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tv   Bloomberg Markets Americas  Bloomberg  January 23, 2019 1:30pm-2:01pm EST

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delayed because of the partial government shutdown. now the president has asked congressional officials for a walk-through of the chamber to prepare for the address. there is no word from speaker pelosi. the first of boeing's long-delayed aerial refueling planes lands tomorrow at an air force base in kansas for a celebration. but the ceremony for the fc-46 may be marred by a three-year delay in important meeting milestones of boeing is far behind its original requirement of providing 18 planes and spare parts by 2017. that may not happen until next year. has steppedreserve into the investigation over money laundering at dansk back. the fed want to know how much deutsche bank handle billions of dollars in suspicious transactions. the danish bank admitted that much of the $230 billion that flowed through its tiny estonian branch may have been dirty.
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another democrat is joining the race for the white house, the mayor of south end, indiana. he is forming an exploratory committee. the associated press obtained his announcement. he is 37, a rhodes scholar, and a navy reserve lieutenant who served a tour of duty in afghanistan. 2017ised his profile in with an unsuccessful run for chairman of the democratic national committee. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. >> live from bloomberg's washington, d.c. studios, i'm
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shery ahn. >> welcome to bloomberg markets. >> here are our top stories. global growth jitters. u.s. stocks fluctuate between green and red as wall street shows concern growth is slowing this year. highlightsom davos, from the world economic forum, including the bank of governor of canada. -- canada governor. shares of tesla tumble as they say they will reduce model x and model as production. let's get started with a major check -- with a quick check on the major averages. the s&p 500s and the nasdaq off of their session lows. the nasdaq gaining 0.3%. season,nding earnings we had some better-than-expected earnings reports from ibm, procter and gamble, united technologies.
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concerns over trade tensions and growth lingering, not to mention the partial government shutdown here in the u.s., day 33. the s&p 500 led lower by energies and material. consumer staples are up. the dollar index losing about a quarter percent. that is after a six-day rally, demand taking a breather after pushing the greenback to a two-week high. amber: you mentioned the consumer staples specter -- sector pay that is where i'm focused, especially as you see a big divergence. proctor and gamble has outperformed over the last year, trading at a premium to the outperformed kimberly-clark. today we got a sample as to why that is. parker and gamble in a rare move actually signaling growth for 2019 as it saw growth in almost every single one of its categories. meanwhile, a company like kimberly-clark signaling its
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sales will likely decline as it grapples with higher cost, particularly raw materials for things like pulp, a key input for the tissue that it makes. a rising u.s.and dollar weighing on a company like kimberly-clark. shery: really different factors pushing the market today. over this week and next, central bank rate decisions will be key. leaving itsboj interest rate policy unchanged, pretty much as expected. the yen interesting is is now under pressure because the boj lowered their inflation forecast for a fourth time in its quarterly outlook. of course, this just puts the boj further away from its global peers. the ecb meeting tomorrow, not to mention the federal reserve next week. the numbers you mention are even more astounding when you consider the boj's balance sheet is $5 trillion.
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without that, they still have not been able to show any meaningful uptick in inflation. we are getting the ecb tomorrow. expectations that mario draghi will signal that those risks remain to the downside and then we have the fed on deck next week. this is interesting, there are only expectations of a 2.6% chance they hike rates. three months ago, that was nearly 80%. it really shows you how much things have changed over the past three months. it is something that our own bank of canada governor has had to grapple with. bloomberg got a chance to speak with the bank of canada governor at davos and got his take on everything from the trade war to government data. shape,economy is in good we have a couple of things we are dealing with, low oil prices for one, uncertainty around the future of the global trading
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system, which of course is a big one. but that is something we all share. ratepretty big change in expectations between december and january for the bank of canada. in a january meeting you didn't raise rates. the expectations of the market is we may not see anything this year. is that your view, would you hang on to the idea that there are quite a few rate rises to go? >> a combination of things going on. oil prices were very weak during the fourth quarter. not just global prices but canadian prices were even lower. that has become a material shot, will knock off about 0.4 percentage points from our outlook. we have to adjust to that. the bigger picture is markets are lost for good reason, about the risk to the global outlook coming from the u.s.-led trade war. that is affecting already many countries. we are in the crosshairs earlier
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than others because of the threat to nafta. we see how it affects investment, has really held back investment in canada. holding back investments in lots of countries. but there are two sides to it. if they reside -- resolve all of that, that will give the economy globally an extra lift. it would be a disaster if the whole situation escalated, but it would also be very positive if it were resolved. we are somewhere in between. you look atnomist, the fundamentals of the canadian economy, global economy, from a medium-term perspective, there would be more room for rate rises, but we could also see quite a long pause. >> we have said, on the side of it, it is data dependent. it will depend on how the economy response to the shots we describe on top of which the housing sector is obviously
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adjusting to the rate rises we have already put in place, along with some macro prudential moves . it has not quite settled down after that round of changes. we like to see that stabilize, and therefore, know where we stand. that, going to watch and the trade situation. that is crucial. we also have to watch how the economy adjust to the floor oil price, which is bouncing back as we speak. >> you mentioned the data dependence. some of that data is not being collected because of the u.s. government shutdown. how is that affecting you, day to day your ability to judge the economy? >> certain things from the u.s., of course. for us, the main one is our monthly international trade data. the two countries share the import data from both countries to become the other countries export data.
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that is why we get the strongest estimates of what is going on. with them shut down, we have very partial export data. >> you cannot see the impact of the trade wars because of the shutdown. >> that is correct. we can talk to our companies, which is the strongest way to find out how it is affecting them. that was the bank of canada governor stephen poloz. money one of the biggest laundering scandals in recent history, bloomberg written the story today that the federal reserve is set to be in the early stage of a probe into deutsche bank, the german bank being investigated over how they handled billions of dollars in suspicious transactions from denmark's leading dance cap. with us now is our financial regulation reporter jesse hamilton there with me in d.c. the deutsche bank ceo said last week, talking about launching an inverse -- internal
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investigation but did not see any evidence of wrongdoing. what is the latest on this ongoing saga? >> of course, the situation is a 'sss, one that deutsche bank u.s. regulators could not ignore. fed starting to preliminary probe into what went on with the transactions, which of course were components of the correspondent bank in relation with deutsche's and other major u.s. banks. ase, they werec at the center of the transactions. the fed is looking to see whether this obviously dirty money, billions in dirty money that has been admitted, was handled properly, or whether deutsche's should have known more about it.
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when you look at just how much deutsche bank has shrunk, i was looking at the market cap, $18 billion. in canada, one of our smallest banks, almost no international exposure, trading at a bigger market cap then deutsche bank. this is a company beset by problems. when you look at this specific issue, what are we talking out with penalties for a bank like this, if they are found to be on the wrong side here? >> the federal reserve has extreme he broad powers with the institutions it regulates. typically, if it finds wrongdoing, it would start with an order to fix the problem. that could also come with major penalties, sanctions of individuals, it is uncertain right now where that will go. but the fed also, as it has shown, on one previous occasion, has an extreme power to limit,
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as it did in the scandals of wells fargo, to limit a bank's u.s. growth. shery: thank you so much, jesse hamilton. here in washington, d.c. we have breaking news right now, we are hearing that michael cohen is postponing his congressional testimony, citing threats from president trump and rudy giuliani. attorneying, cohen's says that he is delaying the betimony and that coehn will delaying the testimony citing threats from president trump. that is the latest in this ongoing saga with michael cohen expected to testify in congress. amber: fascinating development. we are going to die buzz word we come back. canada's top pension manager is raising the red flag on a huge asset shift from public to private markets.
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this is bloomberg. ♪
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amber: this is bloomberg markets. i'm amber kanwar. shery: i'm shery ahn. heading back to the world economic forum, canada's top pension manager says the huge shift of assets from public to private markets could trigger steeper selloffs and exacerbate a crisis. ceo of the, the canada pension investment board, spoke with erik schatzker earlier. think we need really well functioning public markets in any economy. having said that, there is some interesting arguments on the
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other side of this. i heard someone talking a couple days ago about the fact that if you look at the real estate market, almost all of it is in private hands, some that is public, but the purpose of the amount is in private markets, so one of the same with companies? i'm not suggesting that will happen but it was an interesting argument as you look at for private equity -- it was articulated by someone who was a leader in private equity, saying that is maybe the way the world goes. , itone thing i worry about is ok the amount of private assets that are invested today, the way the public markets are functioning. but i worry in a downturn what happens when people are forced to liquidate the public stuff because they cannot sell the private stuff. if there is a sudden dislocation in markets, people who need the money to pay pensions, to pay other obligations, are going to have to sell the public stuff rapidly. you could see a dislocation in
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things that are meant to be very liquid, very safe, they could dislocate quickly. then you could see models and algorithms cai killing something wrong with those assets, like what happened with the aaa tranches of ceos in the financial crisis. i hope that doesn't happen. people who have big chunks of private assets need to think carefully about what they are going to do when things dislocate. that was the canada pension plan investment board mark machin. the ontario teachers pension plan ceo also spoke with bloomberg at the world economic forum in dominoes. is a long from our perspective. while there are always skirmishes of one kind or another in the short-term, we believe it's absolute necessary to be there. we invest a lot in technology there.
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investing in technology in china is very different from doing it in north america. things even their provide opportunities that are quite diverse. ron mock.t was amber, very interesting because the comments come at a time of increasing tension between china and canada, especially with the huawei ceo being detained in canada. still you cannot ignore the potential of the chinese market. of coarse as the economy slows down, we are talking about more stimulus measures. we have already seen this from the pboc. many people saying this could boost the markets. the shanghai composite already entering the bear market in the past year. amber: that is a good point and context is everything. is looking for growth but 7% of their assets are allocated to asia. while we talk about china having the slowest growth since the 1990's, north of 6% is still
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better than what the imf says the global economy is going to own economy.a's so slowing growth is really in the eye of the beholder and signals why china is so important. an interesting interview. we will also be focusing in on a stock, coming up. tesla shares plunging on the announcement that the company will reduce production hours. that is coming up next. this is bloomberg. ♪
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amber: this is bloomberg markets. i'm amber kanwar in toronto. shery: i'm shery ahn in new york. tesla shares seeing a drop after bloomberg learning it will reduce time producing its model s sedans and model x crossovers. for more, let's bring in our tesla reporter who helped to
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bring the story. she is with us from san francisco. how surprise are we that we are seeing tesla pulled back on production? >> not that surprising because earlier this month elon musk announced the company was no longer making the cheaper versions of the model s and ask, dropping the 75 kilowatt hour version of the car as they are shifting to the model three. any time you cut production for production hours, it is not a good sign for the workers. that is how we found out about it, workers were telling us production was going to be cut and the company confirmed it, saying they were reducing production hours. amber: of course, this is skittish or investors because the whole thing about tesla and the dream you are supposed to buy into is that they are going -- to bee to material able to materially ramp up their estimates. does that mean how many cars they can deliver should also be walked back? >> the bigger issue is it speaks
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to demand. the story of tesla has always been a growth story. for years we have heard that there has been while demand for these amazing electric cars and they were struggling with production. now they have production largely ironed out, but what is the demand for the car? as the model three comes out and they race to get the cheapest version out, how many people still want a really expensive model s or x? people need to remember the model s first went into production in june 2012, so this car has been out for roughly seven years. are we hitting a ceiling in terms of demand for the model s and x, not being as robust as it used to be? shery: let's talk about their margins. earlier this month they had to cut prices given the federal tax credits were cut back. we get fourth-quarter results later this month. what are we expecting? tesla will announce on
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january 30, next wednesday. i think it will be a really interesting call. in the notice to employees where he talked about the need to lay off 7% of the workforce worldwide, musk basically said we are still struggling to be profitable, we might be able to do a tidy profit in the fourth quarter based on unaudited results. tone thanry different what we heard on previous earnings calls. thank you so much, dana hull, our tesla reporter. it is time for the bloomberg business flash. a look at some of the biggest stories in news right now. shares of ibm are rising the most in a decade today. beatompany's 2019 forecast estimates. strongerults show a than expected rebound for software after a week third quarter. morgan stanley says the company service transformation is bearing fruit.
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responding -- hulu is a spy to netflix's price [no audio] the company has salvage its credit card relationship with sam's club. they also agreed to settle in $9 billion port olio of loans from a partnership with walmart to capital one. plus it is expanding its network by adding walgreens to those that accept the care credit card. that is your business flash update. shery: another sector that i'm watching, the canada's industry. we could see more consolidation. we are hearing green growth has launched an offer for afria,
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although it does not look like it will be a smooth deal. they say the $1.8 billion offer undervalues it. we could see more fighting. aphria has been targeted by activist investors. amber: absolutely. the shares offer no premium. spoke to one investor who said he would be surprised if the company exists in six months. even though they see this as under valerie the company, the process is on and aphria will ultimately be taken out. out on anyou missed of our conversations we had during programming, tv is your function. you can find our charts there as well. live from toronto and washington, d.c., this is bloomberg. ♪
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mark: i'm mark crumpton with bloomberg's first word news. president trump says he will deliver the state of union address from the house chamber next tuesday as originally planned.
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they pelosi asked that speech be delayed because of the partial government shutdown. now, the president is asking congressional officials for a walk-through of the chamber in preparation for the address. in venezuela, the national assembly leader tells bloomberg the opposition would seek financing and debt relief if it were seen as the rightful government. cnn reports that president trump is prepared to recognize him as the country's legitimate president. executiven's chief asking the world not to give up on his country after the trump administration suggested the u.s. could withdraw troops. still is confident "in the commitment of the united states tuesday and support national institutions until there is peace in the country." >> all


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