Trading 30 minutes away from the end of the friday session. Down for a second day in three lead by grace, denmark, and the ftse in london. Sterling continues to rise as the pound continues to rise, 1. 4 higher against the dollar. A boe policymaker goes from dove to hawk and increases the chance of a rate hike in coming months. H m had a bigger summer sales clear out inventory and did more in the Second Quarter than it would probably mean to discount need to discount more in the Third Quarter after an annual 27 surge in inventory as of the end of may. It did say the autumn season is off to a good start. After this massive clearance sale. 2. 6 is the rise in h m shares today. Shares have fallen 16 this year and on track for a third annual drop, the longest losing stretch on record. Portugal strengthen economy leading the bond market confidence and helping drive down its borrowing costs with the yield premium to the german basisar has front to 240 points, near the lowest level since january of last year from as high as 389 basis point in february. And prove both prospects could help the country gained its Credit Rating outlook improved improved Growth Prospects could help the country gain his Credit Rating outlook. And itexpecting a review could help the outlook be revised to positive from stable. This is the spread between wti and brent with wti briefly rising above 50 yesterday. Fixed bmi says we will see the spread narrow in coming weeks as u. S. Refining capacity recovers from disruption. It had been as wide as six dollars, the yellow line is the average clearly 2. 75. How is it looking in the u. S. . We opened with a mixed nature but a little bit of a risk on feel with the equity bulls in place. The s p not doing a lot. The nasdaq up almost one half of 1 . This could be surprising given the headline risks that north korea shooting the missile with potential to reach gaum avenue guam and the london terror attack, not hurting equities in the United States. I want to get to apple because that is probably the bigger reasons the nasdaq is higher. Apple and some of their suppliers like sky works making some gains with apple up the First Time Since monday. There were some reports in fortune that the iphone 8 and iphone 8 plus were sold out and perhaps starting to make pushing off shipment date, they were supposed to be in stores september 22 and it look like dates may be late september or early october. Supplier starting to make gains on that headlines. The biggest winner i mentioned and the biggest loser is oracle. We spoke with vonnie which is down now almost 7 on concerns over the future of its cloud revenue, perhaps only growing 41 next quarter, versus 51 growth this year. That comes on top of a top and bottom line and can bet investors concerned about clout and the future of growth in oracle. I mentioned headline risks, not having impact on the bond market. To 221,ear yield is up a week ago we were at 205. 16 basis point rise in yields as bond price down. 220, we were going back to the highest yield since august 22. A risk on feel as stocks higher. Bonds a little bit lower in price. Vonnie taylor riggs, thank you very much. Lets stick with the markets and u. S. Stocks remaining near alltime highs, 2500 for the s p 500, even after the unexpected decline in august, retail sales and the geopolitical tensions continuing in north korea. Joining us for a look at how to manage in this environment is Michael Purves at week then company. Looking for a drop in the s p 500 before the end of the year but as we move through the month and nothing happens, are you as convinced as you were at the beginning of the year that we will see a correction . Yearend price target is 23 you have to get there. I will probably taking the price target up in the coming weeks. The broader message is that, if you step back, you can take the view that globally sigrid nice Growth Continues to persist and with that context against the backdrop of generally constructive central banking, the question is which assess will have the best risk adjusted returns . I am not convinced between now and yearend the u. S. Equity markets as a whole will have that. If Global Growth and local is appetite remains on. Vonnie is there something broken in these markets for Investment Capital . Michael no, if there was a recession around the corner in 2018, you would see different price action than right now. It is a matter of where do you want to put your capital. If you take the view that the global risk is on, you will find better returns in emerging markets that massively underperformed the s p 500 for seven years and starting a turnaround. 1. I would make about u. S. Equities, 1. I would make about u. S. Equities, if you want to be aggressively long for u. S. Equities, you can say that who will lead . Tech, which has done a tremendous lot job in leadership and the first of the or, will they keep performing that way . On the other hand, will you make a bet that the underperformers like the small caps are going to suddenly kick into gear . If you are making that that that small caps and maybe financials by extension will try to outperform, you are betting that the white house, congress get something done with fiscal stimulus. Essentially, you are basically trading a Political Risk in that sense. Mark is that a big ask . Are you less confident that the trump agenda will be pushed through in the mediumterm . Michael if you look at there is growing fissures and what i will call a tricolor Republican Party with the tea party, the front wing, and everyone else trump wing, and everyone else and those do not seem to be contracting. The president s Approval Ratings, they have certainly come up since charlottesville. If they stay relatively low, it gives more license for very as members of the senate and the house to afford to disagree with donald trump. I watch those Approval Ratings very closely. I cannot see the chart. Vonnie it is 48. 06 any bloomberg chart library. Michael i am fond of this chart. With Donald Trumps job approval rating. A strong correlation. Both have been coming up. When you are talking about small caps, youre talking about fiscal stimulus implement it and i think tax reform will be extraordinarily collocated, more so collocated, more so than people complicated, more so than people give it credit for. Mark when it comes to emerging markets, if you are bullish on emerging markets, i suppose, do you want the trump agenda to come through or not . Or does it not matter . If emerging markets reflective of the synchronized Global Growth story, how does the donald trump agenda play into the em story . If the donald trump story isnt limited, you will probably see is implemented, if youre talking fiscal stimulus, something articulated and you saw in the markets, you will see a stronger dollar and probably higher u. S. Nominal real yields. Those will be major headwinds for emerging markets. My emerging markets view is conditioned upon the dollar continuing to be nonstrong. I think that is a pretty easy bet. Vonnie it sounds like you are saying to go anywhere in this market, you have to take a position on whether President Trump will be successful with legislation or no . No, that is specific of whether the s p will be the last place for the riskadjusted returns. Vonnie or the dollar will strengthen against the yen. Michael the dollar is essential to every asset class. When you talk it is important to mention that when you talk about large cap, dow companies, large tech companies, those are proxies for the global synchronized growth and you will see benefit. In terms of the healthiest resumption of the rally, you will need to see, i would like to see the financials outperforming and i would like to see the small caps performing. Mark this is a chart that shows stoxx 600 versus the s p, both in local pricing and dollars. Clearly, the u. S. Stock market is outperforming the european stock market. This year. Is the strong euro going to continue to weigh on the european Stock Performance . Is it a big concern for you right now, the euro at these levels . Or can it shrug it off . Michael the whole pairing of equity Market Performance and he developed Market Performance with currency strength or the negative Strong Negative correlation, it is in spades in japan with the yen and comes and goes with europe. When we got up to 115 on the and therope equities euro were rising together in the first few months of the year, after the french elections. When you saw the euro take off and go up to 1. 18 with itectations of 1. 25 or 1. 30. Is when you saw the negative correlation come back in and unfortunately i do not see a stop to that right now. Mario draghi has referenced this is an economic issue and it affects euro strength. Weakness, youuro will probably see a great time to buy european equities and it underscores the concept that if you are a u. S. Based and dollarbased investor investing in european equities, you have to think about the fx component. It is so significant. Vonnie where are you advising clients to be . Michael for all probably speaking, emerging markets have been very good and you can selectively, within the s p 500, you can look at sector rotation. I am a little cautious on how this energy rally will be. Some of the underperformers of oil continue to stick to the 50 level. You will probably see some better performance on a more tactical basis. Vonnie sounds like you are just taking michael it is a hard market to be in love with anything right now. Broadly speaking, emerging markets are going to be this is not just a shortterm blip, a sustained reversal so long as global Growth Continues but data out of china continues to be decent enough and enough to power reasonable earnings. Vonnie by yen but hedge for fx risk. Michael yes. Vonnie thank you for joining us. Mark coming up, we spoke with the 18th mar during anniversary celebration of alibaba. Vonnie live from bloomberg World Headquarters in new york, i am vonnie quinn. Mark live from london i am mark barton. Competitorsnd jack ma says he welcomes the competition for the arrival payment platform. Stephen engle spoke with jack ma during alibaba18th anniversary celebrations and asked him about competition. They did not have a spirit of globalization like us. There is a competition. We are first. Ali pay has been around for 10 years with no competitor, good for us but not for the vision we want. In, whenent today came you ask people now, they get more because they know there is somebody who can Work Together and make the market bigger. This is the fun part. They are learning a lot from us and we are learning from them. Those two companies, if we can Work Together, getting cashless pay, based on the trust and credit, that will make the market much bigger. The speed of the internet era oftentimes blurs the lines of regulation and you push the boundary and regulators overreact. How high these days ahead of that and not overstepped your boundary . We step ahead of the regulators, we have to. Otherwise, we go nowhere. They say, my job is to regulate, my job is not to improve the other peoples lives, that is your jobs. It is the painful process alibaba is learning, hal. How have you stayed close to the fire without being burned . We are being careful, we are big, we probably regulate ourselves much more stricter, much more than the regulators. Today, we have more than half of a billion people using us. Such huge transactions. Anything wrong, we have to discipline ourselves. Much more. Policiesave to let the the policies are important. Have you faced resistance in china . Upecently interviewed others think there is an old guard china that does not understand the new economy that they will have to adapt . This course, we are having resistance in the past 18 years almost every day. We see people like them a lot. Evolution, the revolution of the technology. This see the old , theyy, in the early days destroyed lower level companies. We are helping manufacturing. We sold more than 500 billion u. S. Dollar products last year and 70 of them were helping selling the manufacturing. We do not produce. The 500s, the 70 of billion manufacturer from next would never be able to reach the consumers. Facilitate reform at state owned enterprises from the outside because vested interest want to keep the status quo . We are pushing that and that is why a lot of banks do not like us and china. We are not necessarily interested in buying the banks to change it but because of us changing them around, they reformed. The china banks acted very quickly in the past few years. They changed their services so fast. They input so much resources on the technology and on serving the people that are. You do not have to buy a bank and change one bank that you push changing them, when a tiger is following, you can much money faster than your friend. Ma speaking with Stephen Engle earlier and find more on that on a half hour program, alibaba the global disruptor tonight 5 30 p. M. In new york and 6 30 p. M. In hong kong. London, hundreds of people searching for whoever is behind a terrorist attack on a subway train at rush hour. People were injured when a homemade bomb went off and some had burns and a number were hurt in the stampede that followed the last. The small fire in a white bucket is shown by pictures and sky news says the device probably failed to completely detonate and the attack took place in the passings green underground station. We will keep you updated. This is bloomberg. Mark live from london, i am a mark barton with the european close a matter of minutes away. Six minutes away. Vonnie live from new york, miami i am vonnie quinn. Trade ins, they stockholm, sweden, the stock higher, lets talk about why. We have abigail doolittle, august sales missed, why is the stock higher . , the is about the future company talking about how the often season off to a strong start. The august and this is largely priced in and i talked about it in may. They have inventory issues, Charles Allen talks about this big inventory issue they have, a 27 surge in inventory at the end of may. Lets look at that. Onhas put together a ratio days outstanding on bloomberg intelligence. When inventories are low, supply is low and it is demand is solid which we create a good dynamic. As inventory climbs, not so good for the stores and they are working to this inventory issue any strong start to a lot of is a good tell to what is ahead. Vonnie what about the competition . Zahra is biting into their business. We will see that h m down shortly sharply. Eating into h m but h m is turning it around. Mark thank you with our stock of the hour. Mark European Equity straight in, here is a look. Equities are trading, here is a look, this is bloomberg. A look, this is bloomberg. 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. Live from london and new york, this is the european i am mark barton. Stocks missing the friday session lower good autos, retail game, the others gaining. The biggest weekly increase for two months, continuing that trend of alternating between weekly losses and gains that started eight weeks ago. Profit stability, looking at ois, the probability of rate hike. I probably would look at november, the next release of the core inflationary will part report in the u. S. This has moved up to 67 , something we will talk about with jeremy cook from wold first in moment. The shocker today was one of the more dovish members said he may support raising rates in the future after the boe yesterday highlighted the possibility of a right type in coming months rate hike in coming months. Sterling rising to its highest level in 16 months versus the dollar. The premium to hold call options on the pound relative to puts rising to the widest since 2009. Germany, looking at the impact of the latest missile launched from north korea, traders of the major carry currencies seem to be mostly unmoved by the korean peninsula. South african rand, russian ruble, the brazilian reality has been stable real has been stable. They may be into steep losses if this situation worsens into a major event. Bitcoin rising today, was earlier falling. Down on chinas reports that it plans to shut down Cryptocurrency Exchange trading, and investors speculative when it will fall below the psychologically important 3000 level. Current 100 moving day 2877, a key line in the sand, and the bulls will want to see this hold. 3665 today. Vonnie in the last couple days, you can see the yen is back at 111. 08. 75 r today by about against the u. S. Dollar. Trade seeing the offshore at 6. 54 . Putting this into context, a. 7 drop is well lower than what we used to be used to when the pboc could trade within a percentage on either side of a peg. We are back below 50 a barrel for crude oil. , contrastar yield that with the german twoyear yield, you might be surprised, 1. 38 . Risk off for equities. You see that across developed markets today. Risk off friday. The same thing in bonds. You see a little selling u. S. Bonds. It is really sort of a contrast day for risk on for the bond market and risk off for equity markets. Mark great stuff. Lets get more insight on the markets and what to expect from Central Banks with sterling hitting its highest level in 16 months, your makeup from wold first jeremy cook from wold first. What is going on in the last couple hours . Jeremy we are back in two a scenario we havent really seen since 2015. They have boxed themselves into a corner, not just with the minutes of with carnies talk overnight. Turned maybe not into a hawk but into someone more center of the back. We went from seeing a rate rise in 2019 to one probably in november, and probably unanimous. Mark 64 looking at that function. Youre on, here is brexit having an impact. We are not as gloomy as many have said. What is the big deal if we have been at 0. 5 for most of the last seven or eight years and just 0. 25 for the last year . The crucial thing will be how they communicate is. If this is one and done or the beginning of a series, and if this is beginning of the series, why do they think now and do they think inflation is going to roll over from october november, and maybe the gap between inflation and wages will be at a high level, whether that rules over into the early part of the year and we start looking at trend growth, which is still k. Ak, wage growth still wea inflation growth not so much about target. We think it is one and done. Economic conditions are not in place for a hiking cycle. If it is limited and gradual, that is probably 25 basis points every six months with a probable cap below 2 . 1. 5 maybe. We remain to be convinced about why anything should be done more than reversing the emergency. Vonnie our Market Participants being are Market Participants being too hard on mark carney . Jackeremy i think market mark carney has been tough on Market Participants. We have sat there and taken central bankers at their word for a long time, and now we want to see some if you are going to talk about action, give us action. In the minutes explain what you are doing. Remember Forward Guidance . What happened to that . If they want us to come along for the ride, explain where we are going. Vonnie that was in fashion. I will give you that. Let me ask you about this european monetary fund. Is it going to materialize . Jeremy i think it is much like a lot of european ideas. It is great at the committee stage, but as soon as it hits the european union, it slows down to a crawl. We dont actually get anything. We have heard a lot about europe and the u. K. Over the last year or so. We may even get a European Army closer than a monetary fund. It istalked about an anniversary, tomorrow, black wednesday 1992. 4 . Day it fell we are near lows for the period. Is that the chart we should be . Jeremy the brexit cross is not sterling dollar, it is sterling euro. While we have seen a big moving cable and it is to the highest level since june 24, we have not seen a similar move against currency. We are within 5 or 6 of those trade weighted lows in sterling. The movement we have seen for the pound in positive territory as then as the result of the bank of england. If we continue to see depressing news, the john lewis news we heard earlier this week about the impact on consumer confidence, eurosterling is the cross to watch. Mark fed next week . Jeremy to be honest, there will be a lot of focus on harvey and irma, and what that has done to factory orders and domestic reduction. The retail sales were a little soft, the inflation was a little higher than expected. I think datadriven, watch and wait. The data needs to convince me it is coming in december. Mark jeremy cook, chief economist at wold first. Vonnie here is emma chandra. Emma the u. K. Has been rocked by another terrorist attack. Sky news says the device probably failed to fully debt tonight. At least 22 that tonight. Detonate. At least 22 people were injured. It is the fifth terror attack in the u. K. This year. President trump spoke at the white house today about the attack in london. It is a terrible thing. It just keeps going and going, and we have to be very smart. We have to be very tough, which we are not very nearly tough enough. It is a terrible thing. I am going to call the Prime Minister right now. Emma earlier the president implicitly criticized british counterterrorism efforts. According to france, the Un Security Council will hold an emergency meeting to discuss north koreas latest missile launch, the second over japan in just two months, traveling far enough to put the u. S. Territory of law in range guam in ra nge. It was not totally unexpected. Consumer sentiment in the u. S. Fell this month according to the u. S. University of Michigan Survey following the two hurricanes. 9 said the storm could hurt the economy. Economists dont expect it to have a longterm effect. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. Vonnie thank you. Plang up, what is greeces for a clean exit from its latest bailout . We will explore this next with the chief lieutenant. This is bloomberg. I am mark barton. Vonnie i am vonnie quinn. This is the european close on bloomberg markets. Greece from minister says macroeconomic conditions are improving since the bailout, and he is still aiming for a successful completion of the bailout by august of next year. How is he going to get the various parties to agree . Lets ask our next guest, nikos pappas joining us from washington. A very close advisor to the Prime Minister. He intends to get out. The exit is still on track for august of next year. Do you need more relief euro area creditors . A crucial decision of the euro group has two elements that are critical to the prospect of having an exit to the markets of next year. The first is growth. Of the debtments dependent on the growth of the economy, and the second is the buffers that will be there to ensure the country has an exit to the markets as planned. Yesterdays euro group was pretty good. Knows that the program is in place and implementation is going on as planned. Macroeconomic indicators suggest the economy is rebounding and rebounding for good. We expect to go to Something Like close to 2 growth this year. Unemployment keeps falling. Going below the mark of 20 , starting from the mark of 27 . Area creditors are not pleased with greece, but does that mean they want to give more relief . Nikos i think all parties should stick to the agreement. Everybody has to commit to what has been put on paper and signed. This is what has been agreed to since the beginning of the program. We expect our creditors to do the same. We are optimistic because we have a new dynamic. A political discussion was started in europe. It is a clear signal to us that useful lessons have been drawn by rate parts of the political leaders in europe that will make necessary the reform at the european level which is we will never again see a crisis of the magnitude that took your. Mark will it be a clean exit . Answered . That is that when he will finally get yourself off the drip feed of imf money . Nikos the exit is going to be clean and supported by the mechanisms decided by the euro group. Let me repeat, buffers will be there in order to secure an exit to the markets. Haveean countries always an extra capacity and advantage when they tried to get access to the markets. The fact that they are members of the broader Economic Community of the eu. Mark what about the imfs role in the Ongoing Program . What do you want from the imf in this Program Going forward . Nikos it is quite crucial. What we have seen in the recent past is the imf is the most pessimistic of all of our partners. Unfortunately, they have put down predictions for the economy that have not been vindicated. We expect now everybody sticks to the agreement. We say everybody has to stick together what we have agreed to. We expect all our partners to do the same. We hope this review is not going to be delayed like the previous one because of disagreements within institutions. Vonnie why the trip to washington, and how our relations with the u. S. Administration . Nikos nowadays the United States has started to play and enhanced economic role in the area. They have traditionally been a security player. Now we have seen an increased investment interest for tourism,cture works, and all sorts of other areas of the economy from american companies. This is something quite positive, and we welcome that tendency, and we are here to enhance this tendency. Just to mention that next year in the exhibition of thessaloniki, the u. S. Will be the honor country. We expect a good presence in terms of magnitude in substance from american companies. American companies are at the forefront of the road to change and can have a great contribution now in greece. , thank youos pappas for joining us. Mark lets get the Bloomberg Business flash, some of the biggest business stories in the news now. Mercedesbenz playing its biggest overhaul in a decade. Firm upchrysler will form visioning, reader planning for Financial Services and cars and buses. Deutsche bank is pushing ahead for consolidation of its World Management business. The head of the Wealth Management unit told bloomberg that Deutsche Bank will focus on growing business in hong kong, singapore, the u. S. , and switzerland. Investors should house on the executive branch not congress. I think that within the u. S. You can bet on a lack of legislative change because it is hard to get stuff done. Executive action is what the government can do, and they should be focused on deregulation. I think there is a big deregulation trade in this country. Mark seeing opportunities in australia, china, and elsewhere. That is the latest Bloomberg Business flash. Coming up, hollywood looking for an awesome come back. Were looking at the box office contenders next. This is bloomberg. Mark the summer movie season was a huge disappointment. While the fall the any better . Paul sweeney for bloomberg intelligence, will it redeem the summer . Will fall bring in the goodies . I think the fall will be pretty decent. It started off well with a big Opening Weekend for the movie it. it is over 200 million in box office. The summer was so disappointing, and that is where studios get 40 of their box office for the entire year. It is off 15 yearoveryear. 4 , sodate we are down maybe with a strong holiday season, hollywood can break even. A disappointing year compared to 2015 and 2016, recordbreaking years in america. Ip or was summer a bl something more sinister . We ask ourselves that every time we see is when down, and i know hollywood does as well. We think it is just a blip, a function of movies that just did not hit. They did not resonate with moviegoers. 2015 and 2016 were record years. Like a stacked slate of movies. You have got to put good product into theater. When you do, people will come. Ticket prices continue to go up 3 to 4 every year. As long as you keep attendance flat or slightly up, you can grow your box office. Vonnie what about stock . Which stock suffers . Studios are all part of large companies, which typically do not move too much with the box office because theyre such large and diversified companies. It tends to be the theater stocks themselves, the amc, and regal, they are down anywhere from 30 to 60 yeartodate. That is really their breadandbutter, and that is the Way Investors typically play it. Vonnie are you looking at any studios in the next year . At one point by come talk about selling some or all of paramount due to other performance, but they held off on that. Scion holds sony pictures, which it is a question of whether that is a core asset in japan. A lot of these Technology Companies are getting into tv and movies and video content, and they are spending money on original programming. If they wanted to get in and a big way, they would buy the studio. Mark mark hamill in last jedi order Harrison Ford in blade runner . Which one is bigger . Star wars every time. That is the juggernaut. Mark good answer. Paul sweeney, bloomberg intelligence. I will watch them both. Dont miss the conversation. This is bloomberg. Vonnie jonathan this is bloomberg real yield. Jonathan coming up, global reflation shows signs of life. Price pressures grind higher. Central banks react. The bank of england gives off its first in a decade. The reach reveals shows no sign of ending. Austria with a yield of just 2. 1 . Global reflation showing signs of a comeback