Years, along with china and others. Alix and today is the start of the fomc meeting, and hes been putting a lot of pressure on them. What are you guys doing for me and my growth . David it is fascinating that hes really accusing them of being a currency manipulator. Alix we have another headline crossing, saying that they a rate cut as a primary tool for stimulus, outlining what draghi said. What is surprising in that headline is that the rate cutting will be the primary one. David particularly because he mentioned Forward Guidance and the asset purchase program. Now the report is that when they do it, they are going to do it through the rate cuts. Alix to me, the question is how much lower do you want to go . You are already at a 40 basis points. How low do you go, and what does that mean for your tltro, the longterm Borrowing Program . David and ultimately, is that going to get them to do percent get them to 2 . They havent gotten close. Alix our other story is facebook, so staying with currencies, moving from euro to cryptocurrencies. Facebook launching its new cryptocurrency, where you can pay for stuff using it on facebook. It really wants to help make up a lot of the revenues. Big names are behind it, like visa. David and uber and mastercard. No banks involved whatsoever, and the other Tech Companies arent as well. But they have some pretty grand ambitions. They wanted to be like the dollar eventually. Alix later, bloombergs Joe Weisenthal will speak to facebook about this. S p futures continuing to grind higher, now up 0. 5 . If you get stimulus somewhere, that is going to be good for the equity market. President trump tweeting out about the euros on the euro zone unfairly moving its currency. Six basis points lower for the german tenyear, 31 basis points. A stones throw away from the deposit rate for the ecb. David at 8 30 this morning, we get u. S. Housing and Building Permits numbers for may. At 10 00, u. S. Trade ticket terry u. S. Trade secretary Robert Lighthizer testifies before the senate. Tonight at 8 00 President Trump will officially begin his campaign for reelection at a rally in orlando, florida. He needs florida to win, he thinks. Alix yeah, you think . Lets go to bloomberg first take. We are joined by Michael Mckee and lanan. New and prolongation of risks has weighed on exports and manufacturing. If the absence of improvement such that the sustained inflation to our aim is threatened, additional stimulus will be required. Alix and the rate cut a primary tool of that. A surprise were not . Michael not a surprise. There are reasons why they would want to do that. If they were to do quantitative easing, theyve got a question about how much they can buy. They would have to change the p. They can only by change the capital key. They can only buy so much. They would have to change those rules, which could be very complicated and could raise constitutional issues in germany , which has a law against financing the debt. That is a real issue for them. The Forward Guidance at this point hasnt really done a whole lot, so that leaves rate cuts. If they do additional rate cuts, the problem they have is the impact on the banks. , andcould do tiering that might be easier than designing a new qe program at this time. David why will more make it better . Lanan they say mario draghi has gone from whatever it takes to whatever is left. It is not a sure thing that things are going to be better because in the markets, perhaps the ecb has run out of room anyway. Everyone already sees they are reaching the limits of qe, sow much further can they really go and affect the economy . There is also a broader context here. German Investor Confidence is plummeting. They are dusting off their for curve flattening ors. Flatteners. David lets go to the fed. They will start their meetings today. A survey of bloomberg economists says it is not just the Market Pricing in the cuts. That gold part shows how many people think there is going to be a cut. So what do we expect . Michael we expect them to signal that they are willing to make a cut if the data will let that happen. It is going to be a tough needle to thread for jay powell because hes got to tell the market that without panicking the market and giving them the impression that the fed know something that they dont. They will probably drop the word data,t and wait for the which is probably going to be the jobs report, and then maybe move in july if they need to. They are reluctant to do it, but if they have to, they will. Alix the money market is looking at 10 points in an ecb rate cut in december. We saw that just about an hour ago. In the race of who is more dovish, is it the dollar or the euro . Lananh the euro doesnt have much more to move. Investors which were very bullish on the dollar are now starting to bailout on those positions. Citi mentioned they are seeing a slight short on the dollar. The broader context is that the bank of america fund survey is now the most pessimistic since the crisis. This is the context that we are looking at, everyone getting very bearish on markets and getting very pessimistic. From most crowded trade equities to treasuries. We will bring you full coverage of that fed decision tomorrow beginning at two a clock p. M. Eastern. That brings us to our third story, which is how investors are navigating this market without flipflopping trades all over the place. How literally can you invest . [laughter] it isl i dont know, but a change in the entire way you look at the markets from what weve had for the last 10 years. The last 10 years, the fed is spoon feeding you accommodation, and you can just put on a long trade, and that what the market did. Orchids grew last faster than the economy over the last decade, and now markets grew faster than the economy over the last decade, and now that is no longer true. You have an unpredictable president who people cant figure out what is end game is. They dont know which one of those paths he is going to choose. David when we talk about the plight of the european banks, it cant be good for the u. S. Banks what is coming out of the fed. Lananh it is not. Weve gotten signaling that the trading environment is very poor , and people are very worried about what is happening in trade. Investors have become very cautious and bearish. It feels like people are really trying to stay on the sidelines. Morgan stanley has all the bases covered, but the general point is that investors are worried about trade regardless of what happens. Even if we get some hints of a deal, that is only going to postpone concerns about growth for a few months. And lananh l mckee nguyen, thanks very much. You can check out all of the charts we used and more at gtv on your turn tomorrow on your terminal. Mario draghi announced more stimulus could come. President trump says theyve been getting away with this for years, along with china and others. This is bloomberg. Alix european headlines coming fast and furious this morning. Ecb officials see a rate cut as a primary tool for any new stimulus. The bund yield is complete dropping. With us is bloombergs matt miller. Michael mckee was talking to us about how this wasnt surprising, and yet the market seemed surprised. Matt certainly the market was surprised. But mike is saying is that it wasnt surprising given what mario draghi had outlined this morning. Mike makes one of the most important points, which is if you heard what draghi said, he seemed to already be making arguments that he has the legal jurisdiction to change the rules on quantitative easing, on what key,can buy, the capital etc. I think you may be worried that they will be challenged if they do try and buy more bonds. Mike made that point, and i think it is a very strong one. To move just continue the goal posts back further and further in terms of when they are going to raise rates next, and it really hasnt helped markets. The key here is to look at the fiveyear fiveyear forwards, and you see european Inflation Expectations dropping, and that is what has worried mario draghi sintra. Ybody here at alix you can say the same thing when it comes to the u. S. And japan, all rolling over or staying near zero. Any word on that President Trump tweet that basically through some basically threw some shade at mario draghi, saying he was manipulating the currency . Matt i havent heard any word officially from the ecb, but lets see if President Trump thinks Jerome Powell is manipulating the currency when he comes out with another dovish tilt at the fed meeting. They all have clearly got to keep Economic Growth up. The ecb doesnt expect growth of any more than 1. 2 this year, half of what they expect in america. Aty dont expect inflation 1. 6 until 2021, and that is still well below their 2 target, so hes got to do something. T is a little unfair that any move he makes is accused of manipulating currency, but on the other hand, who is in many relating currency . David thanks, matt. Allianzis neil duane, Global Investors global strategist. He is willing to do whatever it seems thatrio draghi hes willing to do whatever it takes. Very littles physical restructuring happening in europe. European presidency and a lot of things are up for grabs, hes trying to say pick the right people because europe needs to be restructured. The second thing is i think hes also trying to bind the hands of his successor. I think hes very clear that potentially, if a rea if barnier gets the presidency, the northern hawks are all known to be slightly less tolerant, so i think hes trying to constrain the successor to come. David which presumably would be trying to avoid a policy mistake , but is it really going to address the underlying problem . The problem in europe right now is that Interest Rates arent low enough. Neil i think hes already made the policy mistake. I think for japan and germany, negative Interest Rates has not created a spending boom as it has in the u. S. Or u. K. It has created more savings. The germans are saying i have a number that i wish to save. If you take money away from me, i save more money to reach that number. As alex mentioned, it is going to hurt the weaker banks. Alix so what do you do when you have the german tenyear at 31 basis points, when you have italy at like 2. 1 . Neil what we are seeing generally around the world there is still a flood of money back into the u. S. , which explains the perplexities of u. S. Dollar strength. I think the dollar still looks the safest place and still has a yield attached to it. Yield, and i think for many european investors, including Big Insurance Companies like allianz, they are stuck with this even though they know it is going to generate no return over the next 10 years. The rules still leave them rather stuck with some of those rates. David do you follow everyone else rushing into bonds . To bonds or certainly increasing in value. Is wewhat is interesting have seen a rotation into real estate, but only the u. S. Has seen that refocusing where i am going to take the risk in the equity markets. Much as i always come in here and say you should take your profits and look elsewhere, they show very little appetite. Alix what has been performing is the defenses, like utilities, safe haven real estate, etfs even. Is that where you would want to be going, or are you looking at cyclicals . Neil i am still looking at the growth cyclicals. Certainly the banks arent investable in many of these cases, and not even being allowed to merge, but i think in terms of valuations, a lot of europe stock now does look very attractive and under loved. Even if you thing about the big five, you can focus on cisco here in the u. S. I think there are stories out there, but it is difficult to make a blanket advice to buy europe because the headlines can get you every morning. Alix commerzbank now expects the ecb to cut the deposit rate by 10 basis points in july. David it strikes me as a little bit like the United States, where markets are forcing the feds hand. It is almost like the markets are forcing the ecb. Alix we will see if they listen. Coming up, flip flopping strategists. Credit suisse doubling back on its call, and j. P. Morgan flip and the switch on credit. We will discuss the world of binary risk. This is bloomberg. Alix investors looking for direction and market analysts arent sure what way to go. Credit suisse says they see a chance of a melt up just two weeks after scrapping their overweight call on stocks. On balance, we think there is more chance of a melt up than a melt down. Meanwhile, jp morgan Asset Management was recently bullish on credit, and now calling the future bleak. I think credit will continue to do well because earnings are. Till looking pretty good youre still having flow through a fiscal stimulus into corporate earnings, but the future looks pretty bleak. Still with us is neil dw ane of allianz Global Investors. You cant have an investing longterm an investing strategy longterm with that. Neil weve been selling this rally all year because we didnt understand why it rallied. I find it interesting that the s p is up nearly 60 nearly 6 , and we are talking about regrading, and i would still argue that the fed cutting rates means the next thing that happens is you get serious cuts to corporate earnings, potentially rising defaults in the banking sector. Riskt see this as a on moment. With the bond market heading towards 2 , it tells you the world looks pretty dark out there. Onid we all tend to trade trade. Is that the whole story . If we didnt have a trade problem, with every other issues investors would be concerned about . Neil i still think the story that happened here in november, the tech story, is still undermining a large part of investor sentiment. The broadcom morning last week i think is symptomatically there is no going to be there is not going to be any second half uptick in the tech sector. I think that disruption will slowly flow through important parts of the sector, and your retail Sales Numbers are bumping along, but it is the only good bit of the u. S. Economy. Very little investment, very little housing, even with lower rates. I think we are on quite thin ice. Our theme is the hunt for income. We dont see the recession just yet. Alix selling equities seems to be a popular trade in the latest Fund Managers survey at bank of america. If you look at overweight equities versus bonds, you see how that reverses in the last few weeks. Are you getting caught up in the momentum of the selling . Do you need to rethink that part of the strategy now . Neil to be honest, i was wrong last year in wanting to take risk outside of the u. S. Equity market, which cracked down to everybody in q4. 2019 has been a slowing, fragmented economy. We still didnt see the chinese economy picking the rest of the world up. If you thing about making America Great again, what i call keeping china great again, as of the two largest economies in the world are trying to internalize their sources of growth. That means others have defined their own sources of growth. They are not restructuring to create it. Problemshere are still of pretty dull outlooks into the second half of the year. David give us some hope here. [laughter] david is it india . Brazil . Indonesia . Neil i think the structural reform is happening in china, india, and indonesia. I think indonesia and india are just not big enough to get the Global Markets very excited. Clearly we are seeing a lot of disruption. The news about facebook overnight could be yet another threat to the Financial Service in the street, to consumer behavior. All of these things are still out there. Technology is still undermining a lot of business models. I dont even have facebook. Alix oh my goodness. [laughter] alix neil will be staying with us. Coming up, markets arent giving up rate cut expectations without a fight. We will look at the good and the bad in the u. S. Economy, and how those can drive the fed over the next 48 hours. This is bloomberg. Is bloomberg daybreak. It is a central bank fueled equity rally we are seeing today. European stocks are the outperform performer, with the exception of european banks. Mario draghi saying rate cuts are still on the table in terms of tools the central bank has, and reportedly central back Officials Say the first line of defense is a rate cut. Bad news for the banks, but good news if you are a bond bull. You are seeing monster moves into all yields. The 210 spread in the u. S. At 20 basis points. The german tenyear is a record low, down seven basis points. Eurodollar now at a twoweek low. All of this made even more interesting by President Trump europe isaying that unfairly moving its currency after mario draghi spoke and gave thumbs up to potential he cutting. Mario d, is that what we have to call him now . David that is his next name. But you are seeing pingpong and backandforth between the ecb president and the president of the United States. Alix to your point earlier, thats what he sees as the biggest threat, any sort of unfair currency devaluation hurting the u. S. Export market. Wanted jaylways powell to cut, right . Now hes thinking mario draghi is ahead of us. Alix china has backup pboc, europe has backup now. David how come we cant cut . Alix exactly right. David now lets find out what is going on outside the Business World. Viviana hurtado is here with first word news. Viviana President Donald Trump seems to downplay the attacks on ships near the persian gulf. The president telling time attacks were very minor. After being asked whether he was considering military action i wontran, he said, say that. In hong kong, chief executive carrie lam is trying to diffuse protests over a controversial extradition bill has rocked the city. She made a personal apology today. Lam i personally have to shoulder much of the responsibility. Controversieso and anxiety in society. For this i offer my most sincere apology to all people of hong kong. Isnt givingl, lam into calls she should resign, and hasnt officially withdrawn the legislation that would allow extradition to china for the first time. President donald trump formally kicking off his 2020 campaign tonight in orlando, florida. He says he has a number of bets that make them a good choice for reelection. The latest gallup poll has his Approval Rating at 43 . No incumbent has been reelected since 1952 while under 48 approval. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im the vr tonto. This is im viviana hurtado. This is bloomberg. Alix the fed kicking off their policy meeting today. The expectation for policy changes are low, but markets are expecting signals for rate cuts this year. We will act as appropriate to sustain the expansion. The fed taking a more cautious attitude on rates and reconsidering, in effect, the last rate increase they put in. I think thats good. We saw a Downside Risk to the outlook. That would be a factor that would call for a more accommodative policy. I think they should we consider. Over the years, the fed has become way to data dependent, and the data swings all over the place, so i worry. What is important is to just keep an open mind and keep being data dependent. I think we are just going to look at how things are evolving. I would rather be patient and let events unfold. Increasingly, the fed may be in a lose lose situation. Alix here to take us through policy, and bad of bloombergs taylor riggs and Michael Mckee. Kick it off with the good. Michael this is totally unfair because any actor will tell you it is more fun to play the bad guy. In this case, thats what the markets are looking for. Heres what we are looking at. The ism services index. Really got a lot of attention. Unlike the manufacturing Side Services index really got a lot of attention. Unlike the manufacturing side, manufacturing seems just fine. Doesnt suggest the economy is about to go into recession. Of course, fridays retail sales number a big bump up. We are also seeing strength in hourly earnings, still above 3 . That should continue to boost outlook and the spending outlook. This is the dollar index, representing what investors think about the u. S. Economy relative to the rest of the world in terms of growth. Obviously we are doing much better than everybody else. We had the reaction of Mario Draghis comments today, but still a strong dollar suggesting we dont think the u. S. Is going to be necessarily collapsing. Point, the signs are mixed about the economy, but there is still a case to be made for the fed sitting. For the case for fed rate cuts, lets go to taylor riggs. Taylor let me see if i can do that. One of the indicators we are looking at is inflation , cpi, core cpi now falling to 2 . Morgan stanley says the threemonth annual core cpi dipped in may to the lowest since 2017. Fiveyear Inflation Expectations from the preliminary university of Michigan Survey in june showed it falling to a record low of 2. 2 . I want to stick with the university of Michigan Survey, that preliminary reading in june. Tos limitary estimate fell 97. 9, below expectations of 98, and falling down from 100 levels that we saw in may. Going back to some of the manufacturing and hard data we are getting that is showing a little bit weaker, the new York Fed Empire index yesterday bumped a reading in june, falling to its lowest since 2016. All of the manufacturing surveys have been flipping as well. The ism manufacturing in the Morgan Stanley Business Conditions index all dropping in june as well. David thanks so much to taylor riggs and Michael Mckee. Allianz is with us. The feds datadependent. Which data . Neil wages are still growing relatively healthily, so i think they are under no pressure to cut rates at all. Save whatu have to they have until you see the whites of the slowdown. David lets say they basically dont change their position at all. No signal of cuts. How will markets react to that . Neil i would expect to see the rates market in particular may take one on the chin and have to recalibrate. I think most people i speak to you are expecting july rather than tomorrow anyway, so people would have to focus on that. But what will change in the next couple of months, if you are the fed and you cut now and we get a trade deal, you are going to look like an idiot after the g20. If they dont cut now and trump and xi dont even talk to each other, and the rhetoric gets worse, they have some more ability to calm the markets. Alix so if the fed needs to pave the way a little bit, what is the key to doing that . Neil im not really an expert fed watcher, but they really should be playing a longer game than this. They are now worried that they are not hitting their inflationary targets. Does cutting rates by 1 2 or 1 4 of 1 , if they do any cutting i think they will cut to zero. David they are not hitting their 2 target, but it is not wildly off. Wages are inflating at a nice pace. Real wage gains are substantial. How certain do they really need to be . This is not what mario draghi is facing in europe. Neil we are much closer to a recession. David but why is the expedition down so much in the United States . Neil i think what weve been seeing to some extent, oil has to 76, taking some pressure off. A lot of the super cyclical parts of the u. S. Economy are now slowing down. They are not recessionary yet, but we havent got a housing boom or a building boom. It is not really kicking back in , which would suggest a loss of confidence. Alix so you like em. Does the fed need to be dovish for you to continue to like em, or is that irrespective of what the fed does . Neil you have to go where the income sits. Theres a lot of political risk. I would probably avoid brazil or mexico, where the politics looks pretty toxic, but i think india or indonesia look fine. Wouldnt go anywhere near south africa or turkey either. You have to be quite selective, but unfortunately thats where we are left with zero Interest Rates and quantitative easing beckoning. You have to take some risks on that return. David in that world, does that mean you need liquidity . You want to go shorter term duration, have access to your cash when you need it . Neil many Fund Managers are struggling with a lack of diversification. Things have either all gone up or down, so they have been very difficult things to hedge. One of the things i like is trying to be contrarian. Even if you look around the sectors in the u. S. , some that are even really unloved, maybe they wont be hit as hard if the love sectors rollover. The u. K. Has gone through brexit changes, and no one around the world owns it. That seems an interesting hedge to me if you want to earn some returns. Alix are you also banking on Central Banks and emerging markets cutting we saw chile do . Neil i think everyone is going to be fighting for growth, but in the back of our mind, we have to recognize that is the power of china. China is not helping the world grow in the way it has the last 20 years. The u. S. Is quite a domestic economy. Even if the u. S. Continues to grow come of the rest of the world doesnt benefit. I think the risks of the second half, which i end up being more cautious of, is i do think trump will go to tariffs on japan and , and that will be popular. So i think the trade friction will roll on in the second half. David as we go into the second half and 2020 is closer and closer, the residential election will be a prison with everything. Neil i also think will be a prism with everything. Neil i also think people need to this is the anniversary of the Chinese Communist party, so he even has a political rationale to push back against the president has well. The politics play at many different levels, unfortunately. David really good point. Thanks so much for being with us. We will bring coverage of that fed decision tomorrow beginning at 2 00 p. M. Eastern. Coming up, so the bees sold. We will take among up, sothebys sold. We will take a look at the winners, coming up. This is bloomberg. Viviana this is bloomberg daybreak. Coming up in the next hour, peter pret, ecb chief economist. Here is your Bloomberg Business flash. When it comes to mba programs, Student Satisfaction surveys dont always line up with school rankings. That is one lesson from the latest Bloomberg Businessweek study. Inspiringchool for and supportive instructors, virginia, followed by byu. To no ones surprise, harvard topping the list of schools where the main and prestige attract recruiters. Harvard resending an admissions offer it made to a student who survived last years shooting at a high school in parkland, florida. He was a conservative defender of gun rights at a time when classmates were pushing for more gun control. He is saying harvard withdrew his offer to enroll over series of racist comments he posted online. Facebook is unveiling a Digital Currency it wants to eventually rival the dollar. It is called libra and will be a socalled stable coin, a Digital Currency that lives on the blockchain and is pegged to established government currencies and securities to avoid massive fluctuations in value. At the earliest, libra comes out next year. Later on bloomberg, we will speak to the head of the facebook digital coin initiative. Reports of corporate misbehavior and harassment have fallen to their lowest levels since october 2017. That is when allegations against harvey one steen harvey. Einstein corporations are more sophisticated in the way they manage bad behavior and negative pr. Im viviana hurtado. That is your Bloomberg Business flash. Alix thanks so much. I was talking to the head of a big pr agency. He was saying if you dont have a strategy for me to, you get get oneor me too, you and you are proactive about everything. David and get a defense to make sure it happens in the first place, not just the message if it comes out. Alix what was it, like avoid women at all cost, which had whole other repercussions . Pence like how mike doesnt have dinner with other women than his wife. Nomuras buyback strategy. Japans biggest Brokerage Firm announced it will buy back as much as 1. 4 billion in shares. Ubs pushes further into automation. The swiss bank boosts its automatic trading force, adding robots to handle derivatives and etfs. And third, sothebys sale winners. A 2. 2 billion sale to investor net 257 ini will cash for each share sold. Basak, i want to kick it off with nomura. They are trying to change stuff up to present something a little bit better. Sonali but lets be clear, this buyback plan is coming out of pointed defense a little bit. They had a horrible profitability in the last couple of quarters and the last year, and now they have this big information leak, and people want an ouster of the ceo. Theres definitely heat on the ceo going into next week. David take the unit that was involved in that scandal. They say they will sell that and buyback shares. I think it is kind of a clever twofer. Sonali it is definitely a clever maneuver. Andy chairman as well, we are seeing calls to make sure the chairman is not in and the chairman as well, we are seeing calls to make sure the chairman is not in charge. David he will be cut back and not in as big a role. Sonali the proxy Advisory Firm which called for this change, and also the change for the ceo and ouster as a whole, we will see how shareholders react next week, as we have seen in a lot of u. S. Banks. It is not hard to get leadership turned over in the middle of a very hard time, so lets see if they have the patience to turn around and fix this mess. David so the best way to fix it is to have machines do it, right . [laughter] david you cant blame a robot. Thats our second story. Automaticanding its trading, going to derivatives and etf funds tied to corporate debt. I guess this is the wave of the future. Sonali you cant blame robots, but you can blame the guy who makes the robots. Electronic with trading in bond markets is it has taken a very long time to take off. Marketsthe equities completely overhauled, and now bonds are the big elephant in the room. You can do it for more easily traded bonds and data come about what ubs is doing is pushing out on the curve a little and saying lets take some Credit Derivatives and bond etfs. Alix one of the big things is liquidity. A lot of these bonds dont have liquidity, which in essence is the problem. The next thing is the sotheby deal. With sotheby going private, it is a big shift in all of these Companies Going private, rich People Holding art, basically. Two big french investors. Does he really think hes going to make money about this make money on this . Sonali it is about legacy, i think. Is thatncial reasoning the income is pretty volatile. It is also, from a financial perspective, a longterm bet on are making anho investment. David so this is like going into Wealth Management in asia. Sonali check out how it did in Public Markets also. Sothebys was not really performing. David not for some time. Sonali so the idea is to take it out of the public eye and have it compete with those who do not have to deal with these quarterly earnings, and maybe do better than his french billionaire counterparts. David the thing i love is sony. Hes been after sony forever. Says let me dond with the other way around. Keep the entertainment and selloff the other part. He did a 180. Sonali that is the whole thing. How do longterm shareholders feel about this . I was covering sony when he was doing the last campaign. The real on 80 is thats the real 180 is what people dont 180 is whatreal people dont like. A be there is some sense that shareholders have reacted pretty well. Formberg has a new function activism. David thats great. Sonali you can trace how you do compared to the activists. David if they spun it off as a separate thing, Sony Entertainment could be bought by someone else in a time when there is huge consolidation. And japan is opening up to activism. The idea is maybe this can be a more friendly discussion then last time around. 100 page slide, coming in prepared. David our thanks to sonali basak. Coming up, the Trump Administration is set to replace sweeping curbs on powerplant production. Thats whats next. This is bloomberg. David this is what im watching. Know,a as you President Trump had a plan, a clean power plan, to cut emissions by 2030. Now we have President Trump, and he doesnt like that. President trump is about to come out with a plan that says i dont think i want to do that. Lets leave it up to the states. We will have some general guidelines. Get as efficient as you can with Efficient Technology with existing technology. Alix certain states are already doing this. California has been super front and center. The only issue is when california makes certain rules because sometimes when it comes up to their car emissions, it poses an issue to carmakers within that state. David there are two issues here. One is the environment, of course. But also, the confusion between state and local, and federal on the other hand. California has certain standards. The Trump Administration says we dont what you do have those. We want you to be more lax. Alix coming up, Cumberland Advisors cio will be joining us on this big bond rally ecb day. This is bloomberg. Alix whos the dovish of them all . Ecb president Mario Draghis has rate cuts are still an option, while the fed kicks off the fomc meeting. President trump takes to twitter, accusing the euro area and china of manipulating their currency. The Trump Administration orders another 100,000 troops in the middle east. David welcome to bloomberg daybreak on this tuesday, june 18. We had a very busy day at the white house today. President trump will officially begin his Reelection Campaign tonight in orlando, florida with a rally. He promises there will be a huge crowd there. Alix and hes been busy on twitter, talking about mario cuts move the currency, and that is unfair against the dollar. I david against the dollar. David against the dollar. David i think he is concerned that mario draghi will get ahead of jay powell in the fed on rate cuts. Alix we are seeing some unbelievable moods within the bond market unbelievable moves within the bond market. Yield down almost eight basis points in the u. S. In germany, 32 basis points, dropping like a stone. A huge amount of buying comes in. If you wind up seeing a rate cut, you are 40 basis points. What does that mean for bund yields . What does that mean for banks . Youre seeing sweden in negative tory tory negative territory now. France down. Eurodollar also at a twoweek low. That is going to be range bound with the push and pull from the fed and the ecb. The bond market is really captivating everyones attention here. France down 10 basis points, right at zero. You can borrow in france for zero. If it it is stunning, but is right, what does that say about where we are going with the Global Economy . Especially with europe. Time now for the warning brief. At 8 30 this morning, we get u. S. Housing starts and Building Permit numbers for the month of may. At 10 15, u. S. Trade representative Robert Lighthizer testifies before the senate on the trade war with china and the usmca. At 8 00 tonight, President Trump will officially begin his campaign for reelection at a rally in orlando, florida. Alix to cut, or not to cut . The implied probabilities of a fed rate cut are all on the rise ahead of a fed meeting tomorrow. Mario draghi said fed rate cuts would be his primary tool. You can see the blue line of an ecb cut. Joining us now are david koto, Cumberland Advisors cio. I want to start with the move in the bond market triggered by mario draghi. What do you do with yields in france at zero . Today is the 46th anniversary of the founding of my company. David congratulations. Guest thank you. 50 years in this business, and never did i think 12 trillion would be negative Interest Rates, and we would be talking about cutting rates at a time there is a shooting war in the middle east and oil is not going up. You and i did a panel years ago at the New York Athletic Club on energy and oil. Could you have ever forecasted any of this . And if you can forecast anything , how can you guess what will happen tomorrow . Its impossible. David i guess my question is are the markets accurately anticipating what is going to happen, or overreacting to a lot of Headline News . At ubs, weur view dont believe the fed is going to cut rates. We believe they are going to stay on hold through the end of 2020. We will be listening very carefully to the fed statement tomorrow to see if there is any change in the fomc statement. For example, removing the word patient. We will be looking at the dots. We will be looking carefully at chair powells news conference. In our view, the economy looks too strong for a rate cut right now. We have unemployment at 50 year lows. The consumer is strong. We are not at the point yet where we expect the fed to cut, but we will be listening very carefully tomorrow. Guest laura is absolutely right. When you look in the weeds and look at the pce, all of the technical computations, they dont say cut. The Unemployment Rate at 3. 6 doesnt say cut. At seven you doesnt say cut. If i were on the fomc, i wouldnt vote to cut. David but what about the breakevens, or the survey on Inflation Expectations . They have really taken a leg down. Guest it is a marvelous question. How much of that is driven by the zero Interest Rate policy on half of the world, and what would it be if it would normal if it were normal . Not that we will get a normal, but what would it be . The indicator is so distorted now. You are open to a lot of risk. I think the risk in markets is higher than people surmise, and use historical references and they use historical references which were developed in different climate in a different world which were developed in a different climate and a different world. Alix you are not expecting any kind of cut, or at least a more dovish fed. What is the snapback potential, then come on wednesday . Then, on wednesday . Stayinge are diversified across regions. We are overweight to u. S. Emerging markets u. S. , emerging markets, and japan. We are short treasuries at this point in time because it is very difficult to position when you have this type of uncertain environment, particularly when one of the biggest risks is around trade policy. The outcome is very difficult to predict. World superpowers arguing over some very thorny issues. I think at this stage, the best we can do is maintain a. Iversified portfolio economic extension will continue to play out while protecting the downside. David do you necessarily have to shortened duration . What does that mean for capital duration and future growth . Guest terrible. We have a bad climate for capital formation. That is why capex is down. The short side is your safety net. On the stock side, it is harder. We have a cash reserve. We had it for several months. We may have it for i dont know how long. I can earn 2 without risk. What do i do to go find a return that justifies taking risk . If i look at assets, i see bubbles. Even San Francisco real estate is rising again. Alix so when it comes to the , we mentioned the dots. We mentioned patience. Specifically, what do you look for to see that the economy is in a better spot . What are the keywords . Guest a little softer, a little patient. Pledge. This recurring we are concerned about the economy. Concerned about growth. No references to the political thumping they are taking, which i wish would stop. It will never stop. That is what the fed has to do. A little clue. Go look at what the 12 Regional Banks do. The last report of the 12 Regional Banks, not one of them called for a discount rate that. That was in prep for the last discount rate cut. That was in prep for the last meeting. Look at the Regional Bank president s and what their boards do on discount rate cuts. That is the way they can message. All 12 flat, no change the last report. David laura, as we look at the fed about to meet before the decision tomorrow, can they ignore what mario draghi said this morning . What david said is part of the reason there is pressure is what is going on around the globe. If we are having yields come down even further in europe, can jay powell and the fed say we are just going to ignore that and put a lot more pressure on the curve here . Laura i think that does influence inflation in the United States. Looking at the fed forecast of inflation will be another critical metric to look at as part of the next statement because if we see that the fomc expects inflation to remain persistently low or go even lower, that will be an indicator to us that perhaps they are more likely to cut. Very important indicator we will be tracking. K co. Talk David David David kotok and laura kane will be staying with us. Coming up, more on market strategists flipflopping on calls. This is bloomberg. Viviana this is bloomberg daybreak. Korean airlines agrees to buy 20 boeing aircraft valued at more than 6 billion. Rival airbus coming back with another big order. Saudi arabia and airlines agreeing to buy another 65 a320 jets. Select technologie is expected to have an enterprise value of nearly 328 billion, triple the value cited at the last funding round. The Software Maker goes public in a direct listing on thursday. Union isderal credit suing over the name chosen suntrust and bb t over its new ruist. Ed service t the bank to be known as truist will be based in charlotte. That is your Bloomberg Business flash. David i think thewae close theo their name without breaching. Alix whats in a name . David a lot, if you are cocacola. It can make a big difference. Alix well, when we read about maybe the max will get taken out, that is going to fix it. Floated munie firm and goldman was like, no. David the first person i heard saying they should rename the ng, President Trump. [laughter] david hes pretty good at branding. Alix that is entirely true. Flipflopping strategists. Investors looking for direction, and market analysts arent sure which way to go. You have Credit Suisse saying they see a chance of a melt up. They wrote, on balance, we think there is more risk of a melt up then a melt down, and find that we are more positive than most of the clients we meet. And at jp morgan, they are calling the future bleak. I think credit will continue to do well because earnings are still looking good. You are still having the flowthrough of the fiscal stimulus into corporate earnings. What the future looks pretty bleak. I want to start selling rallies in here, say highyield through 40 basis points. Alix still with us, laura kane of ubs global Wealth Managementd advisors. How do you deal with the fact that no one knows what to do . Trade aside, put the Overall Economic picture looks good. We have a strong consumer, low unemployment. Even Business Sentiment actually looks pretty good despite all of the uncertainty in the markets. When we look at the fundamental picture, we are quite positive. When we look at the prospects for corporate earnings, it has slowed since last year, but still ok. Yes, we have to wrestle with this large, looming uncertainty around trade. Our base case is that we get to some sort of deal by the end of the year, which would be a positive for the markets, but in the meantime we are diversifying our exposure and staying exposed to the economic expansion. David in the United States economy, it is all about the consumer. How is the consumer doing . Retail sales have bounced around some. Can the consumer support the economy almost no matter what . 150 millionre are some people working, getting incomes that are gradually rising. The answer is yes. Insulatedlly somewhat in consumer goods, and very much so in services. Overweight the Health Care Industry in the u. S. Not a civil tariff has been levied in health care not a single tariff has been levied in health care. Think about it. No tariff war in the health care sector. So we are segmented in the United States, but the consumer is there. Absolutely. Alix how nimble are you right now, or should you be . Weid k we are not laura are not going to overreact to any one piece of news because we are getting news coming out every day. We are recommending you have your Financial Plan and stick to it. That being said, we are making moves where we can to protect the downside. We want to stay exposed to secular Growth Trends in the tech space, Digital Advertising being one of them. We are being overweight in consumer services, which has less exposure to trade then technology. So where we can, we are meeting adjustments, but we are not overreacting to every piece of news. Alix fair point. Laura kane of ubs global with management, thank you very much global Wealth Management, thank you very much. David kotok is staying with us. Facebook unveiling a new cryptocurrency called libra, and hoping it could rival the dollar. This is bloomberg. Alix time now for bottom line. We look at three Companies Worth watching this morning. First up, facebook officially launched its cryptocurrency. Libra is what it is called. What the head of blockchain for the company had to say. We went the blockchain route because we will have come a by the time we launch, 100 different global organizations that will participate in the governance of this new network and currency. 27 organizations right now, so we needed a way to do centralized governance because one comedy should not control a network that basically is a protocol for value. Alix some companies agree. Visa, mastercard, paypal. The banks, not so much. They already have their own payment thing. We are going to go our own way. David andy regulators might have something to say about this. We will see and the regulators might have something more to say about this. We will see. I want to turn to slack. They are about to come out with an ipo, expected to be over when be over0 billion 120 billion. They are doing extremely well. It is really growing substantially. Alix what is more interesting is it is a direct listing. You only have two big banks. David like spotify. Alix they are splitting 22 million of fees. David but if they go out at like triple the last round of valuation, it is a big step up taylor is a big step up. Are the third thing we looking at is this years Paris Air Show. It is something we expect to happen before the end of this year. My guess is that by sometime in the summer, it is going to happen. Alix joining us now from the Paris Air Show is Brooke Sutherland of bloomberg opinion. What is the word on the ground in terms of boeing . Are orders starting to come in . To see ae are starting little bit of orders, but i say a little bit because yesterday was crickets. You really heard the ceo Dennis Muilenburg strike a tone of humility, saying they are doing everything they can to get the 737 back in the sky, but that is not necessarily translating into orders for the time being. They did get an order today for 7s from korean airlines, but still a significant deficit to airbus. It is expected to squints the market for middlemarket aircraft after the 737 max 8 crisis. David if airbus is ahead of boeing so far, how much of that is because of the 737 max problem . Would they have had some struggles anyway . Brooke it has been interesting because airbus has gotten orders for this extended range version of its bestselling jet, and i think there is a lot of appetite for that. Theres also been comments by airlines that say they still want the boeing middlemarket aircraft, that they see an opportunity there. I think obviously the 737 max, you cant deny that that is a cloud right now. We have many orders for those planes, and i would be highly surprised if we see them before the end of the week. I think there is too much uncertainty. No one knows for sure when regulators will feel comfortable putting the plane back in the sky. It has become political football, and that raises a whole new level of questions for these customers. David bloombergs Brooke Sutherland, thank you for joining us from the Paris Air Show. Still with us is david kotok of Cumberland Advisors. What do you make of the boeing phenomenon . If boeing loses to airbus, it is a longterm strategic loss for the company. I always look at boeing as number one, airbus trying to catch up. We had a little conversation offcamera about this change. It is a major change for the United States. You always look at theimport numbers. At export import numbers. It was the preeminent supplier. If they are losing that position, you dont get that back in a hurry. It could take decades to get that back. Big deal underway here. A little question we dont talk about is the Currency Exchange rates from the buyers. The second thing we dont talk from his the leasing rates the Aircraft Leasing companies, which are providing the finance. I am wondering how much credit spread widening is there because of the max . Nobody talks about it. It is hard to see it, but it cant have gotten any tighter. I am concerned about boeing. I think boeing could lose the number one position. Alix that is david kotok of Cumberland Advisors. Thank you very much. 0 on your 10 year over in france. It looks to be headed to negative territory. David french bond has lost over 10 basis points. Italy has lost 19. Alix 32 for germany. Unbelievable moves. Coming up, the prospect of more stimulus leading this surge in bonds. We will speak to an ecb former chief economist. This is bloomberg. The latest innovation from xfinity isnt just a store. Its a save more with a new kind of Wireless Network store. Its a look what your wifi can do now store. A get your questions answered by awesome experts store. Its a now theres one store that connects your life like never before store. The xfinity store is here. And its simple, easy, awesome. Alix this is bloomberg daybreak. I am alix steel. Historical moves being made in the bond market. Futures reacting to potentially more easing from the ecb as mario draghi says he has tools in his toolbox and ecb Officials Saying a rate cut as their primary tool. European bank stocks are actually up. 2 . I would assume they would be totally hammered as were seeing unbelievably moves in the gilt market. 32 basis points for germany. France at zero. Sweden at zero as well. The curve continuing to flatten. Off the lows, but still flattening is the word of the day. It seems like the currency market is somewhat more stable. We are in a two we glow, but were President Trump saying i do not like what you are doing with your currency. Mario draghi props it up and that is not fair for us. Not sure the markets are paying attention to President Trump on the currency. Alix i mean it will be range bound. You wind up having the rhetoric coming out with a push and pull between the fed and the ecb and that is putting a crimp on any kind of big selloff in the euro. David we did get housing numbers which beat survey. Versus 1239. The big news is in the european bonds. Alix and the bond market in the u. S. As well. Two,t perilously close to the lowest level since 2016. At some point you get overbought. A bank of america fund manager said u. S. Treasuries have been overcrowded. U. S. Equities to u. S. Treasuries, at what point you get overbought . David it was two weeks ago that the 2. 05 call on the tenure alix 175 1. 75 seemed crazy. David how the world has changed. Lets go over to central mattgal where bloombergs miller is sitting down with the former ecb chief economist. Matt . Tt peter, great to talk with you. President trump basically said it is unfair that mario draghi suggests stimulatory measures at a time when the currency is already falling against the dollar. That offers the european manufacturers and unfair damage. What you think . Peter the president of the United States tweets on something that is normal communication of the president of the ecb. The strategy of the ecb has always been clear. The prices have been much weaker recently. I think the communication is in line with the strategy. Markets reacted to this clarification, given the fact that news had not been good on the inflation front. I think we should not exaggerate the impact of the communication of today on the Exchange Rate. The moves have been small and have to be put in perspective. There is also a lot which has been sent by the president of the ecb which was conditional about further news. I think we have to put it into perspective. He willrio draghi says offer additional stimulus if the Economic Outlook does not improve. It has not in the last few years youve been the chief economist. Is there any years to expect it will . Peter i think things are improving on the Wage Inflation front. If you look at the latest data on wages, it is positive. The question is you have a lot of uncertainties on the external side so you should not put the blame on the ecb policy when the International Environment has deteriorated related to uncertainties related to trade. You have to put things right. It is true you have a situation where there is a lot of Uncertainty International trade. Then you have a weakening of the european economy, which is depending on trade, and then you have the Monetary Policy communication related to that. You have to put the sequence right. I think it would be good to stabilize the International Business environment. That would be the priority. The Exchange Rate issues are second order sort of issues. Matt what do you think about the first tool mario draghi could reach for . Is a rate cut his first move . Peter im not in the ecb anymore. Matt youre an outsider see can tell us what you think. Peter i think all the measures that have been taken by the ecb, there was always an assessment of the combined effects. Not have an does impact, it is the combination of these measures together. You have to think carefully about what you do when the time comes. Matt it seems like Forward Guidance has not had much of an impact. Peter that is not true. Matt where do you see it . Peter you think about the last Forward Guidance announcement. Markets were somewhat disappointed because you had a number of bad news, especially on the inflation front. Five years was not good. There was a little bit of the markets waiting for a signal from the ecb that if things continue to deteriorate, they would do what is necessary to stimulate the economy. That has been the communication of mario draghi. He clarified it today. Also talking about the signatory in the inflation target was marketsor marcus for and you see that in market reaction. The currency developments are not the objectives. There are some side effects on the currency markets. They are quite limited. He would nott said raise rates through the summer say019, then 2020, he could 2050 and the five years would still be diving. Doesnt he have to do in Interest Rate cut or bring back quantitative easing . Peter what is important is the optionality, to make the options more credible. Markets want to be real the markets want to be reassured if the market if conditions do not improve, do. Ou have the necessary tools markets have reacted in a trustful way to the communication. Matt you talked about mitigation. Do you think we could see tiering on a european level . Peter if the ecb would go further down with the Interest Rate, i think it would issue. Der the tiering so far the ecb has concluded that the negative rates would not impair the transmission mechanism or the bank lending function of banks. If you go further negative, they will look back at the issue. My former colleague said that to you recently. Matt he also said the biggest issues facing the european economy have been in manufacturing. I thought it was interesting because im living in germany, they make a lot of stuff. Is it a good idea to have a german ecb president owing mario draghi . Peter the nationality should not matter. Matt do you think it would . Peter the personality the skills, in europe these things matter. I think confidence and good communication, that really matters. If you look the ecb in the last 20 years, you will see three president s. There has been a lot of continuity. The Ecb Governing Council is not only the president. It is all the members, and that is been quite collegial. Matt i heard you talking about continuity today. Similar but iever trust the institution can manage a continuity well. I believe that. Different butl be the environment would also be different. I am trustful in the institution. Matt thank you for joining us. Former chief economist at the European Central bank. Back to you. David thanks a much for a timely and important interview from portugal. Lets get a look at headlines outside the Business World with bloomberg first word news. Viviana in London Conservative Party members will again whittle down the risk the list of candidates to succeed theresa may. The second round of voting is later today. Boris johnson is the clear favorite. He has picked out the support of prominent brexit supporter. Over to hong kong, where carrie lam is trying to diffuse protest over a controversial extradition bill that is the rock the city. Today she personally apologized. Shoulderonally have to much of the responsibility. This has led to controversies and anxieties in society. For this, ill for my most since i offer my most sincere apology to all people of hong kong. Viviana carrie lam is not giving in to demands she resigned and she is not officially withdrawn the legislation that would allow extradition to china. Donald trump seems to downplay the attacks on ships near the timean gulf, telling magazine the attacks were very minor. Asked if he would consider attacks against iran, he said i would not say that. Iran ran denying u. S. Allegations it was behind the attacks. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. This is bloomberg. David . David thanks very much. Geopolitical risks from iran to china. Well hear from one of the nations most experienced and accomplished military leaders, Stanley Mcchrystal. He is joining us next. Alix we dont breaking news that the Deutsche Bank ceo is said to consider replacing the cfo. A lot of turmoil there. He is looking at replacing the cfo and that may lead the Investment Bank in a dual role. Thats coming out according to some reports. D theres a magazine wex this is something thought about as the Investigation Continues and continues. It looks like theyre considering replacing the cfo. This is bloomberg. Viviana coming up later today, Hilton Worldwide ceo. Alix more news on the Deutsche Bank headline. The ceo said to be considering replacing the cfo. There was an article earlier that talked about the ceo considering replacing Garth Ritchie as head of the Investment Banking operation while remaining cfo. Definite management shakeups. The cfo will be replaced. David we will see how it develops and what actually happens. It seems he is getting the message the estimate changes. He has to the message make changes. In the meantime it is time for follow the lead. Today we look at the world of geopolitics from iran to china through the eyes of one of her most experienced and accomplished military leaders. As a four star general, Stanley Mcchrystal commanded forces in iraq and was in charge of forces in afghanistan. He is now a senior fellow at Yale University and is responsible for several books on leadership. We welcome general Stanley Mcchrystal. Gen. Mcchrystal thanks for having me. David lets talk about iran. You know that area well. When we hear the u. S. Will send 1000 troops, what is that for . What would that accomplish . Gen. Mcchrystal it could be protection of existing forces, but it can also give new capabilities. Iran might be using new technology or doing new actions and it gives the military the ability to counter those, specifically. David during your service and iran, you may not have fought directly against revolutionary guard, but they were one step away from what was going on over there. What can you tell us about your playbook . You have any doubts there behind the attackers . Gen. Mcchrystal i do not. The signature makes great sense. The Iranian Revolutionary guard is an extraordinary competent force that operates with hamas, it operates inside syria and against itoperate through proxies but also representatives there. They are clear eyed about strategic objectives. A regionalto be power, which is a rational objective for a country like iran, and they use their military power, sometimes directly but more often indirectly with great effectiveness. David are they under the command of the leadership of iran or are they a force on their own . Gen. Mcchrystal it is different than the United States. The commander of the force is an extra very leader. He is a lead from the front, very thoughtful, hardnosed leader. He probably has a role unlike any uniformed person in the United States. He probably has more autonomy than anything we would see. David weve heard from mike pompeo we will do whatever it takes to protect shipping into the persian gulf. We have the capability to do that if they wanted directorships . Gen. Mcchrystal they can make it very difficult but yes we can. We can protect shipping like we did the 1980s. We can threaten iran, not with Nuclear Attack or invasion but with force and kind. What itthe question is will take to do that. David what should the goal of the United States be . How can we play this to get the objectives we have with respect to that regime . Gen. Mcchrystal first we have to decide what our policy in the region is. For most of my career of the 1980s and 1990s, it was about the flow of oil. That is not as important as it once was. The stability of the region is key. We have key nations we are allied with. Saudi arabia, israel, and others. What we have to have his original picture of what we want the region to look like. You think about that. Iran will have a role. Whether theyre a Nuclear Power or not, they will be a regional player. We have to figure out what we think the role should be and understand they will not take dictation from us and go execute that. It will be region some kind of agreement. The same with the situation in iraq, the situation in lebanon, in syria. All of those are pieces and apostle that fit together. If we do not have a Strategic Blueprint of what we like it to look like, it is hard to work for that. David how badly do we need the europeans to be part of that nowtegic loophole right they are expressing doubt, even about the intelligence. Gen. Mcchrystal i think we need the europeans badly. We are at an age where nations of the world have to work together. If you look at when you do not have the support, you try to do an embargo or sanctions against a country like iran, if everyone is not on board, the embargo does not work. You have to do things by alliance. The importance of allies, whether it is ships and tanks, is less important than the kind of diplomatic support we had for a while and we have to work back toward. David lets turn to china. That is another big contest of a different sort. Starting with trade and commerce, although there is tension in the South China Sea. A largerut that into Historical Perspective of a fast rising number two power over taking a number one power . Gen. Mcchrystal we tend to think of china as a four, backwards country that suddenly wants to be a first country. In the mind of the chinese, it is a return to the middle kingdom, which was the center of the world. They had a bad couple of hundred years and now they are back. We have to think of them as a competitor but also somebody we work with in the future because they are a reality. They are very aggressive economically, diplomatically in terms of tying up things like commodities around the world, engaging in places like africa, so we have to pay great attention to that and be more engaged. Militarily, they are still behind us militarily. They upgraded enough capability with a of raise the cost of fighting them militarily. What weve seen in the South China Sea just makes it much more difficult for the United States to waive the military stick and to intimidate them. The line between the economic and the commercial is becoming blurred. Our leadership this is a National Security concern, not just a trade concern. How much of this is a National Security concern . Gen. Mcchrystal it is an important National Security concern. When you look at how the government of china and racks with their economy, it is clearly a different relationship than we have. ,hen they compete with us whether it is giving technological secrets or doing digital interaction, it is all part of a national policy. Theres a much greater sense of national direction. Given that relationship, is this a zero sum game . Gen. Mcchrystal if it is, we are problems in the future. We have to view it as more than that. We have to view the idea that china continues to get more wealthy in the world, use more resources, have greater say, but not at the cost of the United States. The United States since world war ii had disproportionate economic, military, and diplomatic power. That was a historical aberration. That will not come back. In 1946 we were half the worlds gdp. That cannot last. Ist we do not want to view the idea that it is a bipolar world or try polar world where the zerosum game makes people competitive to the point where you start to invite military action. David general, great having you here. Thank you for your time. That is general Stanley Mcchrystal. Alix here is what i am watching global yields plummeting to record lows whether you are in france or germany or sweden after dovish comments from mario draghi. Here is taylor riggs with more on the moves we are seeing. Taylor you just listed off the entire countries of europe. You have germany a 32, japan 12, france at 0 , a record low, and the u. S. 10 year hovering just above the 2 level. We are taking a look at a gauge of global Interest Rates. 1. 57, the down to a lowest since december of 2017. We spoke with the chief economist of Deutsche Bank last week, and what he said is that when you take a look at all of the negative debt outstanding, which is almost a 12 trillion, not necessarily the levels of the rate at which we got here. Six months ago that david going debt only about half that amount. Concerning how quickly and how far we have come. Here with that means is you have the tenure falling back down to a 2 . The threemonth tenure now down to 18 . We are now inverted for 19 straight days. Interestingly, the 2. 10 is not moving. Even though you have the rally in the 10 year, you are also seeing a rally in the twoyear yields as markets are expecting the fed to cut. Alix thank you so much. Twoyear yields down by five basis points. Joining us is marc chandler, bannockburn strategist. Did you think he was see the 10 year bond yield and 32 basis points . Arc im still trying to get my head around the negative Interest Rates and what is the floor. The irish hadreer hiked rates to 1000 before they devalued. We know there is no ceiling for Interest Rates but we know there is a floor for Interest Rates. 100 basis points. Alix that will be something if we get to that. Think the move is justified based on what mario draghi said earlier today and bloomberg reports a rate cut will be the first tool in the ecb kit . Marc what mario draghi told us is he set a low bar for more stimulus by saying if inflation does not move back towards its target, more stimulus will be necessary. He mentioned not only rate cuts, but besides the rate cuts he would take measures to mitigate some of the negative implications which brings back the idea of curing, not giving the negative Interest Rate at he also mentioned the resumption of asset purchases as a possibility and he mentioned the rules that guided the program before our contingent on the condition their responding to. I think mario draghi will not tie the hands of his successor, who will come in in october and show the ecb has a range of tools and the bias is to use them because inflation is not moving toward target. Alix how does that set up for the fed when President Trump came in tweeting . What will it take to get some upside to the dollar in the fed meeting . Marc the dollar is nearly firm still. We dipped below the 1. 12 level on the euro today for the first time in two weeks. The low for the year is 1. 11. There is talk about the currency from the u. S. , whether it is president s were president ial candidates, i thought we had an agreement not to weaponize the Foreign Exchange market by talking about it. Countries are allowed to change Interest Rates and i think that is all mario draghi indicated. Qe, the u. S. Was pursuing some people claimed this was a currency war, and i would argue against it. Monetary policy is not 05 is not zerosum. Alix appreciate the conversation. Marc chandler. Unbelievable record moving bond day. David within seems like a race to who can get lower faster. Alix a race to cut. Up on the open, jim caron of Morgan Stanley. This is bloomberg. Jonathan from new york city for our audience worldwide. Im jonathan ferro. The countdown to the open starts right now. Jonathan president mario draghi making the case to pass more stimulus into the european economy. Accusing the ecb of weakening its currency to gain an unfair advantage, piling more pressure on chairman powell as the fed begins its meeting in washington. 30 minutes until the opening bell. Stocks higher. We are positive 17 points on the s p 500. The treasury market yields lower by six basis points on the 10 year to 2. 04 and the euro softer. Eurodollar 1. 12. Lets begin with the big issue. Mario draghi raising expectations stimulus is coming. He has reemphasize the fact that his toolkit is open. The power of the toolkit is still viable and he is leaving that in the hands of his successors. Precommitting to further easing
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