By 9. 1 and the pain is very much in the tech sector. The nasdaq is down even more. Stoxx 600 down by 6 10 of 1 . 1834,rodollar is at 100 stabilizing at this point. The euro has been down and pushing back. The lira is that a fresh record low against the dollar. Just off a fresh record low. Alix a lot of activity in the u. S. Is a steep selloff in tech. Scarlet fu, walk us through the nuts and bolts. Scarlett we are off the worst levels of the session before the nasdaq its the biggest drop since june 11. No specific catalyst. The jobless claims report was not encouraging, but this is a long time coming. People saying equities were not extended, especially those in the growth sectors and specifically mecca cap names. Looking at the different indexes within the nasdaq 100, 80 9 of the members are lower. Are down. M within the s p 500, 62 . Then you get to the dow average. 57 of the members are lower and within the valley, only half the members are down. They give you the sense of the rotation taking place or perhaps some of the air coming out of the balloon when it comes to lofty tech stocks. And there were of course plenty of signs that the rally was running out of steams steam. Looking at gross etf from vanguard and i share, they hard they had their largest monthly outflow in august. I should say outflows for the month of august, you saw inflows in april, may, and june. Monstrous inflows for vanguard growth. Does this mean anything in terms of people falling out of love with tech shares and growth shares . Probably not. Tom in europe says that performance wins out in the end and perhaps investors still favor growth, but they are choosing to express it in less generic ways. For instance, the etf that tracks the nasdaq 100 and the kathy woods innovation etf saw a big monthly inflows for the month of august. This might just be an opportunity to take money off the table and people are looking for more reasonable entry points Going Forward. A long weekend upon us, people may be content to let things go for little bit and come back in later on. At the travel stocks doing relatively well on both sides of the atlantic, you wonder if there is a vaccine element to all of this. Positive news over the last 24 hours maybe feeding into the neighbor the narrative. The global head of the hbc fixed income analysts analysis joining us now. What is the selloff today meaning for your world . The equity market has been buying and for ages now. Some of it may be down to the feds ideas about inflation aggregates. I say ideas, but i mean aspirations to hitting some sort of average inflation. Its an aspiration, it isnt going to happen. At some stage i guess reality kicks in. There are experts out there that know more about equities than me and most people would tell you that the market was overbought. The fact is that rates are not going anywhere for a long time and i dont really see how that can be good news for equities. Normally low real rates are associated with uncertainty. Playing the what if game, what if this is about vaccine optimism and getting back to some sort of normal . If theres a playbook for that, dumping growth and buying value, what does it mean for rates . Currently we are seeing of it in the bond market and if it is a replacement vaccine, shouldnt there be a backup in the yield . He would have to be talking about a vaccine that works and could be distributed very quickly. That seems like a big ask. To me the challenge to the gaps. S is the huge output strong disinflationary pressure that is still there. The vaccine would be great news and i can see that, but i dont really see how it changes the outlook for rates in the next few years. It doesnt reverse whats happened. Why are you so pessimistic on inflation, stephen . Im realistic. I think that the aspiration of 2 inflation is already a bit of a problem. It seems to be something that comes from the 1980s. Who said 2 inflation was a good thing . If you have no inflation or you have deflation and or nominal wages the same, you are better off, arent you . I dont know where this idea that 2 inflation would be a good thing came from. I think im being realistic. Isx if your reality reflected in Inflation Expectations in the u. S. , for example, they all moved higher, it seems, towards 2 . Do you see that as the market expecting inflation to kick to pick up . Or is that just reflecting Something Like inflation uncertainty . I wrote a paper about this last week. There have been about 100 basis points in shift from the 10 year breakeven, from 100 to 200. 2 , more what we are likely to see as an average over the next 10 years. The reality is that most of those are down to the liquidity premium in the product of inflation. The tips market, the product. And the generalized uncertainty that is more macro. Uncertainty is a form of risk premium as well. Its about the inflation outlook. We dont know if there will be deflation or inflation. Its very unlikely that we will be moving into a high inflation environment. The uncertainty is multifaceted and i think that much of the meuse the moves and tips and breakevens come from that. It gives you a spurious outcome. If people think that there has been a reflationary move, they are mistaken. Reale argued that the yield is a residual of a calculation that takes inflation away from nominal yields and adjusts for risk yields. Inflation is always a monetary phenomenon. I am sure i have heard that somewhere. Im wondering why it isnt and what you think it would take to get inflation higher. Im looking for markers that would be potential indicators that we could be moving into an inflationary world. What is steven major looking for . Was a stated that like it fact, i guess it might be in a textbook. Sounds like it came from someone. Someone much more famous than me, of course. Its rather axiomatic, theory. In practice, the money needs to be in the pockets of people so that they can go spend it and buy things in large amounts. Up. Then prices go but wages have to go up. Those kinds of things have to happen. At the moment, the money that has been put out there, its a huge financing trade that sits in the banks. The banks have basically helped finance those asset purchases. That is not inflationary. All of these ideas that m2 is somehow linked to higher inflation in the future are nonsense as far as im concerned. The money is stuck inside the banking system. Itsidea has to change and not going to anytime soon. Some of the 1970s textbooks may not apply to whats happening right now. Alix when clients come to you and say check out the real yields, im its low and negative, im going to go into risk, what do you say to that . Show them the work we have done on this. The real yield looks like something but it doesnt tell you anything. Its not stimulative, doesnt make me want to do anything. People look at low real yields on Government Bonds and then they go purchase in emerging markets are equities. Someone who compares the real rates of a dm bond with the dm bond is missing the point. The real rate in the end is filled with all kinds of credit risk and default risk that dont exist in the written the riskfree asset market. Treasury. Isk and inflation risk, Interest Rate risk, but its not default risk, thats different. We have to compare like with like and i think that low yield rates and treasuries are the outcome and there is no reason to go by risky stuff. A proper analysis that looks at a full data set will show you that the idea of using real ands to justify a purchase equities is incorrect. Where is the dollar going and is it going to continue to go down . Its stabilizing at the moment, but what is davids outlook . What does it mean for rates . We think the dollar has not lost supremacy and again, the real rate comparison might be misleading here. I think the euro has just got back to its average, as you know, since the euro was created its been in a range in the middle of the range is 1. 2. We only just got back to that recently. The euro came this year from a probably oversold position. Good news in europe, removing the tail risk. Seems the ecb is doing more than the fed. ,he ecb has been more active their Balance Sheet expanding more than the fed this year on a 2019 basis. There is some explanation for the move. But i dont think we should read too much into it. I certainly think the real rate differential could be misleading as well. So, we are still dollar bullish. All that thought, stephen, stick with us. This is bloomberg. Alix live from new york, im alix steel and this is the european close. Stephen is still with us. As european stocks head into the close of the session, pick up where you left off, the ucb has made it known, they didnt like it. Talking it down, what do they do next week . They have a lot to worry about next week. The september meeting follows the higher entry where there was cautious optimism and a lot of , thingsterm rapid data for mobility and what have you, seems to be rolling over. So, maybe things dont look what is good. Then there is the euro, as you mentioned, and the recent inflation grid. All of that says that Everything Else may be doing more. From the ecbs position, though, as i said in the previous segment, the ecb in terms of the Balance Sheet has been doing more in terms of the fed this more in terms of increase, based on last year. Also, they do more in credit and take more risks. So, they could rightly say they have already done a lot and buy some more time, but at the same time it looks to me like some of the incoming is pointing the other way. Then there are the staff projections for 2021, 2022. Stark rejections for growth two years out. 100 and 47 over bund, do you think it patents from here . Like greek trading Government Bonds, moving up and down together. Its quite interesting how there is very little differentiation. The big tail risk was removed a few months ago with the big step euthe fiscal side and the recovery fund. So, there might be some localized risks. September is a month when a lot tends to happen in italy and everywhere because there is planning for the budget process october, through planning for next year. Its a time of tension and most people in the market would expect some disruption in september or october. But at the moment, it looks very attractive. Which wee confident, are, basically, the rates are not going anywhere, that looks like a good pickup. Pt fees are unattractive and liquid compared to some of the ig corporate, for example. Talking of the corporate space, forcing people out into lower grade credit, whats your assessment of what these rates look like as we enter the autumn . Clearly Government Supports in certain parts of europe are starting to fade. The french budget is likely to help out a little bit, but nevertheless it looks like we are in for a tough autumn. Do you think that credit pressure at the bottom end of the market in the highyield space will increase . Some of the stuff going out the door recently will be sustainable . I think you are onto something there. Normally you would be expecting some sort of default cycle kicking in. The question is, how supportive will government measures continue to be . It seems that in europe compared to the u. S. Governments, they are prepared to help households and, therefore, Small Companies much more than the u. S. Im talking about unemployment benefits, etc. , furlough schemes. Thats one big difference. A more market type of move in the u. S. Is likely. I think Market Forces can prevail more in the u. S. , you could have a more aggressive default cycle over there than in europe. It seems that the ecb is prepared to step up. They actually take credit risk and when they go down the curve, they do it to the tune of the highyield and they basically buy bonds and put them on the Balance Sheet. What the fed is doing is more signaling that its willing to buy to backstop the treasury. Thats not the same thing at all. I think in the coming months we will see versions between the europe and the u. S. There because of Government Support schemes delaying Market Forces, in a way the European Market looks safer than the u. S. Equivalent. It comes at a costs and the costs is issuance. Oh lausch old was looking at german debt with issues coming from france as well, budget deficit exceeding growth. We heard that from the cbo who wins in the front . You are right. The numbers are huge. If you told me at the start of the year that we would be looking at numbers like that, i wouldnt have believed you. Governments dont have much choice. In the case of germany at least, they have Balance Sheet. Dont forget we are coming from a healthy fiscal position. One of the biggest surprises of 2020 has been the german switch to being on the fiscal side, along with a uturn on the e. U. Recovery fund, which they allowed to happen. Numbers are huge, but you still have the ecb with the increase and i have never been that worried about Government Bond supply. I have written a lot about this in the past. I think that bonds dont trade like potatoes or any other kind of vegetable. They are sophisticated financial instruments. To they are priced according not just simple demand supply dynamics. Its all telegraphed in advance. Its true to say that each auction or syndication is an event, but when it comes to pricing year end or next year, and all smoothed out ultimately priced to where the policy would be in the policy rate is going nowhere. Mr. Major, thank you very much indeed. Steven major of hsbc we are seeing something of a selloff in the Technology Space right now. The nasdaq is down, this is its biggest route since march. The big question i guess, is, do you buy the debt . Will bea lot of people asking themselves that question right now. This is bloomberg. Time for the Bloomberg Business flash with a look at some of the biggest is this stories in the news right now. Shares of tesla are lower today, the largest shareholder of the electric car maker cut their stake. Bailey gives reduced their tesla Stake Holdings from 7. 7 in february to less than 4. 3 percent, according to dow jones. The firm had to cut holdings because of guidelines that restrict the weight of a single stock in client portfolios. And Carnival Cruise lines are preparing to resume operations. They will start sailing sunday. Italian and german cruises resuming trips in november. The coronavirus pandemic led to the shutdown of the global cruise industry. That is your business flash. Alix are you going on a cruise this weekend . Carnival is one of the top performers in the s p based on the stay home stocks that are getting taken out. Guy it all kind of makes sense, doesnt it . We have had positive news around vaccine and you wonder if it is a capitalist for what we are seeing here and you wonder if those stayathome stocks that are stock drivers will fade. We have also seen a real kind of blowoff moved to the upside, which has been incredible and may have been generated as a result of whats going on on the Options Market, but to date we have single rotation back in these stocks and maybe there is an underlying vaccine element. Carnival is up strongly. Iag is up by 5. 2 . By 4. 1. Is up european and u. S. Travel stocks, which could be big beneficiaries of a vaccine, or trading strongly today. European equity markets are fading and the travel sector is off its highs as we head to the close today. On volume, we are down. Not as much as in the united states, clearly. Europe is more value driven. It may alternately end up protecting it. We have also seen this move pushing the dollar back up the euro down. 100 and 20 to 118 is a tailwind. Anyways, we will deal with the details in just a moment. This is bloomberg. Guy 30 seconds until the end of regular trading in europe. I suspect the end of trading cannot come soon enough if you are long this market because the selloff has been gathering pace over the last hour, clearly led by what is happening in the united states. Europe spent most of the day in positive territory. It is a selloff towards the end of the day that catches everybodys attention. Driven by what is happening in the united states. It is being reflected here. The euro is protecting the European Markets. We have seen the euro backing off 1. 20, that is a factor. A whole range of elements helping out. 1. 1823 is where we are trading. Europe is more valueoriented and has a lot of travel stocks as well which are doing well. You wonder whether the vaccine element to what is happening or whether this all originated in scotland, with bailey and his decision to lighten up on the tesla position. Your finger on one particular element when we talk about the selloffs. That was the lesson we learned in 2000. Things were probably as stretched as they are now. Lets talk about what is happening with the individual markets. There is little bit of difference but not much. I want to highlight it. The ftse 100 and the dax broadly off the same amount. Outperformance from the cac 40. It is being led on a points basis by stocks like lvmh. We have seen today, finally the announcement, we will talk about this more in a moment, regarding the 100 billion euro french stimulus plan designed to put the French Economy back on track and revive the political fortunes of president macron. I wonder whether that is why we are seeing the outperformance in the cap 40 . In terms of the in the cac 40 . Outperformance in the travel sectors. That is certainly helping out as well. Autos are doing relatively well. Food and beverage, the defensive staple style story being helped out. Unsurprisingly, the bottom end of the market, there you have it, the technology sector, the leading sector in europe. Alix it is the same thing in the u. S. At one point you have the nasdaq off 5 , that wouldve been the worst selloff since march. Off those levels, but still a brutal day. President trump ways in. He says do you notice any time fake news polls are put out, like at fox news, the stock market goes down. We are going to win. Joining us from edinburgh is stephanie kelly. President trump makes frequency the relationship between politics and the u. S. Market. How do see it . Stephanie kind of a fascinating relationship now that we have entered this phase. Before we knew trump was relatively sensitive to the stock market at extremes. It seems in 2019 in particular 10 seem to be the threshold where there were concerns about the u. S. China. That seems to rile