Seeks a court needed International Response and opposing penalties on the regime for undermining democracy. The Treasury Department accused macatee a mexican soccer star of having links to a major drug trafficker as part of hitting 22 mexican nationals with sanctions that freed their assets in the u. S. Departmenty or released a statement saying the move was made in conjunction with the Mexican Government following multiyear investigation of the drug network allegedly run by role hernandez that has links to two new major exits and drug cartels. Opec says three nations every a friend their commitment to the agreement to cut oil production. Iraq, and kazakhstan. When it come up short comes to actually reducing output. 24 countries agreed last year to cut back and try to end the global oriole global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. I am Mark Crumpton. This is bloomberg. Likewise. Carlet Joe Weisenthal is off 30 minutes from the trade from trading in the u. S. Struck stocks lower for the second straight day in assets when higher. The question is what did you miss . President trumps rhetoric against north korea rather rattled markets around the world. The fed president said whoever is the next fed chair should consider warning. More highlights from our exclusive interview next. Didnt disney ready to embrace the cord cutter. How it plans to transcend cable into a gold mine. Rising global tensions have put reneweds perspectives on risk taking. It is held onto the game, blending the gains of threats. The vix is still significantly low. The reaction suggest shortterm volatility in equities . The chief economist at the institute joins us from washington. Great to have you on the show. A certain sense of cautiousness for investors making sense when both sides, north koreans and United States, amplifying uncertainty here. Absolutely. Two years ago, it was china. It caused people to delay forecasts about how much growth would be. Delaycost the fed to policy normalization can north korea is no were near the size of china but it is the fact that it is nuclear and we do not know how it will be nuclear, that is a threat. Markets are reacting badly and it could be amplified. That is partly because of what we see and what we dont see. How much financial strength is their backing all this up . Geopolitical risk in any kind of action could lead to more market volatility. Rises tof it actionable levels for the fed, stageay bring about a new in the market. Can you explain what that levels mean . Is it the rate of change we could see it move that . I think the easiest way to measure it is to look at the market measure, like a move index on the bond market. The fed has reacted slow for his normalization of any policy change when there was a large and sustained rise in the vix and the move index that ugly volatility start to go up. The measures are at historically low measures but lets wait and see. We still have all of september to go before we start to see the policy action. Jackson hole, they tell us if are ready to move. We had delays until december. I am looking at the function on the bloomberg which indicates investors right now are not really pricing in real odds of an increase in the fed funds rate until march. 56 for march. Said, you have to wonder whether Monetary Policy could be a catalyst for more volatility as suggested . What do you think . It is good reason not to move also because inflation is not there. Inflation has been on a declining trend and we do not know why. A spokesperson says with low rates of unemployment, we should start to see some signs of rising inflation. Loweringgns of inflation. In the past, i have come to you before and said the rate has always been a lousy measure and now more so than ever because of a change in demographics. What i tell viewers to look at is the ratio of hiring to job openings. That now is still at historically low levels. Data cannot just recently, my god, look at all the job openings, it must be a hot labor market out there. The only thing that makes wages and prices rise are hiring and hiring is at the slowest pace ever. People are reluctant to hire until they find the right person. They would rather wait until they come of the current range. That Means NothingGoing Forward for quite a while. That is his everyone he said to us. He does not expect inflation to reappear in any certain sense. He did not quantify be on that. At the same time, the imf actually raised overall costs. Huge partg partner, a of that, you can can look at these things and say, you have got Central Banks talking about the exit but there is no more pressing need to on the inflation front. They decided it was pretty benign. Do you agree . Things are getting much better. Twice of zero is still zero. From may bedle goes zero point something to one point something. It does not make me stand up and advance. It is still not a lot of growth. Growth inflation is not there. If there is any sense of thattainty or disruption could throw growth offtrack, that is something to watch out for more than anything else. Do you think the biggest sort of uncertainty we have seen does come from the Monetary Policy . Investors now, geopolitics , aome a more pressing issue. Ack of clarity geopolitics has become a part of that environment. We have seen that happen with brexit and all sorts of earlier events. Theres no reason for the fed to not stall if markets behave badly because of concerns about geopolitics. That iset to happen but not to say it cannot happen. That is the risk i will be watching out for. Been talking to howard and jeff and most of them sound more cautious of late, saying they want to do risk, they want to reconsider some assets Asset Classes because prices have gotten lofty here. Given that there is no real visibility into what will happen in washington, is this a good strategy at this point . Were still looking at a fairly the riskvironment and for taking performance is higher than going into something favorite now. It seems as though you cannot go broke by complacency. The trouble with that is we are in a world of disordered markets. For as long as we have had zero rates, almost 10 years. People have almost forgotten what a normal environment looks like. Restore the normal environment get rid of these distortions in all of these cautions are right. We had zero rates all over the place. But thee can there be market that raises asset prices and cannot be sustained over the long run given basic economic fundamentals. Bitounding the alarm little being a catalyst for volatility. Thank you for joining us. Up, if the poems he fails to dissuade north korea in its nuclear ambitions, what options does the u. S. Have . The commander general ways in. From new york, this is bloomberg. Scarlet the federal government is quietly weighing military options to eliminate nuclear capabilities. A former nato supreme allied commander, david gura began by asking him about rex tillersons, that americans should sleep well at night. Forget anybody is excited. This has been building for some time and for decades, north korea has had the potential to inflict hundreds hundreds of thousands of categories. Harry our own forces there and by the our own strategic deterrent, that is still operative. When you look at what options are available, so much of the conversation means on diplomatic that aside, plans for military options as well. How much of this has been thought about over the decades we have been dealing with the issue . If i knew the specifics, i cannot tell you. Is you could try and teams andecial forces locate Nuclear Warheads hear it if we did that, and im just making up numbers, your military commanders would probably tell you they have an 80 chance of getting 70 or 80 of the warheads. He would initiate that action by disabling the north korean air Defense System in the commandandcontrol medications. Do we think the north would just am via do nothing while we are rolling around the countryside flying helicopters and shooting guard . I dont think so. You would trigger a general conflict on the peninsula. Positioned to bring conventional fires, chemical fires, biological fires, on the city, a and he hasation other shorter range missiles with chemical and biological weapons. The other option is to just take out the whole country and put them in 200 Nuclear Weapons in the country, hit every , use groundsite penetrating weapons, going deep because they have had 70 years to harden their facilities in his mountain ridges and valleys in the north. Could you get everything, probably not, but you would make a mess. There is no good military option here. Us fors frustrated years. I wonder how things are different now with new principles in place . A new leader in south korea, north korea as well. Has this changed since you interested with it when you were a serving general . Very little has changed in terms of the military situation. North korea has gotten longerrange rockets. The threat to the south korean population is much worse. That was the former nato supreme allied commander speaking with Bloomberg Markets earlier today. Isa time for a look at the biggest business stories right now. Asset prices approached generally fully valued. He said there is not much buffer. Have the same view after record stock market surges. Exploring a possible spanish wind power firm. Oaktree has a 71 majority stake in the area, valued at 1. 2 billion. Foreign investors are noble assets renewable assets. Is according to people from a with the matter. Joins softbank with targeting the cable carrier. Target has a market value of and paytv billion providers. That is your Bloomberg Business flash. Few minutes to go until the closing bell. Lets look at a stock that moves into the session. Were focused on starbucks down to his lowest level since february. Helping to drive the shares lower. Abigail doolittle is with us now. Abigail the analysts are basically saying we have seen all of the slowing growth. What he is talking about is what we all see. Basically the fact that there are so many stores everywhere that the new stores do not have a great chance of growing or being profitable. If we happen the bloomberg and tape it would just take a look at the function, this is a map of the u. S. And it shows us all in the u. S. , look at this. It is pretty it it is pretty incredible. Represented here on this map, you can see how they would all eat on each other. Targets and airports. It is the main issue fighting against starbucks. The food and beverage innovation has peaked and labor investment apparently may need to be put in play. As a number of challenges. Elsewhere. Out can everyone is looking forward thinking they could be a growth grabber. It is 14 of revenue, 6 . Should some time on the on a phone or cheap if it is likely to happen. This is a fiveyear chart. You see shares have appreciated last fively over the years. In the last two years, it has been stagnating in the range. A bearish break of the uptrend, and of china does not come on quickly, it seems that is unlike economy could see more selling pressure ahead. The Company Agave shot in the arm. Been on then has job since april. What is he doing about growth . That is a good point. Soould probably close those they could cannibalize together. The ceos on not in a position to override the current message. I believe that was in 2005 and in 2008, the the Company Really struggled in a big way. They do not want to completely steer the mission the messaging. The bottom line is there is a reality check that growth is slowing here and many to figure out how to message it perhaps by the end of the year and maybe the ceo, kevin johnson. I say every time i walk by starbucks, im reminded how i just walked past another one so im going around the same block over and over. Exactly right. If there were a coffee shop before, weve going there or deliberately to a starbucks . I would personally go to starbucks because i am a starbucks person when that is the option. I spoke with jennifer in one trait of human beings is we want what we cannot have. Starbucks is now anywhere. It takes away that desirability factor. I think that is the point of it. There we go. Bloomberg coffee. Thank you. U. S. Banks recovered a great deal since the financial crisis. European banks have wallowed in the last years. International counterparts from new york, this is bloomberg. The 10 Year Anniversary of the decision to freeze funds that were exposed to subprime mortgages. Only later on did we realize this was the catalyst in that snowballed into the Global Financial crisis. In the u. S. , europe, and around the world. Indexropean bank stocks in the white. Banks around the world have not recovered from the crisis yet. They would be above the red line. P and banks are in the worst shape. Areaw how u. S. Bank stocks until about 2011 or so. European banks did better than that and then things changed around 2011 and 2012 as europe went through a debt crisis. We continue to see some of the struggles there they look for growth and brexit presents a whole new level of challenge for the Banking Sector there as well. Recapitalizing the american thanks and the europeans werent. Italy is one of the most conserving once for their nonperforming loans. We started to see them deal with that. I saw a fascinating headline about italy and the fact that they are holding themselves in debt, also one of the big issues around 1011 of the height of the crisis. Bank ind about the bond their holdings. A total reduction in sovereign debt holdings. Automatically. It one of the things going on as a result quite interesting. Yields down. I am talking about what we talked about earlier on in Bloomberg Markets. Look at what is going on with factors that could make in factors investors cautious. Keyave seen a number of reserve key reversals. The down the s p 500 in the last few days. I am looking at technical reasons. We have talked about this a number of times before. The correlation between the s p stocks, if you look on the righthand side, not only that, but in the last year or day is average wedding large amount in the average moving day, it is not as actually it is more common than you would realize, the ratio between the average winners and losers has been a levels not seen since the 1990s. Not reason for a bear a reason for i bear market but a reason to be cautious. A lot of warnings to be cautious of late. Take a look at how the market is set up now as we head toward the close. Caution there with the dow off. 2 . Second of losses. From new york, this is bloomberg. Julia whatd you miss . Stocks around the world retreating after President Trump rants of rhetoric against north korea. Im julia chatterley. Scarlet im scarlet fu. It Joe Weisenthal is off this week. Onia if you are tuning in twitter, we want to welcome you to closing bell coverage. Begin with our market minutes. We did see stocks get a little bit of a leg up in the last hour of trading. They paired their losses but we are still looking at declines for the major indexes. The s p little change here. The second straight decline. The first today drop for the dow since late june before the 10 day winning streak. A look at whatve is going on in terms of individual movers. Scarlet disney and netflix, we gave you the results yesterday, earnings ecommerce sales missed. Direct tore launching consumer streaming services. A investor still questioning what that means for the company. Does it entail more shortterm pain for a longterm gain . Its bad news because disney will no longer provide content to netflix in a couple of years. It is no longer going to pay or get that payment from netflix. That means a loss of content as well. Its not the only defense company. Lockheed martin a lot of rhetoric around President Trump and north korea sending these defense shares up on the day. At 1906, a drop of almost priceline at 1906, a drop of almost 7 . Lets take a look at the bond markets now. We have the headlines on north korea and you see a natural bid for safety. Not much going on with the u. S. Tenure yields. We did see them earlier on in the session with a 23 billion 10 year auction. Italyn see underperforming there. Just above touching 2 . This is an interesting one. , its trumps comments got one third of the landmass covered by u. S. Military base. You can look inside the terminal here, g btv we have not seen much of a reaction. I cant tell you much about the liquidity in this market, but i thought this illustrates the power of the bloomberg terminal. Scarlet i did not realize that guam had debt or municipal bonds. Julia exactly. Scarlet lets move on to currencies here. The dollar turned positive, creeping higher. Not really. Ticking higher. , it would beve up the longest winning streak since march. I want to highlight the korean theas well as because of headlines out of north korea and washington. Lower at the open. The dollar gap higher at the open on heightened tensions. And it reflects the Dollar Strength versus the won. ,he hong kong dollar surged rebounding from a 10 year low. We are talking in relative terms here because the hong kong dollar is pegged to the u. S. Currency. The Hong Kong Monetary authority announced they will drain liquidity from the financial system. If you look at the hong kong dollar over the last few years, we see a steady weakening of the hong kong currency driven by a wider Interest Rate cap with the dollar. Ample liquidity in that currency. Julia given Everything Else we have said, gold trading at an eight week high. And in the copper market, we see that the first drop we have seen for four days. You expect a bit of risk pairing. A bit of crossreference on corn and soybean. The u. S. Department of agriculture releasing their world agriculture supply and demand report. And we get the first corn and soybean forecast of the season based on that. Discussing the market minutes. Scarlet breaking news from 21st century fox, Rupert Murdochs company. It reported fiscal fourthquarter adjusted earnings of 36 as that <