Transcripts For BLOOMBERG Bloomberg Go 20160615

Takeover. You will get a good idea of on the session. The latest on the debate and a third time unlucky as msci snubs hina shares. Clinton leaving trump in the latest bloomberg poll. Lets begin with the fed. Theres zero perfect unlike liehood of a fed increase today. Lets go to carl. He is chief bloomberg economist. What are we expecting this afternoon . If we can mix british politics and fed policy together, we can invoke the quotation from margaret thatcher, the lady is not returning. It will apply to Janet Yellens approach in the press Conference Today as well. Shes going to play a cool hand. She wont specifically cite him but it could come up in the press conference, particularly during the q a. The fed is very much aware of international risks and how this is playing into their policy strategy. However, i would say more important is the much more important is the domestic outlook. So she will not be returning because shes going to be somewhat dismissive of the wobble in the labor market as of may and i think she will hold on to the notion that the fed could raise rates multiple times this year. Mid year language likely has to change and she gave a hint of that in her last public remarks where she said rate increase could be appropriate in the coming months and that could include either july or september. One of the things we are hearing is its not the markets are determining what the fed is doing right now. If shes paying attention to market what, would they be telling her right now carl shes not going to be dictated by the markets and the markets are saying no rate increases until february of next year. Thats one reason why she will she will have to push back that tone. Theres little to gain by reinforcing the market view, instead by taking a somewhat tougher tone. Im not going to say hawkish but a tougher tone, maybe she can start to steer Market Sentiment back toward the notion of a july or september rate increase which has not been priced in at present. Thank you, carl. And later, tune in for other special coverage of the fed decision at 1 00 p. M. Eastern time on Bloomberg Television and bloomberg radio. And expect lots of questions on the next subject. The referendum eight days away. The last 24 hours, five polls all showing the same thing. Leaf in the lead. Mark, give me the latest. The big question is whether they will change the strategy. Hes doubling down. Hes doubling down. Crisis. Faces a fiscal he warned there would be a 30 billion pound black knoll the finances and he says because of that that they will cut the spending in health, education and of course in defense as well and will get tax sized. Lets listen to the chancellor. Rather than finding out the consequences for the nations budget after we quit the e. U. , the public should know what they are before they take that choice so they can avoid these consequences altogether. We want to stabilize the economy filling a 30billion pound black hole would cause difficult tax rises. 57 conservative m. P. s have written the letter saying its absurd that the chancellor could threaten further us a terity. They say he would have to step down if he did as much and it goes against the conservative partys election manifesto. They said they wouldnt cut spending and wouldnt raise taxes. Continue divisions within the conservative party. You want to have this developed in the next week or no. Looking at the position, youve got a flotilla on the thames going to the leaves. The county of nigel saying if you vote, you will see more tax hikes and more spending cut which is are in the polls now. The bookie seems to be chasing the polls on the moment. What are your thoughts on that . Five polls in the last two days have put brexit ahead. The movement is very much ahead. There was a poll last night from comrades for the Sun Newspaper who is pro brexit as well which could remain 46 or 45 ahead but a month ago remain more 11 points ahead. William held said yesterday by the weekend, brexit would be favorite within the bookies. Momentum is with brexit, which is why as you say, the chancellor is doubling down. And john, just to highlight the concern within the government, within the remain cab, dont forget who was standing next to the chancellor today, the former chancellor, darling. Theyre putting out all the stops tell the british people we need you to vote to stay in the e. U. Truely stunning. You wonder whether darling would have chosen a fiscal policy that was to tighten policy after the event of a brexit. The fact that theyre sharing a platform is stunning. Three times not the charm. Chinas domestic equity were denied entry for a third time. For more, lets bring in economic correspondent in hong kong, third time. Yet chinese stocks are up. What happened . Good morning. They said it was a historical hat they would get in. One is the credibility gap that china has with investors around the world. Those Global Investors are lukewarm with china. And it showed just how far china has to go before it sbi grates. S economy and the market the u. S. Loan is much more than expected as we saw the First Quarter coming back at the expense of some of those reforms. This is a big delay that were seeing in china right now. Of course china needs to rein in. We had a warning that they have to the authorities are aware of their problems. The issue is they cant rein in that credit. They want growth to hit 6. 5 . The number was a big the government and regulators try to clamp down there. With a big increase in the bank lending and thats keeping the economy taking over and thats the problem for the government, how to manage keeping the economy on track while tackling their big debt problems. Thank you. The latest Bloomberg Politics poll is out and Hillary Clinton is leading donald trump. Lets bring in megan murphy here with us in new york. Megan, what did this poll say and most important, this is the first poll since the tragedy in orlando over the weekend. It is the first poll since that tragedy. And what this poll shows is a stunning gap that Hillary Clinton has opened up according to this bloomberg poll. A 12point lead over donald trump. And what this really shows is not only has trump lost a tremendous amount of ground owing to this really torrid week he had with controversial comments about a judge with his very unwelcomed comments in the wake of that orlando tragedy and also but rising enthusiasm in support for Hillary Clinton among the people who would be more inclined to vote for her. Were not just seeing that donald trump is fading after having such a controversial week. We actually also see that Hillary Clinton may be picking up enthusiasm among supporters that she is really going to need to carry her home as we head into this general election cycle. There was some news in there that might concern her and thats the wrong trackright track critical number. Whats always been interesting about the hillhilldonald trump divide is who is going to be more successful various different things. We did go out into the field with several questions in the wake of the orlando tragedy and one thing showed that donald trump still has the slight majority among voter who is perceive him as stronger as National Security when asked. If an incident like this had happened a year later when the president ial race is over, who would you want to see in the presidency and he still has a slim majority among voters. 4541 in this poll. Lets remind ourselves he had a much wider, wider margin among voter who is value National Security which is going to be one over the defining themes in this election. He needs to expand that base and support to really have a credible shot at the presidency. If that continues to narrow, if theyre both seen as equally president ial on issues like the economy and national issues, Hillary Clinton will take it. Its just on a demographic. Its just down to numbers. John . Thank you very much, david. Check out a markets. Turn it upside down. You get an idea of where we trade. 45 points higher. Inching back towards that 6,000 points level. Stronger swiss, yen and pound. Today, stronger pound. Sterling appreciating. A 142 handle earlier in the session. We trade at 141. Unemployment, an 11year low in the u. K. In the bond market, you see the fee. Yesterday, 38 yield over in the u. K. Today, we push high. Up four basis points. Here is one were talking about throughout the day. Crude, fiveday losing streak. Alex . Alex a risk on rally without oil. What does that mean . Coming up, it is the countdown to the fed decision. The markets put the odds of the d hike at zero as brexit weighs. Plus, were talking fed and Monetary Policy with bank of next. s jonathan lets get a quick check of the markets. Equities firm. Futures up. Dow futures up 42 points. P futures positive by almost. 25. Rebound in europe with 88 points. And 49 on the ftse 100. Euro sterling pulling back from the 80 pens level. Were down by a third of 1 . It is a weaker yen story at 106 27 yield, a touch higher ahead of the fed decision or nondecision. 4 . Down by he fed in focus. Is june really live . June is definitely a live meeting but what we do depends on how the economy is going to evolve. I think it certainly could be a meeting in which action can be taken. All meetings are live. If we did come in with data thats the long lines are expecting, the case will be very strong. The fundamental are Strong Enough that were likely going to be removing accommodation more quickly than as currently anticipated in Financial Markets. I support moving slowly with Interest Rates adjustment toward more normal level but i view the current level as too low for todays economic conditions. At this stage, its im inconclusive about how im going to be thinking about june, but i would not take it off the table. Jonathan how quickly things change in a month. June not looking so live. Emmanuela june isnt live, is it . Theyre probably looking back and thinking they probably shouldnt be so confident in june. The fed has the same Information Set as the markets have. They were trying remind markets that its a live meeting. Weve got hit with the weak Inflation Expectations data. At this point, june is not a possibility. Theyre going to stay on hold prove thought we make it a hike but it depends on how the data evolves. Alex will we see fed president s downgrade their like from two to one . That seems to be the most pivotal question. The average dots they move. And then reflecting the reality that growth is slow. So that key kind of data point is going to stay steady. The rhetoric will tone down a bit. The g. D. P. Dot will come down a bit for the Fourth Quarter of 2016. O within the sep, some disappointing changes. Make a prediction. Will she refer brexit . I think the press will really focus on that and she will have to address with how it matters for the fed. The e. U. Referendum whether its china and she will hammer on Inflation Expectations. These are the themes that will really come up in the press conference may not come up within the statement itself and she will have to acknowledge that the look has gotten more cloudy. Alex they still need to keep markets on track at some point and i have a great function in my terminal here. Mipr. Lled thats where we are right now. But the dont have it. Wait a minute. It shows that basically, the market expectation has rerated so much in just two weeks, so quickly to the downside that you almost think she has to be hawkish just to keep the markets on track. Theres going to be a reminder that theyre going to be exiting. What we dont know is how quickly that looked like. So yellen would have to encourage markets that say look, the consumer is still strong. And the Unemployment Rate is coming down. So fundamentally, there are reasons to feel encouraged about the economy. The baseline is strong when all of the risks that makes the fed more cautious and when theyre asymmetric, youve got to wait longer. Jonathan one of the reasons is june is no longer live is brexit and the miss on an ugly payroll report. But you find it hard to find other data points to reconcile with that measure. What do you see in the labor markets right now . I think it still looks very healthy. Were trenting down for jobless rate but the fact that were seeing that trend down as well, thats a sign that were getting a tightening in labor market which is could be good for wages and broad income growth. The data is very volatile. Its subject to heavy revisions. Weve got to take it with a grain of salt and the trend is quite strong. So the labor market still looks strong. The consumer 3. 5 for real consumption growth in the second quarter. The consumer is still alive and kicking. The domestic market is strong. What do you look at the incorporate numbers . Were still seeing signs of g. D. P. And labor income to g. D. P. Its still relatively low. Labor costs are low. So there still is an incentive for companies to continue hiring. Wages are rising but theyre rising gradually and the overall labor costs is still relatively low. Alex you dont think we are going to see the downgrade in projections. But by 50 basis points in not that long of a time and that has big implications for the broader tightening cycle. What do you think we see there . Longer term is less. Definitely the average dot, the mean dots will move on. Median is less certain. But i think itll be a question of whether the fed is willing to capitulate on that. They want to remind markets were on a hiking trajectory. We think they will stick with the current trajectory. Jonathan thank you for joining us, emmanuela. Alex coming up, another day and another warning from the u. K. Remain camp. Find out what theyre saying today. Plus later, an interview that you do not want to miss. Former president bill clinton talks education, technology and how to get the economy growing again with our own david west on. All that and more on go. David this is bloomberg go. Now lets get a check on some stocks that are moving in advance of the open. Alex zara is the owner to the Worlds Largest retailer. Zara coming out with earnings that beat expectations. The company benefiting from that faster Distribution System that allowed to it get more of its fast fashion into store more quickly than competitors like h m. I should point out they were down for 10 straight sessions going into this Earnings Report losing nearly 8 in that time. Sticking with retail, were looking at shoemaker jimmy choo. Theyre trading sticking into its forecast for the full year. Shares gaining by 14 . E stock was raced to buy liberum. Strong lly, the irish maker higher by 2 . There was a report that the company was nearing a deal be acquired for about 20 billion by a u. K. Based firm after spokesperson declined to comment but the stock has declined sharply over the past 12 months. Down some 41 and fended off a akeover offense. So well see if there is anything to this report and of course, well update you on any developments there. Jonathan thank you very much. Coming down, the latest poll showing the leaf campaign. We will discuss the odds of a brexit. And we will bring you my coanchor, davids sitdown with bill clinton. Much more on deck right here on bloomberg go. Jonathan the beautiful of london with the ftse rebounding. Up. Of 1 . 53 points in the green. The risk of selloff from yesterday running out of steam. The ftse up about. 9. The dbacks 1 higher. That risk reflecting in the effects market. Yesterday, stronger ftse, younger yen and the opposite today. With a 142 handle at one point on the back of some really solid job states around the u. K. Unemployment, 11year low. Thats the f. X. Market. Yields higher. Our basis points higher. That risk on rally today pushing the back end yields higher. In crude, fiveday losing streak. Both scombrent w. T. I. , 48 handle on w. T. I. 4920 on bren. Here are some headlines with sherry. Hillary clinton has opened up a doubledigit lead over donald trump in the race for the white house. A new Politics National poll shows clinton leading trump 49 to 37 among likely voters and 55 of those survey say they could never vote for trump. Trump does have an edge when it comes to fighting terrorism by a 5045 more gin. Voter says he will do a better job. Nato says its sending a clear message to russia by increasing the number of troops in eastern europe. A Multinational Force of 4,000 troops will be deployed in poland and three baltic nation which is border russia. Nato is trying to that they are vulnerable to attacks. Officials in indonesia dont expect a repeat of the forest fires that led to think haze in singapore and other parts of southeast asia. But that may be viewed in the forecast for better weather. Indonesian fire patrols are donned not to have done a lot in the fire. Global news 24 hours a day. David . David thank you. Yesterday, c. G. I. American included 6 . I had the opportunity to sit down with former president bill clinton. Bill then we had flat wages, declining middle class income and rising in poverty. And you can flip it with some of the same things we did. But then we had very high Interest Rates for stifling growth. Now we have Interest Rates below inflation and the long drag after the drag as trifling growth. O we we still need more Public Investment now. We need National Infrastructure program which includes clean energy. We need to double down on our investment in science and technology which has kept our country strong. I spent 3 billion of your money to sequence a human genome for the first time. You can do it for less than 1,000 now. And we have more than 200 billion in verifyial economic benefits. Thats pretty good return on our investments, i would say. We spent the first 500 million that Newt Gingrich and i agreed on to spend on nanotechnology and i was in a school in Eastern Kentucky in Morehead State the other day and i watched undergraduates making nanosatellites that could be put in space for 1 million than what these others do for 400 million. The undergraduates making these little satellites powered by Computing Power that was clamped into a little tungsten box about n inch and a quarter fuse. You get a big rate of return on that. And since jobs are coming and going fast in our economy, we need to emphasize that. But i think to do it, we need to stop screaming at each other and demonizing each other and sort of say im going to work and figure out, you know, how to do it. Alex that was former president bill clinton speaking on the Global Initiative america. One of the things that struck me with this. We talked about fiscal stimulus. We dont have leaders saying specifics such as the genome project. They invested 3 million. 200 billion or nanotechnology. We dont have leaders standing up and saying that. Alex if there is stagnation in the economy, there isnt that much the central bank can do. Credit suisse saying just that. But it has to rely on fiscal stimulus in the g4 and thats really what mr. Clinton was talking about. David and she was very forthright in saying that. We dont have that now. That is not in our quiver. We are deloiven fiscal stimulus although he thinks clean energy and technology and things, theres a lot of room for growth. Alex did he see the political will in the future for that to happen . David we talked about whats happening to the politics, the discourse in this country. And he moans the fact that we have people who are really people in their own silos. He mentioned Newt Gingrich working with him in nanotechnology. Alex a great interview. Comprehensive. David now we have a morning mustread over to john. John thank you. A stunning scene from the south of england today. In kent, ashford, the chancellor sharing a platform with the former u. K. Chancellor from the labor side darling. Take a listen to what mr. Darling had to say. Every sensible authority agree we vote leave our ability to leave the consequences of that will be reduced. And whats more, the markets will know it. Thats why im even more worried now, much more worried than i was in 2008. Tom keene. Now is what is the signal . M what is the signal with president obama and the republican. Two separate parties. Jonathan it tells me that these two have gotten together and doubled down on that to say hey, you do this, these are the consequences. Its a massive debate about whether they can do this. With the chancellor and the man hat delivered that budget. Tom away from chancellor darlings amazing headlines that we saw across at bloomberg was the idea from chancellor osbourne that you would need a new budget out. Why is that . I dont understand the immediacy, the abruptness that this vote would bring. And how you could account the additional fiscal tightening when this can be done. When know one has the vision of what the consequences would be. Tom they lose flow from europe but that happens out quarters and years later. Jonathan years and years later that may not be as severe as they say. Yesterday, you and i had a conversation. Five polls, 24 hours, all the ng the lead on whether chancellor would have to change the debate. Theyre doubling down. Theyre not doing more. Tom and the other observation and well be doing this next week from london is were seeing people really begin to line up. The telegraph, they have two separate opeds. And theres heated debate in europe and United Kingdom and theyre really studying this. Dmitly saying brexit, do it. Jonathan the people see is vastly different. When individual in the north of england in minimum wage who are looking for pay rise. The additional point talking of the labor market is pretty solid in the u. K. Today. It says to me even with the uncertainty, the u. K. Is doing ok. Tom what have we seen in sterling in the u. K. . We had a 144, 133. We grind on to a 141 handle. We get more polls thursday, friday, saturday, do you just assume that we see further currency adjustment . Or are we already seeing the easy moves . Jonathan thigh strategist in the market in london, it seems that Downside Protection has been taken out. And the next day tom what does that mean . Jonathan if you want to take Downside Protection tom theyre looking at me saying what the hell did we say . Jonathan thats getting very expensive. The next trade that people are looking at is the short euro trade. Om we had the float la today. Flotilla today. Jonathan its truly stunning. Tom theyre going way too fast on the river. Theyre going like 20 knots on the river you. Gracefully go down the thames. Jonathan may we will get on the boat and show them how its done next week. Surveillance radio. Tune in on the plug. Tom i dont want pounds. I want dollars. David maybe i can follow jonathan. A blow to chinas selfesteem. Stocks have been denied entrant to the msci entrance. Look out below. Last time the msci turned it down, the chiang thigh composite went down 43 . Should we expect more declines from chinese stocks this time . More go is up next. Alex Marc Andreessen reveals his forecast in a text phase at 8 45 a. M. Eastern. Alex and heres your Bloomberg Business flash. Three private equity groups are in the final rounds of bidding for yahoo . The finalists include a t. P. G. Advent international and a partnership of Sycamore Partners and venture capital. Theyre joined by at t, verizon and quicken loans dan gilbert. Volkswagen is planning to merge component units to save costs and may sell off noncorps assets. V. W. C. E. O. Is trying to bring europes largest car maker out of that. Emissions testing scandals among the assets that could be sold to ducatti. Disneys new shanghai theme park doesnt even have its official grand opening till tomorrow and already, the companys expanding their resort. Disney c. E. O. Bob iger says construction has begun to large some attractions in the park. Theit costs 5. 5 billion and it is disneys largest investment ever. David . David thank you. Denied again. Msci, the Worlds Largest indexing firm delayed the chinas inclusion shares for a third time. Scarlet fu sat down with the founder yesterday and what he says about the snub. We dont feel vindicated on a cision by some index setting board about including china. First of all, i should mention although we have been short china since the end of 2009, the one thing weve never been short is the ashare market. David joining now to react is julian timber. Welcome back here. First of all, why did they do it . Why did they exclude them yet a third time . Because the markets are not as free as the index would like. And we saw this last year when the shanghai composite after 100 plus rise started falling 20 , 30 . Trading ban, all kinds of restrictions coming in. And thats not how a free twoway market trades. So im not thoroughly surprised that this has happened. David were looking at a chart of what happened. It went into a peak and when they denied it last night, you see a big drop down. The markets are up today. Ultimately, the fundamentals always win out. So you can have a trading strategy about index inclusion and as we were talking earlier, we had the same thing back in 2000 in the s p 500 during the dotcom bubble to see which stock was going to be added in the s p 500 and it would go up 20 immediately and ultimately, the fundamentals win. 2007 was the top of the bubble. I dont think the market decline because it wasnt included in the index. It declined because it was overvalued and there was a bubble. And obviously as you and see from this time around, the markets much lower. I wouldnt expect a similar action. Jonathan its not a free market for the ashares. Is that why . Its not a free market. Large Institution Investors will go into the Hong Kong Market and yeah. I mean, theres only so many places to put your money if youre chinese. And the ashares is one of them. Properties are other. Commodities is another. It tends to be a very volatility market. Alex you raised this in our earlier meeting. When you saw this happened to the shanghai composite market, its staggering. It shot so high. David the speculation may be Government Intervention to buy up shares. Yeah. Its an interesting market to trade if you have assets to trade. Alex come on. This is a highly volatile market with lots of big moves. So i wouldnt read too much into the daily patterns. David in fairness to the government of china, on the one hand, we say we want you to free up markets. On the other hand, we dont like it when your markets get too royal here. Theyre trying to do a delicate dance here. How can they handle those two things . And thats the paradox that they face. And its not only the ashares, its the currency as well. They want to move towards capitalism and they want a twoway free market but they want things to be orderly and when things get disorderly, they cant help but intervene. And thats a pattern that has continued including last august when they devalued the wong. Jonathan given amount of intervention, what is this currency doing in the s. T. R. . Alex well done. The currency is overvalued because the economy has slowed pretty dramatically over the last couple of years. And the dollar has gone way up as the fed has had a tightening bias. Well, everybody else on the planet has been easing and a lot of pressure on the dollar because the juan juan is fixed to the dollar. Nd it makes it overvalued. So that was behind this whole move when the fed would get more hawkish, it would unleash this whole chain reaction. So that currency needs to find its week lib yum and eventually it will. David but not to let you off the hook with jonathans question, is that a political or economic decision . Probably a little bit of both. I wasnt privy to the Decision Making process. David it it wasnt a economic decision what, could be the ramifications of having a currency in the s. T. R. For political reasons . I mean, i dont know. The currency is being adjusted, not always in the cleanest of ways, but its getting there. Its just a question of how many bumps in the road that we get until we get to full a fully free floating market. Alex a note on our jargon lurk here. Its a currency borrowing. You totally you definitely need it. David china was really pressing for this because they saw it as a matter of their pride and their prestige internationally. They were saying our economy is this big. Were this important to the global economy. We how far this status with the other social economies. Thats understandable. China has a big economy. They want to be on the big stage. The msci inclusion points along that journey. Alex and i want to point out the nittygritty as we wrap up. You were mentioning the flows that we did see in the msci. They had a great start here on bloomberg. We talked about the flows that were focused on china and hong kong just in the last week. Were about 387 million. Thats quite a significant amount of fund flow. Does that come out of the market . Are we going to see that kind of volatility . It could. I tend to not focus so much on the short term. I mean, theres a lot of trading strategies about index inclusion, especially one as important as this because all of a sudden, a market comes into the index. But my understanding is that with ownership caps and index caps that china would only be about 1 of the msci e. M. Index and result to about 20 billion a flow. So the impact was probably overstated to begin with. David thanks very much for being with us. Jonathan next on bloomberg go, how did you trade around the donald Trump Presidency . The question that traders are asking. And off the charts. Thats next. Alex this is bloomberg go. Time for off the charts. One of my favorite segments with julie. Newline]julie the election of the United States. But seemingly, we havent seen that much Market Reaction but there may be some with the mexican peso because now, weve got citi group and bark clays reameding shortening the peso because of a chance of a donald Trump Victory and the implication for the mexican currency. We have seen a surge in that volatility. And to be sure it doesnt just have to do with the prospector a Trump Presidency, it has to do with the prospect of rising Interest Rates in the United States which could cause ripple effects across emerging markets but the peso is among the worst performers. Alex the mexican peso is a barometer for assets as well as for oil. Oil moved up, the peso tends to as well. Thats odd that would not be the case especially because their central bank would move with the fed. It could be a mitigating circumstance and if youre looking at emerging markets and youre looking at the trump rhetoric on mexico specifically, this could be something that differentiates it as opposed to some degree. Something else ive been watching, but the forecast for the peso. So you can look at the peso has been doing. When it goes up, the peso is going down. Its the dollar versus the peso. Here we have the median forecast of the strategists and this is the forwards. How are people trading where the peso is going to be. There, took into consideration its not just citi group and bark clays saying shorted, people are furthering peso decline. Alex really interesting. I love that difference. Julie, thank you very much. John . John she has to get crude in that. Ext on bloomberg go, if tech i. P. O. s are about a tick up. More go next. Equities rallying across europe. The day after tomorrow. Will janet yellen set the stage for a july rate hike . Cold turn against the campaign. Grexit could mean higher taxes and deep spending cuts. Stephanie surprisingly snubbing china. David welcome to the second hour of bloomberg. Focusd at china all in stephanie . We will have special coverage on bloomberg tv and radio. Jonathan looking for to that. We will bring you an interview from bloombergs Technology Conference in san francisco. A conversation you do not want to miss. Stephanie lets check in with our team for index coverage. Michael mccain in new york on decision day for the fed. Francine lacqua and the third time unlucky. Snubbed chinese shares once again. That story from hong kong. The top story is the fed. A 0 chance is the likelihood of an interestrate this afternoon. Lets bring in michael mckee. Many fed president s will move there to hike call this year down to one . It is hard to tell it and i will go on a limb and make a prediction. A lot has changed. Was deadt the grexit and now that has foot their there was always a question about what fed would do about grexit. Now an excuse even if it goes ahead because data had been lousy. Creation and Consumer Expectations for inflation, both trending down. A good reason for the fed to say lets pause for a month and see what happens. Retail sales Still Holding up. Is there a chance the fed chairman will have to upgrade to give the market in line . Probably not a lot of change. They had been predicting a bit of a rebound for growth. Market is not completely rolling over. What will be interesting is do they lower that . Janet yellen has some explaining to do. She will have to tell people why the fed still sees a much steeper path of Interest Rate increases. You can see the represented rate way below where the fed is right now. Probably question number one at the press conference. Stephanie thank you so much michael mckee. In tune and later for our special coverage of the decisions starting at 1 00 p. M. Eastern jonathan lets get the latest. The referendum vote eight days away. My colleague, francine the clock. Lacqua. E francine the scene in london is remarkable. You have the campaign fighting it out and on the other hand, you have the former chancellor from the labour party with the current chancellor actually arguing and telling voters they should remain. Andink it will get uglier mark gilbert put in a great piece saying this might not even right time to scare voters. It may be counterproductive. Lets look at how the chancellor tried to scare voters today. Both of us have to make difficult decisions and they will be once again. Difficult decisions starting next friday, in the months ahead and years to come. Bothine it is clear campaigns are upping the ante as the polls have been moving quite a lot. What we learned is if you continue telling people this is the end of the world, they may vote against you. Jonathan it is remarkable they are keeping up with the polls. The volume of that is going on leave. The majority of the value will remain. To gauge where it is going and what is the leading indicator . It is difficult. When you speak to people in the city of london, it does seem anecdotally, it is not that difficult to understand what that is about. Some are saying sovereignty. Others say integration. Are a voter, it will be difficult to understand what will go through your mind when you are in that booth june 23. Jonathan thank you for joining us. China. Lets go to the third time was not the charm. Chinese domestic equities were denied, the benchmark index for a third time. Bloombergs chief economics correspondent. Why were they denied and why were they surprised . Is a reality check for chinese policymakers. They were getting hard for this. A few days ago, included. There still remained a significant credibility gap for china with Global Investors. Long way to go a before it is fully integrated with markets and the economy with the rest of the global system. Talknk china talks a big on grander form, but decisions like does demonstrate how far you have to go. Traders were suspicious. Roleand still plays a big in the chinese market. It is expected this decision will further drive down the shanghai composite. The last time this happened, it went down. Quick third is one school of thought this might be more negative because of the currency because it would have attracted. Egative inflows and china the fed is not going to be there anymore. Reaction, the wait widere, goes to the negative high they still have not recovered from the hangover of last year path stock market boom and bust. Credibility is damaged. That is why the fed meeting is for the future of chinas currency. I would say it is a negative return and stocks and a potential negative as well. Days away from the grexit referendum and hours away from the fed shares. News fed chairs News Conference. Percentagey over one point on the dax. The risk is dented to the market, the weaker swiss franc on the session, a weaker japanese yen as well. It is not just a rebound from yesterday. Really solid labor market data out of the u. K. In the bond market, yields are pushing higher. About three basis points. The commodity market, the risk on moves extended to copper. Having a huge session up 3 right now. Someone explain crude to me. A risk on rally without crude getting involved . We traded 49 on brent and 47 on wti. Wrap up the headlines outside the Business World with first word news. A doubledigit lead for Hillary Clinton in the latest National Polltics which shows clinton leading donald trump 49 to 37 . 55 of those surveyed said they could never vote for trump. Trump has an edge when it comes to fighting terrorism by 5245 margin. Meanwhile, president obama and the Republican House leader paul ryan finds himself on the inside of an issue. Both are rejecting Donald Trumps call to ban muslim from entering the u. S. President Francois Hollande says a look take a long time to defeat terrorism. The attacker was later killed and three suspects are being questioned. Over fours powered by 2100 journalists. Coming up on the program, staying ahead, tech and financials led the way last month. Theyve been the biggest laggard in june. The ceo of highlight capital joins us next coming up. 2016 has stephanie not been stephanie good to many hedge funds. Hedge funds are now trailing the s p 500 by the most at any point this year. ,ne could be bucking the trend named among the 50 Top Performing hedge funds in 2014 by bloomberg. It has about 3 billion of assets under management and jacob dobbs joins us now. Good to see you. Hedge funds have gotten really her and a lot of that rest. Are they calling you up and freaking out now . I would point out that not all hedge funds are the same. Every hedge fund has a different strategy in a different portfolio. I read about hedge funds having troubles but plenty of funds have different kinds of investments that are doing perfectly fine. The trading environment has been brutal nonetheless era who would have thought you would be hurting right now and that utilities would have still been holding up so well. How do you handle the vicious sector rotation . Collects in 2016, we have seen vicious sector rotation. A lot of this is for reasons i cannot explain. We have been making sure we are not overweighted in any one factor too much. Would be tempting to do so. There is just a small handful of Companies Really thriving and succeeding in todays economy. Tending to invest just in those 38 is important to look beyond the near term and be and spreadn ourselves over a variety of sectors to a chore that the rotation occurs does not affect our fund. In other words, by having asked hundred to multiple sectors, it protects us from that type of volatility and then we earn more consistent returns. David no one has all their hedge fund. You are part of a portfolio. What is the segment your hedge fund fills in . We are primarily investing equities. Hort in u. S. If that is the area they are trying to get exposure to come we can do that for them. Primarilyund, we are earning the return on our fund, stock picking eternity rather than the exposure to the markets. That is usually quite modest. The job is easier than predicting the direction of the market. The winnerso pick and sure the losers and make a return on the difference between the two. Jonathan bank of America Merrill lynch did a fund manager survey, the highest since 2001. What is your allocation like right now . The fun is somewhat normally exposed. We have a little bit of cash. You always want some capital available for that wonderful opportunity that presented itself. I think it is a time to be invested. Some of thesect rather alarming binary events but thereorthcoming, will be winners and losers and all we have to do is identify them. All the hedge funds are trying to pick the same winners and the same losers. Goldman sachs showed that Hedge Fund Managers have a greater portion of their assets in top 10 holdings and look at what happened to valeant. Must be much more difficult and not following elements. It would be easy to say, lets take the losers and back them, but some of those will not come back out. How do you figure out which ones are the Good Investments . It is a good point and i appreciate that. You have to have a bit of a contrarian attitude and you cannot just take for granted the consensus opinion. In addition, you need a longterm horizon. That is where we can really outshine our competition in that we are not so concerned about the next few weeks and the next few orders. Over our time horizon, we can envision a scenario in which a company can succeed or a company can create value. Who cares if they are perceived as a loser today . That may create an entry point that is exciting. David jacob will stay with us because we want to pin him down next on bloomberg. Entirely domestic united hates presence. A very interesting acquisition about a year and a half ago. It is a company that has Fiber Networks in major cities in the United States. That is theparent beginning of a strategy for additional growth. What is needed for today and the future is densification inside urban environments. Hard to find placement for the cell towers. A computer sized device even hang on a street lamp or a streetlight that allows for the networks to be dense aside in smaller bites. But this needs to be connected back to the network and that is what they bought. This is basically pipeline for broadband, for mobile. Why do you think that is a big growth area . Data usage will grow 10 full in the next five years. More more video is being sued over mobile. That consumes a tremendous amount of data. Out, 2018 andolls shortly thereafter, that will allow for much faster speeds and greater use of video and it may even threaten the cable system. There will be further densification required in cities. Stephanie another thing i love is cit. The contrarian view, you are biting the bullet for the longer term. It is nice to look at for the short term. Exactly. When i referred to the great entry points, that is one of the stocks i am alluding to. This stock has been so unloved, it trades at Something Like 5. 6 times value. They have a Major Regional Bank business and a small rail business. They have decided to change the strategy. They are divesting the Aircraft Leasing business and believe it will be done by december 31 of this year. We think they can get at least book value for this, which is about 3 billion. If they get the capital back i the end of the year, give it back to their shareholders, you are essentially creating a Regional Bank at a massive discount to book value, could be. 4 times book value. To sithave the patience through nearterm uncertainty over their core business, you get an incredibly undervalued asset a year from now. Pick last one, your stock. Why Willis Towers Watson . Mergers a result of a between willis, the insurance broker. The ceo is a man named john who came on the watch inside. He is an excellent ceo and a great operator and a great capital allocator. He is going to improve the margins, extract revenue synergies between the two businesses, improve the morality and the culture. As a result of the merger, you get an amazing entry point, trading at 11. 8 times earnings. There is a lot of concern that willis is not a highquality business. If you have the patience to sit through this turnaround, you can see that multiple on earnings expand to normal level and earn 52 on the stock. David thank you for being here. Stephanie good to see you. Wting to commodities, climbing to the fifth straight day and heading to the longest decline since february. Joining us now is the cofounder and chief market strategist. Explain this to me. A rest on rally and crude is not participating. Crude is off on its own. You look at crude and it has become to steal something from dependent. Bit data crude oil is what i call equilibrium with a net. You look at the oversupply we had in 2015. Some of us had it at 2. 1 Million Barrels per day oversupply. We have cut that back quite a bit. Supply disruptions in nigeria, ongoing right now in venezuela, and a little bit of that is offset by iran. More 700tes are thousand. Given the turmoil in the oilproducing nations and the regular supply and demand fluctuations, that does nothing for me. This is the midpoint of a new range. Alix what kind of downside will we see . Less in the shortterm, 46 pretty easily. That is a long take. I expect to see 55 this year. Global demand continues to fall with north america leading that. We do not see that turning around soon with a massive reduction in capex. That will not live overnight even with the cost talk of them. You do not turn them on like you turn on a faucet. I think the supply will continue to shrink to the summer at least. Alix what is your upside if we get more supply and disruption . 55 is where we will see people take short positions. It is 5490 but you have got to reach up to the even number when you get there. Alix all right. Thank you very much, bobby. Up next, we will bring you the latest u. S. Economic data as it breaks in later. An interview with marc from the bloomberg Technology Conference in san francisco. More on deck coming up, one hour away from the open right here in new york city. Futures are firm and equities are rallying in europe. Ftse 100 up 59 points. A switch of the board very quickly. In 16. At 106 stronger pound on the session. Get ready for the rio Olympic Games by switching to xfinity x1. Show me gymnastics. X1 lets you search by sport, watch nbcs highlights and catch every live event on your tv with nbc sports live extra. Im getting ready. Are you . X1 will change the way you experience nbcuniversals coverage of the rio Olympic Games. Call or go online today to switch to x1. Alix losing streak since february. And also the dax rebounding and the ftse up by 1 . Lets switch up the boards. The story in the currency market is about the stronger pound retracing some of those devastating losses it saw yesterday. Youave breaking news for here in the u. S. You are looking at a 1. 2 increase in may, better than what was estimated. The last inflation rate the fed announcementre his at 2 00 p. M. It feeds through the court. The Producer Price index coming in at 1. 2 . Manufacturing for june is also coming in much stronger than estimated at around 6. 01. You are seeing a little move in the two year yield. Not really. 4. 3 . Ton of movingot a right there. Holding at the highs of the session. Jonathan we take it from the u. S. To the u. K. Matt winkler joins us now to discuss grexit. I suggest everyone read your article. You write that a week before whether to leave the european union, public preferences to call. The markets are finding a little bit of a different view. The expectation of the u. K. Will remain. Markets pull in different directions. Superiorend to be indicators. The riskiest currency so ,ar, we can bring up the chart absolute return an absolute moves in volatility. What does the pound tell you . The pound is riskier than the ruble and the South African rand and brazil. It is riskier than everything and that is because markets do not like uncertainty. Now,k for the vote right there is a lot of uncertainty. Jonathan the second chart i want to get to is the pound against the dollar, one month applied volatility versus one year of wide volatility. One year captures the big event, the referendum tom of the blue line. The white line is one year volatility. It has picked up the compared to one month, there is a huge spread. Uncertainty versus certainty. One year, they are certain things will be fine and there is no turbulence in the months ahead. Is sayinghe market there will be a vote in the vote will be to remain within the eu. If it were not that, you would see far more volatility in the months ahead and i would be reflected in the oneyear measure of volatility. This is a fascinating piece that i want to push you a little bit p are we talked about the funds future rate and the closer you get to the actual decision day, the more accurate the market becomes. Difference here because further out it is less accurate . I do not think it is inappropriate comparison to Something Like the grexit vote. The reason is the grexit vote is a turning point. Away fromrning point everything we have known for a long time. If there was a view, a possibility that that would happen, you would see much more of an expectation of volatility. We all know the funds at some point will go up but we do not know when you are the fed is data dependent. Tois waiting for the data confirm its incentive to raise Interest Rates. It is a different equation than the grexit haired we keep getting poll after poll that says volatility, but then you have longerterm markets. Jonathan and that is what you are looking at. I want to know what it tells you. Before, have seen this 1995. The people of quebec, one month before they were to vote to secede from canada, a sevenpoint lead to leave canada. There was quite a bit of anxiety, to say the least, at the time. You look at the collection of canadian assets, the currency and the debt market and the they were all as pointing to a vote here that vote was very close. Having said that, the markets did anticipate no change. Not all polls are created equal. There are so many polls and there are always outliers and think you cannot rely on. To an increasing degree, you see 538 do a poll of polls. When they take an average and exclude outliers, it seems different. Is one place where everyone is coming in and putting their pets down. Would say Financial Markets are perhaps a more reliable indicator to get her be together because what you are getting is everybody in the marketplace at one time. Currency investors and debt investors, they are there together. They are not different species and they are all going to reflect their own anticipation of an event. David unlike someone coming up financing a few a question. For me istaking away when we use the options market, we use stuff like that. It is hedging uncertainty. It is not so much someone going out and saying this is what i think will happen. Here is my portfolio and i will take out a hedge. I think that is the take away from what is happening with volatility. Nearterm uncertainty is not necessarily a bet that something will happen. Think that is right. Anytime you get to the days leading up to an important event, you will see people trying to protect themselves, take out a new insurance policy. That is what hedging is all about, insurance policy against the risk of change. Alix it also means you cannot necessarily trust the market. Great to have you with us. You can find the full article on bloomberg view. In other news, denied entry. China passes domestic equity entry has been rejected for the third time. This is not the only challenge for china. The capitalow is Research Managing Director and the former president of the bank of China International u. S. They. And goodave you morning. Why is it so important that chinese shares get in . Why do we care . The chinese care deeply because symbolically, it is important. They are trying to prove themselves internationally. China will be significant for the stock markets. Nearterm, there would not be a change in Asset Allocation. What does china have to rethink . This is the third time many analystss were really caught off guard by the all of this. Many had to say that the cousin they were trying to be nice to china. Year used thest stock market as a casino to pull money out of. It scared money its get everybody in the entire world. There had to be more stability with china with the markets and Less Government interference. The other issue is it is very hard to which our money. A big Asset Allocation in china, you cannot get your money out and that is a problem created problem. Something that makes us put yourself in chinas shoes. Of the challenges is not allowing us to repatriate funds. They cannot open up without risking. That is the point. Trying to control the equity and Capital Markets going in and out of the country. You cannot do that if you are trying to include the global funds in the market. Control. Usually do is the chilling capital in and out and investors are saying x but note banks. Jonathan we can bring out a oneyear chart on the shanghai composite. The peak of the bubble, which everyone considers a bubble last year. Idea thatnside, the you suspend ipos, tell them they are not allowed to sell, make it unpatriotic to short the countries on that index, im looking at what they are doing and it does not look like a market. It does not look like anyone is doing anything to get anywhere near a free market. I agree with that. Most chinese view the stock market as a gamble. They do not consider that a huge part of overall Asset Allocation. Globally, we think of markets as strategically important. We look at that as an indication but that is not the front and center of china. Capital banks and elsewhere. They are retail driven an extremely volatile. A good portion of the stocks in m a shares are owned by companies and it is not a lot of visibility on what they are doing. There is a lot of nervousness. Much is this really about looking what officials are doing versus speaking to investors and saying, do you want this . That was the subtext i got, they talked about technical factors. Markethe casino of the last year, Fund Managers are telling them this is way too volatile for us and we cannot get our money out. Why will you include them . David it is a business in the end. To what extent will this affect business . Flows will not be included initially. Over time, they have to Fund Managers. The other news overnight is we saw a lot of loans and i it seemst up because like china wants a reform and they want to do the right ring with china shares and they want to do the right thing when it comes to debt but they are still not doing it. What is the Tipping Point . Everyone is very concerned the debt bubble is getting 250 of gdp was 1. 5 trillion in the previous month. Basically, china is desperately shoving cash into the system. China. Property bubble in it is very worrisome and investors are getting nervous and people are trying to get the bubble going until the music stops. Alix thank you very much. Some Senate Republicans are pushing to expand surveillance power. The agency has a longstanding request to expand the scope in a terrorism investigation. Come thisn could week. House Committee Republicans claimed he obstructed an investigation into whether his agency when after a conservative Group Seeking a taxexempt status. They called for president obama to fire him. A dramatic moment in south africa. He took off his prosthetic leg and walked on his thumbs. It is part of the argument that he is a vulnerable man who deserves leniency when sentenced for killing his girlfriend. The judge will propose the sentence this week. Thank you. Coming up, is is twitter primed for a takeover . Iposrecast for m a and in the tech space. That is next. Jonathan right here in the green room, make sure to stay with bloomberg for our special coverage of the fed decision coming up. David earlier this week, the bloomberg Technology Conference is in san francisco. They discussed going to nonmicrosoft merger. The Parent Company of Bloomberg Television is an investor. Take a listen. A great case study of was Silicon Valley does well. Someone uses linkedin ago. O long 2004 and to the five. It was not that long ago. They both are Amazing Company over the past 12 years. It eliminates a lot of the guesswork as to what works. It is the result of an enormous amount of effort. A great business and a great service. Basically, the Linkedin User base, effectively the same user base. For m a . Oes it mean we see more deals in negotiation than we have in quach or years. Most will probably agree with that. I think for the last three or four years, a lot of companies sat back and watched. A lot of this should happen. It just did not happen. Most Big Tech Companies have done quite well in the last five years. They have to go shopping because they have to fill in gaps in their portfolio. They can buy these companies. It is indicative of what will be a series. There are not that many that are this taken there will be a whole run of them this year and next year. Emily who will buy and who will get bought . That is ending a question everyone has to deal with. We work with our companies. You sometimes get somebody who comes along and makes an offer that makes ends. A lot of the Big American Companies are in a big position. More of theg a lot. Ortune 500 there are other kinds of Consumer Product companies and tech companies. There will be a run of acquisitions with nontraditional buyers. We like to say a big part of how we think about our businesses, the view is that if lincoln gets bought, it is more likely to get bought. Probably the opposite. If microsoft buys linked in, they will probably not by twitter tomorrow. One fewer buyer. I am positive there are Big Companies thinking about it and twitter is thinking about it. Twitter is now the only other public social Network Rather than facebook. An twitter survive . An amazing accomplishment over the last 12 years. Built a great business. It is a question of how they want to turn the dials. I think they can survive just fine. They can be around indefinitely. Companies send you forward or backward. They cannot to stay still hear the question on twitter that people are watching is under the leadership, what are the new things they will do. Speaking with our own emily chang at the bloomberg tech conference. U. S. Versust, the the u. K. In the battle of the charts. This is bloomberg. Time now for back on the charts. Mark barton please. Over to you. Mark 32 economists, just a day after the u. K. Referendum. The median estimate is concern a grexit occurred to hold 21 30, 135. That would be the downside of 8 from todays level. That would be the biggest ,ecline ever against the dollar bigger than 1992, bigger than the height of the financial crisis. Saidther nine economists sterling would fall below 130 and a further 5 say sterling would fall below 120. If we hit 120, that is the lowest level since 1985. Favorite here, the alltime low for sterling dollar, 105, february of 1995. 150 is the median level, 145150. In upside of roughly 5 to percent. Say nine out of the 32 will the pound will rise further than that. They say the economy faces difficulties other than the referendum. There was a hall and alts hall and oates. Alix believe it or not, im seeing them this weekend. I cannot hope to match the enthusiasm, but i will try with this chart. The u. S. Ooking at recession, going into the fed announcement today, will the fed be hamstrung by economic weakness by the latest jobs report . This is a Deutsche Bank model. He is looking at the 10 year and to your spread in the united this and the treasury market but he is adjusting it for historically low shortterm Interest Rates to what his model found and this goes back to 1990 looking at the recession, is that we are at the highest risk of a recession in the United States since the financial crisis, since the last recession on, at 55 . That is where we are given what we have seen here there has in a debate about the yield curve not recession. A 55 chance that the answer to that is yes. I love london and i love mark aren and i will go with julie because i increasingly hear people upping their percentage on their session. Julie the yield curve is so pivotal. Tenant actually convert when you have a twoyear yields already . Mark, nice job. Mark they run off the brought up with a credit reserve. David julie is the unanimous viktor. Jonathan thank you very much to you both. Up next, the market open right here on bloomberg. The open is 32 minutes away. Jonathan here is your Global Markets snapshot. Across the board, a spike over 1. 4 Percentage Points higher. The biggest drop since february. Higher up by 9 and we inch back toward 6000 points. Weaker yen, stronger pound. The town appreciated by about. 5 stronger jobs data out of the u. K. In the bond market yield, pushing higher on yields. In the commodity market, here is the story. It is risk on. Getting hammered. It is 30 minutes away. David i am david westin here with Jonathan Ferro and alix steel. Alix right now, the results of fomc meeting. Heating up yet again and china missing out. But nevertheless, chinese stocks rise. With us all to discuss it is the Asset Management ceo peter. First, we want to kick it off with the fed. Eyes on the fed. The fomc meeting today. The rate hike increase. The real question is how will the. Be revised down . And i jumped out in go into real data. Of the dataivative appeared believe what the fed says, which we do, to not believe it is not useful, if they are genuinely data german and will really be german by the numbers, what we have is a mixed set of data that are not inclusive. You have odd Employment Data but strong Consumer Spending but concerning credit quality. Is anance, what you have interestingly stable economy. It means you do not move from a fed policy perspective. You do not take action until there is a reason to act. I do not see reason to act. I think frankly they watch until september and that means if the data are real, we have got to wait until we see what happens. I do not see any reason to do so. David i think you are at the heart of the matter. The data is next. Of what your bias is, do not change anything or you say, you look at historic norms, we are really low on this number. Inflation, there is substantial disparity. And if you are kind of in the Tipping Point low, you have to point out the risk of not acting. Recessionnce of a only want to carefully before you start raising rates in that environment. The only issue is when you go up. We have got a Federal Reserve made up of incredibly conservative academics. The idea we do anything rash is unbelievable. Never criticize the academy. My job is to create value for people in the world. They will do their job but i think you are right. I would never say ridiculous but i defer to you. Grexit, china, and the fed in my view is sort of a nonissue. In ontopic. There is not enough clarity or directional reality to compel action. David but maybe that is a healthy thing. We will get to a world where the entire World Economy and all of this is hinges on every word that comes out of fed. It is a new world. Peter it is a new world you can , when youing back started having the government involved in the economy for the just 400 years here it or 50 years. Me flip this one for you. We spent a lot of time worrying about volatility for the markets. The situation is actually not volatile. We have got plenty of other stuff to worry about the the fed will leave rates where they are and we will see what happens in september and we worry about other stuff. You can watch fed chair Janet Yellens News Conference live here i 1 00 p. M. Eastern time. The number two story is the battle over grexit. It is heating up. That britain would be worse off shouldnt leave the eu. 11 year low and the pay picks up. Not just to the market the people, living in england and europe. Week . We headed next my problem with the debate is next week, my colleagues over there, it does matter. Nobody knows why. Nobody has a clue why it matters. Here will be a vote i have not heard an intelligent discussion of the reason to vote for or the consequences to vote for. Is if you vote to exit, cameron has got to go to the eu finance minister conference next week and invoke article 50, which has never been involved. Nobody has any idea what they are voting on. That, horribly politicized, and it is either exit, or it is a nightmare if you stay, but no one can articulate why. There is a tiny parallel that i think is relevant. Closer and closer, you will remember the reporting came out that it really was like exit, oa it was not that close. We will see. Worth, i would be surprised if they voted to exit. Be an important much larger. Talk about the possibility of other people leaving the eu. Many trade crudes are pending right now. Ery antitrade it concerns me from a pure economic level. When i am over in the u. K. And listening to people argue about it, it is not an economic conversation. That kind of concerns me. It is a breakdown of globalization, which will not actually help the coal miner with a lowpaid job. It does not help. The history is, it makes it worse. Anytime you take actions that impede the flow of capital, you will not do any good for anybody. That is my principal concern for the exit. At thea look at the rise right. Much more later in the hour. The number three story is out of china for the third time since 2013. The addition of chinese stocks was rejected. Look at that start. You care the shares are included . We do care and let me tell you why. A 220 billion Asset Management business, our clients, pension funds, retirement plans driven by consultants. The managers performance has always consistently been measured against benchmarks. It is difficult to manage against the benchmark index if you do not have faith in the underlying quality of the index. What has been done here is look, we have got clear criteria for inclusion in the index and china has stuck to their standards. No one should be surprised this. In the real world, there is history here as well. China is trying to work its way to word capitalism and i am not sure it knows how. Again, no one should be particularly surprised by this. There is history here as well. Think about the best capitalistic economy in the history of western civilization, the united date. Look at what happened from 1870 until 1930. Panic afterted panic after panic or jpmorgan had to rebuild the market single handle the three times area then you have the collapse. These are very complicated, organic animals and china has a huge one. We happened to work our way toward a manageable market, starting with private sector and layering in regulation. China will come in it with another and. Trying to build up private sector. That is really hard. I think they could do it if they are committed to it. Until there is clear evidence of that happening, they made the right decision and that is the way it has got to work. Our managers to have faith on the Underlying Industries which their performance is being measured, which is the right way to do this. Jonathan just want to get to a headline quickly. Nigeria rate to be marketdriven or nigeria to release guidelines on wednesday. We will bring you more detail on that. The Central Banks to allow the rate to be marketdriven. Ahead ofthe open the open, about 20 minutes away. Volkswagen is apparently embarking on a broad Strategic Review according to our reporting. Apparently, the ceo presented his plans to the board on tuesday and then presented to the media on thursday. Basically a refocus after the cheating scandal away from growth cost. Business, the costsharing and stepping up vehicle development. Those shares up i want percent. Ofs is the largest supplier airbus and apparently, it had taken on too many orders from airbus as well as knowing and has a backlog of orders it was not able to then deliver. It now says with the long jam in the production of premium seats, four airbus in particular, it is now starting to ease. At see those shares rising airbus shares are also rising. We have a deal in the outsourced Software Business in the United States. Insurance software and does insurance outsourcing services, 9. 5 acquired for nine per share. To the companys close yesterday. Not trading at this morning but the shares have soared this year. If you look at the chart, it is up 46 and they have made small acquisitions and have reported strong profit growth. We will see how they react to the latest by when the shares open up. Alix something happening in the markets right now, we will get a chart of s p futures versus the oil prices are oil prices have taken a turn for the worse, down by over 2 . And thee or s p minis oil prices, you see the s p has started to roll over a little bit. You have to wonder if they can sustain that during the decline we see in oil prices. David now time for first word news around the world. Hillary clinton now has a doubledigit lead over Republican Donald Trump in the race for the white house. A new National Poll shows clinton leading trump. 55 of those surveyed say they could never vote for trump. Comeshas an edge when it to fighting terrorism by 5245 margin. Voters say he would do a better job. Warned that extremist from syria may see attacks in france and belgium. The warning from belgium came less than two days after a man claiming allegiance to the Islamic State killed place opposite spirit Authorities Say they have no information about stuff of a target. China has a warning ahead of the white house meeting. Is Chinese Foreign ministry telling the u. S. Not to support any separatist activity. China says the dalai lama wants just what to bet from the rest of china. The leader has pushed more for tibetan autonomy rather than complete independence. Global news 24 hours a day powered by 2400 journalists in one of 150 those around the world. Thank you. Coming up, the bidding for yahoo narrows with just a handful of groups making final offers. Is left. Ind out who plus, jim chanos is out with new aeas researching for potential short. The interview in just a few minutes. Alix breaking news. Industrial production is down. 4 . It was supposed to be down. 2. Rosein april, production. 7 . You had the weaker dollar but could not sustain that throughout may. In terms of what we are seeing in equities, a little bit of a when it comes to treasuries and you have the dollar turning a little stronger in terms of futures, only up. 1 . The grexit fears continue and the polls have not really changed here they all show the same thing. Lead is leading. Sterling is rising. The data shows an unexpected pick up in wage growth. The risk is spreading far beyond sterling. Management ceor, and president. I will start with you. Pound, euro crosses. What do you make of that . See the market looking for other ways to protect themselves. Focus. O has come into we think the euro might perform differently than the market is priced in the event of a disruption. Jonathan is that a politics or a surplus story . It is much different than where we were two years ago when the euro crisis first started to emerge in 2012. Now i big surplus. Ecb is buying large amounts of government security. Webetween those two things, think the euro might hold up a lot better than people might expect. Alix we have not seen that and sometimes, the yen longs are crazy right now. U. S. Dollar. The at what point do you think initioning is so onesided all the currency trades that there is a washout . I think you are correct that the market is a long yen. The risk is that we are going to a bank of japan meeting. The bank of japan may push back against yen strength, further easing possible thursday morning or next month. I do not think the market is prepared for that possibility. Jonathan everyone is looking to trade around the grexit. Brexit. Beyondg to investors, the euro crosses . Where we think risk might be underpriced is commodity currencies, which have held up a lot better. Maybe a green light for some of the higher yields currencies to perform quite well. We are probably closer to the u. S. Recession, as one of your early chart indicated. It is not the right scenario for those currencies to do well. Or maybe moreere euros,ionally, long currency trades could do well if the market shifts its focus to something broader risk. Alix im glad you brought up the dollar. Can the fed really move the needle . If the fed winds up losing confidence, longerterm tightening cycle, not just the next nine months, what is the impact today on the dollar . A think we will have a strong dollar for a while. Currencies in abstract are not that meaningful here they have meaning in relation to each other. I think the dollar will be not justy strong economically but politically in that is another reason why it is tough for the fed to raise rates. It is taking a step towards strengthening the dollar. I am not sure they want to do that. Boxre in a little bit of a. It ends up that they will stay in an the euro stabilizes, i think the pound probably stabilizes and the dollar could come down a little bit and that might give the fed a little more room. A couple of these answers, we will know in a few days. Knocking on the door and saying can you help me out a little bit . David volatility. Have you seen a rise in the overall volume of trading going on . You are seeing a rise in pricing volatility for the event. Is not unusually high at this point. It is more about possibility and on thursday and friday, things become very shocking. Thank you for being on the program. We are counting it down to the market open. Futures are still slightly firm. Where are we . Still ahead, a bloomberg exclusive. In interview with jim, who will reveal the best short for the current market and discuss the current state of the credit market next. By 3. 5 p futures are up points. Joining us is peter. Look at oil. I just pointed out a few minutes ago how oil was rolling over. We had seen a tight correlation between stocks and oil. Do you think oil is on its own right now . Peter it is not on its own but it is overly correlated in the First Quarter. We spent sometimes reeking with managers in the Midstream Energy companies driven by oil flow. They got destroyed in the second half of last year and in the First Quarter, they have come back very strongly. Is, it is closer to training on its fundamentals than it has been in the last 12 to 18 months. You have seen the middle east sovereign wealth funds work their way through at the end of leicester in the First Quarter. It is less correlated with stocks and the equity markets than it was eight months ago and correctly so. It probably will be for some time and it will be in better shape in terms of the ability to trade on its own now. Jonathan that is a thing now . Bloomberg go, a rally. Three minutes away. Jonathan this is bloomberg. Lets get you up to speed on where the markets are. Around futures are up 4. 45 points. There is a snap back from yesterdays big losses. Of 1 . We are resounding in todays session. The opening bell is ringing. T is beautiful a stronger pound on the session. The dollar yen is higher. Just. 1. 62 eld is unchanged at we dont have a rally in crude. Julie hyman, lets open this. Julie oil, we should mention that we are watching Oil Inventory numbers coming out at 10 30. That could change the direction to some degree. All averages are higher to some degree. We are not seeing as big of a rally. In some part by the rally. About point 25 . People are waiting to hear what janet yellen has to say. And it is not unusual to have that much volume one way or the other, ahead of a hearing from the fed. We have an interesting story in the wall street journal today regarding the relationship tween these two companies. Pandg are at odds with walmart. Offering inhouse bands to procter gamble. The two of them have been in a discussion for sometimes. They have a strained relationship but it is an important relationship. Take a look at the bloomberg to it a look at how important is. This supply chain analysis for walmart, it is the number three provider or supplier. , berkshiretric hathaway the top two. Procter gamble accounts for 3 . And also, we have revenue from walmart. Moving along, we are taking a look at bank of america today. That is after the ft reported that the consumer unit job cuts told lead to 8000, according those cuts. Not necessarily active cuts. You can see that they are moving up with the market today. There is a bounce bank in the financials. The stock has been downgraded to neutral. A price target of going to 32. Above where it is right now. We are at 4. 6 . Server share gains are leveling off. We are operating at a tenure peak. It is unclear if this happened because of the u. S. Etf. It is interesting that they are both trading higher. Jonathan thank you. Then four hours we will get latest fed decision. No rate hike is expected this month. There is a 60 of a rate hike in july. The market is waiting to hear. Lindsey piegza joins us here. So you stood there in front of chair yellen. What is your first question . My first question is clarity surrounding the motivation to keep the fed on the sidelines. In the aftermath of the april meeting, there was a plethora of hawkish comments from a number of officials, including the chairman herself. But in the aftermath of the weaker than expected unemployment report, it seems some officials have lost be stomach for a summer rate hike. So i want to know, is it the employment picture alone . Or is the concern more broadbased . The latter suggests a longer time of weight between now and the next official rate increase. Alix do you feel like the fed has lost its stomach or the markets . I think it is the fed. The market had been talked up, following a rate increase. But now, saying lets not pay too much attention for one data point. We are on a firmer footing. The chairman said we would not see a rate increase in the coming month. You will see one over time. So that backed off from the more time pacific language. The function on the that with you gauge the futures. If you look at the move, the thing i want to point out here is the radical recalibration. Not once but twice. Expectations were rockbottom. Anythinglly gauge about where we will be at the end of the year, given how much change we have seen in the last month alone . Difficult. Is very because that is reflecting this back and forth. The switch between fed officials, talking up its summer increase and then taking it away. If we do see a better unemployment report, maybe they talk up a july raise. But then they could pull that back. So the backandforth is not a reflection of the market, and more a reflection of fed officials themselves have been running amok with their comments. Tolly being disingenuous confuse the market about where the actual longterm path for policy is headed. David isnt the case that the more the fed talks and doesnt do what it says it will do, it will affect the market . Think the worth went up to 34 or 35 the market still wasnt buying it. Is there a danger on Janet Yellens part to not getting the markets to where they need to be when she needs them to . Lindsey absolutely. I think this really was the last straw for the fed, undermining what little credibility they have left. It is almost as if the fed has been crying wolf and now the markets are not going to necessarily believe hawkish or september,july if there is questionable data out there. I think the fed has done themselves a serious the service by eroding their credibility. Alix it seems to be that janet yellen was very clear. She came out and specifically data there is incoming inconsistent with labor market conditions, influencing inflation she does expect further gradual increases to be appropriate. She did sound hawkish. She did seem to say, we are going forward. The markets just seemed not to believe her. Lindsey exactly. She is talking out one side of her mouth about being data dependent but on the other side we are hearing the time specific language over the coming months. Last year, and by the end of the year, said officials need to learn that it is inappropriate to offer the marketplace time specific language. That they need to stick to the rhetoric that it is all about the data. Then they would be able to maintain their credibility with the marketplace if we sell the data shift to the downside. The market would simply anticipate a change or nonchange in Monetary Policy. Again, the time specific rhetoric is muddying the waters and undermining credibility as they talk up the market and failed to present the policy change that the market was anticipating. David thank you so much. Hat was Lindsey Piegza you dont want to miss our special coverage of the Federal Reserves decision at 1 00 p. M. New york time. Now, we turn to a bloomberg exclusive. Spoke to scarlet fu in new york. He discussed what he is doing with the short opportunities in the market. On,s a bull market goes seven years into this bull all thingshink that being equal becomes easier to find true ideas. Because increase of late, and a teacher course on this, you do see more and more corporate stretching to make estimates and forecasts. It is a very clear historically, in terms of what we see with corporate misbehavior or fraud, it follows the financial segment with a lag. Scarlet how long . It could be months or years but it is a lag. And the reason is, as bull markets go on, smarter and smarter people suspend their sense of disbelief and want to get in on all kinds of schemes. In more think that rational times, you would want to keep your money in your wallet. And increasingly, managers feel they can get away with more risky behavior. When the markets go down, funding dries up and the ability of companies to raise money is lessened and some people even want their money back. Most are dependent on new capital, you get the problems like made off and enron. Dependent on capital, even to some extent, the financial crisis. So that is something we have to watch. I think that the dual emergence of valeant, a company we know the public, in markets and tear and a host in the private market, it is really important. It is now we are seeing to really Big Companies led by charismatic leaders who appear to be of something that they worked. They arenk that watching now to see if the private sector in the Silicon Valley and wall street, to see if we see more of this emerge. One area that we have noted more recently that has suddenly imploded are the online lenders. Scarlet lending club and the like . Today there was news out on an amex spinoff, which caught people flatfooted. Talking about a big drop in credit quality. One of the reasons we think we are seeing this deterioration is that the online lenders, we were locked we were shocked to find out, we looked at them. 80 work on debt consolidation. So if you were at the end of your financial rope, the online lenders would lend you money to consolidate your debt. And if they are having problems, the ability for consumers to refinance is tougher. I will point out one area in the credit markets that has us worried is the auto sector. Scarlet what specifically . Lower subprime. What were seeing in some markets is as much as some lenders lending 125 used car values. Which should scare the heck out of everybody. And that is because for a lot of workers who dont own a home, their car or truck was there main asset. Scarlet their livelihood. Jim chanos right. So we are seeing that be much more aggressive and it is starting to turn down now. Thatallas jim chanos was jim chanos speaking with scarlet fu. What he just said. It strikes me that the consistent thing he is saying is that investors are not asking enough questions. Words, there are no sport valeant or lending club that is the consistent theme. It goes deeper. This is something we live every day. Isconsolidate up but it seven different managers. Each with their own disciplinary process. Soon to be eight. The ceose talked to consistently about one aspect of their process. Jim is right about the risk going up as you get further into a full cycle. Because if there is pressure, the markets arent necessarily longterm thinking and they do but companies under shortterm earnings pressure. Every one of our affiliates has been consistent in discussions that they do all the work, they look at the materials, they look through the audit and the aspi right questions but the next whom are thef questions being asked . They are displayed about getting in the room with management and every single one of them can tell us stories about companies that looked really good on paper and then they went to the board room and sat with the ceo and cfo and the head of sales and they walked out of the room saying, we are not buying that company. I dont care what the numbers look like on paper. I dont trust what they are telling and i dont think they have a good vision. That is a critical component of this process. And it is tough. Because we are institutional. We have enough power to get in the room. It is very tough in the retail space to get the questions answered by the people who must answer them. Jonathan it has been great to have you with us. Peter bain. Up, a billion dollar boost by 2020. Where is it going to come from . Stocks up by around one third of 1 . David this is bloomberg , i am here in the green room. A map, we have special coverage of the meeting at 1 00, we have the pimco leader. I am shery ahn with the Bloomberg Business flash. Usage rose at the fastest pace in performance. They were driven higher by the biggest monthly increase in Energy Prices in a year. The Labor Department says the user price index increased 4 10 of 1 . Food was up 3 10 of 1 . Twitter is investing 17 million in the music streaming business sound cloud. A larger financing round is expect it to amount to 100 million, arguing the company at 700 million dollars. Twitter has invested in startups, including developer music and mobile marketing platforms. Von gart the Worlds Largest mutual bond manager by offering lowcost investments. Now they want to cost they want to cut fees even more in the hopes of boosting investor returns at a time when returns are low. Is average Expense Ratio compared to an industry mean of one dollar. That is the Bloomberg Business flash. Minutes until the session here. Lets get some movers for you. Julie lets start with para go. One might have thought it would news that itfter was close to being acquired by u. K. Based firm. They poured cold water on this this morning. Saying that there is skepticism about any natural acquirers. We have seen shares pulled back by 4 . Is anotherces company we are watching. Shares are searching by 12 . Yesterday, why was it up so much . They make a noninvasive screening for colorectal cancer. Plunged afterres the u. S. Task force gave preferences to colonoscopies over this type of screening but apparently, an analyst pointed been puticle that had force website that seemed to not necessarily give preference to colonoscopies. So it looks like somebody got the word yesterday and the shares are up another 13 today. We have another company we are watching. Are underway at Morgan Stanley analysts say there could be further delays in the Nuclear Construction schedule. Toshiba,use, owned by is scheduled to build the latest Nuclear Plant but analysts at Morgan Stanley say they are concerned about the ability to get the project done on time. Alix thank you so much. Lets go to abigail doolittle, live in the nasdaq. Abigail one stock that we are watching this morning that is on the move. 3 after ite down was downgraded from a cell to a neutral. Says that the high end grocery deal with increased atpetition and he has crisis 24, a sharp downside. Not helping the situation is the news yesterday that they did receive a letter from the fda about unsanitary conditions in a massachusetts plant. Well on ther as open here at the nasdaq, Cisco Systems is the biggest drive. Sachse 1. 7 goldman did downgrade them with a price target of 32. Those are two stocks moving here on the open. David etfs, they are the special favorite of smalltime investors but now the big guys want to get in. Additutional investors will 300 billion to the industry by the end of the decade. Our bloomberg stocks reporter is joining us now. There is more to it than this. Why do investors want to get in in such a big way . A lot of reasons. Of is the general broadening appeal amongst investors for these types of broadbased investments. Fillhe idea that etfs can a liquidity gap. A lot of people are talking about a market that is a fixed income market. There there are concerns that it will not be able to hold out. In thefollow something fixed income market and suddenly then you have more maneuverability. So there are expected to add 200 billion a year. Like ao have things derivative replacement. If you have a big portfolio and you typically hedge a position with options, suddenly you can hedge a position with etf. You have exposure on the downside. So there are a lot of different aspects here. The fourth one is smart beta. Alix smart beta is huge. How does that change the case for index investing . Oliver listen, this is obviously not something that is going away anytime soon. The idea is that you have Institutional Investors who have a lot of money that want to actually apply etfs beyond something then getting a broader benchmark exposure shows that these tools will have a lot of different uses in the market. And that will continue to change the way we see the action. David to be crass, how much with this cost . The fact is that it is a lot less expensive and a good way to get a return. Oliver absolutely. If you are charging a fee to people to manage money than you want to come back and make money. Etfs are pretty cheap. At the end of the day, it is supposed to track roughly 2000 but suddenly, maybe you could just get a small cap etf that can apply a little beta to your portfolio to make sure that you do manage and get closer to the performance of the benchmark. David thank you so much. Jonathan this is bloomberg. 25 minutes until the session. Nigeriasfed central bank allowing the Exchange Rate to be marketdriven. Speculation has pegged around this a long time. We are expecting a significant evaluation on the day when it is implemented. Alix you can blame oil on that, in part. A special onl have at 1 00 p. M. This afternoon to cover it all. Alix and we have the doj and boe tomorrow. It will be a central bank hot 24 hours. So we will have the fed chair janet yellen our coverage begins at 1 00 p. M. Vonnie imo the vonnie quinn. Mark and from london, i am mark barton. This is Bloomberg Markets on Bloomberg Television. Vonnie we are going to take you from new york to washington to london. Stocks are rebounding ahead of todays fed decision with markets factoring no chance of a rate hike today. He will tell you what clues to look for in the statement. When the polls are saying yes, the markets are saying no. You will have a roundtable on the case for a u. K. Exit from that is entering the final stretch with eight days to go. A new bloomberg poll shows Hillary Clinton opening up a doubledigit National Lead over donald trump. Those polls echoed one of the mainstream never