We will talk to the man himself, jeff currie, later on this hour. I want to talk about what is happening in the u. K. , take a look at sterling. Marcel barnier says a brexit transition is not a given if a decent agreement if a disagreement persists. David he says never mind. Now lets turn to our top two stories. Jeffrey gun lock is right all along, the the 10year yield. L on the 10 year and keeping the government open. Lisa joining us is abramowicz of bloomberg you have the 200day moving average with the s p starting to flirt with that 200day, and that goes to be correction we have not seen in a while. We bounced off the 200day twice in 2016. Luc, have we found the bottom . I am not sure yet. Lets check out another chart. We were talking about early in january, world equity index euphoria, right now, looking at my terminal, s p 500 members are overbought. 0. 4 . The shares oversold up to about 1 3. It might be good news of a contrarian indicator, but around these time, the chinese devaluation, we actually peaked at a much higher share over toward constituents. It does seem like some of the bloodletting and the auditing of stocks has further to go. David this is what i dont get, lisa, how much is just technical . As opposed to something changing in the fundamental ongoing economy . Fundamental as the economy, people are saying it is still strong. David then why is it doing this . Lisa lisa that does not mean the market cannot reprice. Evaluationsg price have gotten too high, especially the fact that you have the low yields that are rising, especially with the credit deficit, and right now, everything is being priced to perfection of your even if there is a technical seller or a rebound, things could change. , and to havehanged the repricing of expectations. I think that is what you are seeing is people wondering how long is this going to continue, where are we going to reprice . So the conversation alix so the conversation a few days ago is this could change to the vix and u. S. Equities. What is the conversation today . Luke right now, the conversation really leads us into the bond market. Yesterday, pretty much stocks. We know the lows and bonds did not go at the highs. Yields were actually rising during the selloff. If you are talking about before selling from risk parity involved, it is not just contained to u. S. Equities, the cost of asset classes. I will say this, yesterday, if you looked at the credit default index of credit, you actually were starting to see a little bit more concerned dided in than you yesterday. That indicates it is spreading a little bit. Alix lets get to that. Come inside the bloomberg. This i totally make fun of jeff dunlap, 2. 6 , well, he was right. You can see when we wound up hitting that level in breaking through, equity markets started rolling over, and the question becomes, lisa, when do yields get impacted enough to get the private investors coming back in and chill everything out . Lisa this is a complicated question. It sounds simple, but it has to do also with supply and demand as well. Right now, what you are seeing is it is not so clearcut why a japanese investor or European Investor would buy u. S. Treasuries, because the hedging costs have risen so increased inas yields. The currency has exposures of they would have for treasury yields, we are not that highyielding, so it is not that attractive. If you dont have that bit and you have more supply, all of a sudden, the bonds can actually come out and can demand more yield. David so why are they so high . Lisa because the dollar has fallen. There is the expectation that the dollar could weaken and there is a trend there. David so it looks Like Congress will be a little less volatile at the moment. Early this morning, they passed a house and senate bill. What you are looking at is a 10year yield on the treasury. What youre looking at is money jobs numbers came out on friday, and the two verbalized in the middle have to do with the budget deal earlier this week, and the last on the right is just this morning. You can see how they do tend to go up as they come to terms here. What is the concerns about the deficit spending. . Luke i am not sure if that is something that is coincidental or something that has just happened in the last couple of cases. On the inflation risk, this idea that this market selloff is really about yields, it is really about deflation. The majority this year, and u. S. 10 year yields have been driven by premiums, certainly that has been around, but the traders who think this is about inflation should talk about the trade or inflation risk. Threeyear inflation paths are not going to show the benefits over averages over 3 or not showing any sign that people are worried about this. It is fairly low levels. Lisa i actually dont think it is a coincidence that you saw yields go higher. The figure deficit is becoming an increasing concern for bond traders. Alix great stuff, guys. Appreciate it. Lots to dig into. What are you reading this weekend . Luke everything. I did not get to read too much this week. Alix Lisa Abramowicz and bluecollar and luke kawa, thank you. Dimock joins us from arizona. Tom, a real pleasure to get your perspective after a really dramatic six days in the market. How are we set up on a potential basis Going Forward . Tom right now is an opportune time. We reported that these days ago, and we did not identify as a high risk in the market. Our objective at the time remains the same on the s p example, 2564. S the risk downside should pretty much all that level. We are looking at the market right now, really a replica of the januaryfebruary 2014 decline. If you recall, in january at that time, we turned bearish, we were looking for a possible replication of the 1929 decline. Weshifted gears and said were going back up. Our usual, that is expectation on a rally or decline. If we break that, we go to 11. 2 , and that is what we are dealing with right now. 11. 2 off the s p high. We got complementary downside objective of 15248. When you compare history, i want to go back to 2007, because that is what my mom has been thinking about, when you see this decline. Compare the s p and 2007 and now, and what you see on the downside. Tom we have a preamble, and it is called the setup. We look for nine consecutive closes, and we reported that in 1987. It hit a bottom at that time, down 10. 2 . Currently, as of yesterday, we are down 10 . Inwe are somewhat alignment with 1987. We did decline a little bit additional, and then we rally. That is what we are looking for here. We have a good chance that today could mark the love. Ideally the low. The same thing happened in 1949. Same thing in 1987. Alix part of it also might have to do with the vix. That is what sparked the drum on monday. Take a look at the the drama on monday. Take a look at the vix chart. Tom it typically does give us advance notice on what to expect in the markets. The vix back in early january identified a bottom. Broke that solid line, which we call our set of trend market, we knew that we vix was going to move to the upside. We did not expect it to move the way it did. The fact that it broke the solid line and terminated there, it tells us the vix will go higher. I think we will just move sideways with the vix, but we got to play it almost week by week to determine if it will go higher. It looks like it exhausts itself. It was unprecedented. And asked why did the same thing. Xy did the same thing. S p, the a semion the queue qqq, the new york stock exchange, they are all there, but they are all invalid or disqualified brakes. If they had shifted to qualified brakes, we would have extended decline, but it does not look that way yet. Right now, we are on a deflection point, but it looks like markets will turn up. Alix commodities have been holding in. Equities have really started to roll over. We have seen a downside for oil in particular, a 60day moving average. If we take a look at where we are, have we bottomed in commodities . Tom i think so. I think bonds need about two more down closes, the 30year bond and the fiveyear. More down closes i think successfully lower, they should exhaust to the downside, pricewise. That should exhaust as well. I do not know how it will be explained fundamentally or resolved, you know, with the bonds price moving up and the stop moving up at least temporarily but i think they will move in unison together. Alix tom, i love getting your perspective after a tumultuous week. Tom demark looking for the bottom, demark analytics, thank you so much. Coming up, more on the markets as we wrap this tough week for stocks. Here is where we set up for the year. We are still up by about 18 for the doubt, but we are negative on the year. It has been a brutal week for stocks. This is bloomberg. Taylor this is bloomberg daybreak. Yourtaylor runs with Bloomberg Business flash. Amazon is setting of a Delivery Service to compete with ups and fedex. They are shipping was los angeles in the coming weeks. Pick them up from thirdparty merchants and ship them to consumers. Qualcomm has rejected the Largest Technology takeover bid in history. It is what broadcom calls its best and final offer. That leaves the future of the proposal to be decided by shareholders next month. China has waited almost 25 years. Now the world was the biggest oil buyer is getting its own contract. Starting next month, china will start lifting oil futures in shanghai, seen as a challenge to the benchmark, west texas intermediate and brent. And that is your Bloomberg Business flash. Alix thanks, kailey. Here is what some experts had to say. It will go on much further, much further, and be much more with thet than spending behavior, and that could start to influence sonomic outlook, but first far, i would say we had a 10year correction, off 10 , 11 , 12 . We had more than a couple of 10year treasuries. I will argue it is not really done, because these things take time, and it is hard to have such a dislocated without having all kinds of wreckage around that you are not expecting. This is much more great online, getting priced in. It was not a big deal, but now that its unwinding, and the dollar market is realizing the decline from qe, so we have to be ready. Week, 30. 6 billion last u. S. Equity funds seeing 33 billion. By far, the u. S. As a that got hit the hardest. Join us now is Darrell Cronk, Wells Fargo Bank cio. Thinkl right now, we equities are approaching they are not quite there yet a good level. Places just say, alix, where you can try Topline Revenue growth, places like financials, industrials all make sense at this moment. The fixedincome market, it is probably time to play a little more defense than offense right now. David give us the call. We are approaching the point what assumptions are you making, for example, about Interest Rates . Notties are 3 , and 2. 5 . Darrell it is likely. David what is that due to equities . Darrell moore downside, david. I think the key 200day moving average is important to watch. That 2538. If we breach that, we probably do extend lower. Started up early this morning, now we have turned them negative. It looks like we might have a little more downside yet today before they really step in. Alix Paul Mortimer of bnp paribas has my favorite quote on the spirit the problem is the gap between the Monetary Policy has become a sort of nannying, handholding, overprotective fairytale, and the return to the. Dult real world is jarring reality and fantasy have to be reconciled. Do you agree with that . Darrell i do. But whatever adjective you want on it, extraordinary in monetary stimulus. The narrative is turning quickly from monetary stimulus and a slow and gradual walk back from that to almost extraordinary fiscal stimulus domestically, right . Bill, have got the tax. Nd now 300 billion in a year if you annualized that over a fiveyear, 10year period, you are talking about almost 1. 5 trillion. David the budget is almost as big as the tax reform deal was, and we made such a big deal about tax reform. Long was a time not too ago, global synchronized growth was going to bring us out of this alix like, 10 days ago. [laughter] david exactly. I can remember that. How much of that is similar because we had more and more you start notonce seeing that leverage, the global Dividend Growth does not look like it is growing so much . Darrell i may disagree there a little bit, david. I think the growth story is intact. In fact, if you want to talk about the budget deal, that additional high government strength adds to gdp growth, not detracts from it. It causes concerns in the debt longterm and where Interest Rates ago, but it is actually gdp confident. Verye story is still strong, not just in the u. S. But in europe, and that is the difference, i think, where the concern was around gee, are we heading to a global slowdown, like when china caused those problems . David come back to your call. Are you seeing the benefits from this . It is that increased rates coming up more volatility, so can the benefit get smaller . Darrell absolutely. Your margins should expand. Basically back to where we were in october, november on 10 spread. ,lix all right, Darrell Cronk you are staying with us. David in the end, congress came up with a way to keep the government going, spending more than 300 billion a year. We will look at what that means for the federal deficit next. This is bloomberg. David early this morning, Congress Finally agreed on a budget that will he the government funded for two years and put off the debt storm for a few years. But they are borrowing another 300 billion a year, which may not take the federal deficit to a new record, but it does come close. This chart shows the federal deficit going way back over time , and where it goes down, the federal deficit goes up. In 2007,ly plunged 2008. It is coming back up as the deficit is going back up. Schenker. E now marty shanke a turn. A heck of marty it is. It is basically the government giving a home equity line. They can write checks for the next year at whatever level they want without any control whatsoever. So we have to hope nobody forecloses. Marty that is correct, david. Darrell typically at this point, you have the factory contracting, not expanding. Ins could be 800 billion the deficit, next to 1 trillion. That is very unusual with a tolerated gdp and record unemployment where we are. David this all goes back to some of the concerns about inflation, that we are ramping up fiscal stimulus. Darrell that is right. The real key, you just heard about wage inflation. Wage inflation with productivity i growth is good inflation. Without it, is not. David marty, what about fiscal hawks, deficit hawks . What happened to that . Marty deficit doves. David not one person stood up and said this is too much. Marty it has been a startling thereal, gop values, that is no issuing any fiscal restraint whatsoever. If this but it had been delivered by barack obama, there would be republicans [laughter] be boycottswill with signs. Marty yes. This would not have happened. I would not discount the bipartisan nature and this 72 democrats won a lot of a house and this pulls 72 democrats went along in the house and this goes both in the senate and in the house. Darrell i do not know if it is good. I think they will still take a run at it. It is infrastructure money in this budget, 29, but the real 200 billion the president is proposing, that will take a lot, david. I do not know if they will get there. David marty schenker, Darrell Cronk, thank you so much. Coming up, we will hear from jeff currie of Goldman Sachs next. This is bloomberg. Alix this is bloomberg daybreak. I am alix steel. We made it, everybody, to friday. Futures are down by about 95. A big selloff in emerging markets. Over to europe, you can see the dax almost felt by 2 . It is still trading in the u. S. , but less than we thought throughout the rest of the world. This will no doubt be an active trading day as you head into the weekend. The safety trade, dollaryen actually on the upside of. 1 . It is a mixed dollar story today, and the stories continue to be south, bond, sell, bond, yields moving higher at 2. 3 . The vix still elevated route the week, and crude below a 50day moving average, 100day moving average, only three dollars away. What technical downside could we see . Lets get an update of what is making headlines outside the business world. Kailey leinz this year. Ailey congress ended a brief Government Shutdown. The house narrowly approved 300 billion that will extend the debt ceiling for a year. A number of republicans and democrats voted against the measure. Rand paul blocked the senate vote for hours. He was angry about the billions of spending increases at the center of the deal. For the first time, a member of the dynasty that rules north korea is visiting the south. Kim jonguns sister will meet with south koreas president moon for lunch tomorrow. In china, inflation at the factory level is moving. The price index rose 4. 3 in january from a year ago, the Third Straight month of slowing down. Worldsgests that the biggest trading nation will not be passing on much inflation to the rest of the world in the near term. Global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. I am kailey leinz. This is bloomberg. Alix . Alix thank you. A Global Market selloff, one market that started some type of chain bulk. You are looking at a normalized , the bulk is the blue iem is the red line. Goldman sachs last week upgraded their rank calls over 80 if this months and double down today on the bullish stance of commodities, driven by the robust backup. Joining us now is the man behind that call, jeff currie, Goldman Sachs global head of commodities research. What do you make of the last few days . Jeff i think the Global Financial markets have been a case of what we had last year, meaning you have shortsellers, momentum traders, the Systematic Trading strategies, trading down drafting the markets, and i think when you look at the position, it is much tighter. Once you break through these limits, boom. Remember, oil had corrections last year. It was a difficult year for us last year. What we are seeing is that now spreading to the rest of the financial markets. Alix if you take into account well, for example, copper below the 100day