U. S. Cpi is due out today. Can the fed raise rates again this year if that measure remains subdued . s head start. She is holding a 15 point lead, but will still need a coalition partner. Who will it be, matt . Matt that is the question we are all discussing in germany. We will be discussing that over the next six weeks, for sure. Right now, a more immediate threat. We are less than 30 minutes from the european open. Futures are down across the board after the big drop in tehe u. S. Yesterday. As guy mentioned, people fleeing into haven assets. Bitcoin is trading at an all intraday high. The bunds, coming down. This trend is interesting. Over the last month we have come down from 0. 6 to 0. 5 . Trendmove in a downward as investors prepare for more risk. If i look at it one day look at the bund trade, we have come down in yields, meaning investors are buying debt, se eking safety and pushing the yield down to 0. 4 . Guy gmm is a fantastic function because it creates a score card and rates it relative to recent experience. There is the s p 500, and its a different color from the rest of the markets. That move was bigger than we have seen of late, by some significant margin. The s p 500, down by 1. 45 . Its the middle of august and in reality, most people are out of their debt. We are in a low liquidity environment, but still, Pay Attention to these moves. South korea is down by 1. 7 . The Chinese Market is down by 1. 64 . The european markets are down by 1. 5 . This morning, the dollar is bid the yen. Thyou can see that on that scre. Lets show you what else is going on. Here is the commodities market. Ironore, down by 4. 52 . The market is really stern to pull back on some of these commodities. Lets get our first word news update was shery ahn. Shery thank you. All the top that janet yellen has been talking about strengthening the Balance Sheet faced a test. Bloomberg data shows securities are already lagging behind treasuries for the First Time Since 2011. Investors are demanding 29 basis points to buy the bonds instead of treasuries with a spread on most troubling from 2016s low. Facedanks are set to mounting pressure from regulators to write off bad loans. European authorities are now beginning to lose patience with some irish lenders, many more Urgent Solutions are sought, unless convincing plans are laid out. Kenyas main Opposition Alliance has demanded the candidate be declared the winner of the president ial election. The National SuperAlliance Says it obtained data showing the primer for minister the former Prime Minister won more than 8 million ballots, compared for 7. 75 million president kenyatta. Singapores economy posted faster growth in the Second Quarter than previously estimated by the government. Most domestic product is seasonally adjusted and analyzed 2. 2 in the Second Quarter from the previous three months. That was revised up from the earlier estimate of 0. 4 and beat economist estimates of 0. 5 . Google has canceled an all a hands meeting to address hiring issues and a memo written by an engineer. He called thehat meeting off after questions to online, were posted raising concerns that employees and t identified in the leak would be harassed. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Guy thank you. President donald trump has stepped up his campaign a pressure on north korea, warning things will happen to them like they have never thought possible. Investors are going for havens, from what the Hedge Fund Manager ray dalio said. Inked ins used his l put to recommend investors 5 to 10 in gold. I wonder if he has made that move already. Matt i wonder. Meanwhile, William Dudley offered a positive outlook for the u. S. Economy. The jobs market and inflation. Yesterday in a speech he predicted an increase in Consumer Prices over the medium term towards the Central Banks objective of 2 julyt us. S. Cpi data for at 1 30 u. K. Time. Goodman joins us live from singapore. Lets talk first about gold. Ifseems that obviously, somebody is a big investors says that to the market, he is talking from his own book, but historically come it has been a safe haven. Is it still as much of a haven as it was . Sure, gold is a safe haven, and in high demand. Ago, regarding north korea, people were saying, it is not that big of a deal. North korea is a problem from time to time, but now the rhetoric has really changed, just as President Trumps frederick has changed. We have australia saying it will support the u. S. If needed. We have ray dalio recommending gold. This flight to safety has heated up. You mentioned bunds, saying people are rushing to bunds, even at a yield of 0. 4 . That is not an attractive yield, but because there is demand for these securities, it shows how strong the demand for safety is now. Guy he would have thought the Swiss National bank went from laughing to crying this week. Lets talk about what we will get in terms of the cpi number. Core pcu is certainly something to Pay Attention to, but we should look at the cpi. 2 thend up with the 0 market is expecting, can we price out the possibility of a december rate hike . Or is it too early to do that . Right, i think the number we are looking at is 1. 8 , which would be below the 2 fed inflation target. Keep in mind, the fed uses a number of different inflation gauges to monitor inflation. 1. 8 , of course, is less than 2 . Even if it is 2 , there are still several other inflation gauges that are below that target. We have conflict going on right now. The fed signaled it will raise rates once more this year. Traders in the market are betting that it wont. There is this conflict that has been set up. It really looks like the inflation gauges are not coming up to target, that the fed might have to revise the projection for another rate hike this year. Matt wes, im looking at a chart of the u. S. 10 year yield, right now at 2. 2 . In the beginning of the year, people were talking about going to 3 , which would be literally off this chart. Whats the outlook for treasuries right now . Thats pretty fascinating. Even of the fed has raised rates three times over the last several months, 10 year yields have fallen. So, does not always follow that when the fed raises rates, treasuries must fall in price of rising yield. I think there are a lot of reasons to be bullish on treasuries now. The weak as encouraged overseas investors to buy. Some of that demand is showing up from foreign Central Banks. We mentioned the 0. 4 bund field. 5 e u. S. Treasury yield of 4. 2 is far more attractive than what you can get in germany or japan. Last of all, even though the u. S. Economy is chugging along, inflation, which is what investors are worried about, does not seem to be picking up. Guy wes, thank you very much, indeed. Fantastic coverage. Wes goodman, joining us. You can follow the entire team , ayour bloomberg mliv fantastic function. Another fantastic function, matt, tv. Speaking, coming up. You can also watch videos, the mostwatched video, the videos between north korea and south korea and President Trump talking about north korea as well. It is dominating the mind of the markets right now. Matt dont forget, the google scandal. It is also dominating the markets at the moment, though it is not affecting their investment decisions. Up next, time to toughen up. President trump says his fire and fury warning maybe wasnt tough enough. We will talk about that. It is infecting investment decisions. This is bloomberg. Matt welcome back to Bloomberg Markets european open. Im matt miller in berlin, alongside guy johnson in london. Now we go to shery ahn in hong kong for the Bloomberg Business flash. Wonry google u. K. Has approval to build a campus alongside their existing buildings in london. It can accommodate as many as 5000 workers and it was approved yesterday. The building will be the highest building in the European Union and construction will start next year. Chinas online watchdog has launched an investigation into multiple violations by baidu, and waidu. They made no immediate comment on the notice. The bond board member from uber is stepping down. Graves served as the Senior Vice President of operations and is on the executive Leadership Team tasked with running the business in the absence of a ceo. He will relinquish those positions next month, but will remain on the board to help the Company Search for a ceo to replace the cofounder. That is your Bloomberg Business flash. Guy thank you. Donald trump has stepped up his campaign for pressure on north korea as he warned the regime not to follow through on firing a missile towards u. S. The latest or marks reinforce the aggressive the latest remarks reinforce the president s stance, despite Rex Tillerson trying to ease tensions. I think this is the first time they heard it like they heard it. Frankly, the people that were questioning if it was too tough, maybe it was not tough enough. Matt joining us now is our asian political editor. Give us a sense of how this is being perceived in asia. Im wondering whether or not the pressure is being felt more in beijing than in pyongyang . Certainly throughout asia, there is a lot of concern just about what is going on. They are used to threats emanating from north korea. Almost to the point where they ignore what kim jong un is saying. The difference this time is the rhetoric is coming from the white house, which is ramping things up. As far as china goes, they have been pretty quiet and are telling people to calm down. Yet, we did see an editorial in the communist Party Newspaper today, warning essentially, that if the u. S. Tries to invade north korea, china would be there to defend them. At the same time, they said if north korea provokes, we will remain neutral. Matt basically, china is saying i saw that editorial as well that they would band together with russia and north korea in an axis of power against the u. S. And australia, etc. Isnt this kind of unexpected that they would support north vehemently . E they have supported north korea for years, since the creation of north korea. Interest. A strategic they see north korea as a buffer. Tate against the United States if north korea were to fall, you would have u. S. Troops on the border, potentially a nuclear arms unified korea aligned with the United States, not to mention a refugee crisis. From chinas perspective, that is a great strategic bet. They want to maintain the status quo on the peninsula, a divided peninsula that keeps a buffer between the u. S. And chinese border. Guy what are people talking about, in terms of donald trump . Im just wondering what the perception is. Is he seen as being a wildcard . Is that perception seen as being esqueiberate nixon strategy that nixon seemed to pursue . What is the perception coming out of the white house . Question. Ts a good it depends on where you sit. Japan,ies are australia, south korea. They all say they are glad donald trump is putting the military options on the table. That needs to be there. And we support the u. S. I think what you are hearing behind the closed doors is more, we dont taken seriously. We dont take these threats seriously. We dont see any mobilization towards war. There is a concern, in a sense, the mad man theory, will it work this time . It remains to be seen. People are worried that there is a wildcard in the white house now. Just on what he is saying about north korea, but the whole trump administration. Nature, andctable the the danger something might happen. Whether that would change kim jong uns behavior remains to be seen. He really wants to be declared a nuclear state. He wants to be accepted as that and he sees Nuclear Weapons as the only thing as preventing the United States from invading his country. Matt it is certainly unsettling europe, and ie in am sure for those closer to the possible danger as well. The situation has definitely roiled markets. We will talk about the drops in futures. We are just nine minutes away from the open. We will see how it affects the castrate. Affects the cash rate. Up next, we have your stocks to watch. This is bloomberg. Guy six minutes to go until the cash open. More broadly we are expecting markets to open up down 0. 5 , adding to the losses we saw yesterday. This is the ironore charge going back to the beginning of this year. The red line is where we started the year and you can see ironore bouncing off this level. The market is very nervous about the geopolitical story. We have come down, not sharply, but we are beginning to unwind some of this trade. The miners are the ones to be watching out for at the getgo. It could affect london. Matt yes, i am watching, it is the 13 billion biotech company. The company says the revenue forecast is now 1 to 3 growth. It previously had forecasted bigger growth than that. We are looking at a cut forecast for novozymes. That could be one reason to see the stocks come down. It has already shown some pretty serious growth and then retraction. It was up at 1. 25 , and it is currently up 16 after coming down from the june highs. Again, novozymes, after missing the Second Quarter earnings figures, is now saying it expects revenue to grow this year, but not as strongly as it previously had. So, watch this 13 billion stock at the open. Guy matt, before we get to that market open, four minutes now. Let me show you the wei screen to give you a heads up on what were looking at a couple things to highlight. The european markets on the fair value calculations are called lower. We are down by 0. 5 . It looks like the dax will outperform. I want to highlight what is happening appear at the top. Take a look at the fair value on the s p. It looks like it will open flat, which is interesting considering where we came through yesterday. We will deal with the european cash open in a moment. We will get to the states a little bit later on. Inflation is the big story of the day. This is bloomberg. Guy a minute to go until the cash open. We think will will see we will see a negative start to the day. It looks like a fixed state is going to stabilize. On. Et inflation data later moment, we are pointed to a drop of around half a percent. We are going to add to the losses from yesterday. Matt i have been playing with an idea, it i havent seen gold moving that much out of the range. Gets freakedbody out about a nuclear catastrophe. To pull faith haven here. You have the u. S. 10year in white, the japanese yen in blue. The last month compared to put going. Theas taken the luster last year compared to bitcoin. It has taken the luster. We will show you this screen in a month. The mining stocks are likely to be under pressure. Iron ore was down 5 overnight. A substantial move. The london market is not underperforming significantly. London is down 1 at the getgo this friday morning. Aex looking at drops. Dax does. E how the the bond market is a bit at the moment. A soft looking. A soft open. Matt i am checking the grr screen on the stoxx 600. You mentioned miners, basic resources down 3. 1 . Bankston 1 . Oil and gas than 1 . S at the the miner bottom. The defensive sectors of the least of the losers today. You have utilities at the top. You can see telecoms and food and Beverage Companies up there. All groups down today, as you may have expected, and the defensive groups are the ones that are taking the latest hits as as peopleits, go more riskoff as far as stocks are concerned. Guy absolutely. Rio is down 5 . Lets take you to the mov screen. We will highlight the Mining Sector. Glencore is off 4. 66 . Billington is down 2. 91 . Miners that are adding the weight to the downside in terms of market moves we are seeing this morning. You are seeing iron or trading sharply. , a bignt donald trump factor in all of this, stepping up his campaign of pressure on north korea, warning things will happen to them like never possible. Like ever thought possible. That is a quote. Ray dalio terms of the game of chicken between the u. S. And north korea. He recommends 10 assets in gold to protect against the core risk. Meanwhile, yes. We are on the same page quite literally. Alliam dudley offered positive outlook for the u. S. Economy. A positive outlook for the jobs market, and a positive outlook for inflation in his a speech yesterday, predicting an increase in dpi over the medium term in cpi over the medium term. Here is some of the comments that we have had throughout the week. Going to get to a yearoveryear number of 2 until some of these drop out of the statistics. It is going to take time. Policy has been surprised by inflation coming into the downside during the amounts,d not by tiny by a large amount compared to progress we made through 2015 and 2016. Inflation has been coming up short relative to our 2 target. That matters. It matters that investors believe the fed can achieve its goals. It moved up from a low level in 2015 when it was held down. Were on the weak side. Inflation continues to run below that 2 . For july do today. Joining us now, andrew sheets. Good morning. What is the biggest factor in the market . Andrew geopolitics has taken the lead here. On monday, it would have been absolutely round cpi and the timing of a fed action. The rhetoric we have seen out of , thatgton and north korea has been the predominant factor now dominating markets. Back, these a step are thinned markets. The president , theoretically on holiday, is it just the fact we are in holiday liquidity in various Asset Classes that is driving this pickup and volatility . Andrew i think that is an important point. As silly as it might sound as were people currently are are really are is a factor. The fact is, august is a time when a lot of people around. We have the president and staff not in