Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20180221

Eastern, we get existing home sales data. At 1 00 the u. S. Treasury is auctioning 35 million in fiveyear notes. Now the turn to our first take away, these are big stories. That great treasury sale continues with twoyear yields in the option yesterday the highest in 10 years. Continues toconomy struggle to get wage increases to keep up with inflation. Glencore reports earnings with catholics flow and earnings the turnaround in that company is so dramatic. It was on deaths door just a couple of years ago. Come inside the bloomberg. We had all those auctions yesterday, and this is what we saw. Yields rising to the highest level in 2008 print much across the board. Ira, what did we learned yesterday . We learned demand was maybe a little higher than perhaps people feared. I cant say there werent a little hiccups here and there. The threemonth bill demand maybe wasnt quite up to standard. But otherwise when you look at the 2year note and six months bill auction, they went ok. I think today we will probably come and go. The fiveyear maturity has actually underperformed over the last two weeks, and i think that makes room for a little bit of supply. Sevenyear tomorrow, i think that could be a little dicier. That is the first time we have seen a big out of increase in issuance in something with a bit more market risk then we seen. David did we have a sense of whether markets are learning to adjust these higher Interest Rates so that they dont go into shock . What is happening in the earnings market is an intense focus. Violation is naturally constrained, so you are more sensitive to drive price action, and that is what yesterday was all about. About half of Earnings Releases yesterday were mrs. As opposed to be. That was 8 misses as opposed to beats. Utc more movement in sectors sensitive to Interest Rates you do see more movement in sectors sensitive to Interest Rates. Certainly the higher yield dividend paying scots are underperforming. It is not a huge drag on stocks at this point in time. Alix you guys are looking at 4 , right . Gina i think the market is more sensitive to about a 4 yield. To get towill be hard 4 , quite frankly, at least anytime soon. What it would take to get 10 year treasury yields up to that level would be significantly faster growth, and in particular, much higher inflation, and we just dont have that right now. Story is, i think, important. When you look at the twoyear option yesterday, demand was higher than in june. You saw basically in the whole second half of last year and 2016 the demand for him out of bonds being issued was actually about the same as it has been for the last year and a half. Ok demand for the twoyear. One of the things that had to happen for that is the amber line on this particular chart alix weve never heard amber. [laughter] ira well, will he made the chart, that is what they told us when we made the chart, that is what they told us. Of the curve is at the steep end, so the amber line shows you how much the current 2year note has gone up compared to the old 2year note. This is a little bit of market nuance here, but you are talking about curves steepening in a particular part of the curve to make that particular issue more attractive. David we want to turn to our second story over the u. K. We got stories this morning about wage growth going up by 2. 5 . The bad news is inflation is going up even further than that. We will hear later today about where exactly they are going with this. What does this mean for the bank of england . Carney always talks about real wage growth which we are not happen. Wage Growth Continues to fall a little become a particularly when youre trying to hike Interest Rates because you think inflation is railway, that is a real problem because is running away, that becomes a real problem. Alix we are also seeing theresa may and parliament, we have learned 62 conservatives have pressed may for a clean break, so still a hard brexit scenario. Is risk appropriately priced in the u. K. . Gina if you look, the equity market is pretty hip to this story. It has clearly been a big drag on domestic equities and the u. K. , and i think the even bigger story is what the pound has been doing, reflecting what is happening with inflation and growth conditions, what is happening at the central bank. That has been a huge drag on the stoxx. Cks. Sort of on the sto anything that relieves that pressure will fuel u. K. Stocks. David normally is the pound goes down you think there are bargains there and people will buy. Gina the pound is actually gone up relative to the dollar, like everything else. That makes the u. K. Exports much more expensive. That is a big drag on the biggest countries Biggest Companies in europe. A lot of those are energy companies, which we know have been big laggers in the market. It has just the nature a dearth of growth opportunities. Ira when you have slowing growth and wind up with prospectsm growth coming down, you worry about inflation. When you get bad wage numbers, you worry that inflation is going to start to come down. The problem in the u. K. Is what exactly with our process best prospects be postbrexit prospects be postbrexit . You dont have a lot of clarity on where the economy is going to be had. Alix lets look at the third story, which is glencore. We talked about 10 billion in Free Cash Flow. Debt down, profit up,. Up. Rofit if you look across the energy and materials space, what you find is a big improvement. You have a couple of very big bad apples. Exxonn and ask on and are good examples that spoil the soup in the energy sector. But if you look at the others you have an improving story and a rare secondment rare secondment of the equities market, and glencore is an example of that. It is not as Company Specific as you might think. There is a broader story of improvement going on. They are expected to lead to the earnings recovery on the index this year. There is a big story of recovery. I think is a total disconnect between the recovery happening in Energy Shares and sentiment in the Investor Base because sentiment is extremely early negative. Ive not gotten in front of a long only investor that has told me they are not worried about the energy sector. There is just no optimism. I think any Hedge Fund Universe theres a lot more willingness to take a little more chance on an Energy Recovery and inflation trade developing and the equity markets, but it certainly is not a widespread optimistic sort of story. Alix what is also so fascinating about glencore is the fact they have been able to repay debt. I feel like a year and a half ago were talking about, can they make it, they have too much debt, etc. Ira there are a lot of companies that have good Free Cash Flow and continue to pay down debt. You are an interesting place right now because you are starting to get here were yields are in treasuries that a lot of maturing debt actually has lower Interest Rates than where they could issue debt today. That wasnt the case the last decade. The last decade everyone was paying down debt or paying less interest on debt. That is not the case today, even with credit spreads as tight as they are. We dont know if we should actually issue this debt because it is just more expensive. Gina and ira of bloomberg intelligence. Coming up, more on those bond auctions and how they could move the markets. This is bloomberg. David south africa has announced their new budget under their new president , and it is pretty interesting. Going to bet is difficult on a lot of people, but it is necessary, a form of austerity, to bring their finances in line and narrow the gdp, which the United States is not moving towards. Pass . Can it pass . Can it be implemented . Theres a lot to read through in south africa. David this is maybe an early indication that mr. Rum opposer ramaphosa is going to do what is asked expected. You we need to us the treasury auctions last november, you would say, nothing ever happens here. The problem is we have gone from 2. 4 percent to 2. 9 on the yield on the 10 year. If we can move that quickly, then obviously yields are going north of three on the 10 year. To me most important piece of the information here is, how long do we settle into the new level . The spread between the two and the 10 has broadened out. That was the bogeyman last year. I think we pay close attention to all of the options now and certainly two things like hands of inflation, commentary around inflation, and the fed minutes later this afternoon. David how much of this is the underlying economy . On the other hand, the treasury borrowing a lot more money at the same time the fed is getting out of the business. Art i think both of those things in a will measure. I think it is also commentary ecb certainly talking about august being the end of their quantitative easing program. It is not just our central bank. Nd where we are headed david you said that wasnt necessarily a line in the sand. There is a line in the sand somewhere. At what point do you start to get pretty nervous . Art at 4 yield on the 10 year. We sort of painted ourselves in a corner three weeks ago when the jobs numbers came out and we saw a hint of inflation in the wages. Ever since then people have been saying, wait a minute, if we get 3 that of the end of the universe, which is crazy talk. It is just that is where we have been for the last seven years. It was not long ago you would say if yields could get to 5 they might start attracting money from equities into fixed income. That never has that number has never been anywhere close. I would say wake me up at 4 . We continue to make ourselves into a corner that doesnt really exist. Alix but we have seen such a rotation and more defensive tone market. Ken on the what does that tell you in terms of what emerges as a leader . Art you bring up some very good points. In the rising Interest Rate environment, utilities should not be holding up very well, nor should staples. To the extent we are in this interim, the only place that looks defensive seems to be catching a bid. It is some of those defensive sectors garnering sponsorship, which is very intuitive. Alix especially because energy and materials have been one of the top three worstperforming sectors you would think would do well. Art commodities actually hung in better than equities. I think that is where some of the biggest catches are. About awhen you think lighter regulatory touch, garnering some benefit repatriating capital and Economic Activity picking up, i think tech will always be a leading sector. If i had to take three leaders i financialsech, when you get 75 basis points in germany, 2. 4 looks pretty good. The twoyear is very local. This chart here that shows what the market is expecting the fed to do in terms of rate hikes. The yellow line is next year, the white line this year. It is almost three hikes for this year and one for next year. What are you going to be looking for today that changes this market view . Art unfortunately this meeting is really in the rearview mirror. This is really the swansong. It has been well disseminated. It is hard for us to imagine that something is going to pop out of this meeting where we say, oh my goodness, that is a lot different from what we are thinking. I dont think anything today changes consensus thinking. I think when march rollaround death rolls around and we have to hear from a new fed chair and nobody voters are, that is the difference rolls around and we have to hear from a new fed chair and know where the voters are, that is the difference. There is nothing new here unfortunately. Coming up, glencore reporting record profits, cutting its net debt by 1 3. More on glencores Strong Performance and what it means for the sector, next. This is bloomberg. Alix the glencore surprise had a bigger dividend on the end of surging stocks. Joining us is bloombergs chief energy correspondent. The standout is that 10 billion in Free Cash Flow. What are they going to buy . Reporter glencore certainly seems to have more spending in 2018. Says therexecutive are no deals, but made clear the committee will have a free cash for 2018,0 billion that probably means it could afford some acquisitions. For sure the market is going to because used potentially that is one of the potential candidates. Alix so it is eventually going to be a an ag play, is that what you are hearing . Reporter they do not have a big presence in the United States. That is one area. If we know one thing about glencore, they are very opportunistic. If a deal comes, theyre going to go for it. If the price is right and what it is coming from. Glass was keeping a very open mind on what he is going to do. He did three deals in 2017. He said in general last year he had no idea he was going to do those deals. And why are they so good on her trading versus other companies that dont do as well in the grading trading in their marketing . Reporter they build an empire of mines and oil fields and other assets. Other companies have tried to create Trading Companies around it. It is a very different approach. The culture is not there. Everyone started their career trading commodities. Alix thanks very much. Great to talk to you. David still with us is our hope is art hogan. A want to go back to something you mentioned before. Theres a great chart here that shows us what youre thin betweene divergence commodities and energy. Art the biggest bogeyman in this entire thing is that Equity Investors are afraid that supplies wont come back online. Weve seen that in energy before. The price of wti is artificially held up. Saudi arabia is holding the price up because they have a lot of deals to get done. The largest of all the concerns is that at any point in time, kers can really start producing more. I think all of that is overblown. I think what we are not looking at is how much demand has blown up. You completely shut out the synchronized Global Economic growth we have seen that has increased demand and continues into the next three years. We think demand is catching up with supply. I think inventories are working their way down. X is the big guys anps arenk u. S. Probably as cheap as we have seen in the cycle. I think the Services Side has already played out. I think you could perhaps short the services. Alix good stuff. Art will be sticking with us. Coming up, Prime Minister theresa may speaking with parliament. 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. Leaving every competitor, threat and challengretail. Euvered. 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. Alix this is bloomberg daybreak americas. Im alix steel. Very much a wait and see when you have that fire option coming up at 1 00 and the fed releasing its minutes. After that 1 selloff yesterday, it feels relatively calm. Composite pmi also coming in weaker. Im watching treasuries here in the u. S. Sterling getting hit after the wage data did not hold up, unemployment rose to 4. 4 , causing a rally in the gilt market. Here in the u. S. , everyone talking about the 2year yield. Five basis points, selling picked up after yesterdays option, 2. 7 , the highest ands 2008. Crude, wrapped up into all of this, a stronger commodity story. David lets get a check on news at sign the Business World with kailey leinz. It is President Trump first action with gun control since the florida shooting. He told the Justice Department to write regulations banning socalled bump stocks. The white house will not roll out the chance that the president made back restrictions on rifles like the one used in florida. With the first time, the white house has it knowledge russia tried to interfere in the 2016 election. Also said it is clear that russia had no impact on the results in the Trump Campaign did not collude with the russians. President trump had been criticized after not speaking out after last weeks indictments. Prime minister theresa may is considering a longer brexit transition period. That can worsen her relations with members of her own conservative party. They want the u. K. Out of the block as quickly as possible. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im kailey leinz. This is bloomberg. At this hour, Prime Minister theresa may is taking questions. This is another member of parliament talking at the moment. Later this morning, mark carney will be addressing the treasury committee, discussing the policy decisions and forecast. Joining us now from london is lucy makin. I am going to put up a chart that shows the trend on wage increases and you inflation in the u. K. Wages were going up faster than inflation. Now we have the reverse. What does this tell us about the economy . A harderers are having time, it is causing them or to buy things but their wages are not keeping pace. Consumers are a huge driver of growth. That tell marks carney as you look forward to his testifying today, what does this say about what their policy should be . Have tosaid we will deal with and overshoot of inflation. They believe it was driven by the pound dropped off and the brexit vote. Then they had to decide that maybe that was not so great, and that is when they raised rates, which we saw in november. Now they have to make a decision on what they will do next. People are saying they could raise as soon as may, but todays data was mixed. It will be interesting to see what he has to say. David what are the markets thinking about . The pound has weakened, what are the markets anticipating . Markets are very jumpy on anything the governor has to say. It has been really pronounced lately. Anything he says this afternoon that has any bearing on whether we get to may hikes are not will be the key. I imagine he will want to be cautious. We have a few months before this comes up, and a lot of data to come, so you dont want to go too hard on one month data. David thank you so much for being with us, lucy. Alix i should point out, to your question, we have seen the implied volatility of two hikes stay. Off the highs of last week but still held firm. In the markets in europe, eurodollar weaker today after a miss in composite eurozone pmi, but that can still point to a growth rate of 4 for the first two months of the year. Joining us now to discuss is. Othar mentel what do you agree with, that you should be shorting specific companies, italian banks . Whether he not sure is shorting all of europe or just having an extended currency play where he is betting on an Even Stronger euro, and that would hurt those companies with mostly noneuro revenues. I would probably be more with barclays and say, europe is coming out strongly, pmis today are showing that. I would not want to be short europe. Alix here is the more bearish side. This is looking and earnings revisions in europe. Negative for the four of the last five weeks. Side, look at the bearish it is basically topline growth may not cut it. Lothar i think what we are starting to see is the strong euro starting to bite. Companies are not at the risk of overheating anymore because the strong euro is putting a damper on exports. That could become a selfcontrol to theer mechanism potential of europe overheating. David art hogan, at what point does this turn into a changing point in the economy . This could turn into a jargon of german exports. Art you are seeing euro strength when the ecb has not hinted at making a move. At the least, consensus is august of this year. That does not mean that they will start to increase rates. You have euro strength solely predicated on the fact that we have growth. Surprisingly good Economic Growth in the eurozone. Unfortunately, the currency is acting as ballast. It pushes the ecb into a difficult position. They had to be so gradual in what they are doing and how they message that. David given the current account surplus in europe, where should the european trading, what is the real value . Surprisedwouldnt be if the euro comes off of its heights. That is not so much on the back of a weakening euro zone. It is more that i would expect a dog to grow stronger. That may be counter the consensus opinion but we have seen real yields in the u. S. Improve. In the past, that has led to a strengthening of the u. S. Dollar. We think the u. S. Dollar is oversold and do a bounce. That would see the euro come down versus the dollar. Fastest pace of inflation since 2011 but Service Providers slowed their rate of increases. What kind of margin squeeze my favorite looking at for these companies, or margin erosion, i should say . Lothar there might be some margin erosion but i dont see that at the moment to be really an Inflationary Pressure of too much in europe. The inflation pressure is still stronger in the u. S. , at least initially, it will drive the fed to tighten monetary environment more quickly than europe. Yes, europe has not started, and will eventually need to start. But if you look at the current rate of inflation, they are nowhere near scary levels. Rather the opposite, we should be grateful we are not near deflationary levels anymore. David compare the equity markets in the u. S. With europe. The way we have seen it developed, the u. S. Has been way ahead of europe if you consider all other factors. Maybe because of geopolitical risk. When does europe catch up . Art they never catch up. We will always be a little bit more expensive. 500, fors on the s p example, about 17. 5 all told. That is three multiple turns more than europe. There is some mean reversion, we should probably be one of the and a half. What stops them from happening . A policy mistake. Either we get too aggressive in Monetary Policy and flatten our yield curve, slow the economy the to quickly, or perhaps ecb does not catch up fast enough. You are putting together portfolios, does this mean you are overweight europe equities versus u. S. Equities . Lothar we are at the moment, we will remain overweight europe, but we are looking at closing our underweight to the u. S. Dollar in the next couple of sessions. Alix is that a Short Covering bounce or a more permanent position . Lothar we dont know quite yet. It very much depends on the development of inflation in the u. S. Are we going to get a slowdown of Inflationary Pressures . Which we expect to happen in the mediumterm. We just would not want to be under with the u. S. Dollar. We think that dollar weakness has probably run its course. Art i agree with that. Improving, we think Monetary Policy is coming three times this year, rates rising for the right reason. The dollar continues to have weakness. That part of it does not make sense. Have the other side, you these twin deficits we are talking about, the account deficit, budget deficit, and then you have stronger Global Growth elsewhere. That is the other side of the argument, why is that wrong . Art it is not necessarily wrong. When you think about how we are going to budget out 2018, how much more issuance there will be, about 1. 3 trillion, none of that is new news but the dollar continues to weaken. Currencies are always going to be versus something else. I just think it is overdone in the near term. You are not a predictor, but i will ask you to. You must put assumptions in a bottom where the euro at the end of the year. What are you projecting . Lothar we would be projecting the dollar could be higher, could be by as much as five percent, 10 . That would be our negative case. If the dollar goes a lot stronger from here, that means the Global Economy slows. A strong dollar is not good for emerging markets, europe. Then things could reverse from where we are at the moment. That is still quite a bit away. We have not seen the dollar turning but that is one of the concerns we have in our portfolio construction. Lothar mentel, art hogan, thank you for joining us today. In the wake of the tragic Florida School shooting, teachers had a rude awakening of how they have been unknowingly been supporting the maker of the assault weapon used to kill some of their own. Join tom keene and Jonathan Ferro on bloomberg radio. You can hear them all across the United States on sirius xm radio. Live from new york, this is bloomberg. Kailey this is bloomberg daybreak. Coming up in the next hour, subadra rajappa, head of u. S. Rate strategy at societe generale. Now to your Bloomberg Business flash. Spacex is set to launch another rocket today. The falcon nine will carry the spanish satellite that can generate highresolution images of the earth, even if the area is covered by clouds. It will also employ two experimental satellites that will provide Global Internet access. When it comes to buying stocks, it is americas second for barclays. Replaced america. In germany, the ceo of Georgia Force says the exchange has its sights set on a quarter of the cleared market next year. He has a strategy of learning business away from london. I believe the markets are oblique. We can live with different euro clearance. We can deal with different approaches here. Frankly, the markets will sort this out finally. Kailey that is your Bloomberg Business flash. Alix three things that wall street is buzzing about this morning. First, unknown investments. A stain pension plan for florida teachers held more than 40,000 shares of the Firearms Company used in the weapons used in last weeks attack. Hsbcs new ceo exploring all options for their unit. And finally, let them drink tap. 25 years at the everglades foundation. Joining us now is jason kelly. You have to know what you own at the end of the day. This is a store that dug into of state pension plan florida teachers, and it turns out they hold a lot of guns talks. Jason this is some great reporting from our colleagues in bloomberg news. They dug into public filings and found the florida retirement investdid, as you say, in this gun maker that made the gun used in the attack. Alix American Outdoor brands, which you may know as smith wesson. Under a different name. How active are going to get shareholders who are removed rum the equity market getting involved in this situation . Jason there are couple of elements. One is public stocks, and this is also an issue going back to sandy hook, cal stars, calpers, in a week of that tragedy, pulled some of their Stock Holdings out of some gunmakers. There is another element of this which goes back to private equity. That is a step removed where a Public Pension Fund or an endowment, a limited partner in a private equity fund. In this case, it was cerberus just a few years ago. In that case, you dont really have any control over what the private it equity fund invest in, but you can essentially walk away from the fund. David it is one of the unintended consequences of passive investing. You get a list of hundreds of stocks that you own one or two of. And we are entering an era where any investor, whether a pensioner, someone in their 401 k , is taking a closer look at these sorts of things. There are funds that are marketed in all sorts of ways to really lay out what is ultimately owned by the stockholder. Alix they did it with oil, and it worked on the margins. Story, sort of a day two story with hsbc. We have a new ceo in town. He said, i have to look at this asset management. I will do anything it takes to get into the game. Prettythis is a pressing matter. Wealth management less so but still very important to the future of these banks. You mentioned etfs and the whole move to passive. That is ultimately what is shrinking the margins here. David when you are up against the vanguard who is in the trillions of dollars, you need scale. Alix are they going to sell it, spin it off, or build it up . Jason we dont know exactly yet. It could be all of the above. Probably not. Them Credit Agricole spun off. A number of are ways you can do it, you can make acquisitions and keep it inhouse. You can take your unit, combined ath somebody else, and form separate company, or you can get out of the business altogether. Probably do not get out of the business altogether because it can be a lucrative part of banking. David there is a juicy one. Wall street titans get together down at the breakers, and they are drinking tap water, and they are very proud of it. These are a lot of people we recognize. Steve schwarzman, paul tudor jones. It was for a very good cause, an important cause. Jason in part, the reason they were drinking tap water, clean water is a big issue, especially in florida, as it relates to the cleanliness of the everglades. An important cause but it is always nice to see billionaires acting just like us. When you have the optics of that, a super fancy place, fancy people, tap water, the optics dont hold well. Not sure how concerned people in palm beach are concerned about optics. Jason if you are concerned about optics, maybe dont wear that shirt. Alix the dress code was carried head posh. Rot david thanks so much, jason kelly. Coming up, calls for latvias Central Bank Governor to step down. More on what im watching. Alix and you can watch us on the line, check out our graphics and interact with us. This is bloomberg. David this is what im watching today, latvia. 2 Million People a joining russia, used to be a part of the soviet union. It turns out latvia has a thriving banking sector, particularly after cyprus one out of the Money Laundering business. The Central Bank Governor Ilmars Rimsevics has been accused of soliciting a bride. They arrested him for two days. The thirdlargest bank is accused of Money Laundering or the North Koreans to support their missile program. The ecb is asking them to not give any money out. Its little country, 27 of sovereign debt is held by the ecb. We have a chart that will show the spread between latvian sovereign debt and the bund. Look at where the spread is between a latvian debt and german bunds. Alix you have a governing council today and frank are, so the ecb can address this. What do they do from all of this . Is themr. Rimsevics longestserving member on that counsel. I dont think he can leave the country right now. Alix isnt there a russian angle . David the latvian government, the defense minister is saying that this is all a Misinformation Campaign from the russians. Alix interesting. Coming up, u. S. Treasury auctions underway. We will speak with subadra rajappa, head of societe u. S. Rates strategy. Continuing to climb ahead of those auctions. This is bloomberg. Show me the money. Wages in the u. K. That is the wrong chart. I got you. The u. K. Cannot keep up with inflation as mark prepares for his testimony. Markets prep to discuss minutes from the feds latest meeting. And party like in his 2008. 2year yields hitting their highest in a decade with more supply on deck. David welcome to bloomberg daybreak americas. Im david westin. Now we have the right chart up. It is a wait and see mode for the markets. Flat on the day after the selloff yesterday. The dow closed off down 1 . Storyder, stronger dollar across the major currencies. Sterling getting hit the hardest. Crude a little bit weaker as you have been stronger dollar. David now it is time for the morning brief. At 10 00, we will get existing home sales data. Then at 1 00, the treasury will be auctioning off 30 billion of five young endnotes fiveyear notes. Alix lets get a look at the days business news. House hasnthite knowledge that russia tried to interfere in a 2016 election but Sarah Sanders said it is also clear that they had no impact on the results and the Trump Campaign did not collude with russia. President trump been criticized for not speaking out against russia after last weeks indictments. It is President Trumps first action involving gun control since Florida School shooting. He told the Justice Department to write regulations banning socalled bump stocks. The white house will not rule out the chance the president may back restrictions on rifles like the one used in florida. In south africa, the new president is gambling on a tax hike. Willalue added tax increase from 14 to 15 , the First Time Since the end of apartheid that south africa has raised a tax that is seen as hitting the poorest the hardest. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im kailey leinz. This is bloomberg. David the great treasury sale continues with 2year yields that yesterday the highest in 10 years and a five young and 7year sales to come. Joining us now is daniel cap dive and sue judge our auto. As you look at these, i was here yesterday when they made the sale and it spiked up to 2. 25. Should we be concerned . Subadra we should be watching it closely. What i look at from my perspective is who is actually buying at the auctions. Is it direct, indirect bidders, primary dealers . Yesterdays auction, a majority was taken down by the primary dealers. Typically in the 2year in the front you see indirect bidders, a proxy for foreign demand of treasuries. If that balance mixes and you dont see that much participation coming from foreign Central Banks or the Investor Base, direct bidders, that is a bit of a concern for me. David what has been the pattern on Foreign Investment in u. S. Treasuries, relatively flat, as it gone up or down . Chinese fx reserves have declined in the last two years. Demand for treasuries have declined a little bit. A little bit of a pickup, but in general you have not seen the growth in their portfolio at the same magnitude of the class of a years. So we are seeing less demand from overseas. Alix lets dig deeper into yesterdays option. 26week, allhe 13, the ones auctioned off yesterday at the highest level since 2008. Daniel, why is the dollar not significantly stronger . Daniel the dollar relationship with front and yields has broken down this year. Some of those Core Exchange rates, dollar versus the commodity exporter currencies still follows rate differentials. So not a complete break across the whole market. But eurodollar sensitivity to rates seems to be low. Ro got cheap when their Central Banks were getting into qe, and now there is some pullback to fair value as markets are anticipating policy becoming more synchronized across the g10. Alix it also seems to be a hedging story. You have japanese investors buying unhedged u. S. Debt, insurers coming in to do that. How does this play out in the fx market . Subadra i am more focused on the right side of things. If you look at the japanese balance of payments, there was actually an allocation away from treasuries, into more foreign bonds like bunds. You are seeing japanese investors move away from treasuries. What we track here is the cross currency basis. Yields in treasuries look attractive to japanese investors on a currency adjusted basis, you tend to see demand from overseas accounts. We have not gotten to that point and we are not seeing the kind of demand we have seen in the past from japanese investors for treasuries. Alix on the same side of that, yielded more than the equivalent security. Daniel the investors in these economies accumulated a lot of dollar risk during that period. Now they see their own currencies are beginning to recover back to more sustainable levels. They have a lot of incentive to hedge or hold back on new purchases. That is why the dollar is under pressure. David to oversimplify, has fx consumed any carry trade . Is that all an fx issue . Daniel it seems like the carry trade is in place but the dollar is bizarre in currency. When Risk Appetite is doing well, equity doing well, the dollar is underperforming. Normally with a higher yield, we would expect it to do well. I think it goes back to the structural headwind the dollar is facing. Faster than we would have thought, we thought the dollar would weaken second half of the year. It is playing out much earlier than the market anticipates. Look at yields, 2. 98 on the 10year, Goldman Sachs using their forecast for the year. Where are you at . Ubadra i could see 3 beyond that, i struggle to see what the catalysts are for 15 rises in yield. Alix you see for investors coming in . Subadra i dont see a catalyst in u. S. Fundamentals. If that does not exist, we could potentially see demand coming from overseas accounts when yields stabilize around 3 . Is,ly what i struggle with we have seen a pickup in inflation, have seen positive numbers on the earnings as well as the cpi print much higher than expected on the core. But i dont see a sustained path higher to inflation in the u. S. Maybe in the second half. I find it hard to see how treasury yields will arise on a 15 basis. David the 2. 9 we saw in wage increases the couple weeks ago, is that a oneoff, aberration, that that will come back and . Subadra we have seen the yearoveryear rate go up to 2. 9 for one month and then come back. I need to see sustained pickup in wages. 2. 9 is still a low number of historical perspective. You are looking at 4 wages, and that is a concern. We are still on the low end of the wage spectrum. Of the equity markets, when do you get to the point where the drawback dollar needs to be dragged up . There is no objective level. Once the dollar gets back to more sustainable equilibrium levels, may around 1. 30 versus yen,uro, 100 versus the rates will begin to matter more. Meantime, what currencies are on the upside . Daniel the Swedish Krona could do great. The euro has 5 to go over the next year or so, a decent move. Dollaryen could really break down significantly. That is one that is very high relative to longterm equilibrium. David what about Commodity Currencies like the Australian Dollar . Daniel we think those are much closer to longterm equilibrium levels. The Canadian Dollar does not need to move much at all. Bank of canada and the fed are probably in sync at this point. Dollar canada probably does not go anywhere over the next couple of years. Aussie, maybe an upside from current levels. The big caps are versus the yen, euro, those qe currencies. Alix lets focus on the options specifically. Is the good trade going to be shorting in the five and 7year . Subadra the five looks relatively cheap. Given the fact that we have sold off and there is some concession going into the auction, i would not be surprised to see what we had yesterday. Concession going in and then demand coming at the level where it is at just before. Alix seven, the same strategy . Subadra i think it could go ok, kind of an orphan part of the curve, and we could see some demand. 0s, where do you see 2 1 30s . Subadra there is still potential for the curve to flatten. We are in the middle of a rate hike cycle. Ultimately, we will need to see a flatter curve. Alix what would be the breaking point for the 2year . Flatter, sure, but how much more can we flatten . We are ending the year around 30 basis points. We are not calling for a flatter inverted curve by the end of the year. We could see some term premium being built into the back end of the curve because the ecb is already tapering asset purchases. We could see the curve getting close to flat but not really getting to zero or inverted. Alix 30 basis points was insane a few years ago. Subadra rajappa, thank you. Daniel katzive is sticking with us. Euro dollar lower after a weaker reading on eurozone pmi but growth could be a killer for the first few months. This is bloomberg. Kailey this is bloomberg daybreak americas. Glencore is reported record annual profits thanks to its Marketing Business and metals and mining trading. The swiss commodities trader and miner says it take 2. 9 billion of dividends this year, well above the minimum it had pledged. Debt by acut net third. For the first time, dish network hazard ordered signups for its low cost sling tv service. They have attracted 2. 2 million paying 20 a month, a sign of progress in efforts to slow four years of subscriber losses. Dish is trying to attract those who dont Pay Tv Service for cheaper options. When it comes to buying stocks come it is america second for barclays. Europe has replaced the u. S. As the banks favorite market, based on what barclays sees as the regions cheaper valuations and strong earnings potential. The u. S. Had been a top choices 2010. That is your Bloomberg Business flash. Europe,aying on eurodollar weaker today after a miss in the composite zone pmi. But the economy is still expanding at the fastest quarterly pace in eight years. Joining us in this daniel katzive. Joining us also is gina martin adams. Daniel, what is the breaking point for eurodollar, when does it hurt growth . Daniel you have to watch the year on year change. Still not very high. Once that starts getting up to the 10 area, the ecb may get more concerned about inflation headwinds. ,he other thing to note Inflation Expectations have been stable or higher in europe, even though the euro is going up. It is hard for the ecb to argue that the euro is hurting their mission. Alix if you are barclays, and you like europe in terms of faster dividend growth, do you need to have a negative view to support that basis . Daniel i dont think so. There are Global Investors that dont need to take the fx risk because they can hedge away euro risk that current Interest Rates. The view is independent of the equity fx story to some extent. Alix i want to pull up a chart that shows the negative side to europe, looking at earnings revisions. Negative four four of the last five weeks. Is this a legitimate, fair case . Gina a lot of it is currency. There is a lack of transmission from whats happening in the macro indicators to whats happening in the earnings stream. There is a big difference from the earnings season in europe and the u. S. In europe, increasing expectations for growth. Here in the u. S. , we are not seeing the same degree. We just crested that 50 level last week. We started out in a much more negative, broader reporting season. , but oneting better notable lack of improvement is in the industrial space. Things are so great in the macro. Why isnt it translating to industrial earnings . Only a quarter of european industrials have reported so far but there have been notable misses so far. Is biggest reason currencies. This has been a consistent issue in europe, starting since last year. It is showing up in the earnings results, which are becoming a drag on stocks. This is largely the biggest disappointment last year, europe was not this outperform or, but the macro data was great. So the missing link here appears to be currency. David i really dont understand this. On the money hand, there is growth in europe. That drives the euro up. But the company dont benefit from it. That seems like a circle. The biggest problem is a lot of these economies are very export sensitive. Even the you have greater growth and better domestic economic , particularlyies in germany, to run a lot of europe, are very export sensitive. They have to see accelerating growth on top of the currency to make up for the appreciation. David but the exports are not going down in terms of current account deficits. The exports should be going up relative to imports. Gina think about the difference in growth rates. The euro went up 10 . Global Economic Growth did not accelerate 10 . It was the translation effect of that. Not to mention, costs are increasing, too. Just because you have this incremental improvement in topline growth, if you have this massive acceleration in currency and Commodity Prices accelerating at a faster pace, you have a lot of translation into the bottomline earnings growth. Daniel the other thing to remember from an fx perspective, the ecb worries about a trade weighted euro. The dollar is weak broadly. Trade we need euro has not gone up nearly as much. That is something to keep an eye on. Alix what is your base case for the ecb . Daniel on a glide path to begin tapering later in the year. Ecb has told us with their plan is for the next nine months. Focused on forward guidance. In policy arees still nine months away. David gina, looking at the u. S. Market, is there an imbalance that will have to resolve itself sooner or later . Gina its a good question. Strategies have tried to play the europe card for years. We have to get more optimistic about european shares. For years, we have been generally disappointed. I think the market is telling you something about the u. S. Outlook still being very solid, fundamental outlook is strong, earnings outlook is stronger, and europe will struggle a little bit as long as the euro is a problem. If you get a reversal, if you get some Dollar Strength in your weakness, that conflict the scale. But even though we have had strong growth in europe and improvement, and Monetary Policy makers have been easier than in the u. S. , it has not translated into results. A lot of that is translated to the currency. David thank you so much, gina martin adams. Daniel katzive will stay with us. The u. K. Released unemployment data today as mark carney addresses parliament this morning. We will have the latest from london. This is bloomberg. Alix Prime Minister theresa may speaking to parliament today. With us today is our u. K. Parliament reporter. I want to start with this chart. It is the white line, cpi inflation for the u. K. The blue is the basic wage growth. The threemonth average is picking up but still other inflation. What kind of pressure does this put on the mpc . Pressure. Amount of if wages are lagging inflation, people have less money. That means you can consumers are struggling, a squeeze on living standards. That is a big issue here. Consumers are huge driver of the uks economy. Maybe we are starting to move out of that inflationary cycle and we will see more wage increases come through, but this is where people are now. Alix dan, what do you think when it comes to sterling . Rate hike still priced in, as many as two in some respects. But then you have the inflation data. Daniel we think the pricing is on the aggressive side. The markets are trying to trade sterling as if it is a cyclical currency where all that matters is Monetary Policy but there is a structural issue on the European Union negotiations. Very complicated negotiation maintainingplicated cohesiveness on the cabinet side in the u. K. , coming up with something that works for the eu and u. K. During the process there will be a lot of headline risk. It will keep the bank of england more cautious. I think the markets are underestimating how negative that could be for the currency. For the u. K. ,wirp showing where the market things we will see the rates at the end of the year. Implies oneine hike. Purple implies two. Both are holding up well. Very get anything on this from mark carney . Anyhat is the question, hints on whether we could see a rate increase may be as soon as may. That is what everyone is watching for. Thank you very much for being with us. Daniel katzive is staying with us. Sad breaking news. The reverend billy graham has passed away. He was the noted worldwide evangelist who had rallies around the world since the 1940s. He was close to several president s including truman, johnson, and nixon. He was a close spiritual advisor. I actually met him a couple of times. I grew up in a church in click, michigan where the pastor had worked with him. Alix 99, died at his home in north carolina. , peacefully. David we will have much more on this. This is bloomberg. Alix this is bloomberg daybreak. Im alix steel. Wait and see not but the tone is more optimistic heading into the minutes as well as the fog i got auction. Dow jones off by 1 . S p futures slipping into positive territory. European stocks a touch this weaker. Sterling continues to get hit after its unemployment went to 4. 4 . A broader stronger dollar story across g10. Gilt also getting a nice bit. In the u. S. , the selloff on the front and continues. Yields up by four basis points. Commodities weaker as the dollar continues to maintain strength. David now for an update on what is making headlines outside the Business World. Kailey leinz has more. Kailey Evangelist Billy Graham has died, he was 99. He became known as the most influential preacher of the 21st century. British Prime Minister theresa may is considering a longer brexit transition period. She is asking the eu to rethink its plan to end the transition that businesses want on the final day of 2020. That can worsen her relations with members of her own conservative party. They want the u. K. Out of the block as quick we as possible. Spacex is set to launch another rocket today which will carry a spanish satellite that can carry High Resolution images of the earth, even if covered by clouds. The rocket will also employ two experimental satellites that will multiply Global Internet access from space. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im kailey leinz. This is bloomberg. I am of a certain age, we used to watch apollo go up. We are a long way from that. They are not launching a tesla car now, satellites this time . Alix spacex is launching their own satellite. That is the real nut. That is when everyone is paying attention to. David more broadly, the privatization of space. It was always us against the russians. Forget about federal government infrastructure spending, this is elon musk. Thing isimpressive when you see those booster rockets come back. I cannot believe they are doing that. Alix i agree with you. 7 this morning is what we have as the guidance. Taking off from california. Today, the Federal Reserve publishes its january meeting minutes. Investors will be watching for any clues on accelerating inflation and what that may mean for the feds rate hike trajectory. Joining us now is Carl Riccadonna. Still what this is daniel katzive. I want to focus on three or four words here. It used to be that under janet yellen, they would talk about gradual adjustments. Now in the last minutes they say further gradual adjustments. What does that mean . I think we are getting overly focused on the further language. I think that is continuation of what we saw, more of the same, gradual pace under chair yellen will continue under chair powell. I dont think we should read into that a strong indication that the fed is leaning toward four hikes. A bitmeeting minutes are more stale than usual, we have a new fed chair. Average Hourly Earnings surprise in the jobs report came after that. Epi news came after that. The fed is led by a different person and possibly thinking of the world really now compared to when those minutes were corresponded to. David will this have an effect on the dollar . Daniel i think you always see the sign of the market that is the weakest after the minutes. The market response to the headlines that are most troubling relative to consensus. If they come out hawkish and there is upside pressure on yields, the dollar could do better. To do really well against the euro, you need to see equity market, the pressure. That would put some pressure on the big short dollar positions out there. If we market handle it well, maybe not. Alix is the conversation that be aboutisten to today acceleration of hikes in 2018 or continued hikes over the next three years . Carl continued pace. As we look at the hawkish dot plots from last year, we are content with three rate hikes. Certainly, if the dollar continues to weaken considerably, easing financial conditions, or if we suddenly see a meaningful acceleration in the labor market, that could shift sentiment toward four. What is more likely, especially as we look to the productions of the march meeting, maybe pricing in more rate hikes for next year. We are at a three per year pace. Maybe that further gradual pace is signaling of three hikes per year next year. Avid youre not psychologist, but explained the psychology of the fed. On the one hand, 2. 9 percent rates, and on the other hand, the market goes crazy. Should i be concerned about rates going higher or stick to my knitting . Think they were relieved that the markets were reacting to what the fed was doing in terms ever moving policy accommodation, pricing and more inflation. This is one risk you mentioned hawkish language. One risk is there will be some jawboning about Financial Stability concerns. This has to do with the fed tightening policy and the markets not responding. We started to see that in 2018. That language in particular could be a bit stale. Alix lets take a look at rate hikes. This is fed funds futures. The yellow line looks at where the market sees rates going in 2019, the white line, the end of 2018. Three hikes for this year, next year looking at one and change. Where are we going to see the rerating if we see a continuation of hikes . Daniel no matter what the fed says it thinks it will be doing, it is all contingent on how the economy holds up. Tois hardware the market reprice 2019 based on what the fed is saying in january 2018. You may see some upside, steepening of that part of the dont see the market likely doing major repricing, no matter what the minutes say. Carl excellent point. Further gradual. Plenty of time for the markets to respond to whats happening in the economy. If the fed is racing toward four and then backing off next year, it is almost like they are misleading the tax reforms and fiscal stimulus. This is a smarter fed than that. They will not panic over a shortterm growth spurt. You make an interesting point that i had not thought of. If you are a policy maker, you might like the fact that the markets are overreacting to that 2. 9 . That propping his comes back out of the marketplace. The market still has the capability of adjusting. Carl as long as there is a twoway market. Dramatict want a stocks were, but a little bit of a selloff would be a welcome development, especially to the hawkish leaning folks who have been concerned about these ups in the equity markets. Alix i like how williams and hawks are now synonymous. He is potentially on the shortlist for vice chair. Alix we had a change in who is voting this year. What are going to learn about peoples stance that we dont know already . Carl i think we can read more from their public comments. The committee has somewhat of a more hawkish profile this year. That the duty think that maybe it is four hikes, but when you look at the evolution of the dot plots, the hawks were pretty locked in in the evolution between september and december. David we need to say goodbye and thank you to daniel katzive. Always great to have you here. Alix also looking at the impact of the credit market. Sprint came in and issued 1. 5 billion worth of debt. This is the high gilt market. 336 basis points. Incredible tightening, no matter what we have seen in the markets. Anything that the fed can do to shake the credit markets . Carl they are watching carefully to see if all of this expansion of federal Lending Demand is going to put pressure on the private markets. That charge is showing us that crowding out is not an issue, at least not yet. Lisa abramowicz is here, by the way. What did we learn about the credit market yesterday . Lisa lets put this into perspective. It is the biggest junk bond issuer in broad indexes, more than 30 billion of debt. Its been looking for a suitor for many years. Yesterday it said, by the way, we need to get up to speed with forrn technology with 5g wireless distribution, so we need another billion dollars. Basically, the junk Bond Investors were a little bit scattered, nervous by this particular issuance. They are adding yet more debt on to this massive pile. To give you a sense, their bonds did selloff. So even though you are seeing that tightening in spreads alix didnt they want to raise a billion and they got 1. 5 . Yes, but existing bonds did selloff. To me that is fascinating. At a certain point, you are getting some pushback, a feeling of discernment from investment on the edges. David that is the interesting question. Sprint is a company how do i put this diplomatically has not been on a path for success. They have real challenges in their underlying business. Forget about the borrowing of money. There has been a lot of people thinking, it is not sustainable the way they are going. Lisa they have been lowering prices. Think of the olympics and all the ads of how to grade was to switch to sprint. That cuts into margins. Right now, junk rated Telecom Companies have a very difficult scenario. They need money, capital to build out their infrastructure and bring it up to speed into the modern era. But they are not able to generate the same kind of income from their clients as they used to. Alix in terms of the credit market, where are the stressors . I would not think these are cracks in the market. Walk me through the more moderate junk world. Now, the highyield market is becoming more idiosyncratic come even in the low rated, highyield bond market. We had a deal with albertsons yesterday. The Grocery Store was going to buy right aid. Right aid bonds were much bigger beneficiaries of that news. Rated bonds go above par. That was a huge benefit, and would be a boon. On the other hand, spring bonds were selling off in addition to an Additional Fund raise. I would argue that right now you are getting more discernment and a bifurcation of specific at to a lot of people indicates more help, than perhaps in the past. David we tend to talk about equity markets selling off. What about the bond market . You see that spread so narrow on high yield, does that make the fed nervous . Carl they are watching financial conditions more broadly. If equities are up, that is a concern. If spreads are narrow and there is no discrimination in the market, that is also a potential point of concern. But what i think we can see by looking at highyield spreads, credit spreads in general, very tight spreads. This is an important indicator of where we stand in the economic cycle. Year, we kepthe hearing we are in year nine of the cycle so the next recession cannot be far off. Credit spreads are an excellent barometer of economic cycles. When that spread starts to whiten it out, that could be the tightening of credit in the late stages of a cycle, useful looking at recessions. That is not where we are. We are still solidly in the center point of this expansion. Point,his goes to lisas Investment Grade in highyield spread. More are seeing idiosyncratic risk, do we need to Pay Attention to more specific companies now . Lisa it is always worthwhile looking at broad strokes, but companies are important, and there is a question come at what point do companies create the market . Sprint is a market massive debtor. If they run into trouble, what happens . What happens if verizon, another company with a ton of debt, on the lowest near the lowest rank of debt one of investors are forced to sell . Could that be an idiosyncratic risk itself . Right now, corporate analysis is going to be more important than a few years ago. Ofid Carl Riccadonna Bloomberg Economics and lisa abramowicz. Coming up, discussing the u. S. Housing market. Numbers are coming out in about one hour, 15 minutes. As you commute in today, you can tune in to listen to tom keene and Jonathan Ferro. You can listen all across the United States on sirius xm radio. Live from new york, this is bloomberg. Kailey this is bloomberg daybreak. Coming up later today on bloomberg markets, Neel Kashkari , minneapolis Federal Reserve president. David borrowing cost for those buying houses are going up and Mortgage Applications are done or a second consecutive week. The mba Mortgage Applications index fell 6. 6 last week and the average rate for 30 yaya toure loans increased to the highest since 2013. Joining us is the laura richardson. You know these numbers. Tell us what is going on. At 10 00. Ome sales what is happening in the Housing Market more broadly . Nela a continuation of the last three years which is really slim inventory. We have not built enough housing to keep up with current demand, population changes, and with the growing jobs market. When we see at redfin working with buyers, people are ready to pounce and nothing to pounce on because inventory is so short. It because Mortgage Rates are going up, is that biting into the demand . Nela when did you buy your house, what was the market rate . I got mine for 3. 25 . If i went to four point 1 , that would be a thousand dollar increase. Nela what will make you leave mortgage . You may not like the house but you will always be in love with the mortgage. That is what we are seeing sellers grapple with. There are some firsttime buyers in the market will never seen a rate over 5 , but we know that rates are still fairly cheap. What is really a headwind is inventory at home pricing. David we have a chart on inventory that may illustrate what you are saying. I never thought about the fact that if you have a cheap market, you may hold onto that house. We have not seen any noticeable increase in inventory in two years. It is worse the more affordable you get. There has not been any meaningful increases in starter homes in several years, since 2012. We are seeing firsttime buyers cannot compete, there are a lot of investors, a lot of people who want to serve that singlefamily home into a rental or that condo into an airbnb. It is really hard to compete. Alix we will get to that airbnb part in a second, but what have you seen in the last few months as we head into the end of the year, seasonal patterns based on tax reform . What have we noticed in the Housing Market . See in theyou will numbers that cannot today is weakness in sales numbers. First of all, it was cold in december. We think that curtailed a lot of touring and housing activity. I think you will see the main laggards will be in the midwest, michigan, cincinnati, people in places that had real weather events. But you will also see the uncertainty of tax reform. People did not know exactly where they stood, they still have not seen the benefits in their paycheck. What they know, especially in new york and new jersey and california, is they cannot deduct as much of that house price as they used to. They are capped at 10,000 for state and local taxes. That is going to be a meaningful driver for some buyers in markets. Alix we spoke to sam zell about that. That me and my housing. He says your budgeting is messed up. He said it will not affect people who want to buy a house. You disagree with that. Nela house prices are so high right now, buyers are making calculations. If it is more expensive to buy a house, if it feeds back into your monthly payment, they will offer less. Buyers have a slight advantage because the price has just gone up from december to january. David are housing prices that high . In the northeast, there is a perception that in connecticut, westchester, parts of new jersey, that house prices have come down, making people less willing to sell right now. Nela perception may not be reality. Redfin is in urban markets as well, so we are in the cities. We see that house prices are up 7. 8 yearoveryear. That is a full percentage point faster year over year than last year. We are seeing an acceleration and pricing pressure. More houses are selling above list now than last year, and the amount they are selling for is higher. So this tells me this will be a really competitive spring market. That house price increase is not going anywhere. Alix lets move into the airbnb part. Luxury pushing into shortterm rentals. You build this highrise condo but you leave a couple of floors open or luxury rental airbnb. Do you see this permeating the market . Nela i think the effect of airbnb is not completely understood. On the one hand you see that luxury side, and experiential lifestyle for some people. I can see were there could be a market for that. But also, it could be an affordability mechanism. If you can rent out a room or basement on airbnb, you can bring down some of those mortgage costs in a way that you could not do as effectively as a fulltime landlord. It is another option for home buyers who are willing to take a risk in a different way. Alix neither richardson, so good to see you. Buying supplies of cobalt. More on what im watching next. If you have a bloomberg terminal, check out tv. Interact with us directly. Check it out. This is bloomberg. Alix what im watching is apple meets commodities. Cobalt is used in batteries, from electric vehicles to iphones. Now we learn apple may buy supplies directly from minors for cobalt because they are so scared that we are going to see a shortage of cobalt because of electric vehicles. Talk there is a lot of about that. Where does cobalt come from . Alix the majority comes from the drc. David no geopolitical risks there. China has been instrumental in building up their own supply over the last couple of years. In japan, we heard mitsubishi corp. Will be doubling its stake into mitsubishi motors, which a shareholder, because they can secure things like nickel, cobalt, lithium. David we know who else is in cobol, glencore. Alix there were some rumors that apple would secure some cobalt from glencore. Andng up, Michael Purvis chris cressotti. This is bloomberg. Show me the olympic winter games like ive never seen before. Xfinity x1, yeah, i always know the scor. Triple corks in 4k. Lookin so sick. Stream live on every screen, every win, every trick. 2000 hours of coverage, get your mind blown. 50 olympic channels, yup, youre in the zone. And if theres something that you want to see, pick up that voice remote and just say show me. Experience nbcuniversals coverage of the olympic winter games like never before with xfinity. Proud partner of team usa. We use so why do we pay touters thave a phone connected. When were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And now, get a 200 prepaid card when you buy an iphone. Its a new kind of network designed to save you money. Call, visit, or go to xfnitymobile. Com. 30 from new york city, minutes until the start of trading. This is the countdown to the open. United states auctions 50 billion today. The message from Credit Suisse saying stocks will continue to climb with yields. We await Federal Reserve minutes finalhair yellens meeting as chair powell takes over. Positive two points on the s p 500. The euro down by. 1 . Treasuries stabilize at the long end, coming in about a basis point. The focus has been on the front end of the last 24 hours. Treasury50 billion of notes are up to date. Its what some big strategists have been saying about this week