Transcripts For BLOOMBERG Bloomberg Go 20160912 : vimarsana.

There is no alternative come and that is why they are investing. David it is what youre seeing. It was not the fundamentals of the equity markets, it was the liquidity pressed into the marketplace that drove up the values. Alix notice rick parity funds now those risk parity funds that is the risk Going Forward. We will be discussing all of this, plus centralbank policy and the feds next move and the state of the bond market with peter hooper. That is coming up in just a moment. Jon, you are taking a look at the after of that friday bond selloff. Jon the followthrough into asia and europe once again. A threeday losing streak in europe, every Industry Group trading in negative territory. The miners got hammered in london, the ftse down by 1. 5 . In the fx market, dollaryen lower. The dollar stronger on both of the other on most of the other crosses. Positive by about 2 . In commodities, risk off with crude, brent, and the bti coming in at 1. 8 there. And wti humming in at 130 there. The bond market is where the story has been. Up another two basis points on treasuries. We trade 1. 69. The 1. 5 4 , and the bond market story in the u. K. Has been phenomenal. Yields spiked as much as 20 basis points on the 10year in three trading sessions. I want to bring in the Bloomberg Team from around the world, beginning in london with nejra cehic, covering the european asiats, then moving on to with enda curran in hong kong, and mike regan here in new york. Into, the continuous story friday and monday what do you see . Nejra i am seeing a stock selloff in london. Today down 1. 7n percent. It is headed for its biggest loss is the aftermath of exit. If we look at the bloomberg, at the grr every Industry Group is down. We are seeing Commodity Prices decline. You talked about volatility rising. That tracks the eurozone volatility is headed for its biggest jump since january. If we look at the bloomberg, here are three month volatility futures versus the ev stocks. Traders are really pricing and more volatility down the line because this relationship is at its highest since 2013. Talking about the bond market, we have seen the u. K. Gilt market lead the selloff. We saw that happen on friday. In germany, it pushed the 10 year yields back above the zero we are almost four basis points on that. It is headed for its highest since june 24, these yields in germany up for a third day. Finally, this is europes worstperforming bond market portugal. We are at about three Percentage Points. You can see it ticky higher. Jon thank you. Friday, the followthrough into asia, pretty brutal. Froms bring in Enda Curran Hong Kong lets bring in enda curran from hong kong. More of the same as it reaches asia . Enda absolutely right, jon. We saw a bond selloff in the region, in australia and new zealand. It just goes to speak to how the vulnerable ciao vulnerable asia is it just goes to speak to how vulnerable asia is. ,o not forget that the yuan there is the view that china has gotten quite lucky this year. If we start seeing money out of asia if all that change, we will start seeing money coming out of asia. Jon enda curran, in hong kong. Lets bring in mike regan from new york. Mike, another story on friday, ringing futures lower. Are we expecting more of the same . How significant are the fed speakers coming up throughout the morning . Mike it is significant, but it is not unusual when you have a long stretch of quiet with Little Movement up or down in the stock market to see volatility come back quickly like this. The question is, what would cause it to stop . I still think this is largely a tantrum after the ecb last week disappointed investors. That said, everyone has other eyes on the feds next meeting, and the speakers today, people will be glued to those speeches. To get back to your put about the movers friday were all bond proxy companies utilities, telephone companies. That is what makes this dip in the market unusual. Defensive groups that perform well in a stock market correction, but since they were the bond proxies everyone had piled into looking for yields, throughout the last year and a half or so, they are the leading groups on the downside. There is a bit of an unusual situation. Out governord pick Lael Brainards speech some people call it fed noise. There were expectations that she would come out with a hawkish tilt. Does the Market Action friday into monday does that change at the fed . Mike i think it probably does. If the market freaks out enough, it takes the odds of a fed increase in september off the table. Hillary clintons health is now a very big concern, and obviously it throws a lot of uncertainty into an election that the markets seem pretty comfortable with her in the league, and now there is a lot more uncertainty Going Forward with that. Jon mike regan. Futures are negative in the United States, equities are down in europe. You saw the followthrough in asia. Lets get you some movers and crossover to alix steel. Alix definitely uncertainty in the market and in individual stocks or Deutsche Bank is getting hit, along with the entire european market. Ceo john cryan is saying Asset Management will remain a central part to the business. There were a lot of rumors and speculation that that division would be sold to raise capital. In a letter to stafford in a he said theyffers, are committed to the union. Another stock getting hit hard is samsung, the worst twoday slide since 2008. You had those faulty batteries in the note 7 smartphone. The total cost could be 1 billion, as we look at the 2. 5 million unit recall. Thatllion market cap is Molson Coors Brewing apache. It is a bad twoday slide for this company. Company those talks are set to end. The issue was where the company would have been helmed. The Merger Company was supposed to be headquartered in europe, the Operational Center for praxair. Lindein lies the issue wind is down in market share. David there is another story that may be weighing on investor seminar on investor sentiment, and that is the health of democratic nominee Hillary Clinton. We saw that disturbing video yesterday of her stumbling as she was being helped into her vehicle. Here it is, just after the 9 11 ceremony. Megan we know what happened yesterday, where she was taken away from the 9 11 ceremony. First we were told it was heatstroke, and then that video emerged, showing her stumbling, needing to be helped into her vehicle. We were told eight hours later that she is suffering from pneumonia, diagnosed on friday. She canceled her planned trip to california today and tomorrow, and we expect we will have further information from the campaign. When this first happened, they waited to typical mode, which is a lock down. They withdrew access to the press, and information was pretty scant until late in the day. David what possible effect could this have on the campaign itself, particularly as this risk as this race appears to be tightening . And could it affect the markets . Megan in terms of the impact on the campaign, the main issue is this has been a type of issue that was always brushed aside as a rightwing conspiracy theory, question her health. Several on the far right have been increasingly vocal about it in recent weeks, as she was coughing. And legitimizes that issue and brings it back to the center of the campaign. An increased call for her to release her medical records. The markets have been relatively sanguine. We have talked about how the markets do not seem to have priced in a donald Trump Victory or presidency. I think you will see part of a reaction today will be about increased uncertainty. You will see people starting to wake up and say this is a real possibility. David will this cause both camps to be more forthcoming about Health Records . We have to bear in mind that donald trump is 70, Hillary Clintons 68, and neither side is forthcoming. Megan there will be increasing pressure for both of them to release medical records, and for her to have a full investment a full medical workup. They will try to say, do not make this into a mountain. This is a limited incident, she is fine, we will see how it plays out in the coming weeks. David megan murphy, thank you for being here. Jonathan, as if the markets did not have to deal with so much. Jon the 10 year yields, we reynardwe have governor governor brainard. This is bloomberg. Jon from new york city, this is bloomberg. Im Jonathan Ferro. It is indeed another busy day for the fed before the quiet until begins. Deutsche bank says governor Lael Brainards speech is an important opportunity. Great to have you with us on the program. This speech gets scheduled come and you come out with a note that says this is an opportunity, and all of a sudden we are expecting a hawkish tilt from governor brainerd . Y . Peter normally these speeches are scheduled well in advance. We have been hearing earlier in sanweek people like francisco fed president williams sounding hawkish but the market not responding. So it could be a coincidence, but it is an opportunity for the fed to give a message to the market that is very critical. Lael brainard is dovish. Something more hawkish, the market will listen. It means janet yellen does not have to give a special interview, which is a little less convenient. It is obviously an opportunity to send a message to the market if they decide to use it. Jon what do we base the assumption on, why they need to go out and do this . Peter it is not terribly effective if they are going to september. G in they have been careful about saying september. I do not think they want to lock that in at this point, but they have not moved the markets. Expectationss with and the market only about at 30 , that makes it difficult to move. 50, would like to see it up be a0, without having it major impact on markets at the time. Alix but when they take the opportunity, the market winds up not believing them. It seems like none of the theish guys if you have dove, maybe the markets will move a little bit. Thed the more they talk, less the markets listen to them. Is there that level of coordination with janet yellen and Lael Brainard . Do you think she went to Lael Brainard and sadid please be hawkish . Peter it is possible. These people obviously talk amongst themselves in the halls of the fed. Faced with a situation that is pretty much locking them out of moving in september, this is an opportunity to move things. It does not happen that often, but it is i think more comfortable for janet yellen to have someone like Lael Brainard give this measures than for her to come on and have to do it herself. Reaction have market on friday bleeding over to today. You have the feeling of a temper a 2013. A l does that make things more dovish . Jon if you believe that what is happening in japan is driving Global Markets, then by default you believe the two guys at the end of jgbs are driving markets. By default, it is two blokes trading jgbs, driving Global Markets. Why should the fed pay any attention to that whatsoever . Peter volatility went up on friday, financial conditions came down at it. I do not think it did anywhere near enough to cause them to move off track, if indeed they want to move in september. The economic case is there. The labor market is doing well. Inflation is not quite where they want to see it, but you have been hearing a lot from leadership saying the case is better. A little bit of volatility in the market will not throw them off. If we get a big drop, that is something else. Jon based on what we saw friday and today, there is more reason to maintain some kind of credibility. Alix Morgan Stanley saying that the fiveyear yield, at 1. 2 , does show a 60 probability of a fed hike by december. What is the magic number . The treasury market need to be to have the market be ok with a rate hike . Peter the general belief is that september is out, december is in. 60 . 50 ink to get things up to for september, Lael Brainard has give a decidedly less dovish talk today. We are hearing from dennis lockhart, the atlanta fed president , a centrist. If he gives a strongly hawkish effect it will have an but not as much as the Lael Brainard speech will have at this point. The theo you look at brp function, or do you look at end of the yield curve . Peter we look at both. Alix with growth slowing around the world, it will not take much the way of and they get if of a negative economic shot to break the tension. Peter hooper breaks down the five headed dragon that could weigh on global activity, next. This is bloomberg. Lets get a check of the markets for you. Deep into negative territory, more of the same after the s p 500 posted the biggest oneday loss since june 24 of this year. Futures down by 1. 19 on the dow. In europe, the futures down by 119 on the dow. Dollaryen with a 101 handle. The story in the bond market, starting to differentiate things a little bit. Friday was a blanket selloff. Today treasuries are relatively resilient with yields just off one basis point at 1. 69 . David, it is pretty much risk off commodity. David and gilts have reacted much more. Lets take a longer view on what is going on with these markets. It is time to do a Sensitivity Analysis on what factors there are that could have the most effect on the fundamentals of the economy. Deutsche bank has done just such an analysis, and peter hooper is here to take us through what they found. Lets take us to the subject that is on everyones mind when the fed will raise rates. Look ate took a with the data said, historically what the activity was in Major Companies in and said action. The fed raises rates 25 basis points over the next two years, it is going to reduce gdp globally by. 4 . 2 per year. That is a noticeable negative impact. David with china being heard among the worst. Peter a number of emergingmarket companies are particularly sensitive to this action. But if i could add a point to what Eric Rosengren drove home yesterday, yes, it is a negative impact, but if they wait it could be more negative. They could have to do more down the road, which means more pay later on. If they do so now, it will cost you. David so it is not necessarily an argument against the rate. The price of oil went up 10 if that happened, what would happen . Peter there would be winners and losers. Perhaps not us up perhaps on balance, global activity, not as much impact. Consumers this would be a negative, Oil Prices Going up. For producers it would be a positive. We saw this in spades over the last drop in oil prices as a shock. David at the moment we do not need to worry about it, because oil prices are down. Jon but with what we have experienced over the last 18 to , weve only really seen the negative effect on a net basis. Some would argue that with the wouldch you did some argue that. With the research you did, what has changed the echo peter in the u. S. , it shifts to core suppliers. Being a negative. But the u. S. Consumer overall is looking pretty good right now. I attribute some of that to what has happened to oil prices. Globally it is seen to be the plus side of the picture, and i think there is benefit. Certainly in the u. S. , that is a clear case. David china we talk about it a lot. What would happen if you took 1 off the growth pattern of china . Peter that is a bigger shock than the fed raising rates. Up to half a percent or more on gdp across countries, particularly countries who are close trading partners with china. David particularly Asian Companies particularly Asian Countries malaysia and gapore they will hit they will be hit particularly hard. Peter if you pull together a ,umber of negative shocks that could be at the big negative. But we do not know if it will be positive or negative shots, so it works both ways. There is a fair amount of uncertainty out there bank. The range of uncertainty around the expectation of noble growth being something in the neighborhood of 3 to 3. 5 in the next year, it could be 1. 5 . David thank you so much for being here with us today. Jon clinton cancels california. Schedulees her following a diagnosis of pneumonia. That is ahead in Global Markets. Quities are lower the futures are down by about 100 point for new york city, this is bloomberg. Alix this is bloomberg , im alix steel. This local of 30 p. M. In london, and heres what you need to know. Democratic now many Hillary Clinton canceling a twoday trip to california after her Campaign Said she is suffering from pneumonia. It followed clintons abrupt departure from the september 11 commemoration after her doctor said she became overheated and dehydrated. The fed governor will speak in chicago today. Mr. Last scheduled appearance by the fed official before next weeks policy decisions. Ahead of that speech, were seeing stocks fall around the world, following fridays almost 400 point selloff on the doubt. For more on the markets, lets head over to jon. Remarkable. Nathan you see the followthrough to asia and europe from fridays ugly session. The dax is down by two Percentage Points. Are highly classes correlated. The dollaryen lower, is also a stronger dollar story with the bloomberg dollar index up by. 2 . Risk off in commodities as you would expect. Wti and crude coming in by two Percentage Points. Are driven byly was happening in fixed income. Yields move higher on the front end of the yield curve in treasuries, we move up by another basis points to 79. Tenure guilt is moving at about 20 basis points over three trading days. Up at aboutuild is 20 basis points over three trading days. Is how rates relate to equity. That is what we have seen over the last month or so. This is the chart between correlation and of the s p 500 and the u. S. 10 year yield. What we have seen as a yield into a negative correlation. You are seeing 10 year treasuries and equities move like for like. Its that correlation that makes this such an important move. A High Percentage of equity market is hypersensitive to what is happening in the bond market. That is what we see spillover from highyield into lower equities. David fascinating. We talked what another factor that may affect markets today. No fewer than three of the most read stories in the bloomberg are all about Hillary Clintons health. They are collectively are morning mustread. Joining us to take us through the story and what it means is marty schenker, bloombergs a Senior Editor for Global Economics and government. Theith the basis basics. What do we know about Hillary Clintons health . We have this apparent stumble, and it turns out we have pneumonia. What do we know . Much ase know as Hillary Clintons people decide to tell us. They belatedly said she had been diagnosed with pneumonia on friday. And still attended the 9 11 memorial. She had to leave suddenly. It was 90 minutes before we got any word whatsoever about her whereabouts or what was going on. It was pretty disconcerting for a while. David how significant is this in the campaign . How much worse is it, because they seem to be very cherry in giving out their information . A narrative that been going on in the Clinton Campaign throughout. They are very reticent to volunteer inflammation information. Its interesting to think what wouldve happened when they disclosed if they disclosed that ammonia the pneumonia when it was diagnosed. People would be talking about her courage fighting through the pneumonia and attending the memorial. Instead we have headlines questioning her health. David a bank of america analysts has said the markets i have been sanguine because they think Hillary Clinton will be president. Is it too soon to tell if thats true . Personally am skeptical that people are investing their money on the basis of this campaign. Everything seems to change day today. Throw upctions you can the window. Its not a great environment to be putting money down. David how is donald trump playing this, in reaction to Hillary Clinton . He is 70 years old, as opposed to hillary 68 years old. We dont know much about his health. Marty we dont. He promised to issue his medical records. The pressure will increase for him to do so, and for Hillary Clinton as well. The Trump Campaign has been told to basically wish hillary well. And not try to take advantage of these questions. David thanks, marty schenker. Bloombergs executive editor for Global Economics and government. Alix for more on the market selloff, what a Trump Presidency are climbing the polls, doug ramsey joins us from minneapolis on skype. We just talking about the implication of trump on the markets. If the markets are pricing in what does this kind of risk events mean of the uncertainty in the markets . Im not sure, when i look at the respective platforms of the two candidates i dont see a great economic edge one way or another, quite frankly. Im really a loss to tell you the nearterm implications on the markets. Alix we do have david will bank of america saying the markets waking up to a potential Trump Presidency, there would be a huge boost to gdp, and a stimulus unlike any we have seen in the past decade and gdp could skyrocket. Do you feel like thats a possibility come january, february for the markets . Doug quite frankly, i really dont. He certainly talks in antiestablishment game, the institutional inertia in great that i so have a hard time believing in terms of some giant fiscal stimulus plan i have a hard time believing that anything would go through, were he to be elected. Alix that moves us to the news of the day in what we have seen over the last two trading days. The global bond selloff in followthrough today in asia, continues in europe, as well as futures here in the u. S. As the riskfree rally finally run its course . Doug i dont think its over. We were bearish coming into this year, and changed her tune earlier this spring, based largely on the action of the market. We think that stocks in the u. S. Are pretty significantly overvalued. But the action of the market is far more productive, in terms of an intermediateterm timeframe. 3, 6, 9 months. It would be very unusual to put in a major top here, just given the strength weve seen across the board up until the last week. We made new highs last week on the midcap and smallcap indices. Its been fairly broad, especially in the last two months. The highyield, lowball trade pulled back some. Weve seen high beta groups, Technology Break out and again until basically friday. 7 , butull back, 5 to i think we will be making higher highs later in the year into early 2017. Jonathan lets talk into the high beta groups you just laid out. And evaluations of what we used to call the safer assets. The question i have been exploring on Bloomberg Radio and bloomberg tv is how you look at these markets and navigate things when the most risky assets currently are ones we used to perceive is the safest . Doug i think you grow your teeth and go for the more cyclical, higher beta trade. Weve done a lot of work on the valuations of those safe havens. It is stunning to see how high they are on a relative basis with the market so close to a new high. Utility stocksic trading at 22, 23 times trailing earnings. We look at a premium of low whole versus high beta. Six weeks ago, you reached a ratio of almost two to one, in other words, double the multiple on safe havens versus the high beta. Thats almost unprecedented. It only see that one other time, in the depths of armageddon back at the lows of 2008, 2009. Its. Usual and i wouldnt be surprised to see those stocks stumble quite a bit in a 5 to 7 correction. This raises the question of a rotation in the cyclicals. If you take a look of the ratio between s p tech versus s p utilities, tech history to outperform in the last few months. When we have a stumbling opening market like this, do we wind up seeing tech continue to outperform . You talk about the strength in the equity markets, is that a strength tied to the fundamentals in terms of earnings and topline growth . Or is it tied to liquidity . And if we do begin to believe that that gets drawn down, what does it do to the strength of the marketplace . Look to me we looking earnings a little differently than s p 500 topdown earnings estimates, which are always too high. , all thee a turn here secondquarter Earnings Results now having been reported, we looking earnings breadth indicator. Looking Earnings Results of 4000 Public Companies, and the percentage of those Companies Reporting year on year earnings gains has finally turned up. It was in a multiquarter, a six or seven quarter downturn. And finally turned up, albeit from a low level. It looks like the market is discounting greater earnings. Sort of a trough in corporate earnings power. Ramsey, chief investment officer. No doubt, we will be exploring this theme for the next couple of days. Jonathan coming up next on weinstein had a special situation, gives his answer. From new york city on Global Markets with futures deeply negative, this is bloomberg. David this is bloomberg , and im david westin in the hewlettpackard enterprise greenroom. Coming up, scott bok gives us his investment ideas and m a opportunities. This is bloomberg. Nina your Bloomberg Business flash. Fertilizer producer in north america, in the latest in a string of megadeals in the agricultural chemicals market. The name of the new company will be announced before the merger closures. Hp is seeing its feature and copiers and printers. They are buying samsungs printer business for a little more than 1 billion. According to people familiar with the matter, hp will show off several new copiers or corporate clients at a Conference Today in boston. The Company Split off from hewlettpackard Enterprise Last year. Shares of samsung fell the most in more than four years after more warnings about its note seven smartphone. Company and u. S. Relators warned users to turn off the phones and stopped charging them. Batteries caught fire or exploded. Samsung has announced a worldwide voluntary recall. Thats your Bloomberg Business flash. Does the global bond selloff mean more distressed investing opportunities if you can stomach the risk . The number of bonds with the lowest junk ratings and negative outlook is a sevenyear high. These companies have almost 360 billion in outstanding debt. This debt gets riskier as both equity and bond market selloff. Globaleinstein, kkr cohead of special situations joins us now, 2. 5 billion of dry powder ready to go. You invest in special situations. You you look at that chart, say awesome, lots of opportunities, or woe, too much risk . Jamie thats our future pipeline of opportunities. The lending mistakes made in and environment right now, where things are flowing easily, since you up one or two years down the road for the backside of a credit cycle, which is stress and distress for companies. Alix you said distressed opportunities are not distressed enough yet. You take a look at the global bond selloff over the last few days, equities getting slammed. Is it creating that distressed environment you have been waiting for for a multiyear . For almost a year . Jamie its helpful for our strategy. In an environment where you have had endless amounts of quantitative easing and a flow of capital through Financial Markets into fixed income and credit in the search for yield, you end up with marginal credit decisions they get made. Is difficult for somebody like us, who is more opportunistic, to be effective in that environment. When you have the tied rollout, and for the last couple of days, it looks like the beginning of the tide rolling out, it could quickly turn the other day and be an opportunity. David when does the gun go off for you . When do you say now is the opportunity . Jamie when the fear level is a lot higher. You never bottom check in via things at the lows. You end up buying on the way down. But effectively, when the tone of the dialogue changes a lot of people become very concerned about credit quality, it becomes part of the conversation. You see outflows from fixed income assets or credit assets in particular. That is what it becomes a lot more actionable for us. Jonathan what are the maturity profiles of some of these companies . Its when these guys really feel the pain of crisis in the bond market. That is not necessarily tomorrow, it could be years and years away. What is the maturity profile like . Jamie is been a lot of refinancing activity. The majority of the activity has been refinancing driven, rather than new issue driven for things like m a. Theres not a nearterm maturity wall that people are looking at. Theres the much talked about maturity wall after the financial crisis that proved not to be. Its actually Companies Running out of cash. Thats what ultimately happens. Weve seen Capital Markets way open. We take a look at oil and gas, they presented a 5 of those Distressed Companies that we showed you in the beginning of the segment. You would think this would be a perfect distressed opportunity for you. But money has been flowing into that sector and you are holding off. You mentioned oil and gas, the true default rate, most of the default activity in the last 12 months has been in oil and gas and commodities related things. More than three quarters of the actual default has been in the sectors. David in debt service, how to those compare . Is the bond rating is efficient surrogate for that, or are you Monitoring Company by company . Jamie bond ratings are lagging indicator of whats actually happening to companies. You have to have your own financial models and projections of how these companies are doing. At the end of the day, you are tracking cash. Alix what areas are distressed enough that you are putting money to work . Jamie one sector is an industry in transition, not just a matter of whats going on in Financial Markets but what is happening in those companies. Its been in the Retail Sector in particular. It had highprofile bankruptcies in that space very last year, even radioshack, which is a large ben grubbs a large vibrancy. This year, sports authority. We didnt invest which is a large bankruptcy. This year, sports authority. We didnt invest in those. Alix you like to j. C. Penney for that. Before the turnaround. Strategicer their reset the didnt work a few years ago, they had a Management Change at the end of 2013. That was only got involved, when their bonds were trading at . 50 on the dollar and the market was convinced there going to run out of liquidity. Jonathan heres a price point, low, heres a price point high, are you looking at in terms of that story . Jamie youre looking at the company, with the store footprint looks like, what is the earnings potential, how easily could they be just intermediated violence sources by Online Sources . They are really show rooming experiences rather than real experiences. Those of the types of things that are going to end up in trouble. Korea till businesses that you create a reason to come into the store, edit is something in need, those are things that can survive. David that sounds Like Department stores. Jamie it is. To extent. J. C. Penney is a different business than the other apparel focused department stores. They have been interesting things like adding appliances. Appliances are hard to buy online. Its a difficult supply chain to execute. They are adding other types of home goods that are difficult to buy online. They have a very large private label business, which is hard to dissenter mediate d isintermediate. Alix coal prices of seeing a huge pop nuc opportunities, even though a lot of guys wont touch coal with a 10 foot pole. Since the turn of the year right here. Jamie is quite amazing. You look at the level, is more than doubled off the lows we were out in the spring. The situation going on in metallurgical coal, theres been a reduction in production in china. That created a bit of a supply squeeze. Day, the targets are going up in a vertical fashion. I dont think that necessarily reflect the longterm outlook, but in the shortterm, it is interesting when you see a market more than double in price. The dynamics are very coal very different. Coal, used in steel production. Thermal coal is a very different situation. Secular issues as people move away from thermal coal to cleaner forms of energy. You, jamie to have weinstein, kkr global cohead of special situations. Guys are like thank you. Weve been waiting for it. This could be at. David hes patient to wait for his opportunity. Coming up, the debt selloff has affected bond markets all over the world. Thats it off the charts, and this is bloomberg. Alix this is bloomberg , im alix steel. Jeffries is calling it mini bond market row, but the markets are seeing a frontier in qe policies is slowly ending. These three charts help tell that story. This is the 10 year yield on jgb. Now above all of its moving averages. Last week, he moved above that hell line, the 200 day moving average. The yield of trending toward zero. If you were buying Japanese Equities on a weaker yen and falling yields, what happens when the yield start to rise . Even a small change in the yield curve has big applications for the markets. The other big event, with what happening in u. S. Equities. The white line is the s p 500 and the purple line is Consumer Staples. The blue line is utilities. Yearan see is the 10 yield, that redline in the second panel started to move higher. Bonds started to move lower. That leads us to the correlation , the 10 year yield and s p correlation turning negative. You have stocks and bonds rises moving together. A big risk when it comes to the risk parity funds that are both long equities and long bonds. When this winds up checking out, how much more selling could there be . Story is from europe, a basic chart that tells a very powerful story. The german 10 year bond yield moving over 0 . Its the first time that has happened since june, right before the break the vote. Jpmorgan right before the brexit vote. Jpmorgan says watch this spread. They are widening as much as 1 as we see the money coming out of that bond market. You can see that was spanish debt today, its been the biggest today increase for yields since december. That is started and bear fruit as you have the global bond selloff affecting japan, europe, and back here at home in the u. S. Jonathan referendum risk on the periphery, with a referendum coming up in italy. A whole 3, 4 basis points. Coming up on bloomberg , george karl tells george goncalves. From new york city, this is bloomberg. A rude awakenings. After several weeks of postbrexit slumber, the stock market falls out of bed. Volatility comes surging back. Jonathan the final word on september. Investors seek clarity on the tightening timeline ahead of septembers policy meeting. Alix clinton contagion. Hillary clinton canceling her twoday trip to california, fueling speculation over her health. We debate the impact on the market. David welcome to the second hour of bloomberg. Im david westin with Jonathan Ferro and alix steel. It started on friday with the bond market. Now, it has spread. Theres not much pretty in any of the markets. Jonathan i believe it started a month ago in the jgb market. Its a clearing of the deck, so to speak. Whether its a reason to be concerned and freaked out is another thing together. Whether you think this is an Inflection Point is some thing we debate through this program. Its an unwinding of the reach for yale, in which the building up for months if not years. Alix when you have a backup and yields, that can be a risk on trade. It means better Global Growth. This is a different circumstance that only worries about Central Banks and their efficacy and policy programs. Also, will he be more hawkish . David its not Global Growth that striving those yields. Its what the ecb says. Jonathan if the modality to the qe program. Its not a recalibration of inflection. Alix coming up later, we discussed Investment Opportunities in the current m a environment with greenhills ceo scott bok. A check on the markets, we are seeing the dow futures still off the triple digits. Jonathan take friday, insert monday, and you have the moves today as well. I will stress we are right off the lows on the s p 500 futures. Equities in europe off the lows as well, but still deeply negative with the dax down by 1. 8 and the ftse up by 1. 6. Risk off captured by dollaryen, but we are not seeing a significantly stronger dollar. With the bloomberg dollar index positive by not even. 1 . , 47 off in brandon w ti handle on brent in trading at the moment. The big stories in fixed income, to year yield on the front end of the Treasury Curve or almost of a basis point to 79 on the session. Some of the market of have the biggest rally. , long into the yield curve up by three basis points. Tenure guild has take 10 year yield has taken a beating. Alix its been unbelievable move. Lets go around the world and check in with the Bloomberg Team for indepth coverage of all this top stories. Basel in new york matt we have the market angles covered for you with Oliver Renick and mark barton covering european action. The can be more hawkish. Janet yellens one just job on rates higher. Matt this would be the last chance to do it, we have a on wednesday,d where they wont be able to talk probably. Dovish, one ofry the more cautious members on the committee. Last time she spoke, she was talking about the need for a watchful waiting and seeing more Economic Data coming in. The news weve gotten recently hasnt been so great. We see what she says. , on this was a late add friday we heard she was going to be speaking. What are the realistic chance or she does have a hawkish tilt, considering the data weve seen and her typical stance . Matt those chances seem low. The thing with a late additions to the calendar is the media gets these media advisories kind of late to begin with. The speech was probably scheduled well in advance. What we have heard from her, and what weve done sense we heard from her suggests that she will probably continue to tell the same line. It will be a big surprise if she came out more hawkish today. Alix matt boesler, you are saying the media is behind the curve. It does add more uncertainties in the markets, from the fed and also in politics. David exactly the point. As if we didnt have enough uncertainty, now we have uncertainty surrounding Hillary Clinton, the democratic nominee for president. Megan murphy joins us from washington. Take us into the story about Hillary Clinton, and would we have ever learned she has pneumonia if she hadnt had the difficulty getting into her vehicle at 911 . Megan had this video ever spectator who took this video of for entering her vehicle and appearing to stumble , and being held in by her secret service detail, the campaign wouldve liked to have skated over this. She said it was heatstroke, it was a humid day in new york at the 9 11 ceremony. It has changed things for her campaign. Herrought this issue of health, long thought of as a far right fringe conspiracy idea into the sending the center. F the Campaign Donald trump just said over the past 20 minutes that he has had his own physical examination just recently and will be releasing details of that examination this week. Thats likely to further ratchet the present the pressure on her to really release her medical history. David he had a statement from his doctor saying no one had ever run for president before who is as healthy as donald trump was. Well see what the statement says. When will we get some sense about whether this having a real effect on the campaign and voters . Megan the polls have been tightening in this race before this weekend. Had she not have a health scare, what we would be talking about is a gaffe in her campaign over the weekend, her reference to some of Trump Supporters as a basket of deplorables, low withm lumping them in racists and xena phobics. Weve seen the polls tighten crucially in several swing states. We will see this play out over and see how people react to the thought that their 68yearold and 70yearold candidates for president s may be suffering from the effects of the brutal rigor of the campaign trail. David megan, thank you. Megan murphy, our Washington Bureau chief. Jonathan writing headlines from fed speakers today, the atlanta fed president decline is a comment on possible action of an fomc move in september. He does say wage pressures are accelerating and broadening out. The u. S. Economy is quote checking the long enough stalling out. Tightening labor markets warned inflation confidence. Init of a hawkish tilt comments from dennis lockhart. No surprise. Looking at u. S. Equities and looking ahead for some of the event risk we have on the agenda, want to bring in Oliver Renick and these will see through in todays moves as well. Any reason why this wont continue . Oliver thats exact the what is happening. There is a little bit of a thatsh tilt, some signs easy money from around the world might not be quite as easy. You have to reevaluate the trades that have built up over the past year or so. How much that has to unwind Going Forward there still is a lot of money that has to get recalibrated as people decide which way rates are going to go in houston they are going to happen. Is a hatedut how bull market, but in the shorter term, theres been a lot of long positioning thats happening in different parts of the market. Jonathan it feels juvenile to put this down to the Federal Reserve and the conditions warrant serious discussion of a rate hike. You see the agenda this week, all the points that come out monday through friday, everyone is focused on the opinion of a couple of fed speakers, including governor brainerd. How significant is it that the fed may not move in a weeks time . Oliver a lot of what is happening here is something to do with positioning. When you look at what happened with that funds expectations with fed funds futures on friday, there was a brief jump up to 38 . It came right back down in terms of expectations for the september hike. At the end of the day, the expectations for a rate move didnt quite change substantially. What changed is the fact is there is a positioning thats happened over the markets its gotten very built up in a lot of ways. At a certain point, that has to unwind. Jonathan Oliver Renick, the bloomberg stocks reporter. , we have the move on friday, and after just one day of a move, what do you make of whats happening and what are Market Participants saying about the action . Its categorically broadbased. Every Industry Group is trading lower today on the stoxx 600. , thatsdown 2 earlier the story when it comes to the Industry Groups. Look at the be stocks and the fear index and the volatility index. This is up for a second day. Todays 20 move, is the biggest since january the fourth. We are at 23, nowhere near the prebrexit highs around 40. That wasnt as high as levels we saw back in august of last year, when china devalued its currency. Of low volatility has clearly come to an end. Last week, this gauge phil to the lows level in over the new year. The lowest level in over a year. Look at the yield in italy, spain, france, and germany. In germany, highest since june 23, in france, highest since june 24, in italy, june 20. There is a glass is halffull. This is the moving averages of the stoxx 600. The orange line is the 50 day, the blue line is the 200 day. On friday, you know what happened . The 50 day moved about 200 day. That hasnt happened for 20 months. The last time that happens, this index rose more than 20 , to a new record. That is big. That is a golden cross. Im trying to make the glass halffull today. Jonathan it isnt easy. You wereou said right, you up the wrong team. Mark you are right, and thank you. I did say toone. It was a knock to our confidence after three wins in a row, but we will be back. Jonathan mark barton will be back from london. Getting back to business, features are all flows. Off lows. Alix we do have a mover on the upside today, para go. Its taking a 4. 6 stake in the company, saying the company had an operational and financial misstep when it rejected mylan. Them to sell off their perception form suitable business. The downside, you have hewlettpackard, inc. , buying samsungs printer business. You have the pc market and the printer business shrinking. Hp is try to get more market share as that happens. For hphe biggest deal after the breakup from hewlettpackard. , part ofpgraded to buy that as the New York Times reporting that pandora and amazon are going to restart their new Music Service business. They may have lower prices, five dollars apiece, trying to compete with modify an apple music. Jonathan coming up, a selloff in fixed incomes. Snowballing into a Global Market row. U. S. Features not faring well. Up next, Greenville Ceo scott bok reveals with a selloff means for m a investments and distressed assets as well. From new york city, this is bloomberg. Jonathan from new york city, this is bloomberg. Im Jonathan Ferro. A global selloff is threatening to snowball. How will it impact the m a landscape . Another slumping deal activity similar to the First Quarter of this year. Joining us is scott bok, Greenville Greenville ceo. Its good to have you with us on the program. Where is the m a activity . And it all came back again. These kind of market droughts market routes, does this concern them . Or does it not change anything at all . It changesnt think much. Markets go up and down all the time and m a deals take months or years to get done. You look foolish as a ceo to change her whole strategy consolidate, go to a different country, simply because the market is up and down a few percent. Jonathan i hear this, but then i see deals off the back of debt markets, where you can find yourself really teed really cheap. The change the calculus when you get a big rates move . Final strokes of any transaction, you have to set the final terms. Setting those final terms when markets are very volatile is more difficult. Pausemetimes do see a like you did the beginning of the year and again after brexit. It doesnt take long and things settle back. It doesnt matter where, you just need them to settle so you can negotiate final terms. Lbo it can affect the world. You have a buyout the you may have taken on that you cant offload the debt. That seizes up and its trading at . 70 on the dollar. Is this a circumstance for that . We just had a dead clear that was backed up since february. Scott the private equity world is a little different. We work mostly with Public Companies doing transactions in a strategic way. Private equity has not been that successful and taking Big Companies private since the financial crisis. There was a huge boom in activity in 2005, 2006, 2007. Since then, they struggled and i do need cheap financing. They dont have synergies, they need financing to make a deal work. David what are the financials the fundamentals driving m a . Weve seen topline growth buying revenue, and a drive for cost reduction. It feels like a lot of sectors have maxed out on those. What would drive m a Going Forward . More of the same. Try to consolidate your sector and reduce cost, because we are still at a low growth world. Its hard to get topline growth in almost any sector. Companies look for how can i consolidate my industry and get some additional sales, and certainly take on costs. Jonathan we you sending your talent at the moment . Japan, yields are at record lows. And institutions specializing in fixed income, they were flying to japan trying to get business. Where you sending your sales reps . Scott here in the u. S. The market is by far the strongest. Our economy is strong and relative dollars. And in a has been strong willed it to the rest of the world as well. If you look at europe and japan and china in the commodity sensitive places like australia or latin america, they have much bigger problems and we do here. I think companies are more likely to act and do Something Big and strategic in the u. S. Than elsewhere. Alix theres out that m a from asia and china. Are you still thing that trend . Scott yes. Most companies in japan for europe as well, they still would like to get into this market. Sometimes you think the currency is weaker for certain parts of the world, they would be less likely to buy in the u. S. But it encourages them. They need to get into this market, which is so big and still showing better growth than elsewhere. Greenvillecott bok, greenhill ceo. Alix can the firm compete against j. P. Morgan . We will discuss. This is bloomberg. David this is bloomberg , im david weston. Will receive 50 million in fees, which is the good news. A recent bloomberg gadfly piece asks what comes next for greenhill . Ceo scott bok is here to answer that question. Fees we never disclosed unless we have to, publicly. I think the 50 million figure came from your columnist and not for us. We would never disclosed that. We can certainly replenish that. Our outsiders think is that entire business rises or falls based on the deals they read about in the press. At any time, were working on dozens of transactions. Some of which are big and will become known in the weeks and months to come. Many of which are small and we were in good fees and they will never become really public. Theyre just not that interesting. They are not big enough to be interesting. One thing ive said a number of times over the years is its been years since we had any single client represent 10 of our revenue in a year. Its a diverse pipeline of a lot of things we work on. That was a wonderful transaction. But there are play more behind it. David take us into your business. Your fees are going to be larger for a big deal than for a small deal. How lumpy is your business . What percentage of your business is represented i what you would characterize as big business, as opposed to the more modest ones that make you more money . Is an everchanging group. Our top 10 transactions of the year are always quite meaningful. They are not half, but quite meaningful to the overall firm. Almost every year, the top 10 is a completely different 10 of companies that we meet through new Business Development efforts and the recording of senior ,ankers who come into our firm the references were wework with a company and maybe they have an overlapping board member with another company. Its a diverse and granular business. But the ones that get all the headlines are probably assumed to be more important than they really are. Atx when you take a look that bar chart we just showed, which is pipeline deals versus your other competitors, your stocks traded a premium to your fears. But if you are not keeping up in the same kind of mandate, your stock should be related. Scott what analysts look at things like pipelines, theyre looking to publicly known transactions and the side of those. They add that up and call of the volume of m a. Pipeline, the internal one, which is dozens of transactions. Very few of which are even known to an outside analyst. That is the pipeline i look at. What are you most excited about . Emerson, doinge the biggest acquisition theyve ever done in canada. Whistler on the sale to vail resort, if you are a secure, you understand the scarce you understand that connection. Its a strategic deal, the spinoff from broadcasting that had valuable digital assets. Now they are spinning off the digital assets. What is the strategy left . Its going to be broadcast only . Huge trend across industries for many years, to really focus in consolidate. That, theydoing separated off the publishing. Now they are separating off exciting which is an and highgrowth company. The theory is that companies thrive best when they are independent and focus just on that strategy, instead of part of a conglomerate. David other broadcast companies that have focused have gone buying spree. Are they going to be buying . Scott that is for them to decide. They done some acquisitions recently. They have tremendous scale already. The theory is cars. Com, you can ask the same question. You separate these things out and each is better able to grow. David scott bok, greenhill ceo. Alix stocks and bonds selling off, high yield traded looking at shady as he sees prince continuing to widen. Up next, the man who has been sounding the alarm on highyield for a while. Bank of america is george this is bloomberg. Jonathan from new york city, this is bloomberg. Lets get a check of the markets for you. Look at futures in the United States and we are way off the lows. Europe is still deep into negative territory with the dax up by 1. 75 and the ftse 100 down by 1. 5 . Agodrop that it was an hour , some of that coming out in the last 30 minutes. The bloomberg dollar index showing a slightly stronger dollar buyback. The commodity market is risk off. Brent the 47 handle. The bond market has been the epicenter of what has been happening. Thehave been talking about 30 day correlation between the 10 day treasury yields and s p 500. Very tight in terms of treasury yields up and equities down. The rate story to equities. Yields are higher by 2. 5 basis points. The moves and equity reflecting the moves in bonds as they start to shake things up in the last 30 minutes. The long end of the Treasury Curve coming up by one basis points to 2. 381 . Friday may turned into a bit of a flattening. Lets look at some movers. Alix we have some individual movers for you and showing you the breakdown of m a. The all stock deal between the two companies wouldve been worth more than 30 billion. Heart of the issue would be where the combined company would be headquartered. It would be headquartered in europe with Operational Centers in connecticut. It is down by about 8 . The revenues were nearly double praxair, but praxair made more profit. Also taking a look at fertilizer makers. The ceo will be in charge of the combined company. We have seen a tone of come deals happening like Bayer Monsanto potentially and potash prices have been completely hammered, needing this consolidation to happen. It has been down by 32 . Off in board is spinning an ipo about 30 million shares. Ashland will retain an 85 stake in the company. This is a yeartodate chart of ashland and hopes to keep shares at 28 each. We have got a little bit of an ipo and m a in the breakdown. Thats a roundup of your stock movers. Jonathan the yen is hosting a today stop after a selloff. A whole host of comments coming from fed speakers today ahead of a decision next week. Joining us now to discuss is the head of global fx strategy at moody. Does that change the game for you . Do you anticipate it will . No, i dont do gets going to change. We still expect yen strength. All the things that have been happening over the past few days may accelerate the move higher in the yen because i think what the market is going through right now, it is waking up to the possibility that Monetary Policy has reached its. Imitations jonathan jgb volume has dropped off a cliff. How can you use it as an indicator for global markers when it could literally be just fine . How much risk is there looking at the jgb market in any kind of direction . Vasileios i fully agree with you. We are talking about a market that has moved by potentially very small numbers of transactions. I think we are looking at an internal environment where we are going to see Central Banks talk but largely not doing a lot. Largely because we are in a process where Monetary Policy has risky limitations. With all the moves that we went through in the fx market over the past couple of years, they have started at one end at the beginning of the year and it will be a trend that will carry on. David them what will the markets look at . They have been looking at what the Central Banks have been doing for a good long time rather than fundamentals. What will step into the breach . Vasileios first of all, i think this process has started, and it started at the end of the. Year. It started with bank canada saying, hold on a second. Further depreciation and the Canadian Dollar is threatening inflation. And moved on to the bank of japan into the ecb. The market has been gradually coming to realize that. That this is a very interesting question. When these things change and the market reassesses what has been happening and how far away from fundamentals we have been, the process kicks in. What we have found empirically is that what you are away from equilibria and the process starts reversing, it continues very much uninterrupted. That is why i think the dollar is on a multiple decline per year and the yen goes higher from here. Central banks will not be an important driver Going Forward. Fiscal policy is what is going to matter. Jonathan is it reluctance on the Central Banks behalf or their limited ability to affect the fx market . Vasileios i think its mostly limitations. For the fx you have Central Banks with a mandate for inflation. You have the yearoveryear change in the price level. In order for the fx to keep on having impact on inflation, it keeps on depreciating. That is purely from a base affect. This will ultimately carry on forever and is not a structural change in the economy. The way i see it, Central Banks by time for Structural Reforms to kick in. You need Structural Reforms and fiscal policy. Monetary policy is not going to change the long run equilibrium. David you talked about the yen and the dollar, but you not talked about the euro. It takes us back to mario draghi s failure to act. Where is the euro going . Vasileios clearly to the upside. The euro right now is between the story of what is happening in the eurozone, which is using to a certain extent because of head when, because we have a Political Risk priced in. We have the italian referendum priced in, but you also have the dollar store. The dollar is by and large overvalued across the board. More thans been priced into europe. It should be trading at 120, but now trades at 112115. The bias is for upside. Jonathan what does that mean for one of the biggest shorts out there, the cable short . Vasileios we have quite an aggressive call on cable. We have 120 by the end of the year and we have 93 for euro sterling by the end of the year. I have a pretty strong the on that. I think it is far too early for people to start celebrating that xit has not change things in the u. K. Over the past few years, we have had 60 more inflows to the u. K. Compared to the historical average. Given uncertainty about the form of the brexit, this is bound to help in the u. K. And it will have an effect on sterling. Jonathan special thanks to the head of Global Strategies that unicredit visiting us. This is what key banks are looking at equity and bond selloff. The high and trade is starting to wobble. Spreads are starting to widen over the past few days. You can see a tiny uptick and there are 500 basis points more than 10 year treasuries. Joining us now is mike from bank of America Merrill lynch, who has been warning about fundamental risk to the highend market highyield market for months. You said that has trumped week fundamentals. Is this the start of a big unwind of that trade . Mike i think it certainly could be a start of the unwind. I do not know how big it is going to be. That is really going to come down to what happens with the fed later this month. I think the fed is going to play a big impact to the credit markets in general as well as decisions out of the ecb and into 2016g forward and early 2017 or we have the whole reach for yield argument and the drive toward u. S. Fixed income assets. That could potentially begin to unwind as rates go higher and Central Banks use back on the pedal o a bit. Alix how does that play out in deeply bifurcated market . Does this become attractive on double bees or double sees or does it freezeout from triple s . S to mid b mike triple cs have not caught a bid yet in the primary market. Issuers,l triple c only a percent have passed the primary market over the last 12 months. That is indicative of a recessionary type level. Investors are not clamoring for new issuing on the triple c space. We have seen ig investors and the reach for yield argument has been the reach for safe yield argument. Has been more in the double d space and highgrade has been in the aaa space. What i do think is that you have a continuation of easing centralbank policy. If you have 10 trillion of negative yielding assets, youre likely to see that manifest itself in the single the space. If you get a fed hike in september or are economists think in december, what is likely to happen is that you will have a bit of an unwind. I think you are about to have some risk off and you could actually see that manifest itself in triple cs as you have a bit of a lost confidence in the fed. I think the whole spectrum to get hurt for various reasons. As the status quos, i think you could see single bs outperform. Jonathan were talking about a comparative reach for yield. You get the pickup and the spread and you trade the spread. Are we shifting perception away from picking up the spread and just looking at absolute yield . Historically the spread is not as tight as it has been in the past. The actual absolute yield is incredibly low. When do we start looking at the latter instead of the former . Mike there are two things to note here. One is the reach for yield argument. Lets go over that one last time because what it has been to date is a reach for say field. Treasuries are some of the bestperforming Asset Classes out there. Far in therformer so ig up until a least a couple weeks ago. Really this whole search for yield has been a search for safe yield and not necessarily a search for risk yield. More to your point, on a spread basis, we are getting to very tight levels, particularly within the safest part of highyield. Almost all type of cycle types at highyield. Most do not think about the product on spread terms. Most big about it in terms of total yield. Remains ands quo you continue to have massive centralbank policy, i think, as you mentioned, that absolute yield of single be credit looks attractive. I think we are not seeing the bid for triple cs. I do not think that comes back anytime soon and a lot depends on what happens with the fed, the ecb, and the boj. Alix great perspective. Great to talk to you. Thanks very much for joining us. Is central bank translating into the steeper yield curve. Bullish bets falling to the lowest level since march. Could the global bond rally finally be over . George gives us his trade next. This is bloomberg. Alix this is bloomberg. Im alix steel in the hewlettpackard greenroom. In the next hour, Richard Chilton is letting us know where he is putting his money to work in his top stock picks. Heres your Bloomberg Business flash. Hp seeing its future in coppers and printers. The company has agreed to buy samsons printer business for a little more than a billion dollars. According to people familiar with the matter, hp will show up several new copiers attic Conference Today in boston. The Company Split off from hewlettpackard Enterprise Last year. I merger of equals will create the largest fertilizer producer in north america. Otash corporation will combine with a grium. A new company name will be announced before the merger closes. Propose thatnt to the services be subject to the same set of rules that regulate the telecommuters and business. That would be seen for a victory as a victory for the telecom industry. Im nina melendez. This is bloomberg. Jonathan it is the last fed voice we will have before the Rate Decision next week. The Federal Reserve governor will be speaking at 1 15 p. M. Eastern in chicago later today. Lets bring in george gone calves. The rate debate gets even more juvenile. The idea that it would ts up first attempt at 21 rate hike. What does it say about the strategy . George what we expect later will play some role to expectations, but i think the fed wants to signal to markets that they are serious about raising rates in the coming months. I do not think we have to read it as a view that they will actually hike in september. The fact that we are bouncing from one speaker to the next to get guidance tells you all market is very nervous. Even if we were to get a dovish speech from bernard, i do not think the markets would be able to hang their hat on that. I think we would see the selloff we are seeing in risk assets and the curve steepening we have had so far. Really european and japanese bond markets that are driving global rates and Global Markets. Im not expecting much from one fed speaker to move things the other way. Jonathan i will ask you a question i asked someone earlier. If it is driven literally by handful trades many given day, watch it a few traders in japan shape Monetary Policy at the Federal Reserve . George this is all function of the scarcity bit. Hugeacts that we have seen inflows into the u. S. Bond markets and slightly higher yields over there and its more compelling for those investors to stay home with a local bias, i figured this matter. I think it does matter. I think we are at the mercy of this premium adjustment and we would see higher rates as a result regardless of what happens. Jonathan i want to ask you about credibility. We had a selloff on friday and a bit of a selloff today. Is their credibility on the line for september 21, given the majority of the fomc have all said the same thing, its all on the table a rate hike is on the table . George the second hike is more important in the first hike and they want to regain the narrative of hiking rates. Market probabilities are still under 50 . That, inc. To see gain credibility for the sake of that, they can do that. The fed is more nuanced and will wherere of a hawkish skip to a close call, but keep the hike alive for 2016. That put themselves in a position where they want to sound tough. Lets see if they can deliver. Report out onas a friday that the degree of correlation between jgb trading and the rest of the global bond market was. 862 wh. Why is that . Wise the global bond market looking to government bonds in japan . George it is one big homogenous market ultimately for you can pick and choose your spots and invest your fixed income paper. I do think we are correlated because of the qe programs sucking up all the collateral in the system and forcing investors to sometimes make decisions they would not like to do. I think that correlation remains high. I do think at some point where we get rates high enough that it actually breaks down the equilibrium of other asset credits and equities. It caps a move in rates. Im not quite sure we are there yet. Alix part of the thing here in the u. S. Is buy the dips. We have seen basis points come down on the long end of the curve. George i do think the bias has a steep in. This is not the big one that we referred to and a lot of people are discussing. We think the markets are cleaning up positions ahead of the fed and the boj next week. This is not just kind of going to show the markets how we become so sensitive to the Central Banks actions. It really comes down to the fed accelerating hikes and regaining the flattening posture. Until then, i think it will do all the work. Jonathan thanks for joining us. David coming up, are we about to repeat the temper tantrum of 2012 . We will show you next in battle of the chart. S. This is bloomberg. David this is bloomberg. You know what time it is it is battle of the charts. Alix steel has returned from vacation to take on oliver. Oliver i feel like we have similar charts, but im going to roll with this. Thattory of the day is now bonds are looking pretty flat and futures are starting to person of their losses, but im looking at the earnings yield versus the bond yield on the top panel here. It is showing you evaluation where both stocks and bonds are strongly valued. The bottom panel shows the correlation between the 10 year yield in the s p 500, which is now very negative. And meets a positive price correlation between the two and that is really important. Last time you saw that kind of degree you see that temper tantrum. Will that happen here . That will be the big question Going Forward. Alix it is extremely similar and mine supports his chart. This is the net future positions for the s p as well as 10 year treasuries. You can see they are both relatively high. It is the highest you seen since 2013. Are you looking at a potential temper tantrum . Levels . T 2013 what kind of reversal d. C. With those net future positions so high, especially when you take into account risk parity funds . They do that so they want to protect themselves. If you cannot protect yourself, you see some kind of watch up washout. Any bond market bounce would be modest. More uncertainty and choppy markets ahead. This is dual and supportive. David it is pretty much showing the same thing. Jonathan its another issue for chartause i used olivers , so i have to vote for him. Won. so alix jonathan coming up in the next hour, Richard Chilton overseas 6 billion in assets. From new york city, its the countdown to the cash open in new york. Futures are negative. Call it a court of 1 . From new york, this is bloomberg. Alix we are 30 minutes from the opening bell in new york city. This is bloomberg. Im alix steel here with david westin and Jonathan Ferro. Happy monday. Its great to be back. The dow is off by triple digits. We are off by 45 points and it feels like a little bit of a dip and you are seeing that tension play out a little bit to the bond market. Jonathan this resilience in the u. S. Markets you much unchanged on the session and futures coming right back in. Look of the european equities where they are getting absolutely hammered at the moment. David and also asia. Right across the globe, it was really down. Jonathan if the followthrough from friday. Alix what does that say about the search for yield that we keep waiting for the big unwind . David were going to search for yield next with a big important hedge fund manager. E is rich i Richard Chilton and he manages 6 billion in assets. What he is buying in a very spooky market. Jonathan not much drama and features ahead of the open. Futures are down by 10th of 1 . Where you do see a little bit of drama is three days of losses in europe. 1. 7 on germanys dax. Some Dollar Strength maybe, but a big move capturing some risk off and affect space. A much stronger japanese yen in the session. We were down two Percentage Points and now only down 1. 3 . Wti ise up on brent and 45. 25. The action has been in yields across the bond markets. Yields are much higher than on friday. We are seeing a low bit of a merger in the last hour or so. 10 year treasury yields up around the basis point. Yield is up 30 basis points. A really big flat of the last couple of months and a reach for yields in the bond proxies. Alix absolutely of reversal of that and a move into cyclical stocks. Individual movers for you we want to highlight and ugly, terrible today slide for samsung. It is the biggest today slide since 2008 and the worst day since 2012. Those notes seven smartphones keep catching fire and there is a recall of 2. 5 Million Units that could cost the company over 1 billion. Looking at its competitor, apple also slightly lower today. The New York Times is having reports that apple is having layoffs at its electric car unit. They have never confirmed they are working on electric car, but may be rethinking their plans. Star board is taking a 1. 6 stake in the company and said it was not good that it rejected mylans offer back in november and that it was a misstep. Perrigo to sell since rejecting that mylan bid. For more on what is happening in other markets, Abigail Doolittle is at the nasdaq. Mark barton is in london. Abigail, youre taking a look at the airliners. Of americanres Airlines Trading lower after they reported that august traffic fell by 2. 8 . It is not exactly the dynamic that investors are looking for. The company did reiterate its Third Quarter of you, but with the stock down, the Airline Stocks tend to be a bit more sensitive to Global Financial market jitters. Also trading lower in the premarket is ch robinson. Their shares were downgraded to equal weight at barclays. They say that the nearterm running situation could be under pressure as the trucking sector stabilizes. It is worth noting that shares of ch robinson did fall slightly through the moving day averages and that could suggest that we are going to see someone downside ahead. Alix thanks so much, Abigail Doolittle. Also joining us from london is mark barton. It is by the dip when it comes to stock futures in the u. S. , but not the case in europe. Mark we were down 2 and still we have had a threeday drop. The 2 drop was the most ands june 27. Since june 27 two only 20 une 27. Ar 20 stocks are rising today. Last week, the gauge fell to the lowest level in the year. We have risen today for the second day. Since januarygest 4. We are nowhere near the highs we saw prebrexit. Those highs were not near the highs that we saw in august last year when the pboc weakened the yuan. We are nowhere near the levels of fear we saw in june and in august last year. Yields are fascinating as john keeps telling us. This is the core that we are seeing in the selloff of Asset Classes today. Just last month, we saw risk low. Ields in italy and spain and france and germany, we saw a record low yields in july. We cross zero on friday. We are up to. 02 basis points. It is all because of draghi. He did not give markets what they expected. We expected at least some sort of discussion or extension of the qb program. Ahead of mark carney and the meeting on thursday, check out the 30 year yield. The 10 year yield is gaining as well. We are back at those levels where the bank of england stimulus was added to the economy on august 4. The only thing i can give you is that the two year yield is now falling want to get. Basically it is read right across a bloomberg today. Alix rising yields sink all boats. Jonathan the epicenter of all Asset Classes. They hold up richly valued assets and heres an example of that. Consumer staples the forward earnings pe north of 20 as people were reaching for yields on a forward pe basis. Joining us now is Richard Chilton, chairman and ceo chilton investments, a company that has 6. 5 billion. That chart is example of a reach for yield. You view what you hold them is clearly different way. Is that where we are at . Richard it really is. When the tide goes out, you see who swims naked. The global hunt for yield, which has really taken the s p to the levels that its that time you look at the bestperforming segments within s p and its Consumer Staples, materials, utilities, and telecom. People were hungry for it and that is very systematic of what is going on in the world with respect to the Global Deflation story and the fact that 35 of the worlds debt is trading below par. That hunt for yield was real. I dont think its over. This is a correction. Rates will come into play and come up a little bit and people will freak out and it will sell some of the stuff. It is not over because the world is it really growing. Jonathan you been calling this market a speakin spooky one. Are you set up to take advantage of the moment . Richard we use the market to sell. A lot of stocks have done well for us and we put on aggressive short decisions, but we are the lowest invested we have been in three years, both on a gross and net basis. It is spooky because the market while everybody was at the beach, it just kind of waffled up. It is spooky because it was so indiscriminate with respect to what it was punishing. If you look at individual stocks, it did not even report earnings or miss earnings. The stocks would be down 15 , 20 . That is a spooky market when they go out and shoot the winners for no reason. Thelso tells me that pullback is happening and its going to happen and its not over yet. I think we can pullback on the s p to 2000. It is painful, yes, but cleansing, definitely. Then i think it would be ok, but the market in the face of where we are with corporate earnings, which were good but not great, with gdp growth, which is ok, but lets keep in mind that none will gdp growth is back to levels of 1991 and 2001 at 2. 4 . The real level is a little conserving at 1. 2 concerning at 1. 2 . The consumer is starting to show signs of fatigue and i think a lot of it has to do with wages have not grown in five quarters. Alix that brings the question the fiscal policies. The matter who we get in the white house next year, perhaps we get some kind of stimulus. The idea that stimulus is good for the economy would be terrible for stocks and bonds at the end of the day. David its a great question and im curious because its not just the United States. You also hear increasingly in europe that those eight days of austerity are over, which means fiscal stimulus. How does that affect your longterm decisions . When he think about the backdrop of why stimulus was there on a global basis, it was there because of what i believe for a while that the world is in the throes of deflation. We were not growing and we are not going. This grand experiment started in japan and worked across the globe with respect to trying to stimulate growth by lowering Interest Rates to encourage loans. That is not happening. As been pushing against the strength. With 30 of the sovereign debt underwater and under par, that bigriment either works for works badly or works badly. We are not seen the Profit Growth that needs to be there. As a result of that, i think that when investors wake up and good,at stimulus is stimulus is not working. We got a problem. Jonathan if we get a pullback to 2000 on the s p 500, mr. Chilton larson to the bloomberg terminal. What is the first thing you are looking at . What are you looking to put the money to work . Richard as investors, we really do with companies. We by businesses that we would like to buy ourselves and try to identify businesses where the prices would be patient to own those. You have reached some levels in some of the stocks that are pretty unattractive. On the other side, the short book is always want to look at. When you hate them the most, and believe me, i hated my shorts the most over the summer. When you hit them the most, thats when you need them the ost. S david Richard Chilton is staying with us. Need a melendez has news from outside the business world. Donald Trump Says Health is now a key factor in the race. Hillary clinton appeared to stumble after being held into a van. Donald trump spoke to fox news today. The coughing fit was a week ago and i assume that was pneumonia also appeared pneumonia also. Somethings going on. I hope she gets back on the trail. We will see her at the debate. Nina trump says he will release medical records and. China says do not blame us. The Korean Nuclear issue is all about the conflict between north korea and the u. S. The valuetioned abou of economic sanctions on north korea and says the problem can only be resolved through dialogue and confrontation. The president of the philippine says the u. S. Special forces in the country must go. He says he will review the policy of letting u. S. Troops fight muslim terrorist groups on the island. He says the presence makes matters worse. As many as 1300 americans have been on the island since 2002. Global news 20 for hours a day powered by more than 2600 journalists and analyst and more than 120 countries, i am nina melendez. Alix coming up, were going to look at what is going on in north americas most coveted oilfield. The big chart you need to know. A week of the next fed Rate Decision, we are seeing a Global Market selloff. Did investors get to bullish . That is ahead. This is bloomberg. Alix this is bloomberg. Were putting oil as the future in focus. Heres the chart that tells a very interesting story. S is permian really cost drilling cost five horsepower. This is how lower cost have become to perform a rate at the mecca of shale right now. 2015, cost has fallen so much and that has helped a lot of producers actually stay in the money at 50 or less oil. The question that every analyst is talking about how much of these shrill and costs are permanent drilling cost are permanent . Perhaps companies can keep drilling and adding rigs if oil is at 40 or 50. Once you start adding rigs, do your costs suddenly rise . That will push the breakeven cost even higher and that means we need even higher oil prices. A debate that is unfolding and no one knows the answer. We will have big implications for the curve of oil futures. Lets turn to the trade. Joining us now is alan essman a bullseye option. There still looking at potential opec freeze at the end of the month. What is the most important factor leading futures today . It still remains the dollar. Netnet, crude oil was still up last week. Technically it has been trading in the series of lower highs and higher lows. Were looking at a 10 breakout at this 45 level. Which way not so sure just yet. Alix as we keep eyeing the movement of the dollar in oil, what is the Downside Potential . Theres always going to be these from the mental discussions, but im focusing on the technical action. Have at that it did not significant bounce on friday and only a 25 chance for a rate hike. I know the markets may have overreacted on friday. Am looking at that not having regimental effect on crude oil. You talk about the ability of the producers to ratchet up production and even make money at these levels. Its important to realize that yes, we always know that theres a lot of supply out there. These producers can manipulate their inputs and they can produce more when prices get hired fo higher, but 50 seems o be the wall right now. Alix what is the downside . Are we looking at 40 . Alan the downside is 40. If you look at the markets, i am more biased to the upside. Last week had some positive action as you saw the big drawdowns in stockpiles. We will have to wait and see, but i am not convinced that the dollar is going to go a whole lot higher. If it does not go higher, that allows crude to move a drift up a bit. An joining us. Ckm jonathan with equity selling off, where can investors find opportunity . The chairman of one of bloombergs best Investment Funds tell us where he puts his money to work. Downnew york, county you to the cache open with futures marginally negative, this is bloomberg. David i am david westin and this is bloomberg. We are back with Richard Chilton. You talked earlier about using august to sell and go to catch. You have to do something that 6. 5 billion you have to lets go back to Consumer Staples. What do you find so attractive about caseys . Anhard when we try to make investment, we try to find a company that has all the characteristics of a great Business Model that we can on for three to six years or longer. We do a lot of fundamental work. The month of june, i do not get any anthony bourdais and awards for going to the most exotic places. I want to Fort Lauderdale in the middle of june and when i look to see caseys and cleveland to see sherwinwilliams. It is a company we have known for a long time. We just started making investments in caseys. David their Convenience Stores. One doesyes and what not understand about Convenience Stores is that everyone think they are volatile because of spreads and gas prices. That totally changed in the industry for a whole host of reasons. What most people do not realize about caseys is that they are the largest, the fourthlargest of sellers of pizzas and america. Sellers of pizzas in america. It has evolved more into a fast bakery,estaurant, sandwich place as well as convenience items. Not only selling beer and cigarettes but selling eggs and milk and things like that. Through their chain, they sell 2 million pizzas a month. ,hey will generate, i think about 250 million a year just from selling pizzas. To have a robust Bakery Business and robust prepared food business. If you look at consistency of the cash flows and the fact that in the midwest, they are in very small markets, they can grow for a very long time. Jonathan we talked about Consumer Staples and i just want to look into caseys. What is the valuation measure that you are looking at . Richard when you think about their forward pe, and we have them at 19 times next year, but more importantly, they bought a bunch of companies. There are accounting issues with respect representation, which views the numbers higher. This is a cash machine and a song at 11 Free Cash Flow yield right now, which is ridiculous. David you also like autoparts. Tell us about automation. Richard autozone and auto nation i like both of them. They were both hit very hard in the month of august and theyre both really good businesses. Autozone, we have been invested in for about six years. In a month for no reason other than people think amazon is going to take over the world. Amazon has been selling autoparts for three years. Discount to a 20 autozone, but keep in mind that walmart has been competing with autozone for 60 years and sells at the same 25 discount. Amazon is not going to put a major hurt. Half the business comes from the commercial side where you need the part in about 30 minutes. Stockesult of that, the is a great business. Alix when you take a look at market pick stocks, the is saying to expect more volatility and look at the Dividend Growth players. How much of that is your strategy . Autozone and autonation do not pay a dividend. Richard we like the dividend growers, but we do not look at a dividend grower with a high index by. We look at equality Business Model. The high and Growth Companies are the Good Companies that can continuously grow their dividend because they can and the model is so good that it allows them. There so much Free Cash Flow because the model is good. Autonation and autozone could do that if they wanted to. They have chosen to take their serialsh flow and to be buying back their own bac stock. Autonation has grown revenues from 13 billion to 25 billion over the last 10 years. Theyve cut the number of shares outstanding at over 50 over the last 10 years. Having growth and giving it back to the investors. Jonathan Richard Chilton, thank you very much. We are counting down to the cash opening in new york city. The opening bell moments away with futures marginally negative and equities in the red in europe. From new jonathan we are moments away from the opening bell in new york. Futures are softer marginally, down by 1 5 of 1 . Wereer this morning we down about 100 points. The losses have remained in europe. Ae ftse is over by one and half. If you hear the bell ringing in new york. Is a stronger japanese yen capturing the global story. Friday, rally we saw that is some resiliency for the treasury market area you can see risk off with the softest session of the samadhi commodity market. We are 25 seconds into the session. Lets break it down to you. Things were not as bad as they were. The dow is around 18,000. It has not been below 18,000 since the beginning of july. Futures are coming off the worst. Ay since after brexit there is not as much panic as we saw over in asia and europe. Radix, but offhe the lows of those future sessions. The other story is the vicks. Chart,look at the today you see a huge run. Down,w it take a big leg interrupting this rally that went up 50 over the last two days. This is off the high of the session you saw come into the futures market. We do have some individual movers we want to highlight for you. Olaris is getting hit it was done as 15 earlier. In itsre some delays turbo vehicles on safety issues. That is pulling the whole group down like Harley Davidson as well. I will look at u. S. Steel. Indicative of a weaker commodity scheme we saw throughout the morning. Nickel, iron or getting hit particularly hard and u. S. Still getting dragged down. Its lowest level since june. We see reverberations from the dollar to commodities as well as to the equity markets. I feel like its a different market today. Jonathan there is some resilience kicking in. Has defined Global Markets for much of the last year. Stock and bond prices are moving together. Is 10 year yield and s p negative. When bonds go up, stocks will up. Joining us from San Francisco is the president of jmp security. Kevin it, its great to have you on the program. Lets talk about that correlation. Are we seeing that or is it a correction . Think you are seeing a slight correction. What youve got going on is a change in attitude from Central Banks around the world led by the ecb last week, maybe more hesitation about doing more in terms of asset purchases purchases. Doubts about the programs put in place. When we come into september 21, when the fed and the bank of questions, there are about how aggressive Central Banks will be Going Forward. Jonathan whats more important this at this point . I think the fundamentals will way out here. Whatever happens will be slight and we will take a pause and pay attention. Fundamentals will eventually drive what happens with the fed. I think thirdquarter earnings will show a continuation of a trend, which is good earnings from some of the companies we been up watching and muted earnings for the rest of the market. That will put the fed on pause and the first slight rise. I think we will take a timeout and pay attention. Thats what we will see for the rest of 2016. Alix we have seen rotation into value, a rotation as well. Consumerks versus staples and utilities, tack have started to outperform value as well. If that continues, do we see an unwinding of that search for yield . Kevin what you are describing is the nearterm dynamic. We came close to recession like conditions in the third and Fourth Quarter last year. We turned in the second quarter. Thats why you see value, industrial, financial start to improve. We avoided that and we are going to be accelerating to the end of the year. The longerterm issue is about how fast we can grow from here. That is going to be part of the debate that will happen on the 21st. The question for us is if the fed focuses on the improvement in the nearterm growth items or if they focus more on the longterm sustainability of this pick up we have seen in recent months. It is in fact the case, and we dont know yet, at least pullback of it. What does that mean for financials . Could they lead the market . i think its tough to see financials taking over leadership of the market. There is a backdrop of overregulation, lending has not been a priority for the banks lately. There is a hard time going back to the old ways. I think you describe Technology Leading the market. Look what happened this year. You see facebook and amazon having the years they have had. You see Old Companies like microsoft really leading the market. I think that will continue to be a theme. Drivenogy has enhancements, running the economy. I dont see financials being the leg up for the market going into 2017. Jonathan im going to ask you about education. Market participants tend to be some of the most highly educated individuals. Is there a misunderstanding of whats happening in the global bond market and what it means for equities . Kevin there are two interpretation. One is the qe programs and the Monetary Policy has pushed down yields. The other interpretation is credit creation is creating an undercurrent of very weak inflation, a be even deflation which would argue for lower bond yields. Its curious to see which comes first, the chicken or the egg. The bond market tends to be more feeding at, usually different clientele, and institutional type clientele. That debate is a critical one and one that will be on bond next all over the country. David one of the challenges for somebody putting in the other , at what portfolio point does that break down . Kevin the correlation youre talking about is a shortterm phenomenon. When you look at the search for yield that has been a feature of two, ultimately if you take a longer perspective and look at the relationship between Economic Growth, the size of the economy, the size of the underlying earnings, thats what dominates in the long run. I can see a scenario where dividends, stocks, stocks of have highyield potential have a nearterm time where they perform. I dont think thats the key thing. How much growth will we see and how much is the ultimate earnings power of the indices you are talking about . The difference between shortterm and longterm. Jonathan you are sticking with us. Coming up, alledge ins and the markets. At theestors are looking price of political gridlock. Here is a picture for you. There is some resiliency in the u. S. Equity market. Only p 500 is down, but marginally. From york city, our coverage of Global Markets and the price action this is bloomberg. David this is bloomberg. Coming up on bloomberg west, 6 45 p. M. Be at eastern time. This is bloomberg. It lets get you up to speed on the markets. Some resiliency for u. S. Equities. Futures were lower. The dow was down by 1 10 of 1 . The s p was dead flat and the nasdaq, lets talk about that correlation. In equitiesare up are still resilient for the u. S. The conversation will continue. Lets look at some of the movers in new york. Abigail doolittle is that the nasdaq. The nasdaq do have stabilizing after fridays big selloff. We do have some stocks trading off sharply. Prank fter Deutsche Bank downloaded finish line. The stock valuation is very high. Its close to being priced to perfection. There is not a lot of room for execution errors. They are on the sidelines. Also trading lower on the open here, having its worst day since august, american airlines. They reported august traffic fell by 2. 8 . Capacity rose by 1. 4 . Thats not really a positive dynamic. Have been talking about the idea that the airlines are having a difficult time filling planes at desired affairs. The company did reiterate thirdquarter guidance. Sector sensitive to global jitters in the financial market. That could be wayne a bit as well. Weighing a little bit. Alix Political Uncertainty is on the market. Donald trump is climbing in the polls. ,ccording to bank of america markets are beginning to wake up to the prospect of a Trump Victory. He spoke with us about how the market is pricing in the u. S. Election. David this is the single most important election in 30 years as far as Financial Markets are concerned. Calm now, it was extremely about the election. I think a lot of that has to do with the markets are competent. Idea was she would win with a landslide victory. Electronics market continues to give only a 30 chance to donald trump of stealing this thing under hillarys feet. Alix he is so passionate about it. We do you agree with his assessment . All of the recent issues with her health and some of the other comments over the weekend before the news of her pneumonia, this is still a race we have eight weeks to talk about. As long as we are talking about it, there is an opportunity for donald trump to rise in the polls. Over the summer, the market got complacent. I think it was slowly but surely grinding higher. I think this volatility is expected in the fall. It may have been a little abrupt. There was a wind at our backs for 90 days. There was low volume and low volatility. Volatilitys is the we saw that is not to be unexpected. The race clearly isnt over. I think this is going to be interesting eight weeks. When there is this kind of market, there will be volatility. Im not sure that is surprising. Alix the risk trade seems to be unwinding. Its nos apprise that the risk trump is unwinding as starting to climb in some battleground states. Do you expect that to continue as we head toward the election . Kevin i dont think it goes up. I dont think it goes on and on. I havey election that seen, there are always questions about whats going to come next. To the extent that there is a consensus, which up until now was that hillary might take the election, that was big into the cake. As we get closer to the election, who knows . Whichever way it goes, its not just the president that matters. Its also going to be the composition of the congress and what able is able to get done. I understand there is attempting onuld to handicap the race the stock market and the economy in the future. Most of the analysis i have seen in the past, it ends up woefully short of what ends up happening. We are withholding our judgment on the outcome of the election and ultimately what effect it will have on the economy. David we have much to be modest about. Explain to me from your experience, how sophisticated are these markets . Its another thing if we have a divided government. To the markets really want action in washington . Are they happier with a government that is controlled by one party that is more likely to get things done it, or are they happier with a stalemate . Mark thats a great question. The markets are forwardlooking. As a summer, we saw a market that was rising with low volatility and low volume and was ok with the election outcome in november. You expect some volatility in september. October is always a question mark. The market once an environment in which there is ability to grow and find innovation and there is a roadblock in congress to get things done. When you put more comments out why politicians that talk about stalemates and not getting along with the other side, markets dont like that. I think markets want to see things getting done. Over the course of the last a hardears, we have had time getting along. The markets had a very good eight years. That goingect forward congress would find a way to get things done. I think given the history of the last eight years, they will find a way to get a better dialogue going. I think the markets will like that. If the markets have to choose between having minimal regulation and on the other hand having stimulus, which is more conducive to innovation and growth . The pro growth camp is going to be in favor of less regulation, they are going to be in favor of a lighter hand by government in the private sector. The extent to that being baked cards, the progrowth camp is going to cheer that. Alix thank you so much for breaking that down for us. It is a very interesting question. Ae market is not pricing in trump stimulus it could add a lot to gdp and with the dollar there could be a huge rise. He is really beating the drum on that. David we may find out what the market thinks as these polls start to narrow. Coming up at the top of the hour is Bloomberg Markets. What do we look forward to . is this something that could be more prolonged or sustained . Its not the big win. We will be asking paul donovan whether he thinks its the big win. Ont is he anticipating later today. The fed government is speaking after 1 00 eastern. We will be talking about hillarys health problems. Nondisclosure . What will it prompt from the donald Trump Campaign. Deals are following through and deals are going through. David thank you. Jonathan investors will be watching key events this weekend. We are 20 minutes into the markets. ,quities and the cash open marginally negative and down 1 10 of 1 . From new york, this is bloomberg. Jonathan we are about 22 minutes into the session. Lets get you up to speed. Its marginally negative here in new york. There is some resilience kicking into the u. S. Market. There is not much in europe. At the ftse is down almost 1. 5 on the session. Dollaryen is lower, capturing that risk off story. Have a stronger japanese. We talked about a bond market rally on friday. Monday is less severe. Some risk off in the commodities market is filtering through. Handle. With a 45 debate, is was a big this the beginning of the big on selloff, or is this a mini selloff. This is a selloff in a low bond yield world. Its a different kind of selloff. It looks like you know that. David i feel sorry for the Federal Reserve. The more they talk, the less anybody believes them. Jonathan their credibility has been a shot through their own forecast. They set up their transparency to ease markets. What they found is the regime they set up has been on the way out. They need to rethink communication in the Federal Reserve. Alix do they have any control over rates at all . We have 50 billion worth of treasury coming online in the next 48 hours. Is that going to lift the yield up . Fairness, at the beginning of this process, they never would have guessed it wouldve gone this long before you had real Economic Growth and they never expected to go on this long. This is temporary stimulus and they dont know how to get out of it or it it. Isx physical some us fiscal stimulus the worst scenario . You actually get a bond market. Jonathan that could sow the seeds for a real market rally. Fed we will hear from the president of minneapolis. He will be the last member to speak ahead of the Rate Decision. They do this week, we have a lot of key events coming up. Tuesday we are going to the oil report. Will see import price index and from the u. K. Unemployment data. Thursday, there is a Rate Decision out of the bank of england. On friday we have Consumer Price index. That puts mark carney in the driver seat. We will hear more backing off of any stimulus that would heard from area groggy last week. Retail sales is a massive data point. There are some questions about resiliency of the u. S. Consumer and given how much thats been holding up gdp over the last couple of quarters, that is significant. David that is 70 of our economy. We have put a lot of pressure on the u. S. Economy. The consumer has been out there all by themselves. Alix we have seen wage gains start to pick up. If that eats into Companies Profit margins, does that hold back the employment lever and they have to fire or not hire people . Jonathan we have the governor coming up. The enthusiasm around the speech , i find it absolutely fascinating. Wrap up bloomberg with a little bit of cynicism, this is Jonathan Ferro. Bloomberg markets is up next. In new york, this is bloomberg. Vonnie it is 3 00 in london, i am vonnie quinn. Mark welcome to Bloomberg Markets on bloomberg television. Vonnie we are going to take you from washington to south korea and cover stories out of the u. K. And mexico in the next hour. The worldors is in a sea of red as there are concerns over the limits of central bank stimulus. We are awaiting the fed in a few hours. Mark they are going to create the worlds of biggest supplier. They crossed the 30 billion plan to become the largest supplier of industrial gases. Vonnie Hillary Clintons health is threatening to mushroom into a political crisis