Books help ge turnaround . Julie why not . Today, the answer appears to be corporate earnings and other individual stocks pushing things i. Things higher. Nasdaq at records today. As this momentum continues to drive trading. A great story that mike regan recently wrote in business week. He talked about the fear of missing out trade taking hold here, especially with retail investors. We have seen strategists raise their yearend forecasts. 8. 55 is the updated target, the alon yellow line. Quickly, wehe year, saw the s p outpaced the median yearend target. The dow at 26,000. Boeings price target being raised at citigroup. It was upgraded to outperform. Shares up 2. 6 . Unitedhealth group out with earnings. Because of taxes, earnings will be higher in 2018. Merck announcing positive results related to its lung cancer drug. Those shares up. Citigroup saying despite the 22 billion charge, it will stick to its payout for 2018 beyond because of tax benefits Going Forward. General electric down 3 after the announcement of that big writedown of 6. 2 billion. The size of that will be 15 billion over seven years, much larger than the company had signaled. End mention at the amazon shares trading at a record. They had been rising for 10 straight days. 13. 5 already. Theanalyst commentary ishest target analyst, 1600 where he thinks amazon shares are going to go. Mark stocks are up for the second day. Look at the bottom of this chart, its almost significant whats happening to oil and gas and basic resources. Basic resource stocks falling after the best streak since october of 2015 as the dollar rises today. Oil stocks falling for the first day in 10 after the longest winning run since october 2006. Lets talk about inflation in u. K. It has come down a bit, using for the first time in six months easing for the first time in six months. That november 3 was the fastest rate in three years. This could be the starting point of the turning point for inflation, the effect of sterling depreciation following the brexit referendum. With a 2. 4 is year level at the end of 2018. This is productivity, stubbornly week productivity weak productivity may pick up more than currently expected the blue line is the premier trend. The actual trend is the white line. The week productivity growth could pick up quicker. That was the view of the boe policymaker. Everyations for a pickup year since the financial crisis. There has been some recent improvement its just 1 higher than 10 years ago. Lets get to bp. Bp in the news. A posttaxto book nonoperating charges 1. 7 billion charge of 1. 7 billion. Cash payments related to the deepwater horizon disaster. Now anticipated to be roughly 3 billion. The cost of the worst offshore hasspill in u. S. History amounted to more than 16 billion in compensation and penalties. Shares of bp down by 3 . Vonnie thank you for that. Lets stick with markets more broadly as stocks in the u. S. And europe keep falling is there an end in sight . Joining us now, Barbara Reinhard of Voya Investment management. Financial conditions are supportive, Economic Conditions are supportive. What will stop this . Barbara you have a lot of earning support, too. Fourthquarter earnings will be coming out over the course of the next two weeks. Theyve been upping their estimates, along with strong guidance from companies. I think whats going on right now, there was a rotation out of equities into safer haven assets in december, even through the first week of this year. There will be a big catch up because positioning is not on the side of markets going higher just yet. Vonnie which Asset Classes will you be watching . Barbara the big flows between equities and fixed income. Over the first couple of weeks of this year, you have seen money being redeemed out of equity funds into bond funds. Say it isny analysts in bonds where we might see a selloff trigger. Are you concerned that those flows might trigger . Barbara not necessarily. You need a couple of things going in that way. Voya, we look at sentiment we look at the underlying fundamentals, they are so strong at this point. Retail sales have been strong, Consumer Confidence at high levels. ,n terms of the inflation data we see that inflation will start to creep a bit higher because of the effects of the wireless sales it will be difficult to mount a sustainable strong rally past the feds 2 mark encore mark on core personal expenditures. Mark is the market underpricing with the fed will do this year when it comes to hikes . Barbara it has not price and everything the fed has said they are going to do. The markets only priced in a little more than two Interest Rate hikes. The fed has been good at telegraphing their intentions to the market. Last year, we had the same issue. Hikesd delivered three and the market didnt correct. No big surprises from the fed. We think that same type of legacy will be withheld. Mark on the issue of the tax cut, what is priced into these markets . Barbara youve come quite a long way. Analysts have been upping their estimates on the s p 500. 150 this year. That has quite a bit of it priced in. You are not going to get the big multiples you got last year. S p 500, 50 of the returns last year was earnings. This year, its likely to be more earnings and multiple expansion. Whatever you get on top line earnings is what you will get plus the 2 dividend yield. Vonnie you talk about highyield bond spreads tightening. Where do you look for value when you are trying to decide how much to allocate to bond loans . Barbara thats a big component of our Asset Allocation. We are preparing for retirement we find the best opportunities in the at julie we think it loan is a defensive place to be. Tight isnt that a space . Barbara you get the benefit of the increase in the coupon payment. Its not a matter of it being a crowded space. We see that the fundamentals are good for companies to earn their coupon payments and make their coupon payments and deliver very good earnings. Mark you like japan, you like em. Where does europe fit into the mix . Barbara the ecb delivering its somewhat hawkish message last week did give the markets a bit of cause for caution, but not much. You take a look at the all caps inld index, 47 countries that index are all above their 50 day moving average. We see some rotation away from the u. S. Towards the emerging markets. Thats where the growth is going to be. Equities broadly have been under owned outside of the u. S. Vonnie you have to be careful of dollar dynamics. Barbara the dollar has gotten ahead of itself. Does tend toss persist over the next couple of years because you have bigger budget deficits. It may be a little overdone at this point. It probably continues to drift lower. Vonnie our thanks to Barbara Reinhard, head of Asset Allocation at Voya Investment management. Lets check in on the first word news. Former white house strategist, steve bannon, is being questions today by the House Committee investigating russian meddling in the u. S. Election. Benin described the meeting between a russian lawyer and trump associate as treasonous. Republicanon, leaders are trying to avert a Government Shutdown friday. Democrats say the bill must include a measured that keeps young undocumented immigrants from being deported. Toldhinas leader has President Trump at two sides must Work Together to resolve trade disputes. China has been resisting harsher sanctions on north korea and President Trump called for state concessions. There hasnt been a selloff in bitcoin like this for months. The cryptocurrency has been down 20 today. Less than a month ago, bitcoin was trading in 19,000. China is among those trying to crack down on speculation. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Vonnie thank you. Breaking news on Goldman Sachs erasing gains of the day. Goldman suffered the worst commodities performance in its history as a Public Company with a drop of 75 in net revenues in 2017. Goldman sachs suffering the worst commodities performance in its history as a Public Company. Commodity revenues said to have dropped 75 . This is bloomberg. Mark live from london, im mark barton. Vonnie im vonnie quinn. This is Bloomberg Markets. President trump get set to welcome the president of kazakhstan. Another government showdown on the horizon. As lawmakers face a friday deadline to pass a new spending bill. Kevin cirilli is live from the washington bureau. Does anyone think the government will shut down at midnight on friday . Kevin increasingly, it looks like they will have to short past some sort of shortterm funding bill. President trump tweeting criticism of president dick s alleged remarks regarding el salvador in african nations in which he called them an expletive nation. Engaged in ae has twitter back and forth with senator dick durbin. Divisive righto now that it could force lawmakers to pass a shortterm, two extension of this government funding bill. Vonnie where will democrats in . Kevin not on daca. They feel not only do they have e, but theheir sid Business Community has been very much in line with the obama administrations daca policies. In addition to that, we did see some type of leeway for the president to step away on a host of issues regarding immigration, including the issue of chain immigration, slicing that often putting that on a separate issue. When you talk about this calendar year, the president will have to address the issue headon, not just with a longerterm funding bill, but also on the issue of trade. Extents kazakhstans leader meets with trump later. Kevin first and foremost, National Security. How will these two nations get along on the issue of National Security . We could see some talks on trade as well. With regards to trade in particular, we have seen in the last couple of days and interesting developments in the u. S. And china. The chinese look to have some type of conversation with the United States on growing tensions on trade. Vonnie Kevin Cirilli reporting from our washington, d. C. Bureau. Citi shares hit their highest in a decade. We are in the middle of the analyst call. We previously wrapped up the media calls earlier this morning. It is the same theme. All the focus is on tax reform. That 22 billion charge due to a write off of their deferred tax assets. That had been priced in. Large theg the charge is large but the impact on the banks capital will be relatively smaller. What are they going to do longterm with the windfall from this tax reform . Citi has made it clear that the impact will go to investors and shareholders. The ceo said tax reform does not change their capital return goals. They are committed to that 60 billion return of capital in the next few years. Tax reform strengthens and enhances their ability to do that. They are looking at higher net income Going Forward and improving that return on tangible common equity. A different approach then we heard from jamie dimon on friday. He talked about this windfall. Hikes or mean Wage Benefits to consumers . Basically, the longterm net effect is that tax reform will be positive. We are looking at the financials index, the top performer since the election of donald trump. A net positive. Vonnie we will have more on citi coming up in the next hour. To the fordked chief executive, next. This is bloomberg. Mark this is Bloomberg Markets. Are american legacy automakers we talked with ford ceo jim hackett. Jim i quote bill gates who said you really overestimate the arrival and underestimate the impact. I really believe that. I think the impact is like this isalifetime does the most important thing we both think in the last 80 years the Ford Motor Company has to address, which is the integration of this capability in the design of vehicles and coupled with a smarter world. This is what we said at ces. The nature of Edge Computing or internet of things is evolving so fast that the vehicles have to coupled with them in ways that do Something Like this. You waste more fuel in trying to find a parking spot than you do sitting in a traffic jam. Ifres no reason for that the vehicle is smart enough and the parking spot can ping that its available. In that world, theres no need for a sitting meter maid because the intelligence can meter out parking fees and the vehicle can pay for it without the customer having to do anything. Today, 16 years later, i think they will have the perfect option they can drive because there will be a world with a passion for this vehicle, but they can have the option of delegating tasks to that vehicle that their grandfather never expected, including never crashing. Vonnie that was jim hackett with david westin in detroit this weekend. Later this hour, we will have more on the auto business. Lamborghini ceo Stefano Domenicali is our guest. Mark bitcoin boom. Crypto hedge funds saw a 1000 return last year. How can that continue . That is next. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Vonnie live from new york, on vonnie quinn. Mark im mark barton. This is Bloomberg Markets on bloomberg television. Taylor riggs has more from new york. The eu has toughened its demands for concessions the u. K. Must make during the brexit transition. The u. K. Wont be able to apply new immigration rules to eu citizens arriving during the transition period. Anyone coming before the end of 2020 could stay indefinitely. Russia may go on a spending spree after years of austerity. The kremlin is considering a plan to boost spending on transport and roads by 30 over three years. On health care and education would rise about 20 . It could be the Worst Oil Spill in decades in the east china sea. It has spread noticeably and now covers 52 square miles. The Worst Oil Spill in decades in the east chinaa fe fallout has now dissipated. There is a report that counterintelligence officials warned President Trumps soninlaw about Rupert Murdochs exwife. Said murdoch could be using her friendship with Jared Kushner and ivanka trump to further the interests of the chinese government. Hepokesman for murdoch says has no knowledge of any Intelligence Agency concerns. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im taylor riggs. Mark bitcoin falling as much as 20 . Today. Crackdowns the Digital Asset is down over 35 this month. Warning investors it could go even lower. A currency but very important characteristics of currencies are not there. It is an extremely volatile value which undermines its use as a currency. People who are investing should be prepared to lose all of their money. Mark this might be enough to keep Global Investors on the sidelines. Crypto hedge funds soared more than 1000 in 2017. Joining us now with more is ed robinson. Decline was the biggest since january 14 2015. It is quite a sizable decline. Why is it every time the south korean finance minister others something about the current about bitcoin, bitcoin gets absolutely hammered. South korea has been leading the charge. Investors are mad for bitcoin. They are buying it at 30 to 40 premiums. Is a shutdown of Cryptocurrency Exchanges seriously an option and if it was to take place wouldnt investors just go elsewhere . Theres a lot of mixed signals coming out of south korea. Thats why we have seen gyrations in bitcoin with every utterance that an official says one way or the other. To answer your second question yes, these exchanges are highly portable. They are on the internet. Its only a matter of time before they would pop someone else and south korean investors would buy somewhere else. Mark china is also clamping down on cryptocurrency trading. Yes it is. They borrowed icos last fall and that had an impact. It not bitcoin down a bit in september. Theres a sense that this is a test. Theyre firing shots across the bow. Theyre not going to outlaw it permanently. They just want to shake it out and eventually garner control over it and it will start to come back online but it will be highly regulated. Vonnie how would you even regulate these exchanges . The most recent one was shut down for several days and cost investors huge anxiety and nobody knew where to go for answers. Increasingly there has to be processd of domiciling that takes place with these exchanges. There is a Futures Exchange here called crypto facilities. They have opted to become regulated by their domestic regulators. I think this a is a legitimization process. Players who some want to be regulated to try and assuage the concerns of investors who believe this is too crazy to put their money in. Price to illustrate the movements for viewers i want to show viewers the chart. It shows the price of bitcoin in white. You can see the extent of the movement over the last several days. Moveroblem with this whole to make them legitimate and to regulate them is you are going to get an internal war among the community. Because the reason many people got in in the first place was to be free. To have liberty from all of the constraints of the regular order. Wont they bolt . Point anda very good i think its one of the grand ironies of this entire story. Bitcoin was designed to make an end run around the entire Financial Services system as well as central banks. Its a peertopeer network. The fact that wall street has glommed onto it and now you have hedge fund setting up and futures contract and the rest is really distorting the original mission. Its a very good question. What do the true believers do . How do they respond to this and will it matter . Mark on the hedge funds, nine cryptocurrency hedge funds. 1167 as a group in 2017. Whats the moral . Of the story here . . It sure made you look smart. Now the test comes. Now it is choppy. Now the headline risk is really sensitive and its totally unpredictable. These graspntals to onto to ensure investors are not just betting on cryptocurrency prices. Theres all sorts of strategies around cryptocurrencies. Indeed. Futures contracts is one. Arbitrage is massive in bitcoin because of the disparity in prices and exchanges and of course theres a lot of expectations that Exchange Traded funds could be around the corner. The sec has kind of put the brakes on that. Lets see if they sit on similar gains at the end of 2018. Thank you, ed robinson. Vonnie coming up, another setback for General Electric. Shares slump as the company gets burned by its insurance business. This is bloomberg. Mark im mark barton. Vonnie im vonnie quinn. This is Bloomberg Markets. Merck are help pushing the dow following the results of a study of one of its key drugs. Julie hyman has details. This is the companys lung cancer drug. Its topready one of sellers. The difference is that now it might even get expanded sales as a result of this study. It is not completed. Merck is releasing initial results from it. Basically the conclusion is when combined with chemotherapy it did improve survival. Its interesting because merck added the survival metric to the study and initially cause concern that that would delay the results of it. It appears that is in fact not the case here. It basically cements leadership. Its already expected to help mark merck. If you take a look at the various business lines youve got vaccines in blue. Youve got Animal Health in orange and pharmaceuticals in white. Overall what you are looking at is sort of tepid if any growth here for the various revenue lines particularly when you put them all together. Going to help boost the company potentially. 10. 6 billion in sales for 2022 would be key to its 2. 5 sales target. Meyer dropped off financially on this news. They are falling because of the results of this study. This would give market and advantage. Basically a bernstein analyst says the delay that i mentioned that was perceived as being the result of adding that survival metric to the study had created toopening for competitors reach x u. S. Markets first. It seems like that is no longer the case so that is why we are seeing other stocks decline. Vonnie merck is up 7 . Thank you. Another stock we are watching, General Electric shares are down thanwing fallen by more 2 today. Its taking a 6. 2 billion charge in q4 because of lingering problems in its insurance business. The ceo said at a time when we are moving forward as a company a charge of this magnitude from isegacy insurance portfolio deeply disappointing. Brooke sutherland joins us now. Column entitled expect more ugly ge surprises. That is sort of what people were thinking after you had the thirdquarter Earnings Report where you have to dramatically and you hadguidance november where they had to cut the dividend and dramatically reduce 2018 guidance. A lot of people at that point the worst is behind us. An increasing concern about ge capital. Behemoth. Ill a one analyst puts it is still a top 20 u. S. Bank with over 140 billion in assets. This is huge and it is very opaque in nature. We dont know everything thats in here as evidenced by the extent of the charge they are taking and there could still be more to come with different pieces of ge capital in terms of liability. Vonnie will John Flannery be forced to take the decision to break up the company . This is something i have been calling for for quite a long time. Maybe its not as unpalatable as you might think. We are in an environment where Industrial Companies are breaking up. We want simpler companies that have managementwe are in an enve Industrial Companies are breaking up. Teams that can be more reactive to shift in market trend. Company ak at ge as a lot of its problems have been in. Il and gas markets to industries where they invested significantly through acquisitions but clearly in retrospect was misguided. The parts of the business that are doing ok our aerospace and health care and those are strong businesses with good Profit Margins that are growing. Do you really need to be in all of those at once or do you want to stick to the good parts and see what you can do with the parts that are left desirable . Mark how much Financial Flexibility does ge have right now . Not a lot. They had to cut their dividend because they had to admit their businesses do not generate enough cash flow to support that very high dividend. Even after they cut it there are still some concerns do they have enough cash coming in the door to pay for everything they need. Targeting 67 billion in industrial Free Cash Flow next year. Some analysts say after you back andtension pension restructuring and look at the number in a way that most Industrial Companies would thats more like zero and then you still have to pay for the dividends. The tax bill is unfortunately going to be a headwind. Bringing all of their foreign earnings back home will require a tax bill. Thats going to be a very significant liability at a time when it doesnt have the means to take on more liability. Its rather constrained. Mark what happened at the start of this year . Ge shares were enjoying a good run. That goes back to the point. They thought that maybe the worst was over with ge. That we had gotten all of this bad news out of the way. I was a little bit concerned at that point. Even if you believe you got all the bad news out of the way this is not going to be an easy turnaround. The power markets are in a state of decline. Thankelf has been pretty about the fact that those frank about the fact that those are not going to reverse. Todays news with more unexpected nasty surprises coming out i think that does beg the question of what else there might still be to come. Everyone is trying to judge the bottom and you dont want to miss out on the revival of ge shares. Mightt Stuck Holding what ultimately be dead money for the better part of a year. Vonnie the column is entitled expect more ugly ge surprises. Brooke sutherland, thank you. You can find those columns on the bloomberg. Mark time for the Bloomberg Business flash. Bp expects to take a 1. 7 billion charge in the fourth remaining 2017 on economic losses and other claims from the Deepwater Horizon Oil disaster. The British Company says the cash impact is expect it to be spread of over a multiyear period. In the gulf of mexico had already cost bp more than 60 billion in compensation and penalties. Saudi arabias southern wealth fund is going hollywood. The saudi fund in talks to invest more than 500 million in endeavor. The Holding Company for Talent Agency wme. Stars such as matt damon and ben affleck. The Biggest Health insurer in the u. S. Is giving investors a look at how the tax cut could boost industry profits. United health has raised its forecast thanks to the recent text changes. The company also posted fourthquarter profit that beat estimates. That is the latest Bloomberg Business flash. , we will hit the road with lamborghini chief executive. How is demand for its new suv . This is bloomberg. Mark im mark barton. Vonnie im vonnie quinn. This is Bloomberg Markets. Lamborghini is making the new push for its suv which just debuted in north america. Joining us now is the lamborghini global ceo and president Stefano Domenicali. He used to run the Formula One Racing Team for ferrari. You might know him as the man who gave the pope a lamborghini last year for charity. Another great year for lamborghini. The seventh Consecutive Year of. Rowth an you sold 3815 lamborghinis in the states. It was a great year for lamborghini last year. Growth is showing the brand is really there. Product. Great mainly for the youngsters as an aspirational product. The super suv we launched just yesterday is another boost that the brand will grow even further. Vonnie do you think lamborghini is undervalued within the Volkswagen Group . This is something i cannot say for sure. For me its important that as a brand in part of the group we are making sure that the value is there. Then we need to make sure that we stabilize and we are consistent in growth in a world where we know the competition is very tight. Putting ourwe are heads up around the competition. Chart if you look at our in the bloomberg library, volkswagen in white and Fiat Chrysler in yellow. Might lamborghini be a candidate for a spin off . We have a fantastic shareholders that will make that decision. Iseed to make sure the brand going in the right direction in ,erms of dimension, awareness growth, ability. To make sure it is happening. Suv youat about the launched in detroit . Tell us about demand so far. How is it going . Actually its going incredibly well. The a couple of weeks orders are already very high. Mark can give us numbers . I would say its already over 2000 units as an order in the first couple of weeks. It is Something Special and unique. All around the world. Not only the United States but all around the world. Its a great success. Mark what about the production ramp up . Can you meet demand or where you will you limit the vehicle fairly strictly . Rampup issay the the biggest challenge from the production point of view. Built up a complete line of production in italy. In one year we moved from 80,000 square meters to 165 160,000 square meters. Sure thet is to make first delivery will start in the beginning of summer. In america they will arrive the third quarter. I think when we will see a full year of production in 2019 have to see globally the double what we are selling today. You used to head up for aris Formula One Racing Team. The milliseconds are important to you. Talk about the updates to some of the already in production v12. Ls like the thats a good question. We dont have to forget one thing. , maybe in new segment a new super niche of the super suv. Not forgetting that we are a super sport car brand. The focus has to be there. We are thinking what will be the right solution for this new models. Will beure that when it the right time we will have different power units making sure that for example the v12 will be part of the package. How much extra will that cost us . Its not a matter of cost. Its a matter of being current with the brand. Vonnie i forget that you dont ask about cost when youre talking about lamborghinis. Us a tutorialve of lamborghini speak. Responsibility when you see that response from so hard. T is its our responsibility to deliver the right quantity of cars as soon as we can. Vonnie no pitstops for you. Stefano domenicali, thank you for joining us. Mark coming up, we are less than 35 minutes until the end of the session. The ftse is lower. Again a gain for the dax. This is bloomberg. Mark 30 minutes left in the trading day in europe today. Im mark barton. Vonnie im vonnie quinn. This is the european close on Bloomberg Markets. Mark here of top stories we are covering. Stocks racing to records. The dow topic 26,000 for the first time. The dollar strengthening as the earnings season picks up steam today. The latest round of Economic Data and what it means for consumers in the u. K. As the eu steps up its demands for more concessions in the next round of brexit talks. Expecting a windfall from u. S. Tax cuts. Citigroup says it will shower profits on investors. The bank sticking with its payout of at least 60 billion to shareholders. A look at whats happening to european equities
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