Around 0. 4 . Take a look at what is happening in the rates market. 1. 74 year yield on the 10 year. That steepening we started to get off of the fed meeting yesterday on the twos and tens continues. Still seeing some flattening and other areas of the curve right now, but you are getting some good news here. , holding aboveed the 1500 an ounce level for the second day in a row. Thank stocks over in europe are leading the charge bank stocks over in europe are leading the charge, not quite leading the charge here. Rising,bank index seeing a lot of strength despite the expectations with regard to fed rates here. A lot of folks saying things wont turn out as bad. Maybe a little bit of flight back into financials. Central bank is absently front and central, so waiting to see the impact of the feds second straight rate cut and all of those other Monetary Policy decisions weve had around the world. Weve been watching every thing from indonesia to switzerland to the bank of england. A whole range of Central Banks in focus. We are joined by chris turner, ing head of fx strategy. The fed, not a surprise. But in some ways, the fact that the fed and the chair didnt answer many of the questions market wants answers to kind of leaves us a little bit in limbo right now. Weve clearly got a very divided fomc. Jay powell last night really didnt answer any of the questions. It kind of feels like we are in a much more difficult to navigate period for the fed. How do we deal with this from a dollar perspective . What does it mean for Global Markets . Chris i think earlier yesterday, ahead of the fed meeting, the market was getting side was getting excited on what happened in the overnight repo market. They havent hit it head on by looking at the bank reserves. I think they will probably look at that into the october meeting. To address your point, this morning we saw a bit of a flatter u. S. Yield curve. Generally that is associated with the fed not doing enough to fight the global downturn. That has been generally consistent with a strong dollar. Two reflate the global economy, youve got to see the fed turned dovish. We just havent been seeing that. It seems like they have been dragged reluctantly into these cuts, but they are not buying into the easing cycle yet. Guy what does that mean for the dollar . Chris i think the dollar stays relatively bid for the time being. If you look back in july, that did prove the peak for the dollar, so trade tensions picked up after that. For the time being, there has to be either some great news on , or in the many factoring sector for the rest of the world, or some thing that would justify a much sharper easing cycle. We had existing home sales today, which have been really strong, keeping firm, really. Romaine when you talk about evers Central Banks have, a lot of talk about the Balance Sheet after we had that repo ripple on monday and tuesday. Do you think this idea that we were eight 800 billion on the at 800nced we were billion on the fed Balance Sheet, using we will go ever back to that . Or will they have a choice to open it up . Chris i think they probably were discovering where was that touch point when perhaps a lack of liquidity really exposed itself through these overnight rates. Weve reached the point with low weekve levels this with tax payments from corporates on monday. I think it is going to be out there, and he market will be looking to do a sort of fix by bank reserve. Do they add permanent liquidity . I think any suggestion this probably wide of the mark, but as we move towards the october meeting, there will be a lot of discussion over does the fed add some bank reserves. It might be negative for the dollar because the fed is effectively pointing money. Romaine obviously a big trade here, both for bond traders, even equity traders, is playing off these fx differentials. Do you see any risk, whether you are getting dollar risk or not, of those differentials narrowing to any significant degree . Chris they are narrowing, but not enough to make a difference in dollar pricing because if you are a european or japanese investor looking at investing in treasuries, to hedge that dollar risk still costs about 2. 5 or so, so it is like a nobrainer. You would leave that open. The position is too extensive to hedge, so i think probably you are going to see at least 50 basis points of rate cuts from the fed, maybe more, before the differentials start to make a difference. Guy lets start working our way around the world, the boj. Kuroda indicating we are maybe going to get action at the next meeting. That surprised if you people. What could he do a few people. What could he do . Chris a whole range of measures they are using. It wont be more qe or jgb buying. Theyve already got Forward Guidance keeping rates low until spring 2020 at the moment. Perhaps they could extend that, but in reality, does it make much deterrence make much difference . Im not too sure, really. They will see how the consumption tax hike plays out and then come back with a new set of forecasts for cpi and gdp at the end of october, but perhaps there might be a 10 basis point rate cut. I dont really think we will see much difference. Guy it doesnt make too much difference to financial markets. Would your expectation be that it is not going to have a meaningful impact on the yen . Chris yeah. What they are trying to do that would have an impact on the yen, they are trying to steepen the yield curve for profitability in the japanese Banking Sector. But given all of the momentum towards a global slowdown and recession, bond yields at negatives around the world, how do you steepen the yield curve in that environment . You maybe switch your buying to the short end of the curve from the longer end of the curve. Theyve tried to do that already. But for the yen, i think the yen will be dominated by the global risk environment. Romaine kuroda is trying to pull that off. Powell is trying to pull that off. Are the Central Banks even driving the ship anymore . [laughter] chris good question. No, i think we are getting to that point where obviously, the fed has got room to move, to cut rates to increase qe, should it need that point down the road. But we moved to this different chapter in august where it is all about fiscal stimulus. It is high time european governments got stuck into fiscal stimulus. Weve seen some opening up in europe already in terms of the physical caps. I think there is focus in germany in terms of some modest fiscal stimulus relating to sustainability issues. I think the next story for the market is what do governments do Central Banks have exhausted their toolkit. Romaine talk to me a little bit about emergingmarket currencies. Do you see anything attractive there at the moment . Chris can peso stayed in crescent the mexican peso stayed incredibly strong throughout this because of readily strong to domestic policy rates of 8 or so. Dollar wasnte going anywhere for the rest of the year, it is not going to selloff, but doesnt have a big rally, perhaps you search for yield in nasa can peso. But a lot of people in mexican peso. A lot of people are doing that already. There are things going on in brazil, for example. Weve got fiscal reform going through, which is very good news for the longer term in terms of the sovereign Balance Sheet. They are being able to cut rates aggressively, so that should be good for growth next year. Should point, the rial cover more into 2020 than today. Regarding the trade war, things could get worse before they get better. ,merging markets as a whole particularly those in asia, are still pretty vulnerable to acceleration of the trade war. Guy we havent talked about the snb in switzerland. We havent talked about brexit yet. Plenty more still to come with chris turner, ing head of fx strategy. Romaine lets check in on the Global Markets right now with abigail doolittle. Abigail at this point, we are looking at a bit of a risk on tone after the volatility after the fed decision yesterday, when stocks went sharply lower and finished about even. Right now, solid gains in the u. S. The s p 500 up 0. 4 come on the nasdaq up 0. 7 . We will take a look at why in just a few minutes. This is as the fed is injecting shortterm liquidity into the system. The dax in germany up 0. 5 . 1. 7 , upcrude up nicely on the week after that attack in saudi arabia. Where we are seeing gains as well, bonds. Lets take a look at the fourday chart of the 10 year yield, down 11 basis points. Of course, bonds are rallying after the fed did cut as expected. Language a little bit hawkish purse on, but investors but investorsme, have the 10 year yield at 1. 76 . For the s p 500, this is the imap in the bloomberg. Even though oil is higher, energy down about 0. 2 . Not a big loss. With yields lower, we also see that real estate, utilities, and Consumer Staples were trading slightly lower. Typically you would see those higher, so some interesting actions here. Financials, despite the fact that yields are lower, are higher. Lots of flipflopping here. Lets to get some big winners within the tech sector. The biggest one of the mall today, microsoft, after announcing a big buyback. We see microsoft up 2. 2 . We also have adobe, oracle, and andy up. Amd up. Ndy up and microsoft is the Global Leader for market cap going back to april 24, or 104 days. Guy absolutely. Like it. Thank you very much indeed. Remember, you can find all of the fantastic functionality we show you on the screens here on bloomberg television, all the great charts. Gtv. There are some examples. You can save them. This is bloomberg. Guy from london, im guy johnson. Romaine from new york, im romaine bostick. This is the european close on bloomberg markets. Lets check in on the bloomberg first word news. Standing by right now, ritika gupta. Ritika President Trump made the latest move in income tax records. According to the new york times, there has been a subpoena of the president s tax returns as part of an investigation into whether the Trump Organization falsified business records. President trump says a peaceful solution with iran may not be possible. The president told foxnews there could be what he called a very we are the saying, Strongest Military in the world by far. The admin attrition is expected to release details tomorrow on the latest sanctions to be imposed on iran. Another sign that the u. S. Housing market may be breaking out of a slump. Sales of previously owned u. S. Homes rose last month to the highest since march 2018. Antact closings rose 1. 3 to annual rate of almost 5. 5 million. That exceeded all forecasts in a Bloomberg Survey of economists. In canada, it is just what Prime MinisterJustin Trudeau didnt need a month before the election. He was forced to apologize for wearing brown face makeup at a party in 2001. A picture of the incident appeared in time magazine. His opponent says the photo reveals someone who is not fit to run the nation. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im ritika gupta. This is bloomberg. Guy thanks very much. Still with us, chrisim ritika. Turner, ing head of fx strategy. Between now and the end of the year, where does the excitement come in fx . It is very quiet at the moment relative to other asset classes. If you take a look at the volatility indicators, not a lot going on. Chris we still got unresolved issues with trade, and perhaps weve got auto tariffs against the european auto sector. I think trump and his team, the commerce secretarys team, will that,ing on a decision on so that is a story potentially. I dont think that is priced in. We had enough negatives coming through in the manufacturing u. S. China china and tariffs that i think the auto sector tariffs would throw another layer on top of that, and could potential he pushed eurodollar down to 1. 05. Weve been flirting below 1. 10. Weve had a massive break out of ranges, but that could be one potential area. Guy what about the pound . Is it reaching some sort of crescendo moment . We are waiting for a court case that is going to be announced next week. Bank of england today did nothing. Kind of sat on its hands, understandably. The bank of england has 10 basis points of cuts rest in between now and the end of 2020. If you take a look at where we are with the pound, theres not a lot of movement or action there either. Chris looking at the term structure and the Options Market for i was coming in today, there is still a very big kink around the octobernovember period, and flows havent come off too much since weve had that court ruling which told boris he had to ask for the delay if he couldnt get a deal. The Options Market is still quite nervous that there could be some sizable moves around that octobernovember window. I dont think we should be too complacent just yet that the bad onlyis in there, and the way is sideways or higher for the pound. Romaine lets go over to asia a little bit. We saw the yuan we can a little a littlee yuan weaken bit. When you see how asian currencies are playing nice or not nice with the rest of the world, where do you see them heading at the moment . Chris i think it is still volatile the moment. You have a trade war emerging with japan, as well as subject to the u. S. China trade trend. It is already undervalued, the korean won. If you take a two to three year view, these are great levels to get involved in the korean won, but probably just for the next three months or so, we are not looking for any major resolution. Youve also got the unresolved issue with oil. Obviously we are talking about production coming back online, but to what degree the saudis for the u. S. Respond to the actions earlier in the week is very bad news for asian currencies, where theyve got 90 Energy Dependence ratio. So the yen and korea are very exposed there as well. Romaine all of the fear we had a few months ago that we could be in some sort of currency war between the u. S. And china, do we need to worry about that . Chris i think what we felt at the time when dollar renminbi went above seven, and u. S. Treasury called china a currency manipulator, the treasury was essentially saying you claim to be able to control your currency so well, how come youre going above seven . That was really a problem from the u. S. Side. Maytegically, the chinese at certain points allow the renminbi, allow Market Forces to ticket lower. I dont think they are devaluing it themselves, but they will not stand in way of those working forces. Occasionally and strategically, they will let it go. ,he pressure comes on them from for example, a fresh round of tariffs coming. I think the currencies are playing a role in the trade war at the moment. Is going tosuisse charge on declines for big balances. We are seeing negative rates being passed on to customers by big swiss banks. Today, the s p did nothing the snb did nothing. Nothing. Didnt do it protected banks a bit more in terms of negative rates. Can i assume from that that the snb has reached the limit in its ability to cut rates, despite the fact it is able to protect its banks . It is not able to completely protect them, and they are now having to pass on some of these costs to customers. Chris i tend to agree with you in that the Banking Sector was screaming over the impact of negative deposit rates, and yet today, they already had generous exemption requirements. Before it was 20 times minimum reserves. Times now it is 25 times been a member serves. So yes, they are reaching the limits. Rates markets are acting a similar way. Swiss yields moved slightly higher. There are so many market saying if they are completely protecting the banks, they can now cut away. If they were doing so, that would be primarily to weaken the currency. I think internationally, youve got problems if you were just out there purely manipulating your currency. I know they target that to try and reflate the economy, but i think it is quite difficult. Theyve probably done 12 billion swiss francs of intervention over the last six weeks or so. I think their ability to do 50 or 100, personally i think that is quite limited. Guy we are going to leave it there. Thank you for stopping by to see yesterday. Chris turner, ing head of fx strategy. This is bloomberg. Time now for a Bloomberg Business flash, a look at some of the biggest business stories in the news right now. Shares of target rising today. The discount retailer announcing a new 5 billion Share Buyback program. It will start when the current 5 billion program is complete. That will happen in fiscal 2020. The buyback authorization where percent about 9 of targets market cap authorization represents about 9 of targets market cap. Tiffany plans to open more stores in mainland china, and wants to make its shanghai the moststore nycrtant location after its fifth avenue store. That is your Bloomberg Business flash. Seeing a lot of bid inditex stock names. Bid in the tech stocks names. The nasdaq rallying as well. If you are looking for a bit more positive lizzie more volatility, youre not getting much on the vix, down about 0. 5 . Guy european markets up my around 0. 5 . Banks absolutely leading the charge here in europe. Some of the peripheral names really doing well today in markets like spain. Cac upe 100, dax, and around 0. 5 . Three minutes to go until the european close. Thats next. 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. Guy 30 seconds to go until the end the regular trading here in europe, positive today near session highs, the spanish market outperforming, the banks leading the charge in europe. There certainly the best. Toy continue to add weight the ftse, the cac, dax, all trading up. We see a number of different factors today, clearly centralbank news is one of the dominant themes, also some idiosyncratic individual stock stories with focusing on. Lets take a look at