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tv   Bloomberg Markets Americas  Bloomberg  July 16, 2019 1:00pm-2:00pm EDT

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mark sanford is considering a primary challenge to the president. sanford told the newspaper that he will decide whether to run over the next month. he served as the state's governor from 2003 to 2011. he was elected to congress in 2013 and became a fierce critic of the president but lost the republican primary for his house seat in 2018, after the president endorsed his opponent. herto rico's governor says will stay on the job despite the deepening political crisis gripping his administration. thousands of people took to the streets to demand his resignation after the release of profane and misogynistic chats with aids. the investigation led to the arrest of twoaides in his administration last week. president trump's nomination for secretary of defense says the u.s. needs to take greater steps to counter threats from china. mark esper says the pentagon
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needs more bases the route the indo pacific region because of what he called china's significant technological advancements. meantime, china says the iran nuclear deal is irreplaceable and says the agreement is the only way to resolve issues with the country's nuclear program. the chinese foreign ministry blamed the united states or the tensions with iran. last year, the u.s. pulled out of that deal and we imposed sanctions. re-imposed sanctions. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. vonnie: it is 1:00 p.m. in new york, 6:00 in london, and 1:00 a.m. in hong kong. welcome to "bloomberg markets."
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from bloomberg world headquarters in new york, here are the top stores on the bloomberg and around the world we are following. retail therapy. retailers post broad gains, flexing the muscle of the american consumer. can a strength continue to drive economic growth? investors parse a trio of bank earnings today. how markets are positioned ahead of a busy reporting season. big tech raises for a showdown. u.s. technology giants are headed for their biggest antitrust showdown with congress in 20 years. we will tell you what is at stake. powell speaking on monetary policy a bank of france event in paris. you can watch this event real time on the bloomberg. he has been saying that the fed will act as appropriate once data comes in. he mentions he sees core pce at 1.7% for the year.
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taylor riggs is with us halfway through the trading day. we have had a turnaround. taylor: we are seeing a little bit of red on the screen, a little turnaround. theot some optimism from banks this morning, now trying to figure out the direction of the market. big tech is under pressure, getting a lot of antitrust regulation and hearings. certainly, that is weighing on big tech. i wanted to look at some of the big tech stocks we are following. arrow electronics reported second-quarter earnings that missed. they are also starting a reduction program, not necessarily the size, the fact the size missed, but that they missed is pretty concerning. you are seeing that go into the other chipmakers. terminal,e into my
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one thing we've been talking about is the record highs the last three straight days. a little bit of a turnaround now, as volume has slipped .3%. perhaps winning for some direction, getting back to the fundamentals in earnings season driving the market one way or another. if there is any good news, it is all about the airlines. better-than-expected retail sales numbers that came out. you've heard this from the bank executives, too. highlightingigroup strength in credit cards and the consumer. perhaps that filters out to the travel industry with these airlines. certainly getting a boost, perhaps with the holiday summer travel season continuing. we know that united airlines will be reporting earnings after the bell around 4:15. vonnie: taylor riggs, thank you for that wrap up.
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earnings for big banks well underway. wells fargo posted its small and lending income since 2016 as the pain of lower interest rates begins to have revenues. let's bring in the hondius capital chief investment officer shawn matthews to talk about all the risks. you say one of the major risks is in credit markets. >> absolutely. looking at the debt markets, we have $600 billion of negative corporate yields. 10 years ago if you would have said corporate debt could have negative yields, you would say no way. it is pushing people into the equity market, as there is no other alternative out there. really, the equity market is being driven by cheap debt. the corporate buybacks of equity have been substantial. citigroup, they said they grew 12% or 13%, but you take out the tax cut and
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corporate buybacks, and the earnings are flat. it is all being driven by cheap debt. it could go on for a while more but there implications to that. vonnie: that has been the case for a while, so what happens when the fed -- consensus expectation now -- to drop rates by 25 basis points. shawn: they are pushing on a string right now from an economic standpoint. if you look at what has happened in japan the last 20 years, europe as well, they have not been able to increase their economic output because they lowered interest rates. i think we are getting into that trap as well. we will lower interest rates but we are having financial assets continue to go higher, which is bifurcating the world as well. only 52% of the country owns stock. they will do well because of that, but you have a substantial amount of people that are not doing well. eventually, they will demand higher wages. we are starting to see those now
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especially in the u k, europe as well, and the u.s., where it is 3% plus. if productivity gains do not continue to go up, you'll have inflationary pressure from the bottom, which will cause bond investors to be more concerned inevitably, which means you will have higher rates. vonnie: that is what we've been aiting for, but the fed chair saying in france there increased in certainties. shawn: absolutely. part of the issue is all the problems that came out of 2007, it took a while to heal the marketplace. you are starting to see which pressure at the bottom, financial assets going up at the top, which is putting pressure, and the middle class has been stagnant for the last 20 years. unemployment,low everyone thinking the phillips curve is dead -- i think it is just dormant -- but as you push
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lower, that employment group will look for higher wages. i think you are starting to see some gains. vonnie: at what point do we see something toppling? if i follow your argument correctly, we would have a domino effect on other asset classes. where does it begin, leveraged loans? shawn: that is the great unknown. leveraged loans, certainly they are par or less because nobody mark sent to market. the commercial mortgage space has some issues as well. pynesse seeing some top there . this could go on for a while. the problem is, when you are looking at your capital and how to deploy it, you want to make sure not to take undue risk for the return you are getting. right now in a debt market you are taking too much risk for the opportunity and return you are getting.
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vonnie: we have to leave it there. shawn matthews, cio of hondius capital management. back to those comments from jay powell. he said at the bank of france in paris that the central bank is carefully monitoring the downside risk to u.s. growth and control accordingly to its expansion. to talk about that, let's talk about this with ira jersey. we just had shawn matthews talk about how the fed has been spurring financial assets -- i don't want to put words in his mouth -- but essentially enthusiasm is not bubbles. the fed chairman is saying there needs to be most likely a 25 basis point drop. how do you make sense of it all? commentsr powell's were very similar to what he said last week.
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increased uncertainty makes it seem like the fed will cut. ist the fed is trying to do appease markets and the economy by cutting just once or twice, probably two times, so that way they don't need to do more later. the fed does not have a lot of arrows and its quiver. they can only cut nine times and then they can do some type of nontraditional monetary policy. they don't really want to do that if they can avoid it. it is this risk management issue that he is trying to get across. vonnie: what is the urgency, are they being led by markets? he did mention seeing core pce at 7%, granted, which is not to percent, but we are seeing growth and there is plenty of employment happening. what is the urgency to cut rates right now? ira: i think it is just risk management. when you look at the global economic environment, the u.s. is holding on ok. but will we be immune to what is going on in europe and other
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places where growth rates are slowing a lot? they want to get in front of that and make sure the u.s. does not slow. we had good retail data today, good data on employment. but the manufacturing sector is still sleeping. data,of the manufacturing production orders were flat month on month. that is not good. manufacturing sector tends to lead the services sector by a little bit. i think the fed wants to get in whereof that situation manufacturing is weak, and then services, and then you have a bigger problem, and have to cut more. we had the franklin templeton cio earlier on that said the economy is healthy, this is a mistake. when will we know if the cut that is coming was a mistake? ira: probably a not until next year, frankly. unless inflation and wages continue to push up higher and you get a significant rebound in the manufacturing sector, you
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will not necessarily see that. people were saying it was a mistake to do quantitative easing, that we would get a ton of inflation. there are other factors other than easy monetary policy that will cause inflation. from a macro economic perspective, it is a much slower elephant moving along, in a more meandering way. it will be quarters, not weeks that will determine whether or not they made a policy mistake. vonnie: concern over the leverage loan market ebbs and flows. we just had somebody saying this is potentially where things topple over. janet yellen have been talking about this as well. but it is going strong. loans are still being issued and there are still buyers for them. ira: there are some markets in the credit market that might be a little frothy. that is driven in part because interest rates are so low not
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only in the u.s., but globally, where you wind up having people chasing yield. there are people that are just yield hungry. if you are, you are willing to take more credit risk in an environment where the credit matrix is not improving all that much, but you get that extra spread over risk-free assets. instead of buying a five year 1.25%, you end up buying another five-year debt that is a couple hundred basis points above that, because you need that yield. so there is a risk. if the economy starts falling , it may start to show up in the credit markets. vonnie: i read jersey, thank you. in adent trump commenting cabinet meeting, talking about the fed and china. all of a sudden, everybody started saying to turkey, ok, we will sell you the patriot missile.
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then they said, we will sell you the patriot missile. by that time, turkey had already signed and paid a lot of money to pressure for the missile system that they were not allowed to buy here, foolishly. turkey is a nato member. 100ey also ordered over f-35 planes, substantially over 100. they have plans to order more. but because they have a system of missiles that is made in russia, they are now prohibited from buying over 100 planes. i would say lockheed is not exactly happy. a lot of jobs. i have always had a good relationship. we have the pastor who came back at my request. he was going to be in jail for 25 years. i called president erdogan and i said, listen, he is an innocent man, he is a pastor, a religious , he is notnot a spy the things they said.
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we had a couple conversations and i was able to get him back, along with many other people i ble to get back. the press does not want to write about it. i guess we have 21 back. i got anyone back. either, unlike the 1.8 billion that was paid by the obama administration to get hostages back. i don't pay. once you pay, it doesn't work out. we have a situation where turkey is very good with us, very good. we are now telling turkey that because you have really been forced to buy another missile system, we are not going to sell you the f-35 fighter jets. it is a tough situation that they are in, and it's a tough situation that we have been placed in, the united states. weh all of that being said,
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are working through it, we will see what happens, but it is not fair. i don't stick up for countries, i don't stick up for turkey, other than i have had a good relationship with president erdogan. he wanted to buy our patriot missile. we would not sell it. he really wanted to buy it. when he made a deal with another country, russia, to buy the system that he didn't even want, all of a sudden we say, we will now sell you the patriot. because he bought a russian missile, we are not allowed to sell billions of dollars worth of aircraft. it is not a fair situation. do you have something to add? [indiscernible] china, we are doing with first of all, peter is a friend of mine, a tremendous contributor. he spoke at our convention, the republican national convention.
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peter is a brilliant young man, one of the most excess of people in silicon valley. i guess he was an original investor in some of these companies, including facebook, i understand. he made a very strong charge. one of the top, maybe the top expert on all of those things. he made a very big statement about google. i would recommend to the various agencies, including perhaps our , who wereeneral's with us, to maybe take a look. when you say google is involved with china in not a very positive way for our country. we will all look at that. i know our other agencies will be looking at it. we will see if there's any truth to it. made bya big statement somebody who is highly respected. we will look at that. >> [indiscernible] we will see what happens.
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we were sending hundreds of millions of dollars -- are you talking about guatemala and honduras? we were sending hundreds of millions of dollars to formal and honduras. vonnie: the president at a cabinet meeting, he allowed some cameras in. he says turkey will not be able to buy the f-35 fighter after the country began taking delivery this week of a russian missile defense system. also made some comments on the google claim by peter thiel, says he wants william barr to look into the allegations that google's work with china is seemingly treasonous. stocks taking a lead lower after those comments. this is bloomberg. ♪
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vonnie: this is "bloomberg markets." i'm vonnie quinn.
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positive and marcus is not the only executive on capitol hill today. google, facebook, amazon will be in the hot seat this afternoon during a hearing with the house judiciary committee on antitrust. lawmakers will investigate whether the company's dominance stifles innovation and prevents entrepreneurs from starting new businesses. joining us is jennifer rie, our senior intelligence analysts for litigation. when the bigots and concrete moves on antitrust litigation? jennifer: we will be waiting for a while. there is a lot of excitement because there are these high-level executives coming to speak. it will be interesting what they have to say but this is just one of a series of a broad look at this committee is conducting in the power of big tech. it all started last month when they looked at the effect of traditional news from these companies, and then moving on to this innovation. there will be other hearings.
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ultimately, what they are looking at is whether there is a there isere, whether legislation needed to curb the power of the companies. that will take a little while. are they aligned in their message these companies, or does each have a message for lawmakers? some feel like they should regulate themselves. jennifer: they are all different and they are engaged in different businesses, perhaps with the exception that they are all doing advertising. they will be aligned in the fact that they face more competition than the regulator like to say they are, that they compete in a bigger market than many say they do. theoretically, what they'll be things, saying the same staring the conversation into how effective they been for consumers, competing in a broader market. but they all do different businesses. and the allegations about their conduct are different. we will be following the hearings in bringing analysis through the afternoon. our senior analyst for antitrust litigation.
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loan taken by clover technologies, a company that recycles computer waste, is in the spotlight, after losing a third of its values. the company is an example of the perils in leveraged loans. ledobal chase for yield has to lax underwriting. joining me now is reporter lisa lee of bloomberg news. or is this thee beginning of what may be a domino effect in leveraged loans? lisa: it is one case but it is very illustrative. there are so many cases like clover out there in a leverage loan market. 60% of the loans in that market have only loan only, which means there is no subordinate debt. that means there is more volatility when something goes wrong. and it is covenant light which means lenders have little to no recourse to get a seat at the
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table if something goes wrong. lost a third of its gone you quickly, started to nosedive, people ran for the exits. did we see any contagion, did any other loans go this way? moment, no, because the federal reserve is lifting up the markets. the question is if there are more like this. liquidity can vanish like that. right now there is a lot of liquidity, the man from the clo's currently. one alone like this, whether it is two or three, and the risk is not just about defaults come it's about down greater risk. aen rating agencies downgrade loan, clo's and some mutual funds, what will that do to the market? vonnie: so what is the forecast for fallen angels? we have heard concern about leveraged loans, and we just had somebody talking about that market. when do we get a wave of
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downgrades? lisa: right now, people are thinking things are good, corporate are fine. probably not this year, but next year, what happens when earnings start to decline? dealing with are these trade tensions and companies are not investing as much, the capital market closes. it is not a concern for today but in the future there is a worry. vonnie: even with all of these warnings, and they've been going on for a while now, these companies that are issuing covenant light and no covenant loans are still finding buyers. lisa: 13 trillion in negative yields and people are searching for negative yield right now. leveraged loans is an area they can buy. clo's are attractive, so people are piling in. regardless of all the warnings. vonnie: is there any rating agency that is maybe ahead of the curve here? so.: i don't think
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they have been warning about the .isks and the broader market perhaps not so much in individual loans. vonnie: can the fed be expected to help out? lisa: they say they are watching but they don't see too much of a systemic risk, so all they are doing is watching. vonnie: wonderful story as always. watching the leveraged loan industry for any collapse coming. major u.s. banks reporting today. we get the latest with sandler o'neill's jeff harte. that is coming up in the next half hour. meantime, stocks are recovering from their losses. this is bloomberg. ♪ that is coming up in the this is bloomberg. ♪ that is coming up in the i don't know why i didn't get screened a long time ago.
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the president said he would hold off on a threat to impose tariffs on $300 billion in chinese imports, and the chinese president xi jinping had agreed to buy large amounts of american farm goods in exchange. but those purchases have yet to happen. the president spoke during a cabinet meeting at the white house today. a federal judge has barred roger stone from using social media to criticize the criminal case against him. prosecutors told the federal judge that stone has been using his instagram account to attack the government in violation of the february order. stone, a longtime friend of president trump, is charged with witness tampering and lying to congress during robert mueller's investigation into ties between the trump presidential campaign and russia. russian president vladimir putin has left the defense industry with a big debt. he has spent $300 billion buying weapons over the past decade. but the deputy prime minister says companies are spending as
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much on annual debt payments as they make on profits. the kremlin plans to write about some of the debt but not all. at least seven people have been killed and 40 are trapped after a residential building collapse in mumbai today. officials say the building is at least 100 years old. rescue crews pulled survivors from the rubble. the cause is under investigation but building collapses, fires, unregulated development, are common in the unregulated city. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. shery: live from bloomberg world headquarters in new york, i'm shery on. amanda: live in toronto, i'm
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amanda lang. we are joined by our bloomberg and bnn bloomberg audiences. bucking the banking trend. goldman equity traders deliver a surprise revenue increase, that as other wall street banks post bigger than anticipated drops in their division. we take a deep diving too big earnings. facebook under fire. republican and democratic senators are sharply questioning facebook's plan to create its own digital currency, underscoring the challenges they will face getting the cryptocurrency off the ground. 737 max crisis is causing turbulence across the airline industry. so how are carriers navigating the headwinds? a quick check on the markets, it was shaping up to be a lackluster session. better than expected economic data in the u.s. today. that has some rethinking the fed's move. treasuries reacted.
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then president trump and his cabinet making additional comments on tariffs with china but then the market went to new lows. maybe a little bit of weight and see. a -- utilities, engine energy leading the declines in the s&p 500. we mentioned facebook. one question was, with the grilling by lawmakers hurt the stock today? on an intraday basis, the answer is not really. perhaps a little bit too far beay from reality to taking any kind of a hit. shery: we continue to see slowing economic growth around the world, so the fed getting ready to act. chair powell speaking in paris, saying they are walk -- watching the downside risks to the economy. already in a low rate environment, could potentially go lower, and now that is being held by banks who have suffered a blow.
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you mentioned a couple of upsides for some banks. not so for wells fargo. you can see this plunging the session as theyyou can see thise session as they announced the smallest lending income since 2016, not to mention that interest income had been downgraded in april. it is off for percent, some not great news for wells fargo. a lot of uncertainty out there. let's bring you more from president trump from that cabinet meeting moments ago. >> those people we wonder why they are coming back. they are the only ones. we are getting rid of thousands of people who are criminals, taking them out of the country. ms 13 by the thousands. they are going out quickly. professionally, we have papers on everyone that we take out, all legal documents. they come in here legally and they go out legally. on sunday there was a lot of activity but you didn't see it because it went smoothly. folks, the people from
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border patrol, the job they do, they are heroes in many ways. we have border patrol who are nurses, doctors, janitors. i very much want to thank vice president pence for taking a delegation of people down to see that one of our very radical left democrats called concentration caps. they are not concentration camps. they are really well-run. they are very crowded in many cases. in the case of the children, they were not crowded. -- which of the news is shocking, frankly -- said they were very well-run, clean, very nice to the children. we had an adult center of males. many of them were criminals. we cannot let them out. it was very crowded. the best way to solve that is
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not to come. we want to take people in legally, through merit. all of these companies pouring into the u.s. because we are the hottest country in the world right now. every time i mean a world leader, prime minister, theydent, king or queen, say thank you, congratulations on your economy. what you done is incredible. very is down substantially, they are having the worst year in 27 years. i don't want to have them have bad years, but they made a deal and they broker-deal on me. the deal was practically done. like a very short window of time we would have had it finished. but they broke the deal. i said that is all right, we will put tariffs on. 250 billion dollars, obviously having a negative effect. i don't want it to have a negative impact.
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no impact on us other than positive. china devalues their currency, pumping money into their system. there has been no inflation, no nothing. frankly, if we ever got interest rates down to where they should be, and if they were not raised so fast, you would see probably another 10,000 points on the dow. i don't want to act like somebody gets a 99 on a test and they are complaining. i don't like that. but i will complain. frankly, we would have done even better had we had a federal reserve that didn't raise interest rates so quickly, and had we had a federal reserve -- and there are many on the federal reserve -- votes -- but if we had a federal reserve that didn't do quantitative tightening -- they did quantitative tightening -- $50 billion a month, that is a lot of money. now they are doing $25 billion a month. pumpinge, they are
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money into their system and lower rates. in china, they are pumping money into their system and they are lowering rates vary substantially. in rates, the -- in europe, the rates are almost zero. in china, the rates are whatever xi watts. he is the federal reserve, president, everything else. unfortunately, what they did was not appropriate. they are supposed be buying farm products. let's see whether or not they do. our ag, our great farmers. i took $16tariffs, billion to make up for the shortfall. i went to secretary perdue -- fantastic gentlemen, is he here? what happened? he is working with the farmers. i am glad that he is there. he can do more good work there. what was the amount at its highest that china pumped into the farmers? $16 billion. i said that is all right.
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we are taking in many times that in tariffs. we are going to help the farmers out. and i did that with $16 billion. it cost us nothing. yet, the farmers don't want that. they want to make the product and sell it. but it was a small percentage of the tariffs we are taking in. we have a long way to go with tariffs. another $325 billion we can put a tariff on if we want. we are talking to china about a deal. i wish they didn't break the deal we had. we had a deal where china opened up, we had a deal where there would be intellectual property theft, would be taken care of, because it is estimated the a steal $300 billion worth of intellectual property a year. who knows? that is what they tell me. that is a big number. how they get to that number?
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i will accept that they are experts, that is what they do. that,d that to the fact during the obama administration, $500 billion a year was being lost to china. they did nothing. goall fairness, whether you back to bush, clinton, you can go back a long way. the wto, once the wto was formed, china became a rocket ship. now we are doing something about it. now we are doing something about it. we are doing a lot about it. we picked up close to $20 trillion in wealth during my administration from election. i have to say from election. when i got elected, the stock market, the day after, the stock market went wild. if i would not have been elected, you would have had a crash. so i cannot give obama credit, president obama credit, for the tremendous gain from the day that i won until january 20 when
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i took office. that was all attributed to the enthusiasm that we caused and that we have had as a country. from the election until now it's been extraordinary. up $20 trillion, china has lost $20 trillion. if my opponent had one, china would be number one in the world right now. right now we are number one by far. we are going to keep it that way. art peoplee sm sitting in this chair, this position, you will not lose it. we are doing numbers that have never been done before. the number that makes me the happiest is proportionally the biggest gainer in this entire stock market -- tory: you been listening president trump speaking at a cabinet meeting moments ago, talking about everything from immigration policy to trade on china. it was the usual themes, that
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china is developing the currency, not to mention xi jinping has the backing of its central bank. he also said he could apply more terrace on china if he wanted. china is supposed to buy more u.s. farm products. we saw some reduction in the markets after those comments, including the offshore yuan weakening. all of this coming at a time when ambassador lighthizer and onretary mnuchin are talking the phone with their counterparts and we are expecting another meeting in beijing soon. piece ofnother uncertainty resolving a little bit today. news from the eu commission that ursula and all relation -- ursula von der leyen will be replacing jean-claude juncker in november. this was seen as a nailbiter because the members of the euro parliament were not seeming to be backing her. votes was her victory, so a narrow win for her. we should note, christine
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lagarde formally resigned as the imf today. so some resolution on the leadership of the european commission. this is bloomberg. ♪ bloomberg. ♪
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amanda: j.p. morgan chase snaps a three-year streak of quarterly interest raises in its quarterly income. they say they will fall in the second half of 2019. his is a point of interest for many banks reporting. we have a closer look with jeff harte, principal with sandler o'neill. obviously, we knew that interest margin would be a concern in the quarter. how do you treat that when you look out to the quarters ahead?
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thing to do.ugh we have been in a rising rate environment for a while now. balance sheets growing, spreads increasing. looking forward, one of the things we are facing a is what is the fed going to end of doing question mark for a while it was hikes, then it became neutral, and then three or four cuts. now we are pricing in a cut or two. the way you have to look at it as an investor, what is the worst and best case scenarios? let's say the fud cost three times, how bad could it get? if they don't cut at all, how good could it get? if you come in the middle of that range for the big banks, it is pretty manageable. certainly not good news but we have known interest-rate headwinds have been in our face for a while now. the guidance and the results we've been getting so far suggest it is manageable.
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not good but manageable for the big banks. shery: when it comes to the yield curve flattening, we are seeing pressure on these banks. bankstb chart showing have gone the same way as the yield curve, especially when it comes to that performance, that it would reflect what banks could do. does it give you optimism, the fact that it did stephen after fed officials made clear that they would lower rates earlier this month? it has steepened and moved a little bit to the right way. that is the right way to look at that, as far as spread for banks. the ratehere are -- environment is already pricing things being lower. the question is, low growth and balance sheet growth. two things contribute to that income. in both cases, the balance sheet
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growth offset it, so the net interest income was not all the disappointing. that is what investors are having trouble getting their arms around. economic uncertainty in terms of how much loans will grow, coupled with interest-rate uncertainties and what the equity will do. amanda: let's call that the worst-case scenario, a low rate environment, because there is a recession. we see loan growth as a summer and the consumer side suffer. how would you rate that scenario? that is obviously the bad scenario, the fed cutting rates because the economy is slowing and we are heading into a recession. i don't necessarily think that is the case. i look at the economic indicators, i don't see that coming. the recovery is long in the tooth, but it's also been fairly shallow versus the steepness of other recoveries. realistically, we are probably looking at continued good economic growth. if rates come down a little bit,
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that is pretty manageable. if you paint the situation where there is a resolution to the china-u.s. trade issues, and the fed gets the rate cut out of the way, and the economy is still chugging along, all of a sudden you could be painting a pretty nice environment for bank stocks. amanda: we will leave it there, great to have you with us, jeff harte. this is bloomberg. ♪
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shery: facebook back in the hot seat. david marcus, the executive responsible for the proposed cryptocurrency libre spent much of the morning a pyramid for the senate again committee trying to reassure skeptical lawmakers. primordial and we have made mistakes in the past. we have been working and are continuing to work really hard to get better and we have invested in a number of programs
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and the notably on privacy, election integrity, a number of other issues. shery: joining us from dana and mattthen stoller, senior fellow at the open markets institute. it doesn't really matter how the heroes go for facebook. you are against facebook launching libra. , gaverket open institute a report to congress with the reasons why. explain that to us. >> there are a number of different problems with facebook creating a parallel private global currency. there are competition issues, problems of introducing systemic risk into the financial system, problems with anti-money-laundering elements, basic sovereignty of states. there is just a whole lot of questions here that are problematic and it is pretty obvious facebook has not pop them through. one of the things
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facebook have to do today is make headwind, persuading that they are the right entity to shepherd this, that they will own it, that there will be a bank, all kinds of things that they tried to reassure. did they make headway on that? the one thing that marcus did say was, don't you want the innovation to happen in america rather than a global currency coming from somewhere else? that point seem to resonate most with lawmakers today, the idea that if this is going to happen, better to happen in the u.s., potentially in your states. tomorrow they will make the case in the house financial services committee, in your districts. it also seemed the senators today had definitely mass concerns. it was not a very warm reception to say the least, that david marcus got today. senators on both sides of the aisle were very skeptical. at one point, sherrod brown, the ranking democrat on the
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committee basically said it was delusional, his words, to think that we could trust facebook to go ahead with this project. somecommittee basically said its republicans were also pretty skeptical. while a living more willing to give facebook the benefit of the doubt. shery: quickly, if we need to regulate the brock, who would do it in the u.s.? ben: that is a great question. was asked that question and he said he was not in the position to say that. that is really because congress has not said who is in charge here. they have not said which agency is responsible for cryptocurrencies. or the last couple of years in washington, it's been a process of everyone trying to figure it out, but nothing has changed the focus like facebook has. we may see some movement on that now that facebook has come in. is there anything that could persuade you that because this is likely to happen, has the attention of regulators, and will likely be heavily
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regulated, that facebook could be at the table and went back trust? not really. it is not clear what they are trying to solve for. they claim they are trying to help people get into the regulated banking system, which is a laudable goal. but there is nothing about that that requires creating a parallel currency. it is just really a mystery, aside from what some senators call for them and grandiosity of silicon valley to try to create a global private currency. this is crazy. and then the idea that this is some sort of american venture, it is not clear to me why they are putting the reserves backing it in a swiss banking account. shery: what are the implications of libra for monetary policy? it is not clear, could introduce systemic risk into the economy. libra could have a business model similar to unregulated
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money market mutual funds, before the 2008 crisis. au could also see dollarization problem where it already weakens weak systems. there are a number of implications and none of them are good. amanda: great to have your thoughts on this, ben bain, matt stoller. thank you to you both. a quick reminder, fed chair jay powell is speaking on monetary policy at an event in paris. bloomberg subscribers can watch that speech on live . from toronto and new york, this is bloomberg. ♪
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mark: this is bloomberg first word news. european union parliament has can armed ursula von der leyen
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to be the new head of their commission. they voted in france today to approve ursula von der leyen's nomination. she will be the first woman to serve as the european commission president. she was a last-minute candidate to ask -- to proceed jean claude juncker. reportscharleston post that former south carolina governor mark sanford is considering a primary challenge to president trump. he told the newspaper that he will decide whether to run over the next month. governorved as the from 2003-2011. he was elected to congress in 2013, but lost to republican primary in 2018, after the president endorsed his opponent. senators today have been sharply questioning facebook's plan to create its own digital money. at a hearing today before the senate banking committee, lawmakers blasted the social media site for


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