5. 2 trillion in worldwide markets. Amundi some analysts worry is too conservative. We are in this period where we dont know who will be the faster or the question of overvaluation. The u. S. Government shuts down briefly but the Senate Passes the budget deal after a midnight deadline raising hope that a full agreement will be in place before most americans wake up good morning its friday, tgif. We had another weak session in the u. S. Yesterday dow jones was down about 4 . The hand over from asia was not that pretty either we saw the nikkei down 2. 3 down overnight. We saw weak performance in chinese stocks, down about 4 . Some of that is due to liquidity being squeezed into the Lunar New Year the picture for europe, we started off quite weak, but since then european stocks have been trying to make a comeback clawing back towards the zero line stoxx 600 is down about 0. 2 lets look at individual bourses. Yesterday we had big moves in the dax. It was down 2. 5 in yesterdays trading. Its actually up almost at the flat line, and it is relatively outperforming. We had huge swings in the ftse mib today. At one point it was down 0. 5 . Now up 0. 4 . We actually have had relatively good earnings coming out of italian banks. Thats been helping. Yesterday the main focus of attention was on ftse 100. Thats down 0. 4 today as the market digests the news of a more hawkish bank of england the market was not anticipating the bank of england to switch to hawkish, but that has had an impact on the ftse 100 as the uk grapples with Political Uncertainty and a central bank that looks like it wants to tighten more aggressively. This is interesting. Autos and technology are leading the charge this morning, which gives you the impression that cyclicals are making a comebac when it comes to europe. Well see what happens in the u. S. In the u. S. , technology has been a big laggard. Do the down side, Financial Services and banks utilities leading declines this morning. Oil and gas pulling down the sector as the spot price comes under pressure lets talk more detail about whats been happening in the u. S. You can see that the session yesterday in the dow jones was quite weak it was down about 4 yesterdays move was the second worst point drop in history. The whole day yesterday the dow jones traveled about 3,400 points up and down thats less than monday and tuesday, but still quite substantial. In the last five days alone the dow has lost half of its 2017 gains. Thats spectacular switching to the s p, its not looking much prettier there either down about 3. 75 yesterday the s p hit a record high back on the 26th of january from that point its lost 2 2. 6 trillion in market cap technically speaking 8 out of the 11 s p sectors are in correction correction by definition is when the sector is down more than 10 . 8 of them are technically in that correction. Well have to see how things look this morning. The vix with this much volatility and intraday move continues to be the top ij of major focus. You can see it is highlighting the move from low 15 where we opened monday. Monday was a huge day for markets. Weve been hovering around the 35 mark for the week now there doesnt seem to be a respite in site for the vix given how volatile these markets are and the extent of the selloff. People were hoping things would subside, but yesterday again gave a few Warning Signals in the u. S. Market. We need to talk about fixed income the twoyear u. S. Yield is around the 2. 13 mark a lot of focus on the tenyear at 2. 86. On one hand you have technical factors weighing, fundamental factors weighing thats pushing yields higher, but on the other hand youre having down moves on equities bringing on a flight to quality back to the tenyear note at one point the tenyear did touch 2. 90 as equities took a downfall, money came back into fixed income again that pull and tug is happening in the fixed income space. Theres a lot of supply coming to the market so theres not really a natural buyer, that suggests that 3 could be a target all right. Lets move on. Investor pes sicsimism is at a threemonth high the turn away from bullish sentiment ends an eightweek streak of optimism the survey does still show slightly more bulls than bears data from lipper shows 38 billion was pulled out of stock funds in the last week the question on everybodys minds, where do we go from here . Lars calbrier joins us now this doesnt seem like a typical correction to me its been aggravated by the sheer volume of strategies on the market do we buy beaten up stocks on this dip or do we play defensive . Well, we need to remember what has caused the correction the correction was caused by an inflation shock. We had last friday stronger labor figures which then triggered investors to reinvest. Usually corrections happen for other reasons, because you hahae a growth drop or people think growth will come down. The second point which is critical is we just had not had a correction and a correction is normal usually you get corrections once or twice a year. We had not had one for two years. So were getting back to something which is normal. From that perspective id rather be in the camp of your first question where does that adjustment process take us then quickly a correction is healthy you cannot have double digit returns within a month in january we had 10 returns. Thats usually a return which youre having over 1 1 2 years so we expect that this correction will probably continue with heightened volatility, perhaps another 3 , 4 , but it is a buying opportunity as long as earnings are growing. Earnings are growing if you speak to companies, they are having a good year, both on the top line and on the bottom line theyre growing revenues and earnings the fundamentals are still strong when you look at the composition of the players in the market, arent a lot of the players in the form of algos, quant players, players driven by signals. As long as we keep breaking to those lower levels, are those accounts and investors not going to be inclined to keep selling youre right. What Algorithmic Trading is doing is accelerating moves in the markets. In the hedge fund space onethird is dominated by quantitative strategies. So that means once you get volatilities in the system, sharp moves, these moves are accelerated. Theyre accelerated by the volume in etfs thats the new normal. We need to get used to that. Panic is not the right strategy. Not the right strategy for sure, then again theres it appears theres more wood to chop in that space just taking a step back, how much of this is on back of Central Bank Policies and the fact that Central Banks all over the world, not the fed specifically, have injected so much liquidity in the system, have done quantitative easing, have led to this financial repression of Interest Rates isnt it now, many years later, that its coming back to bite again . Youre right what were seeing now is an outcome of all the unconventional Monetary Policy which we have seen over the past few years whats happening now is kind of were going back to the new old normal the new old normal means lower returns, higher volatility, and also better environment for stock pickers. Central banks have been very adverse for stock picking. Weve seen that in the active management space if the Central Banks distorted the market and got us here in the first place, then does the solution lie with them . And im curious, how do you think jay powell will address this entire question of Global Market volatility . The fed, we know, watched the International Markets carefully. Yes, we need to see if theres trickle down into the real economy. At this point is it premature to talk about a powell put . I think at this point its premature. We are now braack in terms of Global Markets where we were in middle december. It is not something which has fed through the system and affected the real economy. Where powell would be concerned is if he sees the correction is now starting to affect the real economy. Then we could speak about a powell put lars, stay with us. Coming up, we get correction reaction in asia shares tumbled there following the fresh selloff on wall street the latest on the Asian Session after this break your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. Jimmys gotten used to his whole yup, hes gone noseblind. Odors. He thinks it smells fine, but his mom smells this. Luckily for all your hardtowash fabrics. Theres febreze fabric refresher. Febreze doesnt just mask, it eliminates odors youve. Gone noseblind to. And try Febreze Unstopables for fabric. With up to twice the fresh scent power, youll want to try it. Again and again and maybe just one more time. Indulge in irresistible freshness. Febreze unstopables. Breathe happy. Welcome to street signs. Loreal shares are on the rise after a better than expected 5. 5 rise in like for like sales in the fourth quarter. Asia helped offset the demand for mass market products in the u. S. The ceo said he was confident of Significant Growth and increased profitability. In an interview with the Financial Times he said he was ready to give up stake in the company if it wanted to sell sticking with some corporate news, maersk shares stop to the bottom of the market after lower than expected q4 earnings. Amundi shares are taking a beating this morning falling to the bottom of the stoxx 600, this despite the french asset manager beating expectations and reporting a 37 increase in net income for the fourth quarter. It says it is aiming on bringing in 150 billion euros of new money through 2020, though some analyst commentary express concerns that future targets are too conservative we spoke with amundis ceo about how clients are dealing with the recent market swings weve always provided clients with savings solution, and the need to invest money we provide all kinds of savings solution from real estate, equity, maybe they will move from equity to other less risky assets, but it doesnt change a lot. I must admit, watching the movement in the treasury yield yesterday, you got the sense that money coming out of equity was going into fixed income, because we saw an Immediate Reaction in yields your sense is that investors will rotate and remain engaged rather than going to cash . Yes two months ago, people asked me are we due for correction, i said the first thing we see is an increase in volatile i volatility, the second thing is the economy growth which is good and the question of debt, which is always a major problem, and which creates overvaluation. So we are in this kind of period we dont know who will be faster, Economic Growth or the question of overvaluation linked to an excessive debt lets turn the conversation to asia. In contrast with worries in the west, chinese inflation eased in january as expected. Ppi rose 4. 3 yearonyear cpi rose 1. 5 , the lowest level since july 2017. The data supports the picture that chinas economy is losing momentum after a stronger than expected 2017 but should also be treated with caution due to distortions caused by the timing of the Lunar New Year sell breaks next week pboc announced it has released nearly 2 trillion yuan in liquidity to meet cash deman ahead of those holidays. Asian stock markets have followed wall street deeply into the red with chinas csi notching the worst week since august of 2015 Nancy Hungerford is in singapore with the conclusion of all the market action. On a relative basis its striking, asia is getting really badly burned by this global stock market selloff china with a strong domestic dynamic i thought would be relatively insulated, but a different story today. Despite the strong fundamentals, theres a degree of fear out there, nervousness and going into the Lunar New Year holiday you talked about it seems investors are not willing to buy in on the dip for fear things could change before the holiday period lets look here at the hang seng you already talked about the Weekly Performance on the csi, look at the hang seng here, off 3 on the session. Weakness across the board for the session. I want to show you the hang seng on a weekly basis, it was off about 10 here you can see this big move to the downside thats significant this will be the worst week since the financial crisis it also brings the index into correction territory and most significantly that means the hang seng is negative for the year before todays close, it was an outlier hanging in positive territory. Weve seen broad selling today lets look at the shanghai it was off about 10 for its worst weekly fall since january 2016 its also the first socalled correction in 743 days it does give you a reminder of how good things have been with this long winning streak and the performance of many of these chinese equity markets throughout the last year lets give a view of the weekly performers the weekly 225 bearing the brunt of the selloff in asia it was off 2. 3 , off session lows, but for the week off almost 9 . The nikkei 225 also in correction territory the south korean main market only down 1. 8 it did not fair as badly as other bourses here but the 6 dip on the week was the worst for the kospi since may 2012 no one is taking chances hanging into the weekend thank you very much for that you is breaking news in. Were speaking about the loreal ceo, he is out with comments saying if nestle wants to sell its stake in loreal, were ready to buy it. He says we have cash in sanofi in terms of the resources to buy nestles stake in loreal. They have enough to do it. Its nestles choice and decision on whether they want to sell their 23 stake in loreal, but they do have the cash to buy it back. We will be having an interview with him at 12 30 cet. Dont miss that. The s p tech sector saw its worst daily performance since the brexit vote on thursday. Big tech names have led the declines on the index this week. The biggest losers are heavily dominated by the tech sector it looks as though a lot of that move happened yesterday. Arjun kharpal joins us on the set this morning we had some really big moves looking at alphabet, apple how much of this is the fact that that market was overcrowded . Lets take a highlevel view and put this into context. Lets year a lot of the f. A. N. G. Stocks were up nearly 50 over the course of the year even with the pullback they were higher than a year ago theres a sense of quocooling o, profit taking. Theres no down that the tech sector does remain strong still. If you look at a lot of the companies, they have huge scale. Facebook at 2 billion users, 1. 3 billion iphones in the market. Many of the companies are starting to monetize users in new ways thats a theme youll see happen throughout this year there are some challenges, of course that comes from individual names, whether thats facebook and its news feed changes or rising regulatory concerns so plenty of challenges as well this year. Looking at the tech hot board, we can put that up in a second if you look at the moves, apple outperformed relative to its competitors, even though theres been so many stories about apple and the fact that their iphone x is not selling as much as they wanted it to why is apple outperforming year to date apple is down 8 its much higher over a yearly basis. People have started to buy into the services story of apple. Yes, the iphone x sales were not as stellar as expected but in the last quarter you saw theaverage selling price jumpe significantly, which was key because it shows theyre selling higher priced models, and Service Revenue grew about 20 per quarter. Thats key it is showing people are buying the Apple Services with an install base of 1. 3 afteral iphones. People can say use apple pay, buy apple music. Thats why youve seen excitement around the apple story. Lars, a quick line on how you would approach the tech sector, which has been such an emblem for the momentum in the stock market we continue to be overweight the tech sector for reasons you mentioned. Strong growth, changing Consumer Habits having said that, in terms of evaluations, its a rich sector. Its something we need to have a structured view. We have a structured view and we keep overweight on it. We use the current weakness in order to buy more tech what sectors do you buy in this environment then . It looks like it will be heightened volatility environment and higher inflation environment. In terms of inflation, we do not think that inflation is going to get out of control. There are too many structural sectors, factors who cannot explain why inflation is likely to be contained. Having said that, cyclical stocks have been beaten down a lot during that correction they will benefit from continued Economic Growth, which we see being very balanced across different regions, emerging markets for instance, europe, and also the u. S therefore cyclicals is really the sector to increase looking at the basket of f. A. N. G. Stocks, any names you favor over others here i think some of the strong performers are amazon for sure thats a company where a lot of people are looking to say cloud is growing significantly, they have a record net profit last year, theyre increasing user base prime subscribers alibaba is another one where you are seeing cloud revenue drop over 100 in the last quarter. And the ecommerce business is growing as they look to move beyond china into other markets. Those are two interesting companies. The risks regulatory to the entire sector especially around Companies Like facebook and google, but also can they monetize some of these businesses those are some of the risks that investors would need to watch out for. So much for the f. A. N. G. S, what about the b. A. T. S. , badu, tencent, and of course alibaba, how do you approach them the sense i get out in singapore is that they are leaps ahead of their counterparts in north north america. If you look at some of the innovations coming fr