tv Bloomberg Daybreak Americas Bloomberg October 12, 2018 7:00am-9:00am EDT
investment banking revenue missing estimates. wells fargo on deck. the week that was, selloffs take a break. investors find their markets, $2.2 trillion on thursday as the s&p closes below technical levels. finds chinay staff does not manipulate currency. welcome to "bloomberg daybreak," on friday, october 12. david westin is sleeping in today. missing bank earnings. i love. >> i love it. we get to hear from jamie dimon in a while and the question is, is he the answer to arresting the stock drop? is a good thing financials are down 6% over the last five. you had disappointing ficc, banking revenue. in the overall market, it looks
like recovery. history tells us you have to be careful of the first bounce after a selloff. it was a brutal two days. the dow lost over 1100 points. s&p futures up 27, 1% rally. twin peaks for the s&p, that is winnable market has in the past come to an end. euro-dollar flat on the day. fx market telling the fed, keep going. 317 -- yield up by 3.17%. lotn: a lot to watch and a to get to when it comes to bank earnings. let's take time for your morning brief. 8 a.m. eastern, third-quarter earnings from wells fargo, more banks on deck. 10:30 p.m., the fed randal quarles will speak at the finance event in bali.
activision lizard releasing new blackout, for call of duty 4. i used to run with people who would talk to the people online who were waiting overnight for these games. jason: your people? alix: maybe? battle star galactica? we are joined. jason: we are indeed. it is all about banks. lisa, jpmorgan hitting the pages. what is your take away? >> it is interesting. the top line beat, they missed on fixed income trading and compensated with again in equity. --in came from loan growth the again came from loan growth and the tax cuts. this is the key.
interest rates rising much faster than they are increasing. the fees they pay to depositors. they are catching this huge margin that any rise in overnight rates is going to bolster. this is interesting. the main question will be -- how sustainable is this at a time when bond trading business, once the engine of profitability, looks like it is less so? jason: luke, what do you make of it? what will the market make of it? >> i am interested that this will move the stock. that interest margin angle -- the other thing is we should be worried about rising rates. we were worried about a flattening yield curve and supply. we should be worried more about the man. that has traditionally been -- about demand. that is traditionally an indicator of revenue growth. we were talking about something that can arrest the selloff. jamie dimon, february 11, 2016 -- i just bought a ton of
jpmorgan stocks. it was too cheap. that was perfectly timed. in an interview a couple weeks backs,ybacks versus cap i prefer more cap backs, we are doing a lot of buybacks as well. into some more enthusiastic about buying his own shares. >> expenses were up 7%. that is interesting when you want a lean balance sheet. technical damage. come inside the bloomberg. s&p 500 dropping. since february. we always bounce up the levels. a more decisive break. walking through the technicals. what do you see? >> not always. we have had a close below and then we manage to get back above -- alix: do not ruin my mojo. >> i love the yellow line but i do not want to put my faith in the aligned particularly -- in
that yellow line when we should see fundamentals takeover. it would be nice to get above the 200 day moving average and we can let earnings to the work. that would be the main takeaway. jason: all right. >> the yellow line does not do much for me. alix: the line is purple, ok? >> the purple line, i do not necessarily have faith. we are seeing more stability today. what we saw overnight with lows in the riskier credit etf's, there seems to be a pause, a deep breath, -- ok we have seen a freak out, and we can start seeing value and pick it up again. when we were talking earlier about this is not armageddon, this is not the beginning of a prolonged selloff, that seems to be right. alix: what i didn't understand about the price action yesterday, growth did well, tech
was not the biggest loser. the nasdaq was only off half a percent. what did you make of that? >> i found that to be supportive. if tech and momentum are going to be your biggest losers for days on end, that is when you start to worry. growth and momentum stocks have sharp reversals. growth never really underperforms value by as much and as quickly as it has in recent sessions. we do not have a lot of things to go back to in the past five to 10 years that remind us of that. call itreminder, something more but the move away from growth leading the way down to something that will be. >> the other issue in the market has to do with the u.n.. the u.s. treasury department will recommend secretary mnuchin that china is not a currency manipulator. dollar-yuan nearing the seven point. this is significant.
we need to live in a world where seven is not the red line. lisa: if we are living in a world of weaker yuan, that will threaten emerging markets in a significant way. we will see if this is the end of pressure from the treasury department. steve mnuchin can still label china a currency manipulator. this is just the advisory from the treasury department. there was data overnight showing china's trade surplus with the u.s. hit a record $134 billion last month. this will only and rage president trump or encourage more of a trade tension backdrop because this is what is -- this is what he is targeting to try to reduce. jason: how does this play into the market? was that underneath what we have seen over the last couple days? luke: this is telling, it is mainly about yields. we were awakening to the chinese cuts and a spike in implied
volatility. yesterday we are hearing things about trump and choosing bring meeting. ais would be a nice way, sense that it will not get out of hand. >> i have to disagree. this week was about yields but it was at least as much about trade especially in light of the reporting of the microchips implanted in u.s. hardware imported from china. you can see this by the action when we got headlines about china, xi jinping and president trump meeting, the market rebounded. direct correlation. yields were coming off highs. it is front and center for traders. alix: we will bring it down over the next couple hours. thank you. you can find all the charts we used and more on gtv , save our charts by running gtv
. beat on earnings and revenue. fourth quarter loans up modestly quarter on quarter and net interest income was up single digits. positive for regional banks. jason: we always look closely at regional banks. 's get distracted by the jpm but these have a lot to tell us about the broader economy. alix: coming up, ficc mrs. on results -- misses on results. this is bloomberg. ♪
♪ taylor: this is "bloomberg daybreak," and i have the bloomberg business flash. gary cohn reportedly has a new job. he is now an adviser at spring labs, a blockchain start up. he has an undisclosed amount of equity in the company and calls it a unique opportunity. he was formerly the president and chief operating officer at goldman sachs. lloyds bank has selected blackrock to manage $40 billion of assets in index strategies. $143oney comes from the billion portfolio currently managed by aberdeen. there will be a partnership and alternative assets for investment technology. bloomberg has learned softbank, has taken goldman sachs as a
lead underwriter for the largest ipo ever. they planned to sell $27 billion of shares. the operator begins marketing the sale next month. sales would be less than the tokyo stock exchange on december 19. -- would begin on the tokyo stock a change on december 19. --on: paul eyes on jpmorgan all eyes on jpmorgan. we will hear from jamie dimon. color on the numbers. jpmorgan up in premarket. the top live blog is noting shares off highest gains in premarket. we will see where they go especially when the commentary comes out. the media commentary, let's bring in from south carolina, columbia, the high country, walter todd, greenwood c i/o. jpmorgan is one of the top holdings. -- cio.
allison, let's start with you. what jumped out for you with these numbers? >> the bottom line the. beat. return on tangible common coming in at 70%, strong. the provision. credit continues to be -- a couple years ago jamie dimon said never, ever better. it continues to get better. jason: walter, you are a holder. is this what you are looking for from jamie dimon? walter: it is a solid quarter. not a home run. more like a double. given the market and shares over the past week, this is a solid moving higher. i was struck by the 6% core growth. that is solid, better than expectations. i'm not worried about the slowdown in ficc, given that the
third quarter includes the slower summer months. alix: were you buying on the dip? walter: certainly with new money coming in from clients, we were buyers over the past several days. financials in general have been disappointing this year. we are hopeful they can catch a bid on the rebound as interest yieldmove up and the curve steepen's. jason: we have also heard this morning from at least one regional bank. looking at them for metrics. what do you see? pnc, we will be looking at the positive pricing. what we saw last quarter, deposit pricing lower than on where we are in the fed hike cycle. that is positive for all banks. last quarter we saw in terms of
acceleration of cost, especially at regional banks. andaw jpmorgan, wells, companies i cover but that is one of the key risks next year given eight rate hikes in. we will be looking at that across banks. jason: walter, you have banks in your portfolio, pnc and suntrust. what do you make of the regional banking scene? beta has beensit focused, incremental loans running at 50% to 60% which means as the fed raises rates, banks are making have to raise dropping to the bottom line. still in good shape. pnc report looks good initially. regionals have been disappointing. we are hopeful they can catch a bid on earnings. alix: let's go deeper into the loans for jpmorgan. loans up 6%.
consumer community banking assets up 14%. less credit provision losses, set aside. is that sustainable? allison: they were lower, delinquencies were higher. right inrs coming in line with jpmorgan guidance. on the loan growth side, jpmorgan, one of the things we will want to hear about is, the broader banking products. the strong sales are supportive overall in terms of customer relationships, growing sales lighting and the loan volume in now the banking product and we will want to hear of that as well. alix: that did not account for yields that drunk to -- that jumped to three and a quarter. cannot continue? can that continue when they
have exposure to auto loans? allison: they think that business is going to recover. with the rate move, we are watching the mortgage side of the business. it is the most sensitive to rates, especially the 10 year and a big jump, we are expecting stable volumes next year and if there could be downside risk if rates go higher. jason: we will hear from jamie dimon coming up. he is a strong voice in the banking world. what you need to hear from him to make you more enthusiastic about jpmorgan? walter: i'm interested to hear what jamie dimon has to say about guidance going forward and what he is seeing given the volatility we have seen. i do not care so much about the prior quarter. it is more about outlook. are they seeing changes in fundamentals? alix: we will see you in the next hour. stay with bloomberg television later.
♪ recover after the longest losing streak in president trump's presidency. is a sustainable? -- is it sustainable? >> this is the ninth year of a bull market. we have had a decent run. is a correction. it is a modest correction. cathartic as opposed to life-threatening. we are getting to a buying opportunity. what hashiking rates, been a surprise is how strong equity markets are. the developments between the u.s. and china have been a
factor. all of these of these are come together to force equity markets to reevaluate. >> getting to a point in the cycle were volatility goes up, as a function of the fed getting into hawkish territory. that means equities will have a tougher time. >> growth has been robust this year. earnings have been robust as well and we have not seen the same performance in markets. that was already a play. overall, there is a profit taking. >> u.s. equities are overvalued. stocks are extremely valued. the 2000 stocks incredibly high. is a way iervalued would describe the u.s. equity market. alix: joining us on the phone is keith parker. keith, i want to get your take. wednesday and then
out of value on thursday, what does that tell you? keith: the rotation growth devalue -- growth devalue, we have been -- growth value. quality growth, we stick to that theme on the back of rising volatility with trade risk on the horizon and rising rates. we still think health care remains our core defensive, long. it continues to outperform. we would be a buyer of tech. jason: one of the quotes that "unequivocally overvalued." what do you think? i would have to disagree after this selloff. times, forward5
earnings at the close. that is not cheap but i would not characterize it as overvalued. it is a fair multiple now. keith,d agree with focusing on higher-quality companies and growth at a reasonable price is the mantra versus extreme picking growth versus value. alix: as yields came up, finally get rotation into value will put pressure on organic earnings growth because of higher yields. when does that conversation make sense for you? keith: it is tougher at these levels where we have seen real rates rise well above 1%, sub 50 basis points last year. with inflation decelerate in, it is tough to argue for rise in yields further that supercharges that value play. there was a point this year where value got cheap.
we like certain parts of the value spectrum. again, in terms of a rise in wees and a crimp in yield, would tilt toward large over small where small caps are over levered and have exposure to rising short rate. alix: walter, you are the value guy. where do you see value over the last five days? walter: growth at a reasonable price. growth-value discussion is a sector call. when you look at indices, technology is at 35%. health care, two thirds of the growth index. it depends on what sectors you think will outperform. we think it is important to have a blend. we like tech and health care on the selloff but we also like more value sectors like financials and industrials that have also been hit hard. jason: anything that will change your mind, walter, today on those sectors you laid out?
walter: not really. in thishas been spared selloff outside consumer staples and utilities. if you want to play the rebound i would not look to those sectors. i would look to those that have been beat up the most to rebound the most as we recover. alix: thank you so much, as we break down the value versus growth conversation. coming up, live to the imf meeting in bali with the man who has the eu's financial services policy. it is about iranian sanctions and how europe will go against the u.s.. this is bloomberg. ♪
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european gains getting a look at the best-performing sectors in europe. a read through four u.s. asset classes, the conversation yesterday was about president trump coming out against the fed but the fx market says, we are good, you can keep raising. mixed but climbing higher against major g10 currencies. center, at the rally. if we wind up getting the relief, what does that mean for u.s.-turkish relations? a list of sanctions? economic has become an and currency story. ago, sixe a long time weeks or so, that rattled markets, the whole issue between
erdogan and trump. alix: earnings front and center. jason: let's take a look at premarketp over 1% in off initial highs. i was reading in on the top live blog, the first hurdle to a u.s. rebound has been cleared by jpmorgan. we will see what happens. alix: by lending more. they are not sick of trading. jason: you know who is not boring? jamie dimon. alix: let's look at headlines outside the business world. taylor: the u.s. treasury department told steve mnuchin china is not manipulating yuan. bloomberg has learned steve mnuchin's staff does not have ground to declare them a
currency manipulator. the price tag for hurricane michael could be $25 billion. the fourth stronger storm ever to hit the u.s. mainland devastated the florida panhandle. a disaster modeler says private insurers will get hit with $10 billion in claims. half the damage will not be covered by insurance. a disappearance of a saudi journalist is prompting some companies to drop out of the so-called davos in the desert. it begins in two weeks. turkish officials say the journalist was murdered in istanbul. the ceos of uber and by, have planned -- viacom have to cancel. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more
than 120 countries. i'm taylor riggs, this is bloomberg. keep an eye on the so-called davos in the desert, will be interesting. bloomberg had an interview with the crown prince of saudi arabia last week. he is seen as something of a reformer. he is a big figure on the global stage. this was meant to be a celebration and a next step in the diversification, economic diversification of saudi arabia. investors were slated to go. rbc had a note yesterday that this conflict could open up rifts in the oil market. this has a broader implication.
that ishe aramco ipo, still on the table. we will see where that goes. -- bali.now to alix: i would love to. jason: our colleague is there with a special guest, european commissioner vice president. hey, jason. hello from bali, it is 7:30 p.m. on the island. meetingurrounding this because of prolonged trade tensions between the u.s. and risingbecause of the interest rate environment. on top of that we also have concerns about brexit. a lot of implications on the global economy today. we had the president of indonesia saying windsor is
coming for the global economy. let's get perspective from valdis dombrovskis. thank you for being with us. there has to be a de-escalation of trade tensions. how do you do that and who will drive? valdis: indeed. if you look at eu-u.s. trade de-escalation is already taking place. following the meeting between commissioner juncker and president trump to stop further escalation of tariffs, and we are now discussing trade, industrial goods. we are down at the negotiating table and trying to find solutions. withurse, we are concerned the u.s. and china, where escalation is continuing. for us it is not only an matter
of bilateral relations but also we think it is important to system, a multilateral the respect of all international organizations like wto. it is also a broader question. reporter: there is no sign of a solution yet. how will a prolonged trade war between the u.s. and china impact eurozone and asia? we are already seeing a slowdown in growth. >valdis: given the fact that we managed de-escalation between the eu and the u.s., coming out strong, direct influence, we expect economic growth in the eu to continue in the face of 2.1%. this ongoing tension, already we see, affecting confidence indicators, potentially affecting investment decisions
of companies. so indirect influence in any case is present. it is important we try to address tensions. reporter: the brexit deadline is also approaching. what is the commission doing? what measures are being enacted to ensure there is no chaos in financial markets should a hard brexit take place? important to agree on the withdrawal agreement between the eu and u.k. this is going on. progresso make major over the next months. agreement for basis for countries by the end of 2020. there is aectors, working group between the bank of england and the central bank to deal with the effects on
financial sector around brexit date, end of march. reporter: we heard from the esm chair, saying for banks in the eu, they still want houses in london should a hard brexit take place. how do you ensure that happens? valdis: that is one of the potential risk areas identified by ecb and bank of england. this is one of the areas our country is working to see what exactly measures are needed to address this. reporter: what moves what you make? can you give us an idea of what moves will be taken to ensure this happens? valdis: we first need to see a report of central banks. this is coming. soon. reports wee those
can communicate clearly on potential means. i do not want to rush things. it is on our radar. meeting, youthis had a meeting with steve mnuchin, treasury secretary of the u.s. what transpired? what was discussed? was the iran sanction discussed? valdis: we were discussing a broadert of issues, eu-u.s. relations. we concentrated on our work on cooperation in financial sector regularity issues, issues for example on ongoing support to ukraine. a number of topics we covered. reporter: how about the iran sanctions? the eu is seeking clarity on issues including the swiss payment system. that eu, or some countries like the u.k., germany, are trying to
get exemption of the swiss payment system. where are you? on the we also touched fundamental issue of u.s. unilateral withdrawal from the iran nuclear deal, despite the fact that the international agency has concluded iran is following this agreement. from the eu side, we continue to be committed to this agreement and therefore, agreement on enforcement of sanctions as regards iran's nuclear deal. one of the issues, we think it to thertant international structure. , swift is alsong
a basis for antiterrorist tracking programs. allow countries serving alternative arrangements, we are losing out in terms of transparency in the financial system and also of possibilities to track terrorists. reporter: is there consensus within the u.s. that swift should be exempted? valdis: this is a work in progress. we are raising the concern and working on how to address it. reporter: we thank you for your insights. wide-ranging issues being discussed in that meeting with steve mnuchin. back to you in new york. alix: thank you. they return to business week beat. pot of gold. the stampede quickens as investors vie for the green in a
flourishing market. the radicalst, platform for investing has the wall street old guard wanting in. the impenetrable investment banker. now, max of bloomberg businessweek. pot. an amazing graphic. canada could be the first group of seven countries to legalize recreational marijuana next week. fun to write a cover lines. puns write themselves. the big thing here is canada becoming the first developed uayntry, or a quiet -- urug is the only one in the world other than to legalize recreational pot.
food and beverage companies, health care, they want to put cbd, the non-psychoactive component injuring's, what else -- in drinks, what else? there is excitement in terms of the world of finance in weed stocks. jason: that has gone from the black market, stock market, now maybe the supermarket. i love this. alix: you worked on that didn't you? jason: i am feeling the writing. what is amazing is, investors have been pouring into this in anticipation. it is still federally illegal in the united states. canada these pot companies are going public. there is a clearer regulatory scheme. everyone is trying to figure out
what the financial situation is. one of the most interesting things from the story is the idea of cannabis futures. one of the problems is the flowers are variable. they have to figure out different things before they are able to go forward in a big way. alix: we do not have a lng contract. it will take a while to get to pot futures. we just got a permian contract. jason: i did not know how you would bring oil in. alix: i got you. jason: so talented. anyone who is listened to a podcast hears an ad for betterment. what is it? app that will manage your money for you. it tries to replace the normal duties of a financial advisor with software.
this kind of thing has been going on for a long time and is becoming more popular. this was the company that started the craze. they are a small company still. start up in new york, raised a couple hundred million dollars. every giant financial institution is doing this same thing. jason: they are known as a robo advisor. that was at first a derogatory term. they used jiu-jitsu. yes we are. now everyone is trying to get in. alix: you think they would be fees.idelity 0% but they are not. i thought that was interesting. max: the big announcement in august, fidelity is offering mutual funds with no fees. that is a response to betterment. it is a competitive thing.
you have this company beating the drum for years about low fees and passive investment strategy. you're seeing fidelity come with a response that generally has a robo but this is a way to get people to open accounts and stay away from robo guidance. jason: interesting space. another interesting space -- dealmaking. from robo advisors, could you have robo rainmakers? max: when you talk to experts in sorts ofwill say all jobs you would not think of could be replaced monday. this is an example. there was a great piece exploring all the way software could replace functions of dealmaking. one of my favorites is the idea of, you hire an investment banker to help you with takeover defense, and there is nan app for that. you basically, which companies
are vulnerable to being taken over or a takeover attempt? alix: sad news for david solomon. he has been jet setting all around the world, getting the personal relationships going to make deals. jason: if he can outsource that to an app, more time to dj. alix: i had a panel, i was talking to asset managers. we have the technology. you just do not know it. we are this huge bank. interesting. jason: they are fronting for the technology. this will not is, put every rainmaker out of business. 30% maybe. jason: features editor, thank you so much. you can hear about those stories on bloomberg radio, weekdays from 2:00 to 5 p.m. and all weekend on the weekend show.
♪ jason: welcome back to "bloomberg daybreak," joining me now, erik hirsch vice-chairman and head of strategic initiatives. i have known him for a long time. amazing. i have this outlook, private equity. you have, you are in touch with investors all over the world. take us inside their mines, especially in a market like this, over the last couple days has reintroduced volatility. but you has done well are chasing this public market on a tear. historically that is not a great environment for private equity, even though it is still delivering. when you introduce volatility
and see pricing come down, that is typically where private equity excels. we have seen that. jason: valuations have been the gaining factor? erik: you're not seeing one of the big weapons that priorit -- that private equity has, taking it private. paying a premium above that does not make any sense. one of the big sources has gone away. you could start to see that come back if you see a price correction. ison: one of the overhangs the dry powder that has been accrued by the managers. how much is that on investors'minds? erik: there is $2 trillion of this on capital. seems large. people are talking about it like it is a real problem. data points. if you take that number as a percentage of global aum, less
than 2%. our entire asset class is less than 2% of the global a u.n.. even -- aum. basing,the investment that capital would take three years to deploy. that does not sound scary. jason: scary for a lot of people, hedge funds. we are starting to hear more and more about exposure to hedge funds in tech stocks. providege fund weakness opportunity for private equity to make their case the big institutional investors? erik: hedge fund weakness over the last decade relative to other markets has benefited the private equity side. you have seen capital flows, hedge funds losing market positions in terms of capital raised and you have seen dollars migrate. that trend is likely to continue. investors fundamentally like the alignment of interest more on
the private equity side than they do in the hedge fund side and as our industry is not known for transparency, it is more transparent than hedge funds. jason: before we were talking about volatility, we were excessively talking about interest rates. all eyes on the fed including the president, notably. what does the changing interest rate environment do positively or negatively for private equity? erik: here is where we split the private equity side versus the private credit side. , on private equity rising rate environment historically has not had much effect on the overall return. essentially, rising rates get passed through to the seller, and purchase prices come down. i would expect that is what we will see as pricing cools off, as it is in public, same in private. on the private credit side, it creates another set of opportunities. you have seen an explosion of capital raising on private credit side. we are still in early innings
despite the market raising money. that will continue for a long time. jason: let's stay on credit. that has been a fascinating boomtown. side,on the public credit people are struggling to hit returns they find satisfactory. returns have been anemic. that is not been true on the private credit side. immediate reaction is -- they must be taking more risk. no. you see a more inefficient market that frankly has been under banked. maybe it will be over banks again but you have taken out a lot of players due to regulatory and split the market wide open where the inefficiency is rampant and people are taking advantage. jason: we talked about returns. returns coming back for private equity? erik: you have basically seen private equity generating mid teens performance after fee.
most investors would find that attractive. and years went public equity market is posting 20% rate of return, 15% has people question liquidity and duration. i do not think anyone believes the public equity market will do that forever. mid teens over a long time looks good. jason: what are you paying for this? people expect the cost of this will come down. erik: it has been coming down but not much. this industry has been resilient around that. goes back to performance. investors are measuring this on a net fee basis and net, net looks attractive. side, ass to the gp much as we would like to pay less, they are not willing to give it for less. jason: always enjoy talking to you. your market outlook is out today. we will see what the next cycle holds. back to you. alix: love to see you drill
down. erickson, had of traditional investments joining us. bank earnings barreling in. downside, a 10th of 1% despite beating the bottom line. jpmorgan trading and ficc came in light but loan growth holding up well. going back to basics quarter for jpmorgan. wells fargo, moments away from reporting. nice boost, wells fargo from the loan growth read through from jpmorgan. more coming up. this is bloomberg. ♪
has a big beat, on earnings. and wells fargo on debt. in the sela takes a break as investors find their footing with global equity markets losing $2.2 trillion on thursday. and no manipulation for now, the u.s. treasury staff finds that china has not manipulated currency values, welcome to bloomberg daybreak. i'm alix steel alongside jason kelly. david westin is missing. let's get right to it. city is delivering some solid is delivering some solid numbers, well above what we were expecting among the company efficiency ratio. earnings are coming in very solid, at 1.73%. i want to point out that wells fargo came out as well, their loans are missing on a quarter on quarter basis, light are in
at $942 million. it's good to get that read on the consumer side. jason: absolutely right. and the bottom line beat is 70eresting, when dollar three cents, the dollar was 170 -- $1.78. this is maybe a nice update for bankers. alix: after they got slammed down 6% over the last five days can you blame them? let's talk about that. we had this rough selloff, the worst since february. futures are up by a full percentage point, no doubt that banks are helping to lead that. in the aspects market you have the euro-dollar, 115 a dollar is a little next. part of this is the daily drama playing out. the 10 year yield is up by two crude is up, and after having its worse selloff in eight weeks. jason: we should walk you
through, wells fargo coming out with total average loans at nine 39.5 billion, down with eps .oming in at $1.13 we will get more on those numbers as they continue to come out. let's break it down, joining us aain is allison williams, senior u.s. banks analyst for bloomberg. it's all happening in real time, what do you see go -- see? brandedis point the cart revenue fell at 3%, which is what we have been watching and we will want to hear more about what's going on. some of the misses have been due to the fact that they have been throwing the teacher balances and the higher cost of funding. they had a portfolio sale that they are attributed the growth to being offset.
we are going to look at the core underlying growth of their. --there. jason: and we are seeing citi shares trading up right now. let's get a check on wells fargo as well, and see what their shares are doing. 1.46%.e also up at they are continuing a trend on stocks moving up. jp morgan said that they went back to basics, they missed on fixed and investment banking, but the core loan was good, they put aside money for any kinds of losses and the delinquency was down. is this going to be a different conversation with citi? >> keep in mind the loan mix. is probably going
across their portfolio the commercial real estate is outperforming the market, and consumer growth across those group,ies with citi bearing in mind i have not seen the overall growth. but looking at their revenue and the fact that they are actually growing, i would say it's hurting the revenue. trading results for j.p. morgan were actually a little worse on fixed, and better in equities, we would want to hear more about that. but overall this could be due to mix, just like differences in the quarter. jason: and when we think back even the last couple of years, there has been that element of a variable, certainly, for a lot of these both bracket banks. i willwith citigroup point bet the pot -- the cost ratio is positive, they are delivering on that. they are coming in ahead of their guidance in the first half
in september, as of their presentation they updated some guidance, giving a clear path forward and they are delivering and that's a key positive. alix: to recap there are some earnings trickling out, city had -- citi had a nice beat, up 9% year on year, reversing five quarters of losses -- if i quarter losing ski -- streak area --. -- streak. you also had wells fargo earnings coming back better than estimated and loan growth coming , so solid forlion wells fargo. we are still waiting for mortgage information from wells fargo, and citigroup's loan growth. stay with us for second because i want to bring in a brian .elski and lisa erickson brian, what's interesting is
that in the last couple of quarters of some of these banks have brought -- blown it out of the water. and this is a little mixed. it's like back to basics. the boring stuff is good. is that enough to reverse the losses? >> yes. you are talking to someone who's seen these banks for some time financial sector -- and the financial sectors, and a broken clock will ring correctly twice a day. it's a game of catch-up that is beginning, and we are starting to see it early in the selloff. yesterday the selloff was more broad, and yields were down. i think at the end of the day these assets were longer-term, and it will be interesting to see what the wealth management business is as part of the earnings to come out. i venture they will be strong in the third quarter. we think the stocks are headed higher. jason: i want to bring you in, lisa, we have been anticipating
these earnings over the past couple of days, what do they tell us about the broader earning environment? especially in light of rising rates from the fed? what do you take away? we are not allowed to speak directly on the financial sector, we are a part of that group. but we are generally upbeat on corporate earnings for the third quarter. if you look at the key backdrop, what you see in the economy, if you look at a broad array of indicators, they are still looking pretty good. dashboard shows that 60% are still in positive territory. and if you are following the guidance around corporate america, we are hearing generally good management of expectations. and the ability to come through. year-over-year for the full year we are expecting earnings right in line with consensus up 20%, which is a good number. those positive
bottom up fundamentals and top-down outlook, we are constructive on earnings seasons for the third quarter. allison i want to get you back in here, we're getting more information on the loan portfolio, how does it stack up for you? it's a positive, given what we are seeing in the overall environment. ist citigroup really issued what portions of their portfolio are growing. the other positive that i would say, credit is something we have been watching for them. is lower than a year ago despite the growth, and that's positive. alix: revenue was down 8%, coming in at 2 million, brian, if we see strains in the large
categories for j.p. morgan and citigroup, what happens when you're at 3.25% as a 10 year yield? is it sustainable? yes. with the fed raised four times out of crisis level, we're still early on in the economic recovery, the market and the economy continues to grow. earnings are great. financials in particular, and tech stocks put out a report reinforcing the fact that the industry is going up which means the economy is going up which means that the loans will be coming out and you will be building stuff. so we keep it as simple as possible but people forget that because we are deathly afraid of the financial services sector. and people have a negative mantra about the big banks. the primary themes are wealth management and commercial banking, which are still major assets around the world. we think these stocks are starting to rotate.
alix: lisa, walk me through yields, what is your tipping point and what gets you nervous? yields willpecting continue to move up, but we are not nervous about the outlook overall. the reason is that we continue to expect the moderate rise upward. if you look at what drives yields, it's what's going on with growth and inflation. what we see on those fronts are very positive in the sense that growth,solid economic but it's not excessive, at moderate levels overall. what we're seeing from the inflation data is the same. upwardould be some pressure from the tight labor market but all the numbers we're seeing so far are nice in the sense that they are showing some upward trajectory, but not excessive levels. when you take those pieces together that supportive of a moderate rise kneeled advisor -- in the yield environment.
while that will provide a challenge to equity moderations we don't see it upsetting the apple cart. alix: thank you all for being with us. tuned, we have an interview with john trees very of wells fargo. that's coming up, also volatility is striking back. we will talk about if the market bounce can be sustained. and we will recap the earnings really fast, with citigroup you have investment banking missing but coming in solid, the long portfolio grew 3%, the growth is slower but still growing. quarterack to basics for j.p. morgan, but you did have core loan growth continuing to climb higher. this is bloomberg. ♪
seeing a recovery after the longest losing streak of president trump's presidency, is the come back going to be sustainable? we spoken to investors about that and here's what they have to say. correction, but it's a modest correction. it's rather cathartic as opposed to life-threatening. in my judgment, we are getting to an opportunity. care,like health and text and we --tech care, and financial and industrial. hashe rise in volatility, traditionally meant that quality has outperformed. and we stick to that being on the back of rising volatility with trade risk on the horizon. and we would be a buyer of tech on the death.
-- the dip. >> the fed is getting into more hawkish territory, that means that equities will have a temperate time. >> earnings and growth have been robust, and we haven't seen the same performance in markets. there is also a process that is happening. >> i think these have come to force the markets to reevaluate. >> u.s. equities are unequivocally overvalued, gold stocks are especially valued, there's a very high valuation. but overall, overvalued. alix: still with us is lisa erickson and brian belski. brian, the bizarre thing was wednesday you had value starting to rally, then growth was rallying, what you want to do? value investing is the most
intrinsic fundamental strategy law. are actually showing value attributes but no one believes it. we have been in a concentrated area with respect to buying the fangs --faangs. we from our perspective, believe the next three to five years we will be moving into a , that heity march cap really value oriented market, financials are a large part of reallyue index -- a value oriented market, financials are a large part of the value index. there's emotional entanglement with respect to financials that people do not want to buy them. from a valuation and earnings growth standpoint, and from a dividend growth standpoint over the next three to five years,
u.s. financials have the strongest dividend growth in the world. we think they are under owned by institutions and the best buying opportunity in a decade and value will be the winner. jason: so why is no one listening to you on financials? >> in no other time in my almost 30 year career has my portfolio manager clients exhibiting such high turnover. that means they are renting stocks, speed dating stocks, they are chasing performance. willess is that financials catch a bid, chased them higher, and when they come up with some sort of excuse they will sell them. .hort-term memories that has to unwind and the true fundamentals of the sector will drive it higher. lisa, when you look at the equity market of a value versus growth scenario, the conversation is as yields go higher, grows momentum stocks have a lot more to prove in terms of organic earnings
growth, what do you see as a tipping point? now we are agnostic on value versus growth. what we would emphasize is that we are on a sector basis, as some of the other investors you are interviewing were continuing to us house. we continue to see -- to espouse. in this very moderate growth environment we think that investors will favor things that can give them an extra ounce of growth, and certainly in those two areas you see a number of secular forces continuing to support opportunities to gain market share and drive new services. online is much more a part of our lives, shopping habits are changing, mobile computing is a bigger driver. and there are clear subsectors and companies that can take advantage of that.
that is where we would advise clients to look in the u.s. equity market. jason: so the tech selloff of a couple of days ago, overblown and people should not be worried about getting back in there. even given the nice run they have had? >> we are advising our clients positions,their tech and remember that the longer-term forces and some bottom-up characteristics of the companies. we are advising our clients to continue to stay committed to that sector. alix: are you upset? we tend to overweight tech in the real money portfolios, there's the consistent earnings growth, dividend growth, and cyclical tech. i think cyclical tech probably has some or earnings. but people fail to recognize that the technology sector has been the most stable earner in the last 10 years, from a secular structural basis the sector has changed dramatically.
and we think it's a great sector to own. brian, good to see you. lisa will be sticking with us. we will bring you some highlights from the big tank earnings -- bank earnings. we had a drop in call, talking about the administration, trump, the economy, and you'll remember this is the guy who said we -- he was smarter than the president. the business community has an active and good dialogue across the whole administration on trade. he says the ministration should be aggressive and we think that's the right strategy. get the allies done and face china. he's given the trump administration a lot of love. we will break down that call with j.p. morgan. as is bloomberg. ♪ is bloomberg. ♪
companies worth watching, first is not a company but companies. hedge fund hotels, what do you think happened when tech sold off? jason: they got crushed, some of the biggest hedge funds in the we saw that huge selloff on thursday there was this great piece. i will tweeted out. , it's anro wrote amazing thing that has happened. but this could be a good time for hedge funds is volatility is coming back. alix: and if you are a hedge fund with low leverage, you are feeling good. jason: and you did would you are supposed to do. you are a hedge fund. alix: and so you down by 3%. what are you watching? jason: softbank is going to pull off what we think will be the biggest ipo ever. anchors, no more is in the mix -- nomura
the mix. alix: joining us now for a look at banks is brooke sutherland, talk about investment banking. what was your big takeaway so far? >> one thing i thought was interesting was investment banking schemes were down for different reasons. citigroup talked about a drop in underwriting fees, which is interesting. one thing we have been looking for is the and and a activity, i looked up the numbers before i came out here, $205 trillion , that's on track to be 2015 which was a huge deal for megadeals. we are on pace to be better than 2006. but a lot of these deals are not getting done, when they are not getting done because of regulatory push back the investment banks do not get paid or they have to wait collect fees. the question is is this a timing
issue? will we see the fees catch up or are we starting to see the beginnings of a slowdown where companies are concerned about the regulatory environment and whether or not they should push ahead? jason: we will certainly hear more from jamie dimon the other big bank ceos on this idea that may be the dealmaking nirvana we have been in for so long, i remember the days when you are .riting about m&a's everyday it wasn't that long ago. >> the thing to remember is that this is still a boom. if we transition to a slowdown at not like we are not going to see strong activity, but it may not be quite as crazy. alix: but also more competition. the big banks say they are going to do the large m&a's, but they're trying to get a medium-sized one, that has to be part of it as well. >> absolutely, you see some
boutique banks on big investments and they are poaching a lot of investment bankers from big banks. that's playing into this. there are also the questions about debt load on these companies, companies that have done some any deals and they are dealing with a leverage burden, are they able to keep up the pace of activity? there was a great piece on paul todman earlier this week. alix: thank you for joining us. we are a minute away from the latest beat on a trade and inflation. we will break down the import export data and in a few minutes, we will have the outspoken jamie dimon on the media call. this is bloomberg. ♪ erg. ♪
earnings coming out of citigroup , j.p. morgan, and wells fargo. break,lar is taking a the euro dollar is down by 2/10 of a percent. we are climbing higher with a potential resolution with the u.s. and turkey when it comes to the pastor and yields are on offer in the u.s.. now,rice is coming down the price indexes coming at 2.7%, that mrs. asked immense -- that mrs. estimates -- misses estimates. this is beating estimates that we were at 3.1% with the him port price index. the export prices are coming in a little weaker. -- the import price index. the export prices are coming in a little weaker. china had a blowout trade surplus with the u.s. and their export market did not seem hindered from the trade war that we had seen. jason: so let's make some sense of this.
for that we turn to michael, joining us here in new york, and we still have lisa erickson of u.s. bank wealth management. help us understand this? >> i'm looking at this quickly, missed theke alix story of your import prices, and it's your middle name, oil. we have a chart of the trade weighted dollar and how it has changed with import prices leaving petroleum. if you take that out you see a line. and there is a big rise in import prices, basically because of oil prices this time around. it is not something to be overly concerned about yet. yet the take of the oil prices to see what's happening. alix: so industrial supply prices rose 1.5% and that's solely oil? not aluminum or steel? >> those are in there, but we
did a separate reading with just oil. the tariffs don't figure into this number because those are not paid by the companies that are receiving them on either end of the tariffs. china puts on retaliatory tariffs, it's the chinese companies buying u.s. products that have to pay more, and the u.s. companies that have to pay more on this end in terms of imports. so that does not show up. but we do have some numbers, let me bring up another chart, i wanted to show people this. this is the china trade numbers that came out today. the yellow lines are the trade surplus with china, it rises. the white line, chinese exports to the united states, a record, up 14%. it looks like chinese companies were rushing to get stuff out the door, we had a lot of things covered by the tariffs, including electric motors, electrical products included in the exports.
indo see a tariff the fact the china -- effect in the china trade numbers. but not necessarily in imports. jason: lisa come on back in and remind is why we care about these numbers from your perspective? if we break this down and we look at the economic data, how does this play through? especially as mike was saying, from a trade percent this. the impact of this trade war that the united states has embarked on. >> generally what we are looking for is confirmation that inflation is still on an upward increase but at a moderate level, and secondarily, what's going on with the consumer and trade. what we are seeing from the report is a nice set of numbers, we are seeing evidence of inflation, particularly as you noted. but not concerning levels, at more moderate levels. that's reading in with the bother -- the broader inflation
picture. we can seembers, that it's at a relatively contained level. what this means for the grocery, the consumer is able to continue to support the economy. some of the import activity continues to support their ability to contribute to the growth. and the consumer is the big part of the u.s. economy. that's a reassuring number. in terms of trade, that's an area we want to launch with continued concern -- to watch with continued concern. some of these numbers on the export side from china are really a blip to circumvent the tariffs coming in. or can the level be sustained? will consumer spending be there going forward? jason: what data will show us the effect of the tariffs mike? >> a good place to look is the
isn numbers. are importing the prices and paying for raw materials. it will show up in that. we'll also see it in the bp eyes -- bpi's. an interesting thing has happened over the next couple -- the last couple of days that will affect the inflation picture. if you take a look at this told me to bring this on friday. the yellow line is the 10 year yield, the blue line is the s&p 500. look at the white line, that's the bloomberg dollar index. when you have disruptions around the world, money flows into the dollar, that did not happen in this case. maybe the dollar has peaked. forces maylationary start to dissipate. alix: while we are trying to suss out neutral rate, and the
fed hike, president trump is doubling down on what he thought of the fed and higher rates are you here is what he had to say. >> i think the fed is far too stringent, and they are making a mistake. and it's not right. despite that, we are doing very well but it's not necessary, in my opinion, and i think i know about it better than they do. lisa, what did you make of that? the president cannot fire jay powell, but in terms of their effort to be above thent and get basis points, how does that change the conversation? in terms of what the fed is doing we think they are on a reasonable course. andou look at unemployment inflation, we have a tight labor market and contained inflation, they want to maintain that
goldilocks scenario. so they will continue those moderate paces of yield increases to make sure that we stay in a good zone. is tough part about this that what happens if we go about the new national rate, we are not a point where there is a clear neutral rate. there is a range where people feel like that can fall. so i think what's reassuring is that this -- they are data inendent, and they are clear that they are monitoring the effects of their actions and what is going on in the economy in general as they continue to make way on their projected rate increases. lisa erickson of u.s. bank wealth management, joining us, thank you for your time. and of course michael mckee with his charts and a nice friday outfit. [laughter] nullity was making
headlines outside the business world. taylor riggs is here with first word news. >> steve mnuchin says that china is not manipulating the yuan. pressure him at declare china a currency manipulator, but the staff is not done so. with the escalation of the trade fight -- tag for hurricane michael could be at least $25 billion, this is the strongest storm to hit the u.s. mainland in the florida panhandle. private insurance will get hit, but there are $10 billion in claims, and about half the damage will not be covered by insurance. learned that david powell is no longer being considered as the next u.s. ambassador to the united nations. he told senior officials at the bank that he plans to say. -- to stay. president trump called him
twice, nikki haley is leaving at the end of the year. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists in more than 120 countries. i am taylor riggs, this is bloomberg. thank you so much. and with this market fluctuation we have to keep in mind we are awaiting the verdict on the release of the pastor in turkey. the lira is climbing on the news as they wait for that. also a lot of political .spects to this as well this is a key issue for president trump, he's been very hasl about this and it ticked off a lot of fluctuation in the currency and broader emerging-market. there's a political element, and a broader economic element to this as well. so we are awaiting that from turkey. waiting for also analyst to kick up into false team for jp morgan.
we do have some headlines, jamie dimon crash the media call, so there was that as well. he comes in strong when it comes to the affected tax rate, the economy is doing well, a big fan of jay powell, says he's doing and taking theb, helm at the analysts call which started a few minutes ago. we will watch for anything else. lakes is the overall pipeline is strong, so we will monitor that as we go. coming up, the clock is ticking for italy, they have to present their deficit goal for the e.u.. we will discuss it with lorenzo codogno. this is bloomberg. ♪
coming up in the next hour, bloomberg markets, the open. deutsche bank's chief local strategist, bankim chadha. ♪ the clock is ticking for italy, italian lawmakers voted in favor of the populist governments fiscal outline, including a higher deficit goal. officials said this will break the rules. this is ahead of the monday deadline. this is part of a story we have been following. codogno,s is lorenzo the former italian treasury chief economist and director general with intimate knowledge of how something like this could play out. what is next? question.a big i think that's an answer that's waiting to happen, because of
the situation stands as the moment -- at the moment, i can only see a big confrontation. me with financial markets. the situation might get worse before it gets better. eventually someone will back down, and change the budget plans. but in my view, the sooner the -- happens the better. that allows time for them to adjust the fiscal plans, and that would be positive in my view. otherwise, if the situation deteriorates without coming to a breaking point, they might actually get to the european elections next year and they already said quite is pleasingly win they want to have a big at the european elections. in order to change the official goal -- the fiscal rules. i think the outcome is very open , and the situation needs to be
closely watched over the next coming days and weeks. i think it will be a lot of action. jason: for you watching in the rest of europe for their commentary? who needs to step in? who are the most important voices? overcomeave already the discussion at the parliamentary budget committee. and the budget committee approved the budget despite the negative opinion by major institutions like the bank of italy, and the court of accountants. the next step is really a discussion of the parliamentary level. eventually the president might reject the budget, but the final word is up to parliament. i would not expect the parliament to move back unless something big happens. on the european side, it's
pretty likely that the commission will reject the and then the european ministers of finance will agree to push italy to excessive deficit procedure, which is not a disaster but would be another step that things are not going well. all of that is playing out in the market as well. i want to plug a chart for our viewers, you can see the spread at 303 basis points. and we saw that the line in the sand was at 400, and that we will not let it get there because it's all about speculators. what happens to the spread at the scenario you see, plays out. as i mentioned, both the european and a time fiscal rules
found --th limited power in the frameworks. it's really up to the financial markets who act as bond vigilantes recently. could happen? it could happen that the spread widens farther. there are some investors that could come in and moderate the situation in the near-term. but it's a big issue going forward about the flow and who will buy the government paper if the situation is one that we just discussed. so it could be a major problem in the near future. alix: will there be a level where the market can influence italy in the e.u.? does it have to be at 2012 levels or are we inflated in a
way that we weren't? >> i think it's difficult to tell. really the transmission to the economy through the banks. as for the banks we need to look at this individually as a specific institution, because they have different sized holdings and government paper as well as different situations. lossesng to record the in their bond portfolio, it will impinge on capital, and reduce lending to the economy. but it is pretty slow. so i think what could happen is if the spread widens, maybe there are some problems with the in havinges in place a fluid transaction in the market.
i don't think there is a level, but some people measure at 400 and have begun keeping point, so to speak. codogno, really wonderful to get your perspective on that. here's what i am watching as we head into this friday after a to mull chu. jp morgan earnings, i want to turn to taylor riggs has been listening to the analyst call, you know the jamie dimon has dumped it -- jumped in, what do we know? >> some colorful commentary to thethe least, he says weakness in spreads have been offset by some of the uptick in emerging markets and currencies. and commodities as well as equities. they has some strong client activity. loan growth was interesting and we got a lot of comments from him, they are expecting the six to 7% loan growth -- 6% to 7% loan growth.
we did get a lot of comments from him on rates and jerome powell and the fed. he says they're looking at 4% rates, his comments saying that rates might hit i've percent were up -- hit 5% were a possibility of what they might see. but not totally surprised that president trump is making comments as the business community is watching what washington does and the fed remains open. they are hoping for a steeper curve, higher rates, and some good comments from jamie dimon. alix: really great stuff, thank you. of course looking at those numbers, it was really back to basics for jp morgan, there were missed six estimates but their loan growth hit records in terms of doing their he well, and their average core loan was up 6%.
expenses moved higher because of investments as well as higher cost, but that stock was able to hold onto gains in the free market -- in the premarket. us on the phone -- has a 3000 year target for hows&p 500, julian emanuel, do you feel about that target? >> we feel fine about that target. we expected the kind of volatility that we have seen over the last week or so. we expected it in september, and part of the reason it has been as intense as it has been is because it did not happen in september. when you look at the uncertainty surrounding the midterms, politics, clearly the tone of earnings calls to come. there is enough to think that the market would not continue in a straight line. said that, the work that
we have done has shown that after midterms, the november and december and following year, tends to be very good for stocks . when you look at this morning, we think that thinking about yesterday the price action got reasonably disorderly at the end of the day. and that is the kind of thing we like to see in thinking that the market is likely to find legs. the reaction this morning thus is early, of course to bank stock earnings is very encouraging. jason: let's talk about this morning, what was it within or the commentary we are hearing from jamie dimon and others that makes you feel better about where we are going. >> if you look at it, it varies from report to report. it shows that when you have a strong economy, the rising rate in environment and the health the capital markets you have multiple levers to win.
one firm reports that net interest margin trends are solid , another says long growth is good, perhaps better than expected. the one we think is most encouraging is where fixed income revenues came in better than expected in an environment such as what we have seen and what we think we are likely to the, particularly where the fed is going and where the 10 year yields are going. we think this is going to be a good time going forward for fixed income market making operations. alix: especially if last week was any indication, you will get a lot of client activity. you also deal with derivatives. what is the best way to hedge risk right now? >> we would be less inclined to be hedging risk right now. we have set for a number of weeks that we thought that 2709 was a number where we would start to add.
we got to 2710 yesterday. we are thinking it's time to be patiently buying, in anticipation of higher prices. ,f you did want to hedge risk you don't want to be an outright buyer, but you want offset the premium. we think the time for hedging has largely past. alix: what about the overall higher volatility regime? are we in one? will that be across asset change? one. think we are in started with the volatility that we saw in january and february. in a lot of ways, as you age in a cycle, it's very natural for .olatility to shift higher particularly in an environment where there is now a weston about -- a question about
whether you prefer value or growth given the growth of the international markets. for us it's ok the volatility is higher. you have to change your mindset and be more patient, your stomach might churn as you have seen in the past few days. but it does not mean that stocks will not go higher. we think they do. jason: so you are patiently buying, what are you buying? >> we continue to think the shift that we have seen over the last five or six weeks, particularly in the wake of stabilization of the yield curve is good for financials. financials have been psychologically and i think a previous guest spoke about this, really psychologically held back by the flattening yield curve. what we see in retrospect is the yield curve at this level is much less due to the potential
for a recession straight ahead, and more due to the fact of the fed trying to control the economy and actually ask end -- extend the growth cycle the short end and pressures we are seeing on the long end are now shifting. to us, financials look good. we also think energy is a place you want to be as well. alix: it's so great to get you want today. thank you very much. and jason, thank you for joining me. jason: happy friday. alix: coming up, the open with jon ferro, bankim chadha is joining us, this is bloomberg. ♪
>> i'm jonathan ferro and the count down to the open starts now. equities are staging a recovery with the nasdaq in correction in the s&p 500 coming off a six-day slide, the federal reserve taking an unprecedented be down through the week, committed to more hikes ahead, and the balls looking to earnings seasons. jp morgan is kicking things off with a solid report. away from thetes opening bell, with futures looking better than good, up almost 1%. treasury market is stable, the yield is up, and the dollar is stronger than the euro.