Transcripts For BLOOMBERG Bloomberg Markets 20160725

Desk. Markets still in negative territory as they head into the day. The nasdaq is the biggest down 10 there. I want to show you what is happening with the s p sector. That energy is the biggest laggard the whole day, down 2 here. Crude. Because of information technology, not as bad as industrials and energy in part because of what is happening with micron over the course of the day. You can see it has been up most of the day 6. 3 . It is the biggest gainer not 500 in tech but the s p terms of percentage. It announced a poison pill plan, a strategy to make it unattractive to some bidders that it wants to avoid in order to avoid ownership change. Also bullish ratings. Retail is also winning. Up 4. 5 , 3. 57 there. This is after it was they agreed to Sell International to a group for about 600 50 million. Companies in the radar. Up by about 3. 5 here. Wells fargo saying the gap had seen several developments to create more favorable situations for the company. Urban outfitters, also 3 . Quickly check on deals as well. Yahoo and verizon, four point million dollars. Tesla motors insular city up by 3. 5 . They are close to finalizing the merger. Were talking about oil. I will take you over to oil. 3. 7 . Ght now is down the big reason is because the number of active rigs are rising for the fourth time in four weeks. Down prices right now 51 act then. Energy users take a look there. Look at that. The biggest percentage drops, down about 6. 5 . Vonnie time now for a check on the headlines this afternoon. Matt miller in the newsroom. Matt Elizabeth Warren will deliver the keynote address at the Democratic National convention which starts today in philadelphia. Will speak tonight in a lineup that also includes the first lady, michelle obama. Bernie sanders who challenged clinton, he will deliver the nice closing address. Michelle obamaspeech tonight marked her debut as a surrogate for Hillary Clinton. The women had been distant throughout much of the Obama Presidency but now have common cause on defeating donald trump. The first lady is expected to make several Campaign Stops for clinton. In southern california, a raging wildfire has forced the invest to gauge of 20,000 people. Already been destroyed. Authorities say it is already 10 contained so far. Police in munich are questioning the friend of a teenager who went on a shooting rampage last week. Nine people were killed friday before he killed himself he was described as a loner obsessed with play video games. Russian president Vladimir Putin will not attend next weeks opening ceremony. The decision to let russian compete in the games is a lovely one. Part because of government backed doping. Russian athletes and other sports may take part if they have clean drug reference records. More than 120 countries, i am matt miller, and this is bloomberg. The s p 500 retreating with a record high. We discussed with mike mckee in the last hour. Joining us im boston is the chief Global Investment strategist at charles schwab. Great to talk to you again. Lets start with the central thesis. No shortage of central risk including what we may or may not get from Central Banks this week. In the had rallies market still. It all comes back to earnings. Behaving differently in the last few months since they bottomed. Events like the brexit or the terror attacks with the attempted coup in turkey would have a much more Lasting Impact in the market if it would happen last year or earlier this year. The market has taken a lot of the events in stride and they continue to do so if provisions continue to head to the upside. David could it be that were more a neared to the events that you describe . Perhaps. We have a long history of terrorist attacks to look back upon. It overet has not seen time, it just seems that time to time, they react more or less. A linear pattern, the backdrop for earnings, the markets are any ofre concerned about the events, whether they are political related to the convention the market hikes up that reaction in the global economy. It seems to discount that impact. This quarter will be last in terms of earnings recession. 78 , we still have been in an earnings recession. It is early to say whether that will end or not. Maybe we have some stability and provisions. Sector and material the Commodity Prices today aside seem to have made a bottom that helped to earnings in those sectors. Related to industrial reduction manufacturing, they have suggested they have seen the worst in terms of deceleration but they are not pointing too much acceleration either. Financials continue to see revisions to the downside. It has been a big laggard over the last three months. I do not think we have a lot of momentum in the upside given Global Economic growth. David we have a finance minister meeting, and jack lew met with his italian counterpart. Sense of the european Financial Sector now or the Financial Sector writ large . How fragile do you think it is . Outside of italy, they have done a lot to Shore Capital in the last few years. If you look at the ecb serving data come whereas the u. S. Five years ago, banks started lending again. Earlier in the recovery of the bank cycle, they do have that capital. Outliers like italy and greece in some of the other european banks that are still suffering quite a bit. A lot of capital and they make loans pretty well. The key comes down to declining longterm interest rates, that is the issue. It is margins and not the quality of loans. It is what they are making on each loan and as those come n, other fear gauges, fx traders. The market is coming or is this the comb before the storm . Life there will be another storm. Count on another storm. Whether it is severe like what we saw in the first couple of months, we will have to see. Volatility has to pull back in the summer months. We have got the italian referendum in october and that can contribute to geopolitical concerns. Have an election here in november, you might not of hurt, and those can call cause initial volatility. More questions about the sustainability of any stability in earnings or the energy sector. All of those will contribute to volatility in the second half. We do not think dramatic downsides to the stock market, but expect to see more ups and downs along the way despite the fact earnings finally may have stabilized. David chief Global Investment strategist at charles schwab. Apple reports, help slow down iphone sales in the face of increased competition. We will have the latest. Vonnie time now for a look at some of the biggest business stories in the news right now. Afterank financial receiving an interest from potential to two months ago. That bank has been working with offers fromit possible buyers come market value 1. 9 billion. David Apollo Global management will acquire the owner of red rock dvd rentals and coins are Cash Exchange kiosks. Billion lliott 1. 6 the deal will be 1. 6 billion. Billionaire bond fund manager bill gross is having the health. Holdings inp five growth, the 1. 5 billion global unconstrained on bonds according to the website. Three months earlier, he unloaded all of those. Business business flash update. Apple reported earnings tomorrow and investors will watch of sleep with sales of the iphone. For the first time ever, quarterly iphone sales fell to a year ago. What to expect this time . Joining us from San Francisco is alex len and here in new york is betty liu. Welcome. Is expectede seven to be a big change from the last few does versions. If i could go to you first in San Francisco, where the will there be a lot of people upgrading the time and should we not believe the numbers will be week . Seven, if it comes, it is not going to be until september or october. In march, that will be the interesting gauge, toos he how that fares. It is a lower price product. And notwill be lower, quite as good. If it has chemical cannibalized sales, that might have an impact on the bottom line. For a bit of context, you have a company that has invested in the hardware side of this, trying hard to shift the arvices and hardware, what terrible set about the timeframe for that transition . We have seen a bigger celebration in Service Services revenues. Thing atelling Worldwide Developers conference in june, they are there are expected to be broader changes to the android platform and that did not happen. I think that tells the story that the Service Business remains the way of taking the hardware sticky, if you addicted to the iphone and the ipad and continuing to buy the highly profitable hardware. I think hardware is exactly where apple is having trouble here in china. About that the iphone is two thirds of their sales. The decline is becoming a larger and larger and bigger chunk and china is becoming a chunk of the decline you see in revenue and part of it has to do with the fact that the hardware health, it is great that others in china can do it just as well. Maybe theyre a good so they do not need to be great and as long as they good as long as they are good, they sell well. It is half. We have a photo of one of their most premium phones sold in see here, youcan have that beautiful iphones. It looks almost just as good and the functionality is even better. Is even better than what you get with the iphone and the chinese love that here they say it is good enough and it is half the cost, why not buy that . Vonnie is apple being greedy on margins in china . Know, they came out with cheaper versions. Part of it has to do with the fact that the japanese may not be as brand conscious as we are here. They get what they want for half the price and the phone has become more of a commodity and they have become a brand. Of thes the whole idea software and the services and all of these addons even more important for apple. A last question here, saying we have seen peak tim cook half now, that he is worried about the leadership of the company. At much does tim cook have stake here looking at the transition . Will be whateasure we see in a years time. There is increasingly a sense tomorrow, is tomorrow, that the blockbuster products will come in a years iphonehether that is the eight, which will probably more a substantial upgrades in the iphone seven, or products that we do not know very much about yet. Things like augmented reality and virtual reality, the car, those sorts of bigticket products that could at on massively to apples business if they have done well. Len thank you, alex alix web. Up 10 of the year you we will talk about how to trade in it in the options insight coming up next. This is bloomberg. David donald trump and mike pence, you see mike pence speaking there in roanoke, virginia, in the southwestern part of the commonwealth. Theoke and downtown area, first Public Campaign appearance , officially accepted the party nomination. In the backyard, the democratic my special soon Vice President ial soon to be nominee. You can watch as if you like on life go on a bloomberg. Joining me for todays options insight is jim of mk am holdings. Always good to see you. We are looking at markets pulling back from record highs that we have seen in the past couple of days. By 13. 5. S up what is your take on the markets . No surprise about the polka index. Poke up index. Volatility, the index, the currency volatility, something we have gone on about. You have seen equities pull back a little bit, no real surprise. It is sort of no mans land. David we are seeing a moderate selloff from energy. The of the laggards is technology sector. I want to get to the stock you are looking at. You . Makes it attractive to i saw you are up 10. 7 or so. If you look at the Options Market, there is a lot of disinterest in the name. Total option open interest has declined over the last couple of years, below 50,000, not a whole lot. The Options Market embedded 9 on an absolute basis, fairly elevated, history is not that high. A onemonth curve tells you how the market is positioned. Pretty benign. We look at the Options Market and lead a pretty benign set up. We thinkg that, earnings can be an ok catalyst. Were talking about trade over the several months. Is an inflection in Topline Revenue and that is what the traders about today. In terms of looking over the next several months, content delivery and look in to the olympics in rio, you wanted to delive, and president ial elections, you will go online for that. What do you want to do . The stock below 60, we want to go out to november 3, by a 60 or 70 call spreadif its into ae four hours where you want to be more synthetic with stocks a call around, buying spread, you have significantly less capital at risk in the trade while creating payoff that is 321 in the event that akamai is 70 or higher. Porttlthey lost this from appled facebook a couple of years ago your that explains the shares slide. Hat is an important e scarlet from bloomberg world hecklers in the town manhattan come you are watching bloomberg markets. Lets start with a check of the headlines with matt miller in the new york newsroom. Baltimore mayor Stephanie Rawlings break has been chosen to gavel in the full Democratic National convincing convention in place of out going Debbie Wasserman schultz. She was booed and heckled after she spoke to her delegation after was revealed hacked emails showed some favored Hillary Clinton over bernie sanders. Speaking of sanders, this is what happened when he addressed delegates in philadelphia a short time ago. Mr. Sanders we have got to defeat donald trump. [applause] and we have got to elect Hillary Clinton and tim kaine. Matt sanders says Wasserman Schultzs departure will open the doors to the party for people who really want change. If the president ial election were held today, donald trump what have a 57. 5 chance of winning compared to Hillary Clintons 42. 5 chance of winning. Electoralrump 285 votes. Nba legend Michael Jordan who has long avoided sharing his political views is discussing the recent shootings of African American men in recent and police officers. He writes i have been deeply troubled by the death of africanamericans by the hands of Law Enforcement and angered by the cowardly targeting and killing of police officers. Jordan is donating 2 million to help police and communities they serve. Australias Prime Minister once to push through tough new laws on terrorism. He is calling for jailed journalists to be held indefinitely after prison terms expired in one to introduce laws that would allow preventable detention. And the Olympic Village in Rio De Janeiro has flunked a socalled stress test. Australia will not let its athletes day there. They found block toilets and exposed wiring. Olympic Officials Say repairs will be completed this week. Global news 24 hours a day powered by over 600 journalists and analysts in over 120 countries. Markets close in under 30 minutes and lets go live to the nasdaq. Abigail is with us at the nasdaq. You have been watching the hot stocks that are moving today. it might appear at first that there is not too much action, but here is a fun fact before we look at some of the movers. We have seen the nasdaq alternate between gains and losses over the last 10 russians. Seven out of those 10 sessions have result that in closes of war down have less than half a percent, so a wishywashy market as investors look for direction. It is all about technology with one of the big winners on the day, Advanced Micro Devices of following fridays big 12 move higher as the ceos turnaround efforts are apparently taking shape. 135 on the up year. Yahoo shares are lower by more than 2 on the news yahoo has agreed to sell its core assets to verizon. It could be ays kneejerk sell the news reaction, but most should not be surprised by the sale price. The biggest drag on the nasdaq onay is apple shares down neutral to from sell. They think the cycle for the iphone seven could prove disappointing. The Company Reports tomorrow after the close, suggesting that it could be disappointing. Apple influencing the nasdaq in a negative way today, but what else could influence the town tomorrow . Bigail Gilead Sciences investors are looking for three dollars and two cents on adjusted earnings of seven point 1 billion in revenues. A little bit of a different there with apple. There is thenumber first revenue decline 2012. Drug sales are critical to watch and our Bloomberg Intelligence Analyst Thinks the tailwinds we saw in the First Quarter could play into the Second Quarter and is potentially bracing for a miss and relative to the First Quarter, a 100 million miss did move the needle. Amanda Abigail Doolittle at the nasdaq. Thank you. Two Major Central Bank meetings to watch the Federal Reserve and bank of japan. Investors are anticipating greater policy divergence around the world. The bank of japan will expand monetary stimulus or the fed will signal to highgrade. Our guest is a strategist at rbc. What are we talking about after the fed and the bank of japan . Will we receive the divergence everyone is expecting . I dont believe theres a lot of expectation. It all about the statement. It will be interesting to hear what they have to say about foreign risk. In june, they went to wait and see, that was ahead of the u. K. Referendum. Now that we have had the referendum and the vote is to exit, we have heard a lot of speakers speak about uncertainty, but i am not so sure they will be that worried ,iven that even within the ecb policymakers are pretty sanguine. This policyt about divergence . Theu. S. Will likely go other direction. How will that play out in terms of currencies there . Guest its going to matter a lot with eurodollar. We think at some point, they will end in the t. But when it comes to japan, there is an interesting dynamic. As long as the fed is an actually hiking rates, you dont get the key on the hedging costs which would drive it higher. I think dollar yen will trade lower from hitter. Scarlet amanda brought up the port from the nikkei about a planned doubling in spending. It did seem to move the pair, a short blip higher for the dollar, but it did not last long. It sounds significant that they would expand to ¥6 trillion, but is it . Guest how much of that will be new fiscal spending . How much of it will be just rocked forward a little bit . People are waiting to see what the action is between fiscal and monetary policy. Traditionally, the more fiscal policy, the less monetary easing and that means fiscal stimulus is currency positive. Everyone is waiting to see how the bank of japan will react at the end of this week. We think there is room for disappointment. I want to go back into the bloomberg with an interesting correlation brewing all year between gold and the yen. You can see it straight up all year. What is telling us that straight safe haven assets all seem to be moving in lockstep with each other . Guest since last summer, we have had a return to this world of one trade. Commoditiesat versus gold versus u. S. Treasuries, youve find safe haven assets inversely correlated and it is the prime safe haven. Joe how do you diversify your trade . Guest you can look at the equity neutral window where you can genuinely express relative value and not just take a bet on risk on our risk off. But that window is not big at the moment, so it takes a bit of work. We see the volume of currency trading rising. In terms of what is driving that, this betting one Central Bank Policy against another. About thethat say folks doing trading here and how much of it is really fundamentally driven . Currencies are still the muslim market out there and if you want to take a big that in big positions, its a lot easier to do that in currencies and the fixed income equities. Want to bring in the turkish lira here. It is strengthening after falling to a record low last week. We talk about this increased volume and trading currencies. Is this on any kind of in the mentalist or is this just a gauge of sentiment and a easy way to bet on turkey one way or another . Guest exactly. We had seen a huge selloff in the turkish currency after the up. Led attempt at the co we have seen people fade the move a little bit of a but it is difficult for a longterm investment longterm investor to take a point of view on turkey. I see it as a short term correction rather than a longterm trend. Joe oil has been breaking down for a while. What does that mean for emerging markets . They have had a huge surge along with the come back. Can they hold active oil is crumbling . Guest it depends on which emerging markets we are talking about. We have looked at the winners and losers, but the more interesting story is within g 10 space where dollar canada is actually breaking higher and that is getting a lot of attention. Amanda thank you. Verizon coming up, plans to buy yahoo s assets. We will hear reaction from Marissa Mayer. This is bloomberg. Scarlet this is bloomberg markets. Time for the bloomberg is as flash, a look at some of the biz is biggest business stories in the news right now. At least two groups that include canadian Pension Funds are worthng to release assets 2 billion. Others areur exploring bids. Sun edison is working to sell its controlling stakes in terraform partner and terraform global. The bankrupt clean energy giant is working to manage the sales process. Thats after filing for bankruptcy in april with more than 16 billion in liabilities. Thesorderly exit from European Union by the u. K. Could wipe as much as 1. 6 trillion dollars from future mergers and acquisitions according to a new study. Growthort says with forecast at 1. 1 for 2017, merger volumes will hit by 240 billion in the next five years. That is your business flash up amanda date. Amanda the big news this morning is that verizon has agreed to buy yahoo s core assets. Verizon will pay cash for the deal. Yahoo will be left with stakes in Alibaba Group and yahoo japan. Marissa mayer spoke to emily chang shortly after the deal was announced. Obviously the transition isnt about being strategic for yahoo but unlocking value for our shareholders in the remaining equity stake. Opportunity to kill two birds with one stone, so to speak. Scarlet it has been a difficult right for yahoo over the last couple of years. This deal took forever to put together. Amanda Marissa Mayer charge with turning this country around this company around in the best she can do is rearrange the transaction and hope she can keep her job. Hit 4. 5o first billion in market cap in 1998. The actual market cap is 38 alien dollars. Pretty extraordinary roundtrip for that company. You think of the enterprise value they are hanging onto, its an extra ordinary price. We will see whether aol can take another run at another future with another partner. Got detailslier, we on how verizon will absorb these parts of yahoo with the executive Vice President and president of Product Innovation and the ceo. The yahoo brand is a brand, the yahoo team is an Excellent Team and it fits into the largest strategy verizon has. 12 months ago, on our original deal to what is getting announced today, you will see a thread line of straight focus and strategy. Surprise. Not a big the market understood this is likely where it was going, but yahoo has been in decline and has been losing money. How quickly can you turn that around . Its going to take a lot of work and we have a lot of confidence in the leadership and the team and talent that yahoo . We understand it will take some work to integrate it, but there they are brand people love and billions in terms of audience we can bring to the platform. We have a number of assets we will use to strengthen this business. We know it is hard work putting two companies together but we feel we have the right talent and leadership for that to happen. To companies,rge it is ethical to them people will lose their jobs, but when you merge two pieces of technology, thats very difficult. How are you going to do that . Its probably the most important time in global advertising. A fraction of it is digitized and advertising will be as easy as ecommerce. Online, wethings will build things with yahoo and combined platforms to attack that x hundred billion dollar industry. We will be focused on our planning process with yahoo . We have not had a tremendous chance to go over some of the ets and if you look at the look at this, with mobile video an incredible content from the nfl and nba through our ad tech platforms, we will be serving over a billion consumers. By the way, we work in Silicon Valley and have multiple offices there. We have a similar strategy and there may be synergy in the deal but this deal is about growth and we are going to focus on the growth areas. Its going to start with strategy and structure. Talk about who is going to be running what. It was a belief Marissa Mayer would not be running any of the assets and for her personally, she is fighting to stay. Talk about who is running what and who does what job. When we bought aol, all of the Management Team was working sidebyside talking about who would lead and what conversations would be at play. Weause it was an auction, did not have the ability to talk about those things because there were competitive bids coming in. We will be out in the bay area talking about innovation plans. Aboutl come back and talk who is and what leadership roles, but for verizon, tim will lead this integration and we will work closely with marissa and her team to make sure we have the us and west and smooth integration. Joe that was the verizon executive vp and president of Product Innovation and the aol ceo. Scarlet coming up, buying the deepest stock dips has given investors 300 times the return. This is bloomberg. Scarlet this is bloomberg markets. We are looking at the three charts you need to see before we head into the market close. To kick it off here and it has to do with catching falling knives. Joe this is made by our colleague, all of her rent it has to do with buying the biggest stock tips in 2016. If you really bought the dips, droppedthe stocks that the hardest, you would be getting three times the return of the s p 500. Technicalusing measures to see what is oversold and buying them. Going back to 2009, people have talked about the problems with the by the strategy, but with some of the really sharp movers we have had, it is on steroids. Amanda its interesting of the reason you say dont catch a falling knife. I guess you dont have to pick the bottom, you are catching it near enough the bottom. Joe and they bound so fast that even if you are premature and theres another day, it is going to bounce back fast. It has been a good strategy. The by theinforcing dip strategy. Earnings season continues an apple will be reporting earnings tomorrow and the critical issue is china. China makes up one quarter of the revenue but the problem is chinese competitors like xiaomi are stealing market share with cheaper alternatives to the iphone. Apple is the yellow bar in the first series of each chart. Apple was never the Market Leader because it is worried more about the niche, highend smartphone users rather than mass volume. But everyone else is catching up with huawei providing one out of every four new phones in china. Amanda not only have they caught up, they are catching up with quality. Joe and their earnings are out tomorrow. Other earnings we are watching this week are the big oil producers. Have a look at what analysts are talking about as an earnings recovery. You can see for the first time in many quarters, earnings are expected to be higher. Ity are warning dont expect to last because they think earnings prices will fade often the worst is far from over. The declines are really dramatic. Joe but still theres nothing to cheer about. Amanda that is a falling knife. Continue. Nges we dont know what is going to happen in terms of the price of found ather it has bottom. Scarlet at some point, you figure the comparisons do get easier. It just remains to be seen where oil prices go. That does it for bloomberg markets. Major look at the averages with less than four minutes to go before the close. The s p and dow retreating from record highs. The nasdaq marginally lower. This is bloomberg. Scarlet we are moments away from the closing bell. Im scarlet fu. Joe im joe weisenthal. Amanda and im amanda lang. Closing bell ringing] scarlet u. S. Stocks closing lower, falling from record highs last week. Oil slides below 44 a barrel. Joe the question is whatd you miss . Amanda janet yellen waiting for overwhelming evidence before another rate increase. Joe the Democratic National Convention Kicks off in philadelphia amid a unity problem. We get a live up eight in minutes. And nintendo falls the most after dashed pokemon go hopes. Amanda we begin with the market minutes. The dow and s p retreating as oil prices tumble. If you look at volume, it is below average. There is not a lot of momentum with the s p 500, they have not had back to back gains or losses