another week of corporate news and earnings season. >> what we said was we would pay out 50% of our profits in dividends. >> it looks like tencent is not going to let go. they are going to spend more. >> is anyone surprised by these results? they have not been reading the news are paying attention. julia: it is all straight ahead on "bloomberg best." ♪ julia: hello and welcome. i am julia chatterley, and this is "bloomberg best," your weekly review of this week's important analysis and interviews from bloomberg television. trade was on the agenda this week with talks between the united states and china scheduled in washington. but before face-to-face meetings
began, a tweet provided an unexpected twist. donald trump is ordered the u.s. commerce department to get back into business this week, just weeks after cutting off the chinese government out of their suppliers. in a major reversal, the president tweeted that he and xi were now working together. >> this is a surprising development india. we certainly know that it has proven to be a considerable source of tension for china jobs.e there are 75,000 it meant that company would head out of business and perhaps suggested that cte is a bargaining chip on the table, but we don't quite yet i know what china has put on the table. >> they said they will take another look at semiconductors. >> the chinese did resume examining the qualcomm take over after trump's tweet.
there seems to be a three-dimensional chess game and trump's tweets were moving a knight in that game. north korea, the larger trade and economic dispute with china, it has all become interrelated. it is on story. >> releasing the list of chinese a shares for the next month, the three biggest additions to the emerging market. what does it mean to these companies? >> these stocks are large caps. they are huge. a slice of these companies is going to be added
to the indices. initially, we should not see much impact. this has been well flagged. it is not a huge move, and that is what -- and that is exactly what the index provider wants, what investors want. you do not want a big bank move where shares nobody has owned before -- that is about $2 trillion worth of moving money. it will not be a huge shift from the status quo. >> china has dispatched a delegation to washington about trade talks. u.s. businesses have lined up to oppose the trump administration's tariff policy , including the ceo of the world's most valuable company, ceo tim cook shared at the
white house meeting. tim i talked about trade and the : importance of trade and how i felt that two countries trading together make the pie larger. undoubtedly true that not everyone has been advantaged from that in either country, and we got to work on that. noti felt that tariffs were the right approach there. >> the bond rout getting worse. the 10-year yield hitting its highest level since 2011. the 30 year yield knocking on the door of 3.25%. >> there was a feeling, an underlying to bearish sentiment in the market and they were looking for a reason to selloff. it was sort of a combination of a bunch of things, and it seemed like the market was ready to sell. we saw that you cannot breakthrough towards a rally,
and you have all of the shorts in the market, and it seemed like it was time. >> north korea has canceled wednesday's high-level talks with the south. in that puts next month's planned summit with president trump in doubt. and they called the u.s. a deliberate provocation. if theld be saying, ok, u.s. backs down on the military drills, maybe i have the upper hand more. each side is trying to get the upper hand heading into the negotiations. inin a statement published the news agency a north korean , foreign minister warned that if the u.s. is trying to drive us into a corner to a unilateral nuclear abandonment, we would no longer be interested in a dialogue. >> i would characterize this as a second round in a boxing match after north korea is coming back after being cornered the last few weeks by the u.s., particularly by trump. all indications are today is we have saying, hey,
got skin in this game and we have leveraged here as well. >> i think the risk for the u.s. is really to engage -- is whether to really engage in this discussion publicly with north korea or try to keep the waters as calm as possible and get to june 12, get to singapore, and see what president trump, who is frequently marketing himself as the master of dealmaking, is able to do. italy, another round of negotiations between leaders of the country. two populist parties and a plan on the government this evening. but he expects to have -- what has been agreed to by these two parties and what has not been agreed? what has been left out? >> the main thing is we just do not know who is going to be premier, which is really important when you are trying to form a government. there was a draft program that has tons of points.
you have tax cuts. you have some control on immigration. pension reform. nobody really thinks it is feasible. to really do all of this, they would have to exit the e.u. and many international accords. very populist program. markets might worry if they do all of this. >> in italy, the leader of the five star party announced today that he reached a final agreement with his counterpart head of the league. , italian bonds sold off even more on the news. what would have triggered this reaction in the bond market? >> the main concern about the impact on state finances and the parallel to that of course, is the relationship with the e.u. and the budget rules there. what is concerning the markets , including pledges like what the program called a flat tax, a citizens' income for the poor, which five-star evaluates at a cost of 17 billion euros while
pension institution is more than -- institution says it is more than double that. they will try to review an eu treaty that includes a fiscal contract and various constraints. >> hopes were raised, last night when a trump administration official said that china had offered to cut its trade deficit to the united states by $2 billion. chinese officials denied the report. they said, "the question is about some u.s. officials who said china will cut the deficit. this rumor is not true. this i can confirm. the consultations are still underway. i am not getting ahead of that. the consultations themselves are constructive." >> telling reporters that china has become "very spoiled with regards to their trade policy with the united states." but let's start with the good news. china has scrapped nearly $100 billion worth of sorghum imports. they say that their
investigation is not in line with the public interest, but now we got a take a look at the cast outse china has on that report. they say china will not negotiate under the conditions by the united states and they are dashing hopes of the intellectual property part of this. very much on the radar in hopes of lawmakers that are negotiating on nafta. in addition to that, the energy sector and the labor -- and labor are other contentious points between the u.s. and china. >> the u.s. trade representative says that the u.s., canada, and mexico, are "nowhere near a deal to renegotiate nafta." >> with nafta, the hope was that if they could get a win, they could get something that would prospectsimprove u.s. , and get that through congress this year. look like they are
going to get anything done. paul ryan had put a deadline on it yesterday that is based on the calendar and the legal steps you have to take to get this approved. they have always had more wiggle room then he gave it, but even another two or three weeks is probably not going to get them there. julia: still ahead as we review the week on "bloomberg best," exclusive conversations with central bankers about the next steps for the ecb and the federal reserve. the maneve eiseman, behind "the big short" has advice on what stocks to short today. >> deutsche bank is a problem bank. i think it has to shrink dramatically. julia: and up next more of the , business headlines. >> this is the flag and apple pie kind of gear and you do not want to take a controversial stance. julia: this is bloomberg. ♪
♪ julia: this is "bloomberg best"" i am julia chatterley, and let's continue our global tour of top business stories. in israel the u.s. opened its , new embassy in jerusalem. we believe that it is gainble for both sides to more than they give so that all people can live in peace, safe from danger, free from fear, and able to pursue their dreams. >> the u.s. embassy opening in jerusalem today. in the meantime, at least for the palestinians, tens of thousands converging on gaza's border. it is more than symbolic, isn't it? then the one hand, you have iran deal getting ripped up after trump tried to lie and say that they negated it. you have the israelis with
unprecedented violence, the yom kippur war, and now finally jared kushner, ivanka trump , they're in jerusalem, marking the opening of the american embassy, is something that all israelis are enormously happy to see. they have wanted it for a rate long time. hads the best week he has in office, and he is delighted to see all of this happen. >> at least 55 people have been killed between clashes -- in clashes between the israeli army and palestinian forces. deadliest day since >> are they 2014. going to send more people to the border? people themselves may want to go border because this is a reflection of an unresolved issue for 70 years now. you know, the long-term concern is whether this will destabilize
the region even further? turkeysituation in getting really interesting. the president of the country making a vow to tighten his grip on the economy. in an exclusive interview, president or to one says he plans to take no responsibility n says he plans to take no responsibility. -- responsibility for monetary policy sending the turkish lira to record lows. >> first of all, you are the head of the state. when the people fall into difficulties because of monetary policies, who are they going to hold accountable? they will hold the president accountable. since they will ask the president about it, we have to give off the image of a president who is influential on monetary policies. >> today, again the lira hit a , record low against the dollar, but after that, the turkish central bank came out with the statement, and said, it was mounting market reaction, and it would take necessary steps.
and the lira recovered a little after this, but investors say that the central bank is going to be forced to raise rates, and they are expecting a significant rate hike, at least 200 basis points, in order to curb inflation. and it needs to restore investor confidence. latestn releasing its eco-numbers for the first time in two years, it's economy has shrunk. if you take a look across the board, this is a set of pretty bad numbers. what can we make of them? >> there are a lot of things you can point out. business spending and private expansion were both down. a lot of the blame seems to be pointed at the weather, which was extremely cold during the period in question, unseasonably cold. it seems to have pushed down consumer spending. vegetable prices, the increase is something the government is blaming, as well as people buying fewer smartphones. people are being a little
cautious, and may point to something more permanent, but the opinion is that this is going to be temporary. >> let's dig into some data from the eurozone. economic growth slowed across europe at the start of the year. germany seeing its pace of expansion cut in half amid weaker trade. what is the data telling you? is this a temporary blip? >> i think it is. you have to look at other information. the place i am looking at is the labor market. labor markets and recoveries continued a pace even though growth is slow. if growth is going to be bad for permanently slower, you start sacking people, and that is not happen. what the labor market data is telling you is that the gdp weakness is going to be temporary. >> until today, betting on sporting events was illegal throughout the united states, except in nevada, but the supreme court this morning
struck down the federal statute, free individual states to authorize gambling on sporting events as they see fit. what changes? >> yeah. everything. if you are an operator, a league , this is going to be a seismic shift that really upends the entire sports market and the entire gaming market. david where are we going to see : it first? >> new jersey and delaware. those will be the first to ego out of the gates -- those of you the first two out of the gate. then you will see others, those that already have laws on the books. those will happen quickly. >> wall street has been waiting for congress to cut back on the volcker rule and now it seems they will be taking the first step. doing away with the presumption that -- explain exactly what the regulators are going to propose. >> yeah, they long-held this view that transactions violate the ban on private prop trading.
this is wall street making trades for themselves, rather than the clients. unless you can get authorization from regulators that a short-term trade was to hedge a position or make a market for a client, the presumption was that those traits were banned. now, that is being flipped, and the presumption is most short-term trade are in compliance with volcker, and the only way you get in trouble if you are a bank is if a regulator comes in challenges you later on. >> the confirmation hearing underway. a nominee for fed governor also fielding questions from lawmakers. >> this is the flag and apple pie kind of year you do not want , to take a controversial stance. everyone on the fed agrees that
their balance sheets should be made up of treasuries. they have mortgage bonds and they had to restart the mortgage market and they agree, they want to get out of that business. the rest of richard clare's testimony has consisted of is looking at what he has said about the fed in the past. they should try to push unemployment as low as they can without raising in nation, and the fed has a duty to remain apolitical. all kind of a thing you would expect from any fed nominee parent >> oil rising to $80 a barrel in london for the first time since 2014 as u.s. crude inventories and traders brace for the impact. does it directly have an impact on the amount of oil consumed? >> that is what the ia said yesterday when they released their monthly report. they said the prices at these levels will start to have some impact on supply greater this year.
and they downgraded just a little bit there estimates of how much prices will grow this they wereit does seem warning producers that if these ranges, you will see supply and ,emand come into action crimping growth as people worry about how much gasoline is costing. >> the e.u. summit is underway in bulgaria. leaders announcing a united front against president trump's tough talk on tariffs and iran. >> that's right. the summit was supposed to be about the western world, and a low level discussion as far as the european union is concerned. but what it has turned to is a talking shop about how the e.u. confronts donald trump. they don'two issues like. one, the u.s. pulling out of the iran nuclear deal, and two, the trade sanctions against the european union.
♪ >> welcome back to "bloomberg best." steve eisman made a famous bet against some prime mortgages before the 2008 financial crisis. it was immortalized in the book and film, "the big short." an exclusive conversation with yvonne man. >> deutsche bank as a real possibility, issues in money and technology has taken a long time -- they are probably undercapitalized.
deutsche bank is a problem bank and has to shrink dramatically. >> more consolidation? >> i cannot speak to europe on whether there will be consolidation or not. i think there will definitely be consolidation in the united states which is given by how much companies are spending versus much smaller amounts for regional banks. the regionals will have to merge. >> when you talk about excessive leverage, is that where we are going to see the root in this time of the cycle? where do you think china is? >> i am not going to comment on china. i do not think it would be appropriate for me to talk about it. >> talk more about the biggest, long opportunities right now. what do you think is the biggest opportunity for you in 2018?
>> the biggest opportunity is long-short is making a comeback. in the past, it is really on the long side. there is more volatility and i think the volatility is here to stay. running a hedge portfolio makes more sense. >> i know you are saying you're not looking in the fixed income space right now. is it because you are seeing how much higher yields can go? >> qe is over, rates are going up, i just do not look at many opportunities in the bond market. call me in two years and we can talk. >> coming up, we will dive deeper into the week's news and more exclusive interviews just ahead with policy thoughts from prominent central bankers. >> that would be a concern that we not start into an inversion without our eyes being open.
>> this is "bloomberg best." i am julia chatterley. investors know that policy movements will be coming from the european central bank. the ecb has not yet signaled when it will wind down its bond purchase program. bloomberg spoke exclusively with two members of the governing council about the policy path. let's begin with the interview with the bank of france governor. >> first, we will have to decide about the end of the net asset purchase traders. i already said whether it will end in september or in december, it is not a deep question.
we were very clear about the sequencing. what i explained is that we will give additional guidance before the end of the year about the timing of this first rate hike and about its contingency. let me explain about the timing well past, meaning at least some quarters and the contingency, and to be contingent on the inflation. we will see exactly how we formulate it. we are predictable but we are not [indiscernible].
>> when you say some quarters, could we have seen that for six months or could it be nine months? >> english is not my native language but i understand it could be several triggers. >> three or four? when you look at the main concerns or challenges for the ecb, is it communication to the markets? >> i do not think we have specific concerns. coming back to a 2% inflation target, we are making progress towards this target despite some transient effect, inflation is rather low in the eurozone for 1.2%.
we think inflation will resume its progress in the coming months and this is a temporary effect so we are focused on delivering our price stability. two years ago, there was 2.5% and we expect inflation in 2020 to be at 1.7%. >> are you still comfortable with market expectations which were roughly net purchases and a rate hike in the middle of 2019, does that sound reasonable? >> it is difficult to anticipate what may happen in all central banks. we monitor what is happening. what i can tell you is that we generally consider that markets
have been reading our reaction function well. >> the euro softened quite a bit in recent weeks. do you get a sense from policy makers that there is not a great deal of concern about the euro strength? >> we were concerned always. but we do not have a target for change rates, as you know. the volatility in markets has been more to what has happened to the dollar than other parts of the world. that is still the story. >> the federal reserve had a lot to consider this week as bond yields rose along with inflation expectations.
these issues were top of minds for two fed officials who spoke with bloomberg television. let's start with james, who shared his concerns about a flattening yield curve in an exclusive conversation with kathleen hays. >> if the fed goes up three times for the rest of this year, that is 75 basis points, you have to ask yourself if the 10 year is really going to go up that much in that kind of timeframe. if it does not, we are going to have an inflated yield curve. i think it is crunch time for this. those that are sanguine on this issue feel that the 10 year will rise. the question is, how is that going to proceed over the remainder of this year and into 2019? i do not think we are in any danger right now. it is not too far off the
average slope over the last three years or something. but i would be concerned that we not march into an inversion without our eyes being opened. >> the risk is recession? >> if the yield curve does invert, i would take that as a bearish signal for the economy. >> is that your big concern, next year? >> no, the yield curve would invert. that would send a signal, but you could argue it has been a pretty good signal of problems ahead for the u.s. economy. i do not think you want to get into that situation without thinking it through. >> inflation has been shy of 2% for quite a while. we see commodity prices going up
but when the fed is thinking about our dual mandate the goal in inflation 2%, we are thinking about it on a sustained basis. we are going to look through this transitory movement. my own forecast is that we would see inflation over the next one to two years. >> when are we going to get back to measuring topline inflation? you lead on that with the cleveland's cpi. when do we get back to topline inflation? >> we do have our goal for topline inflation but in order to forecast inflation, we have to look at a variety of different measures of inflation. some of the core measures that
drop out food and energy prices, cpi measure that you mentioned earlier, the true mean measures, we look at those because they give us a better sense of the underlying trend in inflation. nonetheless, it is the headline inflation number that we are targeting and that is how we framed our goal. we look at the other ones because it helps us forecast inflation. ♪
>> you are watching "bloomberg best." i am julia chatterley. let's resume with a focus on company news. chinese internet giant tencent was one of the high-profile firms releasing earnings reports. >> tencent is silencing the skeptics after delivering a better quarter profit. what exactly solidified these strong numbers? >> it is definitely up today because it has not recorded a beat for net income revenue. if you look at their operating margin, it was an increase and even beat estimates for growth margin. if you strip out the other one off items, their core margins actually dropped. it looks like tencent is not going to let go. they are going to spend more and
very committed to their online revenue, online streaming projects, and they are going to expand into new retail. the spending spree looks like it will continue for a long term. >> in the middle of retail week with macy's reporting stronger earnings yesterday, walmart reporting that which fell short of estimates, and jcpenney. >> is anyone surprised by these results? the reality, online is winning. if you have a winning digital platform, you are having winning in that area. walmart, their floorspace is what they need to be dealing with. they need to start addressing their brick-and-mortar operations, shutting down stores. they need to make sure they are turning around what they are
doing in those main source areas because it will be a drag on the online offering longer-term. the flipkart deal is evidence of that. they are buying into a market where amazon is already doing well. to turn that around in another market while they still have problems at home, they have a lot of work to do in the u.s. >> announcing a partnership with the british online grocery. kroger will take a stake. this deal, will it give kroger much scale when it comes to delivery as amazon? >> what this deal should do is give kroger that competitive scale. it is not just about where they can reach customers, it is about how quickly they can and how efficiently they can seal orders and get them to people. >> the dutch banking group reporting first quarter income of 5 million euros, beating
analyst estimates. what are the factors that you are weighing up in deciding and getting closer to decisions on whether to increase dividends? >> we gave an update on capital in february and what we said was we would pay out 50% of our profits and dividends which we declared for the last year. but that we would also consider additional distributions. if we remain within our capital target and we would reflect on that later in the year. all the normal sorts of things that we would consider would reflect on where the business is, how well capitalized we are, where we see the opportunities. >> let's talk about what is happening with credit agricole. it is missing analyst estimates squeezing earnings at the investment bank.
the company says it is well on track to meet its 2019 targets. what happens in trading? can you run us through the numbers of where you saw the weakness? >> there have been changes in the perimeter. participation in banks. obviously, there has been action rates which were unfavorable. the dollar went down during the first quarter compared to the first quarter of 2017. we are mainly strong and specialize in fixed income. activity has been sluggish. a weak market and a bank which specialize in fixed income. is not trying to compensate by taking more risk, the sluggishness of the activity in the markets. >> allianz has reported 1.8% of
above the analyst estimate. it is said to have been boosted by president trump's changes to the u.s. corporate tax and lower restructure charges. >> the operating profit was down 6% but if you adjust for the affect and a one-off that we had last year, it was up 4% and this reflects the underlying, operating improvement across the board if you look at the compilation. we have a business of 8% and estimates meant we could across $21 billion and it went down. it is very strong across all business lines.
>> merck, the german mark has said the probability will probably fall as much as 15% this year. that as the german company's failing liquid crystal business. is this the low point? >> not yet. we have announced that we have a loss to some market shares in asia and that this process is actually continuing until end of 2018. we expect with our most steering
kit in 2019. >> fiscal sales and fourth-quarter earnings estimates falling short. shares flipping this morning. >> we had increasing momentum and our top line revenue, we had record capital returns to our shareholders, so overall, it was a really solid quarter. the fact that our security business grew 11%, our obligation business grew 19%, that is the second big piece here that gives us confidence. the third, the business model. it grew from 29%. recurring offers was up over year-over-year. we are guiding for continued momentum on the top line as well as record earnings per share.
we are pleased with the quarter. >> a major victory for activist investor. -- xerox has called off a $6 billion takeover by japan's fujifilm. great news for these guys. >> it is. they haven't settled and were going to replace a big chunk of the board and then xerox backtracked and said, we are not going to settle. they are backing away from the fuji deal. >> this turned out best for the shareholders and the judge made a landmark decision. he is basically saying, if you do not play by the rules, it does not matter how self-righteous the board is, you
have to play by the rules. this turned out good for the shareholders. we entered this to try to get the best deal for our stock and it turns out, we got a pretty good decision that is going to help shareholders all over the country. >> the board coming under more criticism. the world second proxy advisor separating the chairman and ceo roles that elon has held for the last decade. the question is, is elon musk listening? >> a very legitimate question and honestly, i am dubious a just how much this criticism is going to amount to anything in a couple of weeks and we have tesla's annual shareholder meeting. there is a long history of tesla facing real criticism over its who have long ties to elon musk and personal and professional facing real criticism over its board and the lack of independence on its board is primarily comprised of people relationships with him. there is real questions about
how much they can hold elon musk to account given the role he plays in the company. >> cbs drama has taken another twist. shari redstone has been diluted by a tremendous amount, right? >> she has. it has been diluted from 80% but she does not think her vote should count because yesterday, she came out with a nuclear option of changing the bylaws. you need 90% of the directors to vote for this. on that basis, she has won the vote because it was 11-3 against her. for investors, it means further uncertainty. these companies have been at this for two years. companies need to get their act together if they want to be able
>> i mentioned the euro, it hit a session low after we got the german gdp data coming in weaker than expected. i suspect a lot of that is to do with a stronger dollar than anything else. >> there are around 30,000 functions on the bloomberg and we always enjoy showing you our favorites on bloomberg television. here is a function you can find useful. quicgo.
it leads you to our quick takes where you can get insight into timely topics. here is a quick take from this week. >> when it debuted, the 4g wireless we had today allowed people to hit the road and explore unknown places with only a smart phone for directions. when 5g arrives, it could enable driverless car to take us there. 5g stands for fifth-generation and it can accommodate a lot more. the reason it is being called revolutionary is because 5g will allow connected devices to speak to each other as well as people. >> right now, we are living in a world where it is a one-way experience. >> that is a bloomberg tech reporter. >> you can talk to your phone, you can transmit data, and send it back to the network. 5g, for the first time machines will be communicating with each other in a meaningful way. >> 5g could end up being 100 times faster than what we have
now with speeds that could reach 20 gigabits per second. >> right now, we are living in a in plain language, that means it downloading an hd movie in seconds. five g1 be needed to accommodate the growing internet of things like internet connected for refrigerators, thermostats, dog collars, but it will enable many. >> factory where machines are not connected at all, suddenly, we are looking to be connected in real-time monitoring and things like cars, utility poles, light poles. >> the biggest advance would be a huge reduction in communication lag time. this is known as latency. they will be able to ping each other multiple times to avoid collisions. dated transfers that allow doctors to perform surgery remotely.
how will this work? you will improve network density. >> a fancy word for putting more towers out there. >> 5g will not only use the existing mobile spectrum but stop in higher frequencies like millimeter waves. they can carry data that travels distances. the new towers may have as many as 110 new antennas. getting 5g ready is expected to cost providers billions of dollars over the next five years alone. look for the pop up in big cities and 2019. >> that was one of the many quick takes you can find on the bloomberg. you can also find them at the bloomberg.com along with all of the latest business news and analysis 24 hours a day. that will be all for "bloomberg best." thank you for watching. i am julia chatterley and this is bloomberg. ♪
david: did you always know you that you wanted to run fidelity? abigail: i never felt any pressure to. david: did your father say if you work hard, in 20 or 30 years, you will be the ceo? abigail: he was not the guy who made promises to anybody. david: what do you think investors mostly want? abigail: everything. david: was it complicated growing up with your father and family being so famous? abigail: we were not famous at all. i mean, this this was the equity market in the 1970's, david. david: as you look at what your future is going to be? abigail: i think this is the moment that i've been waiting for. >> would you fix your tie, please? david: well, people wouldn't recognize me if my tie was fixed, but ok. just leave it this way. all right.