Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20180206

Flat. R yen now we had seen it move lower throughout the session but were off the lows of the session and is vix is what everyone watching. 45 is how were trading on the vix. Thats like a quadruple from what we saw last week. Modestly higher. I was interested as to why we didnt see gold spike more. To be about equities and commodities kind of taking on the chin. Raises the question whether its fundamentals or technical. Well be die jekting over the next two hours. For the first take, there are three top stories. You have equitys and what is the fed going to do . David . Were joined by Michael Mckee, Bloomberg International correspondent and the reporter bloomberg news. What happened with the dow yesterday . Ill pull up a screen that tells story of two days in one chart here. One on the left is what happened on friday when we had those out about jobs. The one on the right is what happened yesterday. Michael, what does this tell us . Tells us that we saw return Inflation Expectations earlier this year and that got people starting to worry a little bit. Yields are rising, the economy is better. That should be good for stocks. Rising because it might take a bite out of profits and then people worry. To worry. Rted the risk managers came in and said lets get rid of some of we shouldnt have because were living in this low vol world. Nobody thinks its going to change and now maybe were going to ns its change. Luke, we see the dow coming down. But yesterday about 3 30 or so, we saw this incredible fall off the cliff. I mean, that cant just be were expecting inflation sometime. No, thats the bottom coming out and were trying to nail down exactly what happened there. To give an overview of the, you suspects as it were. As soon as the vix crossed 30, real selling e pressure began right after 3 00. To heres good reason suspect this is due to target vol funds and expected rebalance going after market thats to crush some of the vix products as it did. So theres a good reason to vol funds or target parity funds actually switching their exposure at that time. Best tweet of the day applebaum ofenjamin the New York Times said this is a picture of really sad traders and you click on the computers. D its some people have saying crash, let me get in and buy. E brought up the fact that commodities are selling off in general. But nowhere near what we would if we had a broad concern selloff across Asset Classes. So does that tell us something about global synchronized growth . Still ok. His is just the u. S. Market sorting itself out. Exactly. When you look at whats going on this is the omy, latest information that we got from earnings. In ou can see, the trend recent months has all been up, up, up so theres nothing wrong with the underlying economy. What were getting into is a world where this low inflation forever feeling is starting to go away. Repricing have been that. And now people start to get it means for what a term premium. What it means what they need to price in. Well, lets talk about where getting worried and that comes from the vix. So come inside the bloomberg here. This is the one day net change vix that we saw yesterday. Its the biggest jump that weve seen on record. It jumped about 20 points. All right, luke, so walk me through the relationship between and what we saw with some of the products. A lot of ntially, these products and the most that would , so probably be the chief example. Try do is offer an inverse one day return to the month, vix cond futures contracts. So youre betting that volatility will go down. At more and more, its become term structure play on the idea that second month volatility is priced a ng to be little higher than front month. You benefit from the uncertainty get the positive carry. However, whats happened through year, that f this carry kind of been picking up is a lot slimmer than its been in previous years. Very low. Has been so it did set the stage for an you like this where both get a huge spike, the indexes the products, rather, are forced to then, you know, we know in re going to be buying the after hours vix futures to cover their exposure and their short volatility, theyre buying market. Res in the after so the reason why we really saw hem fall off a cliff in the after hours is because they had rebalance buying to from the damage on friday. So theyre buying a heck of a lot vix futures and what happens of the move in x. I. V. , its falling down 80 on the day, thats generally an phenomenon and its, you know, theyre buying, theyre rebalancing and people starting to get worried about the acceleration event is the lingo du jour. Who got first in this product . Credit swiss says they didnt get hurt. Somebody had to get hurt. Somebody had to. Reddit, apparently theres a lot of retail traders that got absolutely wiped out by this. You know, ive reached out to a few people my age who have been, you know, this, maybe lding wish they hadnt been right now. Looked like a free lunch for so, so long until it wasnt. Far, its unclear of the ripple effects, if any, are spreading or if it directly would be related to these or more the spinoff effect of wait, we got higher vol. Now funds that may be target realized vol but do so with a the ill be selling in coming days which is something that they are now bringing. Lets talk about that. Theyre saying we could see undreds of more billions of dollars in selling of u. S. Equities because of the volatility controlled funds. Walk us through what that is and how it ends up happening. Basically over a two to six months, two to six weeks, every fund will have kind of different mandates but they want to have a expected ount of volatility coming from a top mix of their a assets. Thats more, you know, risk parity so theyll switch the bond and equity exposure to try comingrol the volatility from all components of their portfolio. Target vol funds and funds that want to maintain x level of xposure relative to the market based on the markets realized volatility as the realized picking up, ifow they werent nimble and reducing during the selloff which, you know, you have to bet some of them are in a cataclysmic time like this. But theyll be then selling in the coming days just to catch up with whats happened in the market. Going to our third story. The question, basically is what is the fed supposed to do . Chairman, we put a chart here that shows the likelihood of rate hikes. Nd the top line is the march one which is near 100 certainty. Interesting thing is you look at the rate hikes going out through the rest of the year. That will probably actually come down on each one as its gone on. Is this anticipating that the fed, jay powell and his new fed nervous to say were about the markets. Youre talking about a market most of the people who trade days l street these werent alive the last time or werent in the markets the last time anything like this happened. So werent alive. Theyre looking back and you know, what happened . In the past . Well, 1987, we had a brand new flattenedand we had a and yield curve and then what happened . The markets went back up again. Look forward and you say, whats that going to do . Do . T is inflation going to its not the markets at this point. There doesnt seem to be any systemic risk. To be any t seem significant problem that they need to address. They dont need to put liquidity into the markets. Of liquidity so the feds will stand on the sidelines spending . People stop does that mean theres going to be less inflation . We dont know. Before we months know. This trade on what the fed fund futures will be later in the ear, you know, you can make that casino bet if you want. By the time we get around to june, it will probably be different. Though, is of this, the fed could continue to hike because financial conditions were so loose. Did see them tighten although historically theyre nowhere in what we saw, say, back the crash. They continue to tighten and that removes the cover for the fed, doesnt it . The fed is going to look at impact on the economy. And if the markets are going to have an impact on the economy and inflation n isnt as bad, then they dont need to raise any faster. At this point, when youre at in terms of the Market Reaction weve had so far economic derlying fundamentals is three rate hikes look appropriate. Go faster. Have to theres always a steer because in the past its happened that the fed is going to do it. Going very heyre slow. Very gradually, meeting by meeting. Theres no indication that in a rush to raise rates. So why panic . Spending, they stop luke, brings me to your retail point, how crushed did retail get over the last week . I mean, geez, for millennials, what a bad week. Going down. Man what a bad week. But wouldnt it be ironic just been waiting, financial conditions, the influence of growth outlook. They say inflation is going to come back. Now, as financial conditions tighten, wages and inflation pick up. Wouldnt it be nice if were of whats off actually happening rather than what we think will happen . I think the fed, i think jay would take that tradeoff as long as the markets dont get too bad. Have internalized, really internalized the idea that markets go down but then go again. P special thanks to Michael Mckee of Bloomberg Economics and down awa for breaking volatility products at 7 00 a. M. In the morning. Reporter. s coming up, deeper dive and look into the equities selloff. On sell next . This is bloomberg. This is bloomberg daybreak. I have your Bloomberg Business flash. Oyota has raised its profit forecast for the third time this fiscal year. Asias largest automaker is seeing higher demand in the u. S. For the camry sedan and the rav 4 s. U. V. They plan to spend more on development. An improving Interest Rate environment is likely to support growth. Frances largest bank is forecasting that profit will beat targets. They also reported Fourth Quarter earnings and trading results that were mostly in line with estimates. Xc. E. O. Elon musk is low. Ing the bar he said the maiden flight will be a success if it doesnt blow up on the launch pad. Falcon heavy is a reusable launch vehicle that has doubled the capacity of its close competitor and thats the Bloomberg Business flash. Falcoa they are responsible basically for the Velocity Shares daily inverse short e. T. N. Kawawas a ticker that luke was just talking about. I invested ure that in anything that had that long of a title. Look at the name of that thing, and on. On you need to know its x. I. V. , vix. Se of the were watching that as well. Getting hurt yesterday as that got really wiped up and, of course, the repercussions will be felt in the vix futures market as well. Helping to lead the vix even higher. Now, approaching 50. Futures , u. S. Equity continuing their downturn today. 2011t day for the s p since and now you wind up having Dow Jones Futures off by another 300 points. At another triple digit loss. Through mondays trade and this morning, we did speak to on stors to get their take the market pullback. Do you want to really buy equity . You do. Nk this isnt normal market behavior. Is when we had a correction in equities, rates start to go down. Thats not what were seeing because the source of the correction is rates is when we correction in we have farther to go. I think you want to lay into it. Its a walk and not run situation. On the ave money sideline. Put maybe a third of it to work. We dont believe were point where you could see a sustained pullback in equities. Market moves in a sharp way, you have to be concerned about how that spills ver into funding and to credit markets and the broader financial conditions. Jerome powell, welcome to the neighborhood. First day and the vix goes to 40. Timing. An interesting i think in some ways, if this doesnt spiral into something a bit of a its gift to the fed. Joining us now is russ blackrock allocation Portfolio Manager and gina martin adams, chief equity strategist. What did you learn yesterday, russ . We learned that markets can go down and volatility can go up. Look, i think that this is a of 1 an simply a 1 10 increase in hourly wages. Clearly, you had a lot of very crowded trades. Leverage. You had people in trades, perhaps they did not understand and youre getting an unwind. I think the fortunate thing is weve seen a greater new season. He economy continues to strengthen and despite the backup in bond yields lets emember its only 10 basis points than it was last march. That is not a big change in Financial Market conditions. If anything because of the pullback over the past year, Financial Market conditions are easier. More dramatic because it was so long coming . I think thats part of the reason. Think that when you really look at the charts, we had such a speculative buildup in the early part this year. To have a little bit of relief of that speculation. And that really started to occur yesterday afternoon. Mean, prior to yesterday afternoon, this is a relatively orderly selloff. The rday afternoon, downside acceleration that we saw was pretty extreme and the vix spike that we saw usually dont see vix at 30 unless you have a 10 correction and vix at 40 unless you 15 correction in spots. That gives you the ability to risks y where the real in. Based around volatility and bitcoin and some of the assets, and some is feeding through. Contagion it of a occur yesterday. Stocks uptrended so consistent and so long and strong, theres in this that would suggest its an elimination of a bull market. It does suggest we have some weakness. We have some underlying sort of volatility that we need to experience. Technical. Ngs us to come inside bloomberg here and looking at the 5100 and 200 day s p and erage for the were on that 100 day. We blew past the 50. How much more do we need to kind of nd what acceleration to the down side if we open below the 50 which looks like potentially possible. To get back to our channel uptrend started in 2009 and again in the 2015 correction, create a channel off that trend line, just to get back within the channel, youve got to get averagee 100 day moving on the s p 500. That puts you back within the bull market trend after this so osive move that we saw far this year, you know, is that where we stop . Its rather speculative at this point. Watch the technicals. Im a Firm Believer that tops and bottoms are made on sentiment. Youes no magic number that can find, right . But i do think youve got to see a little bit of an unwind of the pretty big enthusiasm that built up this year back within a trend, you know, not a bad place to be. As you mentioned the 10 year, you get concerned about the fundamentals affecting us . Were back to 2. 7 on the 10 year. Back down from well over 2. 8. Thats a key point. Why is the 10 year rise . There was some increase and expectations. The if the 10 year is rising because real yields are going up and theyre going up in the context stronger economy that will boost earnings growth, that to for the a death knell market. There comes a point where you start to pull demand from the equities. Higher than deal we are today. If you look at history, when yields are rising from this low context of , in the rising real yields, usually the market can sustain that. Im not worried about the 10 now. Right im interested in which stocks particularly got hit yesterday. We took a look actually about and a t hit the most little surprising because essentially the ones that got hit the most are the ones that going up the most. It looks like momentum that you have on your terminal here. Period, health care off 10 almost. Energy at 9 . Materials 7 . A look at what works last year, health care and energy. Yeah. How much of this was a actually . Rade isolate the momentum factor, thats the last leg to fall. We havent seen the true isolate thecks turn over. You are now starting to see that play out in a economy. I want to go to radel leo. He says we are seeing lead cycle behavior, but despite minor connections, physical stimulation is hitting the gas, driving the economy forward into capacity constraints, triggering first inrate increases the market, later in the economy. But they did tighten yesterday, nowhere near the financial crisis, but how do you factor that in. There are a couple things. And yield does become challenge for stocks. We are not seeing the same and it was saw relatively stable yesterday. It was down. Right now, this does not look systemic. Alix all right, thank you very much. I will update you, Dow Jones Futures off by double digits again and s p futures are positive . Let me check because last time they were not. Futures are positive. 60, soes is off by crazy. A triple digit gloss on dow futures. 10 year yield goes nowhere. The safety trade in the market, if you change the boards, dollaryen was lower. The vix is still high, 50 since the First Time Since 2015. More, next. This is bloomberg. Alix this is bloomberg daybreak. Futures jumping all over the map that we could be set up for another ugly open in the u. S. 175jones teachers up by points and s p 500 trying to break into positive but down by. 3 after the worst selloff the s p has seen since 2011. European stocks are continuing to get hit but the dax is off by 2 . Here is the steal for the market, a slight sake haven bid with the dollar up, and buying in treasuries and a lot in europe in terms of bones, and we hit 50 for the vix, the First Time Since 2015 in crude continues to roll over all caps earnings are on the back burner david . And you are excited about crude and im excited about cars. General motors is out. They have been in the north quarter on both earnings per share. Heat on revenue, 37. 7 billion as opposed to 37. 1 billion. They report their margin is holding up nicely with over 10 in north america and they are approaching that number elsewhere read they are making money and latin america and most important, they are investing about one billion dollars in autonomous vehicles. And the margin is fascinating because they had 11 reduction in volume in north america. They had 450,000 less units sold in the increased their margin to 10. 7 . Pretty good story for them. Wouldford said they invest so much but it would hurt profitability . So it is a different story for gm. David good memory. We were talking with we will talk with chuck stevens, the cfo of General Motors, but it appears to be a good report from General Motors. Lets get an update on headlines outside the business world. Kailey leinz is here. Kailey there is a report President Trumps lawyers are telling him not to sit down with an interview with robert mueller. That could lead to a Lengthy Court battle on whether the president would have to answer questions under oath. President trump will have to decide whether to release another memo from the house intelligence committee, this one from democratic numbers of the panel, countering republican claims of his conduct by the fbi and Justice Department. The president has five days to decide. In the u. K. , shoppers are spending more for essential services. Consumer spending rose from one year ago and that was driven by higher prices and supermarket prices. News, 24 hours a day, powered by more than 2400 journalists and analysts in more than 127 countries. I am kailey leinz. This is bloomberg. Alix it was tough for jay powell, the recent volatility providing more questions than answers. With us is Carl Riccadonna, bloomberg chief economist, and lisa abramowicz. I want to draw your attention to this chart, looking at basically they expect, what in terms of a fed hike. For the First Quarter, it is that white line holding up, but the aligned is what we expect in the Third Quarter, and that has rolled over in terms of rate hike expectations. How is the fed looking at the markets . Carl the fed was signaling three hikes and i do not know that they necessarily have to be looking to deviate too far from that. There was concern after the jobs report that exert overheating with that increase in Hourly Earnings the trigger of fact. However, as we look later in the day and with the trading, you see a lot of move in the twoyear yields, and that told you that maybe there was not that much concern in the market of the fed ramping up the pace. I teams view is two hikes this year and i do you is they will not get around to that third hike, which will be in december for you this is not a dramatically changed view, just slower to get the december move. Four reasons, tightening of financial conditions as the fed Balance Sheets online at a fast pace, and probably some further selloff in treasury yields. David what does your to make of the tax cut, more money in peoples pockets, corporation pockets . Carl that does not translate necessarily into stronger growth, so if you are incentivizing funds to come back on u. S. Soil, yes, some will be diverted to private infrastructure or Capital Investment and whatnot. A lot of it gets paid out in Balance Sheet fortifications, so stock buyback, and then day, that type of thing m a, that type of thing. Tax cuts should stimulate the economy, especially in the first half of the year, but i do not know that we are moving the needle tremendously on this organic acceleration in the economy. Better thisould hit year depending on Market Conditions. Alix at what point do you feel there has to be a policy response sometime . I think when it affects the real economy. Alix when does it do that . It affects it if you believe the transmission mechanism between the market and Consumer Confidence is strong enough, if people change the behavior. I agree with carl. At this point, it is not clear it is a major game changer, the tax cuts or recent selloff. 2. 5 may be better, but not one where things have gotten materially better or worse. Kailey are we all of the reacting david are we all over, including the president of the United States . Lisa that is the question. David how many times have we talked about a new record . It is all good, but wasnt as good as we said it was and is it as bad as it is today . Leadingey are the indicator, which shows that people ought to be freaking out more in the stock work it. Credit markets are saying we are not freaking out. Yields did rise, relative yields, the extra spread investors current over benchmarks also rose, which is interesting to me, and it indicates people do view it as a potential credit risk. Which could make some of these companies that are highly leveraged less credit worthy. Any said, you did not see exit this, he saw inflows into the biggest higher bond etf overnight. That said, this is mark material should intel town. We have gone from goldilocks to not so goldilocks anymore. It needs to be that it used to be that all news is good news. Rights . You had that positive for credit. Now, you have inflation, which means higher yields, borrowing costs, which are negative, or you have the stock market overdone, volatility increasing, which is a negative credit. This, to me, is a big shift in tone, which indicates a rockier rest of the year. Alix do you agree . Russ i agree with a lot of that treat i do think we have seen a allocationsglobal have been carried back on credit. Shortterm panic is important because we are talking volatility. Historically, two things drive volatility. When you see the credit market, spreads and meeting economic indicators. For the first time in a long time, both tell you volatility looks more expensive than expected trade long time, it was the opposite. It does not meet volatility has heat for the market has bottomed but suggest relative to the fundamentals of the credit market, this selloff of second has been extreme. Lisa if you have reduced your credit application, how much . Are you looking at the quality or do you see potentially more risk than triple ds given the fact of the incredible leverage their . Reducinghave been mostly in the highyield space and part of it as they and reward arguments, that being in the middle of the risk spectrum early last year made sense. Anywhere where growth is accelerating, you are better off with a combination of equities and duration to mitigate the risk and gain the credit stack. It is more of a relative value trade then a belief we are at the end of the credit cycle. Lisa how much did you bring it down . Russ do was down from two thirds been late 2016. David talk about the wealth effect. We had the president of the United States saying, look at your 401 k . A lot of people are looking at the this morning and it doesnt look so good. Carl if they are looking at your today to move, it is back to zero. Alix dont look at the month to date. Carl rights. You are still up considerably relative to last year, so the wealth effect from the stock market tends to be about half as large as that from the Housing Market and Housing Market shows significant appreciation. I do not think we should too worried about that, but we saw towards the end of last year, the Household Savings rate declined, a signal of economic confidence, which we saw in figures like Consumer Sentiment and whatnot. If we see normalization in the savings rate and spending, that will be a reminder that we are still a to handle growth rate for the economy. That could 2. 5 or better. T is not a blowout 3 growth is not here just yet. What i will watch for is the transmission mechanism, not from household wealth, but corporate confidence. If is mrs. Feel the need to pull back on hiring, that would be the achilles heel of u. S. Economy because we have been strong and dependent. Alix and m a. Russ, you mentioned you paired your height yield risks or high yield risks. Are you adding duration . Russ we have added duration. In the middle of the u. S. Curve. There is a panic about going to that is probably right to we have seen the low yields. All of the secular factors we were talking about in 2017 have not gone away. Demographics are still a challenge, leverage levels are still high as a drag on growth. There are restraining factors, including technology. So that to me seems farfetched. Alix there is one big question in my mind. Lisa this is emerging markets credit. I want to take you into the bloomberg if you want to look, this is the biggest emerging markets etf that trades under thaticket, and to can see yesterday, i saw the biggest oneday withdrawal from this fund in its history, 440 million which isithdrawal, interesting because you had a stronger dollar, yields up in the u. S. , rates rising. This is not a good potential combination for emergingmarket credit, so you have this 13 billion etf with almost a half alien dollars and pulled out have alien dollars. What does this do to the market . Especially because there are assets that are not liquid . This is a question in my mind. Alix but they were some major close. Lisa 100 . Im not saying it is an exit this but interesting to watch. Alix Russ Koesterich and Carl Riccadonna and lisa o, thank you. Volatility showed back up in the markets. To stands to benefit. Our Investment Bankers waking up to feel good today . You can tune in to tom keene from 7 00 to 9 00 in new york and pimm fox joins them from 9 00 to 10 00. They can be heard across the u. S. On sirius xm. This is bloomberg. Alix this is bloomberg daybreak. Kailey i am kailey leinz in the Hewlett Packer enterprise greener. Coming up, chuck stevens, General Motors cfo. David return to wall street, where we cover three things, first, show me the volume. Volatility should back up in the market, so who benefits from it . Number two, a gunshot apple. With all that cash to be repatriated, where does they were not by bonds they were holding. And three, is it time to roll now . Are the bargains out there this morning . Kellyjoining us is jason from bloomberg. Jason good morning. Alix volatility front and center, a chart showing volatility for fx, treasuries, and equities, all picking up, but that white bar is the big street what our investment banks thinking today . Jason i looked at fourthquarter earnings, specifically the sick numbers, which he spent time talking about, and Goldman Sachs is down 50 , versus the same quarter in 2016. Deutsche bank was down, everybody down across the board because there was no volatility, not a lot to do. Now . It feels like there may be more to do. I wonder what you are hearing. Inx if they do not do well the First Quarter, even though we are not halfway in, what is that going to say to them . Then there might the more of a fundamental personnel issue or how they calculate risk issue that we have to look at. David a coincidence that goldman is out, you have not seen nothing yet. It will keep going. Alix also, what does that do to their value at risk . They kept going down, so are banks in the position to whether this . Jason it is a question that has to be talked about. At the corporate level really, because again, over the last 10 years, you have seen investor banks, bold brackets, resize and reshape themselves for what appears to be a different market. This isy knows that cyclical, this was going to come back at some points, and we do not know exactly how the banks of positioned to do this. David it is an interesting time to test the suspenders the fed put in there. All these banks have representatives. You can imagine them calling and saying, how is this affecting your . Alix especially when we are paring back regulation tensely for big banks. The conversation in the Fourth Quarter and Third Quarter for banks was take on more risk. If they all did that and are taking more risk due to the rollback of regulations, where are they now is to mark jason it could be good news where are they now . Jason it could the good news. And it is something people watch closely. To your points, when we get firstquarter numbers and not too long, we will see. David lets talk apple. Apple with a huge amount of cash. It shows it by sector how much cash each sector has. They will bring 350 billion back they say, but one thing that we have not paid attention to is the amount invested in other corporations bonds, and now reports that maybe not so much. Jason we talked about this when the tax reform, tax cuts, tax whatever came out. Tax phil in the blank. This is something companies now have an incentive not to hold that cash overseas. When they did, this is what they invested in. Cutting that back has a lot of repercussions for the bond market. Alix they are also selling and trimming, so we also have to look at the Investment Grade market in supply and demand and not just what the spread is doing with risk on and risk off. Jason exactly. Going forward, how would this reship the market . Alix you will have less of the ideas, less issuance because if you bring back cash, you dont have the issue. See may not have a corporations buying but you may not have the supply. We do not know yet how that plays out. Private equity, you love it. How much cash is on the sidelines and was best position . Jason it is measured in hundreds and billions, upward of one trillion, an area we do not quite know because of the money that is flowing in. We do know we have had record funds raise over the last years in the tens of billions of dollars, 18 billion like stone, upwards of 20 billion by apollo alone, so there is a lot of cash being looked at. One team them they want to put it to work. They have not had a lot of bargains of late. You look at the market. David they had complained about it. They say the prices are too high and they cannot find a lot of good things to invest in. Maybe that will change. Jason i was thinking about it before this about the availability of credit and rising yields and how that may affect the price of money. That is one big benefit to private equity through this recent period, money has remained cheap, so when they can do good deal, they can get the finance. Alix and riding off interest is changing the tax law, which is affecting the margin. If you are looking at the new tenure, does that make a different story . I wonder if the opportunity is in health care because we have seen so Many Health Care funds raised by private equity. Not only because of the selloff of the amazon is, and it wonder if that is where some deals happening. Jason there could be bargainhunting there, for sure. David and what could i summit for after i bought it . It is a question of, what will the market be in three years . Jason private equity has changed over the last 10 years to 20 years. They do have to do a lot more fundamental work and that buying a lot smarter. Alix sometimes keeping a stake. You might keep one for yourself because you have to make returns. It will be interesting the next couple of months. David a lot to sort out, thank you, jason kelly. Coming up, media giants face the choice of eating or being eaten in the wake of walt disneys d for most of 20 to fox 21st century fox. You can watch us online, or interact with us directly at tv on your terminal. Or another ugly day in the equity market. 1. 5 until the cash open. Dow jones futures off i went hundred 86 points. We could read down as much as 2 . S p futures broke below key Technical Levels yesterday, and will it be able to recoup losses today . It is down. 3 in the futures market area the dax logo session in europe and pretty ugly session there, as well. We are seeing a safe haven did in certain areas, in particular, the 10 year german bund yield, down by seven basis points. If you change up the board, you can see other Asset Classes. The fix near 50. Quintupled the fix near 50, quintupled. 10 year yield unchanged. Not a lot of safe haven buying in the treasury market, more in europe. The dollar getting a bit, up. 3 and oil rose over, providing no help to the equity market. David the other thing i am looking at is media. We have disney earnings out and do we have cbs, viacom, a big week for earnings. Normally, you talk about ratings, advertising, but this week, a lot of discussion will be about deals because disney has announced a deal to buy most and it hastury fox caused a fear in the media market. Here are the market caps of the companies. Buying as 150 billion much as 60 billion dollars a box, but look at amazon. They think they are competing against amazon and you have netflix and cbs and viacom, the little guys, and they are looking at disney, saying, can we afford this . Alix you look at the market cap, and a, what would cbs and viacom be able to do if you are competing with disney and fox . And b, how do they not merge . David there are a lot of Companies Like that, particularly in this the worlds, and amazon say, we need more content to go direct to consumers. Cbs and buy, would be trying to do that and viacom would be trying to do that. Alix coming up, we will hear from Chuck Stephens on earnings in the selloff. This is bloomberg. Alix equities crashed, Global Equities get hit after the s p suffers its worst day since 2011, and the vix rising the most on record and related products are blamed for exacerbating the selloff. And what does the fed do with tighter financial conditions and rising wages . David welcome to bloomberg daybreak. I am david westin with alix steel. Alix it was ugly yesterday and that theme is continuing in the market. David volatility is not going away so far. Alix s p futures wanted to climb and they tried several times but cannot get traction. Calme down. 2 and it feels in comparison to yesterday. The euro dollar slightly weaker, a broader and stronger dollar story as the session emerges and selling that the marches in the 10 year treasury market. Lots of safe haven buying in asope but in the u. S. , not strong as oil gets crushed. In europe, the 10year german bund yield is down five basis points. Buying continues. Dollaryen is stronger. It has lost a little steam and the vix is making headlines trade we hit 50, quintupled. Ince that 10 we have seen and gold surprisingly not getting that safe haven balance, down on the day by. 3. David lets find what is going on outside the business world. Kailey on capitol hill, the house will vote lead today on a bill to keep the government funded through march 23. The measure includes fullyear funding for the defense department, setting up a confrontation with the senate, or the plan would probably not have enough votes to pass. That could be a Government Shutdown after midnight thursday. President trump will have to decide whether to release another memo from the house intelligence committee, this one from the democratic members. It counters republican claims of misconduct by the f the ei and Justice Department in the russian investigation. The president has five days to decide. The United Nations is calling for an immediate monthlong ceasefire in syria, United Nations warns refugees trapped face that are consequences. It once a truce to deliver medical care and humanitarian aid. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. David . David see why. It was over 30 minutes ago now that gm announced earnings for the Fourth Quarter and full year in 2017. It Beat Estimates on earnings per share and revenue. The premarkets are up. 1 1. 7 three joining us now is check stephens, General Motors executive Vice President , from motor city in detroit area great to have you back. Take us through your numbers. Was a Fourth Quarter great corridor, another strong quarter, record 3. 1 billion of profitability over 8 margins. Underpinned by strength in north america, earning a record 2. 9 billion and another halfbillion dollars of equity in china and improvement in our international markets, primarily south america, which was profitable for the second straight quarter, so we are pleased with the resilience of the Business Model and traction we are getting in the core business and it caps another yearyear, of record earnings, another year 10. 7 rd margins, margins in north america, so we are pleased with the results. David take that margin number and put it against the volume number because volume in north america was down. How are you keeping the margins up while bobby was going down . Chuck great question. When you look at the Business Model in north america, we have been very focused over the last years on improving brand health, focusing on retail deliveries, intense focus on cost efficiency. The results in 2017 with 10. 7 margins in a year when volumes were down over 13 really demonstrate the improvements in the core Business Model, model in northhe america, and we see those kinds of results around the world. David take us through the transformation that you and other automakers go through with baton amiss and electric be a cool spirit how much money will you invest in 2018 compared to 2017 and can you keep margins up with that investment . Chuck as we talked about back in january for a timeless vehicles, we expect to invest about 1 billion in 2018, up 400 million year over year. It is important to look at the journey over the last years. We have purposely taken action to exit or restructure markets where we could not earn an appropriate return. That is created that has created Financial Flexibility to invest in av, electric cars, without impacting our core operating performance. Decisions purposeful to allow us to focus on growth areas. You are seeing it show up in results. David we are spending a lot of time on bloomberg on the markets, equity markets, and what happened yesterday and friday. Give us the sense from a point of view of a cfo, how does it or not affect your planning . You see a lot of customers get their 401 k s and they are not worth as much, theyre concerned of interest costs going up, does it affect your projections in 2018 . Chuck i think it is still early around the market correction. It is something we will monitor, the whole macro backdrop, whether Interest Rates, inflation, which growth. I would say our fundamental backdrop in foundation for our 2018 expectations still moderate Interest Rate increases, inflation, good growth globally, and in the u. S. , reasonably constructive environment. As that changes, we will monitor its, and we will course correct. I think the one proof point is if you look at 2017. The results we drove in 2017 in a much more challenging environments. That is something we will monitor but i am confident we will take actions to course correct to ensure we can continue to drive a strong performance. David thank you. That is chuck stevens, General Motors chief financial officer. Alix you have to wonder when it starts to matter . David and how high Interest Rates have to go. Alix we saw from the fed loan officer survey yesterday that in terms of the mortgage market, we are seeing tightening on the margins. For more on the markets, we are looking at in ugly open potentially with dow futures and s p 500 trying to flirt with positive numbers. Nasdaq still positive for the year but pretty ugly. The vix, if you were long big spring outside trade, you are sitting pretty because we hit 50, the highest since 2015. Joining us now is walter todd from columbia, south carolina. Great to see you. What did you learn over the past 48 hours . Walter well, what we learned is that the market obviously looking back one week ago, we hit a high, it was extended. A swift burn off of that access in the marketplace now. It is important to ask, what is this not about . It is not about learning or economic fundamentals, which have been earning and economic fundamentals, which have been good. It is not all about the tax law but improving economic growth. The selloff is clearly right now iing technically german think, and some trades you mentioned, the volatility index, a lot of people potentially short volatility, and that is a painful process, but i think it is important to think about what this isnt about. About all of those . Walter it seems to be the case. I know people reported a trade, but i would dispute that. Significant drops chop drops, and a lot in the market. This is to potential about Computer Trading lets look at that in the short term. Alix walter todd is sticking with us. We will hear about where those opportunities are. Lets look at technicals and what they are saying and how much selling we might see. This is bloomberg. Alix this is bloomberg daybreak. Kailey i am kailey leinz with their Bloomberg Business flash. The fashion, formally known as coach is making a comeback. They had a strong Holiday Season and has raised its forecast. Katetry also owns the spade brands, and theyre trying to elevate their image by reducing markdowns pay toyota has raised its profit forecast for the third time in the fiscal year, asias largest automaker is paying higher demands for the. Suv theyedan andrav 4 plan to spend more money on research and development. Apple is cutting back on bond buying this overseas cash. Apple has been sitting out bond yields as it prepares to bring home billions in overseas profit. More than half of their 82 billion cash award is invested in corporate debt. It could have an impact on borrowing costs. That is your Bloomberg Business flash. Look at thet to market and we are with technicals in the main Asset Classes. The s p closing right on that moving the average. Yesterday selling action was extraordinary. Did have its worst two days since 2000 eight and yesterday selling action was reminiscent big day spurred what is next relative to the selling action for major averages . Three 006,at g btv this is a longerterm chart of the s p 500 in blue, relative to its 200 Day Moving Average in yellow. We see we have had the s p 500 extended above that 200 Day Moving Average for about 1. 5 years, suggesting Market Conditions are over, but the trigger for the selloff we see, the fact investors from a sentiment perspective have gotten frothy. At one point, almost 15 above that moving the average, the most since 2011. That led into a formal bear market for the s p 500 and dow. Looking ahead, it appears the s p 500 will cut through that 100 Day Moving Average, the medium term support, and it through the 200 Day Moving Average has happened before, it could get ugly, longerterm selling pressure. One impetus for all of this, then move up we have seen in yields, not just about sentiment and confidence. We have had a huge move up in rates and euros this year, the 10 year yield up more than 30 basis points, similar to 2013. This is g btv 3652, longterm representingyield, a great bond bull market, but it suggests we will see the 10 year yield shoot up to the trend line. Plus, there is wonky stuff in the congestion in the bottom suggesting we will likely see the 10 year yield moved to 3 or higher, and that continues to pressure stocks. Intly, we have had a selloff junk bonds, but we are not seeing Investment Grade bonds wire out gets. 3652, and we see it super types, this is g btv 1901. This has spread doubts. I want to show this going back to the financial crisis. We see that we are at levels before the financial crisis and the blowout. If these experiments widen out, it could be a tell that it is not just a pullout that could turn into something more significant. David thank you. We want to go back to walter todd. You said this was a technical correction and some fundamentals. As you look at it, would you make Investment Decisions different today than one week ago or are you on the same path . Walter no. I think the door has been open for some attractive opportunities. When we look over the next six months to 12 months and beyond, we see a strong economic fundamental backdrop for stocks. That would lead us into the cyclical areas of the market like financials, industrials, materials, consumer discretionary. I think there are opportunities in those sectors were companies have reported in giving you a favorable outlook for earnings, where you could take it manage of the pullbacks. In some cases, in excess of 10 . Alix so specifically, in terms of sectors you are looking closely at, where is the opportunity . It has been health care and energy the last five days. You would think you would want to buy energy now. Energy has been hit hard over the past week or so, and i would be one of and that would be one sector we would look to for opportunity. Overnight, a holding we have, with the great quarter. Stop will be down in cotton the market selloff today, that would be an opportunity. Value is awth versus discussion and i think there is cyclical sectors that are attractive on this pullback. David does it make you hesitant at all in the sense of, those are great investments to make, great upset, but do you want to make other investments in case it goes the other way . We have seen it can go in surprising directions. Walter we believe a diversified portfolio, so exposure to other sectors, as well. I think it is important to elevate balanced Asset Allocation with stocks and bonds, and you saw that in spades yesterday. At the end of the day, at this point, i do not think it makes , haveto kneejerk kneejerk reactions. As painful as this process is, i do not think it makes sense at this point. If we want to broaden out and where we to see other Asset Classes get caught up in the dollar and gold spike, rates move down, that would give us more concern. At this point, we are not seeing that. Alix how are you hedged right now . Walter from clients, generally, in balanced Asset Allocations including stocks and bonds, so that hedge incline portfolios is a bond exposure. Alix is it u. S. Or europe . The safe haven bid has not been here but in europe. For our clients, and they. Exposure have not reacted in any meaningful way to the selloff. We think there are attractive so up opportunities from an Asset Allocations standpoint in the u. S. Forhank you to break helping us break this down. Coming up, Credit Suisse is saying it did not suffer trading losses related to its securities. More on that, will be issued redemption . We will discuss. This is bloomberg. David Credit Suisse has said to be considering buying back one of its Exchange Traded notes after volatility soared yesterday. They said they did not suffer trading losses related to that etn. We are joined by bloombergs john henry aso take us through this little bit. We have seen numbers staggering. Assets went down by as much as 80 . Really lose any money. How does that work . They sell this to their clients but they did not have exposure . Is that what is going on . Maybe the answer is that they probably hedge themselves sufficiently. As you pointed out, from the stock market perspective, for Credit Suisse holders, that is the most important, they went to the market and said, we have not suffered trading losses on this and there have been reports that the bank may suffer a trading loss of 500 million dollars. If you think of the current situation, that would have wiped out the first profit the First Quarter profit for the bank, especially Global Markets. They are trying to shift away from that and they want to do more Wealth Management and Investment Banking services of taking on less risk. So associated to the Global Markets, the trade went sour, and that would have been bad to head off for your earnings. Reassurance for the market, i think that was a positive statement at the end of the day, telling stock investors from Credit Suisse, we have not suffered losses. Said,lines, no client has we suffered a loss from this trade. David you point out this is good news for Credit Suisse shareholders. It appears doesnt hurt the bank, but what about their reputation with their clients and customers . Is a good news to say, we sold do these we did not have exposure, but you lost your money . Nhenrik i am not saying it is great news, it is a matter of perspective. For clients, obviously, a bad thing. No client has said, we suffered a loss of a certain size, probably Retail Investors will be involved. What i am hearing from people in the market and Institutional Investors and hedge funds and the like, they have probably been hedged against. These potential losses. At the end of the day, someone will lose money and we can ask this question later. I think you can look at it from various perspectives. I think what Credit Suisse once toavoid is having wants avoid is having bad headlines over its Global Markets units. I think that tension is not so good, and nothing they would have liked ahead of this. David thank you, that is janhenrik foerster in zurich. Alix one thing they will not like is this chart. This encapsulates what we were talking about, the inverse xiv. The top linetn, of what has happened, the big decline. The bottom panel is how much this product took in in just the last month. You are looking at almost 1 billion a this that this etf has taken in. Joining us is an etf analyst, is this the markets Worst Nightmare and what happened to etf against the shakeout and has massive repercussions against assett classes . I do not think so when you are talking the whole market. Lets put this in perspective rate i think the etn has a ticker and it has become a symbol of what the larger crowded trade. It was reported yesterday that the short total was 2 trillion. You are talking about an etn with less than one billion. It trades a lot, it is popular but put it in perspective. When you look at the etn, it is a highly dangerous product. We have a system coming out where we will give information on all the products. This would get a red light, meaning you need to know a lot before using it. I called these trading tools, whereas most are investment products. The etn did its job. The underlying just blew up, the trade was so bad. Alix i have heard that retail was in this product and you wind up needing to go out and buy futures. That raises the vix. Then you have funds looking at controlled the extent they want one level of volatility and they have to go rebalance and that means they might sell equities. That is where the contagion could be. Eric sure, it is part of the whole thing, but the trade is bigger than vix. The retail component is more legitimate in arguments, should there be a system that lets these things or makes it harder for Retail Investors to get hold of you is they are probably worse than people using this and they learned the hard way this is not a money machine but rather a trade you can get hurt on. Alix thank you for the perspective, Eric Balchunas of bloomberg intelligence. Coming up, the latest Economic Data and u. S. Trade balance figures will be released. We will talk about the selloff and repercussions in emerging markets. Is it different this time . This is bloomberg. This is bloomberg daybreak. Were 30 seconds away from the trade balance here in the u. S. To be a potentially ugly open here in the u. S. Dow jones futures picking up downside now up digits. Another 1 s up fter its worst selloff since 2011. Its all about european bonds. Modestly stronger vix right around 50. Quintupling from what we saw ago and w weeks crossing ata well be in a moment. David, youre looking at it. 53. 1 was actually billion. It was down a little bit from last month. About a billion worse from what were expecting. What donald is is trump, our president really on his bilateral trade and where were doing. A good number as for possible trade steel. On aluminum and the problem you have with the trade deficit is the wider the slower the t the growth and weve already had e indications that the First Quarter Growth Numbers are going down and here we go with another hit to growth in the First Quarter. We do get that First Quarter year it seems. So it isnt clear how long this will last. Ight now, we are seeing some deterioration. At the u. S. China trade deficit. It appears to be it ening a little bit than was last year. These are december numbers, of actually its improved a little bit. U. S. China trade deficit 30 december, it was 35. Imports rose 2 1 2 . Where the discernment tax reform, there will be so much more demand youll the deficit asing because youre importing more stronger demand. Ven though china might be odestly better, mexicos trade deficit rose almost 7 billion. Forget it. In 2016 and fourth now mexico is second, second deficit with the almostd canada also rose 7 billion, too. Our two those are biggest trading partners. And so remember, we bought a lot of the towards the end year. And the cars come over the get counted and all the stuff to make them goes the border. Th over in effect ly and, petroleum, it at role. Like it played a oil prices are higher. Were still importing a lot of petroleum. The higher the oil price goes, it will be hard to her export. Interesting thing is exports in december were down a little november. Nd what we had seen is exports significantly. What the trade weighted dollar, the fall of the dollar has boosted u. S. Exports. For us should be good going forward. Of a nt quite as much gain in december as it was in november. And maybe that was because waiting a little bit to see what the impact of the tax deal was. Did see some cutbacks in business orders. But youre seeing some good news on export front which is economy. Good for the you can adjust trade issues tweaking the dollar enough. Take this and put this together in a broader ontext with the selloff were seeing. Lets talk about volatility. Volatility roaring back into equity markets and thats gone ll the way around the world affecting stocks in asia and in well. E as now is ann lee, adjunct professor at New York University and author of will chinas economy collapse . Joined by our very own bloomberg colleague. Sense of the hinau. S. Relationships about whats going on with trade, on with this market selloff. That will affect investment and china. With sure. U. S. China trade actually chugging along just President Trump got elected. Really take any hard actions against china despite is rhetoric on the campaign boomingd so business is in china. Recoveringy also was everyone so i think everything is at business as usual. Certainly, after trump went davos and his whole team was everyone there will tariffs coming down the i e from the u. S. , this, some has prompted worries. Behind the worries selloff because certainly china demonstrated in the past u. S. Takes any actions it would respond so the u. S. Had already with, you know, actions panels and washing accelerate, you know, into other areas, we should definitely expect come from china and largest t its our trading partner, we do over, you 600 billion im sure at point in trade with them. Ad it employs, you know, over million jobs here in the u. S. Problem. Ld be a real but if youre a decision beijing this morning, look at the u market selloff basically, oh, worried, the United States is going to get concerned. Onald trump is getting concerned and that may make them trade because of the uncertainty . Beijing already knows donald trump strives on uncertainty. That they have been and ing his every move theyve already sent out the u. S. Will take action. Chinese haveat the already been preparing for mething like this. Newspaper global times has lready put out articles saying if the u. S. Does x, you know, we doing y. Pond by you know, be, the number of cars that anyll import or, you know, and so so i people worry it can what happened, you world war ii. He interesting statistic here. China, the trade balance deficit by 8. 1 . U. S. Widened you look at vietnam. A ened by 20 last year and whats happening is either manufacturing is moving vietnam or china transshipping which is one of having with the whole steel tariff issue. You got to watch the entirety of asia. Korea, though, weve been trade. G up on them about 17 balance got better by than trade deficit. Well start hearing vietnam trade wars with the u. S. Though, what i ind really interesting about emerging markets come inside the loomberg here, you would have thought that emerging market wooz have fallen out of bed. Equity took a dip. Line. S the white emerging market didnt. The chin. It on thats the blue line. Vince, whats going on here . Emerging market f. X. Is what talking about is commodities. Big trades e of the or decemberjanuary as well as buying equities was buying commodityrelated f. X. So that is the little bit selloff youre seeing there. The f. X. Market actually is stride. His in nd even more interesting, market is gold aggressively moved move. G the bit ts things in a little of perspective that isnt as big as maybe we should look at it, though. We should point out markets saw 14 funding in general. Any kind of pairing back would make some sense. The issue are margin calls. To get margin calls and held in. When does that start to be triggered . If actually if you ould look at the j. P. Morgan emerging market index, its sharply in the last few days. Thats probably a better of the selloff in the space than maybe the current. Currencies are more of if cooker k of a pressure and the little cap at the top out, s the steam coming f. X. Market the does. Thats the steam coming out of he market and thats people hedging in their e. M. Space. See a broad selloff in f. X. , i dont think we would worry too much about margin calls. And what weve seen, though, put more rying to restrictions on the market to prevent a lot of volatility and shorting, for example. Money is inland continuing to flow through. We see a lot of money coming hong kong index. Whats the regulatory backdrop in china . S right now they dont really stone y set things in crisis, f there is a step in and ntervene to halt whatever they think is chaotic. Past. E done that in the im sure they will continue to beijings number concern is to maintain they dont want Financial Markets to completely derail their economic engine. O they dont have, you know, hard, fast rules, but i would probably true for all regulatory agencies and banks, right . U. S. Federal reserve stepped in aggressively during the 2008 crisis with unprecedented measures. And so i would say that beijing is going to operate the same way. Ann lee of New York University. Thank you all very much for being with us. You here. Ve after is set to report the bell. Espn worries may be helped with a little bit of help from the force. Trailer ns solo disappointing. Are you disappointing with it . Its a fascinating back story. It. Not feeling good about i love everything that they actually. As youre coming in today, if dont want to listen to us force, you canhe tune into our colleagues on the 7 00 to 9 00 every day and tim fox joins the at 9 00. Ion with tom can be rg surveillance eard across the United States on x. M. Radio. P n markets looking at a potentially ugly open. Futures are off. Potential 2 at a open. Loss in the and other Asset Classes, talking safe haven bid is. It really seems to be in bonds. N were seeing now selling pick up the u. S. So you have 2. 75 is how we the 10 years, yields move up by four basis points. E still have yields, though, in europe as over the safe haven of choice, ollars getting a little bit of steam on those stronger yields to get just continues vix stays s the around 50. Unreal move. At the highest since 2015. This is bloomberg. This is bloomberg daybreak. Hewlettpackard enterprise green room. Coming up later today, balance of power. Democratic representative tim ryan of ohio. Now to your Bloomberg Business flash. General motors set a profit year thanks to booming sales of Sport Utility vehicles. Earnings were better than analysts ven after boosted projections last month. Sales growth in the a sevenyear er treak along with other automakers and they took a 7. 3 billion cash charge because of the u. S. Tax overhaul. Allergen sales were higher than xpected last quarter but now the drug maker is bracing for generic competition. One of its biggest sellers will generic ompete with versions this year. Sales Beat Estimates. Allergens top selling product wrinkle treatment botox. Isace x c. E. O. Elon musk setting the bar low. He says the maiden flight will be a success if the rocket on the launch pad. The falcon heavy is a reusable aunch vehicle that has double the capacity of its closest competitor and thats your Bloomberg Business flash. David . Thank you so much. Today, disney is going to be reporting its latest results after the bell. Kick off earnings against Major Media Companies this week. Oining us now for more on and media is porter bibb, capitals managing partner and bloomberg sweeney. Ence, paul being ou so much for here. Lets start off with this selloff, porter, what were seeing. Media stocks affect generally . Not any specific stock. Consumer discretionary has been past, once it goes down, media doesnt do so well. Have ia stocks in general been in a quandary regardless of the overall ed to market. Disney unfortunately lost, they targets in the last quarter. Thats never happened to bob i dont think hell do this period when he reports. Do ow did the media stocks yesterday . They did less badly than some of the other names. But still a rough ride. Porter mentioned, the stocks have been under kind of a twoyear secular decline. Tied to the whole cord cutting issue and what it means for affiliate fees and so on. Point because in 2015, what started the market urmoil and selloff that ended with what happened in china and the u. N. Was disney. It was bob iger. Espn wont have as many subscribe subscribers. Shake started to everything out and the spiral went from there to oil. And the fraternity of Media Leadership didnt like us very much. It is a fraternity. Very much. Lets talk about this cord utting issue because typically if were going to disney earnings, how is espn doing . How are your Cable Networks and things like that and your theme parks. But weve got this other little century fox a 21st acquisition going on. How central will that be . Distract from it the underlying issue . Youll expect bob iger to if not a lot bit this afternoon on fox much major step or, forward. And it really changes the landscape in the whole media industry. Happen, by the way, even though another network suggested will come in there. Rupert murdoch wants to be the largest shareholder in disney as good as l is done. I work for disney so full disclosure, i know bob and ive years. Him for many but how is he positioning the Company Going forward . Hy is this such an important strategic move . It compare to some of the other big deals hes made like with marvel and lucas film . Much bigger. This is 54 billion and this is really his, i think, best last to really position the company as a direct to consumer ompany to compete against the netflix of the world in order to bring his direct to consumer app direct to s and his consumer disney brand to consumers, he needs more content and so he needs the film studio 21st century fox and all their content to really Program Channels fully so they can be competitive in the marketplace. Porter, all that cable going to kill the industry, too, because hes going all digital. That is an interesting point has made so much money off that cable for so long ot just with espn with the Disney Channel and family channel, things like that. It is interesting to sever that relationship. Not severing it but to really away from it. Thats a tough move. Yeah. Es going to control hulu and turn it into a very serious netflix and rough amazon. Hes got espn across the board 100 different digital formats and while the interest in nfl is lagging, theyre down Something Like 18 to 49yearold men in last five years, 25 of them have moved away and are not football. Nfl but there are other sports. And what disney is positioned to only dominate digital in this country but theyre going global. Talked about asset is sky in the u. K. Thats part of and that gives disney a very good franchise in both asia and in europe. Disney were st hearing from. Were hearing from cbs and disney deal has gotten other media companys attention. Hats going on with cbs, viacom . Well, Sherri Redstone has to those two Companies Back together. And she will. Sticking point and wants absolute unfeterred control. If he gets it, fine. May doesnt get it, he have to leave. He did try to buy cbs three and ago on his own ouldnt do it because the redstones have absolute control. Les it appears the outside world says if i dont want it to happen, it happen. Is his situation different . Why is he willing to go over his objection . I think the disney 21st century fox pushed over the edge to say listen, i now this issue when we think about amazon and facebook and googles down the road, we have o think five to 10 years down the road. If you are thinking that far down the road and youre sherri the one, you have to put two companies together. Ideally les is part of it regarded is so well by the street. Would be less involved. Thats a much more risky transaction. Underscore that. I know les as well. I didnt work for him. These are very talented media executives and done a good job shareholders to date but the world goes on. Exactly. Paul . The other company that will on the door when viacom and cbs come together is verizon. Need content. Thank you so much. Bibb, great to you here from media tech capital partners. Alex . Weeks bond s the ns going to say for appetite of duration in the treasury market . What im watching next. You can watch us on line and on our charts and graphic. Interact with us directly. Go to tv go on your terminal. Market, what do you do . In. Tt of guggenheim weighing this is a Healthy Development for the markets in the long run. Equity bull market while bloodied is not broken. Of war say its a tug stocks and bonds just getting under way. That could be the big story for 2018. The markets were seeing that today. F jones futures off but unable so. O the dax picking up a little bit more steam to the down side in europe. Haven trade switch up the board, if youre looking for it, is in the bond market over in europe. And in the dollar now, the 1 . Ar up by. 5 of buying coming in across the curve in germany. Market, yield, treasury five basis points. Selling equities, selling treasuries. Vix. Ng the and commodities getting caught up in that. You have gold and oil now down day. He this is bloomberg. What im watching the middle of the equity selloff is whats treasury appen as the today and er on throughout the week. So david, this is where were week. G at for this you get a four week bill being auctioned today and wednesday, 10 year notes. 24 billion and thursday, you get 16 billion of 30 year. Looking at it for a couple of reasons. Are we e selloff, interested in buying bonds . Nough for high e investors to want to come in. Figure it we can out, foreign demand particularly from japanese and european investigators as they wind up currencies start to higher against the dollar . Well, some sessions. What do they do with their treasury supply . Treasuries feel a little more safe today than they did maybe out last thursday. The safe haven bid has wound p being in the european bond market not necessarily here in the u. S. See that now with equities and bonds selling off in tandem today. Note bid e three year to cover ratio. In a way to look at demand the markets and last three year auction, we saw some solid demand. Will it wind up holding up . Hes ked to one who said curve the belly of the right now. We have steve saying weve seen yields. K in in the t be reflected auction so far this week . Alex, you know, you cover i s much more carefully than do. But how many bid supplies, right. Its not just the demand but how many supply. His he supply going up at t point . Up. Yes, the supply is going treasury refunding announcement happened last weekend. Issuing more p on the short end but in the long end as well. So that will definitely play a well. S demand to keepre the bid to cover up at the same level. Wind up having dealers having even more. N those dynamicsng at 1 00 today. And definitely watching whats markets. In the look at where we are here. We do have the selloff picking the futures market 1 for dow out futures but the open looks to be ugly and the dax up by 2 1 2 . Talking about the safe haven bid. Bond een in the european market. A looks at other Asset Classes, though. Dollar starting to outperform as yields start to pop higher in the u. S. Quity taking down treasuries now. 2. 76 . There had been some safe haven buying earlier in the session. Yields re catapulting up. The vix staying around 50. Unbelievable move. What winds up happening to those linked products . And continuing to get hit along with gold. We see margin calls . Will that happen today . Does that wind up meaning . What is going to be easy to sell in this market . S it going to be gold and are e going to see that reverberating throughout the session . Who gets shaken out. Some real pain people. May not be easy. And you sell what you can. To. What you want coming up, jonathan will be all out. T this is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. This is the countdown to the open. To lobal markets struggled stablize after the s p 500 sinks the most since 2011. On 2018. Kets hit reset the calm is broken. Volatility returns with the a vengeance. Vix hits highs not seen in almost nine years and nightmare for the beloved short volatility trade. Last years big moneymaker gets wakeup call. In the markets 30 minutes until really,ning, as follows, really whippy in futures. Dead flat now. Loads, down loads. Been the story throughout the morning so far. N the f. X. Battle, dollar including the euro at 123. 41 and treasuries bit earlier in the session and yields up five basis points to 276. Whippy price actions very much contained and isolated into the equity market. Equity selloff extended t