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tv   Bloomberg Markets Americas  Bloomberg  September 19, 2019 1:30pm-2:01pm EDT

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as iran's top diplomat warns that any attack on his country by the united dates or saudi "all-outuld lead to war," u.s. secretary of state mike pompeo is headed back to washington after a trip to saudi declarewhere he will the attack on a saudi run oil facility as an act of war. u.s. and saudi arabia accuse iran of carrying out the attack. tamron denies responsibility. to see how our friends and allies in the region this situation. i think i will be able to give the president some important information on how we should think about proceeding. mark: secretary pompeo said he choose a pathld towards peace, but remains doubtful. he described a huge consensus in the region that iran carried out the weekend attack. president trump has made the latest move over his income tax records. he has filed a suit against
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silent sam. this is part of an investigation into whether the trump businession falsified records. israelis are facing the prospect of a third election. the --ek's vote lead left the main two political parties deadlocked, with prime minister benjamin netanyahu nor his rivals living -- holding a clear path to government. netanyahu's conservative party stands at 31 seats. canada's elected new democrat leader that a yearbook photo of a 29-year-old justin trudeau wearing brown face at a 2001 arabian nights costume party at the private school where he was a teacher will impact young kids. the photo will show young people that "trudeau
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is mocking there lived reality." >> it will bring up a lot of pain. it will bring up a lot of hurt. please reached -- reach out to your loved ones and people suffering in silence right now. we let them know they are loved you love them for who they are. mark: the scandal comes as trudeau is seeking reelection. global news, 24 hours a day, on air and at tic-toc 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
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headquarters in new york, i'm shery ahn. amanda: and i'm amanda lang. here are the top stories we are following from around the world. markets hovering near record highs on the heels of a quarter-point rate cut from the federal reserve. chairman jay powell bridging the gap between members of an increasingly divided central bank. plus, controversy for the trudeau campaign. canadian prime minister justin trudeau apologizing for wearing racist makeup at a party in 2001. and the future of general motors. big ony barra betting electric and self driving cars amid a worker strike. let's get you started with a quick check of the major averages. u.s. stocks trading higher in the afternoons sessions, but the dow and nasdaq holding steady. .1%.&p 500 up earlier in the session, approaching all-time highs, but now paring back earlier gains here he this after we heard a
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report citing president trump's maybe 50%nting that to 100% tariffs on chinese goods . that is not being felt well across the market. we are also seeing energy stocks lose ground. the only sector losing ground on the s&p 500 right now, despite that we have the wti and brent rallying in the session, coming sessions of losses. take a look at the japanese yen, one of the two leading gainers among g10 currencies. this after the bank of japan held steady on monetary policy. however, we could be headed towards perhaps a halloween treat -- we have heard the governor talk about now reviewing their policy next month, given that overseas challenges could hurt momentum in prices. we do get august cpi numbers out of japan this evening, so do watch out for that. amanda? amanda: and of course, we have
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seen that along with watching the yield on treasuries, everyone wondering what central banks globally are doing and some reaction there, we have been watching the price of gold in recent weeks as it continues to trend higher. take a look inside your terminal. this is the ratio morgan stanley tracks between gold and the s&p 500. as it widens in a significant way, an 18% change, the folks at morgan stanley are pointing out that could ignore bearishness about the value it -- that could signal bearishness about the valuation of the s&p 500. course, one of the top stories moving all of this markets remains the federal reserve cutting rates for the second straight meeting, as has been widely expected. the benchmark now lowered by 25 basis points. the range, 1.75% to 2%, with chairman powell stressing that the cannot look -- the economic outlook is solid but they are divided over the need for further easing. here to take us through it is achieved u.s. economist at
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oxford economic. in, kathleen,iced but what is next? i want to focus on the balance sheet and what the federal reserve is saying about what we can expect. they are not saying qe, but should we expect some coming our way? think we should expect the fed to be open to the idea and the likelihood of more rate cuts. i think there is still a lot of risk out there, a lot of downside risk that can weigh on economic activity. more notably is the uncertainty surrounding trade policy. the balance sheet is somewhat of a separate issue, but it is almost taking the attention away from the policy action. there are some technical issues and maybe some miscalculation by the new york fed on how many bank reserves should be in the banking system. what is the fed going to do? they are going to continue these repo operations they have been doing, overnight repo and injecting 50, 60, -- $50
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billion, $60 billion, $70 billion into the banking system. they could eventually begin to expand the balance sheet. we could expect that at the next meeting and it would not be quantitative easing. we have to be clear about that. it is not qe in the sense they are looking to prop up the bank reserves, but they are trying to get to an optimal level of bank reserves and maintain them. right now, they are probably below the level they suggest they should be. shery: but this is not qe, when you are actually buying stuff. you hopefully have people continue to listen to economists like myself and explained that, but you are right. it can be somewhat of a subtle difference. the signs should be a lot less. it is hard to say now what size it would be, but let's put it this way -- we thought they were going to put it back and organically grow the balance sheet in march of next year and it would be about $8 billion per month. it will probably be higher than that. it will probably be $40 billion,
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$50 billion per month. amanda: we definitely have seen signs, we are being told there are technical issues in the overnight lending market, the repo market, the fed intervened and all is well, we don't need to worry about it. or is thatthat side, another sign that central banks have pushed into uncharted territory and loss control where they may have once had it. it is a concern of the central bank cannot hit its target rate. know, it is a normal market and investors got concerned. i think the fed realized the issue with the lack of reserves, but that does not mean it will be smooth between now and year-end. way,ll be bumpy and in a they are feeling their way in through this, how much reserves you need to meet supply equals demand. that will take a little bit of trial and error. they have cut their
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global growth forecasting, citing the weakest growth in a decade, and we have u.s. economic data this morning with with existing home prices, with sales rebounding. those twong to see track economies, where the u.s. is strong and the rest of the world is weak, and will u.s. needs to react? you are right. there is a dichotomy between global growth and domestic growth in the u.s.. the consumer is doing quite well, but anything related to is business sector, imports really suffering. and we are seeing some dim -- some impacts in the housing market, a decline in the interest rates that will boost housing. shery: kathleen pous-tio take -- bostjancic, thank you
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for joining us. joining us now is our other guests, thank you for joining us. how big of a disconnect is between the market and what we saw from the dock spot, we are not expecting any more cuts this year or next? slightly belows its july 26 high. that was around 3026. it looks fully valued to me here on the basis of what you can say with low real interest rate pushing up your valuation multiples. the issue we have with the market and the reason we are at a 2900 target, which is below we included induction because of the recession risk. if you look at the yield curve probability model of a recession, you multiply that effect, itotential does hair cut your target a little bit. i do not think there is enough risk reflected in the market
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considering what we face. shery: do you still prefer defensive, despite the fact that we have seen as rally in the past? yes, for the past year we have been very tuned into a long defensive, short cyclical trade with less volatility. it has done very well relative to the cyclicals. hasgh one sector that broken with the defense is health care. but utilities and consumer staples have done well. he will stick with them probably for about six more weeks. i think at the end of october we should have some clarity about preliminary third-quarter gdp, the fed meeting, brexit, and the outlines of a potential ,.s.-china partial trade deal and a meeting of xi and trump, and i think jakarta. if we look at all of those factors, we have air below us and it feels a little bit like wiley coyote right now, because we do not know the difference
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between now and october. amanda: there is some uncertainty out there right now in general, barry. it is driving the narrative a pendingoo much on the recession. where do you feel it in terms of the economic health of the u.s. and beyond? barry: we do look for net exports to be very weak in the third quarter. i am concerned about corporate capital spending and i have watched the cfo sentiment on the onde war -- sentiment dip the trade war. i have some concerns about oil inventory, but that depends on what happens with the consumer and employment. we have seen some softening in the employment side, when you do nitty-gritty analysis of the types of jobs being created and the type of road. if you think about it, the recessions take longer than expected to arrive. when they do arrive, it happens faster than you ever thought possible. sayingeld curve is
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mid-2020 is the recession risk. if it is going to happen, we all know it sometime in early 2020. the market will see that a few months ahead in the fourth quarter. right now it is a bit of an air ball and we are not sure which way. we will continue with our defensive bet. wenda: one of the things also don't know is whether the so-called fed put is actually youg to be effective or, as said, it might expire worthless. what is your thinking on that? barry: we have been saying the fed was too tight since last year. we felt that september was a bridge too far and the december rate hike was a huge mistake, and we actually said going into the year that they would have to cut twice, now they have. the issues are that the feds howr really realized just easy monetary policy was with ben bernanke, and when he left office and gave it to janet yellen, she was left holding the bag.
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as soon as she opened her mouth and said we would raise rates, the atlantic that shadow fed funds went up to zero. that was a huge rate hike, effectively, and they took it up another 225, 230 basis points above that and caused a significant slowdown. we have had problems with the approach to rates for years, and we also look at the fed funds versus what is called a neutral rate, the rate that is not tight or loose. only approaching neutral was too tight considering the trend analysis we did of funds versus neutral. we know that that was too tight and they remain too tight. they really needs to be more aggressive and stop playing defense, and start playing offense. shery: mary, our manager just -- barry,t the threat our manager just asked about the fed put. trump was clearly not happy with what happened yesterday. barry: i do tend to agree. he tends to operate on instinct.
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we came to the same conclusion, the fed was too tight. andink the trade conflict rebalancing going on is disruptive and the fed does not seem to account for that. also note that with negative rates abroad and very low and negative yields abroad, there is no way the u.s. could have maintained the kind of rates it did without dollar strength, which is inherently deflationary. there have been mistakes all around and it is a tough environment. i am surprised to the market has held -- i am surprised the market has held on as well as it has. amanda: great to have your thoughts as usual, very. very banister, diesel head of -- barry bannister, thank you. next, justin trudeau is expected to make a statement after a photo of him in brown faced service at a 2001-party, similar to others. this is bloomberg.
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shery: this is bloomberg markets. i'm shery ahn in new york. lang inand i'm amanda toronto. scandal is rocking justin trudeau's reelection bid, weeks before the vote here. showinghas resurfaced the president in so-called brown face makeup at a 2001-party, just one of many reported incidents. -- correspondent has waited -- trudeau has weighed in. >> it was about doing something i shouldn't have done, and i am really sorry i did. it was something done with a complete lack of judgment and integrity. amanda: justin trudeau will hold
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a news conference in the next hour in winnipeg to address this controversy. our managing editor for canada, david scanlan, in here. you have been following these things for a long time. give us some context on how important, explosive, and relevant this is in the context of the bigger campaign? david: this is huge, amanda. you cannot really overstate this. this is a game changer and historic, a very, very big deal on so many levels. a one-off many years ago, people with ao, we all the things when a were young, but we have pattern here. this is the third one that has surfaced today. the same time is a prime minister who is whole brand and persona is based around inclusion, diversity, gender equality, and he has a pattern clearly of wearing dark makeup. it doesn't fit with that narrative at all. mean: david, what does it for the elections, only five weeks away ca -- away?
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david: it is huge. we know the tories and liberals were net connect. the liberals got ahead in most projections. if you asked anyone yesterday, they would say the liberals might squeak this out. now it is a wide-open question, a wide-open race, and we will see what happens in the next few days, whether trudeau is able to turn the page. and in terms of the broader market context, do you believe one or the other of these candidates will make a difference from an investing point of view? some poking around today. it is hard to know, no real reaction yet. i think it would be fair to say a conservative wing would be a positive for the energy sector. he made it clear he wants to get rid of the carbon tax, he seems to be more of an ally and supporter for the energy sector. maybe he can get a pipeline built finally, even though his
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party members had not much success either. but that is one distinction between the parties for sure. shery: david scanlan, thank you for joining us from canada. coming up next, gm workers on strike and the impact being felt across the industry, next. this is bloomberg. ♪
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amanda: this is bloomberg markets. i'm amanda lang in toronto. shery: gm ceo mary barra is betting big on the future of electric and self driving cars, but tens of thousands of workers are on strike. we cover the story for this week's issue of bloomberg businessweek. david, let me get started by asking you if there is any progress in these negotiations? how long will the strike go on for? david: there is some progress. plodding along might be a way to put it, though.
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there are some big issues here. whatrary workers is one, will happen to the plant in lordstown, ohio that has been idled and pretty much is being sold by gm? that is the one in president does president trump has been so interested in seeing open, because that district in ohio was crucial in the election. temps, the union wants fewer of them. gm wants to get out, the union would like to see something built there. the other stuff, wages and benefits, they can usually come to an agreement on, but somebody will have to cave one way or the other. that is where we are right now and it could probably go on -- i would say for possibly the next week, but you never know. you hit a breakthrough in one place and suddenly everything can come together. one thing that is well-timed about your story, it gives the bigger picture for gm here. it has gone from a company that was everything to everyone to making a pivot that is big,
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risky, into the electric market and self driving cars. tie these things together. will we see a hard line for the itsany, because it knows future is not the same as it passed? david: there is a lot going on. if you look at gm over the past several years, they sold their business to a company in france. they have gotten rid of a few sedan models and closed some plants in the u.s., a plant in and parts of the country that are not making a lot of money, they are getting out of. instead of investing in things like compact cars and midsized or family sedans, they are investing in autonomous vehicles and electric vehicles. these are things that won't give us a return, that we will not see a return from gm or any carmaker probably for years, but they feel the future is there. if you put those things together, what you are basically ,eeing is, they need something
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which is basically cutting workers, getting some cuts in tolth care and other areas support these investments, but those investments do not help the union. they are having a tough time with this transition for general motors. that is where you get the tension between the old-school business and where gm wants to go. amanda: all right, we are going to leave it there. david walsh, thank you so much for this. you can read that story and much more, the cover story of the latest "bloomberg businessweek," now on newsstands and digital platforms. and just a reminder, all the bloomberg users can interact with the charts you see on gtv , the charts are available as well as the analysis that backs them up. from toronto, this is bloomberg. ♪
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issued a warning calling for war if the united states or saudi arabia took military strikes against his country. he made his comments earlier on cnn. >> an all out war. i am making a very serious statement that we do not want war. we do not want to engage in a military confrontation. we believe that a military confrontation based on the isumption -- deception awful. it will have a lot of casualties. but we will not break. mark: this comes amid growing tension following sunday's attack on oil facilities and tehran has denied responsibility. federal health officials say that the number of people diagnosed with vaping related .llnesses is on the rise the cdc says they have 530 30firmed probable cases in states. all patients


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