Transcripts For BLOOMBERG Bloomberg Go 20160920 : vimarsana.

Meetings and say if we will get dissent. If we do not see process, i pledge another fetched these 42016. Monetary policy on wednesday. The secondlargest public pension plan in the u. S. Portfolioinvestment value at 193 billion. You dont want to miss that conversation coming up. Jonathan treading water. That is the way things are set up. Equities are positive in europe. The taxes moving higher as well. By around. 6 . Eurodollar, it is a snooze fest in the fx market. I will talk about that later. Positive, but just only by. 1 . In the mind the market, a rollover on crude today. Brent back 7 10. We talk about this stealing of the yield curve, jake peavy bonds, and right here in the u. S. On treasuries. Treasuries at the long end, 30 year yields at three basis points. Today, centralbank decision. Alix it is finally going to happen. Lets check in with our Bloomberg Team part indepth coverage. Where one day away from that decision from the fact and the boj. Iswashington as wells fargo chief executive officer testifies before that Senate Banking committee. And in berlin as Deutsche Bank severs its worst threeday slide in three months. We want to kick it off with what is happening on wednesday on the fat and boj. Possibility of a rate hike tomorrow. That is what markets are pricing in. What does the data tell us . It is kind of going eh. For the last month, it has been trending lower. Until you get to the last week or so. It turns up just a little bit. If you look at the overall level, it is higher than it was earlier in the year. Maybe there is a chance that the fed may want to surprise us. Bnp paribas is saying that. That the lastid 86 that meetings, all of the meetings under ben bernanke and janet yellen, 10 days out, the future market had correctly priced in a decision. Since they are only saying 20 , that suggests if they were moving, it would not be a surprise, it would be shocking. Alix that means we will not see any movement until december when the chances are over 50 . We have been talking about the boj much more than the fat. What will be the real market mover tomorrow . That is the real question. Follow the yen. If you look at it over the last six months or so, it is completely decoupled from other risk indexes. It has been behaving currency. Why is this . Nobody knows what the bank of japan is doing. They could raise their Purchase Program or lower. They could raise Interest Rates or lower them. They can expand their Bond Buying Program or contract them. There are so many options open that nobody knows what is going to happen. The yen will be the measure of how investors react to the bank of japan whatever they do. Alix whatever they do is the key phrase. Thank you very much. I keep Reading Research after Research Report to find out what the compass is on the yen. One day says laura, one day satire. Says lower, oneay says higher david we will find out tomorrow. He centerpieceomorrow willbe the ceo who is testifyg befo a sete comttee. We now go down to Erik Schatzker down in washington. Clear that there are a number of senators who are pretty irate at this point. Is there anything he can say . There is no sound sweeter to a senator on the Banking Committee then the sound of a ceo apologizing. I would not be surprised if we hear the words i am sorry several times today. To address your question, that will not be enough. Senators are printing this not just as a matter of abuse, because that is clearly what happened to some customers, possibly as many as 2 million, but issue of accountability. We have seen his prepared testimony in front of the Senate Banking committee. I will post right now. I accept full responsibility or practices in our retail business, and i am committed to doing Everything Possible to fix this issue and take the necessary actions to restore trust. It is worth noting that nowhere in this prepared testimony does john stumpf tackle two of the hot issues that you can be certain will, today. Lawbacks on pay, perhaps his own pay or that given to other wells fargo executives, and nothing about whether more heads will roll. You know Elizabeth Warren will ask that question. David there will be some sacrifices and apologies going on. Will we learn anything new about what actually happened . There are a number of days in figures in this testimony that i had not seen before. About thes a lot scandal we did not previously know. We know it began in 2011. That much is known. Of the 5300 people that wells fargo terminated for these abuses of Customer Trust in opening fake Bank Accounts and credit card accounts happened over five years, starting in 2011 and ending in march of 2016. What this testimony tells us is that wells fargo did not begin to remediate this issue, which is to say offer customers credits or send them a check or even a letter of apology for five years. That raises a question as to whether this was really an issue of. Wells fargo treated it as an issue of ethics. They were more concerned about the fact that these salespeople were effectively cutting bonus checks for themselves that they were not entitled to by reporting inflated sales figures. They are different things. Money or trust. The sense from this testimony is that initially it was more about money than trust. I would not be surprised if we see some senators key in on that issue. David thank you. From washington where he will be covering those hearings live. Breaking, the brazilian state of oil company is cutting their fiveyear Investment Plan by 25 to just over 74 billion. It is targeting development and partnerships of over 19 billion for the next year, 2017 to 2018. It is not yet trading in premarket. This is a theme we have been seeing. These they Oil Companies will ofe cut about 10 trillion over the decade. This is what analysts look to when they say we are going to see 70, 80. Jonathan they have to cut it so aggressively, it is counterintuitive, but it makes sense. How many years until that case it . Alix we are seeing a rating for lower even longer. We see opec continue to pump. That is cramping the rebalancing of the market. Jonathan this sets up Deutsche Bank nicely. The bank is set to be offloading risk as it tries to securitize billions of dollars of corporate bonds. Here is caroline hyde. The timing is key. Caroline it is because the timing to get this deal done is before they have to file their thirdquarter report. They want this done by the end of next week. That is one key issue. The other challenge is they want to reduce their risky assets. They want to have the Balance Sheet get rid of the risk associated with a pool of loans and keep some loans, that is why it is a synthetic collateralized loan obligations. They keep the lines but sell off the risk to some of the investors by doing this at a time when they are the worst capitalized under in europe. Slapping authorities them with as much as 13 billion in fines. Securing their wants has sort. Havengent capital, they fallen in price. Yields are spiking higher. No wonder they want to ship risk off the Balance Sheet. Jonathan we have seen this before. I wonder what they will have to do. Caroline we understand the deal will not be huge. It will be less than 5. 5 billion of risk. They did a deal that size last year. This is something we have been seeing across the board. The biggest Scandinavian Bank has so long the risk associated with some of its debt to tidy up some of its Balance Sheet. You seedoing the same. This is a way of reducing risk assets and boosting return on equity and smarmy your capital needs. It is something that regulators might like. Jonathan maybe. Deutsche bank is down another two or three percentage points. It is hammered by 12. 75 in the last three days. Some news outside of the business world. First word news. Thank you. Lawenforcement Officials Say there is no indication that on agronomy was part of a larger network. Ahmed rahami was part of a larger network. He was wounded in a shootout with police. He was born in afghanistan and is a u. S. Citizen. He traveled to pakistan twice in recent years. France has arrested eight people in connection with that track attack that left 86 people dead earlier this year. Prosecutors say the suspect are links to the attackers who were killed by police after driving his truck into a crowd in the city of nice in july. North korea appears that taken a number of steps to developing a missile that could threaten the u. S. They say it was ground testing a new type of engine or longrange rocket. North korea conducted its biggest ever Nuclear Weapons test. U. S. , japan, and south korea are calling for more economic sanctions. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Jonathan thank you very much. The fed wants to hike local growth slowing. With the mpldebate , howard ward. Ohio senator and Banking Committee Sherrod Brown joined us today. From new york, this is bloomberg. Alix this is bloomberg. I still. Analysts see 13 Earnings Growth next year, earnings for s p earnings next year is 133 a share, 13 growth. Joining me is howard ward. Are we going to get there . 13 seems like a huge task. I think that is optimistic. Profit margins are being squeezed i rising wage pressures, lack of pricing power, and what appears to be a slowdown in Global Economic momentum. I think that will prove to be too optimistic. Timesand s p at 20 presents multiple, that is way too expensive than . , itt is closer to 17 times won a 20 number for earnings. You can spend a number as long as we do realize any percent gain in earnings. If earnings are growing, adding to payrolls, no recession, you can defend that because we are in for a long period of ultralow Interest Rates. Alix they dont get bad. Continue to have this bull market if we do not have Earnings Growth . No. We have had two years of latin earnings. The market is expecting an uptick asked here. I think it will get it. The environment is not getting better. We are not accelerating anymore. Were pulling back. Q3 will see an uptick in gdp. A lot of that is inventory restocking after several quarters of destocking. We can move around that trendline quarter to quarter, but that is where we are stuck. Right now, there are warning signs out there. Alix in the beginning of the year, defensives is where you want to be. Those stocks got volatile. We saw a rotation in the last few weeks. Does that maintain, or are we due for another switch . If you are concerned as i am about potentially negative overngs estimate revisions the next couple of quarters, and if you are concerned about slowing economic growth, i would recommend becoming more defensive even if some of those pes remain high, those earnings are more likely to be achieved than those Cyclical Company earnings and cyclical stocks can really hurt you when they miss earnings. Alix does this not worry you over the last few weeks . Not really. The backup in yields is so minute. December, the tenyear treasury was 2. 3 . Today it is 1. 7 . In the year after the fed raised rates, the tenyear rate has gone down. I dont see any further upward pressure on those rates anytime soon. David we look forward to these boj at fat decisions tomorrow. Does it make you nervous . I dont think this is the time to pile into financials. I think it is a mistake to make that move now. We have been waiting for that kind of higher rates, good financials. We have had stop and go in that tree this year. I think it is too late. Alix great to get your perspective. Howard ward, gamco cio. Coming up, the worlds secondlargest Mining Company. More optimistic on the outlook for china. We are with their ceo, finding out why he sounds more positive on china. This is bloomberg. Jonathan from new york city, this is bloomberg. The ceo of the worlds secondlargest Mining Company has turned optimistic on track. I sat down with rio tinto ceo john Jack Sebastian to talk about the pickup in the Construction Market. Heres what he had to say. China is very important for us, for the mining industry. It is around 50 of the Global Demand for minerals. We spent a lot of time in china. I was there two weeks ago. It is sad to say that on the back of the meeting i had with our customers, our partners, our suppliers, as well as government officials, we are becoming much more where we are being described as cautiously optimistic with china. The me give you a few examples. In context of iron or copper, the Construction Market in china. One of the industries we look at is the inventory of housing in tier one, tier three, and tier four. Today, the financial metrics shows that the inventory in tier one currently you are below the seven months, which is the threshold in what we regard as a healthy volume of stop. Stock. The chinese are looking at the economy, it is not about gdp. They dont talk about gdp. They talk about energy consumption. They talk about railway capacity. They talk about exports. When you look at those four or five metrics they look at, they are all slowly but surely moving in the right territory. The draw of the two or three years of activity said,na therefore as i we are becoming more and more cautiously optimistic. Jonathan someone say that is almost sitting on the fence. No. You asked me this question a couple of months ago. As i said, you remember very well, and this current market and government, which is very uncertain, we have to be cautious and conservative in the way we run our business. Im saying we can see an inflection point. Jonathan lets talk about prices. To mr. Mckenzie over at the hp who told me his view on prices. Inyou think that will show the prices of things like copper and iron ore in the mediumterm . Winter is coming in china. During the winter, the construction in theh it is moving right direction, in the shortterm, you expect the severity to come and therefore price in this environment we will see the price recovery in mediumterm. We believe that copper will be the first one to come out of the twilight zone. In the shortterm, it is clearly that was rio tinto ceo John Sebastian bach John Sebastian job sitting down in a sea that interview. The big mind in mongolia, what happens in china is absolutely critical for them. Winter is coming. He is more positive on what is happening afterwards. David it is a fascinating interview. Number one, how well he knows china. Number two, why he needs to know china that well because so much of his business. I did not understand that large of a percentage of his business is tied up in china. Alix in the short term in the market, there is a disconnect. You have city is very bullish. Copper prices about three months out, that is that blue line on the second panel. That has been going down. That can signal a weaker market. Today my cap difficulties. In a few years, it might be a different story. Bhpthan mckenzie over at took that opportunity to take the crystal ball out. It is not all about volume despite price. It is about value. Alix it has to be about those that are or race. Ore rates. Ohio senator and Banking Committee Ranking Member Sherrod Jonathan this is bloomberg. Lets get you up to speed on the market. It positive, equities any in new york. P by is up by dax is u 0. 6 . Of twomarket, the Head Central Bank decisions, if you dont know what they are, you need to go somewhere else. Market, at this time of the session, we are a little softer in the session. Pulling back to a party to handle. Over at the bond market, it has been that yield curve steepening. Yields are coming in at the long end. We invest three half basis points on treasury, 2. 4 . Like many, im excited for the week ahead and tomorrow. Having a great time already. For the fx traders in this market, it has been an absolute snooze fest over the last year. If you are trading one of the most liquid currency pair in the planet, that is your pounddollar. Eurodollar. You see it on the bottom left. The lowest since going public back to 2014. All the way back to 2014. When do we get some volatility . I dont know. Alix after brexit, huge amount of volatility. Heres what else you need to know at this hour. We are just one day away from those all the decisions by the fed and the bank of japan. Barclays and bnp paribas is betting against their peers. Canadas Auto Workers Union has reached a tentative agreement to alleviate concern about the potential for a strike or closings. Wells fargo ceo john stumpf struggling to quell a scandal plans to tell lawmakers today that the bank failed by reacting too slowly to sign that employees were opening millions of unauthorized accounts. He will appear before the Senate Banking committee at 10 00 a. M. Eastern right here on Bloomberg Television. Now for more on that story. David thank you. One of the senators who will be questioning john stumpf shortly is Sherrod Brown, the ranking democratic member on the banking, housing, and urban affairs committee. It begins less than 90 minutes from right now. Thank you for joining us. Sen. Brown good to be with you. David what do you already know about this scandal, and what do you need and want to know . Sen. Brown we know that over 2 million accounts were opened , openedand unasked