Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170911

Down by 10 an ounce, but above, 13 1300 an ounce. David here now is your morning brief. Sachs willgoldman lay out its plans to turn around performance in core bond trading. Apple will be launching a new iphone. Willuropean president deliver a state of the union address. We will get u. S. Economic data on retail sales and inflation. Lets get an update on headlines. We have emma chandra back. Weakenedricane irma overnight after battering south florida. The storm had been downgraded to a category 1 with top winds of 85 miles per hour. It is northeast of naples and is expected to weaken further to a Tropical Storm today. The damage is unknown. Turned into rivers in miami and almost 5 Million People without power. Severe damage in flooding in the florida keys. Research has slashed estimates of total damages from 200 billion to less than a fourth of that. The u. S. Has water down proposed sanctions on north korea. According to a european diplomat. The United Nations Security Council may vote today for punishing kim jonguns local initial missile test. Hillary clinton says that getting paid speeches to wall street was a mistake. The former nominee says in her new book that the core object of those appearances was a contributing factor in her loss to donald trump. She says she should have realized she was giving her opponents ammunition. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im emma chandra. This is bloomberg. David Hurricane Irmas continued rampage through florida is our lead story. Bring us up to speed, eric, what are you seeing there . Good morning. It is just a break here so the Damage Assessment will begin in earnest now that we can see what has happened. Not in orlando, it does appear things were nearly as bad as anyone feared. There was terrible flooding in miami, devastation potentially in the florida keys. Bad damage for certain and places like naples and fort myers and the southwestern coast. As you move up the state it gets better because the winds subsided yesterday and overnight and while they are still strong here they are not Strong Enough to be snapping lens, downtown orlando still has power. I can see it now. Shiftstely the concern to public infrastructure. The Florida Division of Emergency Management has updated the number of florida households without power, it is now 5. 8 million and that number will rise. We dont know what the damage it is for the ports in tampa and elsewhere on the west coast. That is the situation at the moment. The big question remains, just how damaging was the storm . It probably didnt do 200 billion of damage. How much . At this point it is impossible to tell. David it seems to be a sigh of relief in the markets. Is there any danger about a delayed reaction . I remember with katrina, we thought it was ok and then the storm surge came in. What about storm surge in tampa bay . That remains a concern but the National Hurricane center has over the course of the night been dropping the size of the expected storm surge. At one point it was 15 feet. It is possible, i do not have confirmed figures yet, that places like naples did see a storm surge of that level. Tampa, we spoke to the mayor earlier, clearly did not get the magnitude of a surge, the kind of surge that he had feared. There were parts of tampa that would have been covered with water overnight that have read that have remained dry. Tampa escape the worst. As the storm shifted westward and miami was no longer the target, tampa became the big question for per commercial property losses. Ultimately infrastructure damage. Thank you so much. Now is jake up, and energy is jake, energy analyst, on friday, he said irma woodland in southeastern florida. Is, but this into comparison how big this was versus other hurricanes . It was uncertainty where the final track would be. Most of the models showed central or southeastern florida being the main landfall area. Because it shifted to the west, the impacts were not as significant as they could have been and it is not up there in terms of storm damage like katrina or harvey. You saw interaction with land over cuba that weekend the storm. Through the history it was a still impressive storm. Jargon . At is the that theount of Energy Tropical basin has any storm generated. Will set the record today for the most amount of energy created. It has created an amazing amount of Tropical Energy already this season. So itl be watching jose, is a very active season but we got lucky with irma that it grazed cuba. Alix we just saw the average accumulation for energy, 120 versus 150 on average. Why was this year so bad . We are no longer in the super el nino hangover. Two years ago we had this vertical wind shear. Alix what does that mean . Inwhen there is wind blowing Different Directions in Different Levels of the atmosphere. It is very possible when wind is strong for them to be ripped apart and unable to form. Pacific tends the to increase the vertical wind shear in the atlantic ocean. A nina seeking week londo conditions, that has allowed forucive conditions tropical systems, the likes of which we have not seen for a few years now. What is the strength of the relief rally so far . The Market Action will be important for that. The first thing is to not confuse human tragedy with economic impact. We need to separate the two and think about them in isolation. There will be clear winners and losers. Things like airlines, insurers can take a hit. Autos, sectors like that. They will be engage in rebuilding, they could do ok. Stormsegate, tropical tend to have a minimal impact on the market but believe beneath the surface we see performance markers. The big outperformance in europe, Going Forward, how are to think about this in the context of what the Federal Reserve will do and how they will interpret data in the coming months . I think they are still focused on inflation data. When it comes to a rate hike this year, that will be their guide. Idiosyncratic risks, they pop up from time to time, i liken it back to 2015 and 2016, the fed was not expecting a slowdown in the economy. That is different than a hurricane hitting texas or the Tropical Storm in florida but we need to be prepared for Economic Impacts this can happen. If it does speed through to the inflation data it could affect their action later this year. Jonathan do you expect this kind of theme to start a bubble over the coming months . This reflation making a comeback . We think Economic Activity has been picking up over the second course of the year. The numbers out of china are a good first signal as we look to the end of 2017, global activity is alive and well. Things in the u. S. Are looking subdued but when you look at europe, emerging markets, youre seeing stronger growth, stronger inflation and that should be good for risk assets globally. David we want to thank jake cob. David will be staying with us. With the with talk mayor of naples, florida. Live from new york, this is bloomberg. Jonathan first harvey and then irma, the u. S. Hit with backtoback storms for the First Time Since 1964. Federal reserve bank of new york issident bill, things it possible they could have an effect on the timing of increases. Us, the director of fx strategy. Human tragedyorce from economic impact. As far as economic impact, what do you expect over the coming months . We are still keeping the call for the december rate hike from the fed but the impact of the hurricane is that Economic Data will get noisy. The market will have a hard time navigating ups and downs. I agree with what has been said before. The fed is looking for signs of inflation. I dont think we will have a move in cbi because a base effects but we could see a Higher Movement in wages. Average hourlyat earnings, we expect 2. 8 by the end of the year and that could give the fed ammunition to hike. Jonathan your base case for a hike, who are the people youre following . The personnel situation is becoming interesting with vice chair fisher leaving. We know who the key people are. Dudley, focusing on recent conditions and speeches. That is an indication of how the fed is thinking. Markets are pricing in at 30 . We are holding on to it but it is becoming a closer call for sure. David inflation in the United States is key because it will drive the fed. Whether we get the december increase or not. What are your expectations on inflation . A similar boat. We believe the phillips curve is alive and well, it may be broken but we think that further tightness in the labor market should feature into an uptick in average Hourly Earnings which should manifest in inflation. I think it is important that globalization has made the market global. Tight globalg to a market but we need to see conditions tightening europe and a marketing and emerging markets before inflation goes higher. Technology has changed the phillips curve, why do you still have faith in it . More of a fundamental view that deep down inside it makes sense that if there are fewer available workers, existing workers should be able to command higher wages. The phillips curve has a kink in it. I believe there is a level of full employment where wages will eventually begin to rise, perhaps lower than in prior cycles. The next question after that is if we get higher wages, does that feed higher inflation . With shoppers having so many options, and this is global as well by the way because in australia, amazon is about to enter the market. If price competition is high on the retail level, confirms really pass on higher wages in terms of higher prices . Alix that raises the issue of supply versus demand. The fed it can only do so much. They are managing the demand side of the economy. That is the key question. The phillips curve is not to be completely dismissed. Alix bringing it back to your home which is fx, has the dollar bottomed . We think the dollar, the trend has turned around. In the broader downtrend, we are seeing policy convergence instead of the virgins. Central banks starting to instead of divergence. When you look in terms of differentials, it is trading at risk premium. There is negativity priced into the dollar. As much as i would like to see a temporary rebound im am not sure where it will come from. That will need to wait. When we see better inflation numbers, maybe the fed is closer to this next hike, that is when i see it. The dollar looks cheap what looks expensive against it . If you look at the euro it is trading expensively. Euro is complicated because there is an asset relocation trade that has been happening. Our Research Suggests that lately it is more about positioning that is positive on the euro. Off trende euro is on and will continue to strengthen but in the short term there are question marks. Seen thee we shortsellers capitulation . How do we still grind lower on yields . Rates shoulds that go higher Going Forward but this has been a surprise move. Alix has this turned it from will to should . Thatople are recognizing while Interest Rates feel like they should go up, some of the fundamental drivers of Interest Rates picking up are not necessarily there. A riskfree rate, a credit premium and an inflation premium, the inflation premium is not what people wanted it to be an with massive amounts of liquidity from Central Banks, default rates remain low, compressing the credit premium. Rates should head higher and will over the next 12 months but clearly it has been a trade. Discussing 2018, the fed is looking year end at 2. 12 . When the 10year is south of 2. 10, i keep coming back to this question, either someone is wrong, the treasury market or the fed or you will have a flat yield curve. Which one is it . I think there are a couple things there. One, we expect the yield curve to flatten over the course of the normalization cycle. When i look at the global data and see things like ppi in china, solid pmis out of europe, there is a chance for long rates to drift higher as the fed balances the sheet. We could see perhaps long rates move higher, short rates could move higher as well but that prevents an absolute flattening of the yield curve. About the dollar, one of the big risks next year is that the market is too complacent and the fed goes by the forecast they have laid out and they fire a shot across the bow of the drivingnexpectedly shortterm Dollar Strength and longerterm it depreciates because the u. S. Runs a deficit but there is the risk for a stronger dollar next year as the fed normalizes according to trajectory they think they should be on. Both of you are sticking with us. Coming up tomorrow, walter of bg apples biggest event in years. Who is buying the iphone . Stay with bloomberg for live coverage of that event. That is at 1 p. M. Eastern tomorrow. This is bloomberg. Jonathan in europe, a warning for inflation of adjusting the recent rise in the euro, wanting to depress inflation. And judge and this against this background, the recent policy in the Exchange Rate requires monitoring. David, when you use to talk to these guys at the ecb, you wouldnt ask them about the euro. You would ask them about whether the recent timing of financial conditions was unwarranted . Is it unwarranted . I think the financial conditions in europe have fast. Ned a bit far too the strength in the euro much like we were discussing in the , the market is underpricing the fed, the market in europe maybe overpricing ecb action. By our calculations, the ecb should announce tapering this fall, likely in october, try to wind down the pace of asset purchases over 2018. Not necessarily set hiking Interest Rates. It looks like markets have gotten ahead of themselves. The strengthen the euro, not only is a challenging for european exporters that do 50 of the business outside the eurozone but your point, it tightens financial conditions, pushing back against what the ecb is trying to achieve which is a higher core inflation. Jonathan outside of the fx, where is the Market Pricing this action to aggressively . I think it is important to think about where we are today relative to where we are 12 or 18 months ago. Context rates in that relative to where we were around brexit last year, you have seen a tightening in financial conditions. We are coming off a very low level. The impact of moving off, and couldnt be more severe than if we were going from 2 to 2. 5 . The 10year german bond yield, can euro sustain them . It will be more problematic. If they are trying to get core inflation to 1. 3 before they start tapering, that is closer to 1 , it becomes difficult. You are far away from target. The problem for the central bank is what are you going to do about it . Jonathan the structural story, you talked about the deficit in the United States, that is the backdrop . It is the First Central Bank that is exiting qe in a country with a surplus. When you leave qe, capital tends to come back. Positive capital flows, and the top of that you have trade surplus, we never had it here in the u. S. We had to finance the deficit. The double positives are why the euro is getting expensive. Jonathan great to have you on the program. David will be sticking with us. Coming up later, equity strategists will be joining us. Counting down to a new trading week. Futures are positive. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Jonathan from new york city, two hours away from the cash open. Up, 1. 5 on the dow. 11 points on the s p 500. In europe, Insurance Companies leading the gains as they fade the hurricane risk in europe. The story in the bond market, yields higher by five basis points. The 10year. 1. 57 and dollaryen. Swiss franc weakness. Another thing that might be affecting the appetite for risk, north korea. It was expected to fire up theher icbm to celebrate birthday of its founding, but instead it held a big party. Marty shanker joins us here for what this means on the trump administrations handling of north korea. What does it mean as we look forward to the United Nations possible vote happening today . There is a report out that they watered down some of the il off the taken o table in an attempt to get some unanimity at the yuan u. N. There is still question about whether they can get it, whether they get a vote today. Worry, ifo really this is a strategic pause, hoping to get something out of the u. S. That they may not otherwise. It is still possible that missile could go off. It is the right now, dog that did not bark. What is happening more generally in washington . In the aftermath of that deal that trump made with democrats, there is a lot of people pointing to the fact that we could have bipartisanship coming, which could affect tax reform. And taxso with daca reform, were they seem to be more of a meeting of the minds between trump and the democrats and some republicans. Tax reform will be difficult to get some support. Core gop would cut taxes for the highest earners, and democrats will not vote for that. David thank you, marty shanker. To help us sort out the latest from washington and pyongyang is David Leibovitz of j. P. Morgan. Are we getting back to the trump trade and now . We see global inflation pick up, and that passes through into stronger u. S. Inflation, there is the potential for cyclical parts of the market to rally. The divergence between the performance and financials could reassert itself. You also see materials and industrial israeli hard, but that is dependent on the global activity data, then it is necessarily on the political agenda here in the u. S. David it was all about Global Growth . Its important to think back to the middle of last year when started torump trade take off. We are not dismissing the possibility of a tax cut, not dismissing the possibility of a positive change in policy, but we would rather be pleasantly surprised and severely disappointed. Being Earnings Growth robust without any tax cuts, we think the u. S. Economy will grow at about a 2 pace. Any uptick in the global activity data should be a further tailwind for the riskier parts. Alix corporate profits are up double digits, but where is the value . Many do not see the investing opportunity. As i travel around the country and meet with clients, the question is what you do when both stocks and bonds are expensive . The opportunities are thinner than they were perhaps 18 or 24 months ago, but we are still finding opportunity. One of our newer ideas is wading back into energy. We are seeing the downstream companies do well, upstream companies are struggling given where prices are. Just buying the index, you are right, that will not give you any value. But finding those opportunities beneath the surface, that is how we think investors can benefit the most. 42 in cash, would that be interesting . Looking for areas to deploy that. For opportunity is likely larger outside of the u. S. And inside at this point. You can chalk up a lot of that to the fact that we started our Quantitative Easing Program years before the ecb, we are in a later cycle than other economies around the world. We are encouraging investors not to get rid of their securities they own in the u. S. But to perhaps embrace securities outside of the u. S. Now that the dollar and growth are not such a headwind. Jonathan where . We like emerging markets. Everyone got excited about europe, it is of low Single Digits local currency. That kicker from the dollar is what is getting people excited. Stillonomic data does look good. There is a fundamental story there in terms of corporate profits, but focusing on southeast asia, manufacturing economies, as the smartphone cycle begins to reassert itself this year, and as we see better activity out of china, that should be a key support. Are you falling that into your bullish view on the dollar and the e. M. . If the dollary, gets too strong, rates start to rise, that puts downward pressure on emerging markets. Ourselves, if the dollar starts to strengthen, is it strengthened because growth and demand in the u. S. Are healthier, or because geopolitical reasons . The reason these variables are moving, Going Forward, will be much more important than emerging market as a performance that historically. David David Leibovitz, thank you very much. Now lets get an update on what is happening outside of the business world. Emma chandra is here. A weakened Hurricane Irma is making its way up the florida coast. Its been downgraded to a category 1, now northeast of tampa, leaving a trail of destruction. Almost 500 Million People are without power. Streets in miami and elsewhere have been turned into rivers. There has also been Severe Damage in the florida keys. Still, estimates for total damages have been cut from 200 billion to less than a fourth of that. In mexico, Authorities Say the earthquake killed nine people and destroyed thousands of homes and hundreds of homes in the southern part of the country. Aftershocks continued to rattle the region. President trumps former strategist says firing james comey was the biggest political mistake in modern history. Steve bannon made the remarks in an interview on 60 minutes. He says if only had not been fired, there would be no special counsel and you can watch that full interview on tuesday night right here on bloomberg television. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im emma chandra. This is bloomberg. Tune into our colleagues Tom Keene David gura on the radio. This is bloomberg. Coming up later, bill barnett, the mayor of naples, florida. This is bloomberg. Hurricane harvey and irma has had a huge impact on the energy market. They are backsays for oil demand but not production. The combined impact of those hurricanes. Joining us now from new york is the Credit Suisse global head of oil and gas, who is also from houston. I want your take on how things are there. Glad to be here, good morning. Houston is recovering. Depending on where you are, it is hard to think there was a storm, but there are a number of neighborhoods that are dramatically impacted. It is recovering and will recover strong. Mixed review depending on where you are in the city. There is still a lot of work to do. Obviously, that storm and irma will create a lot of recovery. Alix there seems to be a lot of confusion about where the risks lie. Comingee private demand off online enough, or at some point does production get impacted and downstream goes nowhere . Have been in Inflection Point before all of the storm activity, in the sense of where production is going, the impact of price on production. There has been a lot of push as to where u. S. Production will continue to increase at the rates it has been. That depends on economics and returns. The storm activity certainly is the infrastructure, particularly in houston and texas, louisiana, the bulk of ys refineries, terminals, plans are all clustered in that area. There will certainly be an impact in demand in the shortterm because these are substantial Population Centers in texas and florida, louisiana, and also big users of crude oil, chemical plants, and so on. I think you will see a recovery coming fairly soon but it is really an issue that was already a big issue before the storm activity. David what about the effect on stockpiles . We kept seeing a resistance to depleting the stockpiles, which kept the price down. Will the storm, particularly harvey, affect that . It will certainly cause a period of transition. It will take some time to repair a lot of the things i just talked about. I dont think you will see stockpiles go down in the near term. Alix lets talk about ipo and m a. Ipos have gone nowhere in the energy industry. Be ipos were supposed to the hot ipo but have gone nowhere. Oil and gas has really fallen off a cliff. What is the impact . Osmar ipo activity, Capital Markets activity is generally driven by confidence and stability. , as the worldned becomes more concerned about where oil prices are going, its impacting valuations of Public Companies which has impacted investor demand for new issuance. That will sort itself out through yearend. Alix you can make the argument that 45 dollars, 50 has been very stable for the vti. What two companies not like about it . Think the uncertainty is where it translates to in 2018, whether you continue to see an increase in production at levels people originally predicted. Depending on that, overall supply demand balance, it will oil price, valuations, and ultimately demand. David you say the instability will sort itself out by the end of the year. In what way and why . Osmar the u. S. Market is such a small portion of the global market. Opec, other factors impact alix what if opec did not matter . [laughter] i think they all matter. Osmar whether it is additional a globalts, it is game. The moment there is uncertainty at the moment, there is uncertainty where it ends up. David before the end of the year, do you expect any increase in price . Predict that,not but an agreement with certainly help to stabilize the price. In the u. S. Market, not everyone is in the same, production, technology efficiencies. I think it will sort itself out. When it does, we will see the market reopened. We do have a substantial amount of new offerings ready to go at the right time. Alix i was going to say, what does the backlog look like for energy . Mostly oil services . Osmar mostly oil services, upstream. Mna is also impacted by confidence and value. With lower valuations, you may see an increase in m a. Alix do you have an m a backlog . Osmar we do. Alix where do you think you will see the most activity . Osmar generally, stronger players looking at value opportunities. There is also opportunity for consolidation among the smaller players to generate better economics for the industry. Alix thank you. Great to get that insight. If you have a bloomberg terminal, check out tv. You can check us out and interact with us. Take a look at the chart that may have been played out, and interviews that you may have missed. This is bloomberg. Jonathan one hour, 41 minutes away from the open. Speed. Et you up to futures are positive on the dow and s p 500. After marginal losses, expect a snap back at the open. Positive 11 points on the s p 500. Nine points on the down. The expected Missile Launch and north korea did not materialize. Together with Hurricane Irma weakening overnight, that means the insurers risk fades. Inout of 19 Industry Groups positive territory in europe. The story in the fx market, dollar weakness becomes Dollar Strength. Eurodollar coming back to 1. 20, off by one third of 1 . Last week, huge week for treasuries. Yields kissing lows for 2017, just north of 2 . Today we reclaim 2. 10. That is your asset picture. Lets get you up to speed on some of the news elsewhere. Apple unveils its latest Iphone Models tomorrow. According to a league of the operating system, it will be called the iphone 8, 8 plus, and will have a larger screen, crisper cameras, and facial recognition cameras. Fundorlds biggest hedge firm may asked to operate as a private Security Fund manager in china. Bridgewater associates may offer a chinese version of its risk parity strategy. The fund seeks protection from market toilolo with a combination of stocks, bonds, and currency. In china, Producer Price inflation was higher than expected last month, rising 6. 3 in august. That shows the impact of resilient domestic demand in china. That is your Bloomberg Business flash. Staying with china and its economic impact, take a look at copper. The yellow line is the Producer Price index. In august. Over 6 coppere line is lme prices. The white line is global cpi. There was a break in the beginning of 20 16 where Producer Prices shot up but you had copper lacking as well as global cpi. So is there catchup potential for copper . Joining us is andrew cross growth. The rhetoric over the last few weeks was we were to bullish on copper, we should be shorting it. Take a look at the china data. Is that the right call . Short run potential yes. Some things are starting to reverse that fueled the rally over the past couple of months, like the dollar finding a base, potentially some money coming out where we were technically overbought. It would be healthy to see a pullback, but the data in China Remains bullish, underlying indicator to copper demand, power grid investment, auto sales, infrastructure spending, all pointing to growth. Albeit slowing, which is good in the long term. With the Producer Price Index Holding up, china can deal with its deleveraging issue. What is the effect on metals like copper . Andrew longerterm fx is the Corporate Bond sector, if some of these reducers where capacity itorm is being taken out, will become more sustainable to invest in projects Going Forward. From a longerterm perspective, its good, but shortterm you have some choppiness. Month, theext communist party gets together. What is your read under the reforms under president xi . It has been all about stimulating some demand that some say is artificial. Is that set to change next year . Andrew i think expectations have been running pretty high. The path of least resistance has been to err on the bullish side. Some people will probably breathe a sigh of elite that things are starting to look better in china, they are doing with their problems internally, looking to tackle the overcapacity problems, raining in the debt issues. Done, il is said and think there is a much more clear picture for china going into 2018. I think that sets up for a continued bullish outlook for metals, which is contrary to what the market is expecting from the analyst community. That leads me to believe that that is bullish. David one of the reforms they are looking at is the environment. To what extent is that driving the taking off of capacity things like copper . Is that a longterm structural difference in supply . Is a littleer different, they are building more smelting capacity to you can see the imports are shifting. Importing less refined copper, importing more mined supply. They are building smelting capacity. In aluminum, they are taking capacity off, closing zinc mines, steel mills. Copper is a little less bullish, but nevertheless, in a world where the market is short copper supply, it, mine still means it is relatively positive for copper. David take a step back. Copper has come off in the last ink but has had quite a run the last six weeks. What has been the cause of that, are those changing . The cause was the fact that we had the dollar declining, which could see some shortterm stabilization, but we think the dollar ultimately has lowered into 2018. Thisu take a step back, supply and demand picture for copper is healthy, and our opinion. We will only grow mine supply by about 600,000 tons per year, and we only typically get disruptions on the magnitude of about that. If we get any sort of demand growth over the next couple of years, you could see copper with a seven handle at some point in 2018. That would run super contrary to what the market is anticipating. Jonathan andrew, thanks t. Great to see you. Later, james barty, bank of america head of global asset strategy. Futures are positive. It is risk on ahead of the open in new york city. Gains across europe as well. Batters Hurricane Irma florida but the most dire predictions evaporate after it weakened to a Tropical Storm. North korea threatens retaliation it harsher sanctions are passed today. And the reflation story shows a few signs of life in china. Consumer Price Inflation comes in faster than predicted. From new york city, good morning. Welcome to bloomberg daybreak. Im jonathan ferro. Alongside alix steel and david westin. Futures are positive 11 points after a model week of losses. A firmer dollar against a weaker euro and weaker yen. Alix im looking at all of the safe haven trades. Gold relatively flat. 65 a ton. David coming up in the next week, Goldman Sachs will lay out its plans to turn around the performance in its core bond trading unit. Apple is launching a new iphone. European Commission President john claude younger makes an address. Bank of england decision, and u. S. Data on a sales and inflation. Right now, emma chandra is back with first news. Hurricane has now weakened after moving past cap. A storm has been downgraded to a Tropical Storm with top wind around 75 miles per hour. The extent of the damage is not yet known. About 5. 5 Million People are without power. There was Severe Damage and flooding in the florida keys as irma came ashore when 130 mile per hour winds. The u. S. Has water down sanctions on north korea, that is according to a diplomat. The United Nations Security Council made that decision today. An oil. Has now admitted embargo and a reprise of his assets from the new sanctions. Givings clinton says speeches to wall street was a mistake. She says in her new book at the poor optics of those appearances was a contributing factor in her loss to donald trump. Clinton said she should have realized she was giving her opponent and edition. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im emma chandra. This is bloomberg. Here with the latest on Tropical Storm irma and what it is doing is Erik Schatzker coming to us from orlando. What do we know about the damage done . Erik we dont know a lot about the damage done beyond what we have learned yesterday, overnight. The storm flooded miami significantly, did a great deal of destruction in the florida keys. As you can see, the wind is blowing hard in orlando but not to anyto have damage significant degree in the theme parks. We drove through downtown orlando this morning. There are some downed branches, some roadsigns, a lot of debris and garbage, but the city, for the most part, escaped the rest of the storm. That is the sense we are getting across central florida. We heard from tampa this morning, tom and francine spoke to the mayor of francine this morning. It appears to have but did not get day storm surge the city had feared. Florida as a whole did not get the storm surge that Public Officials had feared. The latest update from the National Hurricane center, they are discontinuing some storm surge warnings, to the degree that they are still in effect, surges forot comparedstorm surges to the 15 feet we were considering yesterday. Anid when do we have overall handle on the damage done, people displaced, when will we have a report . Erik they will have a much better idea toward the end of the day after sending out emergency crews to do the assessments of the damage to public infrastructure. What we know from the Florida Division of Emergency Management, more than 5. 8 million households are without power. They will be more, possibly millions more, as the storm moves north. As you can see in orlando, the wind is blowing strongly enough to take down power lines, tree limbs, trees. That is still a problem, and there will be flooding. But beyond those immediate numbers, its hard to tell. We will know what the damage to the ports wise, some of the buildings. Those reports are not available yet. We will bring them to everybody as soon as we have them. Rik, great to see you, stay safe. One area of the market that has seen a bigger reaction, catastrophe bonds, used by investors to bed against natural disasters. Joining us now with more is Lisa Abramowicz and the sheets shall. Lisa, talk to me about the market in broad terms. Price transparency is not something you associate with this. How big is this market getting . The actual cap bond market is 26 billion. The overall Reinsurance Market is 90 billion. It is plenty transparent, they just dont trade that much. Particularly last week there was less trading because it will didnt know how big the storm would be. There are a lot of Institutional Investors in the market who know they are getting into insurance against a complete blowout catastrophe, and they will be on the hook for those losses, but they will get 7 coupon payments in return, which is pretty good. Jonathan and returns have been great over the last year. You imagine this will become a bigger market . That is one speculation. As these storms get more severe, as the forecast called for more of them, you can only imagine the catastrophe bond market will only grow. Think about how much insurers dodged a bullet in the stock market. People were not calling for the demise of Insurance Companies because they had offloaded a lot of that catastrophic risk. Catastrophe bonds have the added vantage of having a Broader Market experience, where insurers can go to a lot of different Bond Investors and get a better price. Payee lower rate than they might if they went to one reinsurer, had some sort of the spoke product. Alix wrap this up into the search for yield we have been seeing. Is tough toow it find yield out there with the 10year, 2. 10. Fantastic about catastrophe risk, you are compensated for something not correlated with either treasuries or stocks. One of the challenges clients how do youtoday is balance out your portfolio, how do you get away from this correlation to stocks in your portfolios . Go. Is a valid place to you have to be a professional, know what you are doing, but it makes a lot of sense. It goes back to that theme of investors looking for yield, they cannot find it, they are looking for diversification, and it is tough to find. David you said you have to be a professional to know when you are doing. Isnt that the case with cat bonds . Bond buyers are not as usual to reinsurance risk. Isnt there a risk of people investing in things they dont understand . I certainly think that is a risk, but my experience is most of these players in the market are professionals, they know what they are doing, and retail does not invest in this market. It is a nice way to go after the opportunity, but on top of bonds, as we saw highlighted, there is this whole other Reinsurance Market that investors can also go after. Interesting, the policies of the fed and ecb forced investors to take environmental risk as well as something else. Does that concern you and others . Lisa i dont know if i murdered by the 26 billion of catastrophe bonds, but surely, people getting pushed to take the literal catastrophic risk on their books to basically take losses, should there be an unprintable storm, is like ce, gambling that you will not get the losses. It highlights how much people have been pushed out of their comfort zones. , i think,cular market is different from the mainstream search for yield, lack of covenants, complete lucy goo see structures you are seeing in the junk bond market. But it does also have the same trend you are talking about. Alix how doesnt it get bigger, if it is not as liquid, and there is nobody but hedge funds . At a debt market, how much Insurance Companies are going into debt that is not liquid, specifically for higher yields. There is a lot of sticky money out there looking for a place. Jonathan we started with a big chart of the swiss re return index. Is that get going to get filled . Yes. High speculation is there should be some kind of premium baked in, given that people are waking up to the idea that we will get more storms, but you have to expect some kind of rebound. Alix you have to think if we did not see irma decrease in antensity, we would have different conversation today. Lisa that is true. Will hearng up, we from bill barnett, the mayor of naples, florida, and the impact of irma. And what it means to the Real Estate Market and the potential rebuilt. This is bloomberg. David north korea celebrated the anniversary of its founding over the weekend but its expected missile test failed to materialize, this as the United Nations Security Council is set to vote on harsher sanction for the country. What this means for the trump administrations handling of the north korean crisis is our Senior Executive editor marty schenker. We have this book coming up, we think, this afternoon. But it is watered down to the point, does it matter . It doesnt really matter, sanctions have not proven to be effective. My view is there has to be some direct negotiation between the u. S. And north korea but its been very difficult to figure out how to accomplish that. These sanctions will not help. Will claimjong un victory here. He well made. Had a Victory Party for the hydrogen bomb, i would not imagine going myself. In the meantime, President Trump had is remarkable deal he made with the democrats, which undercut the republicans. Not that make tax reform easier or harder to get things done . He seems to think easier, because that would clear the plate for tax reform. But it elevated the level of mistrust between himself and his own party. That is going to make tax reform that much harder, not easier. They have to figure out a budget deal before they can get into tax reform. The conservative and traditional parts of the gop are not trusting the president to deliver what he says he would deliver. David great to have you here, marty schenker. Alix the appetite for risk is back. You have investors ditching the safety of treasuries and moving into the dollar as confidence returns to the market. With us is ashish shah. 2. 10 on the 10year, what does that tell you . A lot of people are desperate for economics. At the beginning of the year, we would have said the fed would be hiking rates aggressively. We saw strong growth this year. Now that the fed is talking about tapering, inflation is not materializing in the way they expected it to, the path of rates will be lower. Want to taper, shrink the Balance Sheet, that is the priority, not raising rates. Alix are the shorts all rolled up by now . I think some are, but looking at the Broader Market, across the world, japan is negative, europe is barely positive, u. S. Is an interesting place to come for yield. Jonathan how much letter is the yield curve going to get . Ashish by historical terms, we are around average. In the last 10 years, we are the flood us we have been, and that is a concern. Lending yield curves is not a good sign for yield assets. Risk assets. Jonathan we are at about 1. 41 right now. Where is the line in the sand for you, how flat will that get . Have a specific level, it is the pace and continuation of that flattening that concerns us when it comes to risk assets. Thed when you look at 10year yield, how much depends on the fed, ecb . Ashish that is a fantastic question. It is probably more dependent on the ecb. Obviously, the fed will have influence because they set shortterm rates. If that were to change, it would be a pretty big impact on the 10year note. The ecb is the next big tapering you could see. Obviously, the consultation here is the euro has been rallying, has seen a steep rally. That has the ecb concerned about domestic growth and impact of liquidity conditions. David at the same time, mario draghi said it is all about growth, we are back on the road to recovery. What did that tell you about where the ecb is headed . Ashish we know the direction the ecb is headed, they will taper. At question is the speed which enable will taper, and the timing. Taperew is they will faster than probably the market expects, in part, because the growth is in place. I dont think there are expectations that inflation runs away in europe but i think they want to come out of this, partly because they are running out of things to buy. Jonathan on buying in the european market, why not . Ashish there is plenty of demand for bonds and income coming out of europe. Even as the ecb steps away from the taper, there is plenty of private demand coming into the market. An oddn it has been year, in the sense that risk assets have performed well. Ashish everything is working this year. Gold, yen, stocks, high yield. When will that breakdown . Ashish when you look at how still going onis between the ecb, bank of japan, it is well over a trillion dollars. I think it is 1. 5 trillion. When that much money is going into the market, you have to come up with something to buy. So people are buying everything. As we look forward, what you u. S. To worry about is, the will taper, the fed will taper, the ecb will taper. If you see that tapering occur rapidly come you should be worried not only about your bonds but about your stocks. What do you do about that . Make sure you are balanced between the two. Our biggest concern out there is that investors are so worried about rising rates that they are giving up on duration and selling out on duration and not staying balanced. D, stocksnbalance selloff, you will not have a way to balance your portfolio out. Jonathan high yield is at 5. 6 . Is that justified, is that a buying opportunity . Ashish i think it is justified. Alix is there more to go . The Corporate Bond market in the u. S. Has benefited from negative net issuance. All the issuers are issuing into the low market. You dont want to see first time issuers, reach deal getting done. The bond market has benefited from that as we roll into the fall, you can issuance. People back up their bids. You will have the market perform. David ashish shah will be staying with us. Tomorrow, brian white will join us to discuss apples biggest event in years. Stay with us for live coverage of that event starting at 1 00 eastern time. Jonathan in europe, the ecb gives a warning on inflation, addressing the recent rise in the euro. Board members has persistent gains could push inflation unless it is offset by a strengthening economy. He says against this background, the recent volatility represents a source of uncertainty which requires monitoring. Joining us now from london is james barty. Inll with us is ashish shah new york. James, currency volatility, is this the diplomatic way of addressing currency strength in the modern day speech of the ecb . Why wouldnt they just say it . Why theym not sure wouldnt say it, but that is what they are referring to, dollar euro at 1. 20 is something that the ecb is becoming uncomfortable with. I think maybe they talk about volatility because were we to levelsound 1. 20, these for the foreseeable future, i dont think they would be concerned. They are more word about the carries of the currency ongoing. Sooner or later, that dampens the inflation outlook, which means they will have to adjust the in place and policy. Jonathan some people may say it is because of the speech, but im seeing a big difference in the swissie and japanese yen. Does the market really by any of this verbal intervention from the ecb at all . Bit. a your previous guest was talking about the bond market. Bond yields came down significantly on thursday and friday in the aftermath of the ecb press conference, which clearly mario draghi was saying there was no rush to exit policy. Yes, they will have to taper qe next year, but in terms of rate hikes, he was pushing those further out. They dont want to see the euro go stronger, but any currency has two sides. The strength of the euro has also been mirrored by the weakness of the dollar. What the ecb wants is for rate expectations in the u. S. To start to reprice jonathan . This interesting dynamic was discussed earlier. Buther the euro is stronger the bond market is firmer as well. That in the 24 hours after the ecb. I think this comes down to the fact that there is a different element this time around when it comes to tightening, and that is the quantitative sinopec thing. As the Central Banks are exiting, they want to make sure they dont have to come back and start buying bonds again. Nameare laying out the will not hike rates at the same pace that we would have expected in the past. Is a muche quantity more important thing today for Central Banks than the level of rights. Jonathan a lot of people would point out to me that the reason the euro is doing better is the structural reallocation for euro dominated assets. And that is the story, why arent stocks outperforming . James it depends on which currency you look at, european stocks in terms of dollars have done phenomenally well, up 18 . One of the reasons european stocks struggled a bit in local currency terms is the fact that the euro has been strengthening. We estimate for every 10 rally in the euro knocks about 4 off of european earnings. Jonathan james is sticking with us. You are watching bloomberg. Minutes from the cache open. Could you up to speed on the Market Action. Futures are positive about half of 1 on the dow. Two things driving risk this morning. Over the weekend, some expected a Missile Launch from north korea. That did not materialize. Hurricane irma, that risk faded as well. 19 Industry Groups are higher led by insurance stocks. Thise bond market, last year, morning we reclaim 2. 10. Higher by five basis points. Dollar weakness last week, strength in todays session. Eurodollar back below 1. 20. The story for anyone looking at the premarket movers, check out google quickly. Positive by about half of 1 . Twoave learned google had months and 10 days to file a legal challenge to a fine from the european union. Learnedning, we have google will be appealing that fine. So the soap opera between European Companies and Technology Companies in the u. S. Will continue. Lets get you up to speed on the headlines outside of the business world. Irma is now a tropical now forecasters say it is producing gust near hurricane force. Tampa todayved past and has left quite a trail of destruction. Aret 5. 5 Million People without power in millions have been temporarily displaced. The full extent of wind and flood damage is not yet known. Still, estimates or damage have been reduced. Formernt trumps strategist says firing james comey was the biggest mistake in modern political history. Steve bannon made the remarks in an interview with 60 minutes. He said there is no doubt in james comey has not been fired, there would be no special counsel investigating the trumpadministrations trump administrations ties to russia. Biggest Hedge Fund Firm they asked to operate as a private Securities Fund manager in china. According to a person familiar, Bridgewater Associates may offer a chinese version of its all risk parity strategy. It seeks production from market turmoil with a combination of stocks, bonds, and currencies. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im emma chandra. This is bloomberg. Alix i found that story about bridgewater interesting. He has been in china for years but it is hard with the Due Diligence. It is hard to know what you are investing in in china. He has developed a relationship with the Chinese Government where they really trust him. That he has incorporated some principles of chinese leadership into bridgewaters principles. Jonathan interesting to see what populism means for the and that isina, what he means. I would love to get more thoughts on that. David we are going to stay with china. There are signs of a resilient domestic demand. Reduce or Price Inflation was higher than expected last month and factory prices rose 6. 3 in august. Joining us here on set is michael mckee, our International Economics and policy correspondent. Bloomberg survey 38 economists. This beat all but one estimate. Mike if he is running a Global Macro Fund in china, he will do ok. Shows the Producer Price index in china has been rising since the beginning of 2016. This is often seen as a proxy for gdp in china. Is the Chinese Party congress. She asian ping does not want to go into that with a weak economy. China is investing in infrastructure to build its economy and keep it going. They have spent more on infrastructure last year then during the financial crisis. Arehe same time, they shutting factories, trying to get rid of excess capacity in the steel and aluminum industries. That is pushing up commodity prices, which is also feeding into this rise in the ppi. David they are taking on more credit. How much of this increase we are seeing is attributable to just borrowing more money . Mike it is hard to know with with chinese statistics, but the chinese have been keeping alive the zombie banks that keep on making the bad loans, keeping the economy afloat. They have just started to make some loans go bad. We had some bankruptcies in the last month. A metal producing company. Supposedly, the difference this time is they are going to let some failures happen as they try to introduce a market economy. David they also seem to be less worried about the yuan now. They have taken up some steps to loosen up the restrictions on rmb. Back in 2015 and i have another chart that shows this they devalued in the middle of 2015. That set markets off. People started selling yuan and try to move into other currencies. You can see it weakened by about 12 over that time. Then they put in capital controls that have started to bring that back down, but as they get close to the peoples congress, they are worried about being too tight, so they have relaxed rules on Money Laundering which has showed a reversal, the green circle. We will see if that continues. Everyone is saying, by emerging markets. A little more skeptical when it comes to china. Take a look at the reality in my bloomberg. The white line is msci china index of performing the world index. The blue line is the Producer Price index. Are we overbought with china or have we not priced in enough potential reflation . Still with us are ashish shah and james barty. James, how much relation has china priced in . All asianyou look at equity markets, they have been very strong this year, and for good reason. The expectations in asia are north of point percent, and a lot of that is limited to the recovery of the chinese economy. When the peavy i see were tightening policy this year, strategist were concerned, but its like they have been able to get the balance right. With the renminbi action tightening partly because of dollar weakness, that has made people a lot more comfortable about the outlook generally in china and asia. Alix is that true, even though we have seen about 15 default this year, 20 last year . His point a run the dollar weakening is important. And we tend to look at renminbi against the dollar but we forget china is a global exporter, exposed to euro. The renminbi should be a good play. Wrinkly, shortterm rates in china are very high, relative to the growth going on and inflation picture. It is representing good returns for investors. Dollaryuan. 0 on can we expect more buying . Think its the primary factor by any means, i would say less and less important. You will see less buying overall. The more important point is, as we look forward, you will see investors creep back into the chinese market. They are not as concerned about a wall of money trying to get out. Chinese have demonstrated really well that they can keep money in still atry, there is current account surplus. That is really supported for the local currency, as long as thats a priority priority. President xi took office, he really trumpeted the reform of the state banks. Expect out of the 19 Party Congress a renewed effort to reform the situation with state owned enterprises . Mike thats a major question that people have. He promised a lot of these reforms that did not take place. Maybe what happens is he gets his own people in power and has more ability to do that, but we dont really know. There is still an open question of how much a reformer xi is. We take a look at where the value is in china, as we have seen the performance. You wind up having this transparency issue. You dont want to go by the etf, so how do you put money into work in a value spot . James we owned asian markets broadly. Just about getting exposure to domestic chinese stocks, you want stocks elsewhere in china which are also exposed to strengthen china. That more broadbased approach of combined across the whole of the region. The fact is, we see upgrades literally week after week coming through from asian earnings across the board, reflected in a strength in china, strength in the global economy. Alix do you factor in any trade issues with the u. S. And asia . James at this stage, probably not. There was a lot of jawboning at the beginning of the year, more because it relates to the issues around north korea. In the u. S. On it is and chinas interest to have good relations, even if there will be jawboning from the administration from time to time. What an trying to get at is the broader Political Risk you may have investing in asia and how you may wind up protecting yourself against it, or do you ignore it . James the way we have done with it in our own strategy, a lot of portfolios dealing with it, the economic fundamentals are pretty good. But you can take advantage of the fact that volatility is low. That is how we have done with it. That is how a lot of clients i have talked to have dealt with it as well. David thank you to michael mckee, ashish shah, and james barty. You can tune into tom keene and david gura on the radio. Surveillance can be heard in new york, washington, as well as the San Francisco bay area. Jonathan i hear tom keene is doing the same thing for us on radio. I assume so reluctantly. Getting you up to speed on the markets. We are 50 minutes away from the cash open. A decent tone for risk. Teachers are positive. Up 11 points on the s p 500. Last week, a marginal week of losses. Maybe a little bit of a comeback. The dax up by 1 . In europe, broad gains led by insurers. Fading some of that Hurricane Irma risk as that storm tide down and the risk around it evaporates. The other story, north korea did not launch a missile like many anticipated. Treasuries on offer, yields higher. The dollar is stronger after a week display last week. You are watching bloomberg tv. This is bloomberg daybreak. In the next hour, stuart warburg bnp paribas, equity derivatives strategist. This is bloomberg. David 16 years ago this morning, terrorists attacked the United States. Piloting three commercial airliners in new york and washington. The first was American Airlines flight 11 which crashed into the north tower of the world trade center. We go to tw moments of silence, one at the white house and then ground. The site of the attack. Gallantly streaming. And the rockets red glare the bombs bursting in air gave proof through the night thereur flag was still starspangledat banner yet wave the land of the free brave ome of the [applause] were twoose simultaneous moments of silence, one in washington, the other at ground zero in new york. The first of seven moments of remembrance to be held to remember the attacks on september 11. Markets, we are watching the spread between wti and brent, taking a hit when it comes to Hurricane Irma and harvey. Now widen out to almost six dollars a barrel. Is tighttic basin while the u. S. Will see a backup of oil supplies. A 2. 4 Million Barrels a day refining outage on the gulf coast. Dan baker. Now is just for you,ug because you are my guide. When you look at thats bred, what is the implication for investing in that . Dan by the way, as big as the storms of irma and harvey were, a lot of Lessons Learned since katrina. We did not see as big of a blowout in terms of cracks, with products going way out there is a degree they did last time, but nothing like a 25 we saw in katrina. What youre seeing in the blowout in spreads between wti and brent is a temporary thing. There is quite a lot of crew that needs to be refined that is backed up, that is true. That is dropping cash prices down for the moment. In the end, what will really be hit on the back end of this is not going to be the refining side but crude production. Hereing will be revamped that is coming back online quickly. What is not coming back so quickly is the production in the eagle ford shale, for example. It will take a long time to restart. As opposed to refining, which will start rather quickly. This is a counterintuitive view. Goldman sachs saying it will be demand not production hit. I was talking to many who said that we will be up and running, totally fine, no backup. Why is that wrong . Right now, if you look at the pipeline, what is in demand . Refining. We need to take a lot of product and get cap prices back down, we need to take a lot of crude and turn it into product. What their isnt is a backlog in terms of production necessary. If you have wells that are down, assets in the gulf of mexico down, you may not be so fast to may thinkose as you otherwise. There is plenty of crude out there and there is no need to add to a glut, especially at the lower prices, especially if you figure this is a temporary disconnect what you think is a global price, six dollars higher than what we have in the u. S. Now. Alix what is the storage like at eagle for, how can Companies Continue to produce as downstream is offline before they have to shut up production . Dan in front of the storm, they moved most of the stuff out of eagle for it, so they would have stuff available for local supply coming out. The issue is what has been shut down in terms of production, what is going to get restarted, how quickly that will get restarted. In the refining sector, it is all coming back online quickly. But i have my doubts about whether eagle furred will come back quickly. Alix the trade . Dan you should sells breads. That has been one of the worst trades that most of the traitor friends i know, and myself, have normally made. If we wanted to lose lots of money, it has been to go into spread trading in terms of brent ti. That would be the office trade. Coming back a little bit today. Dicker, long dollar, short treasuries, short ti. Jonathan down the other side of the trade. Dan in my history of recommending traits like this, you would be a big winner. Jonathan good to see you. Elsewhere, tim cook will take the stage on tuesday for the first time in the steve jobs theater. Apple plans to unveil three phones, including a Premium Model which will create a halo over the rest of the smartphone industry. Apple being the most valuable listed company, worth more than 800 billion. To talk more about the direction of that market cap are from new york is angelo zino. He has a price target of 175 a stock. Plenty of speculation around the launch. What are you looking at specifically for tomorrow . Headingain question into the event is the timing of the higherpriced iphone 8 device. Our view is it probably goes out in line with the other two devices on september 22, despite some of the production issues going on. That being said, we think supply constraints will be pretty substantial in the december quarter. Our expectation is apple probably manages the iphone cycle pretty nicely when it comes to geographic side of things. Expect it to be available in the u. S. And other key markets, but held off in other markets. What is it that is stopping them from rolling this out more effectively, where are the supply constraints, the screen, elsewhere . Angelo it is similar to what we saw with the iphone 6. Sizeple shifts the screen with the six it was the screen size. Phone, it is a ship to oled displays. We think that will cause some issues. Apple was looking to put the fingerprint sensor within the oled display. Likely that will not be included because some of the issues there. Nonetheless, supply constraints are coming from the oled side of things. David we hear a lot about this 1000 smartphone. At the same time, smart samsung has one up for 950. Angelo to your point, the note 8 started to accept preorders, will come out this week. From what samsung has said last week, the note 8 orders have been the best they have been from prior launches. At least in the u. S. Our view is there is a market phone. S higher tiered as far as the 1000 phone is concerned, we think there will be an appetite from consumers. Jonathan lets talk about that specifically. Is very expensive. To maintain margins, they would charge what they are going to charge. What can they do about the input costs going into the iphone in the coming years . Are they just going to have to carry on absorbing higher cost, and higher margins means they have to pass it along to the consumer, or can they do something about the cost of those screens . Angelo initially, they are passing on the cost to consumers. Cost willy the oled be the highest among all of the component costs. That is because there are not a lot of manufacturers making the oled screen. Samsung makes about 90 of the supply of those screens. When you look at the memory market, prices are absolutely inflated. Our view is, in the coming quarters, as more oled supply comes on, apple will probably be able to maintain lower prices. Angelo zino, great to have you with us. Tomorrow, full coverage of that apple launch. From new york, this is bloomberg. Joanathan Hurricane Irma batters florida. The most dire protections that operate in north korea threatens retaliation against you and sanctions. Iphone will be called the iphone x. Cost 1000. Ed to where is the reflation . Good morning, good morning. We are 30 minutes from the opening bell. Up 1 s are up positive, reclaim a 500 and we handle on u. S. Treasuries. In the fx market, Dollar Strength did the euro dollar is pulling back below 120. Doubtre down. 4 or it down. 4 . To at onea is down 1 point it was up in premarket or it its all about when they are going to normalize service in florida and georgia. Were canceled after 3700 were canceled yesterday. Most of that comes from delta. Where the runways are situated in atlantic, they run eastwest and the hurricane is coming north south. Bank of america is having a good problem. The dollar is moving higher. It the yields are coming off the 2017 low that is helping her in they have the most expense or to those rate are in rate. The cruise lines are getting a nice pop during pop here in they have pop. They are about one third of the total. You have Royal Caribbean and carnival down 6 so far. They had issues last year with terrorist attacks. It was a rough go for these guys. Maybe the damage wont be as bad for them. David the big headline is it was and is thought as you thought it was going to be. Notathan i will say i did get the missile over the weekend. We did get the sanctions from the yuan. We wonder how thats going to respond. The north korea story is moving in the same direction. Alix markets are going to perform and thats going to be telling. What is the extent of the risk on rally . Do we go higher . Do we fade. Thats a separate about the psychology in the market area market. David the second commercial airliner crashed into the world trade center. It was united flight 175 and many watched live. Even as the north tower was earning from the earlier attack, we take you to the scene now at ground zero to mark the anniversary. Are in a tell me you better place. I am not so sure. Im thinking that here with your family is the best place. Last year, your son gregory graduated college, you should have an here, watching him get his diploma. A month later when youre amanda got america your daughter america got married, you should have been here in the best place. X months after that, your other daughter got married. You should have been walking her down the aisle. Are you in a better place . I really hope so. I am not so sure anymore. I will know in 20 or 30 years. Save me a good seat, little brother. My father, your youngest granddaughter is here today. You are proudly named after your a heartied he had condition. You to hold the door for others every chance that you get, love, strength, peace to everyone near and far. That was the reading of the names. We going to more sounds. Are going to more sounds. We just saw our one of the several moments of silence that will happen today. The names ofeded the people who perished. To tropical now storm irma. It weakened as it went past tampa. Millions of people are displaced. Joining us from orlando is Erik Schatzker. We are finally beginning to get a sense of how long its going to take for Public Officials to get a grasp on the damage. The Public Information officer delivered county just a News Conference in which he said they cant know how bad things are because they cant get to the affected areas. The wind is still very strong here in orlando. It was much worse yesterday in naples. They got 140 mile per hour winds. They are going to have to wait to get there by aircraft. They are going to have to survey the area before they come up with damage estimates. 95 are sent of Collier County was without power. 95 of Collier County was without power. Strugglingcials are because its too hard to get a comprehensive view of how badly the county was hit and hurricane. Harvey, wehe case of had a good sense of how many people needed to be in shelters. There was a huge problem finding them. Where are we now with people displaced . People were being turned away from shelters here in orlando yesterday. We dont know if a found sanctuary for the night. Those, the for hurricane was not as bad as it might have an. En. Be letting going to start people back into miami beach tomorrow. South florida is starting to return to normalcy. That is good for any of those frome who were evacuated flood areas. We dont know if there were any deaths. We dont know about agile tease. The governor will be demanding that information from places like florida keys, who got hit the worst. Above like marco island the everglades, naples, fort myers, tampa spared the worst of the storm. A spokesperson said a couple of ridges had been closed as precautionary measures. Thats where things stand the moment. Joanathan the markets will open in 22 minutes. Futures are positive. We are up i. 5 . Treasuries are selling often yields are high. The dollar is stronger. We have bounced back from that low. Aboutestion has to be act asked about the impact. It is possible they could have an effect on the timing of shortterm Interest Rate increases. Joining us is the derivative strategist. Small heart of the fixed income market breeding a few huge sigh of relief. Lisa we dont have a full sense of what the damage was. One thing is they can have idiosyncratic exposure to risk. Exposed,hem might the we just dont know. Overall losses are not going to be as big as people thought. Up. Athan she has the chart on friday. Lower it was massive. Tell us about what is happening. Lisa you can keep in two perspective that these are not frequently traded. Trading slowed even further because people did not have a sense of how much risk there was and what the track of the storm would be. There was one catastrophe bond highlighted, the citrus rebond that fell. That was to trades. It was a relatively small trade. It could have been one investor trying to liquidate their position. The extent that it was dragged down, it might not be able reflection of the overall market. There is the question of how many investors will get scared and realize the gravity of the risk they are taking on and will remove their money versus how many will be in as more Insurance Companies offset the risk. Joanathan the returns have been pretty good over the last couple of years. Alix 7 yield. You dont get that very easily. Ifa it remains to be seen forecasters expect more of the storms. As people are more exports exposed, you might yet people getting out. Relative to some of the other sellouts have seen, it remained elevated. The vix remained elevated through august and through the last couple of days. The hurricane not realize materializing as badly as we thought. What that means is we might go back to that extremely low level after this weekend. As far as the market being on edge, this may be the end of that. Top the idea is there is a reach for yield and taking more risk than you should. Wheelhouse, ifur the deadline is low, that to take on more risk. Stewart what is interesting is im not sure which provider does this, they look at a number of thanking claims and look at the allocations, especially u. S. Pension plans. One of the things they noticed allocations,es they have gone higher and higher. This is true of institutions looking at what assets and having a higher yield. They may have some higher scores. Say, i am going to get crazy. I think its a good thing. Astrophe bonds and we can have become more prevalent. It distributes the risk between more players. We dont worry about a Big Insurance Company collapsing. This should not be viewed as negative. David they are just not bonds. Thats my problem. Its an insurance policy. Its not a bond yield. Thank you very much. Well be staying with us. Coming up, we will talk to one of the florida cities in the path of the hurricane. Onwill have a live update his city. You are watching from new york. This is bloomberg. Alix as Hurricane Irma shifts over the weekend, its paired miami a direct hit her in that led to many cutting their damage estimates. The worstcase scenario failed to materialize. Of you can see that story. S p and thee is the other lines are all the insurers, whether europe for here in the u. S. They all moved higher as the damage estimates came down. Chicago, whatrom is the trade today . Paul it looks like the stocks will rebound as the damage losses are less than what we thought he might be, especially early friday. Alix which is best poised to get that upside . Stockshe most affected are the florida specialists. There are a number of them that are specialists in Flood Insurance in florida. They are the most affected. They are the most relieved to have relatively limited insured losses from Hurricane Irma. Alix youve got a lot of money in miami and a lot of property there. Who is the biggest backer for that . Paul we really dont know. Its probably going to be diverse over a large number of reinsurers. Offshore,ones you see those are probably the ones who had the biggest exposure to commercial risks. Alix we will be watching that very closely throughout the day. Thank you very much. This is bloomberg. David that was the New York Stock Exchange and the nasdaq having a moment of silence to remember the 9 11 terrorist attacks. Indexthe Consumer Price is up. How much more upside and we see an emerging Market Equities . The yellow line is emerging market indexes in the light line is the china index. The blue line is the Producer Price index. What is the trade . When you have prices underperforming in china, how do you handle that . Producer prices are the key determinant of Earnings Growth. Chinese equities have done very well so far year to date, especially Mainland China equities. Investors are going back into that market. Broadly, i think the story has changed over the last few months. If you look at economic surprise, that has been trending. If you look at some of the developed markets and european equities, u. S. Equities, japanese, all three of those developed markets have broken their momentum and trended to the downside it. In see a pickup of momentum some of the emerging markets. Outside of china, look at brazil. Brazil is a growth story. If you look at resilient ,quities, brazilian equities they have gone up significantly in the last two or three weeks alone. The market has become more positive, will it remain so . Will it . I think this goes back to our conversation about irma. On thursday, there might be impact on the timing of rate cuts. The market priced out a december hike area there could be inflationary impact did impact. He saw that increase when the rates decreased, real rates are lower. Real rates are the key fulcrum of monetary risk to emerging markets. Whats going to happen with the data comes through . Bias . Han where is the do we look through it . Stewart i look back to with respect to the separate spike in inflation, i look back to hurricane katrina. It occurred in august. In seven number, cpi went up 1. 4 . If that would happen, the market would be shocked. Inflation expectations of not increased to that extent. In if you look at the dispersion, the Energy Sector has not rallied enough to make up for what might happen. Necessarilyk thats fully priced. David is there a worse effect . Here, there are going to be a lot of losses that are not insured. Is there a danger that has a dampening effect on consumer spending. Stewart thats a good point. Before, to mention this after katrina there was a divergence with core cpi. Even though there may be Construction Material prices and spending on march appliances and lumber and Construction Materials, you may see a crowding out of regular consumer goods. Houston, there have done 50,000 cars destroyed. That could be a leg up. Stewart we have noticed a decline in use vehicle prices and a decline in auto sales. This could be the kind of turn the Auto Industry needed at this time. Alix what your strongest Commission Trade right now . Stewart one of the things we have discussed investors is positioning is 100 crowded in the trade. When you look at inflows, emerging market etfs have had over 25 as proportion of asset or it if that goes up while other fans go out, funds go out, look for things in option structures. A number of structures that take advantage of low volatility and can help maintain line exposures. Joanathan stay with us. Its good to see you. Futures are positive. We had a marginal week. Back. Set to get is bloomberg. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. Away from the opening bell. Lets go through the price action. Futures are positive. The dow is positive. The hurricane risk is half of the trade. Relief. R half is in the bond market, yields are higher than treasuries. We have six basis points on treasuries. Trading action is 2. 01 . A january 2015 low. The euro is helping us get back to 91. 77. Lets get the market open. Alix that relief rally is participating. The dow jones is up rid of the nasdaq is outperforming. This is due to apple. We are 24 hours away from them launching their new iphones. We are looking at the storm related stocks in the bounceback a may see as the worst an area of did not materialize over the weekend. Travelers is up five cent. United is up 1 . When they start sending planes out, double digits will be affected by the storm. Down. 8 . Is they tend to trade down after a big prestorm run it. Tople by before and have wait a while before the rebuilding gets underway. Has a market, apple struggle between tech and financials. What happens if one of them is petering out . The light line is the s p tech sector. The blue line is financials. They are going in Different Directions. Need those in order for the s p to take another leg higher. What winds up happening, you have the yield curve flat. Year dragging0 down financials. Tech is holding up. How does that go . Financials are 3 lower. Joanathan great work. Lets continue that conversation. Joining us is stewart from bmp. Lets begin with you. Is that set to continue . It looks like this week it might not area there is a lot of volatility in the long end of the curve related to the hurricane and the risk highlighted due to political tensions. We see a lot of volatility. If we see that bounceback, we might get a little that. I would expect that continue in the short run. Longerterm, the yield curve is flattening and analyst are expecting strong earning curbs. Unless we see some evidence that the yield curve is going to start to steepen, those expectations are two robust and they need to come down before financials get a longerterm head. Joanathan what do you have in the market . Is it still about the banks . Stewart i think thats changed a little bit as well. Financials of slow down. I think if you would look at finance is at their peak, if you look at the correlation between the 10 year yield and the financial sector, its almost oneforone. Financials outperformed the rates. Just over the last week, they have come back to parity. I think there has been a lot of enthusiasm on the deregulation front. Thats come out in the last week or two. David you cant really have a Strong Economy without a Strong Financial sector. Does that rules still apply . Is tack changing the rule . Tech changing the rule . Gina its relatively healthy. It is contending with a flattening yield curve area financial has time to shine in the early cycle, when the fed is decreasing rates. The cycle they largely miss that. They had all of the but Balance Sheet resets and lawsuits. Financials have struggled this cycle. When you look at the soundness of the system, it is better than it was 10 years ago. David if there is more demand for loans, can that make it up . Gina it can, it doesnt mean they outperform the s p 500. That is part of the forecast. You see Revenue Growth boost Earnings Growth in an environment in which the yields are flat. They can make it up on an earnings basis, its how they perform relative to the rest of them. The s p 500, if you look at the others, do they need to think about european banks instead of European Technology question mark technology . Stewart thats a fair point. The british banks are global. With tech, there is a large european matter. You have some regional crossover. What you are talking about now is heavily the strongest component. There is deep value versus growth. Basis, we see europe underperform. That makes sense why that has done so. How much is riding on apples announcement tomorrow . Stewart we dont comment on stocks specifically. As far as the tech sector more broadly, it does have a large impact as an us set. Asset. Alix thank you very much. David 16 years ago, terrorist crashed an airliner into a crowded u. S. Office building, this one was the pentagon. To los Dulles Airport angeles and terrorist seized controls. President trump and misses trump are at a pentagon right now to observe a moment of silence commemorating the attack. Is and gentlemen, the chairman of the joint chiefs of staff. The secretary of defense, james mattis. [applause] and gentlemen, the president of the United States and the first lady. Please face the flag for our national and. And some. Anthem. Ome hailedat so proudly we at the twilights last gleaming. Whose broad stripes and bright stars through the perilous fight. Over the ramparts we watched were so gallantly streaming. And the rockets red glare, the bombs bursting in air gave proof through the night that our flag was still there. Matterthat starspangled o say does that starspangled wave over the land of the free and the home of the brave. Ladies and gentlemen, the chief of chaplains. Let us pray. Father, we bow our heads this morning with our feet on sacred soil, consecrated on september 11 by 184 people who perished in an instant and whose legacies will never die. Tore moses was commanded rescue his countrymen from their oppressors, our generation was commissioned from a burning building on this site the same. Losthe nearly 3000 who their lives that day, we remember. For people who deal with the loss to this day, we pray. For first responders, we rejoice. For those who witnessed this shot heard round the world and suited up for combat, we thank you. Thank you for giving our Freedom Fighters enough grit to stand tall and enough guts to stand up to anyone gullible enough to assume america would ever stand down. Standing down in the shadow of the scripturess, tell us one day we will turn our swords into plowshares. Time, help us demonstrate Due Diligence not only in the vigils but in the quality of our vigilance to keep bad guys on the run. Give us the skill to succeed. Give us the will to win. When distances divide, unitas. Appears, this cause is clearly worth the cost. We pause now for a moment of silent reflection. In your holy name we pray, amen. Showman, theand chairman of the joint chiefs of staff. Ladies and gentlemen, distinguished guests, most importantly to the family and friends of the following. For we will be looking President Trump to speak at the pentagon as the nation remembers the terrorist attacks 16 years ago today. Irma has been downgraded to a Tropical Storm. Winds have depth to 70 miles per hour. Yesterday, naples saw some of the worst of the storms. Gustsrongest recorded were 140 miles per hour. Join us is the mayor, hell barnett did bill barnett. david can you hear us . We are still waiting for some connection with the mayor of naples. All of the electronics are very dicey down there. Orange juice futures jumped last week. Florida makes up a huge amount of orange juice reduction. That has reflect it in the rice. Irmas impact is our commodity rocher. Its good to talk to you. Commodity broker. Its good to talk to you. A role ining to play commodities. We wont see this until the usd report area when you look at the through, theyg can still hang onto the trees at 70 miles per hour. The rest of the crop is probably ok. We dont know the impact right now. If you look at the cotton growing in georgia, we will probably see those prices coming up. Area themassive job , thoseand demand issues are things people will look at as well. You need to run those generators for the cars that were destroyed. If they will need to be replaced and refueled. The other thing you want to look at is jobless claims thursday. There could be a big impact on the Federal Reserve and how they raise rates. Alix we did not talk about cotton. What the impact their . Phil they were down to 60. They will probably continue to selloff did the crop was affected during hurricane harvey. We are looking at just rain. Its important that the crop does not touch the ground. It damages the quality of the cotton. That could impact reduction levels. Prices are shifting to move lower. Alix what is the longer term impact . What is the impact to the trees . Phil thats interesting. Some of these trees have citrus greening. They have other diseases that could be spread because of the wind speed. We will see if that is even at play at all. That is something to look out for. As far as trees being uprooted, weve seen telephone poles entries knocked down. We will have to get some aerial views of the citrus growing regions. Gasoline,ing about prices are down 2 . Downside as weal go into recovery mode western mark mode . Shocked that its not holding up as well. We are going to have to monitor it over the next couple of days. We will probably see another massive drawdown on inventory. Going forward, we have such a Large Crude Oil supply we can always crack that into more gasoline. There will be some volatility over the next week or. Week. Alix its good to see you. Thank you very much. If you have the bloomberg terminal, you can watch us live and interact with us directly. You can ask us a question. Members of the armed forces, its an honor to join you on this solemn location. Occasion that is extraordinary and it will always be extraordinary. Before we begin, i want to send prayers to everyone in the path of Hurricane Irma and everyone suffering through the devastation hurricane harvey. Use our storms of catastrophic severity. We are marshaling the full resources of the federal government to help our fellow americans in florida, alabama, georgia, all of those wonderful places and state in harms way. Need,mericans are in americans pull together. We are one country. We emergece hardship, closer and stronger and more determined than ever. We are gathered here today to remember a morning started during much like this one. Travelers stood in line at airport, getting ready to board flights area flights. Began pentagon, people early meetings. Then our world changed. America was under attack. Center, the world trade then here at the pentagon, then in pennsylvania. The horror and anguish of that dark day was seared into our National Memory forever. It was the worst attack on our country since pearl harbor. Worse, this was an attack on civilians, innocent men, william, women, and children. Their lives were taken so needlessly. For the families with us, we know that not a day goes by when you dont think about a loved one stolen fn from your life and our entire nation grieves with you. 2900every family of those 2977nnocent souls innocent souls murdered by terrorists, they were taken from you on that terrible terrible day. No force on earth can ever take away your memories, diminish your love, or break your will to endure and carry on and go forward. Erase your pain or ringback those bring back those you lost. We can pledge our resolve to do whatever we must to keep our people safe. [applause] on that day, not only did the world change, we all changed. Our eyes were opened to the depth of the evil we face. In that hour of darkness, we came together with renewed purpose. Hard references our differences never looked so small. The grounds on which we stand today are a monument to our National Unity and to our strength. For more than seven decades, the pentagon has stood as a symbol of american might. Not only because of the great , but becauseains of the incredible character of the people who fill it. Freedom, theyr defend our flag, they support our courageous troops all around the world. 184 americans who perished on these grounds, there were young servicemembers, dedicated Civil Servants who had worked here for decades, veterans who served in korea, vietnam, and the middle east. All of them loved this country and pledged their lives to protect it. Morning, each of those brave americans died as they lived, as heroes doing their duty and protecting us and our country. Them, wethem, we honor pledge to never ever forget them. [applause] we also remember the lives of the beloved americans who ordered flight 77 at Dulles Airport that morning. Every one of them had a story. Each of them had people they love and who love them back. Behind a deep emptiness that their warmth and grace once filled so fully and so beautifully. Withoul of america wept grief for every life taken that day. We shed our tears in their memory, pledge our devotion in their honor, turn our soul into a resolve to achieve justice in their names. Thiserrorists who attack thought they could incite fear and weaken our spirit. America cannot he intimidated. Those who try will soon join the long list of vanquished enemies who dared to test our metal. [applause] in the years after seven number 11, 5 million young men and women have joined the ranks of our great military to defend their country against barbaric forces of evil and destruction. American forces are relentlessly pursuing and destroying the enemies all civilized people of all civilized people. We are ensuring they never again have a safe haven to launch attacks against our country. We are making plain to these savage killers that there is no dark corner beyond our reach, no sanctuary beyond our grasp, nowhere to hide anywhere on this larger. 9 11, 7000 servicemembers have given their lives fighting terrorists around the globe. Some of them rest just beyond this fence in this shrine to our ofoes on the grounds Arlington National cemetery. They came from all back rounds. Dedicate all there to ourr lives and they defend one Great American flag. [applause] they and every person who puts on the uniform has the love and gratitude of our entire nation. Today as we stand on this hallowed ground, we are reminded of the truth that when america is united, no force on earth can break us apart. 9 11, pentagonof and a special person who was one of the many heroes whose love or his fellow he wasns knew no bounds, a mile away when he got the call over his radio that a plane had crashed into the pentagon. He sped to the scene and raced into smoke and fire. He ducked under live electrical wires and trudged through huddles of jet fuel only steps away from sparks and vicious flames. In the pitch black, he began calling out people in need of help. Faint voices and he wanted to answer those faint voices. One by one, he carried people out of the burning rubble. He kept going back into the whoness, calling out anyone could hear, anyone who was alive. He saved as many as 20 people who had followed his voice. He carried eight himself. For nearly 36 hours, isaac caps on