Another 75 billion on repo operations as investors expect a cut in Interest Rates at todays fomc meeting. Damaged goods. Fedex delivers the latest warning that the trade war is hurting americas corporate titans. Larry kudlow says progress is being made on u. S. China straight you. As saudi arabia attempts to move beyond the worst Oil Disruption in its history, saudi aramco says it will be fully back in business soon. September, ourf gate will be at capacity. Matt good morning. Take a look first off at a onemonth chart of treasuries i have got here in my terminal. I took friday, monday, and tuesday off, so i missed this peak. 1. 9 . Ped up to thats one of the things we will be talking about today. We are all over the repo issues, also a big peak, a much bigger spike over a shorter time period. Take a look at the futures. We are looking at a negative yearre in terms of u. S. 10 in terms of equity futures. This follows gains yesterday certainly in u. S. Stocks as we get closer and closer to records ahead of what is expected to be a fed cut. Anna we are sort of in a Holding Pattern. A very mixed picture coming through in the asian equity session as we wait for that fed meeting. The big focus, as always come expecting another backtoback rate cut from the federal always, expecting another backtoback rate cut from the Federal Reserve. We saw the fed to jumping into the market with some action, the first in a decade it would seem. Rarely do we see these bits of money market plumbing becoming quite so fascinating. The timing of it just before the fed meeting and sing the fed have to act on this as a next or nuance to the meeting. Anl be adds next or extra nuance to the meeting. We will get more on that no doubt. Trade also part of the story in the Asian Session. We have had the numbers out of fedex adding a corporate dimension to what is a macro story. We focus in on Larry Kudlows comments in our headlines. Talking about a certain optimism in the wind when it comes to china. Lets see if theres any optimism for mark cranfield, who joins us live. Let me ask you about what is going on in the repo markets. It is a bit of the money market that rarely gets our attention. It has our attention over the last 40 hours or so. We expect the fed 48 hours or so. We expect the fed to act again. Is this going to have any impact . As long as the fed gets on top of it and start dealing with the day to day issues, it should not have too many repercussions across the markets. It is a major problem for them. The wall street traders have been forced to hold more and more infantry, Treasury Bonds in particular at the same time that the cash supply in the market has been dwindling. The fed has been reluctant to help them smooth the market because officially, the fed is trying to lower its balance sheet, its trying to let bonds runoff. They dont want to increase their Bond Holdings any further. What they did yesterday was to actually buy treasuries for a day and keep cash back to the markets. They need to come up with a system where they can automatically help out the markets smooth these fluctuations. I am sure they are working on such a thing now. It is tricky territory for them because they are trying to lower Interest Rates. When they dont do anything, it makes it look as if shortterm Interest Rates are going higher. Ehe overnight rate was abov the feds fundraiser. It is an the feds fund rate. Its an issue. Its surprising its taken so long because that did not happen overnight. As the government is borrowing money, they are issuing more bonds, the traders have been holding onto it. Its taken them ages to get around to fixing it. The disruptions will go on for a few days yet. Matt in terms of longerterm fix, mark, do you expect changes to the volcker rule, changes to doddfrank because that regulation is being blamed, at least in part, for the lack of liquidity . It is partly in the background because people are forced to. Hold more liquid securities. Treasuries are known to be illiquid. Because they are holding a higher number of those, thats reducing the amount of cash available. It definitely plays a part but its not the only factor. A big factor is the size of the u. S. Government borrowing. Because of their requirement to issue new bonds to finance the deficit, thats forcing more bonds into the market. Me ask you about the fed proper and what kind of response we are going to see in markets to the fed rate cut, which is expected come of course, not yet delivered expected, of course, not yet delivered. Our question of the day, how much can the markets rally on a fed rate cut . Seems vanilla. Futures on the s p look pretty punchy. The s p 500 is within 1 of its record high. What we have seen over the past couple of years is that quite often the market builds up to a new record high. When it reaches it, it does not go much further before it turns down again. Once again, people are expecting the cut. The market is starting to price that in. It may well push onto another record high. It hasats what has been doing over recent years, it will probably only go a small distance over a record height and then turn lower high and then turn lower. If jay powell does not sound as dovish, it would give equity traders an excuse to lock in the fed supposedly is in great cutting mode. It may look a bit strange for some people who have not been following this closely. Matt thanks very much for joining us this morning. I know the mliv blog is a very busy place. Mark cranfield, you can get his work and that of his colleagues by typing mliv go on your bloomberg terminal. How far will stocks rally after the fed cuts the funds rate . You can reach out to mark and the team with your answer. tv go on your bloomberg terminal. Fedex site fedex cuts its forecast. We will talk about the trade war. Remember, Bloomberg Radio is live on your mobile device or on dab digital if you are in london. Tune in. This is bloomberg. Anna welcome back to Bloomberg Markets european open. Lets check the futures. Flat to negative for the start of the european trading day. Waiting for the fed. A focus on auto and Logistics Companies as we wait for the start of the trading day. This getting bloomberg first word news update. Look tols elections have broken the political deadlock in the country. Rivalin netanyahu or his neither Benjamin Netanyahu or his rival seem to have a clear path. There will not be and there cannot be a government that leans on arab antizionist parties, parties that negate the very existence of israel as a jewish and democratic state, parties that absolving praise bloodthirsty terrorist that absorb and praise bloodthirsty terrorists. Mark carney may be asked to extend his term if brexit is delayed, according to the financial times. The prospect of a snap election makes the naming of a successor less and less likely. Mark carney originally was going to serve five years but has extended his term twice. Spain is headed for a fourth election in as many years after King Philippe a concluded there felipe a cat king concluded there was global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt thanks very much. Latestas delivered the sign the trade war is hurting americas corporate titans. The Courier Company slumped in overnight trading after cutting its profit forecast for 2020. It said it would pair its cargo jets to contend with expectations. Why is the trade war a particularly difficult issue for fedex and ceo fred smith . Well, fred smith is well known as a very proactive and vocal free trader. Hes been a longtime republican donor. He has sound the alarm quarter after quarter sounded the alarm quarter after quarter saying that the tariffs are going to have an effect that would lead to some economic slowdown. It would particularly hurt manufacturers. Hes been sounding this alarm for a while and now in this profit outlook, hes saying that it is hurting his company and they are going to have to diminish their expectations. Matt i just want to point out, you mentioned he was a longtime republican donor and a free trader. For those viewers who are too young to remember, the Republican Party used to be the party of free trade, right . Thats right. Exactly. So hes stuck to that and has been, you know, both on a policy level as well as obviously because this is going to hurt his business, making the case that this is the wrong way to go about conducting policy, that that tariffs are going to affect that the tariffs are going to affect businesses and consumers. Now he thing thats happening. Also, the uncertainty hes saying thats happening. Also, the uncertainty the trade war has caused. Poor suggesting democrat voters in the u. S. Are overwhelmingly supportive of free trade, but i digress. Matt now they are. Anna now they are, exactly. How has the trade war specifically weighed on manufacturers that fedex relies upon for its business . Thats right. They have releasing what fred smith really seen what fred and he said it in a call with reporters, that this hurt trade manufacturers. Initially, the trade war did not seem to bite as much. Now we are seeing it in all kinds of manufacturing. When that happens, they dont have the need to move that cargo. Outlook ying their that that will continue to happen as long as these tariffs are in place. Anna we will continue to monitor this story. A look at the reader cross into european corporate read across into european corporates in a moment. Ahead of chairman powells press conference, we spoke to the bank of International Settlement general managers. The r. O. E. Conundrum that Monetary Policy faces right now conundrum that Monetary Policy faces right now is that Monetary Policy has been accommodated. Accommodative. We are still not fully there in terms of economic recovery. Thats what i want to get at. Can Monetary Policy perhaps engender a recovery . Have they run out of options . The toolkit seems to be very bear for many of these Central Banks. I think a little more can be done. As a matter of fact, many central economics, banks face growth still not where it should be. The effectiveness of Monetary Policy is not absolutely guaranteed. Therefore, it needs to be complemented with other policy instruments. Those other policy instruments that you perhaps refer to would be the fiscal side of things . Absolutely. Tell us a little bit about how it varies country by country, country by naturally, but what type of fiscal measures would you be looking at using . Actuallye looking at putting money into peoples bank accounts. Tell me. Before talking about fiscal policy, the elephant in the room in this region is trade policy. I was going to come to the coming yes going to come to that, yes. Good traded a policy, banks would not be pushed so much towards accommodative Monetary Policy. Moving to fiscal policy, i think more than anything, growth inducing policies would be adequate. Increasing Infrastructure Spending would be positive. Policyand monetary through Something Like helicopter money, i dont think that is needed at this stage. As a matter of fact, i dont think we should go into that territory. What changed in the world from Central Banks fighting inflation to now trying to fight deflation . Basically, a huge shock the Global Financial crisis was huge and basically global. It is the first major global. Risis we have needed to fight i think that has affected the capacity to grow. We have not fully recovered from it. Matt that was our exclusive conversation with the bank for international sentiments general manager. Are minutes away from the open of cash trading. We will take a look at your stocks to watch, including deutsche post. Logistics companies are in focus after fedex cuts its forecast. This is bloomberg. 7. 5 minutes to going to the start of equity trading this wednesday morning in europe. Lets get your stocks to watch around the newsroom. Annmarie hordern focused around the Logistics Sector and deutsche post. Paul jarvis government kingfish covering kingfish. Deutsche post on the other logistics names, its all about fedex i guess. Its all about fedex. Slashing their profit outlook. Keep an eye on deutsche post, royal mail. Ceo fred smith pointing his fingers right at the trade wars. Matt paul, lets get to you on kingfish. What have you got . Paul good morning, matt. Their first half results, these numbers at first glance look at disappointing. 6 profit. That is slightly better than analysts are expecting. If you drill into the numbers, the u. K. Business performing slightly better than expected. Declining sales less than 1 . The French Business still struggling quite badly. That has been the story for kingfisher. That French Business has been difficult for a long time. They have a new ceo coming in next week. Anna mixed over at kingfisher. In the car sector, more gloomy data. Gloomy data coming in. August sales were down a lot. Last years august sales were up a lot. The comparison was tough. We are still down over 3 for the year. Watch those car stocks. It looks like this year is not going to end well for car sales. Matt all right, thanks very much for joining us. You can get all of the latest stock stories from our Equities Team by going to first go on your bloomberg and avia the mobile app via the mobile up. Dont miss our interview, by the way. We have the saudi finance minister coming up shortly. And especially in light of the attacks on one of the biggest Oil Producing fields in the world and the huge spike in oil prices. That will be one you dont want to miss. Anna a few other stocks to keep on. Ye we will keep an eye on that one. This business in the u. K. , the cma will review on attempt to purchase that business. We will look for any move in that share price. Advent trying to purchase this asset in the u. K. Pendragon, this is about leasing of cars. They are guiding lower. Coming up is the market open of course. Futures are pointing flat to negative. The Asian Session in limbo. European markets could be in limbo also as we wait for the fed. The focus will be on the rate cut, the guidance about how many rate cuts they still plan to do or how open to the idea they are at least and on the activity in the repo market. That money market rate spiking. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Anna in minutes ago until the start of the cash equity trading go until theute to start of the cash equity trading day. A little bit of upside coming there on msci asiapacific. Broadly speaking, we artificially broadly flat. We are waiting for the fed really. Waiting for that repo activity and for the rate cuts. Oil prices edging a little bit higher come up by 0. 4 or so higher, up by 0. 4 or so. What we have got on the futures right now. Flat to negative really for European Equity markets. Waiting for that fed, waiting for the latest activity by the fed in the repo markets. We saw that spike in money markets, which left unchecked could have impacts on the real economy. Also in equity markets a bit of a Holding Pattern waiting for the Federal Reserve a little bit later on today. European equity markets getting up to speed. I think we have some of the closed markets of yesterday in here of course. We are looking for the ones that are open right now to come to the fore. Waiting for a fairly flat session in the European Equity session. Lets look at whats going on in the sectors as we wait for a little bit of clarity on the trade story. This is the picture on sectors. We are mixed on financials, mixed on health care, higher on utilities, telecoms mixed. A lot of mixed Sector Performance coming through here. Not much of a message coming through here. You get a sense that these markets are taking a breather, waiting and watching the fed. Matt yes, which is of course the usual pattern. Even ahead of a meeting with no change is expected, you do see volumes and volatility drop. People often, traders often turn off their algorithms, shut off Computer Trading because it is difficult for algorithms to parse the feds statements and get the nuance, if there is any. Markets are hoping for very little nuance today. Take a look at the stoxx 600 here. I have a breakdown of the individual movers. 300 36 stocks down 336 stocks down. We have banks on the upside. Banko santander adding the most to the stoxx most point to the stoxx 600. Points, aslso adding well as bnp paribas. On the downside, you see the Big Oil Companies as well as some of the luxury companies. We do see otherwise the Big Oil Companies down. It is mostly oil pulling down. Up. Banks pushing dividend so gone ex its not down 5 for any specific reason other than the fact that you can purchase the stock without the right to lesters dividend. Last years dividend. Anna lets talk about the markets in general today. We are down about a fraction on the stoxx 600,. Investors await the outcome of the fed policy meeting, where it is expected to cut Interest Rates once again. Joining us now is alan higgins, cio of co