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tv   Bloomberg Markets Americas  Bloomberg  July 20, 2018 1:30pm-3:30pm EDT

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with the u.k. the issue must be settled and he added there must be an insurance policy to address the issues of ireland and northern ireland, something he discussed. yesterday that bordernot asking for a between us and ireland and the rest of the u.k. becausechecks on good if the u.k. wants to be in the , we cannot afford to lose time on this issue. mark: he says he feels the back backstop imposed is technically workable and can be improved. the white house says it is not considering supporting a call i've vladimir putin for a
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referendum in eastern ukraine. the u.s. revealed today that the two meetings will discuss it possible referendum in the ukraine. the announcement comes as a plan for a summit this fall between mr. trump in mr. putin in washington that would focus on national security. investigators with the coast guard and ntsb are investigating a tourist boat accident that killed 17 people in missouri. the boat capsized last night in a lake near the resort town of branson. authorities are releasing few details, including whether the people aboard were running lifejackets. a powerful thunderstorm moved to the area at the time of the accident with winds topping 60 miles per hour. respected carnival accusations of sexual harassment in the
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church. the pontiff is considering axon's against a carnal -- actions against a cardinal, including new actions today. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. livehan: live -- shery: from bloomberg hikers, i'm shery ahn. mandalay --r a amanda lang. targets china, thece you and the fed on rates and
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currencies and we have the latest from washington. ge struggles to meet cash goals and dragging shares down after reporting second-quarter earnings. tech titans gear up for earnings next week. we'll hear what to expect in a moment. let's get a check of major averages. we see u.s. stocks giving up earlier gains. they are essentially flat. they had gotten a boost from positive earnings results been with microsoft to honeywell and we had president trump's tweets and comments escalating a trade war. the dow is unchanged, while the s&p 500 is holding flat. we have tech and consumer staples leading. real estate is leading losses. the nasdaq is barely holding onto gains after touching a new record high. the ability of the nasdaq
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to hang onto gains is tied to the strength of technology stocks. we look at how influential tech names are today on the charts. the tech takeover if you will, technology represents roughly one quarter of the s&p 500. to big moves from amazon, apple, and microsoft and google. five years, go back ago. tech made up 17% of the s&p 500. you have to go back to the dot-com bubble to see so much influence in the s&p. microsoft playing a role at the big bet on the cloud paying off for the company with fourth-quarter revenue eating beating the -- --lysts
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what are your takeaways from an oppressive quarter? >> 5% beat earnings by 3%. this is a great trajectory in line over the last two quarters. when you put it together and microsoft does not get love. it has been an impressive 50% move in the stock over the past billionw over an $800 market cap compared to google at $825 billion and apple at $940 billion. two quick takeaways from microsoft's earnings, first is the unearned revenue. investorse key metric want to hone in on, the amount of revenue they are booking that they will benefit from in the future. that is up faster than expectations at 21%. in the midst of what was sales barely is it in, they are doing everything right. you mentioned the cloud
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business, up in currency faster than amazon's cloud growth and 47%. -- at 47%. microsofts that mean can take on amazon when it comes to this segment? amazon has been the biggest player. >> amazon's cloud business is three times bigger than billion to two.5 point billion dollars for is your -- azure/ . if you look at market share, numbers would suggest microsoft is growing faster. if you fast forward two years, it will so -- still see a clear lead but microsoft will play a bigger role. we showed viewers the fact that the s&p 500 has a quarter of the index tied to technology.
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microsoft and it beats expectations, that means dominance. netflix pulled back after its earnings report. what will you watch as we wait for players like amazon and google reports come out? pressureas a different point, critical metric to look at. , it is about case daily and monthly active users. they rolled out new privacy filters that they warned investors would have an impact on engagement and they will roll the filters out across the globe over the next several months. that will be the key factor on facebook. for amazon, we looked at growth in prime day up 24% over year ago. -- over a year ago. when it comes to apple, this is
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all about what the share buyback will do. the critical know that that tim cook has left is that he has not given focus to the concept of net cash neutral. it is a big deal for apple investors. this means they want to bring cash and debt at similar levels which implies they need to give back and incremental $145 billion. the pace of the buyback is something that is vague. we think it will be faster than investors believe and will be as quick as three years, which means that could retire one quarter of their shares outstanding, which would move the stock higher. the cache equation will be focal to the apple quarter. apple,talking about president trump talked about 500 billion dollars of tariffs on chinese goods. what will happen to the supply chain for apple? ,> if the tariffs stick around
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it is probably negative and will raise the crossed of -- the cost of apple products by 5%. hard to say if it will affect the consumer or apple will assume that cost. a year from now i believe we will see lower tariffs been before the tariff warp your cooler heads will prevail and lot of economics will win out. that optimistic tone, thank you so much to gene munster. for more earnings action, let's turn to ge, why flanery still has a lot of work to do. here to break it down is bloomberg opinion columnist. cash flow coming up short. >> that is the key data point to take away is that they had to cut cash flow guidance.
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this is the second year in a row. , -- year the shortfall cause john flannery to cut the dividend for only the second time since the great depression. said it wills rethink its dividend policy and that will likely mean a lower dividend. what today's numbers underscore is that this will be a significant cut. mentionedur piece you ge is working through its woes at a time when a lot of industrial companies are doing well. brooke: you see that today from honeywell's numbers today. ge reported a 6% decline and honeywell had a 6% gain in organic revenue. leased --inc. increased guidance and you are seeing that from companies. distributors reported strong
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numbers and saw strength and core industrial markets. ge is missing out on the upswing. takinghe shift they are and far -- as far as the health care business, they will be dependent on longer cycle businesses if we get to economic downturn. the risk of underperformance if we see downturn. shery: we saw aviation below estimates. brooke: that is a focus point because they need aviation to be perfect to meet profit guides to make this narrative work. aviation was not perfect. i don't there is anything to be alarmed about, you don't have a lot of wiggle room instead of the targets they have set. shery: thank you so much for that, brooke. president trump says he is ready
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to go on tariffs and a whopping 500 billion dollars worth of chinese imports. we have all of the details ahead. this is bloomberg. ♪
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shery: this is "bloomberg markets." i'm shery ahn in new york. jon: i am in trenton. president donald trump taking tariffs to the next level, saying he is ready to go on $500 billion worth of chinese imports. republican senators flexing their muscles and urging the
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to reconsider trade policies. joining us with the latest on trade is bloomberg news is economic reporter, sarah mcgregor. give us the significance of this $500 billion figure. the $500 billion figure is significant. what he said today is he is prepared to put tariffs on everything that comes in from china. until now, the administration has said we tried to avoid putting tariffs on consumer goods, and that might drive up inflation and hit consumers in the pocketbook. everything is being hit from a 25 percent to 10% tariff and there is no way to avoid that. importantly, china will hit that dollar for dollar or in a tit-for-tat session on every action the u.s. takes. chinese imports less from the u.s., and china could take other steps less predictable to hit the u.s.
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shery: like make it more difficult for u.s. companies to operate in china. about any know ongoing negotiations between the two countries? sarah: the trump administration has said talks have broken down. there were high-level talks led by steven mnuchin and wilbur ross in may and june. at talks have petered out this point because trump actually went ahead and put the first round of tariffs on $34 billion of chinese goods just recently. i think that -- china said if you go with tariffs, we are out and won't go with the talks very it has driven a wage between the between the wedge two sides. it was difficult, but with tariffs in place and escalation and the u.s. reiterating that unless china makes deep
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structural and painful changes to the way it runs its state driven economy and gearing it toward a market economy fast is the bottom line for the u.s. china is not going to do that. it would be hard to do that on a quick timeline. it is hard to see where the endgame is. what are some of those other mother -- measures that china can focus on if the import-export tariff story is not one theoretically where they ave the upper hand? more extremere measures because there is more control over chinese consumers. they could organize a boycott of american products. we have seen this happen with agriculture that they could tighten regulations and make it
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harder and make sure that u.s. the safetyke criteria to get into china. some tactics have been used in the past. china has not outlined what take ont might the $34 -- billion dollars against the u.s. tariffs. it remains to be seen. the big outlier many people think china will go for is that china has massive u.s. treasury holdings and $1.2 trillion maybe could use that as leverage. shery: that is a fear right now. sarah mcgregor, take you so much for that. trade war fears making the way to wall street. let's talk about more. that we are hearing president trump talk about the dollar and currencies, could
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this trade war change into a currency war? lives: i don't think so. think so.i don't liquidity was injected a few days ago. we were accused of starting a currency war. the currency is a byproduct of the excess liquidity that was put into the market to stable on -- bond defaults. it is very typical what a central bank does. the byproduct is the currency weakens. focus on what is a declining economy, and maybe something of a dire straits for liquidity issues in china with a tariff situation adding to it. it could escalate. year,his is the time of sarah. we should be talking about earnings and how to the dynamics
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play together? areh: equity investors interested in the earnings. they have come in strong. headlinesade trickling in and they don't seem to end. maybe toward the beginning of the week it seemed we would be focusing on earnings. we had the interview clip leaked and the tweets from the president, with him saying he is ready to go with $500 billion more tariffs. as much as investors want to just look at numbers, because you have to keep thinking about the larger picture as trade plays into it. vince,eaking of tweets, we saw the president double down on comments directed at the u.s. federal reserve. how is the market going to absorb the storyline, especially
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if the president continues to target the fed? vince: markets are ignoring it for the moment. most will say with the tide that jay powell and his crew are immune from the president and fiscal policy and the central bank is a separate entity. trump is putting some pressure, but we have not seen anything like this since the 1970's with next and and burns. the story -- nixon and burns. there was in fighting going on. the federal reserve our fact driven and will stay fact driven . as long as the economy does well , they will the course. if the tariffs slow down the economy, they will pull back. onry: with all of this going with politics and trade, if investors want to be defensive, how do they do that when global markets are interconnected? : i have been asking
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multiple investors about this. s&p global show that in 2016, 40 3% of revenue in two -- 43% in s&p came from overseas. the supply chain is now so interconnected. investors advocate for going for small caps. sayingseeing barclays that even the small-cap companies have imports from overseas. you have mike wilson from morgan stanley saying maybe they got too far ahead of themselves. i spoke with a portfolio manager at columbia, and he speaks with the smaller companies they invest in and he said they do not feel they are completely out of it very they are in it and concerned. at the sector level, consumer staples, some point to tech as a defensive play or positioning yourself with energy and materials, and industrials.
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it is a hard question. i don't think anyone is uniform on their answer. jon: lots of dynamics at play. thank you to both sarah and vince for their take on what is happening in the markets right now. we will have more in bloomberg businessweek coming up this weekend. nikee program coming up, is getting a sales boost takes to the world cup. we will tell you how, next. this is bloomberg. ♪
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jon: this is "bloomberg markets." shery: i'm shery ahn. it is time for the bloomberg business/. /. the undisclosed potential bidder was asked to sign a conventionality along with
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activist investor john paulson so they can look at the books are neither one signed. nike says it is getting a sales finalafter the world cup where both teams were sponsored by nike. most of the players wore nike shoes. nike is hoping the tailwind will add cash in soccer. that is your business flash update you -- update. jon: remember, you can interact with the charts on tv . you can catch up on key analysis and save charts for future reference. this is bloomberg. ♪
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lisa: it's 2:00 p.m. in new york, 11:00 in san fransisco, and 7:00 p.m. in london. i'm lisa abramowicz.
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julie: and i'm julie hyman. welcome to bloomberg markets. we are live and bloomberg world headquarters in new york over the next hour. here are the top stories we are covering on the bloomberg and around the world. state street scoops up charles river systems, but it is being met with some set this is -- skepticism. trumpeasury spanned up to . yields barely budge as the president takes another swing at the fed. and taking flight. meet the team behind all burn, the team that makes a wildly popular new speaker. let's check on where stocks are trading with abigail doolittle. we were looking for some fireworks. i wheel: very small gains at this point for the dow, s&p 500, and the nasdaq. despite all the headlines we have had today and on the week,
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we have gains for the third week in a row. but those fireworks that julie is looking for, here is a little bit of the chop we are seeing on the s&p 500 on the day. we can see that the index opened lower. it has been trading higher. should take a turn down into the close, it would be the second down day in a row. the second time we would see that in a month, but driving on the s&p 500, the battle between , statels and the bears street down 6%, its worst day since june 2016. the company reporting a lackluster quarter, but investors are questioning that charles rangel system -- charles river system acquisition. sky works down 4.6%. they feed but some investors think there was not enough contribution from both apple and sam's on. they are defending those shares, and ge down 3.1%. they also beat, but the power
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unit dragging on results. guidance of investors is not liking that. let's take a look at what is helping the s&p 500. we have capital one financial up 2.9%. they put up a big beat of a commercial bank. these regional banks also put up solid quarters, and regional higher up 1.5%, despite the fact that earnings from continuing operations is smaller. here is some strength. and the headlines around president trump, let's take a look at the 10 year yield in the bloomberg dollar index. president trump has been criticizing the fed and the path of raising rates. we have the 10 year yield up six basis points, despite the commentary. and fed president james bowler earlier did they that the commentary is unlikely to change the fed's path of gradual rate hikes. we see the 10 year yield nearly a 2.9%. but take a look at the dollar. it's on its pace -- it is on
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pace for its worst day, down 7/10 of 1%, despite that we have the yields higher. theng yields would support dollar, but let's hop in the bloomberg and take a look at that relationship. this is a long-term chart. what we are looking at in white, the dollar index, the blue, the 10 year yield going back to 1999. we see they trade roughly in the name pattern. we did have the dollar index rise while yields were lowering, but the question is we have market pricing in additional rate hikes this year and next year. if yields continue to go higher, this dollar index might go higher as well, despite what president trump has been talking about. let's get the first word news with mark crumpton. mark? reportse new york times that michael: secretly recorded a conversation with mr. trump during which they spoke about payments to a former playboy model. the woman, karen the google, said she had a nearly year-long
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affair with mr. trump beginning baron6 after his sons -- son baron was born. the fbi received the recording this year during a raid on cohen's office. mr. trump has denied the two had an affair. secretary of state mike pompeo met with south korean foreign -- the south korean foreign minister today. secretary pompeo was joined by u.s. ambassador nikki haley. that you are in new york to brief the un security council on president trump's summit with north korean leader kim jong own and dialogue with pyongyang. andrzej duda's said today he is hoping to win approval for a november referendum that would include questions over whether the constitution should confer the european union and nato
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memberships, its christian thes, and family bonuses. republican party has chosen charlotte, north carolina to hold the 2020 presidential nominating convention. decisionade its final today, picking an east coast swing state over las vegas, the only other finalist. charlotte hosted the democratic national convention in 2012. global news, 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. lisa? lisa: thank you, mark. state street shares taking a big tumble, falling nearly 6% on plans to spend $2.6 million to acquire charles river systems, they provider of investment dan and analytics software. we are joined now by rondeau .anley -- rondeau hanley
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thank you so much for being with us. why don't you start with -- were you surprised how negatively the markets took this news? >> lisa, not really. when you have an investment like this and you announce an isuisition, obviously it done confidentially and investors are surprise. so investors will need time to digest this and understand how it fits within our long-term strategy. from our perspective, we are not surprised. it will take some time for the investment community to understand it, but i think the community will see it is quite consistent with our overall strategy. lisa: why did you offer in part for it by canceling buybacks? ron: we wanted to pay in all e sure it was capital neutral. the most efficient way to do that was to suspend buybacks in order to not have to issue an inordinate amount of stock. and pay for the balance or the
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issuance. it is julie here. you announced the deal will not be an agreement until 2020, 2021. it is that also in part perhaps of the share reaction? investors like to the return a little bit bigger -- quicker in these acquisitions. is there a way to pull that forward and make it an agreement sooner? ron: it could be, but remember the kinds of deals the investment community is used to seeing from financial institutions. they tend to be consolidation plays, basic banking is not growing. you get one bank merging with another bank, one plus one equals one, and you have a lot of cost to take out. this is meant to be accelerating growth and helping us to actually move into a revenue space. that exists with our current clients, but we do not have the full capabilities to access. this is a pure growth play.
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there is an anti-cost reduction that will occur and it will occur within great treat -- state street, not charles river. it does not have the same media cost reduction that a typical bank deal would have. lisa: i wonder how much this is directly aimed at competing with flat rock -- black rock their platform is similar to charles river and has been successful. how is this a direct strategy to compete better with blackrock? ron: i would describe the strategy as more of responding to what our clients are asking of us. so we serve in the back office and their middle office. our clients, who are big asset managers and owners like sovereign wealth funds, they are looking for a front to back solution. the reality is very few of them have that today. willin is one provider, we be another, but the real competition is actually what exists today within the asset
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manager of consolidating all of that the getty that they have in place. for us, this will fit alongside aladdin. we as a custodian have many share clients with a latin, and our information platform is intended to support both. julie: how much overlap do you have with client in charles river at this point? are you hoping to bring in new client that are clients of charles river, are are you hoping -- or are you hoping to expand the services you are offering to clients? what does the strategy look like? ron: it will be a little bit of both. there is about half of the client that charles river has that are also our clients. there are opportunities on both sides there. but there are also opportunities for new offerings. for example, we are a very large player in foreign exchange and purity's finance. so we can use the charles river platform to enable those capabilities to be brought to
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sktoportfolio managers' de quickly and easily. julie: i want to shift gears a little bit to exchange traded funds. i know you are one of the big providers, along with blackrock and vanguard. last year, 76% of all the flows went to blackrock and vanguard. i was wondering, what does state street have planned? what is the platform have plant to compete better and attract more of those flows? vanguard and blackrock have done a terrific job in terms of accessing the retail and the intermediary market, which is where most of those flows went last year. traditionally and historically, we at date street have been focused on the institutional marketplace and were a leader in that space. late last year we offered our -- we launched our own line of low-cost etf's. that is growing nicely, but it is early days. we are still seeing nice positive flows and working with many distributors, and i think
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you will see them start to make more moves there. lisa: low-cost has been a big driver of a lot of flows. of course, etf's are also affected by what equities are doing, if they are equity etf's in particular. when we talk about this view, we should mention assets under management got a boost last quarter. they were up about 4.5%, two point truck -- $2.7 trillion. that is because equities were performing well. what do you think will happen this year going into next year and how are you positioning stand --to perhaps of withstand dineequity downturn in the market? -- withstand any equity downturn in the market? early 2017,look at 2018, you saw amongst institutional investors a risk off trade. so interestingly, the inflows that occurred in the second quarter were mostly retail or retail intermediate harry
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driven. i think that is a function of the kind of uncertainty that you see in the marketplace around trade and other kinds of issues. the other hand, you see a robust economy, particularly in the u.s.. the u.s. economy is very strong. i think once you see that uncertainty become more clear and where we come out on trade, there is a good reason that will .tart to see improving markets the fundamental markets will still remain quite strong. do take asay things turn for the worse. what would a bear market due to etf flows if it is going so era of lowthis rates and constant rally fiasco -- rallies? it were would assume if a true bear market, you would see institutions and retail investors pull back, and they would pull back from equities. but there are alternatives out there.
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there are lots of good fixed income etf says you start to see interest rates rise and perhaps stabilize. fixed income will be an attractive alternative, so i think you will see a shift in necessarily aot dramatic downturn. and we look at trade. if you want to go through assets under management by region, you have some in the u.s. but also internationally. what are you hearing from clients outside of the u.s. as well as inside the u.s. about their views on trade right now? how concerned are they? you are correct. we have a lot of clients outside the u.s.. about 40% of our revenues are from institutions outside the u.s.. i think the best word to describe it is uncertain. after the literal decades of this movement towards free ande, there is a pause here
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wondering if there will be some kind of reversal. that has profound implications of that is true. you had a story on earlier about supply chains, and it is supply chains, manufacturers have literally built their business systems around global trade. so that leads to a lot of uncertainty, and i think it will be important to get clarity on where this is all going and get it that old as quickly as possible. julie: ron, thank you for your time. hanley joining- o' us from boston. up next, a moscow mystery. perhaps,ell you why, russia dump its treasury. this is bloomberg. ♪ this is bloomberg. ♪
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lisa: this is bloomberg markets. i'm lisa abramowicz. julie: and i'm julie hyman. president trump treads on the fed again. act andter in chief again, saying how a stronger dollar and rising interest rates are undermining america's competitive edge. the 10 year yield higher today after barely budging yesterday, so who will markets ultimately side with? trump or powell? we turn to brian chappatta oh. aboutjust not tweeting the fed, but currency manipulation on the part of the eu and china. that also took a toll, also talking about more tariffs, that is taking a toll. brian: i do not know how the eu is manipulating its currency. i guess he is talking about the ecb going really slow and not moving at the pace of the fed, ultimately. obviously this is sort of -- we --e not seen us kind of talk
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this kind of talk in a long time from a president on the fed. it is interesting, but it seems right now that the bond market is weighing we will side with jerome powell. julie: wait, when you say side with, this will not interrupt anything with fed rate hike, they will retain their independence? brian: exactly. you look at the short end of the curve and there has been no move. you see yields higher on the 10 year, 30 year, and some of that had to do with trump, some of that had to do with news out of japan that the boj might stephen the yield curve. i think the best strategy right now is to stay the course and let this go off into next week. lisa: and i wanted to take a look at the bloomberg to show the old curve. we saw a steepening, or maybe a pause in the flattening as a result of these headlines today. just printed aly column saying i am not sure what to make with this, but it is largely coming down to a pause,
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as you said, and this idea that maybe if the curve is going to stephen, there is a bit more room for the fed to go. julie: i want to switch gears a little bit, could you also brought -- because you also brought to attention this massive decline in russia of the treasury holding. there is a question why. his russia conscientiously trying to reduce exposure to the u.s.? ?f so, why now can you give us some insight into that? itan: i wrote about it and got a lot of feedback yesterday about what might be causing it. one of the things i mentioned was actions. that is certainly, i think, russia is trying to differentiate from dollar assets and go into other diversified, essentially, what they are holding. get out of treasuries, there has been a pickup in the central bank's gold holdings as well, which has been added by rt, among other places, in response .o this rapid decline
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we do not see things like this very often. this chart goes straight off a cliff. and it is such an enormous move as well, it is interesting that it has been so under the radar. when you have heard reports from dealers who were handling some of these transactions are seeing the supply come on the market? why has it been so hidden? brian: it basically comes down to the fact that everyone is so focused on china and japan, because the each own over $1 trillion. russia owns 1/10 of that. russia is not one of those holders that you think of when you think of massive treasury hoards. i think that has been flying under the radar but it has got the attention of the bond market now, because people are trying to figure out ok, how much of this was factored into the 10 year yield essentially going up to 3.12% in may at the same time
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we have seen russia was reducing its holdings. lisa: the bulk of it was in april and may, which was interesting. there are also some very that russia was transferring it to a custody account held somewhere else. i want to clarify one thing. the idea with sanctions, this theory with sanctions is that the u.s. is going in and seizing some of these dollar assets. right after the administration put those harder sanctions on pugin's closer inner circle, that is when this again, right? brian: exactly. it was around march or the end of march that the sanctions took effect. then you saw this quick drop. we have seen russia's holdings overtime sharply increase and sharply decrease, but never quite to this extent. lisa: fascinating, thank you so much. brian chappatta. electric next, general
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shares plunged even as they reveal second-quarter results that topped wall street estimates. they cannot catch a break. from new york, this is bloomberg. ♪ from new york, this is bloomberg. ♪
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this is bloomberg markets. i'm julie hyman. i'm lisa abramowicz. time for the bloomberg business flash, a look at some of the biggest business stories in the news today. shares of general electric are falling today. weakness in the company's power unit weight on profit. revenue in divisions held by 19%, leading ge did trim its cash flow guidance. second-quarter profit flow beat estimates and so did sales, but it is still being penalized. honeywell has raised its profit outlook for the year after a jump in sales. i can quarter earnings had a boost from increased u.s. defense spending, higher oil prices, and a rebound in business, chips, and
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helicopters. a a revenue rose better-than-expected 18%. areschlanger j -- slumbers is frackingger halliburton for market share. it rose 11% in the second quarter. the profit matched the average estimate. and speaking of oil, crude is heading for its third weekly loss in a row, escalating trade conflicts between china and the overshadowing saudi arabia's comments that it will not flood the market with crude. oil has fallen about 6% this month. and that is your business flash update. julie: you can check out the g tv on the bloomberg. we are all about the charts and the data, so that is a great place to go where we see the chart in the bloomberg. you can save the charts for future reference and we will talk a little bit next about
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what will be coming up in tech next week. a lot of tech earnings will come out. we heard from netflix, which took shares down. this is how some of the tech heavyweights have done. basically, google and apple are up. not as much. lisa: this is the stock market today and it is interesting to see where they go will be where the fate of the rest of the s&p 500 and the nasdaq know. that is why this is such an important topic. julie: and there are strategists you are now saying watch the faang stocks for vulnerability in the market. we will talk about it all. this is bloomberg. ♪
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lisa: breaking news, a movement in the u.s. listed shares on the report of a financial -- of financial times that the
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company's board is set to consider a breakup of glaxo. the chairman and investors are going to be still discussing the step in the medium-term. the u.s. listed shares are spiking, sent up a about 3% right now. julie: they are not as heavily traded here in the u.s., but still about 3 million shares. lisa: big investors in the past have agitated for a breakup of glaxo with one investor, neil and that was last year. so that was at least possibly confirmed today with maybe -- let's get more on the first word news with mark upton. -- investorswords with the coast guard of the national transportation safety board are investigating a tourist boat accident that killed 17 people in missouri. the agencies are trying to determine what caused the duck boat to sink last night in a
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lake near the resort town of branson. authorities are releasing few details, including whether the people aboard were wearing life jackets. a powerful thunderstorm was moving through the area at the time of the accident, with wind perrtedly chopping 16 miles hour -- 60 miles per hour. theresa may says nato's defense clause applies for all members, not just big companies -- countries, and she is happy to have montenegrin when the alliance. the president said the tiny balkan countries membership in the alliance means montenegro is "very of exit -- "very could starteople" world war iii because of nato's mutual defense pact. in south korea, more time in prison for the former president. another sentence for eight years in prison for reducing state funds and violating election laws. they are already serving a 24 year term for her role in a
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massive corruption scandal that led to her removal from office. ministry hasnse released a video showing the test launch of an updated missile unit in cause extent. theyials said yesterday were making progress on a variety of new weapons. among them, a high-powered laser weapon system and a nuclear power cruise missile with "unlimited range." the weapons were first unveiled in a speech by president putin in march. global news, 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. comingcloud dreams are true. microsoft floating to record highs today after its cloud technologies are reported more lucrative than everyone thought. for more on microsoft, let's turn to our tech reporter garrett to think -- devinc.
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alphabet will be reporting on monday and alphabet and microsoft -- there is a question. are they taking market share away from amazon? garrett: amazon is the dominant player in this market. they have the majority of the market. microsoft and google, alphabet are going to try and take that share. microsoft was obviously very successful, but the question is are they taking that from amazon . as a whole, are they growing? it is a good question. that is something that comes up on a lot of earnings calls from companies. they are taking cloud infrastructure and cloud services, and when you look at amazon, those that are in retailer other commerce companies are hesitant. i recently decided to go with google, because they would never
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it meant this, but there is a shade of fear they will be competing with amazon one day, so they need to go with amazon or microsoft. tell us about the importance -- julie: tell us about the importance of the cloud when it comes to these players. is it the growth drivers? it seems to be. garrett: it is for my perception for google. it seems like a small part of the business. google is an advertising giant. that is why they get money. the market is still growing at advertising rates are growing up -- going up. but google needs to diversify. as a veryns itself smart tech company in a tech company of the future with a i and everything, but at the day it is advertising and cloud is the best bet for another revenue growth. lisa: we keep hearing about the likelihood there is a bubble
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forming in the faang stocks, and what is that going to do to the valuations as we head into at least -- heavy tech? china, tradee was tariffs, all these concerns about regulation privacy that depressed the stoxx for a bit. -- stocks for a bit. havebusiness as usual, you your traditional quarter using the last year or two of high expectations and high results kept coming in, but you saw what happened with netflix. they miss and suddenly people are running away from the stock. those apocalyptic actions from investors, and they have since come back a little bit. [laughter] lisa: come on, garrett. people want these stocks to fail. they are waiting for something negative to pounce on. the expectations are high once again. lisa: i just want -- julie: i want to focus back on
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amazon for a moment, which is out on thursday. what will be the main thing the investors will be looking for from amazon beside its behemoth -like, not unstoppable -- garrett: the stock has been up 55% this year. jeff bezos i think has $150 million net worth, $50 billion billion net150 worth. $50 billion richer than bill gates. was a snafu, there where the site was down, but nobody cared. maybe they will have some commentary in the results, but they will be looking at the aws revenue. is it growing as fast as they are dominant and secure? it looks like google will have to get their acts together in this race. lisa: thank you so much, garrett. let's get ahead to those earnings. we are also watching for auto earnings next week. the for guidance will be key as lot aboute to hear a
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trade tensions. auto stocks have been down this week because of her new tariff talks. joining us from detroit is auto editor jamie butters. jamie, the latest today, talk from angela merkel about potential auto tariffs and retaliation from the eu. the automakersre taking this threat and are they doing anything to prepare? jamie: yes. they are taking it very seriously. today, the president's tweets about alleging currency manipulation from europe and china definitely keeps stamping up the intensity. to executives and they don't want to talk about what they might do, they might want to wait and see what happens, but they are spending all of their time wargaming and planning this out, what if there is a tariff only from china, europe, or mexico? what are the different pieces they can move around? which cars will they have to raise prices on and will they just top-selling in america?
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selling inop america? it is compensated and chewing up all of their time, keeping them from working on self driving cars, electric cars, and other things they need to do. julie: and it is important to know that we are to said they might top importing some models into the u.s. it president trump if president trump continues the tariffs. i also noticed the price of steel has increased by 40% so far this year in response to the steel tariffs. do commodityg, how increases like that affect the manufacturers on the input cost side? jamie: it is significant. evens a lot more then, more than the tariffs were supposed to raise prices and were projected to raise prices. if you think about it, and average vehicle has maybe $2000 worth of steel. abouts a wide range, but $2000 worth. a 10% increase is $200. maybe you can each that or the
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customer does not mind so much, but warty percent -- 40% is prophet beenan the a lot of vehicles produce for the automakers. if you roll that through to the customers, it will up their monthly payment or push them out of the new car market altogether and into used. it starts to get pretty significant. julie: trade tensions, whether the effect of the raw materials costs or other things, will that overshadow the actual performance in the quarter for these automakers? jamie: yes, absolutely. it will be interesting. we want to see how is g.m. progressing on getting, tooling up for their new pickup. are they making enough of their suvs? we want to know how much ford, remember they had that supplier that makes magnesium parts. they had an explosion and a fire. ford went in to try and get it back online quickly because it is a supply of their most
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important vehicles. we care about all of that, but the most overarching issue for investors is what is the profitability going forward? how do you run this business and what do you do about these tariffs? lisa: thank you, jamie. ford shares down about 7% this year -- 11% this year, gm down 2.5%. up next, skechers tumbling as low as -- skechers tumbling as much as 26%. we also see the s&p 500, dow, and the nasdaq all turning negative. not by much, only 1/10 of 1% by the s&p, but a clear leg lower. we are finding out if there is any particular catalyst. we will update you and figure it out. from new york, this is bloomberg. ♪
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lisa: that is some of our reporting from tictoc by bloomberg, streaming live on twitter. if you could have one superpower, what would it he? julie: that is a really good question. i read a book in which all women can shoot electricity. this is bloomberg markets, i'm lisa abramowicz. julie: it was awesome. lisa: time for our stock of the hour. shares are plunging after the company missed it earnings estimates. the shoes are not having much superpower today.
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doolittle is here with more. what went wrong? abigail: a pretty significant missed. they were expected to put up $.41 per share, $.29. revenue is in line, but that shows you cost arising -- costs were rising. last year in the fourth quarter, we had a strong earnings quarter, but now we are going in the wrong direction. quarter,he most recent this is looking forward, and it has to do with a higher tax rate and also unanticipated -- lisa: higher tax rate? they were expected to have 12% to 14%, but it will be higher than that. interesting. and legal costs sand fx, and they are also aggressive marketing in china, trying to build out asia. feeling that there would be a big short interest on the stock, and 6%, but not huge. julie: back-to-school is coming.
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normally, that would present an opportunity for a company like skechers. abigail: they are talking it up. they are trying to roll out new products. they are also looking at revenues that are shy of the $1.16 billion estimates. also, the $.58 versus the $.68 so it seems like there is not a lot of transparency for them over the long-term. -- howo how much much much is this a retail story and how much of this is skechers? abigail: that is an interesting question, because i was talking said itnalyst, and he was not a look at retail, this is a one-off. he does not think this is a tell on the skechers story, they just don't have a lot of long-term visibility. i would like to take a look at a chart that is pretty interesting in terms of what is happening. this is going all the way back to 1999. we see overall the stock is
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going in the right direction. over the last couple of years, breaking out of that range. this congestion would take the stock near $100, but we see it going back toward what had been resistant, now below $20. this could be a serious story. in terms of a bearish manner. were --, perhaps that is the case, just a lack of visibility right now is they are trying to build out their operations. again, particularly in asia. it looks like there is concern about what this could mean. julie: and also a question about the lay of delivery, with same stores for entire brands versus direct to consumer. baking of footwear, we will bring you -- speaking of footwear, we will bring you the story of allbirds. from new york, this is bloomberg. ♪
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julie: -- lisa: this is bloomberg markets. i'm lisa abramowicz. silicon valley has disrupted everything from the taxicab industry to how we watch television, now it is footwear turning. -- footwear's turn. allbirds ceo's telly story of the company's launch and growth. -- tell a story of the company's launch and growth. born in new was zealand where i am from, and a place that has nearly 30 million sheep. be idea was that will could used in footwear to make shoes that were not just more comfortable, but good for the environment. it seemed obvious and it had not been explored. fast forward a couple of years was born.ds we launched the business with one shoe, which many people told us was not how you launch a shoe
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brand. we started with wall, we added -- wool, we added three and eucalyptus bark. we have an incredibly focused product line. we sell a handful of styles. we are not beholden to wholesale release dates, and it has allowed us to but the customer at the center of the business and to listen. >> every transaction we have in a model, we get data from our can sooner, week -- consumer, we know what we want -- they want. >> and that customer directed relationship has allowed us to move really fast. thes a key part of some of success we have had in the early stages. this thing has grown much faster than we could ever imagine. it started just a few years ago with joe, myself, and his dog walt, working out of his mother-in-law's house not far from here. all of a sudden, we are up to 100 people. >> from the beginning, we realized that culture could be a differentiator for us.
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defininga lot of time our mission, vision, and our values, and it has been incredibly help all in attracting talent -- helpful in attracting talent and outsiders with some notable exceptions. it allowed us to attack this industry with a completely fresh perspective. why think continuing to invest in that theme and making sure priorityculture is top is absolute for us. towe started as a direct consumer business on an e-commerce platform. we quickly added stores. we now have 100 employees across two continents. we sell and four geographies, starting not just with the u.s. but now we have added canada and australia. we have two retail locations, one in san francisco and one in new york. in our first four years, we were able to sell one million year pairs -- pairs of shoes. >> there is a revolution going
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on in the way things are made. customers are starting to demand to know that the things they buy and they where. we want to make things that are new, differentiating experiences that are incredibly sustainable. i think you are going to see a lot more from us and hopefully we will be popping up around the world. >> it is just the beginning for allbirds. lisa, i have a quiz for you. do you know who the only bloomberg anchor is who has a pair of allbirds that i have seen? lisa: oh man. julie: normally she is sitting here. lisa: scarlet? we are thinking of you, scarlet. julie: she is on the cutting edge of fashion. lisa: that is really interesting. i'll find it interesting the price. they are not as expensive as you would think, less than $100 for a lot of these. that is interesting to note. julie: we will see if it has more mass appeal given the hipster, silicon valley type of
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shoe. eucalyptus shoes. we will see. it time for the bloomberg business flash, some of the news today. billionaire peter keele is considering strategies to invest in chinese startups. he is weighing different approaches for investment, including raising a funder entering a partnership. he was an early investor in facebook and a cofounder of paypal. you oversee the network of half -- he oversees a network of half a dozen venture birds. dunkin' donuts is now getting into the cookie business. they are buying a stake in philadelphia-based insomnia cookies. cookieecialize in warm deliveries. rupert murdoch is about to cement his reputation as a great media dealmaker. he is now poised to complete 21st$71 billion sale of century fox entertainment assets to disney now that comcast has dropped out of the running. an estimate that it is
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worth about $18 billion. we will talk more about rupert murdoch's position in the media business. he got a lot of praise from the other executives in sun valley, at least one of the other executives that on valley. that is your business lash update. lisa: coming up in your deals report, we will hear from our exclusive interview today with platform specialty products chair martin franklin. the company just agreed to sell $14.3 its units for fou billion in cash. you can also follow our charts on the bloomberg and become part of the conversation. if you want to see dartmouth college professor danny blanchflower talking about donald trumps comments on the federal reserve, you can go to that and interact with us directly. from new york, this is bloomberg. ♪ ♪ two, down and back up.
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its a new kind of network designed to save you money. click, call or visit a store today. >> it is 3:00 in new york, 12:00 p.m. in san francisco, 8:00 in london. i'm julie hyman. lisa: welcome to bloomberg markets.
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julie: live in bloomberg world headquarters in new york over the next hour. here at the top stories we are covering. ae market ins the week on week note. --weak no. , the eu, the federal reserve on rates and currencies. we get the latest. coming up short by general electric struggling to meet its shares downagging even after second-quarter earnings that looked at least not bad. let's get a check on the markets with abigail doolittle. indeed. deed -- abigail: it is going to be down to the wire what happens on the
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week. if it finishes lower ill be the first two down days in a row since june. take a look at the clear mover. down 7/10 of one perspective -- 7/10 of 1%. president trump talking down the dollar and criticizing the fed. tailwindbeen getting a to stocks earlier when we had modest gains. now not so much. thatr the movers below relatively flat surface, ge and exxon mobil, they did beat estimates. there iswer units, weakness there. free cashevise their flow guidance down. exxon mobil down. microsoft up 2% at a record high after posting a strong fiscal
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fourth quarter. their cloud business helped out. up 3.9% when they reported yesterday the report was ok. the record -- the forecast at a number of downgrades. investors not caring. let's take a look at what could happen. these arethe meek -- the weekly moves. january, a big rally. volatility to the downside. smaller move into the spring and summer. we are on pace for a third up week in a row. it isn see how fractional for the nasdaq in blue. if we see any sort of selling pressure we could see weekly declines for the nasdaq and the s&p 500. even the dow. workpositive note, some out of lpl financial. in the second quarter, it has
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pretended well. gainyear there was a 10% in the second half of the year. we did have three up months of the s&p 500 in this year second-quarter. we are wishy-washy. >> thank you. let's get to first word news. mar: japan's prime minister is the latest world leader to speak out against president trump's proposed all caps. he warned tariffs would backfire and harm america's jobs and economy and devastate the global economy. he said he will keep explaining the president trump japan's auto industry does not threaten america's national security. the european union's chief brexit negotiator saying a legally operated backstop
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agreement is essential for a withdrawal deal to be achieved with the u.k.. the issue must be settled and added there must be an insurance policy to address the issues of ireland and northern ireland, something he discussed with the brexit secretary. asking for a border between northern island and the rest of the u.k.. is checks on goods. we cannot afford to lose time on this issue. mark: he said he feels the backstop proposed by the european commission on behalf of of the union is technically workable and can be improved. germany has ended extradition catalanngs against the
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president. the german court ruled he could only be tried for fraud. spain wanted to try him for rebellion for last year's failed independence movement. floods triggered by a tropical storm have killed 12 people and left others injured in vietnam. after thele drowned tropical storm hit the region thursday. onbal news, on tictoc twitter, powered by 2700 journalists and analysts in 120 countries. this is bloomberg. now for our report. specialty products, to india's upr. the platform founder talked exclusively with bloomberg senior deals reporter at hammond
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who asked what he plan to do with the funds from the deal. >> we will start by paying down existing debts, below a billion dollars depending on the timing on the closing, how much below a billion dollars it will be. capacity to do a share buyback. that will depend on where the shares are trading. the board has approved $750 million allocation for share repurchases. depending on where the markets are at that time will depend on how aggressively will be. >> i'm looking through the shareholder register. it is a who's who. you have a larry robbins. they back you as a deals guy, not someone who is going to do an aggressive buyback program.
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is that going to ultimately be the direction? >> a good question. for some people, they are great supporters. but it is not just about m&a. they see us as capital allocation. back a way, a share barra buyback, wee barr understand this transaction and what it means. it is not where the stock trades today but where it will lead over the next 18 months and the lawn -- and beyond. talking to one of those investors, a short time ago, it is the right strategy for the company end we are also petitioning over the long-term to become a more attractive investment candidate for the
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long institutional type investors. our love for of average on the balance sheet was not as attractive as i think it will be posed divestiture. we will see what comes next. we have a vehicle where we are looking separately at other opportunities in our industry. today is all about platform. franklinat was martin speaking with ed hammond. ed is with us now. we heard what mr. franklin had to say, being a little teasing about his next move. what do we know about future plans? >> he will do another transaction. this is a guy who has built a career out of m&a. he is a successful deal maker.
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, heas this vehicle reassembled his management team. they will be going out in the next month or two to make an acquisition. it is raising a lot of money to go out and buy something but they don't know what it is. they haven't found it but trust us because we are that good. >> exactly. here's a billion dollars go find something nice. >> he has said publicly before he has an idea of what he wants. something consumer facing. like warren buffett. he likes real companies, niche areas. his history spans all sectors. industrials, chemicals, consumer retail. distilleries. everything you want.
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lisa: i'm going to play the skeptic. when he was talking about using proceeds for share buybacks, what you think? >> it is interesting. he has this shareholder base. glenview. he has a lot of hard-core activist investors in his stock. they like to see deals, meaningful transactions. they share buyback i'm sure will .ppreciate but they are not in their as actors. they like franklin and like what he has done with the company. he has the foxes in the henhouse already. i was looking at it. , he's $6 billion of debt going to get it below a billion. that will change the company. julie: another legendary
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, whoaker, rupert murdoch appears to walk away with a fair chunk of money from the sale of 21st century fox. it seemed like, you were at sun valley, he has already been anointed but there was praise for him and his stature. >> king fox. energyas a lot of generated at sun valley. deals, there was a lot of conversation about that. a lot of the questions were about his legacy. final majorhis transaction of his career. mel --7 which is still still relatively young and deal terms.
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there are a lot of older people doing m&a. traction at sun valley. everyone wanted to comment on the fact he had been this amazing force. >> he has been a controversial force. he has not had 100% success. >> you think myspace? who even remembers myspace. he paid $600 million for myspace and sold it for $34 million. what is really interesting, murdoch is getting out of the traditional media does this when tech is pushing into it. perhaps he has seen the writing on the wall. it is going to disrupt to the point the value of his company -- [inaudible]
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the myspace acquisition went wrong. overall i think he has a strong record of deal making, whether buying individual newspapers. that said this controversy cannot only bad deals but bad behavior. the phone hacking scandal was her render us for the murdochs and has damaged the reputation channelspapers and tv irreparably in the u k. does it still exist? we're going to get insight from richard bird. why he says there are signs in the credit market that say run for the hills. this is bloomberg. ♪
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lisa: this is bloomberg markets. thee: it is time for bloomberg business flash, a snapshot of the biggest business stories in the news today. deutsche bank will pay $75 million to settle claims that two units improperly handled securities that represent shares of foreign companies that lead to inappropriate shortselling and profiting around dividend payouts. deutsche bank is not admitting wrongdoing. j.p. morgan chase says the bull market in u.s. stocks have more room to run. the management team could keep gaining for another 2.5 years. returns will not be as high as in the past. bloomberg has learned your capital management has offered
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partmillion to buy a broad of its equity fund. a court-appointed liquidators tried to settle that the weighing offers for assets. that is your business update. withik schatzker sat down the former chief executive of deutsche bank securities who helps manage $25 billion in assets at benefit street. he says while there are positive signs in the credit market there are some that say run for the hills. take a listen. >> leverage levels at all-time highs. the leverage levels are higher than the published leverage levels. the market is used to things called ad backs. a normal form of the definition of cash flow. companies are getting more and more liberal adding things back
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to that number. increase.% leverage levels are as high as anybody has seen them. going back to 2008, right question mccue have higher levels -- right? market, etf's or mutual funds. you feel like when there is a scare you have that technical issue. you have investors that have not made money this year. you have a market that sees rapid he -- rapid prepayments. it is more buyers and sellers. it leads to tighter spreads. >> which way does the teeter totter till? feel goode hills or about where things are question mark >> macro winds. what the central bank is doing , i think that
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wins in the short term but the way we have been positioning of cycle behavior. everything suggests we are due for a problem. the way we have thought about it not have the luxury of not investing. our capital one's return. what we have done is focused on top of the capital structure. 80% of our investments are senior secured. loan devalue's around 50%. , way better than average. playing for the dislocation. >> with the caveat, no two cycles are the same, how would you describe -- how would you compare conditions in today's market with what we saw in the lead up to the financial crisis? >> a lot of similarities.
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some stuff is worse. like leverage levels. >> what else question my >> what else is worse? -- what else is worse? is80% of the loan break it light -- common at light -- covenant light. you really have no covenant and the more private markets where we participate, even though you are not quite a covenant light yet, more buyers and sellers drive these things. what is better? it just doesn't feel like there is as many systemic issues. burr --hat was richard rne speaking to erik schatzker. frequently i will get tweets or messages over the bloomberg,
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what was that chart you talked about on air? this is one of the places you can find that. one of the things we have been watching is the yield curve reacting to the president's tweets on the fed, currency manipulation, and we have seen a pause and the flattening trend. talking much more about that and the president's comments later on. from new york, this is bloomberg. ♪
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>> this is bloomberg markets. time for options insight. mark.g me in chicago, we have seen vacillating in the market this week. not conviction moves. the bigs has been suppressed rate what do you make of this? typicalearnings season
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instead of macro moves? >> he have micro and macro running against each other which creates a nothingness. we have the headline risk out of the president. i think that is a fade. we have earnings. next week is the crazy part of earnings season when we get all the fang names, major stocks reporting. we could see some real action next week. this week is lying, waiting, what is going to happen. earnings have been good. when you have headline risk with a great underlying story it creates s&p down one. julie: why hasn't there been more reaction question when you get the president tweeting about tariffs and currency wars essentially you would think there would be more alarm. running a fourne
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mile race i am tired, a can't run much further. the market is experiencing volatility fatigue. it has been run up and down so much by trump tweeting they are now like, i'm going to sit this one out. that is what i think you are seeing with the markets p a are done. until you show us something new we are done worrying about this. julie: your trade of the day come you are looking at dear -- deere. are looking at a trade that becomes -- that comes before the earnings. why that question mark >> i don't like to trade through earnings. it tends to be a coin flip even on the best companies. i like to trade in front of earnings. dear and caterpillar have been suppressed by china headline risk. i think it is overblown.
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as we head into earnings we will see excitement in the stock. the implied volatility in front of earnings are relatively cheap which allows me to express a bullish opinion for cheap. i can buy the august and spreadsheet, a great risk reward. we've got to leave it there. mark sebastian. thank you. lisa: still ahead, trump versus powell. he will join us to explain, from new york. this is bloomberg. ♪ this isn't just any moving day.
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stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. first word news. the associated press reports the cia confirm the agency's acting watchdog accused of retaliating against whistleblowers is
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resigning. christopher sharply mother's nomination for the inspector general post has stalled in the senate, made the announcement to employees at his office. the ap sides a congressional aide who was not able to discuss the matter publicly. secretary of state mike pompeo the south korean mission in new york today. he was joined by nikki haley. they are in new york to brief the un security council on president trump's summit with kim jong-un and the dialogue with pyongyang. it could take several days to raise a tourist boat that sank in southern missouri last night killing 17 people. the duck


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