Chipotle is up 3. 5 today. Expect other restaurants to do well. The initiation includes stocks like starbucks. 500 is still down a quarter of 1 . We are getting some diverse action among the major indices with the now stack nasdaq and dow almost down 1 . Lets get to our top story. Lets start with the Central Banks. A massive week for Central Banks. Overseeing the fed is at the nickel of that mountain pinnacle of that mountain. Do you think that this 25 consensus is setting us up for a surprise later this week . It sounds slightly contradictory. We have 25 priced in. If we get to five, do equities fall on the back of that . Is that an opportunity . If we get 50, does it go up . I am wondering what the opportunity for the pale risk scenarios are. It is fascinating. Here is the first stop of a rate cutting cycle we have had since september of 2007. It is very unusual and a rare event. The market prices it to be a rate cutting cycle. The market is pricing 100 basis points out of the next 12 months. We are remarkably calm and remarkably relaxed. Volatility is on the floor. I think you have raised a good point. There are risks in either scenario. The fed cuts 25 and the market is worry they will not get ahead of the issue. Even if they cut 50, initially, the markets might rally on that as bigger than expected a bigger than expected action. Times wereo september of 2007 and january of 2001. Neither of those ended well. How do i position around this . What do i do going into this largely expected 25 basis point cut . How do i cover myself, going through what looks like a difficult to navigate period . We think it is supported well on the front end of the cord. Curve. If the fed does 25, the rates are going to stay low. The market will assume it will have to make up for that with more cuts later on. Does 50, the market could see turn in rates well supported. That is what is priced in. We think the front end of the core curve is supported well. Markets are returning to their highs and valuations have expanded a lot. Even as earnings themselves have been soso, we dont think is a time great time to take much risk overall. Vonnie you talk about other rate hiking cycles, have we ever seen a rate hiking cycle for the u. S. Consumer is in such a good position as the data on friday . As we saw from the date on friday . Yes, we have. The market gets lazy with this in terms of saying the consumer is fine and the economy is fine. There is a reason you see unemployment trough before a recession or bear market. Consumer confidence usually peaks right before a recession or bear market. The consumer is usually near their strongest around the time that asset prices are their highest and then they peaked. If we think back to 2001, the consumer seemed strong and the fact that it stayed strong during that mild recession, even in september of 2000 seven, unemployment was low and Consumer Confidence was high. It took a while to realize it was rolling over. I think it is a fair point. I think you have a lot of current weakness on the industrial side and strength on the consumer side. I dont think we can cite that as enough to make us relax. Vonnie when it comes to the labor market, given that we do not fully know what is happening, do we actually start seeing layoffs before we see stronger wages . That is actually our concern. If you talk to Michael Wilson are our chief u. S. Equity strategist, that is what he is concerned about. That you might actually see a relatively familiar pattern. You currently have high margins among corporate america. Those margins are starting to face more pressure. Companies, in trying to protect their margins, look to lay off workers as an initial, temporary cost adjustment exercise. The pattern of past cycles is that that can unfortunately become a self facility fulfilling cycle. Companies, if they continue to face more pressure over the next 12 months, will look to trim labor forces and that would undermine the consumer strength. Guy we have been talking about the dollar going down since the beginning of the year and it hasnt happened. The fed is about to cut rates, possibly by 50 basis points, yet the dollar remains stubbornly strong. Act asdollar going to the local shock absorber as we go through what looks like a different difficult economic period for Central Banks. Is the dollar going to act as the cushion . Will that be a problem for the fed . I think there is a risk there. If they only meet Market Expectations and the dollar stays where it is, the dollar stays historically strong, that remains a drag on u. S. Financial conditions. That does fail to ignite or push the economy forward. I do think you have a challenge that, relative to other Central Banks, the fed can always do more. Cuts easier for the fed to 100 basis points than the ecb or the boj or the bank of england. The is the vulnerability of dollar. If things deteriorate, the fed can do a bit. I dont think the fed will shy away from doing quite a bit if deteriorate. To that could lead to more dollar weakness. The ecb and boj are pouring into the Global Economy right now. You take a look at what is happening with high yield trading 360 over treasuries, intotion money pouring the space of the market. There is a lot of talk about whether the fed is going to ignite some sort of asset bubbles, if we dont already have one. What about these other Central Banks . What is the next step for the boj . What effect will they have . I think you raise a good point. The options to really move the needle for the boj and the European Central bank are limited. They can certainly do things but their ability to do big things, that seems like the feds purview now. The fed can realistically lower rates quite a bit. What i think is fascinating is the Central Banks are pouring onto the market and the overall market is strong but it is strong in an odd way. It is not indiscriminate buying. If you look at the highyield market, it is often the higherrated double bs that are outperforming. Money is going down. Underneath that rally, i think there is signs of hesitation. Investors are not really confident that growth is going to pick up and they are trying to hedge their bets. Vonnie andrew is sticking with us. Is an asset strategist. We are seeing massive movements today. Of course, the dollar is also gaining as the pound sinks. Markets more broadly. In the u. S. , we have the s p 500, down 2 10 of a percent. The dow is up 2 10 of 1 . Johnson johnson is more than 1 higher in the dow. More is also higher by than 1 . Nasdaq is down three quarters of 1 . This is bloomberg. Live from new york, i am vonnie quinn. Guy from london, i am guy johnson. This is the european close. Lets check in with the first word news. Mike pompeo spoke with David Rubenstein. He weighed in on the issue of election interference. Russia. Nt just that is bad english. I will try and correct it. There are more nations than just russia who are attempting to undermine western democracy. That has been true since the founders created this nation. We have to be vigilant. That wednesdayh at 9 00 p. M. Eastern time on bloomberg television. President trump is denying that his weekend tweets criticizing a black congressman was racist. He called Elijah Cummings bal timore district a disgusting rat and rodent infested mess where no one would want to live. He also attacked reverend al sharpton, who is traveling to baltimore to hold a press conference in condemnation of the president. He called sharpton a con man and a troublemaker. Condemned violence in the city. A top official in hong kong spoke as part of a first News Conference from the beijing office. Twoone country, does g systems. Any society would never allow such silence. Follows frustrations. Police fired tear gas and rubber bullets to clear the protesters. Is prepping the European Union to compromise. Johnson insisted he will not theybrexit talks unless refused to reopen the existing divorce deal. Business groups warn that neither britain nor the block is prepared for a no deal brexit. There would be no way to avoid economic damage if britain leaves without an agreement. Ricos governor in waiting says she does not want to take on the job. This comes after weeks of political crisis that have shaken the u. S. Territory. The official next in discussion is the treasury secretary, who is 31 years old and not old enough to be governor. The minimum age is 25. More than 120 countries. I am courtney, this is bloomberg. Lets get a check on markets with abigail doolittle. Take a look at the dow on top. Nasdaq is underperforming. Down three quarters of 1 . The dow was underperforming and the tech heavy nasdaq was outperforming last week. We do not have an alltime high for the nasdaq or s p 500. In europe, we have the dax fluctuating around even. The hang seng was down 1 . All of this could be a big risk. Investors on hold. We have the 10 year yield down for a second day in a row. Fluctuating around even. Investors are waiting to see what the fed does do on wednesday. It is expected they will cut by 25 basis points. Will there be language around another potential cut . As for what is dragging, lets take a look at some of the big tech and internet names. Is down. And amazon alphabet cooling off after a huge last week. Facebook also put up a good quarter. The stock has been down a bit after that record fine of 5 billion by the government. Paypal down 3. 5 . Lets take a look at the intraday chart of the pound. We have the pound at session lows. Down 1. 3 . Possibilitys of the of a no dear breck no deal frexit counts. Brexit mounts. Pretty fast. We will come back to that. We will talk u. K. Politics in a few minutes time. We will dig deeper into what is happening with the pound. Lets discuss what is happening with these markets, more broadly. Lets start with equities. Has it changed your narrative . I dont think it has. I think earning season has been mixed. You have had companys report disappointing outlooks. Especially on the industrial and transportation side, which confirms this idea that your pmi indicesthe globa that the Global Economy is weakening. The leadership market remains narrow. Broad markete underperforming. Confidencet suggests in what we are going to see out of the fed or these other Central Banks or that is going to lift the Global Economic picture. Guy what is it going to take for a rotation to happen . What is it going to take the small caps moving . That combination of easier policy and better growth and this idea that the policy works. For that, we are watching the yield curve. I think if you want that rotation, if you want that 2016 type of risk elevation free acceleration environment, you want to see rates a little bit higher. We are going to ease policy now. It is going to work. Later on, because it is working, they will be able to hike rates later. We are not seeing that yet. If that were to happen, i think that could be a very big deal for there would be a better market environment. There could be different leadership in terms of what works. Vonnie what are the leading indicators that you are looking at in terms of what might happen next to the equity market . It feels like every time there has been any kind of a risk of a downdraft, the president has hasted something or promised a fiscal stimulus or has loaded on the federal reserve. That has kept the market going at times when it might have been iffy. There are a couple of issues. Again, this is aside from the yield curve, which will give good insight into the markets view of will the policy work. We continue to follow the pmis and the Manufacturing Index which continues to decelerate. The new owners index remains week. That is consistent with an industrial backdrop that is still very soft and is still very concerning. Of the also watch some labor market indicators. Again, as you mentioned earlier on this program, i think markets saving grace is that the consumer is strong and nothing can go wrong there. Lining of those Consumer Metrics would be challenging, given how parts of the Global Economy are. Those are things we are watching. I would follow inflation. At the moment, the market is very convinced, the one thing everybody agrees on is that there is little inflationary pressure. Headline cpis should increase as the years go on year goes on. That does a huge amount of disruption to the current narrative. It would challenge some of the rationale. What is your advice to clients in terms of the late hiking cycle . We think the outlook or the risk reward is pretty good. The valuations are never as good as you would like them to be. I think there are a variety of scenarios where it could hold reasonably well. August is a strong seasonal month for treasuries. Of 25 fed uses rates basis points, the market sees that as fine. If the fed acts more aggressively, that could support treasuries, especially the five year and in. Given that we think that data continues to be soft, that will make it harder for rates to reprice, especially given what the bank of japan and the European Central bank and other banks are doing. I think it remains a burmese reasonable environment for treasuries. Vonnie andrew is staying with us. He will have more to talk about. Guy absolutely. 122, 17 is where cable is trading. Punch in gtb go, it looks like this. It does fantastic job. Some of them are related to the pound. That is all i will say. Gtb go on your bloomberg. This is bloomberg. Vonnie it is time for the latest Bloomberg Business flash. London Stock Exchange jumped to ecord after the company the deal is expected to be worth 27 billion u. S. Dollars. Holders receiving just more than a third. Toomberg news competes provide financial news, data and information. Exact sciences is an advanced acquire 2. 8 billion. Exact sciences focuses on early detection. Commercializing oncology tests. Quarterd a tough second profits plunging. Net income tumbled almost 70 . Buying a 69 million majority stake. That is your latest Bloomberg Business flash. Guy big market move today. It is in sterling. You are seeing it on the multiple crosses. We are going to focus on what is happening with the cable rate. The move from 12250 over the last hour is quite rapid. You isension we showed around the end of august. Whether it might happen by the end of the session. Ftse is surging. That is coming up next. This is bloomberg. Trading here in europe, it looks remarkably great today. Today, the weather is good but the stock market is going nowhere but there is one bright spot. The ftse 100 is surging today. Some of that is to do this. This big, big some of the Big Oil Stocks are moving higher. The ftse 100 is absolutely outperforming everything outs. Its up by 150 points and the dax is flat and the cac is flat. , quick look at the grr telecoms are doing well and vodafone is having a good day but there has been a good move into telecoms. It has been one of the recent sector winners. Real estate and utilities are doing ok but the real move is in those associated with sterling. Looking at the bottom and of the market, the auto sector is under pressure. Banks are also under pressure. That is partly a pound story. A quick look at some of the stocks the london Stock Exchanges of by 14 . Is up as well. Heineken is trading down. That is a look at the european close. Vonnie restaurant stocks are in the news as well. Meet is a stock thats moving well. Here is the major averages. The dow is higher and its a mixed picture of the s p 500. The nasdaq is seeing some weakness but we are off the lows. Major stocks in the dow are. Hings like disney lets get to the individual movers. Beyond meat was lower before earnings. We have seen such a runup in this stock that its quite a change. Chipotle Mexican Grill is up. Its not just an initiation of the restaurant stocks but putting too poorly on its conviction buy list at Morgan Stanley. We had a major deal and an interesting type of transaction. Its a spinoff and acquisition at the same time, pfizer and my land getting together. Mylan getting together. Itll be a new company with 20 billion of sales by the year 2020. There is no name yet but we will bring that to you when they decide on one. That is a look at your u. S. Movers so far. The u. K. Prime minister ours johnson is stepping up preparations for a potential no deal brexit with around three months to go until the nation exits the European Union. Joining us with the latest is jeff shanker meant. Got better today. Does boris care . Over 10 years ago, boris said a drop in the pound was a national humiliation. Today, his rhetoric seems different. He spoke about his need for optimism. His foreign secretary was on the radio this morning saying forecast around economic struggles around the brexit were people being too pessimistic. If he does care, hes not likely to let on because his strategy now seems to be going for a no deal brexit and showing the eu that he serious. That he is serious. Vonnie how did the narrative change all of a sudden . Neverms like it went from going to be no deal but absolutely thats the default. Boris johnson is in scotland now trying to convince his own tory minister to get on board. She has said she is absolutely not for a no deal brexit. Then he travels to europe where he will meet a whole lot of skepticism about this new plan of his. Why is everyone so convinced . You say the narrative used to be that no deal is never going to happen. You remember that theresa may also was absolutely adamant that she would leave without a deal and the closer it got to march 29, it became clear that that was not going to happen and the reason was because of the mathematics in parliament. There werent enough entities to support that in the mathematics have not changed. Boris johnson is very much about the narrative. They are briefing the newspapers and setting up new committees and planning new spending on a no deal brexit because they really need this narrative to show that they are absolutely 100 committed to leaving without a deal if the eu wont negotiate. Heay, his spokeswoman said may not even sit down with eu leaders unless they agree to reopen the Withdrawal Agreement that his predecessor negotiated. Think the markets are scared of a no deal brexit . What are they scared of in a general election . Put these things together and you look at the polling that came out over the weekend. That was a suggestion maybe the tories are making gains as a result of this no deal brexit posture. They are making gains of the expense of the brexit party in particular. And that may put the new administration on general election footing. Is it a combination of both . Go back five years and the u. K. Was a very stable economy. Whatever trust that happened in politics, things would remain on level footing. At the moment, we could be heading for a no deal brexit or we could be heading for a second referendum or a general election. Its unlikely things will stay as they are for very long. Guy thank you very much indeed. Sheets tog in andrew get his take. Walk me through the numbers on what you think i know deal brexit would look like in terms of the pound. Trading 1. 22 now so what does a no deal brexit look like . Our fx strategy at Morgan Stanley think if you look at a no deal brexit and if that comes as some is october 31, you could be talking about a pound between one dollar 1. 10 against the dollar so there is uncertainty around any forecast. That is a scenario we still dont think is fully priced into the markets by a long way. England came of out with Inflation Report and Governor Carney is trying to inject to a risk into the market and failed in that process. The market is no pricing rate cuts from the bank of england. What kind of a monetary response to you anticipate and you think with this new government, we could see that monetary response being kind of helped by a big fiscal push questio . I think the bank of england is in a tough spot. You have labor markets that are relatively tight. Brexitany models of which is hard to do, you are probably facing negative supply shock. That would raise inflation all else equal until whatever the new form is created. That also makes it harder to cut rates aggressively. To your point, i think it is fiscal policy that probably has to do more heavy lifting in terms of easing because the bank of england does not have that much room to cut rates in these other challenges. Thats whats interesting about outcome is you can create markets with the Current Administration by easing fiscal policy and addressing growth weakness and you could see a scenario where a new election could lead to loser fiscal policy in many different forms and yet the gilt market seems relaxed that these outcomes would drive any rise in rates. But so far, other forces are clearly winning out. Vonnie some of these forecasts, if they come to pass and we see a steep decline and the pound in the pound if we get a no deal brexit, are the markets able to take that across assets question mark would we see a Ripple Effect and negative detrimental Ripple Effects . This is a serious issue. I think the u. K. Is the worlds fifth or sixth largest economy. It doesnt matter. The European Union is an incredibly large economic force. That this might be something we really dont know up until the wire. March where there was a vote on ultimately the extension came at the last minute. Even the current situation, you could be down to the last minutes of the market will have to deal with this uncertainty for some time. Maybe this is part of the reason we are seeing the current weakness is investors know they will now have to go through this august where parliament is out of session and you are a long ways from getting any concrete developments and its hard to operate in that environment. Therek this matters and is still a lot of uncertainty around it and you are starting to see Options Markets and the u. K. Assets turned start to price in a wider range. Vonnie is there somewhere you can hide out in em until all of this goes away . I think em fixed income markets are reasonably well positioned where the fed is likely to ease and we dont think u. S. Yields rise much from here. They are probably more likely to decline modestly. We think the dollar could ultimately weaken because the u. S. Economy slows more in the second half of the year. Marketsthat sets up em reasonably well in a comes in the context were other things look challenging. We moved equities globally to underweight couple of weeks ago. I think thats based on the view we think the risk reward is just poor on a tactical threemonth basis and a more strategic twelvemonth basis. Fixed income markets are one of the ones we can still follow for suggested return. Vonnie thank if your time today. It is time for another highlight from her interview with secretary of state mike pompeo who spoke with David Rubenstein at the economic hub of washington, d. C. And discussed kim jongun and much more. He is right. He has managed to rise to the level of leadership in a difficult environment where he was a very young man when his time came. From my very first interaction been veryhe has candid about his priorities and how the negotiations might proceed. He has not repeated that he is declared to dean nuclear eyes. I hope we can achieve that. I go to asia midday tomorrow and i will be in bangkok for a couple of days and we hope we can have working level discussions starting soon so we can on lock the rubiks cube. Its a real challenge that he is presented with as the leader of north korea and we hope he can see his way clear so we can get that Brighter Future the president has talked about. Its not enough. The high side of 2000 every day is they need to do more and we need to do more. Congressman needs to change the rules and we need to create a deterrent. It has to be the case that those who want to come here legally cap on those who want to come by some other mechanism choose not to because they understand they will not find a way. It aint just russia. Bad englisht but there are more nations than russia who are attempting to undermine western democracy and that is been true since the founders created this great nation. Vigilant. Be ever the president has said clearly we will do all it takes to make sure the venezuela people get democracy back and thats the mission. We are closer today than we were several months ago. In the end, we will do our part in the nations of the region, we built a Great Coalition from mambers of the oas to the li group and 58 other countries joining us and understand maduro is not the duly elected president. Progress every day. Vonnie secretary of state mont mike pompeo. David rubensteins show on bloomberg tv wednesdays at 9 00 p. M. Eastern. European markets have now settled with the big disparity today on either side of the english channel. We have the ftse 100 up sharply powered largely bym a and the pound which has been trading sharply to the downside. The dax is trading lower and stocks are under pressure. Dip by a decent amount during the auction process. It knocked a few points off the ftse 100. Nevertheless, it closed at 7686. You to the top of the hour and jon ferro is in new york and i will join him in london and this is on Bloomberg Radio in the london area and all of your bloomberg devices. About the talking pound appropriately. This is bloomberg. Vonnie live from new york, im vonnie quinn. Guy and from london, im guy johnson on the european close. Lets get a first word news update. Courtney chinese and american negotiators will meet again this week or two days of talks in shanghai. Truce reached by President Donald Trump and the chinese president last month at the g20. China has indicated it will buy a good with the u. S. Is still waiting whether to ease the prohibition on wallprohibition a wei. Hundreds of tons of lead melted at notre dame when the conceit when the cathedrals roof burned sending toxic levels into the air and city officials ordered a deep cleaning for the neighborhood schools and help the 30s recommend a blood test for those who live nearby. Police and running california said they are not sure why do men opened fire at a popular garlic festival on sunday. One thing is clear is that he went with the intention to kill. Gilroy police a was armed with a rifle and cut through a fence to avoid security. Three people were killed and at least 15 were wounded before police shot and killed the assailant. Sunday was the last day of the festival that attracts more than 100,000 people to gilroy. A, covered 24 hours by more than 2700 journalists and analysts in 120 countries. This is bloomberg. Vonnie thank you. The hour. He stock of shares of dish network are down home is 5 this morning, one of the worst performers in the s p 500. This is after analysts said they see dishes a distant force in the wireless business. Taylor riggs has more. Taylor this was on the deal last week between tmobile and sprint and analysts hope this would create a fourth healthy competitor. Analysts were initially may be excited because they think that dish is an opportunity but it will be a very big uphill battle. I think they are rethinking what this whole strategy means. You can see that dish network got about 9 million subscribers. As part of the deal between sprint and tmobile, they had to sell up this business to dish network. Barclays a downgrading dished to an underweight saying it does not create a lot of upside. It atr analyst downgraded about 40 a share. Their wireless business at about 20 billion even though they are not generating cash flow and youre looking at a company the probably needs to invest 20 billion to upgrade and become a real competitor in the five g network. It will be a long uphill battle. We get numbers after the bell today. We will presumably get some form at update on whats going on with this company. What will we be looking for in terms of details . Taylor they want to talk about the wireless business but outside that, its all about the paytv business. It has been falling and analysts in a looking at Second Quarter subscriber losses to be about 240,000. Its slowing a little bit from the First Quarter but those are still pretty bad losses. You have not seen these type of numbers in many quarters. The problem is that the sling businesses slowing and there is nothing to offset these losses. Vonnie thank you and we will keep a close eye. That is our stock of the hour and coming up as our global battle of the charts. This is bloomberg. Vonnie its time for our global baffle of the charts global battle of the charts. For my chart, i decided to take a look at retail, specifically a canadian retailer bucking the trend. It is an upscale retailer popular for being worn by meghan markle, duchess of sussex. Into the u. S. G market will others are struggling. If you look at the chart, you will see the Revenue Growth as the white bar and six straight corners of doubledigit growth in a few look at sames to samestore sales, number of years of positive samestore sales. The company has been doing fairly well. Other Companies Like cap and aritzia has been Opening Stores and other retailers have seen the shift to online sales,aritzia sees the opposite. They are seeing the physical store pull people to their in a newnd bringing Customer Base of its an interesting example of one retailer thats managing to do well while others are struggling. Vonnie that is fascinating. Everything from north america to britain. I think that was an ingenious chart designed to appeal to the both of us. What do you have . Guy to quote ferris bueller, things move pretty fast around here. I am talking about the pound. Its absolutely breathtaking. Big moves are coming early and whats amazing is the Options Market is really struggling to keep up. Earlier today, the Options Market was pricing if 49 a that the pound would break below 1. 23 and we did that convincingly and in a heartbeat earlier in the session. The red line is the cable breaking lower. Regression line, much more accurate predictor of where the pound has been going in terms of the directional trade and also the duration of change of when it will get there stop that is pointing us to a 1. 22 move by the end of august. As you can see, the yellow candlestick is breaking down toward the 1. 22 level. The rates of change on the pound and it risktaking, catching most of the market completely by surprise. The Options Market is really struggling to catch up with the pound. Vonnie a weaker pound would have implications. This is a tough one. You quoted ferris bueller. Being that we will talk about the pound quite a lot and im sure you will bring it up on , ir radio show later today think i will award the prize to ahnnah. A wonderful chart. Congratulations to you too. Coming up, can the acting director of the Citizen Immigration Services talk to us . From bloombergs be ruined down 10 washington, d c, im kevin cirilli. Michael mckee on President Trump raising pressure on the fed. President trump escalating his feud with congressman Elijah Cummings. Will the fed make President Trump happier this week . Michael they likely will but not because of the president. They are looking at Economic Conditions in the markets but not a Donald Trumps tweets. He put out a couple of more today. The you and china will further lower Interest Rates and pump money into their systems making it much easier for their manufacturing to sell products. With very low inflation, our fed does nothing and probably wi