Laggards, wti declines 3 . Joe Consumer Staples and telecom leading the way, classic defensive sectors. Matt some individual stocks moving down. Bank stocks taking a hit. Pretty decent losses for heavily weighted stocks. Right aid rose the most this year, up 6 . Point 25 after earnings yesterday, initially down, then coming back today. Up, at 13 , massive move least four analysts have upgraded yelp. Some interesting things in the Government Bond market, particularly u. K. , new lows on the 10 year yield, but action as the boe has trouble with its reverse auctions, not enough bids. Better, but all time lows in 10 year yields. I want to go into the bloomberg to talk about mongolia. Bondis a mongolian euro that matures in 2022. That is higher rates on a Government Bond. They said we are running out of money, major crisis. I think investors have forgotten that Interest Rates can go up and there is sovereign risk. Matt other governments would just print more money, right . Joe the problem is they cant euros print print euros. Scarlet i am keeping and i on the korean won, strengthening. Now approaching 1000. A Government Official says if the rate falls below 1000, korean exports will be bashed. 8 against gained the dollar, 7 against the yen. The new Zealand Dollar rose as much as one point 4 against the dollar, coming before the Central Bank Interest rate decision. Ecting to cut rate tonight rates tonight, and once more before the end of the year. Joe the aussie dollar has also been strengthening sense that rate cut. Looke commodity markets, at Saudi ArabianOil Production, new highs. There was talk about wanting to squeeze producers out. They are continuing to pump oil. Oil prices tumbled. Matt internal use, right . Speaking of consumption and palladium futures, surging over 4 on the back of a sales,chinese auto palladium used in catalytic converters. Scarlet those are todays market minutes. Get more insight into todays trading and some moves ,n the energy sector, tobias head of u. S. Equity strategy for citigroup. Into into a bear market, hovering in the low 40s. Where is that going next . Our Commodity Research team thinks that end of year, early wti,year, a low 50s on low 60s by the end of next year. Relative tois soft expectations, but not seeing surge in inventories we saw a year ago, so people suggest similar to last year, probably overstating. Nigeria, reduction problems not likely to be resolved. Want tohappens, you take advantage of weakness in Energy Stocks. Oillet if you look at prices and how Energy Stocks outperformed, they have decoupled. If you look at it as a ratio to the broader market, they have moved in line with oil prices, so what does that mean for where these Energy Stocks are headed . Oil prices go up, historically stocks also go up. People look at the absolute phenomenon. Can get disconnects because all stocks are correlated to some degree if markets are going up even if Energy Prices pullback. On a relative basis, joined hand in glove. If Energy Prices move higher, then we will see this. We are not anticipating strong moves in the dollar either. Commodities are priced in dollars, stronger dollar, weaker commodities. Scarlet shake shack has just reported earnings. Sales up 66. 5 uplion, comparable sales 4. 5 when analysts were looking for 5. 4 , so a miss. Adjusted earnings per share, . 14, versus . 13 consensus estimate. ,bsolute number quarter revenue 66. 5 million. Stock tumbling, down 8 , despite fullyear revenue outlook appears to be higher than previously thought, but it saleslike comcast store are what investors are not liking. Store sales are what investors are not liking. Scarlet it trades at 117 times revenue. The average should be 37 times. Great storywas a this morning saying will be short play work on shack after earnings again this time as for the last three quarters of 2015 since it has become a publicly traded company, traded down even though earnings beat. It looks like it was getting set up for that. Back andnt to go rejoin the bias of citigroup. Rejoined tobias of citigroup. Since june 27, postgregs it postbrexit low, this market is on momentum and value stocks. Does this represent a shift . Does that strategy of piling into low volatility is over for now . Our sense is that there is a shift going on. Worst point,at the bond yields at lowes and people searching for yield. They are willing to overpay in our opinion for these defensive, save stocks with dividend yields. They stop being defensive when you overpay and dont have the safety requirement. As yields move up, income from the treasury market as opposed to dividend driven stocks, then they think about what is a better set up. If the curve steep ands, maybe financials make sense. Lets go beyond that. Eepens, maybe financials make sense. Lets go beyond that. Get 20 ,ot going to 30 , 40 Earnings Growth in these companies. You may get this in deep cyclicals like energy. They are higher than they were at the worst point last year at 26, 27. When you get to the fourth quarter, you will get positive Energy Earnings factor you will not get in defensives. High in energybe relative to these names valuation can be high in Energy Relative to these names. Four months trading left in the year, your s p target is 2150, below where we are now. You are looking for 124 in earnings. Let me interrupt. That is a mistake on the bloomberg data. 122. 50. Een at scarlet we need a correction. Matt maybe it is a mistake in the numbers. It isnt. We have tried to reach out to you guys on this. Matt i will deal with that as soon as we are done. My question is about valuations. Earnings nexted year, all wall street consensus, is that too rich for next year . Does that multiple need to come down . The fun aspect of this. It is a question i kind of hate. What is the right multiple for the market is not up to me. Its up to millions of investors to decide. You the multiples are already reflecting 4 inflation looking at history, but we look at which metrics have been best indicators for performance. We look at the cyclically adjusted pe against normalized bond yields, still suggesting it could be up another 6 over the next 12 months. Me theot about you and finding if the market is expensive or cheap. We look back objectively and see which metrics have been successful in determining stock outcomes. Joe what is your read on sentiment . A lot of people talk about market rallying despite no one likes it. Our people starting to like the market more or are they negative on it . We measure sentiment in various ways. Models proprietary thats a just april to a week and a half ago, we have lost that sentiment driver. We also track correlation by top 50 names in the s p, and that under 20 ,om 86 to warning signal, and people have given up on macro fears. , 30 billionin july dollars went into u. S. Equity oriented etfs, the biggest number and a long time, so you are saying people coming back, chasing the market to a degree, and that is taken has taken the out of the sentiment market. Scarlet coming up, the boe thousand to carry on with its bond buying program. We have the breakdown. A quick check on shares of shake after falling, down 8. 5 missing estimates for comparable sales in the Second Quarter after the company Beat Estimates for revenue, earnings per share, and forecast. The comparable sales number of weighing on the stock. This is bloomberg. Mark lets get to first word news. Donald trump held a roundtable today with coal Mining Executives in virginia. Difficultiesut the facing the industry a with other energy issues. Donald trump attacked Hillary Clinton, who is advocating a move towards renewable fuel forces. He says clinton wants the mines close. The secret service has spoken to Donald TrumpsCampaign Staff about common some say were a threat to mrs. Clinton. The remarks came yesterday and north carolina, where donald trump suggested gun owners could stop a clinton agenda. He denies of violence and was referring to political power. Says a Justice Department report accusing the department of this committing against blacks is not an indictment of every officer. Revealed a pattern of Excessive Force and unlawful arrests. There are officers right now just as offended as we are to see the details that are laid out in this report. Why . Because they wear this uniform proudly and serve the citizens of baltimore honorably each and every day. Mark congressman elijah says the report validates the concerns that residents have been expressing for years. Russian president Vladimir Putin is promising a response to an alleged terror plot and crimea. By ukraine move special forces to carry out what he calls subversive actions was criminal, stupid, and an attempt by ukraine to distract its people from economic problems. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am mark crumpton. Scarlet thank you, mark. Whatd you miss . U. K. Yields on the rise after falling to record lows. The boe says it has enough ons in bonds in a reverse auction. Here now to sort out what is , executive dan maes editor of global economics. What changed between yesterday and today . The boe was, hunting in the 15 year maturity. Today, they went down to the 715. Amongstear bracket is the higheryielding groups of u. K. Bonds. They have been at this since 20082009. Other Central Banks as well. There is not a lot of yield to be chasing. Offers quitewindow a nice thing, so why give it to the central bank . Matt if they offer you enough money. Isnt it an issue of price, i will sell my bond if you pay me enough, right . Boe will know that come back looking to fill a quota with a different maturity, why not keep the yield and sell to the bank next day . Investor. E spoke to to sell it to the boe put take a listen. Trying to buy 15 your bonds is difficult. Ear bonds isonds difficult. Is not the only place where we are seeing the central bank running into these issues. Japanese 10 year yields jumped up on concerns over concerns about running out of bonds to buy, germany, ecb. Is this all the same story or it is august and not a lot of people showing up to these reverse auctions . , how muchs technical idiosyncratic . A bit of both. The Central Banks are not going away. You will run occasionally into these mechanical issues. August has not been august since 2007. Would the boe have preferred to do this another time . Sure. They did not vote for brexit. If theyic was warned chose to leave. Guess what . They chose to leave. The boe pledged to respond. Here we are in august. They cannot do anything about the timing of it. How therelked about is a subtle shift in fiscal policy, the central bank may not have to go entirely alone, but that does not mean they will step back either. Boj officials could say there are other things we could buy. People have heard speculate that other Central Banks may even buy into treasuries. Does that seem a little too crazy . Again, if you go back to 2007, probably nothing seems that crazy now. Matt good point. Inconceivablet be for Central Banks to run into difficulties if they are buying assets outside their own country. Matt they have been reducing anyway. Foreign holders of treasuries have been reducing. Boe,et going back to the how does this experiment with the failed reverse auction change or prompted the boe to a just what it does next time . We will know more thursday when they publish a schedule of what they will buy next week. There is probably some recalibration going on here. Again, they did not ask for brexit. No one would argue with the contention that the brexit pushed the boe into this fresh round of stimulus. This is where we are. Joe one of the arguments for tenderple dont want to their bonds at these reverse is they have nowhere else to put them men, especially in countries where the official rate is negative. They would have to find some other negative yielding bond or hold cash at negative rates. How much does that create a problem . We live in an environment that has been characterized by next or bleat lower bond yields. There is a lot of cash sitting around. We have Global Growth between 2 and 3 . How do we get out of it . You tell me. Joe ill work on it. Thank you very much. Look at we are taking a the probability of a rate cut from the rbnz. This is bloomberg. Scarlet i am scarlet fu. Whatd you miss . Rateealand Central Bank Decision coming out tonight. I am looking at a chart that highlights what is going on. And the easing mode catalyst is a rise in the kiwi. Line, theur white trade weighted new Zealand Dollar, up, up, and. Theation is likely to hit target of 1. 3 , currently at 0. 4 . That is why people are expecting Interest Rates to be cut again to the lowest since going back to 2011. , probability of rate cut is 100 . Today hasurrency strengthened because people have price to that in and looking ahead. Y are also praising pricing and another rate cut before the end of the year. Yields all the way at the other side, remarkable. The latest jobs report, jobs opening Labor Turnover survey. Takes the number of job openings and divides by the number of hires happening, and then you get a proxy for the length of time it takes to fill a job. 1. 1 jobs per opening. Months for jobs opening. At thenot quite postcrisis high, but we are at high levels, speaking to the increased tightness in the market. There are lots of different factors. There are some structural changes going on. Matt i have a look at oil and gas. The Top Five Companies in america, we consolidated their debt. That is the blue column. Of oil and Gas Companies continues to climb into a drop in oil prices. Oil prices in white. The yellow i threw in their last last minute,re refining margins for the gulf coast. It continues to come down. Its not good when you have that rising as the underlying commodities are shrinking as well. Hopefully tobias is right. Macys setming up, to report earnings tomorrow. We will explain why this Department Store company is struggling, next. This is bloomberg. E to first wordt news. And new poll in the president ial race in wisconsin, and law survey has Hillary Clinton with 52 of likely voters, and donald trump 37 . In a fourway contest, clinton at 34 , johnson at 10 , jill stein has 4 . Shows mrs. Clinton has retained most of the bounce she received from the democratic convention. The Bloomberg PoliticsNational Survey shows Hillary Clinton leading donald trump among likely voters. When the Third Party Candidates are included, clintons lead shrinks closer to the margin of error. 17 people dead and 40 injured after two buses collided head on near the Pacific Coast of peru. It took place in a province south of the capital. Traveledball fans who to canton, ohio for the hall of fame game plan to sue the nfl. The game was canceled sunday night because of poor field conditions. The ap says at least 20 people have approached an attorney about a classaction lawsuit. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. I am mark crumpton. Matt thank you very much. A recap of todays action, the indices falling from recordis highs, the s p 500 posting its worst loss in a week, 2175, not far off a record high. At 5204 the nasdaq down and the dow jones at 18 495. Oil fell today, one of the big drags on stocks. Joe shake shack, the burger chain plunging. Were ok, butevenue investors punishing the company p store sales, not as good as the 5. 4 expected. Not what you want to see in a growth restaurant like shake shack, down over 8 . Scarlet we are looking at macys, the incoming ceo has his work cut out for him when he assumes the job next year. He will replace terry lundgren. Sinces macys stock price named ceo. Ren was you can see the steady decline since last july, losing half of its value. The main challenge for macys is encapsulated in this chart. People are spending their money on Internet Sales and eating out. What they are not spending it on is Department Stores and paying for things there. It is not clear what would change that trend. Helpedrise that this has to drive down comparable sales. On top of slower traffic, the stronger u. S. Dollar is weighing on sales to Foreign Tourists. Been a bright spot, online sales providing momentum with brick locations on the decline. ,o combat these challenges macys is Closing Underperforming Stores and expanding its discount offerings. Announcements, macys estill has more locations now been 2006. Slowing sales profits have attracted activist investors, pushing the company to monetize its store portfolio. The firm values macys real estate at 21 billion, double cap right now. Macys is looking to capitalize through joint ventures. We will be looking for these numbers and any announcements on property thursday morning. Joe cap right now. Lets talk more about macys and look what the next ceo has to do to turn the company around. Shelly banjo covers retail. Thank you for joining us. What is they key thing we need to look for our needs to happen when the new ceo takes over to turn the company around . The first thing we will watch for is real estate, what they will do with all that rent. It will unlock value and push macys to close stores. As soon as you have to account barthe rent, it raises the on which stores are profitable to keep open. Bestet what is the practice for macys when it comes to unlocking the value of its property. Have seen some interesting examples with hudsons bay. Sears, a reals Estate Company and spin it off into a reit. Matt that is kind of a bandaid, right . A real solution would be getting people back in the stores to buy stuff. Is that a possibility or do they have to go online . When you have too many stores, that is not helping anyone either. If all your growth is online, why are you keeping so many stores open . We ared coach saying closing 250 Department Stores. That is a roadmap for a company like macys. One of the things that has weighed on macys has been the strong dollar, not good for tourists coming to the u. S. Piece thatn your macys should be more aggressive about going international. What do you see as the opportunity there . Priority number one, but could be a priority down the road. They are finding success with stores in the middle east. Macys has a good brand name that Foreign Tourists love. Scarlet they are definitely leveraging on that bloomingdales name. Which makes me curious that they are expanding to discount stores. There too much supply in these discount chains . I agree with you that the strategy is not smart, but now it is too late. Matt can they forge better relationships with their brands . They have other important brands at macys, but dont have the strength, at least as far as i inr, like Lily Pulitzer target. You want to strengthen your ties with coach, but you should be reaching out to different brands. It used to be that upstart rands would kill to be in macys. Now they are just going online and bypassing the Department Store. Macys is seeing growth in ecommerce, slowing of little bit, but it makes sense that digital is the future and ecommerce needs to transition. What is their edge and digital . Macys ultimate compete online with the amazons of the world . The best thing they ever did was jump into ecommerce quicker than a lot of its competitors. There is that. People are used to it already. There is a first mover advantage there. Scarlet im looking at the management of macys. The chairman and ceo will be stepping down. 4. 8 5 total return analysis tenure. N that 10 yea what is his legacy . It will be mixed. The first years of his career was amazing, merging together these two gigantic Department Stores in the midst of a recession, managed it throughout the recession, and continued to get people to shop while managing ecommerce. On that side, it is great, but then he stopped. He said i have done this great thing and then it popped. Scarlet he ran out of ideas . Who knows. Change would have been better if it happened about a year ago. Matt would it have been better with somebody new . He spent his entire career there. We will see. I think he has to come out of the gate with big ideas, splashy ideas, and bold ones. Joe we just saw walmart by jet. Com, and people are characterizing that as a 3 billion for m aee any argument to be an macys acquirer of fastgrowing companies that could play a role . There are not many jet dotcoms out there. Did buy a Skincare Company not too long ago. A smart move in a world where beauty is one of the bright spots in m a. If they could find a company that help them to move the needle that walmart is hoping it can do, that they can get on the cheap, it is not a bad idea. Joe shelly banjo, thank you very much. We have some breaking news from Chesapeake Energy, it commitment, shale cutting 1. 9 billion in commitments. It will sell the natural gas supply agreement. Proceeds of about 146 million. Chesapeake also giving numbers ex, 1. 26f cap billion. 2. 4, that could go up to billion. For 2017, they could go up to 2. 4 billion. Matt they give breakdown with wide ranges. A 400 million payout to williams partners. Their gasrenegotiate gathering agreement. They are giving preliminary 2017 guide notes 2017 guidance. We dont have alix steel here. Scarlet the stock is up in after hours. Joe the stock has tripled since its low. This deleveraging process is probably why the stock is up over 200 . Scarlet for now, shares rising in afterhours trade. Coming up, no holding back. Saudi arabian Oil Production at a record high. We wait in on what this means for opecs production politics. This is bloomberg. Scarlet i am scarlet fu. Whatd you miss . Saudi arabia giving no ground on mark and on market share. Fresh data shows that saudi arabia, the worlds biggest crude exporter, boosted output to a record high in july. Earlier today, John Hofmeister assessed what this news meant for the global equation. It is in line where i think things were likely to be. Arabia, russia, and iran get their acts together and figure out they are all shipping oil while spending more money than they are bringing in with oil revenue. , we will see over production from those three countries. We dont need the oil. It is too much. The u. S. Is shrinking as production in an oversupplied market, but it would take more than the u. S. To shrink production. With all this over production and the lack of spending capital, we are sitting ourselves setting ourselves up for a price rise in 2019 when the wont be oil that the world needs. Scarlet people are worrying about a supply shortage. Investes would have to now when prices have not yet recovered to keep future oil flowing. 50 a barrel,low incentive toenough invest in capacity supply additions . That is what i meant by the higher prices in 2018 and 2019. There is not enough to keep investing now. Companies are not bringing in enough cash to pay for current production and invest in new production, so we are putting off the day at which time we will have sufficient oil to cover the demand of the world and setting up a crisis on the other side of the price spectrum. It will be a highprice crisis instead of a lowprice crisis. Instead, it will affect the Global Economy and be much more painful because people dont see the pain in the Oil Companies right now with some 400,000 people laid off with the deferral of hundreds of billions of dollars of spending, which affects everyone right back to the steel manufacturers and the supply chain, so it is a terrible time for the oil industry, but consumers are enjoying the consequences of overproduction. A point you made when you said oil nations need to get their Heads Together. Where do you see the conflict right now in terms of countries producing and knocking their Heads Together . How does they get resolved . Is on the verge of collapse, nigeria is in trouble, other countries are in trouble who are members of opec. The saudis rule the day because they have the most production capacity. The saudis are on a geopolitical agenda to say to the russians and iranians, back off. The only weapon they have our oil prices. Somehow the russians and iranians are not listening to the message, and the consequences saudi will keep producing and producing until they feel such a economic pain that they start to back off. You are hearing some rough edged talk about a production freeze. Informal meeting will explore the prospect of a production freeze . Signal, bute a whether or not that happens, we will not know until it happens or doesnt. I understand the saudis point of view. They feel a mortal threat in the region and cannot count on the u. S. For support. That is gone. Not administration will support them, so they have to fight it on their own terms and their own manner. Scarlet you describe these crossed currents nicely. It is debatable how important or critical opec is. Influence the cartels diminishing on oil prices . Will the filings do more to move oil prices on a day to day basis than what opec says when opec meets . Remembered that opec is some 30 Million Barrels a day. The u. S. Is a. 2 Million Barrels a day. In terms of the big swinger, opec remains the big swinger, led by saudi arabia, saudi aramco. They will continue to be the big player out there. The u. S. Can help with shale. We were at 9. 2 Million Barrels a year or so ago, so we can help influence global oil prices, but still the big game in town is opec. Opec is pretty wellcontrolled right now by the saudi agenda. Probably as it should be. They are up around 11 Million Barrels a day. It is a lot of oil. Producer,re a smaller you cannot tell saudi arabia what to do or not to do. Joe that was John Hofmeister. Speaking of energy, Chesapeake Energy has agreed to give up its barnett shale holdings, exiting the birthplace of the shale revolution. It will cut shipping and processing costs by 750 Million Dollars between now and the end of 2017, so this is part of a big costcutting, eliminating 1. 9 billion in longterm pipeline agreements. The stock is rising in afterhours trading, up 4 on the news. This is bloomberg. Scarlet i am scarlet fu. Whatd you miss . The pboc making a push to boost the yuans global appeal. Comes a year after china shocked Global Markets by devaluing the currency. Here to chart the story is betty liu. I guarantee we see a ton of charts on this tomorrow, but you are giving us a preview. What a difference a year makes, right . , as scarlet was saying, the markets were shocked that china devalued its currency. It was a 1. 8 move. It does not sound like a lot, but it is. Railing he markets rolling. Take a look at my chart. Lineyou can see the white ,s the depreciation of the yuan and the first red arrow is august 11. The blue line shows the s p tracking the fall closely, but then you can see it has the verged in the last few months while they markets have gone up and the currency continues to slide, but it is a more measured slide because the pboc has come out with i dont want to say restrictions, but encouragement of restrictive capital outflows, but also more communicative. An unusual move during this time, the central bank admitted they were not relaying information well enough to the market, so now they are being much more transparent, talking to the markets more, so there is more confidence. Matt part of this is the chinese broadened the basket of currencies. A that is point. All in anticipation of the added touan to be the basket at the imf. Lets pull up this chart. Of currencies, onshore and offshore scarlet it is the spread between the offshore and onshore yuan. That the rate is becoming much more fundamentally solid. Joe betty liu. On bloombergher daybreak asia. Scarlet what you need to know to gear up for tomorrows trading day. This is bloomberg. Matt dont miss this. Alibaba earnings tomorrow. At initial jobless claims . C sv i am donnie deutsch. Mark with all due respect to donald trump, next time you might want to put the safety on. Mark on the show tonight, break thatads, polls, and hope Donny Deutsch does not have a breakdown over the election. A brandnew Bloomberg Politics survey shows Hillary Clinton beating donald trump, 50 to 44 in a twoway race. The margin drops when the