Energy is the real driver with crude oil up. E an impressive day after what appeared to be a little bit of a stall in the rally. Alix it was. Chevron was the best performer on the doubt, adding 15 points. Exxon adding seven points. A big leader there. In terms of individual stocks, i did want to highlight the threeday intraday chart of chesapeake. It basically pledged everything but the shirt off its back to secure 4 billion dollars in loans until december, 2017. You can see a 60 rally in shares over two days. That is the biggest rally this stock has seen, at its highest level since november. Uniqueam looking at a measure they have in germany. Its the average bond yield across the entire curve. The first time yesterday, it actually hit 0. 0. That means it costs germany nothing to borrow. It bumped up a little today to zero point 06, but getting a lot of attention, the german bond 0. 06, the getting a lot of attention, the german bond yield close to nothing. Scarlet i am looking at a slight bounce back of the dollar. Ersus the yen we are seeing some consolidation. The yen was at almost 1. 2 four per dollar back in november. This week it touched 1. 0 1. 24 versus the dollar back in november. Is the Canadian Dollar versus the u. S. Dollar. The lineup indicates of the loony weakening. Since then, it has been a pretty robust advance for the loony. It has been strong since july. The catalyst, once again, oil. In january, the loony was at a 13 year low versus the dollar, but a lot of economic data, including jobs, has shown improvement. Its the wti closing above 200 day moving average. Its the first time in almost fromears. You have reports interfax saying russia and saudi arabia are agreeing to some kind of oil freeze despite iran not being part of it. In fact, the kremlin is saying in the day that there is hope of a freeze even without iran. The rhetoric behind the scenes is that these guys are not going to officially meet in delhi unless there is already a deal in place. Oha unless there is already a deal in place. Scarlet breaking news from csx. Earnings match analyst estimates, but it is down from the same time last year, . 45. And terms of outlook, csx says it still sees shares declining. It has indicated that would probably be the case. It dropped significantly because of low commodity prices. It appears the commodity collapse is still hurting Railroad Companies like csx. Alix it got 19 of its revenue from coal last year. Coal is really down. It was a really warm winter. That added to the decline. Natural gas prices are so low, that people would rather use natural gas than coal. That is also hurting csx. Thatet you really see with the revenue numbers. 2. 26 billion in the First Quarter, missing the consensus estimate of 2. 28. To your point, csx seasons outlook being hurt by coal and other fundamentals. Alix there is for sure a recession and commodities. Csx feeling that. Theake a dive into bloomberg. You can see all of these charts at the bottom of the screen. No shocker, i am looking at oil. This is the difference between prices in may versus june. Shortterm time spreads. A rally ine seen is those spreads. That means the difference between the two prices is narrowing, so you dont have a huge gap. Part of that is legit. There is anticipation of a supply crunch. Be removinging to some exports from market because of their maintenance. But the issue is, is this rally getting ahead of itself . We are not in june yet. Seamaintenance in the north hasnt happened yet. Is it too much too fast . Also, when you have the spread getting narrower and narrower, they are like, forget this. This trade socks. They are going to offload the inventory, which means more oil coming on the market. Be careful what you wish for. Scarlet for my deep dive i am taking a look at sector rotation. This illustrates which industries are seeing increasing or decreasing strength. What you will see is that staples, utilities, and telecom are all losing steam. They are heading into this here. Ing quadrant right see materials and green lines, moving into the leading categories. What is lagging behind . Financials and health care. Some movement as we head into the First Quarter earnings season. Joe awesome way to visualize the markets. Alix it looks like a weather map. Joe i am looking at a new function that allows you to track of the upcoming brexit grg into the leading categories. What is lagging behind . Financials and health care. Some movement as we head into the First Quarter referendum. You can see this chart, though blue line. That is the percent of people who say they are inclined to leave. The latest polls have that higher. You have to wonder whether the revelations of the panama papers, which makes people generally more skeptical of elites and global institutions, and the controversy of david hisron having a stake in fathers fund that was domiciled offshore. No implication of thorny tax issues, but it didnt look good. You really want to watch these polls in the coming weeks to see if it will have some momentum. Scarlet not to mention the dutch trade with ukraine. Joe signs of aligning that it could be spreading in the british government. Scarlet before june 25. You can see all these charts and more on twitter. Alix i want to bring in our guest, joshua dietz, a portfolio manager. Look cross you asset, everything looks like it is stuck in a range, whether it currencies, ors, commodities. What kind of catalyst is needed to jolt us out . Startingices, we are to see, will be beneficial. At alpine, we think a great way to take advantage of the markets is with Infrastructure Companies. Infrastructure . If you want safety, go to infrastructure. But you dont necessarily consider that a safe investment. Joshua we do consider it steady, predictable cash flow. Those are the kinds of companies we are looking to invest in. A great example of that is a water and Waste Company that gets 50 of their earnings from water and waste as well. They have cut their expenses over 800 Million Euros over the past couple of years. They plan to cut expenses by 600 Million Euros, which means they will be able to grow earnings and dividends 10 or more per year without economic growth. If we get economic growth, the Waste Division is a beneficiary of that. Alix what joe one of the leading markets this year has been brazil, which has been a surprise to many people, particularly given the ongoing turmoil there. Again, we focus on Infrastructure Companies. If there is impeachment and Interest Rates go lower, we think that will benefit Infrastructure Companies such sec are, which is a road company. Ccr, which is a road company. A believe they will be beneficiary. A government that is more friendly toward business will benefit infrastructure as well. Flow out ofe seen european stocks, out of japanese stocks. Many investors still underweight u. S. Stocks. What companies and regions provide the most opportunity . Company bylooked company as well as by region. Certainly, in brazil, there are several companies. A rail company just had a major recapitalization on friday. They are reducing their debt. We think that is a great opportunity. In the u. S. , we think beneficiaries of the bill passed in september are cement producers. They get 65 percent of their earnings from the United States. Getshave a one company 65 of their earnings from the United States and has a 9 market share. They will benefit. Scarlet i wonder if you have gotten any indication from Company Management that they are kind of stuck. With all of the impeachment drama in brazil, no one really knows what is going to happen this weekend, let alone a month or three months from now. How do executives plan for that scenario . Are focused on making assets more in fission. In the longterm, they are more for assets in the long term, they are prepared for either scenario. Assets more efficient. In the longterm, they are prepared for either scenario. But they are focusing on the businesses on a day to day basis. Joe we are heading into the thick of earnings season. What are the big themes you want to hear from companies . Joshua i want to hear about costcutting. Was a good example. Even though carloads have come is a great example. Carloads came down quite a bit last year and their earnings still dropped only by a couple percent. Earnings are only dropping by 2 , we think there is a great upside when the economy does turn. Optimistic even though this market is perplexing many investors. Joshua, thank you very much. Joshua dietz, Alpine Capital portfolio manager. Scarlet coming up, we go live to brazil. Sposcarpapaina 2. And House Speaker paul ryan held a press Conference Today and ruled out any possibility of running for president. Do not want nor will i expect the nomination for our party. Directly to the delegates on this. If no candidate has a majority on the first ballot, i believe you should only choose a person in has actually participated the primary. Count me out. Mark ryan was the 2012 republican Vice President ial nominee. He has repeatedly said he is not interested in running for president. Republican front runner donald trump floated a short list of potential Vice President ial candidates in an interview with usa today. Names include marco rubio, john kasich, and scott walker, but some candidates appear less than enthusiastic to be considered. Said there is less than zero chance he would join the ticket. Scott walker laughed when he heard his name was mentioned. No reaction from marco rubio. Chairman grassley met with merit garland this morning. Will also meet with pat toomey of pennsylvania and Lisa Murkowski of alaska. India, police say seven people who fled after a weekend fire have surrendered to face prosecution. The blaze killed at least 116 people. It was sparked by an illegal fireworks display at a temple in indio where thousands were whereing india thousands were attending a religious festival. Some 200 people remain hospitalized. Global news 24 hours a day powered by 2400 journalists in more than 150 news bureaus around the world. I am mark crumpton. Scarlet thank you. What did you miss . The brazilian president accusing her Vice President of a coup. Without naming him directly, she indicated he was guilty of the trail of hurt and democracy. This after a congressional betrayal of her aunt democracy. And democracy. Kind of impact could her comments have on the Impeachment Vote coming up . Has been saying its a coup for some time now. That was her defense to the impeachment committee, which was presented to the attorney general. She used a lot of strong words today, like you said. Treason. The trail. We dont expect it to have a very strong impact. We are just waiting for the other parties to vote. Lookwhat does the voting like right now . How many votes are needed for her impeachment . At the latest count, how close are the two . Julia they need to thirds of the lower house, which is 342 votes. The tallies depend on who you ask. This morning, there were reports that the Vice President s allies put the voting at 321 already. The one we have been using as a gauge is around 300, so they are 42 short with a few days to go. Had a statement out today that they think the Vice President is likely to become president in may and will embark on a market friendly reform procedure, but at the end of the day, his hands will be tied and he want be able to get anything done. What do you hear . Julia its entirely possible. We dont know what his government would look like or how long he would be in government. There is an impeachment request against him as well. Much more in the initial stages, but a are having the lower house look into it. They are having the lower house look into it. He is basically being accused of the same thing president rousseff is being accused of. Scarlet she is being accused of so many things. Her accusers are being accused of so many things. The Vice President who may eventually take over the presidency is being accused of so many things. Joe the most surreal detail has to be this leaked recording that came out of the Vice President apparently giving a speech or what thebout administration would look like if the Vice President were to become the president. What is the story there . Julia that was a surprise to all of us. President rousseff herself said she was shocked to see it. He accidentally released an audio that would be a practice speech after impeachment was approved. It was talking about what the government would look like, laying out unity and all of that. He says it was an accident, that he sent it by mistake, but it was certainly another twist. Alix you cant blame him. He has to prep just in case. You never know. Some stories that various facebook groups that people have coordinated to plan protests have become a huge driver. How big of a factor is social media in driving this story . Julia it has been very big to help organize protests. People sign up on facebook. We look at those numbers to gauge how many people are going to attend fees protest, including on son these protests, including on sunday, which is when the vote is happening. Alix thank you very much. Some breakingve news in the biomedical biotech space. Shares are climbing, jumping of medivation, after they are said to have rebuffed a takeover bid from sanofi. This is according to sources close to the matter. Set a fee, of course, looking to , ofue the Company Sanofi course, pursuing the company to expand its Cancer Treatment business. What did you miss . The japanese Security Firm largely exiting european operations. Take a look at this chart. Is compounded by all the uncertainty over the brexit. What is interesting is that bar here, hasd been the firms biggest money loser since 2010. Backave to go pretty far for that to happen. Since then, the red losses have been pretty steep for nomura. A quick check of this function on the bloomberg. Its called lossgo. It allows you to see how many jobs have been shed at different companies. 139,174 jobs cut over the past 12 months. Alix i am looking at analyst that are not actually that terrible. This is a great chart. Is bank of america has earnings revision ratio. As it moves higher, bank of america has earnings revision ratio. Americas earnings revisions ratio. When the chart moves higher, that kind of causes a drop in the s p arise in the s p. A trough in the s p. The end ofts think earnings season will be the end of the badness, and we will only get better. Interesting to see the dollar and energy effects. Speaking of commodities and the Global Economy, i am looking at a couple of measures that are not great proxies for the Global Economy but are sometimes used in this way. And the baltic index. Iron or delivered to china is surging again. It is bouncing back pretty nicely. The baltic dry index, which whiches shipping costs, usually only people talk about when it is going down for some , has been on a really nice surge. Highest level since early december. To whatever extent this might be a signal of the economy, well, they are going in the right direction right now. That we areove talking about it as it goes up. Up, our banks failing the economy . Belook at why banks should answering to consumers rather than shareholders. Valley breaking news on and pharmaceuticals. The shares are dropping in after hours trading. Center bridge, the biggest bond investor, said valiant intends to call a default. This is according to dow jonescnbc reporting. Valley and quickly losing vaiant quickly dropping leant quickly dropping in after hours trading. Have a lot of shortterm problems, but longer term, there was confidence they would be able to make their payments and deal with bond issues. This seems significant. It is a bond issue and not a shortterm stock issue. Scarlet again, the company intends to call a default. In the meantime, we had to mark crumpton. Mark thank you. Today is equal pay day. It marks how far into the year women must work to catch up to mens earnings from the previous year. President obama equal pay for equal work should be a fundamental principle of our economy. Its the idea that whether you are a high school teacher, a business executive, or a professional soccer player, or tennis player, your work should be equally valued and rewarded. Whether you are a man or a woman. Mark the designation protects one of the oldest standing houses near the u. S. Capitol Hillary Clinton and donald trump certifiedially been as winners. Both edged out their rivals by a mere fraction of a percent. Vote is so close, a recount is still possible. Candidates have seven days to file for one. Chinas foreign minister responded to g7 calls for countries to stop Land Reclamation and militarization in one of the world busiest shipping lanes. China has been asserting territorial claims. In other news, the duke and duchess of cambridge joined the indian Prime Minister for a private lunch today in new delhi. Groupr, they met with a of indian women to hear about the countrys plans for women facing domestic abuse. Global news 24 hours a day powered by 2400 journalists in one hundred 50 news bureaus around the world. I am mark crumpton. News bureaus around the world. I am mark crumpton. Pastet crude oil pushing 42 a barrel. Earnings season underway. Fromso have some headlines the superstar bond investor of double line capital. He made some comments about bonds, the fed, and oil. He said increasingly, the fed hike looks like a one and done scenario. Alix he also had some comments on oil, saying oil will have a harder time getting to 50 than it did getting to 40. Momentum slow down. He also said it would surprise him if the dollar weakened. Joe what will it take to get lending more to stimulate the economy . Areresearch says the banks retaining more earnings while paying less in dividends. We spoke about the new research that challenges conventional wisdom on bank capital. Professor mason, thank you for joining us. What is the conventional wisdom about how banks should fund themselves, and what is this new research saying . That you havek is lenders over here who have a certain required return, and over there you have borrowers, and the banks are intermediaries. There is not a lot happening in the Banking Sector as far as Monetary Policy is concerned. What has become clear is that a lot depends on the state of bank balance sheets. Their lending may be much more in sentiments. Ts how applicable is this to banks in the u. S. . Clearedests should have them to return cash to shareholders through dividends and buybacks. Bankwas looking at dividends and buybacks right through the financial crisis. Ofn during the worst the crisis, payouts continued to shareholders at a very high rate. I think there is definitely a problem here. Clearly with doddfrank, we had to strengthen capital requirements. One of the things this research has shown is that an extraordinary amount of earnings have been paid as dividends. The upshot is that while shareholders might like that, it is costly to the economy. Thats right. The majority of earnings that these banks have been paid out. There have been extensive bailouts from the public sector, and yet, the majority of earnings managersdo the bank feel they have to pay out so much . This paper really focuses on the short term problem. We have a lot of people really focused on shortterm results because the shareholders are asset managers. We dont have principles managing their own shares. We have shortterm relationships at every stage and there may be a strong intends throng in center of to deliver results without thinking about the long to a strong incentive deliver results without thinking about the long run. Loans to small and mediumsized businesses have been declining pretty steadily. Even if banks had extra money to lend, would the demand be there . For better or worse, we have a system of macroeconomic stabilization that focuses on the supply side of the credit markets. Maybe that is Something Else we need to change, but i dont think we want to give up fixing that set of problems because there are also concerns on the demand side. Have recently written a lot about trade and the conventional wisdom about free the economygood for is overstated. You say everyone is getting it wrong. What are people getting wrong about free trade . The mistake is thinking its consequential for the u. S. Economy. I think its overstated on both sides. Sayingmp campaign this is the biggest problem for our economy is wrong. The other side saying it would be a disaster is also wrong. Relative price changes, exchange rates, terrace, dont move things around that much. I think its overblown under ariffs dont move things around that much. I think its overblown on both sides. Alix thank you so much. Examine up next, we bank numbers and how they will affect earnings tomorrow morning. Alix time for the Bloomberg Business flash, a look at some of the biggest business stories in the news. Today, analyst estimates however, earnings fell. 14 . Fell csx and other railroads are trying to make up for lower reducingoads by payrolls, improving train speeds, and raising prices. Thegovernment says Automotive Industry needs to make sure vehicles have built in Cyber Security protection. Connected to the internet are expected to be valued at 42 billion by 2025. The top candidate to replace Warren Buffett as ceo of is overseeingaway a restructuring. Warren buffett has said he will step down at the end of the year. His replacement has not been named. Ted montross has said he will step down at the end of beer. His replacement has not been named. Of the year. Nd his replacement has not been named. Scarlet lets take a closer todays the numbers dont lie. We start with banking revenue. These are the fees Financial Firms receive. For jpmorgan specifically, overall revenue likely declined 4 versus last year. That is hotter than the average. Is better thant the average. A 16 drop is expected for their peers. Jpmorgan already warned back in february that its firstquarter Investment Banking seat revenue would drop by a quarter versus the same time last year. That is mainly due to less underwriting for both equity and debt. I familiar scene for bank management, employees, and investors, cost control. The lower the ratio, the better. Jpmorgan is so far missing its longterm target. The bank is targeting 4. 8 by 2017 from 2014 levels. Jumpis jpmorgans expected in loan loss provision in the First Quarter. Analysts estimate that jpmorgan than Energy Reserves more 60 from last year. A pretty big move up. Is allisonng us now williams, a senior banking analyst. She helped us put together this preview of jpmorgan. What is the most important metric to watch tomorrow. Allison corporate credit. We all know that energy has had trouble. Jpmorgan has already announced they will be taking a big energy reserve. About isle are worried credit contagion. Is the pain spreading . There potential losses in other categories . Joe what is happening these days with legal fees and money set aside for legal issues . Have putmany banks their largest legal costs behind them. Have bigpeans still costs ahead of them. One is related to the department settlement. Mbs jpmorgan, citibank, bankamerica already gotten behind gotten that behind them. Wells fargo is putting a different mortgage lawsuit behind them. But i think that is really going to be helpful for banks in terms of, obviously, a lot of people strip it out of the bottom line or their ongoing earning power. But it enables better progress on both fronts. Some goode do have news. U. S. Regulators are prepared to notify some of the biggest banks, including jpmorgan, that how have submitted plans on they would handle a potential bankruptcy. The banks are a little resistant in giving away too much information or perhaps for seeing a worstcase scenario. They still continue to drag on their shares. I feel like every quarter we talk about how banks have not done enough to prepare for the road ahead if that road turns south. Has made a lot of commentary recently about the commitment to the universal bank model. Is it costing him . Allison i think what jpmorgan has shown over the past year is that they have found ways to deal with the constraints of having models, looking at the numbers and feeling up figuring out how to reduce risk without reducing profit opportunity. They have reduced their expected capital hurdle and improved their capital level at the same time, so now they are above where they think regulators are going to tell them to be. As far as the regulators and the calls for more capital, i think it is not surprising that we will hear more about this, especially in an election year. We continue to hear increasing noise about that. If you look at u. S. Banks and the tangible common the ratio for the commercial banks, we are at the highest level to the 1980s, perhaps even back to 1934 depending on the metric you are looking at. Banks set aside enough money to cover Bad Energy Loans . The anticipation is that they will not realize losses until they have to. During earnings season, are you going to believe them . For banks . Ig risk allison if you look at where the stresses are for banks and the types of loans they are reserving, these are loans you charge off first and recover later. A lot of people are optimistic that banks are going to get back most of the money on their loans, but that is going to take time. Either way, the charges are generally going to be frontloaded. There was a lot of action taken earlier in the quarter when oil was at lower levels in terms of looking at credit lines and why borrowers what they should have in their earnings base. Scarlet will this be different than how they managed their loans during the housing crisis . Allison different types of loans have different rates of recovery. In general, as it based loans tend to have a higher rate of recovery. During the housing crisis, it is helpful because you have an asset there, but given what was happening with asset prices alix cole different story. At least oil is up again. A reminder that you can find our full analysis on bloomberg. , an exclusiveg up interview with the countrys with souther koreas finance minister. Scarlet what did you miss . When the imf cut its Global Outlook today, though one bright spot was china. That country upgraded its forecast. As for the other Major Economies in asia, japan and south korea both saw their forecast read forecasts reduced. I spoke exclusively to the south Korean Deputy Prime Minister and finance minister. Take a listen. Korea is still a small, open economy. This as a model case or some kind of signal to the whole world economy. The koreany that economy is somehow doing rather , and if that is the reason why they see the korean economy as some kind of signal for the world economy, that is a conflict. Hit its growth targets for the year . 3. 1 . Is that still reasonable . I hope so. Announced amf fromnation to two point 9 2. 7 . Our target is 3. 1 2. 9 from 2. 7 . Our target is 3. 1 . There are a lot of factors that can affect the out come outcome. A 3 believe we can achieve level this year even though the it would be around 2. 7 . Is weason why i say so have room for policy measures. You i was just going to ask that. What policy levers does korea have two still hit its target . First, our Interest Rate is around 1. 5 . The policy Interest Rate is higher than in some other countries. We have afactor is low Government Debt to petey p ratio. Its quite good compared to p ratio. Untries pd its quite good compared to other countries, so we can expand some fiscal policy. You expect to perhaps use more expansionary fiscal policy to hit your targets . If necessary. I want to ask you, in new york, we have our primary. Republican front runner donald trump has talked a lot about pulling back on the u. S. Role globally, militarily, asking countries to pay more for their furtheren hinting at nuclear proliferation, everyone should defend themselves. What is your response to that kind of frederick . Kind of rhetoric . I cannot respond to pullingng he says, but back u. S. Troops from korea now is not a good idea, i think. A serious threat from the north. Stationing United States troops net. Is sort of a safety i would not say we have to go to war without u. S. Troops, but it is kind of a safety net for us, so i dont think its the right time to talk about pulling out. Exclusivewas my interview with south koreas finance and that beauty Prime Minister. And deputy Prime Minister. Japans wholesale Inflation Numbers are coming out at 7 50 p. M. Eastern. You get a pretty clear trend of what going on there. Alix in china, exportimport data coming out tonight. This is my favorite thing to wake up to, how much copper or they have imported. Its my thing. Joe u. S. Retail sales come out tomorrow at 8 30 a. M. Eastern. Obviously, thats a key leg of. He economy lots of interesting categories. A sense of how optimistic consumers are. Desert islandmy indicator would be china imports. Scarlet i like retail sales. Alix and initial jobless claims. Something for everybody. Scarlet we will see mark i mark halperin. And im john heilemann. And with all due respect to House Speaker paul ryan mr. Ryan i do not want nor will i accept the nomination for our party. Count me out. Let me say again, i am not going to be our partys nominee. I should not be considered, per iod, and of story. John so youre saying theres a chance
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