Julie hyman has been tracking. The game we saw last week in changing perceptions about the fed and its Interest Rate increases, people bringing up the expectations for the fed to raise rates in june, but losing a little bit of steam in todays session as investors await a lot of Economic Data from durable goods to new home sales. Groups on the the move, materials l strongly but besides that, some materials at 1. 2 and energy as the biggest drag, even though if you look at the individual groups, the point or the percentage moves are not that significant, not many groups moving 1 except for that material group. Individually in terms of the biggest gains on the s p 500 index point wise, we have apple rising after report from a taiwanese newspaper that iphone seven orders to suppliers are higher than people were anticipating. Theo getting that details of its bid from bayer for 122 a share. Thisll also extending the gains that we saw for that stock last week. On the downside, weve got exxon mobil falling along with oil prices, microsoft a little bit lower as well as facebook. There was an interesting story bringing up the potential for perhaps microsoft and sale forced to seek some sort of deal, but that could still be a play. The focus on the bed, moving away from commodities, i would argue the are related. Is all interrelated, but the fed has come back to the foreground as the driving factor behind what is going on with stocks. Here, you see the twoyear yield and if you look at w. A. R. P on fed fundserg, that is futures and how they are crossing in the probability of a rate increase in june, up to 30 . You can see this is what happened last week after the replace of release of the fed minutes, the uptake in that probability type related at around 30 chance of an Interest Rate increase at the june meeting, we will be watching this this week. Julie hyman will be back with us, later. Lets check in on the first word news. Mark a baltimore officer has been acquitted of assault and other charges in the arrest of freddie gray who died after being injured in police custody. A judge found officer edward nero not guilty of misconduct in office and reckless endangerment. He was one of Six Baltimore Police officers charged in the case. Said to haveicers checked separate trials over the coming month. Has ended one of the last symbols of wartime animosity between that it states and north vietnam. He lifted the embargo on weapons sales to the country. The improvement is being driven by mutual concern over chinas in limits. The fbis investigation of Hillary Clintons use of a private private email server is nearing an end. Experts say the investigation will likely conclude in a sit down with the democratic president ial frontrunner. The fbi Standard Practice is to save questioning the person at the center of an investigation for last. In austria, a far right party has conceded the in the race for president. Mailin votes give the victory to Alexander Vanderbilt one, an independent act by the green party. Freedom Party Candidate had tried to capitalize on public unhappiness with immigration. To the story back dominant in, one that julie was telling us about, the fed timetable for raising Interest Rates. Policy makers are promoting the idea of a june rate hike as a market slows. On sunday, he said officials continued talk up fed hike. A number of key that members have been speaking out about the prospect of raising rates, possibly starting next month. I think it certainly could be a meeting in which action could be taken. Thehat we do depends on how economy is going to evolve. Not wageowth has growth star picking up, but we are seeing some signs that wages are starting to pick up. Factor in a definite favor of the fomcs view that you can have a gradual normalization. Slowly or gradually, meeting Interest Rates over the next two like twoadual meaning or three Interest Rates Interest Rate hikes this year. I view the current level as too low for todays economic condition. Thing on wall street and the Financial Futures expecting it most one increase over the course of this year, that would be consistent with an economy that was the week. My own view is that the underlying strength of the economy is stronger than that, but the fundamentals are Strong Enough that we are likely going to be removing accommodation little bit more quickly than as currently anticipated in financial markets. My assumption is two or three are possible. I think two or three a spot is probable given the job growth we are seeing, the patient data. If we came in with data that the long lines are expecting. Unconvinced by forecast is on track. I think the case should be strong for raising rates in june. Junejuly the timeline is a reasonable expectation. It is like a Communications Blitz and we have more, coming up. Markets, we have to get what we want to hear. Global head of rate strategy at tb security, you are still looking for one rate hike this year. We have seen a 20 rally in the 1 ,year yield, almost at what is your call . We are thinking that the front end is not fairly priced. I think what the that realize is that in order for them to be able to hike, they have to market the price, but if they were talking sort of without bringing up june, essentially the market was keeping june at hero, it is hard for the market to price the sort of reasonable chance of a september hike with june at zero, so they have to come in and say that june is likely and at junes price for about 30 , it allows september to be 90 . By june, they will not have the conditions and there is no urgency for them to hike. You have the brexit boat right after and yelp ellen said her target for inflation is 3 . We are not at the fed target, so there is no real urgency, but it continues to take that down, the market will not allow them to hike, so they are trying to build option analogy, bring up the fact that we could hike in a oink, and that is why we were kind of meeting short of the front end, we have taken most of these positions off and the front end is fairly priced at , rates tond is a by decline even as the fed hikes because of the whole tightening of financial conditions. To prove the point about the odds of a rate increase, take a look at right now, the odds of a rate increase are 30 are july 27 54 by september, you get to 63 and you can track that before the minutes came out and we were looking at 4 odds of a rating reis in june and 20 nothing past 50 , until december at the earliest. Haso you think the fed taught the market up enough to go in september . I think with that september . I think they can actually hike. The market was already priced for the december hike and yet february. Net in what happens to the dollar, what happens to the cn why, what happens to equities or commodities, all of this is where the risk is going to come in, you and of the fed is dropping about two or three hikes, you can get the tightening and financial conditions and the market will stop rising and the economy cannot handle it. We are getting a rebound in secondquarter growth, but we are not getting a 4 or three to 3 gdp, so we are rebounding to a normal level and i think that is consistent with one hike, this year, oneto hikes next year 12 hikes x year. Next year. Take t to get your you mentioned there is a rally potential for the 10 year. This is the two to 10 year spread and as weve seen over the last few months, that curve is really flattening and this is called a bear flattening, a rally in twoyear and 10 year that is not keeping pace. Continue . Ect that to what we have had is a bit of a twisting curve. I think the front end is fairly stable, and i do not even care that there is a bear flattening, bull flattening in terms of price but where the long end comes in is the fact that the neutral rate is still fairly low, so what the market is not doing is saying that the that might hikes sooner but that they wont keep going too fast, so the endpoint of the hiking cycle, the market does not have a lot of faith that it will be 3 three and a half percent. Where do i get yield if i do not want to invest in negative rates . We started to see data that suggests that this crossflow has started to happen. Youre going to stick with us, but we have breaking news out of the of orting two people familiar with matter. They are being sent to look into the to bank banks Deutsche Bank. You are looking at u. S. Shares of Deutsche Bank and you can see they took a leg down on these headlines, now off about a third of 1 . Perhaps another legal nightmare for Deutsche Bank as it tries to figure out what it strategy is, Going Forward. Deutschenvestigating bank and as a result, massive losses run 2013. We will have more on this story, after this. With we are back the global head of rate strategy at gdc tb security and we are talking about this campaign rhetoric. What happens if the Federal Reserve is just crying wolf . What kind of people does that have along with the brexit vote coming up . This is all in the backdrop of failing growth failing global growth. I think they will lose some credibility as they dont explain what happened. In march, at least for us, it was clear that there is a mandate. I would argue that there is an unofficial current mandate for the fed and theyre looking at inflation and financial conditions. Financial conditions unless they tighten significantly, effectively comfortable with the easing of financial conditions. When they hike, conditions are going to tighten. Between now and september, if you get a significant tightening and that that is essentially crying wolf, we are not going to hike, i think you need to clarify that the tightening and financial conditions was enough of a threat, but as of today, if Growth Continues as expected, and the fed does not go, were not expect in the go in june, but we decided to stall this, does not mean we are not going in july, they could keep talking about july probability. Een july and december, if they did not go in june, with baby or two lower their dot plot . How do they have a hawkish lowering of the. . Lowering of the dot . July and sayo november or december, so there is still some gap and the key assumption would he that financial commissions conditions do not tighten. Dollarket new where the was so when they came in and height. , the expected financial conditions would be unchanged. In a mini version, in the second half of the year, can still go over to hikes in june, then come in and hike either july or september and see if conditions tighten that will essentially take out all hikes. To see it right now, we would have to see growth as weaker or financial conditions tighten. Financial conditions are notorious to predict. Just because we decided to play it safe, but there has been a fundamental shift in their reaction. We have on the terminal, the dots function which allows you to see where the that is projecting the fed funds target rate will be on the 162017, below 1 at about 0. 83 percent. You are looking at one Economic Data point, saying yes, june, no, june. I would say the next payroll report. The last report was disappointing and everything came in, weaker. Average earnings in a pickup as much and that should have happened, the actual numbers of jobs the actual number of jobs created fell. As long as financial conditions are where they are, i think of the principles continue to indicate a remain outcome, we could get one in june. Next friday is pretty important. Thank you so much. Still ahead on Bloomberg Markets, does big oil need to rethink its strategy in the face of a saudi aramco ipo . This is Bloomberg Markets. Lets turn to the oil markets and the implications of the proposed saudi aramco ipo. Could this make their Business Model obsolete . Our next guest says yes it could. Us the Old Oil Order and contract that with this new oil order, we have. If you think back to how things used to be, there was an acceptance that oil was finite, we were going to run out. Six or seven years ago, people were talking about the oil and the idea that demand would never run out, that it would just keep growing, there were all these chinese people, indian people, other emerging markets you wanted to buy cars, so if you had reserves in the ground, and fluctuations aside, it would always go in value, and saudi aramcos ipo is the clearest signal we have had that that thinking maybe obsolete. Make the transition to why that model does not really work anymore. We have a great chart that shows a percent of industry projects that were sanctioned between 2007 and 2010 came on time, on budget and met reduction targets. Era ofplies that the these longterm billions of dollars worth of projects where what youre worth is what is in the ground is kind of over. Ifit certainly is for now, you look at the presentation these companies are doing, all the emphasize is that they are cutting back on spending, protecting dividends. We all know that that would mean the production wont grow, even when they did all of that spending, the production was not growing, but i think part of the reason of why that might be changing is because we can no longer really rely on peak oil theories. Shale has kind of upended the idea that we are going to run out of oil and at the same time, we have seen things like the paris agreement, things like elements in electric vehicles, it is just possible that oil demand could peter a lot sooner than we used inc. This is a huge paradigm shift and certainly has its causes, but what opportunities would it create for exxon or bp . They may be able to capitalize on the fact that they are not the only ones who are hurting. You can only look to cut you only have to look at countries like venezuela, desperately in need of investment. Their own production is flat or going down and they could probably use an injection of capital. The Sticking Point has always been that the Oil Companies want reserves and that goes against the nationalist politics that you see in a lot of these countries. It is nogiven that longer a sure thing that reserves will simply grow in value, it may be in big oils interest to no longer really whether they booked reserves, but just try to get longterm contracts and cash low so that they can pay their dividends. At is a great point and you had a great chart showing what areas have low operating cost and the areas where you really want to be in our areas that are qatar and like iraq, the lowerlevel lefthand side of the screen, so they have a lower operating costs, lower break evens, but you say it is not about going in there in doing with reserves, they can pair up in different ways. If you look at exxon, it has a worldclass chemical company. It would one of be one of the Biggest Chemical Companies in the world on its own, and they can definitely help countries like saudi arabia turned that crude oil into other products. One of the things the saudis like to do is get away from relying on exporting raw barrels, so as far as his companies can use their expertise in other areas, that create an open that could create an opening to partner up. Thank you so much. For more fast commentary, search for us on the web. Coming up, our mystery stock. Shares may get all dressed up. Scarlet live from bloomberg World Headquarters in new york, i am alix steel. Scarlet i am scarlet fu. This is Bloomberg Markets. Lets head to the Bloomberg Markets desk were julie hyman has to big reveal on the ysteryry stock m stock. Julie i will say the phrase, and you will know when it is. You are going to like the way you look, i guarantee it. Alix o oh founder wasber, the attemptnd made some to take the company back over. Inc magazine reveals that he exists going is exploring trying to do it again. It is hard to see if it is working again. You can see how the shares have performed since his ouster, not well. They are rising a little today on this interview, although it is unclear if he will get a bid together and if it makes sense to do it at this time. Of course, mens wearhouse and. A bank have been suffering. If you do not sell suits three for one, you dont get as many people in the door. They deal with a traffic issue. Lending club,at which is rising after a new steak in the company. Stake. They must be pushing for changes. Talksdvisor raising at today. Scarlet thank you so much. Lets go now to the headlines. Mark crumpton has more from the newsroom. Mark c. thank you. Clinic inenthood sarasota, florida has been evacuated because of an unknown substance. People have been taken to a local hospital for an investigation and others are being decontaminated on the scene. Students are safe. The Supreme Court has ruled in favor of a death row inmate from georgia who claimed prosecutors improperly kept africanamericans off the jury. Timothy foster was convicted of killing a white woman in 1996. They say prosecutors were motivated by race. They could give foster a new trial. Republicans are following the present election a lot more closely than democrats. Nearly half of republicans, 47 , say they are following election news very closely. Only 39 of democrats answered the same way. Egypt is sending a remotecontrolled summary to search for the missing jet. Alreadyjoin others searching the many training and see will try to locate the voice and data recorder which could be almost 10,000 feet below the surface. French investigators say moments before the disappearance, it generated automated messages about smoke in the cabin. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. I am mark crumpton. Back to you. Alix thank you so much. Has offered, bayer 62 billion to buy monsanto. Earlier on bloomberg surveillance, bayer ceo tried to calm concerns that the company is stretching finances. Year afterirst closing the transaction already, we see double digit earnings per share. With that, the ability to pay higher dividends to shareholders. Starting from the second year, this will be a doubled