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tv   Bloomberg Markets Americas  Bloomberg  October 16, 2018 10:00am-11:00am EDT

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-- bloomberg markets. ♪ vonnie: the latest on the dispenser jamarcus shelby -- -- some breaking high-frequency data. versus the eight survey. it is not actually surprising after hurricane florence. seeing, weack we're ituld make note of the fact little bit of strength here for the housing data.
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we're looking at solid gains. even last friday, not as big last friday. it feels a little more solid. if we hopped into bloomberg, this is a full screen of the s&p 500 futures. gains despite being at the close. many are headed for a gain and time of three minutes ahead of the, finishing down rebounding overnight. but really took a look -- take a look at the gain over the last two days. perhaps the first weekly gain for the s&p 500 and four weeks. behind this like today, bank earnings. let's look at morgan stanley and goldman sachs. beatn stanley up 3%, they
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top and bottom line as did goldman sachs. the only be bank to beat on all three areas of the fixed income equities and investment banking, goldman sachs beat on the banking revenue. on the year, we have both banks the more than 14% despite fact that rates are rising, something to keep an eye on for the s&p 500. other earnings movers, a bit of a mixed with united help up more than 3%. domino's down 3%. they beat earnings and missed revenue estimates. also down three point 8%. the net asset flows weakened. that,en take a look at down 13%. investorsearnings but clearly not liking this at all. analysis on the
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major seen affecting markets today, we're joined here in new york. christina and london. we start with you because the top of the mind for many business leaders is the weagement consultancies, can continue to strengthen ties with saudi arabia and the middle ease though it may not be restricted -- respected and training. is no economic effect yet but obviously the market is looking to see what type of geopolitical or diplomatic ifues might emerge from this it is resolved or if it is not resolved and how to see that spill over into something like oil markets and into the economy potentially. we here a lot of folks talk about it but until we get a back from then report mike pompeo when he returns and hear from the president himself, we will get a better sense of if this will affect the economy.
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geopolitical the issue is continuing to be discussed, we have earnings today, probably what traders are fundamentally trading on. the big story of the day and what everyone is looking for. ofyou are looking for a sign slowdowns for the economy. you got a little bit of that and then when you look at other companies like united health, like jb hunt, they are all relatively positive earnings where they talk a lot either in statements are on earnings calls about not seeing at a peak. at there was more room to grow, whether it was the drug business for j&j, in the insurance business for united health, and you have the pre-announcement it is expecting 20% revenue growth. you are seeing these companies posting fairly strong top and bottom line growth numbers and growth forecasts. as that continues, that will keep investors assuaged. that is what you're seeing in the markets today. >> west well on that point.
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if you take a look at the bank of america merrill lynch fund survey, investors are incredibly bearish. you look at the survey out of germany today, it is also showing investors are incredibly bearish. selling cyclicals and buying defensive's in the last few weeks. yes, actually most of the narrative coming out of corporate america today is accredited put -- incredibly positive. i would highlight the walmart statement, incredibly buoyant going forward from here. corporate america sounds pretty good. the investment community is worried. is it possible it has got it americare and corporate actually has got it right and at least sees what is going on on the ground? class of think the key difference is while corporate america is doing well, the rest of the world cannot say the same. what all of the survey indicators we have seen are looking at, how markets are doingg at how u.s. is
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well economically speaking and terms of corporate earnings, the rest of the world, not so much. we have spoken about how they are little impetus for equities, and then there is the whole story we -- with italy and brexit still going on. these things are massively eating away at investor confidence. turned down a broad here in europe as well as more broadly like the bank of america survey. it is hard for investors to be more need when one sector of the global economy, the u.s., the rest of the world falling behind. >> doesn't this just speak to the idea that the trade that or so far this year, long u.s. equities and basically ignore everything else, continues to be the right trade? corporate america is doing well. from and was talking about running to the details of what corporate had been saying, talking about games still to
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come, they make it another tax -- tact. why would i change tact and think about investing out of the united states and emerging markets or even in europe? >> probably one argument to be made is valuation. laggards, wet some withinvestors coming out contrarian calls for italian equities, with a bit of a macro -- a downside. there is an argument to be made. but i agree with you in terms of looking at it from a fundamental perspective. the u.s.to be more in equities space at the moment, but of course, the court up -- corollary is the valuations are high and it is hard for investors to just get in at this point when the market is trading at the high level. there is the argument for equities but the question then is time frame. we have to think about where you are entering in and what levels, how long he will stay in there, taking into account that there
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are great risk events coming up at the end of the year for the european space. the 8:00ohammed was on hour and he talked about emerging markets growing weekly, the u.s. growing pretty strongly, and that this divergence will continue and investors have to make that call. that is one of the calls they have to make. classic think he is right and this gets to when he talks about some of the issues in europe. look at some analyst revisions on earnings expectations, they are much more companies, european regularly continental largely because a lot of political risk in germany or the u.k. with brexit, or some of the issues with turkey, the spill over e.m., this to virgins, which was talked about earlier on bloomberg television, i think you will see this play out as it gets to earnings seasons. you see the u.s. remain a growth story and meanwhile, what you
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are seeing even in developed nations in europe is a much more value if you will, but that is for sayingode word not growth. that means investors will play these two sides of this little differently. >> i will talk about fixed income because when you think about it, the exact opposite now starts to apply. investore a u.s. looking at the european bond market, the bond market is starting to look -- look attractive. >> there is a compelling yield story. a 30 year german yield, this is for u.s. based dollar investors. basis points00 more than treasury yields. that is a heck of a markup for safety, which arguably the german on space has just as much as treasury bond space. that is compelling for investors
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in the u.s. especially when they take into account hedging costs for european assets versus home assets. and seeing the same trend in european credit investment grade space as well. that is looking like a more attractive space for dollar-based investors as well. for any in the u.s., europe is looking more like a compelling story at least from the fixed income perspective. to get someou want more on some details of some stories that we're talking about, on the bloomberg is where he can find them. thank you very much indeed. vonnie: you can find more commentary online. let's get to first word news with kaylee. kaylee: turkish police have found evidence that writer jamal khashoggi was killed. there has been no response yet from saudi arabia and multiple reports that saudi arabia may say he died in a tent -- in an
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interrogation at the boston consulate. u.s. defense secretary james mattis laying down tensions with beijing. he told reporters the u.s. is not out to contain china and is cooperating whenever possible. he still said there would be times when they would get on each other's toes. tronic canceled high-level security talks with him set for this month. theresa may is urging her divided cabinet to back her as negotiations with the european union go down to the wire. meetinge-hour cabinet today, they say the government must stand together and firm. talks have hit a roadblock over the issue of the irish order. bill gates says the personal computing would not have existed without paul allen, the billionaire cofounder of microsoft who died yesterday from complications of non-hodgkin's lymphoma. he was 65.
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he stepped down from microsoft in 1983 for health reasons. in the past three decades, he turned his microsoft estate into a fortune. vonnie: thank you for. up, more on secretary of state mike pompeo's visit to saudi arabia. this is bloomberg. ♪
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lonnie: mike pompeo in saudi arabia are meetings, the crown french and other officials. associated press is now turkey policethat
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have discovered evidence in the saudi consulate in instability that jamal khashoggi was killed. we're joined now by the national security -- with national security coverage. what is the u.s. response likely to be? should this be the official case when all of this is finished and put to rest? >> it to hens on how conclusive and convincing explanations from the saudi governments are and this being under k -- undertaken with turkish individuals -- officials. the range of possible sanctions expulsions, you could have a sanctioning of specific individuals who may have been involved in this case, and then you have things although he way up to the much more severe limitations on u.s. arms sales and things like that. i do think a lot will depend on secretary pompeo's's trip and the story that emerges from the investigations and taken by both
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the saudi's and the turkish efforts in istanbul. vonnie: the president of united states hedged yesterday when headed toward the plane to take off for florida. bloomberg's kevin cirilli spoke with a republican senate majority leader mitch mcconnell earlier to get a bit of the congressional response and here's what he had to say. to findconnell: we need a first what happened before deciding what kind of a response .s -- is appropriate see do think there will be some type of response? mitch mcconnell: i cannot imagine there won't be but we need to find out what happens -- what happened. vonnie: he is hedging. >> he is. to say the saudi's have had a much more fraught relationship with the u.s. congress than with this trump administration. i think they have fewer allies in congress and really banks on their personal relationship
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president trump. saudi arabia was the first country he visited after becoming president. there has been pressure on both mitch mcconnell and trump some talk lawmakers like bob corker lookand paul to at least at syria sanctions including limiting arms sales. a lot will depend on how seriously people take results of the investigation in the wake of mike pompeo's trip. >> u.s. policy in the region is largely based on saudi arabia and the united states seeing eye to eye. there any chance that crisis will undermine that, or are any sanctions we will seek purely ?oing to be for pr purposes i hope you get my just? requested is hard to imagine this does long-term damage to the saudi arabia relationship.
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i think both sides have too much at stake and they have already been through a lot. think when the prince met secretary pompeo today, he said we are old and close allies. we stick together. the trump administration has really built its policy strategy and they williran be reluctant to let that go. the saudi's have a seven decade long partnership of the united states on security in particular. that will be hard to shake at this point but it is undermining the relationship in the short-term and it is possible is they leader mcconnell -- as mitch mcconnell said, there will be sessions for all this. i so want to dwell on the issue we talked about yesterday little. turkey. the president switched gears yesterday on his approach in washington's's relationship with it.
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hard to talk about winners but couldstory, turkey be a winner from what happens here in terms of improving the relationship in washington? >> absolutely. when theyimprovement released the american pastor last week. they are clearly in the drivers seat here. -- the intelligence agencies seem to have conclusive evidence that jamal khashoggi was killed and dismembered inside the consulate or the general's's house. that is the intelligence that i think the saudi's in particular but perhaps americans would really not like to see made more public. there will be a lot of pressure on them to show what they know but so far, other than the reports we have from turkish officials, we have not heard or seen any evidence.
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money: i opened the show by saying this would be a discussion with many boardrooms and a lot of management consulting. we talked about whether business could be done with saudi arabia still. not going to future investment initiative like many other u.s. he is certainly not making a reverse on this decision to continue business ties for saudi , so long-term, it does not look like it will have as many complications as may be in the immediate term. classy lab a lot of short-term turbulence like you see what the saudi investment tour -- form next week. jamie dimon as well. banking executives have pulled out of this. seen in washington two prominent lobbying groups, including the park group canceling contracts with saudi arabia. a think the long-term people are looking at this country and its massive oil reserves and plans , thoseaps offer an ipo
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kinds of business opportunities not only in the years ahead that in decades ahead over this -- under this 33-year-old crown prince. i think they will hedge their bets and companies will hedge him -- on how disruptive the heart -- this crisis should be. joining us on the latest surrounding the disappearance of the missing journalists. still ahead, investors wait to making atflix is comeback after its july let down. tech giants reports, it will come a little later today. tech has been a big story, a big rotation in the last few weeks. we will discuss it next. this is bloomberg. ♪ bloomberg. ♪
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money: wife, i'm vonnie quinn. guy: i'm guy johnson. this is bloomberg markets. netflix will report how many new customers signed up for the world's largest state online tv service over the last three months. of desk he joins us out either joins us out of princeton. are we getting a bounce back? >> absolutely. this is a highly anticipated quarter and netflix is a subscriber story. mixup and too few investors were concerned if this was a one-off kind of pick up, they lowballed estimates in or whetheridance, this is the beginning of a slowdown and a longer trend. >> the content legit it estimated to hit about $13 billion.
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can netflix keep it up? >> it is the biggest question on investors mind. claim and about a they have huge mounds of market expenses. thing it will come down to is ultimately subscriber growth. growng as they can subscribers, they will be a look to invest in programming which keeps fueling the cycle growth. corresponding issues, three or $4 billion in projected cash this year. as long as they are able to grow subscribers, upper trajectory, some theaters in terms of the content spending budget and the cash issue. quite how useful is the tech sector in netflix?
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different from the other models. >> a lot of other companies are advertising. this is really more of a subscriber story. even though it is part of the --dex, it is the >> plenty still to come on this program. this is bloomberg. ♪
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vonnie: i'm vonnie quinn. guy: i'm guy johnson.
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this is bloomberg markets. about an hour to go until the european markets close until today. -- close for the day. unitedhealth group pretty good. the one i want to focus on is w.w. grainger which came out with a cracking set of numbers. it seems the markets didn't like the forecast going forward. that's an interesting company in terms of judging where the u.s. economy is. today could just be the best day the european markets have had on an intraday us in four months. cable ratings bid this morning this afternoon 132.14 is where we are. we had soothing words from macron and may. keep an eye on this market.
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the market is incredibly short sterling right now. the market could get really short. brent is down by .2%. highlight the saudi arabia and market started this morning very negatively and then it seems the narrative was changing throughout the day. this nice upward curve. risk came out of that market. let's check in with the bloomberg first word news with kailey leinz. >> president trump's new trade deal with mexico and canada will not get a vote from congress this year. there's not enough time to clear all the procedural hurdles needed to ratify the treaty. trade dealaid the will be at the top of the legislative agenda next year. trump is raising millions for his own reelection campaign in the mid-just the battle over next month congressional election.
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an 18 milliontook dollars in the third quarter. since taking office he has raised 108 million dollars. unusual amount for a president in the first two years of his term. in brazil the farmer at presidential candidate has built up a largely it over his leftist rival in the latest poll. the runoff election is october 28. ates in the u k are growing their fastest pace in almost a decade. average earnings rose more than .% still below the precrisis average print unemployment held at a 43 year low of 44%. global news 24 hours a day on air and at tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. i'm kailey leinz. this is bloomberg. let's get more of our exclusive interview with mitch mcconnell. he spoke with us about a number
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of issues including the mounting controversy over the disappearance of washington post journalist jamal khashoggi. also the upcoming midterms and more. >> i think it's good the the secretary of state out to talk to the king. we need to find out first what happened before deciding what kind of responses appropriate. >> you think there will be some type of response. >> i can't imagine there won't be. i think we need to find out what happened. with some of the republicans in your party including bob has called on the usage of the magnitsky act. do you think this is an appropriate mechanism to use? >> it may be. let's find out what happened. that days from now we saw the justice kavanaugh confirmation has completely captivated the nation for different reasons for different
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people. i'm sure you've got your i on red state democrats. how do you think that has changed the contours of the race? >> it has energized our voters. we knew the democrats were already excited about this election. now our people are as well. in the cliffhanger race as we arizona, nevada, montana, north dakota, missouri, indiana, tennessee, west virginia, florida. a shot ofn like adrenaline to republican voters and hopefully we can match the democrats and enthusiasm. matters in terms of the majority. if you look at the numbers for how the majority has impact did nominations especially cloture thatrs 119 cloture votes you had to call during the president's first two years in office former president obama like2 and w had something six. how has that impacted your strategy? >> they have slow walked but
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can can't stop because we do it with the simple majority. if we were to lose the senate for example the democrats would go from slow walking to no confirmations at all of judges. would have a huge impact on the last two years of the trump administration. in the lame-duck you've got some judicial appointees you like to confirm. >> we have done 84 judges. we're going to do the ones on the floor of the senate before the end of the year. we need to find the government. 25% of the government we didn't find before the end of the fiscal year. >> the wall comes into play. the border wall. >> we are going to try to help the president get funding for the wall. how long funding are you expect them to get funding for the wall?
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>> for the next year. >> what else do you hope to get done in the lame-duck? a possibility of some kind of sentencing reform legislation. a look at that. if we have more than 60 senators on a bipartisan basis who want to do that we will take a look at it. there may be a few other items. we need to finish the farm bill. that will have to get done before the end of the year. that will take plenty of time. vonnie: mitch mcconnell and thanks to kevin cirilli. coming up, goldman sachs and morgan stanley close-out u.s. bank earnings with a banging. -- bang. this is bloomberg. ♪
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guy: from london, i'm guy johnson. vonnie: i am vonnie quinn. this is bloomberg markets. morgan stanley and goldman sachs reporting surprising equity strengths while backlog disappoints in this morning's round of earnings. obviously investors reacting better to one then the other. morgan stanley really losing the way at least for investment banking. >> yes. morgan stanley's numbers are really good on their investment banking side. their management side is a little weaker. people are overlooking that. up over thely years. it has been one of their strengths after the crisis. the investment banking side, their trading revenues are up on both asked income and equities
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which many have struggled to do. all the other banks that have reported one or the other was down for very little up. everything is good. are all positive numbers. vonnie: across the board it feels like ellen sheets are looking healthier. expenses are disappointing. cost control is going to be an issue at these banks. >> it is. only bank of america and wells fargo actually saw a decrease in their expenses. banks is going up a lot to single digit but still going up a lot. when your revenue goes up 5% and your expenses go up 5% it's not really that much profitable. you are really expanding your size but not much higher
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margins. the bottom line is still doing great because tax changes. is helping them increase the difference. pretax net income is huge. the expense is an issue that's going to be a problem going forward in the senate. goldman sachs, the value at went down quite significantly. can you walk me through why that was and why is less risk was taken in the last quarter? their fixedected in income numbers. it reflects that they were not taking as much risk. asks from thently cfos on the coals. it was the quarter before. all this year and this quarter i was just on the call before he came over here. they were asking.
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it looks good but the trading isn't showing at what's happening. we were trying to make sure that's also good. answer.a cliche greattrading is not doing related torobably that. guy: how are the market doing? really that bad. they recently said they were going to rein it in a little bit. retail banking is not their strong suit. retail banking is not their strong suit. goldman has been trying to learn retail banking. which is how big retail banks have done historically. online is good. that's the future trend. there small. they don't have a retail band -- brand name. just a couple weeks ago. my colleagues wrote that they
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are trying to rein in the lending because risks in consumer lending are going up because we are at the top of the cycle. long is the honeymoon period for solomon? >> he's an investment banker. they were good. there was no problem. trading is the issue for them. and he needs to show although that's not his expertise he needs to bring in and the right people and he's made a lot of changes on the top of the bank. the right people will actually really show they can get back in their game in trading. vonnie: thank you. bitcoin is bouncing back a little bit.
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off the touch and lows the digital token has a six week high. >> you have to take out 6800 on first great if that happens you will see people get excited and front run the institutions coming in. 10 thousands of big level and i don't see is breaking 10,000 by the end of the year. i think if the institution starts coming in he will put in new highs. guy: caroline hyde is standing by. over to you. person who isby a integral to the crypto space. talking digital assets or the companies breeding these new
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forms of crypto assets. great to have you here from pantera capital. we have seen significant selloff in the main crypto assets. are we at a bottom now? >> we are close to the bottom at this point. the market is waiting for catalyst to pick things back up. basically two things now. all of these complications launched but they don't really have users yet. the internet before dial-up is how fast these networks are. very slow. it's also with expensive -- very expensive. that's going to change a lot. >> are you looking at company startups that are actually -- first of all the scalability issue. >> we are investing in the products trying to solve that problem. it's basically a computer science problem.
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the internet kind of laid down copper wire. close?we at the moment it takes seven seconds. we can only get seven transactions for a second. when do you get for example the .itcoin blockchain >> i don't know that will ever happen to bitcoin. what about the cost of changing my dollar or my euro into crypto assets? a debit now if you use card or bank account i think within the next year that will be down to 50 basis points. fidelity stuff. all these sorts of new changes popping up. when you can drive costs down. fidelity more of a
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catalyst a catalyst in the market yesterday. why aren't we seeing more pickup. that used to be significant. >> two years ago that was a huge run. we're waiting for actual adoption to pick up. for that you need scalability. it's easy to say you just create an act. here these are all markets. if you don't have scalability you don't have markets. are not seeing a pickup and rebound in the overall crypto market for two years. beforeould see a rebound then. that's going to be the real catalyst that drives the huge network. >> what kind of price will you see. >> crypto space overall. >> interesting you've got funds that back some of the startups
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that are going to solve the scalability issues. you also track bit coin and digital assets in general. how have they fallen over the the digital asset fund is down about half. other assets have gotten hurt more than bitcoin because people have fled into bitcoin as a safe haven. in crypto people have wanted a bit more. >> what about your own fundraising against pantera capital. you are still looking at raising 175 million fun. >> we are targeting the second fund at the end of the year. >> is appetite still there? >> yes. people want to invest in equities when the crypto crisis are down. opposite ofw the
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the cycle even though the natural thing might be to put more money into crypto assets now. it is still pretty low correlation. even if the highest point crypto only goes up to about .2. >> fascinating. thank you for joining us. the new event right here in brooklyn. vonnie: thank you, caroline hyde. we will be back at the sooner than you think conference not a bit. settle nbslion to claims according to the doj. the justice department talking about these residential and mortgage backed securities and saying the japanese bank has agreed to pay that much. it had been investigating all of the marketing sale and issuance of these securities in relation
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to number of misleading investors. the settlement was anticipated at the lower end. between 200 75 and $1 billion. its $280 million that nomura has agreed to play -- pay. this is bloomberg. ♪
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guy: i'm guy johnson. vonnie: i'm vonnie quinn. this is bloomberg markets. guy: time for futures in focus. is fluctuating ahead of key inventory tomorrow. let's go to dan deming joining us from cme. which is the bigger factor in the crude market right now that of the inventory data or the story surrounding saudi arabia? >> in the short term the story surrounding saudi arabia. amounts certainly a fair
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of attention there. it's going to be a dynamic in the marketplace until that gets resolved. when you look at the trends and the inventory numbers the market is still trying to figure out the short-term supply concerns with longer-term demand concerns. i think it's going to be interesting dynamic for the markets to contend with. guy: we saw a rates backing up a few weeks back. that had a profound impact on other asset classes as well. fed minutes are about to come out. we are going to get a sense of where everybody is. aren't the fed minutes this week going to be market moving? i think there's big potential for market moving. now we have seen an equity selloff. very focused on how the fed is viewing the equity portion of this type of event.
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if the trajectory going to continue the same it looks like 12 out of 16 fed officials are looking to raise in december. provisions going into next year, how is the balance sheet going to play out. what are the reductions going into 2019. reallyvestors seeming bearish right now. thank you very much for your time, dan deming. vonnie: shares of progressive are rising after the company posted better-than-expected earnings leading some analysts to think next year's estimates are too conservative. >> really good quarter all around. they had premiums that were up 23%. auto premiums were up about 15%. costs werelorence modest as well. that helped expand their margins by 400 basis points.
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i mentioned the auto sector. revenue most of their from the auto business. what they've been trying to do in order to penetrate the home insurance market is to do underling. it is really helped them expand into home business as well. they still are third-place in -- they are actually progressive may see the biggest growth which will help them going forward. vonnie: it's hilarious you got stuck on the name florence since flo is the progressive -- >> hurricane florence. guy: these are tough things. the stock has doubled in the
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last year. you have dealt with the issue of the hurricane. his the market underpricing this? the stock move has been incredible. >> the analyst community is pretty bullish on the stock. when we talked about the hurricane a year ago in september of 2017 we had hurricane irma. that was a much bigger cost. progressive has much bigger premiums down in florida crude coming into the carolinas with hurricane florence actually made the comps a lot easier. pushing the stock higher. youie: taylor riggs, thank for that stock of the hour. lots more next. this is bloomberg. ♪
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guy: from london, i'm guy johnson. vonnie: i'm vonnie quinn. this is the european close on bloomberg markets.
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guy: here are the top stories we are covering from the bloomberg. .uropean stocks strong earnings from the likes of walmart and strong outlooks. giving confidence that the u.s. economy is still firing on all cylinders. the pound is also claiming ahead of a key eu brexit summit. had strong wage data giving sterling a boost. and commission president jean-claude juncker hinting that it might be reject it. btp yields have come down today. prices have risen.

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