Near its goals. My question, why is this time any different . Alix you have to see, are we aing to have a dudley and fisher that are very different. Fisher is on the more hawkish side. What does that mean for yellen on friday . We have bank of americans global head of commodities. An interviewrx, you will only see on bloomberg. It was still a dollar move today. Jonathan an equity move off the back of that. You are looking at futures in the United States. Down 1 4 of 1 . 2 of 1 . Down 1 w speak. Ad a week of saifed the guidance from stan fisher, the interpretation is a right on the rate hike stillo table. A stronger dollar dominating. In the commodity market, stronger dollar, the commodity complex often. Copper down. A big week of gains for crude last week. Wti putting together its biggest weekly pop since march. Supply coming back to the market. Will talk about that later. In the bond market, the yield curve on treasuries and focus on the back of vice chair Stanley Fischers comments over the weekend. 0. 758 . Notes up to one thing i can guarantee is the debate is going to continue. Alix friday is the day for. Lets go around and check on our bloomberg team. 14 billion acquisition. We have the latest on Stanley Fischers comments. And the latest changes in india centralbank. Want to start with the m a on monday. Our Senior Analyst on biotech joins us. Pfizer buying medivation. That is not a surprise. What was the catalyst that put this together . Good morning. So, pfizer has been looking to get an oncology asset and medivation is a very attractive company. Well performing drug in the market. Cancer. Tate we know that sanofi has been speaking to them about this. They put a bid in place. Pfizer came in and used their war chest of cash to outbid sanofi. Alix 14 billion. It was the second largest since pfizer bought for 17 billion last year. What does that do to the consolidation for the rest of the sector . This is a big story and biotech. Biotech has been the novation engine. Smaller Companies Getting bo ught out, that is usually what happens. This is accepted. We may see more of this coming along. Aso not think it will dry up valuations have come down. Alix is there anything that you can point to that we can see ahead of the u. S. Election with rates so low . Exactly. Theres uncertainty going in with the elections due to the drug pricing. More noise than anything else. Everything is waiting for the valuations to come out. Last your we had very high valuations in the biotech sector. Since last year. The space is looking more in the price to pay. In this case, there about five different bidders. Alix and sanofi out in the cold. Thank you so much. We have to think, as we see some to move the jonathan we are not going to make a strategic decision but it will influence the timing. Update on thee Federal Reserve in goa khartoum to matthewel are and go bosler. Chairr comment from vice Stanley Fischer. 2016 is still on the table. What was the message over the weekend . It is funny because the summertime fed speak has turned ckto the ultimate war shacroarsk test. You can take a hawkish or dovish message. Stand fisher gave us a bit of both. He is expects growth to pick up. Then there are these longerterm issues of productivity that we are still dealing with. He was explicit about the need for not just Monetary Policy but stepped up fiscal and regulatory reforms to boost that. He might take the message that rates are going to stay low unless you call your commerce manning your congressman. Jonathan the Federal Reserve is trying to communicate to the market, to try to take away some inthe trough you might see other asset classes. The market has a message for the fed we dont believe what youre saying anymore. Does the Federal Reserve have a problem with his communications with markets and the markets responses . If you look at the probable probabilities, september is seen as not very likely for a rate hike. We have not gotten strong indications from fed officials that they want september to be on the table. A move by december seen as 5050. Thats probably as good as they could ask for, given how far away the december meeting still is. That keeps the markets honest. It still gives them the option to go if they so choose. Jonathan a busy week. Our economic reporters at bloomberg counting down to Janet Yellens speech coming this friday from jackson hole. Focus isentralbank in in india. It announces replacement for the governor. We are joined from mumbai. Lets begin with the man. Who is replacing him . The differences and similarities between the two. He takes over. This is the government clearly choosing the change. Dr. Patels economic standpoint is very well documented. He has been the key architect of inflation targeting. We know who he is. The markets know what is his position. He takes over in an environment that leads two significant changes. One, the inflation target. Second is the Monetary Policy panel has been put in place to decide an Interest Rate. It is not going to be one mans call anymore. Jonathan that is a really important point, because covenant rajan introduced two things. Investors looking at india right now, they have the continuity in the governor but it is not all about him. Can you talk about the composition of the mpc and what that could look like . Includell representatives on the bank of england and the government and the finance ministry. It would also include the governor of the bank of indian. Bank of india. Nextnot yet clear if the Monetary Policy review will be done by the mpc or by the governor. Also bear in mind that we also want to get our time, the Macro Economic environment in india has changed. Three month high for prices. The expectations are extremely high. Not to mention the pressure for cutting Interest Rates is always high. Jonathan the question remains whether those positions will be somewhat political, and thats something we will be looking at in the monsteths to come. On the markets globally, it is a stronger dollar story. Futre markets in the United States. Chinafor chmemc getting u. S. Regulatory approval to buy syngenta. They have to meet more hurdles, but none seem to be that dramatic as the u. S. This is a 43 billion dollar deal. We have seen a lot of potential deals in this industry. We are seeing buyers continuing trying to buy monsanto. Talking about that stronger dollar, you have weaker Commodity Prices hurting some of the silver mining stocks. They tend to have as much as three times powers over the underlying commodity price. Silver down 1 . Could be some big movers on the downside. Taking a look at valeant getting good news recently. The Company Naming paul hendron as the new cfo. The latest executive change under the ceo. Some up grades based on their debt may not be as bad. Overall, this company moving. I will show you what i am highlighting, 30 in just 10 trading days. Lets get an update on what is making headlines outside the Business World. Thank you. Russia will quit using bases in iran for launch airstrikes for now according to the Iranian Foreign ministry. A defense minister criticized russia for saying it was using iranian bases. The leaders of germany, france and italy will meet at sea to discuss brexit and the threat of terrorism. Will merkel, hollande and be aboard an italian aircraft carrier. Trumps campaign may be wavering on whether he will call 11 millionting immigrants. Trump made it clear to new panel that his position is not final yet. His Campaign Manager says his stance on mass deportation is to be determined. Global news 24 hours a day powered by 2600 journalists and analysts in 120 countries. This is bloomberg. Stanley fischer giving some hawkish comments days ahead of jackson hole. Says therenor kuroda is a chance of additional easing in september. It is centralbank diversions at its finest. Morgan stanleys is here, selling down some risk. This is bloomberg. [ till janetdays yellen speech at jackson hole and Stanley Fischer sees growth picking up this year. The treasury two year to a two month high. Joining us now is jim caron. You got dudley and fischer. More caucus. You guys still say that markets are overestimating a rate hike more hawkish. Jim the fed has a tightening posture. If every meeting was not live, than i think it would be a change of communication. I think it is Due Diligence to say every meeting is live and well take into consideration whatever is happening and we may hike or not. Our view is it will be a slow pace. Jonathan you wake up this morning a see these comments over the weekend. The fed is nearing their goal, big deal. They have done nothing. What makes these comments different . Jim nothing. That is my point. I think fischer is saying what he is supposed to be saying is that we have a tightening bias. Every meeting is a live meeting. Potentially there could be one rate hike, in december. We still need to see much more economic strength. We still need to see the actual inflation. Were not seeing that. If the fed is not hitting inflation goes, i do not know what golf he is talking about. Dlix theres a thir interpretation. You want to take the december risk off the table, move in september. Jonathan there is another interpretation, and that is that we want to introduce some twoway risk. The aggressive moves we saw do you think that is a concern, Financial Stability . Jim it is always a concern. Tightening of financial conditions is going to be important part we also have the jackson hole event. The way i look at this is horses for courses. Alix is that a thing . Jim the horse the Central Banks have been playing as a low rate horse. Tighteningin a posture. But the reality is is i think that this Movement Towards lower rates by many global Central Banks today, i think they are seeing the end. Now they have to switch horses. The fed has been talking about, williams has been saying opposite. We need to have higher Inflation Expectations. Maybe we should target higher inflation instead of having 2 , make it 3 . Look at nominal gdp targets. Higher Inflation Expectations is going to be an important component. It does not mean the fed has to hike Interest Rates. They probably do hike but at a slow pace. Isnt this year . Maybe. Jonathan is that priced into the market and your view is no. I want to understand why. Jim at this point, a lot of folks are starting to put into the market that, the fed may hike in september. I strongly disagree. Where i think the market has gotten the most mispriced is at the back end at the 30 year point. Longterm bond yields have come substantially on this premise that Central Banks will just keep pushing rates lower and lower. If the narrative changes to higher Inflation Expectations, the back end is vulnerable. We will looking at steeper yield curves as a potential risk. Alix when you have overseas investors looking at negative yields, they will buy our treasuries. How do you make the case . Jim they have to change their currency. Alix this is a hedging thing. Jim exactly right. What is happened is if you factor in the hedging costs. If you are a european and you want to convert your euros to dollar, that advantage is not there today like it was in the past. Alix a new thing. This does not happen overnight. At what point does it stop the flow into treasuries or cause reversal . Jim what we need to see is the data. The data has to change. We are not seeing that. We are not seek the deliberate Inflation Expectations into markets. We are seeing grumblings but not actually seeing inflation right now. We need some actual economic growth. We need structural change, and we need to see some fiscal potential stimulus and we need to see the inflation. Were just not seeing it. I dont think it changes till that happens. Jonathan the big deabate you take the spread if you tak e my bloomberg right now and trades at 110 basis points. Youre calling for 5. 30. Ard . Hat a risk rew because we are already so flat. The risk reward is an important point because it has flattened substantially. We are at a point where central bank, williams, are talking about increasing Inflation Expectations, which make the long end of the curve the most vulnerable. The other is that people are heavily positioned in longer duration assets. A rise in yields on the back end hurts the most people. Theres risk reward and some fundamental merit behind it based on what Central Banks are saying, in particular San Francisco feds williams has been talking about increasing inflation expectation. If that becomes the narrative, curves today are very overpriced. Jonathan great to have you with us. He will stick with us and we will dig more into his conviction trade next. Later on, the impacts of indias new centralbank leader. With a be able to anchor Inflation Expectations . From new york city, for our viewers worldwoide, a stronger dollar a rate hike . This is bloomberg. Bloomberg is. Jim caron from Morgan Stanley is still with us. Jim, we talked about that statement before the break but taking risk off seems to be one of your conviction trade. Why . Jim we have had a really good run. Aerything postbrexit, we got lot of things we did not expect. Tighter spreads, higher equity prices. We have to take a step back and say, we are sitting right in front of a really big fed event at jackson hole. We have another one coming up on september 21 without boj. Ime where period of t we need to pull back and build some positions in cash and take some of the profits and keep some powder dry to reinto the market and what we think would be better levels. Alix you dont want Duration Risk, but it does sound like you want to go down the lower risk scale. Jim we still like carry trades. The areas we like them the most are areas of believe have lagged. Sector such as commercial mortgagebacked securities. The defaulter going to be low. Spreads have plenty of room. That is an area we are starting to build some positions in. Financial and Investment Grade credit. Good for the bondholder, not so much for the equity but the bondholder, which is what i do. So, those are sectors that work. Areas we believe our last Interest Rate sensitive. Want to step i away from. Other areas. For example, if we look at high yield, some areas within high yield are the boring sector. Packaging, health care, paper, energy. We can still get 6 , 8 yields in sectors that are more stable. Jonathan just to summarize some of the risk. Matt king wrote this. One of them said that Standard PoorsGlobal Rating have notched up. The biggest default since 2009. Were equal to 2015 in total and it is august. How much of a concern is that . Jim it is a concern as to what sector that is coming in. A lot of the defaults or a lot of the rise and fall rates are coming more in the energy sector. That is something that has been expected. You are right in saying that. That is one of the reasons why i did not mention the energy sector. For us, we like to think of bond funds as being bond funds. Speculative. We want to find sectors that are a little bit less risk sensitive. We are not going to play to high default risks. 8 , yields, what is wrong with that . Jonathan youve got to find it first. Jim caron, great to have you with us. Alix coming up, inside the global hunt for a better way to measure the economy. Gdp threatening to send policy and investors in the wrong direction. This is bloomberg. Avtk0 jonathan from new york city, this is uber this is. Loomberg in europe, in the last 30 minutes, a real rollover. We were positive across the board and now we are negative across the board. The ftse down by half of 1 and the dax up. Softer equities this session developing. Markets, this one story the stronger dollar story. The stronger pound in there as well. The pound, the only currency in the g 10 trading stronger against the dollar. Dollaryen up. 156. Yields on change. Two year notes in focus, up a basis point. Crude started to read force. Reverse. I have got to say the Federal Reserve very much in focus. It seems we have heard from mr. Alix, ive got a say it feels like an attorney since we heard from the lady. You miss her . Alix i do. Remember the hierarchy come you dudley. Len, fischer and here is what else you need to know at this hour. Pfizer has agreed to buy medivation for 14 billion, more than 20 premium for fridays closing. An executive editor of global deals for bloomberg news. What was the real trigger to send this deal over the edge . It was basically the fact that pfizer, since their deal fell apart in april with allergan, they have been trying to do what you would call late stage drugs or assets in market already are could be in the market sooner. The reality is poor sanofi got out gunned by pfizer, which is twice their size. An all cash deal. If you look back at march, it is funny. In march the offer was 52. 50. Medivation was traded between 5 billion and 6 billion. Now they are selling for 14 billion. Its incredible. The view investor i march has to be pretty happy. Alix sanofi not feeling the burn of this deal. Not immediately, but longterm they were hoping for a bigger play to oncology and cancer drugs. Medivation does Prostate Cancer drugs. And theyre developing drugs in breast and blood cancer that could be a huge platform f