The doe says it may be time soon. Two and through. Scandal forces steve went from the home of his empire. And, a synonymy of earnings reports. I am pretty confident with the capacity in our business. We will stay disciplined within the capital framework. We are interested in being the most profitable. On bloomberghead best. Hello and welcome. I am Ramy Inocencio. This is bloomberg best. Of the mostreview important Business News, analysis, and interviews from Bloomberg Television around the world. Investors enter the week on edge after the dow dropped 2 , then on monday the plunge continued. The Dow Jones Industrial average losing 1175 points, a four. 6 percent decline, now off 1. 5 . Last week we had the selloff occur in the context of a monotonous rise in treasury yields, whereas today yields have come off a little bit. It suggests the first time was about Risk Management and position reduction. About earnings, and it has been about earnings for the last week and investors are notng may be tax reform is a great story for all companies. That created a little selloff. That got investors spooked. We are getting some price discovery right now. This kind of disorganized selloff, this will only go on before someone steps up and says there is an opportunity in the selloff, and it does not have to take that long. Overall Global Equities from this time yesterday have lost 2 trillion in market cap. Markets are on the verge of getting disorderly, then you get regulators and Central Banks interested. The equities selloff extended to asia and europe after stocks in the United States recorded their biggest oneday drop in six years. Credit suisse buying back one of its Exchange Traded funds, triggering volatility. Pretty interesting story. It has ironic element to it here at all in investment banks have been waiting for in recent months and years is the return of volatility. Now volatility is back and the first product is blowing up. We had reports earlier they were considering buying it back because of the rise in volatility, so this was a bad against volatility. Now the bank is confirming we will fight back this note in the next two weeks. The implication of that is that investors will lose money. The stoxx 600 worst day since june 2016 come up big drop, far cry from the drops and asia and the u. S. It is a global contagion. We got ourselves into a moment to market. All it takes is a little prick and the air comes back out. Tumbling after its biggest spike ever, but the spike already did its damage. Right now we have not had a normalization in the vix curve. If you look at the spread versus active contracts come up that is what it is tracking today. We are trying to get this normalization and volatility. We are still working on normalizing and we are not there yet. What a difference 24 hours makes come the dow recovered. Rom yesterdays drop it was not a straight up move, down, up, down, little changed, but then we close to near our highs. The market selloff sorry, we rebounded. At what point do market selloffs translate into real economic ramifications . Where would it have to go to see that in Consumer Behavior . I think there is a sigh of relief at the Federal Reserve. The market is finding out stocks dont only go up. We just eliminated a significant amount of shortselling, which was a proxy for picking up yields, which was a reflection of low interest rates. The short answer is i still think it is early and the implications are not significant. Tonomura has apologized customers, writing we sincerely apologize for causing significant difficulties to investors. This is a list of products we believe can be bought that individuals and institutional investors. You look at these products tied to the vix, where they were a few weeks ago is a tremendous shift. Is this shakeout done . We will see. Half the assets are gone because of the inverse side. The long side is still doing fine. These are popular products. That nomura statement was interesting. Says weologizing, but think it is ok for individuals. I think these should be labeled or make clear these are for power tools, or you could call them exotic, but there are a couple that made the news this week. Etfs better leveraged and track volatility. I put oil futures in this category. Tools, they are trading where as the large majority of etfs are investment products. Bank of England Holding rates unchanged. As the boerging turns hawkish, suggesting it may need to raise rates faster than indicated. Market is say the interpreting this as a hawkish hold, different to november. What was interesting about the Market Reaction was in november, ltu saw sterling drop, gi yields drop. Today, the reverse of that in other direction. Markets have started fully pricing in a rate hike in august the probability of a rate hike in may was just over 50 . Now it is 75 . Is may likely . At thatve been looking for a while. They did not say one in done. Soe like two and through, they have given us fair warning another rate hike is coming. U. S. Markets entered a technical correction yesterday dow and s p 500 fell 10 from the closing highs in january. Stocks were hit hard in asian trading. The buzz word is this is a healthy correction. In line withewhat 1987. We did decline a little additional, then we rallied. We have a good chance today could mark below. Ideally we close down the day and start up next monday. 1987 is farcical. That was down 23 in one day. Up 70 over the last five years, and unchanged over the last three months. The motion is adopted with out objection. Voting to pass a twoyear wretched deal, ending a Government Shutdown that started at midnight. The bill raising federal spending by 300 billion dollars and extending the debt ceiling for one year. President trump is set to release his 1. 5 trillion infrastructure plan on monday. No one is showing any fiscal restraint whatsoever. It is basically Congress Giving the government a home equity line with no upward limit. I would not discount the bipartisan nature of this. 72 democrats went along in the house, and this will pave the way as we look for to the daca debate next week. Still ahead as we review the week on bloomberg best, thanks, oil producers, and automakers among the Companies Reporting earnings. Thee, we dig deeper into turmoil that shook markets with three officials from the Federal Reserve and some of the most respected voices and finance. Up next, more of this weeks top business headlines. J wiley goes free. Be stunned and not surprised, that is the reaction here. This is bloomberg. Ramy this is bloomberg best. I am Ramy Inocencio. Tous return to our global of this weeks top business storiesr. Jerome powell has taken over. Ininherits a u. S. Economy its third longest expansion on record with unemployment and inflation both near historically low levels. He inherits the fed at a great time, but there will be a lot of challenges. The main one is how the fed will manage the next crisis. Most likelyll will preside over the next downturn in the economy. 3. 5 andaised rates by rates then they lowered in the downturn by 5. 5 and five 125 , so big moves. And 5. 25 , so big moves. They dont have that buffer this time around. This will be up to the new fed chair to manage. Yellens final act, the Federal Reserve slapped wells fargo and the board with a ceaseanddesist letter. The vendor had its rating cut by three analysts and felt by the most in two years after the fed band the bank from growing until a convinced authorities it is addressing shortcomings. This is a harsh order and unique. The fed itself called it unprecedented. Typically you see the fed talk about board oversight come but the asset cap is what was unique fargo cant wells grow its assets until it shows it has made progress on this, and that could have some longerterm effects. It also seem to indicate it was not happy with the pace of wells fargo cleaning up its act. They have had some time to clean it up, and i think the fed is looking for them to speak data. A south korean court has suspended the prison sentence of jay y. Lee after he appealed the jail term. The sentence was cut by half, although he is now free to go on four years of probation. If you can be stunned and not surprised, that is the reaction today. We are stunned the high Court Reviewing the Appellate Court process in the Central District court behind me, they have not exonerated jay y. Lee. Sentence, but they have allowed him to walk free. He has already left the courthouse by a bus to the detention center, where i suspect he will collect his belongings. A has been there for nearly year. The Yonhap News Agency saying the man who was convicted in the same courthouse in august to a fiveyear prison sentence for various corruption charges, he will be able to go home this evening. It is a stunning reversal because this of all the different options the Appellate Court could have come up with, this was the one that legal experts said was the least likely, second to only being completely exonerated. The bitcoins life continues, and leadncy declined currencies lower as the selloff deepened and investors migrated towards havens. What is the biggest concern right now . More regulations coming . Is this why we continue to see the selloff . There have been a couple of regulatory questions coming up. Regulators are starting to send subpoenas and ask some tough questions about some of the big problems we have seen in bitcoin recently. On top of that, you have big banks and credit card issuers putting freezes on by cryptocurrency. Appears there is said general feeling it could be too risky to allow credit card users to buy on credit, cryptocurrencies, especially some that are more suspect or less well known. Bitcoin is marching towards its second day of gains and comes as senators spoke yesterday, calling for oversight of cryptocurrencies without proposing industry killing measures. The message was roundly we have this under control and they understand these technologies 30 darn well. There are a lot of interesting areas on the margins where legal clarity could benefit innovation , but the hearing was quite a success. Is trying to force qualcomm to come to the bargaining table for what would be the Biggest Technology deal ever. It has raised its takeover bid to 121 billion from 105 billion. They call this the best and final and are not willing to negotiate a higher offer. Is it enough to get qualcomm to the table . The short answer seems to be no. Whatalcomm turning down radcom called its best and final offer at 120 billion and leaves the future of the proposal to be decided by shareholders next month. How do you say we dont like the deal when the deal is 82 a share and your stock is trading at 62 a share and is not going higher . Qualcomm is saying broadcom acquisition,g the the potential resolution of its licensing dispute with apple, and the opportunity to expand as five g Technology Becomes a thing. Resortsounder of wynn has stepped down amid allegations of harassment. The board said it appointed the current president to the role of ceo and remains to committed to upholding the highest standards. Help us to understand the events leading up to this moment. Sexuale social beennduct allegations have circulating and regulators have voiced their concern about the issue, and they have reached out to wynn, wynn macau executives, and key directors to make sure they are fit for their roles. Macau is important market for wynn and where the company nets most of its earnings. Gaming regulators in macau are watching this closely as well. Even as the company has let go of steve wynn, it is still facing pressures because of that linkage to steve wynn. Massachusetts regulators are aggressively continuing their probe into wynn. Both nevada and massachusetts said they are probing allegations of sexual harassment. Massachusetts said it will be taking a look at steve wynns personal stock holdings. Regulators find some reason why he should not continue to be a shareholder, he would have to sell it and that would further put the company in a position where it would be vulnerable to take over. In germany, the political stalemate that has lasted since september appears to be over. Chancellor Angela Merkel reached an agreement on a Coalition Government with the social democratic party. , the financeitions ministry, which has gone to the spd. How much of a concession is that . My third be some grumblings within her own party . It is a big concession. Party, the cdu, should keep the finance ministry considering they were ahead in the polls in the election. The spd made a strong case they want to have this powerhouse so they can make their mark in european policy as well. The currency weakening as much as 1. 2 in shanghai, the biggest move since the 2015 devaluation after data showed was cuttrade surplus h by half. Even the path of true love is not smooth. Nothing goes in a Straight Line. This was going in a Straight Line and is in reversal. Volatility is infectious. Event like the boe, new zealand, you are getting bigger moves in the currency than we would ordinarily see. Import numbers from china did not look pretty. Basically the pboc are talking about current account liberalization, particularly the bond market, so we are getting some twoway moves. Ramy welcome back to bloomberg best. Bloomberg television spoke exclusively with the president s of three regional banks. Bill dudley has been outspoken in his view, the recent fluctuations in equities will have no impact on monetary policy. Kathleen hays spoke with him on thursday. We have had today has no implications for the Economic Outlook. It proceeded a very large rise, so it stops here, the implications for the Economic Outlook are marginal, so probably not change our thinking about the Economic Outlook. Further ando go on be more persistent, then it could start to affect household and is no spending behavior, and that could influence the Economic Outlook. So far, i think it is small potatoes. I was thinking about 2015, when we came into the year and the fed was going to hike rates in march and then there was brexit and a big selloff in the chinese stock market. The fed past in summer and in september, only one that year, so clearly there is a point where markets and market volatility have an impact on the feds path. In the First Quarter of 2016, it was not just the markets. Commodity prices were falling sharply. Putting pressure on emerging market economies dependent on commodity exports. China was going through a difficult adjustment, so it was not a market event or say. It was the things happening in the Global Economy. The Global Economy is doing fine. Wages finally started to accelerate them a more inflation, not just three rate hikes, four in 2018 possible. What do you see . I think it would depend on how the economy if all spirit it is premature economy evolves. It is immature to say how many. Three rate hikes in 2018 seems like a reasonable projection. If the economy looks stronger, could three turn out to be more . Perhaps. If the economy looks softer or inflation does not materialize, then the fed could go slower. The jury is out. Ramy coming up, more conversations with Robert Kaplan and neel kashkari. They shared their Economic Outlook. Plus, more exclusive insight from the biggest players in Global Finance putting volatilities come back into context. I think the markets are still vulnerable to a slowdown in growth momentum. Ramy this is bloomberg. Willam confident that we achieve our objective to ensure price stability. All of the ingredients and requirements are on the table. We have a robust growth. Broadbased growth in the euro area. We have a rising investment activity. We have an increase in unemployment. We have very generous financing. Inflation will come in the mediumterm and that is our goal. And that is why i think that, in this year, we can accept the programpurchase of our balance and start coming back to a more normal monetary policy. Ramy that was ecb executive board member speaking exclusively with matt miller about the progress of the bank towards inflation targets and its timeline for concluding qe. Let us get back to the u. S. And fed policy. Neelnday, we sat down with kashkari. She asked him if rising bond yields and jitters in equity markets have raised the risk of recession. Wasne of the risks i looking for was the flattening of the yield curve. It has now steepened which is a good news sign as opposed to stocks pricing. As opposed to stocks falling. That fact takes a little pressure off and says ok, if the bond market is seeing Inflation Expectations creeping up, that may give the fed more room to tap the brakes. What do you think is the biggest risk to the economy . Say. Is hard to if Oil Prices Take off that could be a big shock to economic growth. The dollar i think is going to put some inflationary pressures on if it continues to trend down. At the thing time, we are seeing growth around the world. Europe is doing better. Japan is doing better. It is a pretty positive Global Economic environment to be in. Hopefully, we have slightly stronger inflation and wage growth. Those would be good problems to have for the Federal Reserve. I know you tweeted out some nice words for janet yellen. I thought she has done an outstanding job and is an a plus public service. At the en