We should also note that yield curves around the world are feeling the pressure as well we did have on friday the german bund, the 10year, falling to its lowest level ever. As for the asian markets, the nikkei down by 1. 75 hang seng also pressured by what is going on in hong kong in terms of the protests there, down 3 . Shaun hi shanghai down 1. 6 in europe, red arrows across the board. Dax is down 1. 35 . Ftse down, as well we have a stronger dollar against the major currencies weaker crude, wti down 0. 7 . Brent down 0. 75 . Couple safe haven trades working this morning, gold prices are up. They actually have been on a great run. They were under 1300 about two months ago you see them up only slightly, little less than 1 , probably because they had been so strong lately not a lot of oomph year. Bitcoin also getting a little bit of a boost right here. Obviously, a lot of capital and motion across borders. That could help the sentiment toward bitcoin you see it up 7 at 11,750 lets talk a lot more about the catalyst this morning for some of these big market movers. Last night, china allowing its currency to fall below the key 7 per dollar level for the first time in more than a decade want to get over to beijing this morning for more on the ground with this big decision or shift, if you will. Eunice reporter yeah, thanks so much, andrew it was a big shift the chinese yuan has cracked 7 thats the way the chinese currency traders describe it that has been raising a lot of questions here as to whether or not beijing authorities are now purposefully devaluing the currency as a way to offset the potential impact of President Trumps next round of tariffs. In a statement on its website, the Chinese Central Bank explicitly linked the depreciation to the trade war, saying the losses today were largely due to unilateralism, trade protectionism, and tariffs on chinese goods, though it didnt mention the u. S. By name. Now, for the past decade, the authorities here have been very careful to keep the yuan stronger than 7. The authorities here, as most people know, very heavily control the currency and the value. Now, theyve been sending the signal theyre going to allow further weakness that signal has been received very well by manufacturers who have been telling us theyve been concerned the 10 tariff is going to have a big impact on their bottom line and hit pretty much everything. It now would include another 300 billion worth of goods. Theres also another risk that people have been talking about here, that it could potentially anger the white house. The signal to the white house would be that beijing is now willing to give up on trade talks all together that it potentially is seen as a way that beijing can weaponize the y uan. There is another big risk factor for the chinese themselves and their own domestic issues, and that is it could potentially trigger capital flight this has been really interesting. The public reaction has been huge, and the hashtag rmb crack 7 is a top trending topic on social media, with 410 million views so far generally, people are expressing doubt that the central bank and the authorities here will be able to protect the value of the currency by that, they interpret it as the value of their money guys eunice, i dont know if youve seen this, the other piece of this is the bitcoin piece. Whether you think some of this is a flight to that. Did you see this it surged as much as 12 since friday is that a result of this . Absolutely. Money leaving the country i dont know if it is money leaving the country. I want to know what the Chinese Government is going to do. Viewed as a hedge. I want to know if china will do anything about that eunice reporter it is difficult to know the authorities here do crack down on bitcoin. It is a lot of the trading on the exchanges has been illegal theres still an underground market for bitcoin a lot of chat rooms of people who do trade in bitcoin. Its difficult to say exactly what the government will be able to do to try to clamp down on this there is a concern that you will see capital flight out of this country. We have i mean, weve talked about this before, 2015 2016, when the government here had decided to depreciate the currency, that led to a lot of money flowing out of here. A whole lot of confidence being lost in the currency by the Chinese People so the government has opinibeenn the past couple years, very careful to put more capital controls on, to try to manage this very carefully. It is a big question mark as to whor whether or not theyll be able to do it eunice, thank you eunice yoon in beijing she mention 2015 s 2016. Summer of 2015, muscle memory, your stomach wrenches because you see the devaluation of the yuan and think when shanghai lost as much as 30 in the span of three weeks you think, are we seeing this once again in terms of u. S. Markets, we were in a somewhat similar position, where we were testing new highs. Had been range bound for a while. The other thing is the treasury yield story, right yes. Back then, we were saying how low can the yields go . Now, theyre basically back there. Right europe, by the way, during that timeframe, lost about 9 it was a selloff around the world that could not be escaped. You wonder this morning if were seeing the opening shots of that i mean, if we thought we were in a trade war before, now were really in one, right yeah. Im waiting for that twitter feed for Donald Trumps response. That will be fascinating to see how he perceives it, especially as he has been harping on the strong u. S. Dollar here. China is able to, overnight, devalue. You can place it within a story of deglobalization Nodeal Brexit seems more likely the hong kong protests are flaring up and continuing. It seems as if there is a narrative behind it. Whether it is really going to take hold or not, thats causing a little risk aversion this morning. A little bit of risk aversion a lot of risk aversion. Not yet. You have the swiss rank against the euro at 25month highs. It is risk aversion for this moment at least. Coming up, much more on the currency move thats driving markets. Well talk about the impact on your money and potential portfolio moves you should consider after this break. As we head to break, take a lock at the biggest premarket winners and losers in the dow. S p looking to open lower this morning. Stay tuned you gauge the greatness of an suv . Is it to carry cargo. 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The fact that the chinese leadership was the quote i read was stunned by this move, certainly is not going to help it is interesting that not only is the yuan below 7, it is the lowest level, the first time its ever been there since its been allowed to trade offshore i understand i believe i understand what the president is trying to do, ybut these are no concrete suppliers from queens who will be pressed into a corner they have weapons, as well i think were now to the point where they may just decide to wait out the president and see who gets elected in 2020 the only moving average that matters in the s p matters because it is also a big round number, but it is a long way to the downside, thatd be the 200day moving average at 2,800. Yeah, that is a long ways down deborah, we were just talking about the muscle memory and the reaction that, you know, you wake up this morning and hear these headlines and you think about what happened in the summer of 2015 how should investors be preparing themselves for not just todays trading day but the length of time, you know, ahead of us, before we have any other developments on the chinese front . Certainly seems as though treasuries continue to be a flight to quality type of instrument the bond market, obviously, reacted to the fed, and the employment report last week. Overriding all of that continues to be sort of whats happening from a Global Economic perspective. Treasuries certainly can take the sting out of whats happening from an equity market perfespective in that regard. Are you worried about bonds looking expensive at this point . Well, we have a fed that is trying to find neutral i dont think that Interest Rates are going back up very quickly at this point. Hopefully, theyre staying sort of where they are without too much movement. In that environment, i think bonds dont really look expensive at this point. They look pretty much average. Spreads, you know, continue to widen on riskier types of assets which is, i think, what is expected at this point in the Business Cycle with treasuries, again, being sort of the safe haven, i believe theyll continue to perform very well. Scott, you know, it seems there are two maybe conflicting impulses this morning from investors who have been through these this cycle for a while. One is, obviously, these new trade threats, the currency disruption, basically says, okay, we have a fragile Global Economy that might be tipped over into something worse. Or, on the other hand, you say, it has never felt smart to sell on one of these trade headlines, one of these currency moves, because theyve typically been relatively shortterm corrective actions. What is going to win out i think that this is different. Now that the chinese have said, we have tools, as well, to the degree that eunice used the word weaponize. To the degree theyre going to weaponize their currency, they may not be the nuclear option. Nuclear option is selling treasuries they hold but this is a very different sort of thing. Again, they were surprised they dont like to be surprised. I think that if you have to pick around a sector here in the United States, you might want to do that for the reason you point out. Its never made sense to sell but, you know, some of these sectors are going to get hurt pretty good. One story that probably is underreported is the fact theyve also said theyre not going to buy a bunch of agriculture commodities. If you look at soybeans, theyre down 6 cents, 1 2 of 1 . Corn is down about the same, but it is bigger, 1. 5 deere, caterpillar, probably going to have a tough time today. Beijing denies the reports since it was initially reported by bloomberg deborah, sounds like both of you are defensive on this. If you think treasuries arent a bad place to be, i mean, how low do 10year neelyields go then we think theyve hit a low at this point, and probably wont go too much lower from a cyclical perspective having said that, theyre better than inflationary rates. We think they are a good place and a safe haven to hide at this point. Last week, the bond market didnt act well. Its been relatively firm as treasury yields have gone lower. Are we in for more indigestion in the credit markets here certainly, i think in this time period, youre going to see some credit spread widening. Thats normal for this part of the cycle. It is a very long Business Cycle. Typically, spreads get wider as you get a little further down that path. We dont think that it will be, you know, the overriding issue in the marketplace, certainly global issues tend to cloud that we do think that there will continue to be credit spread widening and hiccups along the path. Scott, i want to go back to the trade issue. You think this is a fault line, something has just happened here, and it is fundamentally changing the game. What i dont understand about this is why you actually were waiting to see what President Trump says on twitter, but why President Trump wont welcome at this he may feel he has his back in the corner and theyre trying to box him in, and it is not a good thing either, but he doesnt like the stock market to fall he really doesnt. Oftentimes, hell try to do whatever this ecan he can to fit if he is criticized meaningfully, itll be a different story for him and us. Absolutely. To the degree he then starts to walk this back, that would probably be good for everybody we know hes tried to pillory every member of the Federal Reserve open Market Committee in an effort to get Interest Rates lower. The fomc had to have a head slapper on friday morning when they said, my god, weve given the president cover to impose more tariffs i mean, to a certain degree, they probably had to think, oh, we gave scissors to a child and yelled run. The president is not the only one thats impacted by this. I think he has to realize that if he wants to make a deal, and he supposedly is all about the art of the deal, if he wants to make a deal, then he has to realize that he has to take a breath and that things are very different now that theyre going to weaponize their currency. I dont know how likely that would be after just raising the prospect of increasing tariffs i dont think he is going to run to make a deal right this second im suggesting if this continues after a week or two, he might find a way at the same time, what weve seen, deborah, i want to ask you this, the odds of rate cuts go up, dont they, in the back half of the year off all this certainly, the fed doesnt want to be the ones to be blamed for any type of global problems. Having said that, they did what they thought was the best thing, which was, you know, take what was the december rate hike out of the marketplace they took it back. It was an insurance cut in their mind the u. S. Economy continues to perform on an okay basis certainly not where it did in 17 and 18. It is not going too far south. Having said that, this action on friday, the counteraction over the weekend, certainly will cause some pause for various members. There were two dissenters. I doubt there will be Going Forward. We have two new candidates that President Trump has put through from a nominee perspective if theyre confirmed, those are additional votes more than likely in his camp fomc could be at a point where they are reevaluating how they have to respond to the Global Economy in a way thats a little different than what they did last week. All right thank you so much both of you for joining us deborah and scott. We should note, dow futures slightly lower, down 310 at this point. S p futures looking to be down by 35. Lot more coming up on squawk box this morning, we told you about the selloff in Global Markets up next, the individual stocks moving right now, including earnings from Berkshire Hathaway and the shakeup at a European Bank we have that and more when squawk returns after this. [leaf blower] you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. And you should be mad your smart fridge is unnecessarily complicated. 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Whoa. Whoa oops, that cheeky little thing got away from me. My bad. Geico. Its easy to manage your policy whenever, wherever. Can i trouble you for another marshmallow . Welcome back to squawk box. Couple stocks to watch hsbc ousting its ceo john flint after 18 months on the job the chairman says the move is necessary to speed up growth plans, including for its u. S. Business hsbc telling dow jones it plans to cut thousands of jobs and slow investment spending the company did report a rise in first half profit and announced a 1 billion buyback i just like the hsbc ads as they walk down the sky gangways. They do a very good on the marketing of that. I dont know if it is actually increasing business. Operating profit for Japanese TelecomCompany Softbank rising 4 in the second quarter. Thats in line with estimates. You may remember softbank spun off the telecom unit last december and has been trading below its 1500 yen ipo price the company added 372,000 more smartphone users in the last quarter. It expects profit to rise 9 for the full year. Some news out over the weekend. Berkshire hathaways operating profit fell more than expected in the second quarter. Insuran insurance under jowriting and td woes weighed on the company. Its been flat the last 12 months but underperformer lately. It is a tell in what hes invested in. It is banks and insurance, financials, not doing well, right . Yeah. Consumer doing okay it is really a tell of massive railroad. Right exactly. Thats the trade effect, as well. Coming up, chaos in hong kong much of the city was at a standstill over the weekend, and flights were cancelled amid a strike we have the latest from hong kongs administer. Thats next. 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