Transcripts For BLOOMBERG Bloomberg GO 20160418

3 . Down about its already at volume low, down futures down about 2 . 2 . Features here are taking their cue from there. The dax in germany relatively unchanged. Deal, so theno ruble is weakening today. Yenstors are fleeing to the , although now we are at. 4 weaker dollar versus the end. Three pointoil down 32 . 3. 32 . Stanley is actually down about 20 . 8 . We are seeing some good numbers out of Morgan Stanley, but we are also seeing a couple of numbers where people are needing a moment to digest. John . John its been a while since ive been here, im getting a bit more control. Where was the big story in the last 24 hours, the biggest producers failed to reach a deal over the weekend. Saudi arabia refused to freeze out commitments from other producers, joining us now is libbyergs javier blas and joins us on the phone. The market has to work something out, the rally since mid february was about anticipating a deal. Javier there were several factors. Production in the u. S. Is coming down, demand is very good. Particularly in the u. S. And india. Thats a bit in china. Certainly the talk about the freeze in mid february was key area. Iving this market i think its going to be beginning to take a step back because also, it opens the question of what saudi arabia is what to do next. They didnt freeze so they could increase production. Jonathan we moved to the opec meeting, could we get a deal with the likes of russian out there . Libby the key of this meeting was that it was going to set a more constructive stage for the opec meeting. And the inability to freeze output when producers were really pretty close to output tells you these guys dont have a lot of relevance anymore, its going to be very difficult for them to come to an agreement on anything. Most important like, a cut in future. I think thats what the oil market is telling you this morning, that theres no possibility for these guys to get together and have some kind of consensus. Jonathan opec has died about 15 . Imes, is opec really dead javier i would not say so. We sought happening in the 80s and the late 90s. But certainly i would agree that opec if its not dying, its absolutely in intensive care. Other countries with russia cannot agree on freezing this is almost a record level. Its a difficult discussion, its not going to happen. I dont see that happening. The future of opec is in question. David the saudi arabia really want to deal at all . It seems to me for some time theyve been playing a of keeping oil prices down to drive a higher cost producers. The get to blame iran right now, but if iran were there, do they really want an agreement that will raise oil prices . Libby anything have to. You saw with the downgrade of their debt, they are trying to raise the money. Socially, to break even for these countries for their social and economic budgets to work, it is significantly higher than what it costs for them to pull oil out of the ground. Its becoming a problem. I do think they want to get some kind of consensus. I think whats going to happen is the physical oil markets, which are already in the balancing process, are going to bail them out on the back half of 2016. I have a chart on the bloomberg showing production. Iran in blue, the saudis are here in yellow. If you want to check it out in your bloomberg. It shows the iranians have incredible momentum. For a long time, correct me if im wrong, theres a thought in the market that may be couldnt boost production to 4 Million Barrels per day by 2017, as its goal. They already boosted output in march. The first two weeks of this month, iran and iraq have boosted output by one Million Barrels. There are spots where production is just jumping. Javier you are right. Production, particularly from iran, is increasing quickly. Its going in the trajectory that to ron told the market they were going to go. Irantraders doubted that would be able to produce production so fast. His first 15 days of april, the production of iran of crude oil and condensate is coming very quickly. In the saudi production, momentum is coming down. That doesnt mean they cant decide to increase production. I think the tea the key to me is how saudi arabia elapse reacts today. And whether they decide to go facetoface, headtohead in a war against iran. Jonathan libby, bill of what hobby or javier just said. Of noise, headline after headline for various countries. What are you looking at . Libby we have to look at to make sure we continue to see the supply growth in the u. S. Continue to roll over, we need to make sure our demand and numbers, which we have seen arey are seemly extremely strong. Weve seen numbers that of china that are strong. Those are going to be a weekly thing. Finally we need to see the u. S. Inventory continue to be drawn down. The markets are going to be volatile the next couple of months until its kind of a show me thing and people see supply has come down and we are about to be in balance. Lose libbyy to toudouze and javier blas, thank you. Contrast, is Morgan Stanley has gone up in the free market, low market trading reporting firstquarter earnings fell 53 . Us tocampbell is with break down the numbers. I do want to turn to you first, a big beat on the bottom line and a small beat on the top line when it comes revenue. We did see compensation expense coming way down. Theres been some more negatives. Dakin this is a story much like the banks of last week. In a tough revenue environment, Morgan Stanley cut costs. They did bring compensation down. Its easier to do when you have markets and Investment Banking revenue down. You pay those people less money. We did expect to see comment down. Mp down. They cut expenses to fix dent where people would get excited about this. The revenue picture is not very bullish. Revenue is down quarter over quarter and yearoveryear. Thats what people are really betting on for Morgan Stanley. That theyre going to generate more money from that business. Compensation expenses up 3. 7 billion, you can imagine how they got to . 55 a share. I also want to mention the trading revenue. We did see equity trading revenues they didnt beat that. Beat, i think equity did both are down yearoveryear. Up 200 million plus over the estimates we had. The beste of franchises, if not the best franchise on the street. Thats good for them. They have sold their physical commodities is this, they fired business, they fired 25 of their people. Morgan stanley is shifting their mix to stock trading. David theres a larger picture that the emerging from the banks. They are all down on trading and more speculative ventures. What makes up for that . When you have Retail Banking that can compensate, when you come to Morgan Stanley, how they make it up. . Growth areurces of not obvious. They are less levered. They can lever up their gains. Its probably difficult to make it up, and we are in a world of less profitability of the big financials. David you end up with cost cuts. Investors arenk getting used to the fact that the banking of 2016 doesnt look like the banking of 2006. Vonnie do we need the big banks to support the economy . Richard the big banks are in good shape. In terms of lending, there are additional cost the banking that we didnt have before. Banks are safer, but lending is trickier because of the need for liquidity covering ratios. We are in a different world, we have to get used to it. Jonathan this is just a brilliant example of an ugly quarter and many ceos that took control of the situation with expectations management. Thats the reason you have a pop free market. Bottom line, half its filing and everything will bank this reporting earnings so far this season. How does this play out for the rest of the year . Dakin its not a pretty picture. If you talk to bankers, they will tell you some of the activity they thought was going to show up in the First Quarter may get pushed to the Second Quarter. First quarter is typically the busiest, when people shift iftfolios or get deals done, they are bringing one or two deals to market the year. That instill hope april, may, june, we will see some of that activity come through here. If it doesnt, you might start seeing people talk about a revenuesar or very low in some of these businesses throughout the year. We continued talking about this at all of the days stories. Thank you to Dakin Campbell for breaking down is Morgan Stanley clarida withichard us. Brazils president on the verge of losing her office, congress voted in favor of impeaching her and ending 13 years of leftist rule. Now its up to the senate. Analysts say will be difficult for her to stay in power. Shes accused of hiding budget deficit with illegal loans from state banks. We will be live in brazil. The death toll is rising from the earthquake in ecuador. The government says at least 272 people were killed and more than 2500 injured. The magnitude 7. 8 quake was settled north of quito. Many people were trapped in collapsed buildings. Meanwhile, in japan, a series of earthquakes that struck the island are the nations worst in five years. More than 110,000 had to flee their homes. Global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. David coming up, we have more on the president fighting for her job after losing the Impeachment Vote yesterday. And news on the bidding for yahoo , next on bloomberg go. Jonathan this is bloomberg go. Here in europe, im in london, about four hours 50 minutes into the session. The reason most of the losses for the session, now down not even. 2 . The dax rumored to be unchanged. One big reason is crude. As sevenping as much Percentage Points, coming back at 38. 90. 3. 62 that was a one point the biggest drop since september. Doha dominates. Yields go where crude goes, that general risk running right through this market, the dollar yen coming back a little bit. Thats around. 4 . The eurodollar ahead of that ecb meeting later on the week, 11306. Heres vonnie quinn with your Bloomberg Business flash. Leads the race for yahoo after a number of potential bidders dropped out. Iac interactive decided not to make an offer. Earlier, bloomberg reported a wall units are working on a yahoo units that would include yahoo japan. Osborne has come out with the treasury analysis that says leaving the eu would shrink the british economy 6 by 2030. The report warns the damage to the economy would be permanent because lower trade and investments. Says taxing director evasion and the use of Shell Companies is a crucial challenge. The imf meetings, she says companies countries must think outside the box. Earlier this month, leaked documents showed how some of the worlds richest are hiding their assets. David Dilma Rousseff is hanging on by a thread is the lower house voted in favor of impeachment yesterday, setting the road to the present to the senate. They are hoping the Vice President can help whole brazils economy out of the downturn if he steps in. For more, we have Richard Clarida with us. Richard the outperformance has been really incredible. This is the benchmark equity index, up 23 year to date. If your dollar investor, its a better proposition. Up 32 year to date. The realities the strongest of the currencies against the dollar this year. This shows you a whole bunch of things, you can see the rialto is up almost 13 against the u. S. Dollar. Take a look at this. Its a spread, and what we have here in white is the actual performance of the iva vespa compared to the targets. , but it hasrformed already met analyst targets. Need toer analysts raise target prices, will be left in the dust. Or maybe we reached a point where its fairly valued. David to get what happened yesterday in brazil, we are by Anna Edgerton from brazil. There was a vote, two thirds of the lower house voting to impeach the president. What comes next . We will come back to and anderson. Two Anna Edgerton. The markets think she is gone. But there are some steps between here and there. Do you think the markets are jumping quickly . By the this may be rumors instead of the fact. My think the impeachment was widely expected. There are some next steps, there are some small chances we have an election. The best case for the markets is a transition to the Vice President , and may be breaking the stalemate and logjam in brazil, which investors will be supporting. Vonnie we will try and go back to anna in brasilia. If you can hear us, how is the reaction . Our people expecting this is the final straw for the president . Last night was definitely the climax of this whole impeachment process. Its not the end of the road, she still less to go to the senate and fight this process there. The general understanding is whatever the lower house decided, which last i was in favor of impeachment, the senate will follow suit. David is there any reason to expect that she might resign before seeing this out . This could last as long as six month. Anna thats not really her profile, and her attorney general spoke with reporters last night, he said is not being considered, shes not going to resign. She will fight this to very end. Vonnie is there a number two popular choice for a replacement , in terms of market for distance . Participants . Anna is a very good politician, with a bridge to the future program thats been well received by the markets, but he is not a popular politician in terms of being popular with the people. He inherits a country that is very deeply divided. He is going to have a tough road ahead if he does take over as president. David tell us about the bridge to the future. What sort of sense to we have about what economic programs he would put into place if he becomes president . There is no sweeping reforms thats going to revolutionize brazilian economy. That sovereign premium is going to be in excess of treasures. It has been coming down compared to the elevated levels we saw previously. Do you see continued difficulties for the currency . Richard last year was a disaster with that massive depreciation. Political uncertainty and challenges in the country with very high just raising capital outflows is going to be a volatile trade for whatever is going to get into it. Theyre going to need some compensation in order to justify that. Thank you to bloombergs Anna Edgerton reporting for us, Richard Clarida is sticking with us. Jonathan coming up on bloomberg go, the big oil doha. No deal in oil low but stocks are raising early losses here in europe. Jonathan coming up at 8 00 a. M. Eastern, 1 00 p. M. London, dan yergin joins us on bloomberg go, to talk yesterdays doha miller. Meeting. Matt we kick it with Goldman Sachs, which is said the lack of consensus is a negative, but it things that opec will recover in the shortterm, especially in light of the kuwaiti oil strike. Morgan stanley at a risk of higher opec supply. I think these salaries can push through and rebalance by 2018 the saudis can push through and rebalance by 2018. Supply and demand is in balanced by 2016, i think we will hear that as well. Rich, in one word, where we going with oil . Richard its very important, the oil market is stabilizing. And supply and demand are coming into balance later this year. David rich chlorella from pimco, thank you. Verizon is the leading suitor for yahoo after several bidders dropped out. Thats coming up on bloomberg go. John this is bloomberg. It is a Beautiful Day but it was not that pretty for indexes. Lets take a quick look at futures. Doubt futures erred down by around 43 points judged dow futures are down around 43 points. Dax is relatively unchanged. Almost full seven Percentage Points lower. We are now only lower by 3. 5 . Yields and oil are moving in tandem. A little bit risk off right now but for the banks, another bank on wall street with an upside surprise despite declining profit. Morgan stanley is joining the club this morning, up by over 2 . David joining us now from radio is tom keene. Lets get some first word news. There is arguments today in the fight over resident obamas argument against the deportation. Republican governors argue that the president has gone too far in the Court Decision could alter the fate of millions of undocumented immigrants. Levy arabia will try to subsidy tax on its citizens. Cashovernment will divide among middle income families. It is responding to foil Falling Oil Prices. Incident has underscored the concerned about the threat closed by drones. A British Airways jet may have been hit by a drone at heathrow airport. It landed safely and police are investigating. I spent the first few years of my career as a trust lawyer. That leads us into your mustread. Tom paul krugman is talking about monopolies. The New York Times do you think the wifi was cut off . Fios customer and have had a good experience. Tom its a nice essay on the incentive to invest. It goes over the great mystery within the broader economics. Howdy you invest . In the age of oversupply, whyd you need invest if there is too much stuff out there . Hint out there in last weeks Economic Data showing weakness across the board and industrial capacity and utilization it has been declining. Bumping upes are not against capacity constraints, or laborlittle costs then there is little incentive for them to make significant Capital Outlays. Vonnie you have fios working beautifully but many dont have it. David fios is competitive with cable companies. This was competition. Vonnie the build out has stopped. David they invested in the first 25 which is the highest tourn and it got expensive take fiber optics out to the rest of the country. Deals we have seen some get stopped recently. In europe as well, there is a on monopolistic behavior. if you speak to the French Telecom companies, they will tell you fewer players are breast our best because they are involved in a price war. For thech argument market to consolidate and the less concerned you are about price and the more attention you can pay to infrastructure spending. It feels like the opposite argument in the u. S. Which is interesting. Issue is what do you do with the pipe. Thats why verizon actually bought aol. As far as paul krugman, what we have is low nominal gdp, lethargic companies and they consolidate. They do transactions to come in. Do you have this being somewhat like the late in 1930s . it highlights the low gdp world we live in. There is lots of Spare Capacity. The use of capital is better served by acquiring competitors or branching out into other regions without actually having to build out but lying the companies in those sectors rather than simply embarking on aggressive Capital Outlay plans. In a slowgrowing economy and a relatively tough business environment, as a shareholder of a company, i would ask serious questions if they are expanding aggressively when they arguably dont need to. Vonnie you can see the oped in the New York Times. Ts time to get to econ recon federalk we have the reserve in the following week we have jobs. Are keepingmakers the april meeting as a live meeting. Tom have we ever had said meeting . We definitely have an april will be one of those because the economy is still not ready to be considering the next rate move here. We are seeing good jobs data but across production components of the economy, retail sales week, Consumer Spending week, not a lot of Business Investment the theme this week will be housing. Before we get to the data, we have the last fed speak ahead of the april meeting. There may be some last its of input before we had to the fed meeting. Its all about housing in the first half of this week. , permitser estimates tomorrow, existing home sales wednesday. What i will focus most on is the philly fed Business Outlook and jobless claims on thursday. These are the only nonhousing data points this week. They are both april data points. We know q1 was lousy but we dont know how bad. Onnie we also have the ecb thursday. David jargon alert. Tom residual seasonality . Carl this is why we are focusing on the april data. There has been tension in the economy for q1 to disappoint. We dont know why that is the case whether it is the weather a statistical fluke. Q1 was areason, washout and were not sure why. To see if focus on q2 the economy is coming back to life and thats why the philly fed report matters. David we have a colleague in london. And london, we will look at more what the ecb is doing. Dovish tone and her have left mario draghi with a problem. The euro dollar opened up at 1. 10 and its now 1. 13. It has shifted to the credit isnnel but the fx market posting a problem for mario draghi. I wonder how much is left for him to do. Tom thats a good point. When we look at currency and the indicators of a stronger euro, where does governor draghi, where does he want the euro to be . he needs a weaker euro and he has not gotten that ar. They believe we should not anticipate rate action at this meeting and mario draghi is likely to get a fears grilling from the press but will wait a little longer for the last round of easing. R euro buystronge more oil so why is he concerned . Carl germany is the economic driver of europe and they are very dependent on exports to the global economy. A strong euro will hurt them. O and london for the queens birthday . David it was a personal invitation. Thank you both for being here. Soming up next, several bidder have dropped out of the bid for yahoo . We will talk about that next. David welcome back. Coming up at 8 00 a. M. Eastern time, ihs Vice President. Vonnie here is the latest Bloomberg Business flash. There has been an earthquake reported in japan. Is reported to have hit at 8 41 a. M. And we will bring you more details as we get them and this is after a series of earthquakes over the weekend. Firstquarter profits Beat Estimates at pepsico. The fritolay division made up her lagging sales in soda. Alibaba is investing in movies this summer. Invested in the paramount Mission Impossible movie and disney may be on track or one of its best years ever in theaters. Took inngle book almost 104 million over the pia hasand zooto grossed a lot of money. That is your Bloomberg Business flash. I think i need a whole day in a movie theater. Jon turning to yahoo , the deadline for first round beds to buy the struggling company is today. Verizon is the leading suitor. Other companies have dropped out of the race. Alex sherman is joining me now. Lets rule out whos in and whos out. It was said the daily mail might be in the running. You dont need to credit the wall street journal in our report showed you the exact same thing. They dearly mail is likely still in and verizon is the leading candidate and they have been for months. With threerking different Financial Advisors on the deal. You dont do that unless you are serious about potentially buying yahoo there are still a handful of hitters to keep your eye on. You can rule out at t and comcast, iac, and disney. The one thing that was reported would bidwhether time and they have decided not to. There will still be up to three bidders that no one has reported. Itll come out today or tomorrow. Softbank is the big question, do they own part of yahoo japan. What is their role in this and that is yet to be determined. Does yahoo really want to sell . They wont give projections and they dont know what the numbers are. Wants tot think yahoo sell, think they have to sell. They are in a tough position because in the back room, starboard is running a proxy fight to move out the entire yahoo board. The likely thinking is that Marissa Mayer might be gone anyway because the directors will be replacing new people. A rockprobably caught and a hard place where he either has to sell or she doesnt sell and she is remote. Her best bet might be to somehow come up with a deal and stay on with that deal but the chances of that are low. Is it really her choice . Cory she is expensive. She is not only the highestpaid woman in Silicon Valley but the highest date female executive. In all the world. Keeping her on would be an expensive process. You are looking at acquiring the pieces of the business and what you can and where you can cut costs. Vonnie does she get a vote in weather cut the company has to sell . Its not really up to her. Cory she is a big shareholder also. Have been told by many people close the situation that she has been complicit and a willing participant in the sale and she is not behind the scenes trying to break this off. David how surprised would you be other than verizon ended up with yahoo . Surprised if it was someone else. Verizon is the favorite but the favor doesnt always win. It would be hard for me to tell you who that would be. Might want the content and someone different might want the ad serving technology. Someone might want tumbler. Vonnie someone else might want email at dresses. It depends who makes the bids because they want yahoo for many different reasons. Made a change in control. All the employees who have been if theill get paid out core businesses sold. That will make Marissa Mayer even more wealthy. Vonnie we will keep an eye on this story throughout the week. Amazon. Com its starting its video only service. Amazon prime video is an important business in hollywood. There is no more pilot season, everyone is working in hollywood. It has never been so dizzy because amazon is expected to spend 2. 5 billion on content. Thats half of what netflix will spend on content. They have new shows that have been successful in a will spend a lot of money. The new services showing how they are a competitor. David netflix ratings are coming out and its five ilion dollars we expect they spend per year in content. Cory vast fortunes on content. Wall street looks at subscriber numbers and they are looking for subscriber growth. Vonnie there will be no and to binge watching, thank you so much. Gold has had its best start of the year since 1975. Its not alone. Matt miller will take a look at the rallies in Precious Metals next. David that is a pretty sight after the rain and cold. Its a sunny day in new york. Bullish bets on gold are at their highest. Doe did a great story on this over the weekend. This is a chart and we have been talking about the big gold rally and its been the best years ins 1975. This chart shows it may continue and that hedge funds are joining the momentum play. This shows a long option contracts open. This is going along using derivatives and hedge funds hold held the longest position they have held since 2012. David 2009 was the crisis year. Way up in the price of gold slumped the last few years. This is not a price chart. Showing that hedge funds are still long survey expect the momentum to continue even though the price rally has tapered off since march. David you would guess that people get nervous and people go into gold. And you can borrow money cheaply to do that. One thing that was pointed out is that this is affecting other Precious Metals. If you look at silver, hedge funds are more polish as far as bullish as far as their option exposure than they have been since we started keeping records. The cftc does that. These are long options on silver and they started keeping these records in 2006. We are at the highest level we have ever been. David there was a big spike in 2014. Matt silver is much more volatile and less expensive. David you can also do something with it other than make rings. Matt and there is more of it and thats why the prices lower. I thought of the interesting to look at etf holdings of silver. This is physical etf holdings of silver. Itont know where they hold but they have 43 Million Pounds of silver sitting somewhere. You can see that the highest level we have seen since at the end of 2014. Its a pretty steep increase. They are holding all of this stuff in one place. David there is someone making money off of this somewhere. Matt absolutely. Etf tot like you have an just buy silver. They have someone hold it in my have to pay a price for that. David you would like to believe it is secure. Matt you cannot just go in and rob 43 Million Pounds of silver. This holds true across this precious metal spectrum. When you get into platinum that have more industrial usage, we have seen this happen with gold because it is most obvious. Or aad Charles Deveaux number of Fund Managers saying they are now boosting their positions to up to 510 . Up to 10 . Its across the spectrum. Subjectilver would be to downturns in consumption like china. They dont need to buy as much as they dont use as much and this would account for the decline. Palladium isely, even more important and thats very subject to downturns in consumption. David thank you. Yergin coming up, dan will be with us at the top of the hour to talk crude oil plunging after failed doha talks. David crude Oil Prices Slide after a failure to reach a deal limiting output. Revenue from trading stocks and bonds declined lesson expected and oma rousseff was defeated. Her future hangs in the balance after losing a key Impeachment Vote. Welcome the second hour of bloomberg. Vonnie joining us it in a few minutes is dan yergin. Jon no deal in doha is the headline but lets check out the markets. Equities and crude oil lower. Checking on crude oil, its down almost seven Percentage Points for the open yesterday and now down about 3. 8 . Crude is lower and yields are lower. Market. K off in the fx banks are in focus ahead of the open in the u. S. Another upside surprise on u. S. , this time Morgan Stanley, up by over 2. 5 . The big story is crude oil falling with no agreement to limit Oil Production at yesterdays meeting in doha. It has had the biggest drop since september on wti. Joins us now from d. C. Great to have you with us. , and you canha predict the outcome. Is that the chief guide to all of this . I think so, it looked like there was a deal. It would be a very loose deal to agree to agreeable production at the end of the day, it was the saudis and riyadh and the crown prince that laid down that therell not be any deal even of its a lose deal if the iranians were not there. What you had was going to be this deal that would be a bridge to the fall when the markets would stabilize. At the last minute, the bridge crumbled. David i want to know what will happen next. What will drive the saudis . Is this a geopolitical conflict with iran or is this a longerterm game of keeping out the higher cost like shale producers . In the immediate term, its about iran and it shows how central the tensions and rivalry in the region are. Especially since the nuclear and was concluded with iran iranian production is coming back into the market. When i have been out there in the region, what you hear constantly is about iran and its ambitions in the region. The view was not to do them any favors. There is zero trust between these two countries right now. this is a big headline the brazilian reale climbs after impeachment has been voted for. Markets are positively reacting. It was a vote in the lower house yesterday and we get one step closer and the market responds positively again. The currency is climbing 1. 5 . A lot of countries would like to see a higher oil price. Nations note many at the opec meeting. Do with a Major Oil Producers could not do yesterday . Needed alear that you group that goes beyond opec. The days of opec itself eating the determinants are over. There is a very key role of russia. You can see in the comments of the russian oil or Energy Minister, how disappointed they were because it was not only the Energy Minister but Vladimir Putin put his personal prestige in it. Setback for the russians as well. I think there are a lot of geopolitical reverberations that come out of the failure to get even a loose agreement. Vonnie beyond the immediate repercussions, the countries that produce oil, its a big heart of their economy and they need the revenue. Which countries will suffer greatly from this . Venezuela, bulge area . Country under pressure is nigeria and russia maybe less so. When you look at these numbers, it was the revenue imperative you are talking about the drove people to doha. 2014 revenues of 1 trillion in opec area 2014, half of that. Revenues are probably down another 20 this year and this puts pressures on countries. Look at kuwait that it was starting to have cutbacks and its social spending. It is the only country with unionized oil workers in the middle east and the workers are on strike. That is something that will counterbalance some of what has happened as the outcome of doha. Is only 3 Million Barrels of Spare Capacity and that could bring in a risk premium. Does that matter for the markets anymore . Not right now. You have huge inventories but as the market gets back into balance later in 2016 and into next year and you start to see a more balanced market, you start to see kind of a tighter balance. The market looks quite different than it did two years ago. Of pricesless forces whats moving to rebalance the market. Youve got markets and investors and traders trying to work out what was about improving fundamentals around the potential for a doha deal and we did not get one in the market is trying to figure it out. If its improving fundamentals, maybe we have found the bottom. If it was just sentiment, can we go much lowered from here . A lot of it was sentiment and buying time for the fundamentals are changing. Were seeing u. S. Production going down. By the summer, u. S. Production will be down about 1. 3 Million Barrels per day like april of last year. We noticed that its not just the u. S. Where productions going down. People around the world of have the money to put into the fields to keep them going. We see production easing elsewhere. Thats what will work out. I think the expectation is its only in the Third Quarter that you start to see the fundamentals different and the market was kind of running ahead of its self on the basis of this very loose thing called a freeze. Its springtime and the freeze melted. Vonnie what happens now . Two members have to be careful ohaut the postdf rhetoric . They will continue to Pay Attention and what you notice in earlier times a price crisis, it takes months to get something together. Back in february, the Saudi Oil Minister said. This will be a process part of it was waiting to see where iran comes out and how high can it get its production . Once thats clear, it becomes easier to do things. What this has done is handed back to management of the market to the market. thank you for joining us. Shares of Morgan Stanley are moving higher in the premarket after reporting firstquarter earnings that Beat Estimates on the top and bottom line. Profit fell 53 but that was less than analysts expected. What stands out in the report . This is an expense story. I looked at the numbers and they took their noncomp expenses down quite a bit. What makes it tricky is they havet other line they an other line item. We dont know what that is. Vonnie that will be the first question on the conference call. Regardless, they brought expenses down. Investors are seeing that and they like that. David how much debate bring expensive down expenses down . Early to seetle the effect of this. They announced the project earlier this year and we will see more of that play out the rest of this year. Were 6. 1nses billion. Expectations were around 6. 4 billion. They Beat Estimates by coming in by 300 million. What is the larger story we are learning about the major banks . The big picture is that expectations came down to low. They had done a good job of talking down expectations in february so the weakness we expected to see in Investment Banking and trading has been partially offset by the nice lift in net interest income. Expectations get to low and companies can chin a very low bar. David lets judge this next awesome chart. Can see analyst earnings as they change over time. Just six months ago, analyst expected one dollar for Morgan Stanley and a brother expectations down 52 . Tomorrowachs is out and less than three months ago, we were looking for five dollars and now its less than 2. 50. In less than three months, analyst that cut their expectations and have. Each of the ceos said it has been terrible and they will be down 20 and then they didnt. To some extent that is how it has played. Companies want to lower expectations and i want to give themselves a chance to meet or Beat Estimates. Its not new this quarter. What is new is how bad the First Quarter looked to people coming into the end of it and coming into earnings season and it looked really bad. The most important position in these banks, could it be Investor Relations . Thats always an important position to manage expectations. There is a challenge out there. Conditions remain challenging. You mentioned expense reduction and thats part of the Goldman Sachs strategy and that will be critically important and getting the returns on capital up at these banks. Investor relations are important but the fundamentals have to show up. Is 6. 2 return in equity but that does not sound great to me. Morgan stanley had rebuffed calls to put an roe target out there. They finally put a target out and they will arrange between 9 and 11 by next year so they have a ways to go. That. Nalysts make note of 6. 2 , nobody is getting excited about that. It will take a much better revenue environment for them to make those numbers. N we are spending a lot of time comparing the numbers to the estimates but lets compare the banks to each other. Generates 64 than a year earlier. How does this compare to the other players . Which bank has weathered the storm best so far . Its worth remembering with Morgan Stanleys numbers that last year included their physical commodities operation which they have since sold and gotten out of. In december, they also cut 25 of their fixed income staff. Morgan stanley has been the most aggressive of the u. S. Banks in getting out of trading or shrinking their fixed income trading operation. The folks like jpmorgan and citigroup really look best so far in the First Quarter as big commercial banks. They benefit from having a lot of flow and Interest Rates and currency products because of their corporate relationships. Those markets did well in the First Quarter. 5 igroup said they were up on rates and currencies. A fixed income business thats up, you did not know those things existed. Thatig commercial banks are big in macro products. Vonnie thank you so much. There are massive celebrations in brazil as dylan the rousseff as Dilma Rousseff moves closer to impeachment. 1. 5 razilian real climbed but gains may be shortlived as the nation grapples with a struggling economy. Ray from saow is paulo. Been aou said, it has tumultuous couple of weeks that came to a head last night. There were tens of thousands of people behind me here in downtown brasilia. You can see the barricades separating those that were in favor of president rousseff and those against her and they marched toward congress into late in the night. Voting continued and she lost by a large margin. A lot of people were cheering but on the other side, people are frustrated saying this is a coup and theres no real evidence she committed any wrongdoing. David when do we hear from Dilma Rousseff . Now is thepens process moves to the senate. The lower house simply said there are not grounds for her to stand trial in the senate. That will happen in the next couple of days. A leading legislator said she could be removed from office within 15 days. They need only a simple majority for her to temporarily step down. That may be an optimistic timeline. All eyes are on the head of the senate. We will see whether he plays along with the opposition timeline or not. Vonnie katie nixon has a problem for you. Once we get the on the shortterm volatility, what will the transition look like . Whats the intermediate term picture . Frankly is not too bright. But come the country is in its deepest recession than 100 years and inflation is above target and the nation is deeply divided. With standarddent takeover his party and he is being accused of wrongdoing. Yesterday, 150 legislators are being investigated before the Supreme Court. This Corruption Scandal may well continue. To be seen is whether investors continue to see more upside from the business friendly platform that the Vice President has put forward are whether these other factors are and heo weigh heavier will end up being engulfed by the same kind of crisis that may push out president rousseff. David thanks very much for joining us. Vonnie i know you think brazil is a good at the moment but it seems to matter what happens, there will be so much uncertainty for some time. There will be a lot of uncertainty for the next the foreseeable future. We are talking once we get beyond the political crisis to dealing with the real economic crisis. Difficult tory deal with that crisis. Have become more brought of the emerging markets and spaced on the improvement in china not necessarily brazil. Emerging asiaon in terms of our exposure there. Vonnie thank you so much for joining us today. Up, deadline day for yahoo so will verizon make a bid . Vonnie you are watching bloomberg. Cvt is up 66 on the information that a private equy partner is buying them which is an Event Management company for 36 per share. Thats a 69 premium for that stock. Here is your Bloomberg Business flash. More antitrust problems for google in europe. This comes at the same time that eu regulators are preparing a case against their mobile operating system but google has not commented so far. Yahoo lays the race for after other potential bidders have dropped out. Other companies decided not to make offers and we reported that verizon and its aol unit are working on a bid that would include yahoo japan. The ceo of pepsico has tried to expand profit but it was sales in north america that boosted their results. Up, stocks drop after talks between the biggest Oil Producers fail. Vonnie time for futures and focus. After talksng oil between the biggest Oil Producers ended without any agreement on limiting supply. Joining me is alan not meant knuckman from chicago. Were you anticipating such a sharp selloff without a deal . Its very disappointing. Thatilt up expectations they would Say Something or produce an agreement. It looks like they have taken a step act and saudi arabia walked away talking about how they can dramatically increase production in the future. The price action which is most important is only down 3 . Crude oil has stabilized in price. Trading between 3640 two dollars but the question is which way it will break. Will it had back lower or higher . Vonnie what are you waiting for in order to make that call . Its more about the dollar than it is about opec. The dollar got down to the lowest its been since last october. If you look at where crude oil was at that time last year, it was trading around 50. 30 percentstic with off the lows in crude, a break above 42 could spark is market one more time. The target is 48 from the six dollar range. Ive got an upside bias right now and i am encouraged by the fact that the market did not get smacked. We are early in the session but we are only down 3 . Vonnie thank you so much for joining us. Coming up, several bidders have dropped out of the pursuit of yahoo . Stay tuned, you are watching bloomberg. You shouldnt have to go far to get the help youre looking for. Thats why at xfinity were opening up more stores closer to you. Where you can use all of our latest products and technology. And find out how to get the most out of your service. So when you get home, all you have to do is enjoy it. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Shoshow me more like this. E. Show me previously watched. Whats recommended for me. X1 makes it easy to find what you love. Call or go online and switch to x1. Only with xfinity. Jonathan two low reviewers worldwide, we you are watching bloomberg go. Were five hours and 29 minutes into the open in the city of london. It is good to be back. Lets check in on the markets, shall we . A little bit negative in the u. S. Ftse 100 is lower that not by a great margin. Off by about 19 points on the margin. Doha, that is the headline. The dollaryen is showing you the risk of the market, down. 4 . Crude stays lower and was lower by almost seven Percentage Points in the last 24 hours but is now by 4. 2 . Here we go again, Morgan Stanley is another surprise. The bottom line is that profits are down. Morgan stanley is up 2. 29 in the premarket. David it is now time for, what is the big deal . Shares for the online Event Management company are soaring. This after the announcement that the company would be bought by Vista Equity Partners for 1. 6 billion. Ofning us now to discuss all this is alex sherman. Alex, you have been watching this deal for a while . Alex yes. The ups and downs for the reporter is that you are close to breaking a story and you cant get it over the hurdle. We had heard a lot of rumors that they had been shopping themselves. More recently to this equity, a large private firm that specializes in tech software. Back andally, they do software for big event corporations put on. So they help with registration and payments for these events and it would be a company that buys the software. Andthis the bowls this this stuff does this Company Already and the idea is that they will marry these two companies. Vonnie software is becoming a place where people are getting competitive because salesforce has been building up the market. What do these folks have that they could give this to equity . Of it is thatart there are a lot of synergies. Even among stats, which gets higher premium, the premium is 69 over the Closing Price but if you back out a soft chart and look at the one year chart, you will see that they were hovering around 36 a share so if you back up, the premium doesnt seem that big. Vonnie what did they go public at . Alex i dont remember, it was a few years ago. David do you have a sense of how big this marketplace is . This is a business facing businesses. Exactly what they do, in the corporate Event Planning space, they are one of the leaders. If you back it out a little bit, it is thought to be an enormous market so there are all sorts of different players. Largely a corporate hospitality related idea. Priceline, opentable and some of they have have said had initial conversations with priceline and those companies. So it shocked itself and found vista, the company that was most likely to pay up. Vonnie it looks like they went public in august 2013 and they are up by about 1. 1 . ,avid lets go back to yahoo today is the day . Alex i think we will know tomorrow, because the bids can come in all day. There may be bids late today but do stay with bloomberg throughout the day, because there is no question that we will be getting trips and drops of information about who is in and who is out. We already know a lot about this. Verizon is a favorite and they will submit a bid. Certain private equity firms are in. Other privateome firms that have made a bid and there will probably be some other strategics that will come out. One thing we are watching is saw space. They say they dont want to bid but they probably have some interest in what happens to yahoo japan. Particularly if verizon winds up would they be comfortable with verizon owning in japan . David a tricky partnership. That was alex sherman. Thank you for being with us. Vonnie thanks so much, it is time for the first word news. The brazilian president is one step closer to impeachment. It is now up to the brazilian senate. It will be difficult for her to win the votes she needs. She is accused of hiding budget deficits with illegal loans. In germany, Angela Merkel is feeling the heat over the case of the comedian accused of insulting turkeys president. She did grant turkeys request but asecute the comedian poll thinks she made the wrong decision. And saudi arabia will try to limit the impact on its citizens. Tells bloomberg the government will provide cash to low and middle income saudi arabians. They are responding to Falling Oil Prices by cutting subsidies for gasoline, electricity and water. Global news, 24 hours a day powered by our 2400 journalists s around the bureau world. Dealsahead of u. S. High and leverage loan strategies at bank of america and Merrill Lynch think the weakness over the past two months havent been priced into the market. He joins us this morning. Michael, thank you so much. Have been looking at issuance sore for debt but has the issue been a tied to oil . Am i wrong in thinking that is most of the market, the Energy Exposure . Michael thanks for having me. Energy is a huge story. We have seen since november the correlation with noncommodity high yields, the Daily Movement in commodity prices, in particular. Wti in crude has been about percent. I think this is a big issue. A big problem for the market. Investors are taking their eyes off the ball in terms of fundamentals and noncommodities. We are trading purely on oil and much of the strength we have seen over the last few months has been driven by the commodity sector. Commodity paper has rallied extensively and the rest of the markets rally because treasuries are lower. Matt what about the noncommodity space . What is the default look like there . What is the recovery late recovery rate look like . Michael recovery rate is at 15 but in the noncommodity space, 2 . Investors get fixated on the rate itself rather than the losses associated with the default and you can have very low recovery rates in a modestly high default rate, which is just as bad as a very high default rate with high recovery rates. The fact of the matter is that recovery rates have been anemic. Recovery rates are about 10 15 10 Percentage Points15 present points lower. Are veryebt to assets high. Investment in a tangible assets is very low. Ng andave not been investi have been requiring or using cheap debt in order to fund growth through acquisition strategies. Matt what is your call . When you talk to clients today, how do you tell them to play this space . Michael i think we have reached close to the highs of what we will see this year in terms of return. I think yields are bottomed out. I think we will recast the february 11 lows and maybe go wider than that over the course of the year. I am a seller at high yields. And we will be positioning much more defensively in Investment Grade pepper and leverage loads leverage loans. Matt thank you, we appreciate your time. That was Michael Contopoulos there. Coming up, all eyes on the resilient royale. Just looking at the rally here. Jonathan yes, bring up the chart because it is remarkable. The brazilian currency starts trading strongly of the back of some of these headlines. The residents are going one step closer to impeachment but then we do come back aggressively. We have a weaker brazilian currency and a stronger dollar. That is up next. That is up next. How will the political turmoil affect the economy and Financial Markets . Matt matt welcome back. Im here in the green room. Coming up, it david zervos, he smells delicious. Vonnie vonnie you are watching bloomberg go. Shares of Morgan Stanley are up in premarket trading. The reported earnings that Beat Estimates. They fell less than some analysts had expected. Five years ago, amazon began movie streaming and now it has grown into a lucrative business. Amazon is starting a video only Subscription Service to rival netflix. Prime video will cost eight dollars 99 cents a month and the company is offering a Monthly Payment option for amazon prime. And disney may be on track for one of the best years ever in theaters. The jungle book opened by taking an almost 104 million over the weekend. Zoo will bcritics are already rg about the upcoming movie. Brazils future after the president loses a key Impeachment Vote in the lower house of the parliament. The resilient royale climbed and then dropped again. Troyjo. Us now is marcos great to have you with us. She is likely to go at this point. Whoever takes over, what is to say that they can tackle the problem in a way that she couldnt . Marcos she inherited a bad legacy. He thought he had found a magical formula for resilience economic expansion and what he found the new economic matrix. It really overlooked inflation targeting. So a number of the current travails of the brazilian economy were actually inherited it. She made it worse by not reaching out to congress and by choosing a week economic theme. So now, i think this is the way the situation will go in brazil. It will take a lot of symbols at first, choosing the right person to administer finance and the governor of central finance, to be the minister of justice. So that the inquiry may go on, the investigation into the largest Corruption Scandal in residual ever and finding the largest Corruption Scandal in residual ever and finding the right person will not be a bad decision. Hes are important but they will be symbolic. It will help improve brazils honeyman with a new president and it will take tackling the fundamentals of the brazilian economy, which will be a harder task. David do we have any sense of the sort people that would be brought in . I know argentina is very different but the new president there is thought to have selected strong people to implement the new vision. Do we know the sorts of people who would be brought in . Marcos those who are in the know talk about the governor of the central bank and a thesenown economist and are great names for the market. These are the kind of people that they will be looking for. Jonathan a lot of people talk had anrgentina agenda. It was to regain market access. I just wonder, even if they pick the right people together, for is the agenda . What is the first objective . Marcos if it is true on the one hand when was there when these mistakes were made worse, it is also true that late in the Second Quarter late in the Third Quarter, his party put together a document called the bridge towards the future which brings for the policies that are now successful in argentina. They have to do with reforming Social Security and making the labor legislation more modern, simplifying tax legislation, reforming Foreign Policy and trying to have brazil engage with the Global Production chain. Establishing new investment deals with the Dynamic Markets in the world. This is what he should do, fundamentally, in order to inplement a honeymoon brazil. If that happens, brazil will profit. Fundamentals are bad, but perspective could improve and if you tune this right, it will be to results benefit. Vonnie and matt miller has an illustration of what you are talking about. Matt brazil lubricant is a great function where you can search through different stories for any kind of terms. I put impeachment and brazil in the data search across different news sources and you can see the mention of impeachment in brazil has skyrocketed since the beginning of 2016. This is the currency. Isyou are looking, strength when it gets lower, because now, you can only by 3. 5 rail for one dollar whereas at the beginning of the year, you could buy four. Th to restoreth to restore the currency, it gets stronger and stronger. Jonathan looking at that chart, you can see clearly that when the momentum builds towards impeachment, brazilian assets rally. I wonder how justified the movement has been over the past several months. Is it enough to change the leader at the top . Marcos there is great expectation in terms of changing the Economic Management in brazil, it is very important for the different industrial sectors. If you bring in someone who was market,l viewed by the the change of perspective will be a normas. So what we are looking for in this is symbolism. So if he maybe becomes president in the next two days, brazil will go the right way. ,avid dallas Marcos Troyjo thank you for being here. Up next, battle of the charts. Matt miller faces off with cory johnson. Vonnie you are watching bloomberg go. Live shots of bloomberg of new york city. I guess that is the jersey in the distance . David you are right. Vonnie coming up, 10 00 eastern, the Supreme Court will hear arguments on president obamas plan to prevent deportation of immigrants. Syrian peace talks continue in geneva. The u. S. And russia have set an august deadline for a deal. And after the closing dell, ibm will report firstquarter earnings. We will have to see what big blue does. David we have matt miller and cory johnson joining us. And this could be the first win by default . Vonnie he is citing us out. Have,in any case, here we this is a bloomberg gadfly p is that i thought was really good today. You can find that. You can find my chart on the terminal. What it shows you is momentum in Oil Production. This is opec momentum production. You can see it rising and rising strongly because of iran, iraq and the saudis. This is u. S. Production momentum. Momentum is completely slowing down, going negative as we see a lot of shale players shut down because they cant afford to play anymore. This is what opec has brought by allowing the price of oil to go low. The saudis have spent hundreds of millions of dollars. That is hundreds of billions of dollars in the saudi reserve and it has enabled them to continue pumping as much oil as they can at 30 a barrel. American shale producers cannot afford to do that. So the question is the gadfly piece says hey, they didnt want it agreement at doha, because why we do spend hundreds of billions of dollars to get this and rohit away . David exactly. And you have no opponent. Vonnie i think cory johnson is writing a musical. It looks like a sound pattern. Ownd he can come do his show. We will go to terminal trends. Jonathan i am really confused. I always need an alternative to matt miller. This is a very difficult situation. So what we will do is something completely different and have a look at what is trending on the terminal. In london, i will bring your attention to this story. Slumping by 33 percent in the First Quarter, a new tax on overseas buyers and higher andes this is collected i think it is fascinating. More broadly, and more importantly, a globe you a Global Housing bubble in financial hubs across the planet , london, new york and china that drop is fascinating. Several years ago we had a lot of people come into the market, flipping them before completion and it looks like that trend is stopping. David it certainly is an issue in china, as you said. But even into commercial real estate, we see rates turndown in the United States. Vonnie they call it buying on blueprints, isnt that right . You do tend to get a better price. Jonathan yes, but the demand right now is not there. Fx volatility has a lot to do with it. There is weakening in the major currencies in russia and the likelihood of it happening in china as well and that is impacting some of the demand, coming from abroad. Up next on bloomberg go, david zervos joins us for the 9 00 hour and the 2 00 hour in london. Here is why he is recommending emerging markets for the first time. Well talk about that. Doha deal. Oil is falling after the biggest producers fail to produce an agreement on freezing output. Protesters celebrated in the street after the Lower House Congress voted to impeach the brazilian president. Is this the beginning of the end . Shares of Morgan Stanley are rising in the premarket. They saw a bigger drop in fixed income revenue. We are 30 minutes from the opening bell in new york. I am vonnie quinn with david westin in new york and Jonathan Ferro in london. David also here with us is david zervos. Jonathan we are 30 minutes away from the open in new york. Lets get you up to speed in what is happening in markets. The footsie is lowerc1 from the open in new york. Lets get you up to speed in what is happening in markets. The footsie is lower, the dax is down by about 27 points. Futures in the u. S. , 66 points on the dow. The s p 500 is down by almost. 5 . No deal in doha. The movement is crude is huge. It is now down by about 4. 3 . Yen wase with the dollar bridged off. The brazilian currency is lower after a stronger currency initially. Then after the technical term filling the gap, a weaker currency as the president takes a step closer to impeachment. We are looking at Morgan Stanley premarket up by around 1. 6 , another upside surprise. Bottom line, profit down at another u. S. Bank for an ugly First Quarter. Vonnie thank you. The u. S. Supreme court is hearing arguments in the fight over president obamas move to stop deportations. More than two dozen states with republican governors say the executive orders have gone too far. The high courts decision could alter the fate of millions of undocumented immigrants. The death toll is growing from the earthquake in ecuador. At least 272 people have died. Was centeredquake 100 miles from the capital city. Some coastal towns were devastated. Carter is in baghdad at this hour to talk to iraqi leaders about beefing up forces. This is a critical goal in the effort to defeat the islamic state. The u. S. Is considering a number of options including airstrikes and american ground troops. Global news 24 hours a day, powered by our 2400 journalists in 150 news bureaus. David it is time for the three stories that matter to markets. Doha,ill be a surprise brazils Impeachment Vote and Morgan Stanley earnings. Lets start with doha. After the talks dragged on for more than 10 hours and ended with no agreement. Saudi arabia says they will not restrain production without agreement from other producers. For more, lets bring in Elliott Gotkine from delhi. What went wrong . I cant believe anyone went into these talks expecting this to happen. Elliott there was hope but i guess expectations didnt match their hope. As we came into the agreement on saturday night, the saudis got cold feet over signing the agreement. They wanted particular words related to iran saying it would go into effect once i ran went on board but that couldnt be agreed on. The iranians were not even here. Ina result, no deal here doha. Talks will continue among themselves and between each other. The next meeting will be on june the second at the opec meeting. If iran and saudi arabia refused to become more flexible, it is hard to see how any deal can be done. David was this a surprise for you . David zervos not really, the idea that a cartel of this size could put this together should not have been on anyones radar but the market got excited. They put a lot of hope into this. They probably went further than they should have and now we are coming back. It is not that big of a deal given the size of the rally. David yes, it was down by seven present but now down by 4 . David zervos yes, and im with what has gone on since february, i dont think the driver is so high. I think the driver of this recent will rally is the dollar and the change in dollar strategy coming from janet yellen and mario draghi. Thank you to Elliott Gotkine in doha. Turning to number two. Protesters in brazil are celebrating after the Lower House Congress voted in favor of impeaching the brazilian president. Aher joins us now. Where do they go from here . Motion nowimpeachment moves to the senate where analysts say she will find it very difficult to feed off the impeachment motion. Analysts think she is probably looking at at least 51 people against her, already and this is before the actual vote. One thing that she can do and what her allies are talking about, is there threatening to take this to court. So she has two avenues. She could fight the senate but it sounds like from her attorney general that they will also start a legal battle. David there already was one legal proceeding down there. It lost when they challenged it. This is a new one . John basically, if you look at what both sides are saying, everyone is throwing everything at this. We dont actually have details from the attorney general on the proceedings that they are planning to take. But this really is a political battle to the death. Neither side is showing any willingness to back down or seek compromise. Jonathan you mention either side and i think that is important. Because the reporting that we have on television is exclusively about the success of the opposition but you are in brazil. Tell us how excited brazil is right now . John certainly, if you look behind me, last night was an incredible sight. Both sides of the National Mall were divided into two. There was a huge deal of barricades running down the middle. On one side, dressed in red, you president ters of the and her predecessor. On the other side, wearing the colors of the National Soccer team, you had the impeachment protesters out in force. This is a very divided country right now. Whoever becomes president , whether she survives or whether her Vice President takes over, they will have a difficult job in front of them bringing people back together. Jonathan a big thanks to john foraher. Shares of Morgan Stanley are climbing after profits Beat Estimates but trading revenues fell less than expected. The 54 in fixed income revenue was expected given the business cuts. It is very difficult to get a read on what is actually happening, inc. To bank. That what is clear is that it is a cyclical environment that isnt in their favor. The ceo will be more effective with cost cuts if revenue falls. What is left to cut exactly . There is always got to cut that the focus, as you pointed out earlier, was the fixed income business across wall street is struggling. It is a liquidity story, a story with credit markets freezing and a lot of overindulgence in era. T during the qe so that is really a problem for the banks who have built up huge businesses in underwriting corporate loans and debt. And finding the new equilibrium which is probably less than that a where we will not go as high as that. Vonnie so where do they turn to grow their business . We have the huge corporate deals. We are not sure if they are going to continue. David zervos there is light at the end of the tunnel. New ceos are coming into the market this week. At the end of the tunnel. New ceos are coming into the market this week. The highyield market is coming back. And a lot of that i hate to sound like a broken record that a lot of it is stemming from the fact that the Dollar Strength that was pushing on high yields and commodities and a risk scenario globally has been pulled back and it will give some reading room. I dont know if we will get a big push up in credit and we will get some breathing room. We are really at the center of this fixed income rally. Vonnie is everybody going to be one littleor the number of fixed income that comes to the market . David zervos im sure they will. I am not super oldish but there is a window here where things can calmed down. If janet yellen were to have gone down with the full on rate hike, we would be in a much worse position than we are today. So it is good that we have stopped the madness of january or last august, at it is not as though there will be a big rush where we will get excited about a lot of profitability coming from investment banks. Matt this is a chart that david westin put together for Bank Earnings last week and it is relevant. It is a great way to compare them. Wells fargo has been the strongest. Jpmorgan has not been too shabby. It looks like we are seeing Morgan Stanley improve as they focus on boosting their Wealth Management business and optimizing their fixed income business. Do you think their strategy are those the two core parts . David zervos what would you say about wells fargo . It is a u. S. Consumer driven business. That is the strength. So to the extent that Morgan Stanley goes towards a storyline, they will be better off. M a in Investment Banking has been weaker. So it is no surprise that the white line is on top. And jpmorgan has a Good Business along those lines, as well. I dont know if it is sustainable but i am not negative on the u. S. Consumer. Those storylines continue. In terms of the Balance Sheet and the optimism, it is not as good as it has been. Jonathan you mentioned some structural and cyclical issues. When you break down the First Quarter that we have just had, how much of this is a reflection of how difficult it is in the cyclical environment right now versus the regulatory issues Going Forward . Do you see them Getting Better anytime soon . David zervos for the big banks, no. Will has been a plan that get more to coney and for the biggest players. So it will get pushed back into the world where the shadow banks become more important . Had a rightsaid he to endorse his views. She didnt exactly endorse him. David zervos she endorsed the idea that we should talk about it. And i think that idea of regulations is not going to go away anytime soon. Those rules will keep it very difficult for some of the traditional banking transmission mechanisms to work through the u. S. Economy, each will push us into the shadow banking side. And that is a world that we have lived in for the last six years but again, when rates are rising at the u. S. Is moving towards a removable a removal of accommodations, it isnt as though we will get a big push. It is just a reprieve. We all thought 2016 was going to be three or four Interest Rate hikes and now, probably less. Jonathan thank you so much. Those are the three stories that matter the most right now. Much more ahead on bloomberg go. A quickmuch more ahead on bloom. A quick check of bank stocks. We are 17 minutes away. Morgan stanley is trading higher ahead of the open. But off the highs with another upside surprise. We are coming off the back of a big week of gains for the u. S. Banks. Vonnie you are watching bloomberg. This debt Equity Partners is stockholders will see 36 of cash per share, a premium of 69 percent over the friday Closing Price. The deal is expected to close in the Third Quarter. Speculators are pushing the yen higher as intervention looks increasingly less likely. Commodities have had a humbling run recently. Thatll lynch estimates they are running at the weakest pace since 1933. They ended last year on a firm note. And hasbro posted earnings that Beat Estimates parts estimates partly because of the demand of star wars toys. Disney princesses also helped. More trouble for google in europe. The legality of Google Search and Services Comes as eu regulators provide a case against the operating systems. Google has not commented so far. Jonathan thank you. I want to get you up to speed with what is happening in the markets. No deal in doha. Brent crude down by 3. 7 . It was as much as 7 lower, just to give you an idea of the crude moves that we have seen. 3. 78 is the biggest drop since february 23. But the oil market is trading lower on the back of this. Totality france, 3. 7 lower and to complete the oil makers in italy, down by 2. 22 . Crossing to matt miller to look at the big analyst tools. Crude, where is it going to go . It seems like you need a crystal ball to figure out where things are going. Matt a lot of people didnt expect this meeting to change much at all and you do still have the imbalance improving towards the end of the year according to forecasts. That aside, lets take a look at other stocks that have little to do with oil. Apple, lower ahead of the open, extending losses from friday after he refused said apple was reducing iphone production. Today, bernstein said apple shares should be bought on any weakness. This is following the Earnings Report next monday. Apple is cheap and they are upbeat on the outlook for iphones. Cut fromes were outperform to market perform. Analysts say that it is a fair value following the low quality the potential shareholder value is trapped until they improve earnings returns. They jumped 11 last week after news it was the first week since december 2000 11 but now, we hear it is fairly valued. Nd disney is raised to a buy the price target is burying has been raised to put hundred 21. Concerns are already priced into the shares and there are many reasons to be optimistic, including two the opening of disney shanghai in june. They are gaining about. 5 in the free market. Up next on bloomberg , on why hedavid zervos is recommending emerging markets for the First Time Since he has been at the firm. Vonnie you are watching bloomberg. Investors have piled into civilian assets believing the impeachment of a brazilian president will pull the country out of a recession. Join me now is david zervos and he is making positive recommendations for emerging markets for the first time. What makes this different . You know, looking back at the history for us, it qe trade that was going to take away from emerging markets and then you had the europeans and japanese doing similar trades and that forced emerging markets to do ugly things, try to devalue and keep up. They dont do it with the same amount of credibility as a developed market which made us nervous about their ability to deal with what was going on in developed markets. The interesting thing here, which i think goes into the election season, if we call off the dollarstrength moves, which has impeded emerging markets given their dollar liability and the fact that the europeans and chinese are still doing evaluation strategies, if we call that off for a little while, which we have done since february, we get the emerging markets to have a breath of fresh air and we think that could run into the summer months and may be into the election. Because janet yellen in particular is not interested in seeing a significant dollar rise which would, in our opinion, force a chinese breakup of the tag. This essentially a macro trade . You are trading a weakened dollar . You believe that will continue in the way it has been going . David zervos i believe it will continue through the election. If we were to get significant Dollar Strength going into the summer months and we saw a continuation of what we saw through last year when things got messy in the summer and again in january, we would have the chinese react to that. Because they are stuck on the dollar. So to them, Dollar Strength means strength unless they break. If they break, they unleash what they unleashed in august which is a huge tightening in conditions which nobody wants to see, in particularly, the fed. , it is a nicet equilibrium for the moment. Particularly if you dont want to have a big correction in stocks or a big unwieldy set of actions come through the markets as we head into a hotly contested election, which, by the way, if we go to the fringes of a political party, it will probably be less advantageous of the Federal Reserve given that they are not well liked on the fringes of the party. Jonathan the first question i would ask at this point, if this is just a weak dollar trend, why are they playing on the dollar . David zervos we recommend staying with the s p, which we have been recommending through the end of the year and secondly, i think a better way to express it is that we will run the u. S. Economy hot and run vonnie youre watching bloomberg. Us is david, the chief Market Strategist at jefferies. Mark, head ofs energy and Commodities Research at barclays. Looking forward to a conversation with michael. Lets get a quick data check. Equity at futures down about. 4 . Crude oil down four and a quarter percent. Rail, it isn weakening, 3. 59, below the 360 mark there. The yen is showing a little bit of strength again today. Speculators are piling in. The German Government bond, the 10 year yield, 15 basis points. The 10 year spread there is widening out at 65 basis points. Time to see where stocks have opened for trading. Trading right across the board, the concern is that oils and stocks have been tightly tightly correlated. Even a reduction in production out of opec, first, you have not been reading the news, second, youd be disappointed. Lets look at the s p movers here as far as industry groups. Only Consumer Discretionary stocks are moving higher and they are only moving. 02 higher. Not really a move at all. Leaving the losses. You have got financials down as well. I say that because Morgan Stanley i will show you in a second. Lets take a look at netflix and amazon, netflix is out with earnings after the bell. The competition with amazon is fierce. Netflix according to the teenage kid report last week, it is still winning. You see the shares down 1. 3 . If they will really raise prices for those who are grandfathered into the 7. 99 deal to 9. 99 here in the u. S. People will also see how they have done reaching out expanding to 130 countries last year. They have that 80 Million People signed up and paying for netflix. We will see how profitable it is. Year, hequarter last earned expecting three cents this year. We know revenue is up 25 . That is the problem. The company put up. 2 . It beat on estimates that have beat onered so much, it estimates that have been cut 52 in the past six months. Analysts had to come down hard to allow this company to be. Both hasbro and pepsi beat. Hasbro has access to these star wars towards. It has done so well for them. Disney princesses are doing well for them. A winner. They also did well with plato, apparently. Well. O has not done with sales of pepsi, it has come under fire. Here in theks, u. S. , a big boom really helping patsy to stay above the analyst estimate number. Lets be honest. Most companies do not have a problem staying above analyst estimate numbers. Companies beat analysts estimates. Why dont you just say here is what my estimate is. Exactly right we are back with Michael Cohen of barclays. We heard from dan, vice chairman. He said there is euro trust between saudi arabia and iran right now. Lets listen. Of course, it would be a very looseygoosey deal, agreeing to agreeable production levels. It wasend of the day, the saudis, the deputy press that since that lay down, that there would not be any deal, even a looseygoosey deal, if the iranians were not there. Bridge toould be a the autumn when the markets would stabilize. At the last minute, the bridge crumbles. This cannot have been the result people hoped for. It built up our expectations. Is this an elaborate game of chicken . No. All the way up until sunday morning, there was a draft. The hope was this is a bland statement we all agreed to two they couldhe time not even come to any kind of agreement or anything. It really underlines the fact that between saudi arabia and iran, there is a lot of discourse and the deputy conference is truly in the drivers seat and what he is saying really goes right now. Even in the last month or so, striking a bit of a conciliatory tone. Now, by his statements over the weekend is really saying look, we are not getting involved with any kind of agreement. Therefore a long time, if we takes ther step closer, retired for a long time now. Could expose that there is a discord between the two men. It is too early to say. The minister is still the representative to opec, still the voice of the saudi industry. Week or so,t mohammed is going to be releasing a plan for saudi arabia to whether the oil downturn. This is an important moment in the relationship of the men in the saudi kingdom. Across bloomberg that is gone p or what does that mean for the crude market . Michael it is still too early to say but i will same a homage been behind the strategy for several months. Think there are nuances to the strategy that are behind this conciliatory tone over the last few months that the minister was trying to strike. That a freeze was possible. I think it would end up being more of the same. Show us what you have . Matt i have been looking at saudi reserves. Here in white and the price of oil. You can see the massive reserves come down as well. Thisstill keying off bloomberg gadfly piece that says, if we spent 2. 3 billion to get through the slump, why raise the price and help low cost producers get back and the market when we have already bought the market share. Michael over the course of the last two months, when the market gained hope, we actually delay that the reckoning should be taken place. In that sense, there is a Silver Lining hopefully will backtrack into the 40 range. The second thing is the saudis, as he referred to, the rapid drop in Foreign Exchange reserves, the saudis have many options at the disposal. High level of Foreign Exchange reserves. There is no point of them supporting the high cost producers. For them, they can wait it out. Reckoning be a day of and if prices stay very low in the3040 range, it iss by 201720 18 timeframe, there could be Serious Problems and arguably there already are. This will be the first summer where the populace in saudi arabia goes to prices that are more market friendly or more closer to the market. That will essentially lead to possibly some real unrest we are parties seen that. You think the imbalance is getting back to normal by the end of the year. Michael that is why they have possibly been incentivize into not agreement. From the Broader Market balancing going on now. David do you agree with this . I think the fundamentals matter more but i wonder how you think about the overall policy impacting your view on oil in the sense that if we are to see a weaker dollar that states that for a while, does that affect the demand side and the supply side on the oil . You could make an argument it could be quite good for the demand side, actually coming out of the emerging market. To the extent we see a reversal, it could lead to leading itucers harder for the Development Costs over the last several months. Russia saw Development Costs fall by 20 . If that were to reverse as a result of dollar weakening, it could essentially lead to higher costs of production Going Forward. Talking 12 e not relative to other currencies . It would need to be a sincere weakening if you like. Michael it is very much intertwined. To the extent the dollar moves for supply reasons, sorry, that oil moves for supply reasons, we also think the correlation is likely to break down a little bit from where it was and a high correlation in 2015. Thing we have not discussed is what the morning means to u. S. Shale producers hanging on by fingernails, heavily indebted. What has this been for them . Been a nice recovery in the last two months and it will hit them a little harder. I think there was hope in the u. S. More than anywhere else to get something on the books that would either increase the demand side or stop the supply side. I was coming at it from the demand side when i asked the question, is there a lurking increase in demand we are not necessarily taking into account that comes through from a weaker dollar and a stronger china and the u. S. A really good question. There is certainly the possibility. India and china are strong andces of demand growth should the dollar continued to weaken, that could lead to higher david thank you, michael for being back with us. You will stick with us and still ahead, netflix reports after the bell today as subscriber growth in the United States slows. Chemistry during service keep adding new customers overseas . Vonnie i am vonnie quinn with your latest Bloomberg Business flash. Little change since april, an indication spring selling season got underway. Wells fargo builders sentiments index held at 58, greater than 50 meaning more people are building fluid market conditions. 15 minutes. Alibaba pictures is investing in two dozen movies coming out this summer. The latest teenage mutant ninja. Urtles Mission Impossible, rogue nation. Amazon began movie streaming five years ago as a way to retain customers. A is going now into potentially lucrative standalone business. Cost eight will dollars a month. Targeting Online Shoppers and that is the Bloomberg Business flash. Lets get back to the markets. A mature trading session handed over the backs of the u. S. About 16 minutes into a session. No big deal here. Movers,e look at the the market is looking pretty brazilian. The crude market looks resilient to what you might have expected when you are on the edge of your seat waiting for the talks to be over. Awould have expected freefall. As john pointed out, not falling much. I want to point out individual movers. None of these are related to the markets. By this. Aken out club based Event Management software for businesses in case you were wondering. A private Equity Company will pale most 1. 7 billion or the services. Ed event let me talk about kb homes also. A ton of housing data will be out this week. Space for those releases throughout the week. Cut to sector perform versus outperform. It is largely due to valuation. Space, latinosg rolled back down to a more neutral. Shares have been doing so well keep an i on housing. It will be important this week. Abigail thank you. Apple trading lower. On a report friday, the company asked if iphone suppliers would keep production at the current produced levels, just in the iphone demand is weak. N some contrast in recent weeks, after the Company Guided down back in january. We have real uncertainty here. We take a look at the longer stockchart and we see the put it debt down on selling pressure suggesting sales of apple could trade closer to the recent lows at or below 100 per share into the companys march report next monday after the bell. Vonnie thank you so much. Turning to yahoo . The deadline is today to buy the company. Isning me to discuss bloomberg editor at large. It has been sitting there because of a low acquisition. It was a very interesting one. Very different than a well, but it really focused on two thanks. One was a strong content business. Allowed a business that them to serve not just that a look sites but beyond that. A very popular mail service for the home page. Somewhere as well. They adept technology they beef up before technicians. Is in theike verizon same place it is in. Able to pick off the parts they want. They do not have to buy the whole thing. Specifically, as i understand it, yahoo has a good process with respect to video appeared on the other hand, if you look at how often yahoo isple go to the website, it very small compared to other competitors. It is very much on desktops and not mobile. All the consumption goes to is not stronghoo here. Turning to netflix, there is a new Subscription Service coming out to rival netflix. Amazon would want to come up with great content for this. The question is whether the other would be the case. It has already got terrific content and has done quite well for themselves. 4k video at a lower price. Netflix only has at a premium level. Amazon has a great ram name and they know more about their customers than any other business in the entire world. They will be able to market these things very successfully. Agoie david a little while it is a sequel to the one which i was a big fan on. Figure it is a brazil day and there is a correlation. Do a phenomenal job of producing a series of, anybody has kids, they need to realize the kids are saying, you should check this and that out. Linning moreix emmys now for their work. Classy even more important than emmys or subscribers, the big challenge for netflix is overseas. It is interesting because it has kind of been a disaster for the company for the last quarter. It is a business. The content is expensive. With showtime,ng hbo, and amazon to produce the content and get people to make the content. By some counts, it has come down a lot in terms of how much is available. Mark has in some great work showing the customers are more status with netflix and they ache there is more content even though there is not. Vonnie that is cory johnson, editor at large. Thanks to david. Jonathan coming up, Bloomberg Markets with eddie lu and mark barton. Out where you go in the markets is mark barton. Interview, he is in new york and will be talking about the finance ministers meeting later this week. Of relief . Some sort global we will tell you what it means for the price of oil. Were speaking to the chief executive of rugby because today, a nontransferable, 5. 5 on. It could raise up to 15 billion pounds. It is exciting stuff. Mark barton coming up with Bloomberg Markets. A look ahead at what is coming up later today and in the week in the markets and economics. Jonathan it seems equity market resilience is what is happening with crude . Quite screwed or inequities actually. Alsoe Morgan Stanley raising its game. You wonder if the loses on the banks and wall street. That is it for bloomberg. Coming up next is the former chair coming up tomorrow. Betty it is 10 00 a. M. In new york. Mark welcome to Bloomberg Markets on bloomberg television. Betty we will take you from new york to london to brazil in the next hour. Here is what were watching. Print pecs bigger biggest producers of the weekend, threatening to run new the routing oil prices, snapping back from earlier losses, still down almost 2 . Mark hanging by a thread, that is how supporters are of theizing the future presidency in brazil after a lower house of congress voted in favor of her impeachment. 10 she do anything to stave off her roster . Betty deadline day. The company bidding for yahoos assets are starting to narrow, leading to google