Mixed picture w m go, a mixed picture with the cac 40 and to 10 and the dax is up sub 1 and the ftse 100 in the u. K. Up 5 10 of 1 and the ibex in spain one of the worst performers. Asset on a across headline level with european equities unchanged. Space, a little bit of Dollar Strength which means cable off by 1 10 of a percent. Interesting dynamics around sterling with employment and wage data with mark carney testifying and news about brexit geared brexit. And the u. K. And their view on the transitional deal. We ceos move lower we see yield move lower in the core and periphery. Thematic chart that i got from Marcus Ashworth. Spain and the u. S. s 30 year yields rapidly diverging. Front and. At the end. The final chart, i mentioned the euro, after flash pmi data on the eurozone coming in weaker than expected. The euro off slightly and approaching its trendline since middecember as momentum appears to be favoring losses. We like to watch the technical charts. In the u. S. , the major averages trading higher with the bulls out and the dow, s p 500, nasdaq all solidly higher after yesterdays bearish intraday volatility. A reversal to the downside but buyers back today. The transportation average up 1. 8 , the best day in more than one month which has to do with strength in airplanes and trains. Individual movers trading higher, alaska air, American Airlines come Union Pacific, kansas city southern, Nothing Specific behind this. We do have Union Pacific earlier presenting at a barclays industrial conference. A lot of strength. No strength and one reason the dow is lagging is walmart. Yesterday it fell more than 10 , its worst day since 1988. On the open, it had been higher but reversing lower, down 2 , a drag on the dow. It seems investors not cheering or buying the dip, the rebound around the idea walmart had a disappointing outlook, it is sticking with that view that it could be a tough year for walmart and shares are lower. Where we see a little interesting action, the 210 spread, it is lower, a yield a real look at inflation and Rate Movement with it down it could be a tailwind for stocks, despite the fact we have a twoyear trading higher. Down 9. 6 ,s, bitcoin it has recently been in a rally, up more than 50 , more than 100 from its low. The technicals, they are pretty interesting, this is g btv the last year trading action, the move from 1002 20000 and in december and early this year, congestion and the sellers took advantage, took control with a big move below 6000. We have the Bitcoin Trading below the uptrend which say the sellers are in control. It could suggest we will see the area of congestion have a complete confirmation to the downside. It would be below 1000 per bitcoin. Vonnie thank you for that market update. Calm and politics. The situation not for emerging markets. Mexico and brazil, regime change in south africa. Here to discuss it is rick schmidt. Than 50manages more billion in total assets and 19 billion in em assets. He has control or partial control over major funds including the Global Equity funds and the emergingmarket funds. Correct . I am part of a team. Vonnie lets talk about the about markets and global equities. Where are you skewing that fund . Our Global Portfolio is the best want to ask, look at my actions and not my words. For the last two years, three years, reduced in the u. S. And increase in europe and emerging markets. Vonnie everywhere . We are bottomup. Decreasing in the u. S. A 13 year low in our weight in the United States. Ago, in five years years ago, we had an overweight. Vonnie why is that . Looking for more of a correction or you think it will be too volatile . Or everywhere else is more positive . Valuations. We have no view on the politics of the u. S. When we look at the businesses, we find cheaper examples we can buy outside. Vonnie and what countries . Thats in what countries . Europe and japan, and europe we and materials companies, atlas top , Industrial Gas companies that are very internationals, they happen to be headquartered in europe and cheaper than in the u. S. With violations. Vonnie you held onto nike and priceline with u. S. Equities, are we not getting full with nike . Nike had a bad year since the until the Fourth Quarter, that is a good example we like the longterm outlook and we held. Same with priceline, it is a european business, European Hotel business is more important than the u. S. On a bottomup point of view, we like the business. Nejra good to see you. What are you expecting from volatility for the rest of 2018, and what will it mean for your allocation . Answer the second half first, nothing to our allocation and we do not invest based on volatility but see it as an opportunity. The important thing to remember is that volatility was very low last year but the levels we are seeing this year are not particularly high by a longerterm standard. I do not see us making any changes. Europe,hen it comes to we have had these flash pmi day out today that are a little bit weaker, not suggesting you pay that much attention to this but the you leave in the europe growth story that we have moved from a time of recovery to expansion . The data would support that view, yes. Nejra in europe, what interests you most . On a geographical basis or sector level . We are bottomup investors but financials is a great example. We have one financial in our Global Portfolio. Vonnie it is italian. Spanish. It is an emerging markets bank. View is bottomup and the businesses we own are primarily international businesses, selling throughout the globe, just happened to have their headquarters in europe. I need to get my banks straight. The us more about emergingmarket portfolio because we have a lot of elections coming up and you suggest that will not make a big difference to what you do with your holdings. It probably will not make a difference but it could, always a risk. If there is one thing the difference between risk and uncertainty, everyone knows there is an election coming in july 1 in mexico and i forget which month in november in brazil. The result of those could have an impact but we think the prices are at such a level it is still attractive. Vonnie how do you manage for currency risks, or do you . Is it part of how you think about it, taiwan semiconductor, samsung. We have the ability to hedge in our portfolios but we do not primarily because we do not think we can add value by doing so am a particularly in emerging markets, it is expensive. On balance, we try to find businesses that the currency will not matter. We will have a shortterm effect. Vonnie it matters if the dollars depreciate. For a short time but most great businesses will be able to get the earnings back by raising prices. Assessingwere all about where yields are going, particularly treasuries and will be tenure hit 3 or 4 . You are a bottomup investor, does this have significant for you . Very little. It has some significance for a discount cash flow dilation house. Violation house. Valuation house. We do not try to predict them. Vonnie top allocation in that fund is banks. They like that sector. We are selective in where we own them, we own them in smaller markets and have some u. S. Financials and we only own one bank in europe. Vonnie we have to leave it there but great speaking with you, rick schmidt. You manage the emergingmarket and Global Equity funds along with other people. Lets get to the first word news with courtney donohoe. A shortage of properties in the u. S. Is hurting the real estate industry. Home of previously owned fell in january to a fourmonth low and contract closings dropped 3. 2 to an annual rate of less than 5. 4 million. The inventory of available home fell almost 10 to the lowest level in january in almost two decades. President trump will hold a listening session about School Shootings today and meet with parents, teachers, and Students Affected by the School Shooting last week. And the shootings at columbine, colorado and newtown, connecticut, he is a strong supporter of gun rights by the white house says he is willing to listen to guncontrol proposals. British Prime Minister theresa may is considering a longer brexit transition time, she has asked the eu to rethink its plans and the tradition on the couldday of 2020 which worsen her relations with members of her own conservative party who want the u. K. Out of the block as quickly as possible. Wrote renowned christian Evangelist Billy Graham has died , he preached to more than 200 Million People in 185 countries over six decades. He became known as the chaplain to the white house, giving and access to u. S. President s and other world leaders. He is considered the most influential american preacher of the 20th century. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am courtney donohoe. This is bloomberg. Nejra thank you. Coming up, Latvia Central Bank and broiled in scandal when his private banks are not bearing better, we are not we will get you the latest. Mark carney is speaking before Parliament Treasury committee, giving the central bank or rather talking about the quarterly Inflation Report and sticking to the script from the quarterly Inflation Report we got recently appeared he said the u. K. Is headed for higher Interest Rates but policymakers need clearer guidance on the timing of any future rate increase. Mark carney has been sticking to the script, saying rates will need to rise somewhat earlier at at a greater extent than previously anticipated. The pound has been paring losses. On the follow it all bloomberg. This is bloomberg. York, i ame from new vonnie quinn. Nejra live from the city of london, i am nejra cehic counting you down to the european close. Butmembers meeting today one member of the banks governing council is conspicuously absent. The governor of the bank of latvia is facing allegations of soliciting bribes. He says he is the victim of a Smear Campaign which other latvian Officials Say is directed by the kremlin as the nations thirdlargest bank is under scrutiny for possible ties to north korea. Lets go to our russian politics reporter in moscow. There are a lot of threads coming together. It is quite complicated. Can you explain where we are . Governor is ine his post but he cannot carry out his duties. Because, under the terms of his bail, he is not allowed to leave the country. And because he is under investigation, he is not allowed to work as a governor. He is not stepping down and says he is innocent. He claims he is the victim of a Smear Campaign. There are a lot of allegations flying around that he is making against certain banks that have been made against him. This will take a long time to play out. Nejra what position does this put the ecb in . It is a very delicate situation for the ecb because, if any of these allegations are correct, it means someone who has been at the heart of the decisionmaking and Monetary Policy in europe is guilty of extortion, demanding bribes. It is here is serious. Vonnie it is eerie serious. It is very serious. Vonnie im great and hungry and turkeys doing right politically and the ecb is not supposed to be concerned with national politics. How does that move forward, does the European Union have to come up with some guidelines politically to finish it as a union . You have countries like latvia where the problem of Money Laundering has been around for quite some time. This is a problem, how do you force in a National Level these rules . They will have to think about how you make sure that there is compliance across the block. Vonnie i have to ask you the continuing reaction to the Robert Mueller investigation in the United States. And thethe newspapers media in moscow say . There was a sense of shock when the indictments were issued. On the face of it, russian officials have tried to say that they do not really care about ,hat is happening, in reality they do because they see the issue will continue to escalate in the United States and what does it mean for russia it means they face further sanctions. He is reporting on russia and latvia. This is bloomberg. Nejra lets focus on football. Of the english kind. Contracts for elite footballers playing for the wealthiest european clubs can be priced in hundreds of millions of euros. The president of fc barcelona joined us to discuss the markets for players likely in a messy and neymar. , revenue was so quite nobody would pay that close but they did. A lot of money. That means the market is growing. Inflation of course. Are in this industry of football and will see 22 Million Euros and we spend them. The purchase you made would not have been possible without selling them are neymar . And possible. Impossible. Sible they decided to sell because it was an option they could not say no. At a high price. You used to have a base case of 60 Million Euros and the year ago you said you can top it. You spent almost 250 Million Euros. Variables thatme will be produced in the season coming up. , 60y year, we have a club Million Euros to spend on new players. , we havel some players additional. Last summer was different because a player we did not want to leave left and is playing in germany. Has it. Or will we go higher has it peaked or will be go higher and higher . Clubs belongure, to state or very rich people and are investing money in football and the money comes to the clubs. We try always to keep our players because we do not want to sell and want to have a good and Competitive Team trying to win a title. Nobodythat next summer will buy our best players. Lets talk about your best player, messi. He is the best player in the world. 200 million in diet, 300 million in volume, 300 million . It is 300 million but we changed it last november. 400 Million Euros. 700 Million Euros. Pleasant ofare the the president of the club, if somebody came in to offer you 700 Million Euros, you would not sell messi . No. Not even if it secures the future of the club . No. We want to have good football. A unique way of football we do player. I is our key messi does not want to leave barcelona. He likes the city. He came from argentina when he was 12 years old. If ahave as many player does not want to leave, he will stay forever. Vonnie the president of fc barcelona, a convinced resident talking to bloomberg. Nejra lets look at where european markets are trading as we head to the close. Stoxx 600 on a headline level pretty much flat but divergence in terms of geography. Dax lower and the ftse 100 is higher all the cac 40 is pretty much unchanged. Nejra from bloombergs European Headquarters in london, i am nejra cehic. Equities just finished in european trading and lets take you to the action. On a headline level, pretty much unchanged for the stoxx 600 after backandforth at the beginning of the week. On a regional basis, interesting moves with the dax lower by 2 10 of 1 and the cac 40 up to tenths of 1 . U. K. Ftse 100 up 6 10 of 1 . On the downside, spain either x down a tense of 1 . Down a 10th commodity producers have been leading the gains, glencore among them, Financial Services doing well. Utilities on the downside and personal and Household GoodsCompany Leaving the losses. A mixed picture when it comes to the industry groups. Six income space, generally yields are moving lower in the session with the euro soft. Pmi data that missed forecast in the eurozone. 10 year spread, this has been rising a little bit recently as we approach the italian election on march 4. How much of the risk is priced in . The spread has tightened a little bit today but it could rise as the election gets closer. Is it a turning point . Year giltme, 10 yield, down three basis points, 1. 55 percent with u. K. Assets interesting in this session with weker sterling earlier after saw the Unemployment Rate in the u. K. Unexpectedly rise. News around brexit with a floor to cable. Mark carney and other boe officials testifying to the Treasury Committee and the outcome is that generally we are seeing sterling lower. 10 year gilt yield also lower. That is a look at the european market. Vonnie a quick look at assets in the u. S. , watching stocks all they are in the green, particularly the nasdaq but to year yield up 2. 26 . ,igher yields and lower price therefore the twoyear and the 210 spread is interesting. Thettle bit of a lift on front and but the spread is coming in 63 basis points. Trend for the dollar and the counterpart is the yen, not changing. Movement. Not much of four year ion ratio,the bills to cover 2. 75 versus 3. 38 at the previous auction. A little bit less. We have the real auction we are waiting on at 1 00, a fiveyear auction which will be much more interesting and telling before the fomc meeting at 2 00 p. M. Our rates specialist joins us, repricing this week, a fallout from the equity tumble is happening now. What do you read into it . , there are a couple of things the fourweek auction today, bonds orand, more bills being auction and not a surprise demand stay the same with more supply. Lower bid to covers. Now, we are repricing for the fact we have more supply. And inon the front particular and the Treasury Department will issue 6 billion more of twoyear and three your notes and 1 billion more of everything else. It makes sense that you have today with twoyear notes higher in yield and the rest of the curve is flat. Vonnie is it what the fed was hoping would play out . They were hoping for higher yields but a steeper yield curve which from to tens, you have that but others you have not, 530 and other yields which have not steepened as much as the 210. Vonnie the curve may steepen as soon as the maturities are in the spotlight. I am not so sure about that because primarily the amount of supply on the front end will be much higher. It is possible that the curve may selloff but ultimately is a curve flattening. I will be looking for any minutes today, how much has the fed thought process changed . Their meeting was in the midi middle of a market meltdown. We are expecting them to hike in march and two more times this year but the market is only pricing for one 2019 hike. If that changes and the fed is hawkish, you have a more flatter curve. It is the curve shape that will matter. Nejra we have been talking about and Michael Mckee talked about it, what the word further meant. What do you take away . It means further tightening and continuation of the trend of economic trends. When you heard some fed speak earlier, everyone thinks we will hike a few more times this year. When you look at economic trends, inflation which is heading towards 2 in Core Measures the Federal Reserve looks at, it is likely they will continue to hike. The market is not pricing the risk enough of 2019 that activity. Once you get that, you can see twoyear and three your notes pop a lot and people may talk about a policy era that the fed will go too far and the economy will not be able to stand 3 fed funds rate. When that happens, i think you wind up getting a very flat yield curve and that is when you see a peak in yields. Nejra should we still be talking about a bond bear market . In some ways you have had it, we are well off the lows in Interest Rates and you have seen prices go down in a lot of instruments. Question perplexing me is what makes a bond bear market continue . Why would we have significantly higher trend in yields and it has to come from inflation moving particularly higher. One of the reasons we have higher yields this year is a return of risk premium with real yields, the yield on things like treasury inflation protection securities has gone up a lot. Inflation expectations have not cured it tells me that when you sharprisk off and have a that may harm economic growth, you can see yields rally back down quite a lot. Inflation expectations tend to be more sticky and we have not seen that increase over the nearterm in inflation expectations. Vonnie henri pricing, Michael Mckee was asking Neel Kashkari sloppiness, you look at the securities and fixed income space, is there anything . Variable loans . Any aspect of the market you are worried about . In the credit market, the spread market, we have not seen the same type of activity that has been associated with credit bubbles. We have seen leverage rising a little bit but earnings also continuing to move higher. The activity at the corporate sector, particularly on the back of the tax plan will be important. Could you see repatriation of overseas held cash and use that to pay down debt . In which case you could prolong the credit cycle even longer. Vonnie partly seen it already are we seeing it already . Basically, generally speaking, they could use it for capital expenditures, they could use it for share buybacks, or to pay back debt. Depending on the share of how much used in aggregate, that will matter. If a lot of it is used to pay down some debt, and particularly for highly leveraged sectors and companies, prolong the cycle longer and you wind up with an environment or you get growth at unprecedented length of cyclical growth. Vonnie we should not complain. Not yet. Nejra thank you for coming vonnie thank you for coming. Lets get the first word news. Opec could be forced to stick with cuts for longer than planned, according to the International Energy agency, a rise in oil supply from nonopec nations may thwart efforts by opec and his partners to unwind production cuts that began last year. In south africa, the new president is gambling on a tax hike, the value added tax will increase from 14 to 15 , the First Time Since the end of apartheid south africa has raised the tax seen as hitting the poor the hardest. The president is trying to stabilize debt which could backfire in the election next year. Kushner b is about his access to highly classified materiallaking it has led to a struggle with the white house chief of staff over who should see the nation secrets. Jared kushner has an interim security clearance and his fbi background check has not been completed. Global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. I am courtney donohoe. This is bloomberg. Vonnie coming up, when Silicon Valley tech the latest apple news. Nejra live from london, i am nejra cehic with the european close. Vonnie in new york, i am vonnie quinn. Nejra mark carney is things vague on the timing of rate hikes which is a split from the quarterly Inflation Report as he faced the Treasury Committee. Joining us with more is market shots worth. Marcus ashworth. We had data earlier and news on brexit and a testimony from mark carney and other boe officials with sterling down and gilt yields lower. Why that reaction . Are downk gilt yields because of the massive buyback from the bank of england in the middle of march, 18 billion. Buying, replenishing the maturities. As far as sterling, or cable in particular as an dollar sterling is much more sensitive to brexit than anything else. Logically it is sterlingeuro but the market less the dollar, much more sensitive to brexit and if you fears with an extensional transition, that the law in from the cabinet , ed in from the cabinet pushback they may not guarantee the full amount of the 40 billion come what may. Does not have a twoway street and europe thinks the money comes regardless whether they block off a transition time the u. K. Could hold back its money. This will go a long distance. Nejra the Employment Data earlier today, does that change your view on what the bank of england should be doing . Officials are sticking to the script today. The uptick in the Unemployment Rate you can look through your look through. So what . It is within very strong levels. Productivity is doing pretty well. The interesting thing was the pickup and average weekly earnings. Excluding bonuses, the key measure the boe looks at. The pickup is still well below inflation. This is what the bank of england is looking at. They see wage rises picking up speed and the real income gap, cost of living below what you are in, is tightening below what you earn, is tightening. Vonnie for the u. S. Viewers, what does it feel like on the street . Do you know the brexit vote happened, is like continuing as normal . Sun still rises, not true as it is winter. [laughter] what is amusing from the testimony, written testimony, the bank of england has it wrong. , retail sales are weaker at the moment but the of 2016is, since august economyy cut rates, the has gone along nicely. They are turning around to say we need to raise rates because the economy is so strong. You, Marcus Ashworth joining us. Vonnie time for the Bloomberg Business flash. Lloyds will invest 4. 2 billion in technology as part of a threeyear strategic plan, the biggest Mortgage Lender will buy back up to 1. 4 billion worth of its own shares as they reported Fourth Quarter profit was down 20 which missed estimates. Pratt and temporary fix to an engine problem that led to the grounding of some air buses. They would replace a new seal with the original one that was scrapped because of durability issues. They are working on a remnant effects. When it comes to buying stocks, americas second for barclays, replacing the u. S. As british banks favorite develop markets based on what they see to be very cheaper valuations and stronger earnings potential. The u. S. Had been their top choice since 2010. Apple is moving to secure its supply chain, they are in buys with a company to cobalt directly from them and worried about demand in electric vehicle batteries could threaten is applied which it needs for iphones and ipads. Lets bring in our Senior Energy and commodities reporter. Great reporting on your part. Is this unprecedented for apple . Yes, they have never gone and bought cobalt directly from minors. They never had to because the Global Market has been cobalt market has been quiet, apple is one of the big users for ipads and iphones, but never a question whether they could have enough. Nejra this is to secure the supply chain. How likely can they do it . If they are willing to pay up , there are plenty of mining companies, not so many but there are some, including glencore and others who have plenty of cobalt. Planning increases in supply and no doubt at the right price, a deal could be done. Will be uple does it to them and whether they can strike a deal. Vonnie talking about congo, does apple have enough expertise or can it hire contractors it may need to secure the licenses and government permits needed . We are not talking about in theoing around mines congo and trying to buy some here and there. We are talking about them going , theg miners like glencore Worlds Largest global minor, and signing big deals between one Large Company and another. They have a concern in cobalt in congo, apple will have a concern in congo and in the cobalt market as a whole because congo produces two thirds of the world cobalt but they do not have to go door to door and try to secure it. Vonnie what happens if it runs out in congo . The supplyuestion of running out in congo then the demand running ahead of supply. , which are changed or medically in the last couple of years with electric vehicle growth, there will not be enough says one forecast. Demand will more than triple by 2030. Fore may be enough cobalt supply but not obvious where it will come from and not enough cobalt in the world to replace every car with an electric vehicle tomorrow. Nejra this has to do with electric vehicles, is it about saving money for apple . I do not think it is. The value of the cobalt in a single iphone is like one dollar even after the price tripled in the last 18 months. That is around it could double and it would not be a lot of money, it is more a question supply because for apple, not a problem if the price doubles but a problem if there is not enough cobalt to produce phones they want to. Seniorthank you to our energy and equities reporter. Ira vonnie battle of the church coming up. Battle of the charts coming up. Vonnie i feel like i have to put on a hollywood voice, global battle of the charts where we look at the most telling chart of the day and what they mean for investors. Byess them on the bloomberg running the function featured at the bottom of your screen. The stakes are higher with a big introduction, kevin kelly, take it away. Emerging markets have had a stellar run over the last year, nearly doubling the s p 500 and times of returns. Blueech sector, i have in is the msci emerging markets index and invite is the difference between the technology and Energy Sector correlation to broader emerging markets. It means that when the white line is below the red dash, the spread is negative and the em is tied to the Energy Sector. A big commodity boom the last cycle, em equities heavily dependent driven by commodities. Fastforward to today and we see the spread is starting to go to infotech which makes up a quarter of the emergingmarket and the key for emerging markets Going Forward is how well chinese tech will be able to do. 4690. Set g btv vonnie i was mesmerized by the title. What do you have . Nejra i want to focus on sterling because we have been watching mark carney and other boe officials testifying in front of the Treasury Committee in the u. K. And sterling is weaker in the session. We have seen more of a paris position in the risk reversal but this is talking about volatility with expectations versus reality. The cable three months and flight versus historical volatility spread and in white the six month blue and the one year in yellow. This shows volatility spreads widening at historical swings which have been lagging the implied measures. You can see my chart on the bloomberg at g btv 4614. Vonnie i love that chart but i hope you do not might i give the ground to kevin. In the spirit of the olympics,. 01 because the title could be better. I would have put em and please. It was the title. Counting down to the fed minutes still ahead. I am Mark Crumpton with first word news, students who survived the Florida School student arrived at the State Capitol building in tallahassee. 100 students made the trip hoping to pressure lawmakers to ban the assault style rifle used to kill 17 people and their Parkland School last week. They told the students and parents waiting for them that they are fighting to protect all students. President trump will hold a listening session about School Shootings today and meet with parents, teachers, and Students Affected by the shooting last week and the shootings in columbine, colorado and newtown, connecticut. The president is a strong supporter of gun rights but the white house says he is willing to listen to gun control proposals. Hispresident is attacking predecessor and suggesting he should have done more to prevent russia election meddling. The president said why didnt obama is something about the meddling . He took a swipe at his attorney general. During the 2016 campaign, president obama called out russia for political