Nevertheless, stocks are rallying, the s p 500 back above 3000. The dollar index almost reached 99. It is still a lot stronger but it is trading at 98. 61 now and that is having an impact on other Asset Classes like crude oil. Gold as well coming off a little bit. Some of the stocks that are moving in the s p 500, Restaurant Brands and Food Companies continuing their outperformance. Kellogg up more than 10 . Also yum brands had better sales. Performers in the s p 500 are performing very poorly, losing almost a quarter of their market capitalization. Analysts saying there is nothing left right now in this company. Problem withhad a its drilling wells. They space them to close together in part of the Permian Basin and they have to get rid of some and that is causing serious issues. Guy good stuff. Governor mark carney says he is less confident about the economy amidst a no deal brexit. Since may, global trade tensions have intensified, little activity has remained a no dealhe idea of brexit has increased sing evidently. We are joined now by chris turner, ings head of fx energy. Fx strategy. Chris interesting scene. Probabilities having gone up. That graph is kind of sterling today. Guy what can you do . Basically all you can do is sit back and watch. He would not say today he would put a no deal brexit into the formula. The governments policy is still that we will have a smooth brexit until he is told otherwise. Chris it is far too political to be making adjustments. You are left with the bank of england, it is pretty mechanical and a look at what is priced into the rate curve, rate cuts, together with their assumptions of a smooth orderly brexit. 2020 gets a modest upgrade. I think it is quite mechanical and perhaps staying out of it until we see what happens at the end of october. Vonnie the market is not staying out of it with the british right now. Is that the dollar moving or is that actual traders saying this is not going to well . Got not going too well . Soft highhad that 7 i7gure i7 figure. It is important for the short end of the curve, short and rates have come off after sort of bouncing yesterday evening and have taken a bit of a seam out of the dollar rally. Forie your forecast sterling and ing . To 1. 18e have it down in q3, q4. That should put euro sterling up to 95. This is our highest probability governmentne of the failing to get any concessions from brussels by late september early october and a noconfidence vote called within the government and an early election in december. Of all the available outcomes, that is our baseline. Guy how do you calculate a no deal brexit, where the level is . Is it where the current account comes back into balance . What metrics should we look at and try and understand in that kind of scenario and lets assume that the Financial System does not blow up and that we do kind of vaguely see ports opening. How do you calculate . Models, somele of fair model valid some fair value models, the share of government consumption. Look at some of those models they shift over time but sterling is super weak. Maybe at extremes it gets to 25 undervalued. , you could seeme euro sterling up to parody. Parity. For it to recover, you would probably need some clarity to emerge, whether the elections depending on the nature of the next government. There is a lot of uncertainty. Year. Lly we saw this last it only stayed there briefly but you would suspect in the event of a no deal brexit that sterling weakness would be far more prolonged. Vonnie what is the number one client question you got today . Our traders today, late may, early june, we saw the shift to a positive risk environment. You had your guest larry talking about the steeper yield curve, the inflationary environment with the view that the fed was going to move ahead of the curve and reflate the u. S. And Global Economy which is good. The dollar kind of week across the board and that really set the tone for june and july and the question stays, do we need to hand all of that back suggestingair powell it was not going to be quite as aggressive as the market was expecting . For the month of august, particularly on the trade view with things like increasing frustrations from the white house against china, we would say it is a difficult environment and probably telling the yen should outperform the crosses and emergingmarket currencies in general. Crosses,ou said yen which would be the most attractive given that we really dont know from daytoday what kind of trade headlines we are going to get . Chris obviously sterling would expect to be on the back foot right now, sterlingyen. You bubbled we think the commodities, what we saw in may right after the deterioration of trade relations, you saw a lot of the Commodity Currencies come under pressure, so emergingmarket space, things like the rand and latin american currencies as well. Guy lets talk about the dollar. The dollar continues to confound. The beginning of this year, people telling me the dollar is going to go down, it hasnt. What is it going to take for the dollar to go down . The fed cut rates and the dollar went up. There is an expectation that Central Banks around the world are going to be doing more are going to be doing more and the level of negative debt accelerated sharply. We are now north of 14 billion. Is the fed under attack when it comes to the dollar and is there anything they can do about it . Chris we saw the dollar briefly in june and july and somehow the fed has to get ahead of the curve again and steepen that yield curve. The big story about the dollar is itss we saw in 2017 does not have compelling stories overseas. That is not the case in europe and that is why the ecbs response will likely be in september. Now, it wouldight be a big surprise to see above train growth in china. Development in terms of trade tension. Guy none of those things seem very close. Chris no. Guy so the dollar stays strong for a long time. More maybe a little bit for the euro right now. Guy does not become a problem for the president . Become a problem for the president . Night at sort of the and certainly things it is on the table which is outrageous in itself, considering unilateral intervention. Ould not be surprised if you could get i think the seen the failed period of unilateral intervention. The bank of japan spent hundreds of millions of dollars trying to hold the yen above the dollar and had to wave the white flag. Unless the fed is easing aggressively or there is better , andover seas on trade even a thread of denver intervention would not change the dollar lower on a sustained basis. Guy chris turner from ing is going to stay with us. He is the head of fx strategy. Vonnie lets get a check on the markets. A nice rally in equity, partially off the back of summer earnings and partially because the market is quite pleased with itself right now. The dow is up. The s p, the best performer is ortega up half a percent. Says that the current guidance is likely within expectations. Nasdaq up a full 1. 4 . The 10 year yield at 1. 96. This is bloomberg. Vonnie live from new york, i am vonnie quinn. Guy and i am guy johnson. This is the european close on bloomberg markets. Lets get a first word news update. Claims stayed under 15,000. Powellss up jay comments that the labor market remains strong. Government releases the july jobs report sunday. Chinas foreign minister stressed the u. S. After meeting with secretary of state mike pompeo. They spoke on the sidelines of a regional foreign bank says when it advances u. S. Interests, the trumpet administration is ready to cooperate with china. Last week, china accused the u. S. Of undermining global security. Democratic residential candidates trying to take down frontrunner joe biden in last nights debate. Biden took shots from nine undercut nine other contenders on a variety of issues. Julian castro got into it with biden on immigration. What we need are politicians that actually have some guts on this issue. Enough to say the plan doesnt make sense. Biden was trying to put to rest questions on whether he is prepared enough to face President Trump next year. President trump has offered Vladimir Putin u. S. Help in fighting siberian wildfires. Putining to the kremlin, says russia has already put together a fleet of planes to battle the blazes. He says the call was a signal it will be possible to restore full relations between the two countries. Global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. I am courtney donohoe. This is bloomberg. Vonnie lets check Global Markets now and here is Abigail Doolittle. Abigail a pretty interesting trading day. Big gains in the u. S. 1 ,s p 500 up about 9 10 of the best day in more than a month. All of this of course after yesterdays fedinduced pullback for stocks, something that was a hawkish rate cut, dovish investors not liking that but today we are looking at a nice rebound partially on Earnings Data and the reconsideration of the fed. Interesting of course is the fact that we have bonds rallying too. Especially that ifn number that was week. We dont have the risk on tone that we did for stocks. Take a look at the emerging markets. Row, theventh day in a worst stretch since september of last year. This could be worrisome because the emerging markets tend to act better around strong liquidity. The fact that you have emergingmarket still selling off tells you that yesterdays hawkish rate cut is being considered and that you could continue to see the emergingmarket em pullback a little bit. We take a look at an interesting year to date chart and the s p 500 in yellow, the em index, earlier this year tracking pretty closely, the s p 500 leading and then around april, china started to sell off on liquidity concerns. We will get the diversions. Divergence. In early bearish tale. Lets take a look at these very quickly, kellogg and Cf Industries doing very well. Kellogg up for its best day since downside, down 25 on growth concerns and thats certainly true it that is certainly true for concho resources. Investors not liking the outlook for the driller. Guy thank you very much. Fascinating to see that happening in this post powell environment we are watching. Is goingk about what to spark some volatility back into the Foreign Exchange markets. Chris turner, ing head of fx energy is still with us. We were talking about whether or not we would see intervention from the united states. Unilateral tends to be much more difficult. What would it take to get serious vol spikes at the moment . Chris you talked about intervention and i think that would change the regime really if the fed were to come in and sell dollars. It seems unlikely but would it be effective . A bubbly not but from a volatility perspective it would be a game changer. We have not seen g5 or g7 intervention since 2011 and unilateral, 15 years or so. Also for volatility, it is important to break out into new ranges, unfamiliar territory. Eurodollar going below 1. 10. You can see volatility picking up. The market this year was thinking the dollar was going to top out. It looked like the eurodollar was pushing down to the lows at 1. 05. One of the big drags in volatility is what is happening in the rates market because it has been flattening or inverting. Markets isin the fx almost seen as a yield enhancing structure. Pickup in debt is so low, negative in many cases. Guy one thing i am increasingly interested in is the s p. The ecb looks like it is going to go, probably 10 basis points. Already 75. The ecb is talking about tearing which would give more ammunition to further negative. What does Thomas Jordan do . What we see the s p moving before september . How big does it go and what impact does it have on the currency . Chris a very tricky situation. They do meet before the ecb. It is like 10 or 20 from the ecb. Probably think at least, 10 to 20, perhaps more. ,he policy rate in switzerland it is now. 75. Loads of room, we can cut rates and intervene. With intervention, there are limitations. The s p Balance Sheet is already 110 of gdp. In theory that can go higher but they found in 2015 you can lose a lot of money. Also the wildcard out there is the currency manipulates report from the u. S. Treasury. In 12 months if you do any more than 2 of gdp than you are triggering one of the three criteria. The s p in theory might only ever a intervention of 14 billion swiss francs. One billion toid 2 billion over the past couple of weeks or so. At 120, the floor euroswiss. I think the market is really going to be focusing on euroswiss in the runup to what should be the fresh round of qe from the ecb in september. Vonnie if we take a birds eye view of the whole Foreign Exchange market, what is it exactly that is dominating flow . Guy was mentioning yield and the search for yield and i think referring back to your earlier question, regarding what kind of environment are we in, last year was all about trade woes, divergence between a strong u. S. Economy and weakening economies elsewhere on the planet. We still have that unresolved issue of dollarchina. Time the u. S. Economy is slowing and i think the market is going to be focusing on, does the external environment how much does that impact the domestic u. S. Economy . Environment could show up in the manufacturing sector, things like Business Investment and capital goods orders. I think it is all going to be external the environment due to the u. S. Economy and how aggressively does the fed react and if the fed acknowledges the slow down in u. S. Growth and there is no sign of that at the moment beyond the first 25 they delivered but if they do acknowledge that the u. S. Economy slows more aggressively than expected, we should get yield curve steepening and a weaker dollar and a pro risk environment. Just for the month of august, i think trade tensions could pick up again. You,e chris turner, thank ing head of fx energy. This is bloomberg. Vonnie checking u. S. Markets now, it is safe to say a rally across the board. 1 , theand s p up nasdaq up more than 1. 5 . The 10 year yield is back down. The 210 spread is below 14 basis points. Wti on a stronger dollar is down more than 3 at 56. 7. Guy basically equities have round tripped to where they were. The u. S. Twoyear has done the exact same. Ftse is flat. Dax up a little bit more. That is the picture as we head toward the european close. This is bloomberg. Guy wrapping up the european session, 30 seconds until the end of regular trading. Continental markets rallying. London flat. I will explain the reasons in just a moment. Let me move from the equity market to the british pound. I want to highlight what is happening. Is one factor behind what is happening in london. It is a more useful indicator over the last 30 minutes. Isms the effect of the u. S. Manufacturing. The dollar following the dollar falling. The u. S. Twoyear round tripping on the powell story of the last 24 hours. Lets talk about where we are with the individual markets. Surely where we are with the ftse, dax, and the cac 40. Is negative because the mining stocks have been under pressure. We have seen a dollar factor in all of this at a series of number coming through. I talked to the rio ceo. And ok set of numbers. That stock still under pressure as is the sector. A trade narrative in all of that. That is what is dragging the ftse lower. The dax up. 5 , the cac 40 up. 6 . Let me show you the sector breakdown. We are seeing Financial Services doing well, technology is doing well, Household Goods doing well. A more eclectic mix. The yield stocks are catching a bit, which is interesting. Food and beverages, Household Goods, those are yield generating stories. Health care is in there as well. Not necessarily what you would expect. Take a look at what is happening in the credit market. Ccc catching a bid. There are the mining stories under pressure. The other factor dragging down london is the oil and gas sector. Shell under pressure coming coming in below the lowest expectations. Miners and some of the oil stocks. London is rich with those stocks and they have been under pressure. There shell down by. 499 . European banks seem to be producing good results when it comes to trading. It is obviously a difficult sector. Emma chandra is bringing us British American tobacco, i think it is the biggest addition to the ftse 100. The alternatives are driving that business. Heated tobacco doing well for British American tobacco. The powell story is still present. We are still watching the Central Bank Effect on the markets. Some of the individual stocks having effect today. That is a look at the european close. Vonnie Dollar Strength has come off but we are still seeing a stronger dollar. We almost topped 99 in the overnight session. The 10 year yield saw another big move, 1. 96 we are at now. Traders digesting the fomc move. Whether it is a hawkish move. What we should do with our cash, and then theres the manufacturing data you mentioned filling expansion. Definitely trepidation on the part of some manufacturers but we are still above 50, even though we are at a threeyear low for some components, still an expansionary territory. Below 14 basis points for the 210 curve. Watching the rest of the curve for other things like inversion. Crude oil down 2. 3 on the shelf figures and some of the other minors and drillers and oil services. They are all down, also because of the strong dollar. Lets have a look at individual movers. Back p 500 up 1 , well above the 3000 mark. The Health Care Distributors index up 4. 6 . Most of the distributors up pretty big. The same with food in retelling, it is up 1. 6 . Kellogg came in strong. Sales up 10 . Snacks offset weakness in cereal. Yum brands another of the restaurants that did good this quarter. The oil and gas drilling sub , they are down multiple Percentage Points today. , but also stories just a general malaise in the industry. Guy european banks have been something of a value trap. Starting to get earnings coming in and they are surprising the market. Socgen outperforming most rivals in Equities Trading at its largest restructuring in years take