Of japan. It was a failed auction in japan, not completely failed, not a good option, the worst we have seen the last couple of years. Jgb marketsg the getting a bit of a fright because the boj is likely to step away. And the pension fund out of japan is going to be potentially foreign butsifying currencyhedged bonds as being domestic, taking some of the bid away from the market. We saw a six basis point move. 12 basis points over the last month. That is a massive move. Vonnie here in the u. S. , after the ism data came in, we saw stocks take a turn. The s p was positive by as much as half a percent. Orer times when we got bad less good data, it sent markets higher, because it was thought the fed might become more dovish. We are back to the old way of things, where bad data equals a selloff. You can see the dow is down 0. 6 . A similar story for treasuries. The high on the 10 year yield we are right down to one point 62, a 13 basis point move down to 1. 62, a 13 basis point move in a few minutes of the session. Some of the stocks on the move today include the online trade brokers. Td ameritrade down 21 . E trade financial down almost 20 . This after schwab said it is reducing online trade commissions, in some places to zero, on things like stocks, etfs, options. It is a feeding frenzy for online traders. Guy and it is brutal. A big miss, as we have been discussing, on the ism factory index. It unexpectedly fell. It has entered contraction. It is a number that move markets across the board. We are joined now by an Oppenheimer Asset Management chief investment strategist. Good morning. Of all, give me your reaction to the ism number. It was a big mess. I wonder what it changes, and by how much. John the first thing we have to think of is the second one below 50. That right away is an amber light on the dashboard. The good news is it is manufacturing. It is not the services index. It makes all the sense in the world that it would be off from for theth perspective simple reason that where we are today is in the middle of a trade war, owing into its second year. Going into its second year. There is increased breadth and depth of this thing. It is possible in the next few weeks, if talks fail in washington so manufacturing is on pause in many ways. It is not on pause, but not at the levels we have seen over the last few years, prior to the tariff war. Seemed to price out another fed cut. We saw mr. Evans from chicago speaking in frankfurt, germany a little earlier on, indicating he is quite comfortable with where policy is now. Even the data coming from manufacturing, do you think the fed should be comfortable with where we are now . John i think the fed is very likely to cut again at the end ,f october, as a result of this and so long as the trade war situation remains as an overhang. I do not think it will do over 25 bits, but it is likely it will move. Vonnie this is one data point, a weak data point. Those talks are due to begin october 10 and 11. If we dont get something done quickly, october 15, the e. U. Soon. S might be coming Government Shutdown risk. Iowa caucuses coming up. There is a lot to worry about. Could this be the beginning of a major selloff . John i dont think it is the beginning of a selloff, but it is a signal to the administration that the market is not exactly happy with the way things are looking right now. The administration has given essentially has been very friendly to the markets for a long time. Most recently, it seems to be testing that friendship. Vonnie does this put more pressure on the fed to be more dovish, essentially to do the work of reversing what is obviously a trade impact . John i would say it certainly pushes back any thought of normalization at this point. Most likely, a more dovish angle, at least for now. Vonnie, we really do believe that if we can get a trade deal, all this goes 180 degrees in a different direction, and people will be worrying about when the fed is going to raise again. This is an artificial overhang. Both the United States and china really should make a deal for their respective constituencies, as well as their trading partners. There was a Global Economic recovery in progress prior to march of 2018. Pute then, that has been into bands. In the u. S. , we do have sustainable economic recovery still, notwithstanding the manufacturing number. But it is a situation where its just got to make a deal and work ahead from that. Something like the salt agreement that was once related to armaments, the strategic arms Limitation Treaty with the soviet union that lasted over was in a process over many administrations, and ended when the soviet union failed. Guy john, do you think the market do you think the market is priced for a deal right now . You have to believe, with the s p kind of where it is we are still pretty close to record highs. The market Still Believes a deal as possible. Is there a risk to the opposite end of the spectrum, that we dont get a deal . The market is priced for a deal. The risk has to be that we dont get one. John i would have to say that i think when you look at this, if you look at the performance of the market over the course of the last quarter, and since september 20 of last year, which was its last real peak, it has really been remarkably conservative in where it has moved this year, if you consider the fact that the s p 500, if i am correct, is slightly below where it was on september 20. I think last week it was slightly above, but has given up some of those gains. I think it discounted the mistake the Fourth Quarter of last year was, where people overreacted to a lot of things, a lot of negative projection. Essentially, we are waiting to see what happens. It is sort of like when you are in a plane and you are circling over laguardia. Vonnie john, stay with us. Fus stays with us. Lets get a check of markets with abigail doolittle. Abigail we are looking at a solidly risk off tone around the world. Look at the s p 500 in the u. S. Earlier, up about 0. 4 . 1. 3 , on pace for its worst day in more than a month. That index did start off slightly higher, now sharply lower. The worst down 0. 8 , day for the Australian Dollar versus the u. S. Dollar since may. The bank cut their rates a third time, to a record low. That is not just weighing on the Australian Dollar. Copper is down one point 9 . Australia and china are big users of those natural resources. A big risk off picture. , withm is in the u. S. Losses for the stoxx 600 and europe, we are looking at the german manufacturing pmi, deeply in a contraction. The red line at 50. Above, expansion. Below, contraction. China in yellow, germany in purple, in contraction. The u. S. , both august and september in contraction. September the lowest in 10 years. That is a concern. There could be more weakness a low ahead. Overnight, the s p had nice gains. Then this came out and created a 1 reversal. The bears supported by a pretty decent bid at this point if you look at bonds. This is remarkable. The twoyear yields in the u. S. It has shed 13 basis points on that disappointing ism print. We also have the yen getting a bid. We have gold higher. If you look at the vix, not popping a lot, but overall serving the Fourth Quarter with a risk off tone. Vonnie abigail, thank you for that. That is abigail doolittle. Remember the function on the bloomberg allows you to browse on of the recent charts bloomberg tv. Catch up on key analysis and save your favorites for future reference. Guy from london, im guy johnson. Vonnie from new york, im vonnie quinn. Guy lets check in on the bloomberg news. Secretary of state mike pompeo is playing hardball with House Democrats in the impeachment investigation. Pompeo rejected a Committee Plan to take testimony this week from several state department officials. He said the committee appears to be trying to intimidate and bully them. Pompeo wrote on twitter that he wont tolerate such tactics. North korea says it will resume Nuclear Talks with the u. S. The official news agency referred to the discussions as working level. During a meeting in june, kim jongun and President Trump agreed to hold talks in a matter of weeks, but the sides have not met since them to discuss details for the disarmament deal. The wto cut its outlook for global trade growth to the weakest level in about a decade. It was the first round of tariffs could make matters worse. A 2 increase in trade volume this year, and 2. 7 next year. It is Prime MinisterBoris Johnson is confirming that britain will make firm proposals for a new deal with the European Union within days. At the end of this month, the u. K. Is due to leave the 28nation bloc. Are growing impatient with the failure to set out detailed plans for an open border between ireland and northern ireland. That is the key Sticking Point to a deal. Little news 24 hours a day on air, and a tictoc on twitter, powered by more than 27 journalists in more than 120 countries. This is bloomberg. Guy thank you very much indeed. Clashed withve police on the streets of hong kong. This as beijing marks the 70th anniversary of the founding of the peoples republic of china. Joining us now with more on what is happening now in hong kong, Stephen Engle, bloombergs chief north asia correspondent. Bring us up to speed. Ephen there is lots of frustration on the streets of hong kong, not only with the protesters of course, but their autonomy guaranteed by beijing, as they went on rampages of civil disobedience, clashes with the police, and vandalism, as we see here at the entrance way to one of the subway stops at causeway bay. I might add that this is some of the most expensive Retail Real Estate in the world. Look at this. Around here, all of these shops are not only closed because it is 11 15 at night. They have been close all day long. This is the october 1 national day holiday. This is when millions of people this week in china millions have come down from china to shop. They are nowhere to be found. That has really split the city. The city is absolutely polarized between those supporting the protesters not necessarily the violence or the vandalism, but supporting the protest movement and their ultimate aim and those on the other side who say, why are you trashing the city . Why are you ruining what we have built . It is a very polarized city, and today, october 1, encapsulates that frustration. A particular is black eye to china. Doeschina retaliate china retaliate in more of an open way after this . It is very hard to predict what beijing is going to do. To be very fair, beijing has very much left hong kong alone. Yes, there has been some saber rattling, some threats of the use of the military from across the border. But they have not done that. If anything, what they have done is let hong kongs government and police try to manage a political impasse, and the big gulf between the police and the population, the public at large, which has grown wider and wider. It is a really difficult situation. What else can beijing do, other than let the raisin rot on the vine . They can continue to block tour groups and individual travelers feedchina who come down to the lifeblood of hong kong, and that is commerce. Vonnie you can get more images out of hong kong and mainland china. That is correspondent Stephen Engle in hong kong. We are still with the Oppenheimer Asset Management chief Investment Strategy strategist. Investcult time to domestically. Also a difficult time internationally. You see what is going on in china, apart from the tariff war. What are you advising oppenheimer customers as to how to invest in emerging markets and china . John i have been in this business over 36 years. It is not that i did not expect to live this long. I did not know how fast it would happen. There is always trouble. I cant remember a time save newspapers for a couple of weeks. Look back. Headlines always say there is trouble. You cant let it freeze you. You have to look at the cyclical trends that remain intact, the secular trends, the longerterm trends that are available, and look for opportunities when what might have been too expensive a few weeks ago gets cheaper to pick up. That is the way fortunes can be made. Not guaranteed, but it is the way they often are made, by buying when things are at discount. Vonnie what is cheap now . There has not been a massive runoff. John i will say this we continue to like the cyclicals. We like technology, consumer discretionary, industrials, and we like financials. Within the financials, as an alpha pic, when you can really select the winners within financials, a lot of big banks are making good profits, because they dont pay a lot on deposits, as we all know. On top of it, they charge a lot on their credit cards and fees. Banks, many of the big for example. I cant mention any names because i manage money. , what we would have to say is we would stick with the cyclicals. The defensives have not had a remarkably good year. All the way back to september thethey outperformed cyclicals, the defensives, although they have been fairly even this year. Guy john, when does value come back . John that is the waiting for godot waiting for question. Value will probably have to wait in the wings until we get a that cantion of growth lift it to probably overvalued levels, and investors will widen their exposure, diversify it within the area. The other thing is, within the value space, some stocks are value traps, and will be forever, because they have been left behind by technology, or their management has not grabbed it. There are many value propositions that are very good. Own and be patient with them in a diversified portfolio. Guy what do you make of recent ipo failures and the pulling of ipos such as we work . John i think it points to a few things. I think if there is anything in the ipo market, as well as within cryptocurrencies, there has been significant exuberance, or irrational exuberance, which carried prices way above what they should have been. As a result, there has been a significant correction in individual ipo names, and of course bitcoin has had quite a pullback. I dont know what it is doing today, but yesterday it had been hit pretty hard. What we have got to say is we think the market is very concerned with valuations. It seems to be less concerned with large publicly traded established companies. When it comes to ipos, it may be that the gestation period is so long for companies before they go to ipo, there is almost a desperation and hunger to own these things and they finally come out of the ipo. People underbid them, and somebody says, when did they turn cash flow positive . That is when the premise gets questioned and people say, how good is their Competitive Edge . Marginat does the growth look like . Is this really a tech company . We have to leave it there. Thank you for stopping by. The Oppenheimer Asset Management chief executive chief investment strategist. Later this week, dont miss my interview with the chicago fed president , Charles Evans, just after 7 30 a. M. In london, 2 30 a. M. In new york. He is going to be in madrid. He was talking this week in frankfurt. Rates may be about where they need to be right now. Wonder if todays ism number will change his view. Vonnie its time for the latest Bloomberg Business flash with the biggest stories in the news now. Airbnb is charting an unconventional path to the public markets. The home share startup is laying the ground up groundwork for a direct listing. Slack opted for a similar path. Some of the biggest ipos this hadr uber, lyft lackluster debuts. Another congressional hearing with plans to invite amazon, google, and facebook. The issue they may be damaging the Competitive Landscape for small business. Tech giants already facing investigation from the justice department, ftc, and house antitrust committee. Lets take u. S. Markets now. A decided turn negative following ism data that was week weak by a longshot shot. 47. 8 was the headline data number. The employment number, 46. 3. Construction spending in the month of august was week as well. 0. 6 , the nasdaq down 0. 3 . Guy a look at european markets toward the end of the day here. It has been a negative afternoon, driven lower by the ism print out of the United States. Every sector is in negative territory. The worst performers are financials, health care. Thanks not having a good day. Heading banks not having a good day. Decent volume today. Allftse, dax, and cac lower. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Call, click, or visit a store today. Guy 30 seconds until the end of regular trading in europe and we are firmly in the red for the majors. We are already down before the ism print came throughout of the United States. That sent markets tumbling down to session lows and that is where we are right now. We continue down after that print came out. Down around 1 . The ftse faring a little bit better. The pound taking a beating this afternoon. The ftse fares better. Remember an antagonistic relationship between those two. The cac 40 down 1. 28 . Industrials, anything related to the Global Economy from a manufacturing point of view feeling the pressure this afternoon. Lets take a look at what is happening with the grr function, give you an idea of what is going on with the sector rotation. We are seeing rotation, we are seeing everything down, but nevertheless the composition is interesting. It is the safety trade helping out. Telecom has had a great last quarter. Utilities are the bestperforming curate oil and gas doing better. What is in