Transcripts For BLOOMBERG Bloomberg Go 20160817

100 day moving average. Alixjon no conviction. Mr. Delay comes down and says right is live around 22 . I cant imagine why, given whats happened in the past, the markets wont believe them. Alix we will be watching all market it isthe sort of like all quiet on the western front before the fomc. Jon with the exception of moves and equities in europe. The ftse marginally lower come up by. 1 . In the fx market, low conviction, lack of direction. Yesterday, turn it upside down and thats what youve got. Weaknesses make him a strength today. Yesterday,ness strength today. The rally in brent crude, coming down a bit today. Citigroup saying the opec fueled rally should give you a bit of caution. Of the yield curve on treasuries, that will be in focus as well. To your notes up about one basis point. Notes up about one basis point. ,he long end of the guilt curve one or two basis points. Some superlong that over in the united kingdom. A little bit of extra supply. Alix lets go around the world and check in with our Bloomberg Team for indepth coverage of all of our cap stories top stories. Mike mckee with a preview from the fed minutes from meeting. The odds of a fed rate hike for 2016 finally above 50 . Any clarity we will be able to get today . Said the july statement the nearterm risks to Economic Outlook had diminished, but its not provide any warning that a rate increase was imminent. We did get that yesterday with dudley and lockhart. We have pulled forward the timing of the next great move from march yesterday morning to december today. You look at the chart and it defines market schizophrenia. Maybe the minutes will give us some clarity as to fed thinking. Who is on what side here in the debate . At this point, people dont know what the fed is doing. Dudley encompassed the fact that that that might not even know what theyre doing as well. You are mispricing and imminent rate hike, but it is still lower for longer. Are we looking at a total rethink of fed policy in the fed . Mike it is not a total rethink, we are getting very close to it. Sheets the feds balance since the beginning of the crisis and nominal gdp, they put a floor under the crisis in 2009. Since then, they have not been able to generate growth or inflation, no matter how big the Balance Sheet gets and how low Interest Rates are. Janet yellen will have that meeting in september. Hank you very much, mike mckee no doubt, we will see the ship continued to looking to inflation data versus the labor data. Jon we got some july jobless claims the number may not be what many expected. Lets bring in Simon Kennedy from london. We had the ilo report which a lot ofs people thought the jobless claims would rise. They did not. What is the story ech . Theres a lot of volatility that has to be taken into account. That is why the pound struggled we can talk about the resilience in the u. K. Labor market even after the referendum. Whether that continues remains to be seen. We are forecasting higher on implement, retail sales data tomorrow showing a big insight. Jon weve had the inflation data, we just had the labor market data, tomorrow is retail sales. What do you think the bank of england will be watching more keenlyn anything more than anything . Whether they are transferring onto high street or main street that is the key data tomorrow. Jon i would still call it the high street. We had the jobless claims and they dropped and most people expected them to increase. You are a ceo, what are you going to do . You have low visibility come are you going to cut jobs . Cutting jobs takes conviction, pausing hiring does not. Job openings in the u. K. Fell. Is the real story. We have other data we want to look to in the united states. Target reported secondorder earnings about 30 minutes ago. They beat on earnings per share, but there is an disappointment. Isnnon the key number comparable samestore sales. Those dropped 1. 1 , the first time they have declined for target in more than two years. The ceo said it will not get any better in the second half of the year, the company cutting their guidance for the full year and the second half of the year. Weve seen the stock down about 3 , there were some warning signs this could happen. In the first quarter, the ceo was saying they could see sales dropping a difficult consumer environment, consumers are not spending. We have seen that at some retailers but of retailers, we still seen providing strong results. Not everyone is a winner. If you have a great, strong product and great store experience, consumers will be going there. If you dont have what consumers want, people will not just go there because your doors are open. David what did we learn about lowes today . Vonnie yesterday, home depot yesterday, shannon home depot look goed good. Lowes has not been able to catch that tailwind. A very different story when it comes to Urban Outfitters. Come sales rose by a surprise 1 . The expectation was for a decrease of 1 . The stock also raised to buy at ever core. It was brand sales that jumped about 5 in the Second Quarter. Urban did use more money and spent more money on technology, didevertheless co manage to raise those samestore sales. Companyopping, this might be used for the seven chip intel is 15 of this compass revenue. Price target lowered by about 12 . Lonal that might not be demerger may not des merger might not happen. Emma donald trump is shaking up his struggling campaign yet again. Stephen been and is a former banker at goldman sachs. The Senior Adviser will become the campaign manager. All of this is seen as a demotion for the campaign manager, paul manafort. American investors have lost considerable confidence in trump. Registered voters with money in the market narrowly picked trump over Hillary Clinton. Turkey wants to free up prison space for the thousands of people arrested following last months failed coup attempt. Some 38,000 prisoners will be released. Since the coup attempt, the turkish government has detained 35,000 people for questioning. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Jon coming up, the great or not so great rate debate. Dudley and lockhart calling the september meeting alive one. Live one. This is bloomberg. Alix this is bloomberg. Fed minutes from julys meeting out later today. After the more hawkish comments history, there is now 50 chance of a rate hike this year for the First Time Since the brexit vote. Oining us now is greg peters he manages the Prudential Total Return Bond Fund and helps to oversee the firms assets good to see you. Do we need to see a real rating of the yield curve higher if we continue to see higher rate expectations . Greg its amazing to me that there is so much focus on the fed minutes this morning. Its clear that the markets have been leaning against what the fed has been saying now for the past couple of years. Now, it is the coin flip in the year end. They are data dependent. I was reading a bunch of articles last night and this morning, what to look at in the fed minutes. Im not sure its going to be a lot there to hang your hat on and into the day at the end of the day, the fed is data dependent. Jon are they . Greg supposedly. If you do get strong Economic Data here in the u. S. , i do believe you have a replay of last year, fourth quarter. Alix are we looking at a backup in the yield curve like we saw in japan a few weeks ago . Greg i dont think so. Im not overly worried about the curve steepening, im not worried about race moving higher in a meaningful way. The rates moving higher in a meaningful way. Im inspecting yields to rally the markets are dissipating the fed is tightening for no reason and leading you closer to the edge of recession. Im not overly worried about yields moving higher. Where i can be horribly wrong around that is the fiscal side. You hear a lot of chatter about physical, fiscal, physical, not only in the u. S. , but also in europe and japan. If that has teeth to it, that could be a game changer. It is too early, it is just chatter, but that is the one thing we are focused on in terms of changing the yield dynamic. Jon we have this conversation a lot on this program. These countries we talk about running fiscal, theyre running huge budget deficits. What is fiscal stimulus even look like . Were talking about fiscal stimulus in the u. K. How much bigger does the budget deficit need to be for to become stimulative . In my mind, having negative rates and not being aggressive on the fiscal side is a wasted opportunity. I understand the debt stock is too high and we are over indebted across the globe, but you the end of the day, need to see these countries take advantage of this negative rate environment in order or i think. In order to move forward, i think. Understand the need for austerity, but i dont know if austerity is the answer at this went when you are in such a negative yield environment. Alix the concern is we are seeing a lot of bubbles being created. Carl icahn weighed in on this yesterday. Moneyot of buy back is not going into capital. Think of it as a rich family that has a lot of fun, sits around the pool and keeps printing up ious to the town. You keep going until you go broke. The registries are building huge bubbles. Alix you take on Duration Risk or credit risk . Might i wonder if there be Something Else in these minutes that could come out that could change where markets react. Maybe we should change the entire paradigm you heard it from williams and bullard a few months ago. Would that change the market . Greg i think so. Im not sure its going to be out in the minutes. Jackson is attacking that same issue. Im not sure exactly what was going to come out there. Yes, it is being revisited, and i think that is a good thing. Its clear that after so many years of this stimulus type of policy, youre not seeing the boost in the thrust. I do think williams is on to something. Honestly, they are waging the wrong war. There is a different paradigm and i think the fed is slowly starting to recognize that. You, greg peters. Some breaking news for you. Potential m a wednesday, united bancshares said to be in talks to buy cardinal financial. Through. Still may fall cardinal financial moving higher by 3 . Jon we take you to the world of politics some potentially bad news for mr. Donald trump. Those with money in the markets are losing confidence in the republican nominee. We will tell you why. David this is bloomberg. Stock has been dropping, according to a new poll put out by Bloomberg Politics. Trump was narrowly picked over clinton that number is down from the advantage in the june poll win trump led by 50 30 . For more, we bring in megan murphy. This targeted registered voters with money in the market and it shows that trump is losing some of that advantage. Megan hes lost a lot of that advantage. There is a bigger split with people who have more money in the markets. More money you have in the markets, the more you are losing confidence in donald trump as your guy. He still has a narrow advantage with people with relatively smaller sums the market, but if he loses that high money, traditionally establishment leaning crowd of people, that is not a good sign for him. David you also asked specifically about tax policy. It was interesting come on the buffet role that says people who make 1 million or more should have a minimum tax of 30 , it showed a narrow majority in favor. Megan these statistics read incredibly, but it goes to highlightgoes to tax plan which does favor the wealthy. Is he really in alignment and on the right side of these issues with the majority of people hes targeting . The number ofg rates and reducing the overall tax rate, it was somewhat surprising not the support one would have thought. Megan it is counterintuitive. We think this cohort of voters would have been the most sensitive to bringing the top rates down, lowering the Corporate Tax rate. We have not seen that level of support there is still a way to go, but it does show that perhaps this trend of the perception of rising inequality that perhaps the tax system that is rigged in favor of the wealthy, this is something that is gaining traction more upanddown and across the voter covert. David there seems to be a shakeup at the trump campaign. Megan it is a shakeup. They cannot talk their way out of this one. Bannonve elevated steve and kelly and conway known to outspoken,y antiestablishment member of the party as this very senior figure in the campaign. Paul manafort was brought in to keep trump disciplined. Talking all day today whether hes been demoted or how they want to spin this one. Campaign firing on all cylinders that david rumors that roger ailes might be helping out some. Alix the fed back in focus. We will review the fomc meetings out at 2 00 p. M. Eastern today. This is bloomberg. Hey hows it going, hotcakes . Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Alix this is bloomberg. It is 7 30 a. M. On wall street, 12 30 in london. Ciscots are coming at according to crn. They will cut as many as 14,000 employees worldwide, 20 of its workforce. Yuki labor markets and showing signs of continued resilience after the referendum on eu membership. U. K. Labor markets. Billion Sovereign Wealth Fund gained 1. 3 after losing. 6 in the first quarter. From the u. K. P property market. They had to get out of some of that due to brexit. Jon we sit here 24 hours ago having a discussion about a dovish fed, now talking about a hawkish fed. Its all about the next big meeting. The most important meeting at the fed since the last one until the next one. September 20 its endeavor 21 and september 21. Equities a little softer in todays session. 18 out of the 19 Industry Groups lower on the session. The ftse a little softer as well, down by. 25 . Dollar weakness yesterday, Dollar Strength today. The bloomer dollar index bloomberg dollar index up. 3 . We will be talking to bnp paribas later on in the program. By freezingriven output at alltime highs in saudi arabia. Citigroup saying you should take some caution. Brent down. 3 . 75are up one basis point to extra supply coming to the market, you set that up, yields up at the long end of the curve, too. Lets get to emma chandra for first word news. A monstrous wildfire has forced 80,000 people to flee their homes the fire forced the shutdown of interstate 16, leaving driver stranded for hours. The British Government plans to get tougher on accountants and advisers helping their clients avoid taxes. The treasury says these sanctions would make would be enablers think twice. At the summer olympics, the fourth gold medal for simone biles. A so stopping showstopping floor exercise. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. David the big news coming later today will be the minutes from the fomc july meeting. From mohammed elerian from Bloomberg View entitled what to expect from the feds minutes. Minutes. , productivity, low inflation, external threats iveness offect fed policy overall. What might the fed be able to tell us in these minutes about why we are not a young economist who owns a franchise on economic growth, there is something going on now that is where the argument begins. , with amost interesting lousy subpar productivity, combining that with weaker Industrial Production is, what can they do given all they need to do but not make productivity worse . David does it all come back to corporate investments in the end . Tom that is a really sophisticated question, actually. It comes back to how you jump start corporate investment, Capital Expenditures and get back to the good feeling of , a word for aing better use of capital given the amount of labor you input in. That is the heart of it. How do we spur investment . Can you do this with the great distortion of Interest Rates . David we just heard from president williams raising questions about the overall paradigms. Is that fed getting ready to think maybe the overall paradigm has to shift . The Cottage Industry of u. K. Economics mohammed came out of i think of the Great Program at Rice University as well. , they arethree basis in a bit of a prisoners dilemma. They are sorting through that with Great Respect for the yellenges jerr chair has she was handed a fed policy were none of it was in the textbook. You talk about effectiveness, you really wonder how they can regain the confidence in the markets. The dots are here and the vigilantes are down here weve never seen this data. They are in the middle of Monetary Policy trying to reinvent the entire structure. The have to be totally fixated within speeches and , keeping theents sotoric and dialogue going they are effective to the september meeting, effective to the december meeting and many suggest they will do nothing until next year. Right now, the markets are dead. You count the severals and the ews upid that sets us beautifully for those minutes later today. Lets continue the conversation on the fed with minutes outtings today paul krugman on bloomberg tv. Paula an accumulation of evidence that Monetary Policy is pretty ineffective. We came into this thinking Monetary Policy of zero rates was an effective, then along came qe, then along came negative rates. This all these other things that Central Banks can do, but its not doing much. Jon Monetary Policy is an effective, according to paul krugman. Joining us now is tom porcelli. Fascinating about that conversation, he pivots away from saying it is an effective effective to sing maybe they should raise at the fed is it because the inflation target is too low . I would submit to you that it is ineffective because the transfer mechanism is broken. Think about what lower rates are supposed to do, stimulate Economic Activity. If there is not a lot of our way going on and not a lot of lending going on, you will not have these low rates be able to have the intended effect on the economy. That is what we saw, particularly early on in the backdrop. Consumers were not demanding loans. Banks were not in the mood to make loans. Necessarily a Monetary Policy problem. Monetary policy has done all it can do. You have these roadblocks in the way. It makes for the easy characterization that Monetary Policy is an effective. Having a debate about raising the inflation target . Why does raising it make it somehow easier . Tom context is key here. If the fed actually does go to this idea of raising the inflation target let me boil it down to the most simple idea. The fed thinks policy is going to stay lower for longer. Thats all that is a reflection of. Raising the inflation target doesnt mean the fed can all of a sudden just magically raise inflation. Issues people are saying for why monetary policies and effective apply to this conversation as well. That Monetary Policy is ineffective apply to this conversation as well. Alix williams and bullard have come out and said the old rulebook does not work anymore. We dont think the fed has many more hikes in them. A handful of hikes left at best. The next downturn will come, the fed has to cut rates toward zero. Cut rates as close to zero as possible, job on the markets and roll into other rounds i of qe. Markets and roll into other rounds of qe. Itnk tom keene had absolutely right what we know from the previous fomc meeting is that they said nearterm risks have diminished. We also know from the statement have ast fed officials rosier outlook on the nearterm Economic Outlook. Ideasleshing out of those will be following i will never be outright dismissive of the minutes come up with all the the minutes, but with all the talk dont ever underestimate the markets ability to throw a tantrum. See yields back up in that regard, but for those people looking for material backing up of yields, sustainable backing up of yields, they will be disappointed. The reality for this backdrop is theres not a lot of inflation we can actually find right now. Youre probably speaking to one of the few economists who has highlighted that there is lets inflation less inflation than is appreciated. Jon thank you very much for coming on the program. Putting the inflation target of two Percentage Points to try to energize Inflation Expectations. Many Market Participants sit here and say you are at zero, you have done 80 billion qe everything on, you cannot do it now. The fed consistently has to lower back to the market. The market has been calling it right for while what is the effect of the fed on currencies . Two regional veggies say there could be a rate hike in september. Has the dollar found a bottom . Chiefs sayonal fed there could be a rate hike in september. Alix this is bloomberg. Alang up, Deutsche Banks ruskin gives his outlook for the volatile currency market. Emma target got hit last quarter by what Ceo Brian Cornell cause a difficult retail environment. The chain cut its annual forecast after sales fell 1. 1 , more than expected. Target has been cutting costs to boost profit. That did help earnings beat estimates, but now, target risks falling into a deeper slump. The countrys secondlargest homeimprovement chain posted secondquarter sales and profits that missed estimates. The prophets also trailed that of home depot. Lowes had outperformed its rival in the first order. Applications for an up limit benefits and u. K. On excitedly fell in the first month after the brexit boat Unemployment Benefits in the u. K. Unexpectedly fell in the first month after the brexit vote. Jon to the Federal Reserve game will they, wont they hike . The dollar1 on index, climbing after a threemonth low, paring some of its gain than the last one he minutes or so. I want to bring in daniel katzive. I would call it a low conviction trade coming market that just flipped itself on its head in the last four hours. Daniel the market has to sell short dollars. Markets doubted whether the fed would rate heights again hike rates again this year. That has hurt the dollar. We think that that is preparing us for a september hike. Wereys comments yesterday very smith again, think he was very explicit try to guide the market towards pricing more. Jon how did you capture the upside . Daniel it will be a broad move. The dollar does best against commodity exporters right now. There will be some friction in risk assets as the fed market prepares for fed tightening. David you think the market right now is pricing in a september hike . Daniel not yet, but we are beginning the process of getting there. The fed is data dependent. Yet to get through the unemployment report at the end of the month. David theres a lot of data between now and september 21. What happens when those data come in and the market has disappointed . Daniel the dollar would go back to what it was a few weeks ago. The main release to watch as the jobs report at the beginning of september. That is the key thing the fed is watching. With the last two releases having come in solid, even a erate growth jon may was ugly, fine. Fine. Nd july were you are saying a gradual shift towards the prospects of a move in september how do they reenergize expectations . Daniel we got a good start yesterday. The minutes always have something for everybody. They are hard to interpret. Minutesc gist of the will be some of the risks they been worried about in previous meetings are diminishing. That should also get the market moving in that direction. David its all about the fed and the expectations of the fed. Doesnt the fx market also respond to the Underlying Fund metals of the u. S. Economy . The strength of the currency should reflect the strength of the economy longterm. Daniel the transmission mechanism between the fx the cost of carry on dollar shorts, changing the cost away dollar risk, making the u. S. More attractive for yield seeking also affects things like eminem crossborder m a crossborder. Alix the dollar is moving faster than the changes in rates. Jon as you started the capture the upside of a dollar rally. You say it will be broadbased. How limited will it be . Dollar pushes higher, fed steps back. I think it will be exactly the same. You will see the dollar have a good couple of months. At that point, you will see the feedback we saw last time, lower oil prices, higher dollar c and we will not get the kind of big momentum move in the dollar that we saw in the second half of 2014 or early 2015. Jon so much fun. Daniel katzive thank you for coming on the program. David why japanese investors are paying the highest ethics hedging costs since 2008 fx hedging costs since 2008. Alix this is bloomberg. The most important chart in the treasury market if you had your yen risk. Causing him to reduce his exposure to 10 year treasuries these three charts will explain why. This is the Interest Rate differential between the u. S. And japan. The overall borrowing rate is about 50 basis points higher than in japan. When you want to hedge your currency in the stock market, you buy the currency and sell it using the forward market. The cost to you is the difference between Interest Rate and the forward rate. As the u. S. Interest rates increase, it gets more expensive to hedge and sell those forward rates. Another part of the reason why japanese investors are h accelerating their overseas the most since the mo 2013. The are less dollars flowing into japan. This white line here is u. S. Prime money market funds, they used to buy Japanese Bank shortterm assets which led to more dollar flows into japan, but now, those assets . Part of that is regulatory issues. The result has been negative premiums on a basis swap. The more negative it gets is the the morene expensive it is for japanese investors to trade in yen to get the subsequent dollar cash flow. Risk, it out your yen is getting more expensive for you, eroding the yield premium you will get by owning u. S. Treasuries. That will reduce investor flow into the treasury market or outflowssk or leads to or leads tomarket outflows jon i want the big Capital Appreciation of the underlying asset. This is bloomberg. Butrate expectations 20 rate hike for the First Time Since brexit says that president dudley says a september move as possible. Slump and eight difficult retail environment. Markethe u. K. Labor shows resilience after the referendum. Sterling is struggling to rally. David welcome to the second hour of bloomberg. Live from the bloomberg headquarters in new york city so its all about the dollar and all about the fed as i look over to the minutes later today. Called up london at the 30 a. M. And i said we are playing this game again. 24 hours ago we were talking about the fed doing nothing and now we are saying they will do something. Alix not only that, but the other Central Banks are dependent on what the fed does. Kiwi, the to the reserve bank of new zealand is cutting rates and they cannot do anything about their currency unless the fed hikes. David we saw that last summer and that did not work out well. At the one hundred day moving average. Were all over the currency market. Xhe Deutsche Bank head of ef will be with us later in the program. It feels stable on the markets. Europe, 18 of the 19th Industry Groups on the stoxx 600 are down of the day. The footsie is down by one quarter of 1 . About the dollar crosses later when we get the fed minutes. There is broad Dollar Strength is around 100 points 67. Market,ommodity citigroup is saying be cautious of that rally we have seen so far. 11 that of a pullback in oil. A little bit of a pullback in oil. Market, its all about the front end of the yield curve on treasuries, up about one basis point. We are waiting on the potential for a rate hike this year, maybe not. Alix lets go around the world and check in with our Bloomberg Team on our top stories. The fedhave a view of minutes. We will also talk about disappointing key Earnings Reports and more opposed brexit data from the u. K. Carl riccadona. I am looking at the implied policy curve. Brexit is the yellow line and it rated tow much re there is a fed rate a retracement that is anticipating a more mild approach to policy from the fed. Alix will we get any clarity . There is more confusion within the fed. Rerating ise overblown but maybe what the fed wants to do, i dont think bill dudley from the new york fed is serious about the september meeting. He says its possible and not probable. Many scenarios are possible but the fed will not have sufficient clarity that the economy has shrugged off its sluggishness in time for the september meeting for the fed to increase rates. If you are gunning for december, you have to be serious about the next two meetings as well. A boring subject more boring but as we look at the fed minutes this afternoon, we have to keep in mind that these are more dated than usual. Gdpfed had not seen the q2 numbers or the extensive back revisions and had not seen the last jobs report which sound of the all clear. Alix dudley and lockhart saw those last 24 hours and spoke of a potential rate heart rate hike. Will this get the market re rating higher . Fed will have to start a Communications Campaign to put december on the map. September is simply too soon. Alix thanks very much. Makes it more difficult are the retail earnings we get it the consumer was posted be the back bone of growth. Of thewe know it some retail suppliers have been doing. We now look at the puzzle of retail sales. We got the Earnings Report from target which was a mixed bag. They were able to beat expectations in part because of cost cutting per when you look at samestore sales which is a key indicator that investors look for, they were down 1. 1 . This is the first time samestore sales have fallen at target in two years. The ceo told investors dont expect it to get better and the second half. He expects sales the rest of the year that could be down as much as 2 . The consumer might be feeling more confident but when it comes to real, true brick and Mortar Retail and Companies Like target, we dont see it in the numbers. The have been retailers doing well but it is not a Strong Enough consumer that everybody is thriving in this environment. David we also got some numbers from lows. What does that tell us about where the consumer is now . Another mixed bag. The earnings were up 9 and they said they see consumers investing in their home and they feel are hamas an asset which says something about the strength of the Housing Market and lows comes out with a big disappointment for investors. Lowes cannot capture that tailwind of spending coming from consumers. There is a market of winners and losers right now and not every retailer will succeed. The consumer is still modest and spending in targeted ways. David walmart is still to come, thank you so much. The u. K. Votes to lead the European Union and the unemployment potentially rises and we face negotiations. Maybe not. Whats the story . Big expectations ahead of jobless claims to rise 9000. They thought about amount in july. The brexit wrought that many rot that many people expected is yet to come. Expect unemployment to push higher over the next couple of years so this might be a pain deferred for now. , theren the postbrexit has been no brexit just anxiety about the negotiations. If youve got data points this, this month caps on at you which one pops out at you . They probably want to wait until retail sales tomorrow. That may tell us whether it will translate into shopping sales. They saw inflation picking up and that is a concern down the road if it continues to rise the on to the target. It will be a wait and see whether the employment numbers will pick up. Jonathan we will bring in the retail sales right here. Thank you so much. Its all about the fed in the markets but there are also earnings. We got the disappointing numbers from the lows and target Urban Outfitters is a different story. Cops sales were to the upside, rising 1 in the company is raised to a buy. It was due to brand sales. In the Second Quarter. Another stock on the move is cisco. We get earnings after the bell this evening but it could that they will cut 14,000 of its which is 20 of its workforce. We will hear more about this in the earnings after the bell. The potential deal in regional banks come united bancshares and cardinal financial could be in a deal to merge. They are in talks but could fall apart so nothing has been settled yet. We might get some news about this the rest of the week. This highlights how hard it is for regional banks to make money. You have negative Interest Rates and the Federal Reserve fund rate is relatively near zero plus, regulation. We have seen regional banks teaming up to combat those things. Lets go outside the world of business. A shakeup at the donald trump struggling campaign may be a signal that he will keep doing things his way. He made the executive chairman of Breitbart News to be his campaign ceo. He once worked at goldman sachs. The Campaign Chairman is keeping his title but this may be a sign that he is not working out. Americans have money in the voters whoregistered invest in stocks and bonds regularly picked donald trump i40 10 40 and Hillary Clinton does better with those who have invested. 40,000 in brazil, the suspended president has appealed to senators less than two weeks before they begin her impeachment trial. To holdusseff promised a referendum on new elections if she survives the proceedings. She is accused of using county tricks to hide it deficit. Using accounting tricks to hide a deficit. Thank you very much. A weaker u. S. Dollar boosted commodities but could janet yellen crush the rally . We will debate that in our next. Able coming up from new york, worldwide, this is bloomberg. Alix commodities are down today with a stronger dollar that is the bottom here . We will ask Andrew Mckenzie who was on the front lines. Seee are starting to evidence of the u. S. Domestic gas market. The next market to rebalance more properly will be the oil market. That is probably a year or two off. Thereafter, we have to go to the end of this decade to see a fully rebalanced market for metals. Joining us now for the co dtable is michael ophen. Else looks at the dayton says we will have oversupply and we are looking at the back of the decade to we get talents. What is the difference . We primarily think the supply side will be slower in growth. We got this good growth this year out of perot. U. We think supply growth be relatively poor. There has been a lot of headlines in last couple of weeks about surging supply. There will be some Significant Growth on a gross basis over the next couple of years with new projects. On a net basis given whats happening with chile and the significant cut in investment budget, we think net growth will be pretty poor post2017. Andrew mckenzie was saying natural gas first and then oil. Does that matchup . In natural gas, we see prizes moving higher toward the end of the year and there is the potential for pricing to exceed expectations in the first quarter. Its because of production issues. On the oil side, what we have seen over the last couple of months is nigerian production has continued to come off. Barrels per day off from nigeria and also venezuela is outputting less. From a rebalancing perspective, we got this large level of inventory we have to contend with. Yet the market still has a longerterm tightening story. To the extent to try to price that in earlier, we think that happens beginning in the fourth quarter. For the next couple of weeks, there will be a macro picture and a high level of inventory that the market has to contend with before we get to product draws we should see when refineries begin their turnaround. Premium production in america increase for the first time in six months. That is a big part of the shale story. What we have seen over the last couple of weeks is that producers have exceeded expectations. What they are prepared to do in terms of their expectations for the market. Only one small slice of the Global Oil Market pie. 1. 4 Million Barrels per day may grow by 200,000 Barrels Per Day next year but in light of a demand picture that is to growing by a Million Barrels per day and in light of other nonopec supply that is falling by 700,000 Barrels Per Day, we think the market will get concern and we did to see a higher price to dispatch more and more u. S. Shale into the market. Lets take a look at supply issues. Where might we see the most supply in copper that could put a dent in your relatively balance forecast for the next 1. 5 years. Premium there has been a lot of growth in peru. We dont think there is more growth there. There is potential in africa in zambia. These areas of been constrained in terms of supply growth in recent years due to a lack of power supply. Also inseen some growth zambia with one project that was just started late last year. Its ramping up now and there is potential that the power issue needs to be solved before Significant Growth happens. To see growth there, you need to have the power constrained situation solved. 2 isSomething Else you the copper that is coming online across the world is lower. Asits not worth as much cannot replace any kind of production loss you might have from the good stuff. In, the market factors that what do you think the upside is prices . To get the same tonnage of refined copper, you have to process more dirt to get there. That major production costs are on are under upward pressure. You need more machinery to get to the same volume of copper. We think the copper costs, production costs will not go down further. They fell a lot last year. This year, we think there has been a change. You see the Commodity Currencies of generally been picking up again. We see a lot of the q2 results from copper miners under pressure from costs picking up. We probably got to a floor at least. In terms of where the prices go think the supply will struggle on the back end of this decade. The mining space is crushed in 2012. There are such a long lead time between spending now in bringing on an production and its typically 810 years between development and production in the Copper Mining space. We are likely to see higher prices on the back end of this decade. It could be 7,000 per ton by the end of the decade. Alix what is the fair price now . Key concern is clearly what is going on in the macro side of things. If the fed raises rates in september and the market is not expecting that, i think that is the key risk to isis to the broader commodity complex as we go into september. We think prices get up into the 60s in the first half of next year. Shale is not a light switch. The rest of Oil Production is not a light switch that can be turned on over the course of a month or two. There is a high level of inventory but at the same time, in order to prepare for 2018 and beyond, we will need to see a higher price. Stuff but 7,000 for copper. Thank you so much. Thats a pretty bold call by the end of the decade. Thats very outofthebox. David that was a great commodities discussion. Coming up, wy stevenn prepares to open the most expensive casino his career and is doing it as the Chinese Government weighs in on highend government spending. This is bloomberg. Steve wynns set to open the most expensive casino his career in macau. The government attempted crackdown on the biggest Gambling Center and the luxury sector. He says the pressure is having a Material Impact on gambling there. The vip shrunk because the demand went away. The customers went away. I dont think the government took aim at the junket operators, thats not my opinion thats not the impression i have. The policies of Central Government in beijing had an effect of reducing consumer end, louis the high vuitton and chanel gaming phil into that category. Gaming phil into that category. The more aggressive spenders seem to have been constrained gaming fell into that category. That has impacted the amount of activity these junket operators brought to the table. Then they shrunk and disappeared. Alix that was the chairman and ceo of wynn resorts. That adjustment has not trickled down enough yet as the company is operating in macau. David he is a shrewd casino operator and builder. I wonder whether he anticipated as much of a shift in the Chinese Governments attitude. That he heard last week wanted 400 new tables and he only got 150. Its just a flow of money that has kept moving around. Speculation is still in china but its in a different place. David Chinese People love to gamble either in the gaming casinos or the stock market. Jonathan next up concerns over brexit. We get a read on the real estate market. This is bloomberg. [ clock ticking ] time. You only have so much. Thats why we want to make sure you wont have to wait on hold. And you wont have to guess when well turn up. Because after all we should fit into your life. Not the other way around. Everything is cool when youre watching a screen everything is awesome, when youre sharing a meme a voice remote, show me angry kings you know whats awesome . Everything apps that please, more selfies, endless hours of the best tvs brand new apps, shows to go, awesome internet thats super whoa. Everything is awesome xfinity. The future of awesome. Lets get you up to speed on global markets. Futures are marginally negative in the united states. Equities are lower in europe. Its softer on the dax as well. The leading losing Industry Group is the miners, basic resources. A stronger dollar captured by the dollar index is positive by about one three of 1 with commodities lower. Ofper is down by about 7 10 1 . The moves in the commodity market are driven by the moves in the dollar and the commodity moves are driving this the stocks. This is the bond market. Yields of the long end of the 30 year with treasuries coming in by about one basis point. The focus will be on the front end of the curve ahead of the Federal Reserve minutes. Will there be a suggestion that september is on the table . Will theket market price this in . Alix if you are up from 15 last week, there might be some kind of rerating. Lets start with retail. Starting with lows, earnings missed estimates and cant sales were up 2 but that did not meet estimates. 7. 5 but its raising concerns that home depot is doing well and lows is not doing as well. What does it say about the state of the consumer in the Home Improvement world . Beenmer discretionary has holding up gdp growth. Is this the start of a turn or a specific issue with lows . A rough time for target. It is the first samestore sales overinto the years, down 1 in the company cut its annual forecast. Price andage ticket how much people are spending there was down over 1 . Walmart and is not amazon eating away at them. They were able to cut costs and help their bottom line but they might not have that kind of firepower in the back half of the year. A very different story if you look at Urban Outfitters. Their comps sales rose 1 . Up had the outfitter brands 5 for the Second Quarter. It got an upgrade at ever core. Childrens place is beating Second Quarter estimates by losing one sent. Are a loss of 3 but they raise their fullyear forecast by 10 when it comes to earnings. A clouded picture of the haves and havenots of retail. For everything outside the business world, emma chandra is here. An enormous wildfire east of los angeles has forced people to flee their homes. The fire forced to shut down of parts of interstate 15 leaving some drivers stranded for hours. The fire began only yesterday morning. The daughter of former Vice President dick cheney may be headed to capitol hill. She has won the republican primary for it the only seat in the wyoming house. Its a seat her father once held and her nomination means she is a favored to win in november and republicans have a 31 edge over democrats in wyoming. Turkey wants to free prison space of thousands of people arrested last month. Some 38,000 prisoners will be released. They include inmates who have this bug behavior and have less than two years to serve. Since the coup attempt, the turkish government has detained 35 the 35,000 people for questioning. David yesterday, a word from sam moselle open he said he was yesterday, we heard from sam zell. You have to look at supply. There is ancity, 18 increase in the hotel space. Thats in two or three years. That has to have an impact on cash flows. ,hey are building hudson yards 12 million square feet of office space. Ill say 10 or 12 million feet of additional demand. David thats not what you want to hear when you are the one building it. Is the chief executive of related companies. That is your project. Welcome back to the program. How is your cash flow doing . Cash flows are good. Hudson yards is going great and we have 10 million square feet under construction today. We have over 5 million square feet of office space signed and leased and another. 2 million square feet in negotiation im not sure sam had all the facts together ons on hudson yards. We seem to be doing great but there is a lot of addition to supply. People keep saying there is too much and how will that work out. Office space is not office space. There is a different shooting factor between the new product being developed and what exists. In new york city, safety percent 50 of our Office Spaces under 50 years old. Companies dont want to occupy those spaces. The way people work today is different than how they worked 50 years ago. We are building the Office Spaces of the future. Technology, efficient layouts and heating and cooling systems and you can look at this these elevator systems that can handle the density and that does not exist in the old building so people are moving from the older towers the newer towers. David the older ones dont go away. That happens in some of them and its good for new york city b and lower class onbecause it encourages companies to move to new york like Startup Companies that may not have been able to afford the newer buildings. Some of the gets repurposed into ,ther types of Development Hotels and residential and that is good for new york city. We are not competing necessarily with existing stock. People have realized that ceos have realized that office space is not just about where they occupy in where they work3. Retention and attraction tools of people are moving to locations where there employees want to be and where its exciting and nightlife exists. We created that hold liveworkplay environment in hudson yards. David i think its the largest commercial real estate project in u. S. History . That is a multiyear project. Youve got to somehow make projections. For businessook at growth or Business Investment to fill that kind of space . Largeare making a very bet on new york city first and foremost. Also replacing a lot of existing space of we are building a better mousetrap and giving people a reason to move from some of the old space to bet onhe same time as we the macro economics of the future of new york city. When you look at the things happening around the world, new york city has become more attractive than it ever has. You can talk about brexit or political strife, that is pushing investors to move capital to new york city. That capital flows into new york and is driving Business Activity and it will help us grow. The you are nearing residential portion of hudson yards so can you give us an inside what the rental market in new york city is like . On september 14, we will open our sales office and begin sales , residential sales at hudson yards. Those are for sale buildings, not rentals. People have talked about the top of the market or prices being too high in new york city. What has happened is the consumer becomes much more discerning as to what they are getting for what price. There is a lot of overpriced product right now coming to the market in new york city. What you need to do is delivering the right product at the right price. For that, there are still lots of demand. On the rental market side, we some froth and the top end of the market. There has been addition to supply and a fair amount coming. Some of our Real Estate Tax abatements have expired over the last year. Rush to get projects completed before the expiration of the program. That has not been renewed yet so i think youll see a decline in supply and i think the rent will pop up after that. David when you have a project of this magnitude, it has to have an effect on the marketplace overall. Does it drive down prices for others . Does it take market share from other competitors . New york city is growing. Does not all have to come from competitors. I think its similar to the office market. People like to move to newer, better product over time and thats what we are delivering. Turn to have eufinance things like these because you do a lot of financing. Where are you looking around the world for financing for this size of a project . This is ultimately a 25 million development. There is not one answer for this. The money for capital for this project comes from all around the world. There is no part of the world we have not uncovered. Of sovereignation wealth funds, pension funds, debt from institutions, u. S. And foreign. We have touched on virtually every type of fund raising possible for this. Its been said there is a lot of amateurs in the real estate market. Is there the feeling that investors are too overweight in commercial real estate and residential . In the last year or so in my travels around the world and talking to sovereigns and pension funds, there is movement to push more capital for urban markets. It goes back to what the alternatives are. Interest rates are zero. Real estate provides a relatively predictable recurring stream of cash flow. Neither an even Greater Movement to move capital in the u. S. David at some point, the drive can make estate capital to freely available and it can put pressure on these projects. You might have too much borrowing to support what the cash flow is. Underwriting has not really shifted. From a debt perspective, you are not seeing that kind of frothing us. Prices for stabilized assets become pretty high. Citys are high in new york but i think it has become a safe haven for capital from around the world. Make of someo you of the Retail Products like blackstone who has a big reit fund coming up . Are you invested in that . We have a Fund Management business and we raise capital for that business as well. We dont do any retail so all of our investors are institutions, pension funds, Sovereign Wealth Funds. David what do you think about it . Its a way of smaller individuals able to access core real estate assets where they dont have a way to do that. Whether or not an individual is better off buying a publicly traded reit, im not sure what the benefit is to the individual to have locked up capital versus public money. David we saw others in the u. K. After the brexit vote of as peoples people tried to get out. Maybe ended made maybe individual investors dont understand the liquidity. An individual, i figure makes more sense to invest in the public companies. Advantagese what the to put money into a locked up type of investment. Some of them are not marked on a regular basis. The public, and his or market daily. Some people like to put the money in and forget about it and not look at what the values are each day. Its just an individual investor decision. David thank you so much. Coming up, the first time the center for Automated Technology is drifting away from detroit. We will discuss where and white next. This is bloomberg. Alix this is bloomberg. The Deutsche Bank head of affects will give is out look for the volatile currency outlook. David detroit has started to look for talent in Silicon Valley. Joining us now is jamie butters from detroit. I have heard that ford was to be thought of as a technology company. Is this a move away from the motor city . Anduring the recession restructuring of the automakers, they reconsolidated around detroit. The way the technology is changing, they need to be part of the Silicon Valley ecosystem. To hire talented people and there is good tech talent out there but its not just finding the talent. They are swimming in that ecosystem and sharing ideas with colleagues at other companies, people who have worked at other startups and it gives them a different set of ideas than they get from their traditional midwestern base. David how large an investment will they make in Silicon Valley and what is the timeline . Are notnvestments particularly huge unless you are buying a company. Gm has spent more than 1 billion by buying Cruise Automation and lyft but they are getting equity in companies. If you are hiring people, we talking about a few million dollars. For a company with hundreds of billions of revenue, when they build a factory, it is usually 1 billion. These are fairly small investments to get some new energy and life in the company. Feel like two years ago, i was asking if tesla was going to stop being a tech company and become a car company. Is gm and ford going to become a car company and then a tech company question mark they are trying to be seen as mobility tech companies. Tesla is more diversified. They might add solar city so it muddies the play for them. General motors, we joked that they were a Health Care Provider that happened to make cars now they really want to be a company that does technology and innovates and is a part of the discussion for how transportation and mobility will change in the coming century. You mentioned the gm investment in lyft and crews. Which Car Companies are ahead in this move toward mobility . There are some dark horses. If you asked me 24 hours ago, i isld tell you ford considerably behind that they have been doing a lot of work that the surface. They are aiming to be as aggressive as bmw or anyone else. Bmw and mercedes are among the leaders who have great on road capabilities. As well as the most advanced tesla has the most adaptive system. Its been controversial because thinklot makes people its more self driving than it is. Having self driving cars and putting in more than one million miles. Will takewhen they that service public. It could be before 2021 when ford and bmw are talking. The m w and ford have put the most Ambitious Goals on the road right now. That will not be the end of the story. What about Fiat Chrysler . They have a deal with google so where are they . Their deal appears to be a supply arrangement. They will sell them 100 bands and customize them. Themuch they get into brains of the operation, they will see. , i heard himonne speak about it in the factory in canada where they make the minivans. He said we will get a partner and they are good and smart people and we will go on this path. We will see what we learned along the way. That was not a deal the other automakers wanted to take but Fiat Chrysler is a little smaller. Maybe its a good play for them. David thanks for joining us. Its a good day when we talk cars. Alix coming up, we will look how investmentgrade bond sales up compared to previous years. This is bloomberg. David its time for battle of the charts. Lisa goes first today. Of august as being the sleepy as month but when it comes to investmentgrade bond sales, you are looking at what is a record pace of investmentgrade bond sales in the u. S. , almost 100 billion of debt sold so far this month compared to less than half of that for the same time last year. The Stimulus Program coming out of the ecb and england are pushing people into investmentgrade bonds globally and the u. S. Is not alone. Expect this to only accelerate going into september. Companies really want to lock in these near record low borrowing costs ahead of an election season that will be contentious. It feels sleepy out there and yet it is not sleepy at all. David pretty dramatic chart. Alix is that net new issuance . Thats interesting. How much is going toward refinancing and how much is new, thats a good question. Hand that theyon dont want to repatriate from overseas. Looking at the big blowup speech the last couple of days saying that neutral Interest Rates are historically depressed and will stay that way. The white line is the forecast as of march. This is the need for funding as per the fed in their last projections. This white line is the effective funds rate, how it is trading in the market. If you want to get where williams is talking about, thats a 25 basis point hike but thats it. Shows aboutuction 3 . To dont have that much room height. If you hike up to here, then you are done. Economic policy may not be as stimulative as we may think. David jonathan . Jonathan my vote goes to lisa. We spend many hours talking about governments issuing more debt and taking advantage of low rates and carpets are doing good and there is no discussion about that. Spreads areime when the way they are, the corporate is ahead of the curve. Investors are looking at overall yield. Lisas chart is an intelligence test. I am voting that lisa. Fiscal stimulus is all we have going. Bank headthe deutsche of fx will give us his outlook for the u. S. Dollar and global fx. This is bloomberg. A minutes from the opening bell in new york. This is bloomberg. Happy wednesday. We are for hours away from fomc minutes. We are still looking for some kind of clarity. David maybe a magical answer and i hope we are not disappointed. You wonder this is a concerted effort by the fed to get to wait risk in there. Up on thisng program, we will have alan ruskin, the head of affects research at the Deutsche Bank. We look ahead to the fomc minutes and the dollar rising. He thinks the yen could be headed to the low 90s. Lets check in where the markets are. The debate for the fed rate is on. In europe, thee ftse 100 is still soft with eight days of gains and two days of losses and the dax is off by one percentage point. Basic resources of the leading loser on the back of a stronger dollar. A softer session in commodities. Wti is marginally negative on the session. We will be on the front and of the yield curve on treasuries. We are looking had to the Federal Reserve minutes. Alix we have some premarket movers for you valeant is getting another upgrade at stanley. The price target is now 42. It got an upgrade earlier in the week. Morgan stanley sees a clear vision for the company and perhaps new debt covenants will be modest. Its the idea they will be ok. We are also looking at Analog Devices which makes circuits. It raised fourthquarter guidance. Apple is their top customer at 13 of revenue for this company. We are looking at retailers. American eagle outfitters is down. Mistwn brand estimates comments and they raised prices and tried to boost results but overall, their comps sales were up 3 but the brand sales missed estimates. The company only sees low singledigit increases in those comps sales. For more and whats happening in the market, Abigail Doolittle is at the nasdaq. Asml had a brutal morning. Asml holdings is a chip Equipment Company and its dropping in europe. Its down in the premarket in the u. S. On a mini bombshell. It has news from intel that the company is not going to be using an upcoming type of technology on a certain size of chip that intel makes but they may use it on another size of its ready, implying a big delay. It could be as much as three years. Bank of America Merrill lynch cut them from a by two neutral. Ofcking with chips, shares the are down sharply in premarket after they offered a fiscal firstquarter earnings forecast that is well below consensus by as much as 52 . Ubs cut its rating on this. They think there is more risk to consensus but is mind could be changed if they make a creative acquisition. Its a 50 e, downside for the shares. Alix thank you so much. In u. S. Little calm markets but a downside in european markets. European stocks are heading for the longest run without gains in two months, four days without gains. Of 1 down almost 6 10 and commodity producers are leading the losses and most interesting groups are down on the europe equity benchmark. Investors could be weighing the rally and see the dax moving. European investors are also digesting the hawkish comments from some fed officials. Stocks,ok at specific the worst performer on the stoxx admiral group. Its the Insurance Group down 7. 4 , the most since june 24 after reporting a decline in their solvency ratio. Are down andres firstquarter profits missed analyst estimates. Linde is down 3. 7 . We heard about the preliminary talks yesterday but citigroup says a potential tie up would face regulatory hurdles. David thanks so much. Turning back to the fed, hawkish comments coming from the fed president has sent the dollar rallying from a threemonth low. Alan ruskin joins us now. Welcome back to the program. Let me question the premise was it the socalled hawkish comments that affected the dollar or were there more technical reasons . I think the hawkish comments made huge difference. Dollaryen was sliding through 100 and it looked like we would have a profound move. It stopped dollaryen in its tracks. The asian markets responded appropriately. If anything, i am surprised about how muted the response has been in the likes of said fund futures. Jonathan why are you so surprised about that . You are probably right, i should not be surprised. Its probably a credibility issue. And we see the september fed fund futures move ahead by 1. 5 basis points. Our calculation was 1. 5 which would looks way too low. The market is being groomed to think they are more correct than the fed and have been for quite some time and are inclined not to believe the fed at this point. Yesterday it was about a dovish fed and then activity toward a hawkish fed. What is the communication and what do you read . Are trying to say we are data dependent. The problem with that is that if that data reverses, makes it to predict this. Its a difficult message to give. The market is not getting the message now. Of the issue is the catch 22. They telegraph a rate hike in the dollar rallies. Do you believe the catch22 thesis . I think it was more havilland at the start of the year. Its primarily because it was hurting the dollarchina. That the market got used to the idea that dollarchina can move by 1 , the world will not end. We are in a much better place in terms of the dollar knock on effect. The other aspect is that oil has found a mid range. 45 giveandtake is no grand thing. Picked out a couple of dates like august 21 with janet yellen speaking and the decision by the fed in september. We expecting from janet yellen . There is an expectation we will get some kind of communication as to what they will do in september. Is it some kind of thought piece . Its probably more of a thought piece but there might be a few clues in the next hike and timing of the fact that they are open to a hike this year perhaps. It might also be something to do like the peace from williams. Out a paper and the market misconstrued that and said it was dovish. They are putting out a range of potential scenarios where the fed has to think the rate is lower than previously believed. To defend the fed and its communications. Maybe they are telling us all they know. The communication is not that there will be a rate hike in september but they say thats a possibility. The markets will level of certainty that does not exist. There is some truth in that. Issue, they are taking a somewhat hawkish of view for the short term. The have a dovish view for longterm. They are trying to say the terminal rate is coming down. How the market will receive that is interesting. The market might say they can live with that. Alix we have seen someone of a risk on rally in currencies. How do risk assets want up responding to that . It is confusing now. Throughd like risk on the janet yellen speech and then i thought we would get to the august payroll number. I think the market has to be more wary about the risk on in a profound way. Until we get more clarity from the fed and i think we will get that. Now, its more of a modeling story as far as the risk story. Jonathan great to have you with us. We will talk about the big plays in the fx market and the debate over the Federal Reserve. Will have full live coverage of the fed minutes at 2 00 p. M. Eastern. Lets go for an update on the newsem outside. Donald trump has overhauled the leadership of his campaign and said he will do whatever it takes to win. He replaces campaign ceo. The Campaign Chairman will keep his title. He was seen as someone who can help broaden the donald trump appeal the donald trump is not been inclined to accept his recommendations. American investors have lost confidence in donald trump according to a new politics poll. Registered voters with money in the market narrowly picked trump over democrat Hillary Clinton, back in june, donald trump lead to 50 30 3 . Turkey was to free a prison space for the thousands of people arrested following last months coup attempt. Inmates who have displayed Good Behavior and of less than two years to serve will be released. Since the coup attempt, the turkish government has detained 35,000 people for questioning. Global news, 24 hours a day in more than 120 countries. Alix thank you so much. Coming up, target is out with isnings earlier as the ceo giving his prescription for the current retail environment. Could besays cisco laying off up to 14,000 employees. Where will those cuts come from . This is bloomberg. Alix bloomberg this is bloomberg , refiners are in focus today who dont have retail gas stations could pay 1. 8 billion more this year. Carl icon cause it a rigged marketplace and this is what is rigged about it. If you are a finer, you have to blend ethanol in gasoline to gather and you get a credit and you turn them into the epa and you have extra credits and you can sell those into the marketplace. If you get caught short, you can go to the marketplace and buy them at the spot rate but that has been increasing around one dollar as of mid july. Thats creating a huge cost burden for these refiners. Carl icahn says the marketplace is rigged and that will cause a number of refineries going bankrupt. Lets turn to the trade in oil. ,oining us is philipstreibel im looking at brent at 50. How much more upside can we get . I think oil prices will push up to that 50 level. Saudi arabia is looking at stabilizing the market. Crude oil has been at this extended level at these lower prices. This could be the first time that opec comes together to implement a production cap. We have seen a 10 rise over the past three days. Its a little bit of a setback thats possible especially if the fed is a bit hawkish. Russia has complied with saudi arabia. Any kind of pullback in oil the short starts will cover and thats where it think oil prices will push up to 50. Alix citigroup says a rally of oil is insane. And saudi arabia pumping more than the u. S. They are doing it, why would they want to freeze now . How can you buy into that rally . Its a tough call. Time we have gotten over 50 recently, the last push failed and we go all the way back down to below 40. Theink it is mainly competition. Shell producers will start to ramp up production. Gasoline levels are at record highs. A trade. Ly i think opec is looking at pushing this up so they can implement more hedges. We get north of 50 and you are looking at the downside again. Alix thank you so much. Jonathan coming up, the japanese yen broke through 100 yesterday. It came back up in our next tost says it could drop in the low 90s next. This is bloomberg. Jonathan dollaryen drop to below 100 yesterday briefly. Is there more strength ahead for the japanese currency . Alan ruskin is back with us. You talked about this self reinforcement of hedging her broad that can impact of that. When we go lower, it 10 to draw in more hedging by japanese investors who have investments abroad. It tends to draw in more hedging by japanese investors. Who have investments abroad. The other discussion is how you can have a stronger japanese yen when the fed seemingly is pivoting toward tightening more. The story is not as clear cut as many people think. Its not just a weaker yen. You tend toycles, see the yen do better when the fed has tightened. Willthis will meet is yet to be seen and the risk is the main driver. Go at fed tightening, risk off, the yen of the one currency that does pretty well against the dollar. Been risk on and you have indicated that you want to look at the South African rand in the australian dollar. Why is that . Youve got very basic trendlines going on in both the 2011 and aince trendline on the aussie. Trends,reak longterm it sends a message. Dollar have in rand has been one of those currencies that has been on a steady trend that went parabolic but now it has come down. It sends some sort of psychological signal. It is contingent on the fed being dovish again. If the fed tightens, it will be hard to be positive on carry. Jonathan we had a discussion about capturing the upside of the dollar. Talking about Commodity Currencies. Is that how you would capture dollar upset upside, reduce the commodity play . I think you have to take it one currency at a time. Sterling has shown it has a weak underbelly. That is one that is a natural. Sterlingyen could easily go to 1. 20. That seems to be working on both sides. The Commodity Currencies look like they are fully valued if not overvalued. Jonathan people are waiting Federal Reserve bank of australia and new zealand to do more. Will it be driven on the other side of the trade . Its a double whammy. It will be led by the u. S. Fed side. Typically, commodities and Commodity Currencies get hit because there is a direct commodity link. Commodities typically go down when the dollar goes up and currencies also go down that much more. Jonathan september 21, the boj in the morning and later we get a Federal Reserve decision. What do you want to know the outcome . I want to know about the fed who is the biggest driver in the global market. Is perennially disappointing. Jonathan how on earth does that play out in the market . The market sees them as out of bullets and will weaken the currency. Jonathan how much of a problem does that become for the bank of japan . Theyve got this aggressive charge actor in bond buying already but they are not generating the traction in the economy they wanted to see. , its a bit of aba losing wicket. A broader sense, the market loses sight of this and they are at full employment. Jonathan thank you so much. Great to have you with us. Coming up, four minutes and 20 minutes for meds and 20 seconds away from the open and futures are marginally down and decidedly lower in europe. The basic resources segment is dragging its tail at the moment. The stronger dollar story any weaker session for commodities. Ahead of the fed minutes, yields are not change for the 10 year. We are pivoting toward the cash open in new york city. This is bloomberg. From new york city, this is bloomberg. Im jonathan ferro. Lets get you up to date markets. Up by just one single point on the s p 500 are not even. 1 . The dax streaking by one fourth percentage point. The bell ringing in new york europe,derperforming in here is the story. Dollar and backing down despite better than expected jobless claims out of the u. K. We are unchanged on a 10 year at 1. 57 . We are. 5 hours away from the federal minutes. Lets get your market open. Stephanie relatively flat across the board. The nasdaq slipping into minor positive territory but no one is picking up into minutes. We have retail earnings continuing to trickle out and there are winners and losers. On the downside, you have target up 2 . Is cutting its annual forecast. Samestore sales were down 1. 1 , slightly worse than estimated. They go on to say the next quarter, sales could be flat at best. Terms of sales lower than home depot had seller earnings yesterday. But the worry is if Home Improvement was helping consumers with gdp, is this a warning sign . Not when it comes to Urban Outfitters. A surprise 1 . Seems to be paying off. Also following in health care let her in they dont in mid july to the department of justice saying it would to the Obamacare Health exchange if they did not pass A Humana Aetna deal we learned days ago aetna because it wask not profitable. They could lose 300 million on those plans this year. Were learning according to the was alsohat perhaps it because they were not letting this tie up happen. , will they or wont they, i want to look at the dollar slightly higher again, moving yesterday on the comments hikewe could see a rate sooner. Yield backing up ever so slightly, commodities getting hit on the stronger dollar. David . Cut its annual called awhat its ceo difficult retail environment. , oliver,s on the phone welcome, and thank you for joining us. What happened today . We saw there down like 6 . Cops perg callout is sale. They turned up 1. 1 and also reduced the Outlook Negative to the flat. They cut by about 6 . As well as the lowering of earnings per share. The question here is what happened with traffic and as we dissect it, there are different considerations here. Target has shifted its considerations. Consumers really need to reengage and that caused a little disruption. Electronic is a little weaker. Opportunity is for them to further improve their food business. Rebalancing between the stock trip. Was candid about opportunities and the big take away was getting more people in the stores. We were looking at two factors going and, signature factors. Categories,nature and then online, is that strategy a good strategy or do they need to change it . We have seen good changes. Categories it , its like the momentum continues to be solid. Also, online was strong and digital through at 16 . Really think about the future, which is amazon in excess of 20 billion and been top three and consumables very veryly, these remain critical. Target can be fun and good at marketing and product innovation. We will continue to see that. Both of those categories. Thank you so much, oliver. Down the most since may actually. Is cisco, planning to cut up to 14,000 jobs of running to tech news. Joining us for more is cory johnson. Most since early july. 20 of the workforce, where is it coming from . Cory they have acquired so Many Companies over so many years and maybe even better than any company in the history of those in valley, under Chuck Robbins, the new ceo, a way to look at things and resize the company, they really have not seen, unlike all the other major hardware singer hewlettpackard, dell, you name lot. Ompanies that sell a businesses have been shrinking. Cisco only recently, in the last three quarters, has seen sales ,ecline quarter after quarter trying to address that with a smaller workforce, looking for in the fourth quarter. As they turn focus on software, you could make the argument they need different types of people so they find people on the hardware side and then have to hire people on the you have toe . Cori look at this as a company that has stuck together over many acquisitions over the years. As they move to focus on more software and more security, they wired those companies to do those things and in the legacy business of servers and routers and switches, even if that business is so important and does well, a lot of people historically who work on that on those businesses, perhaps it is where we will see cuts if at all. It is also interesting, the discussion in Silicon Valley right now about how to do that and the discussion is due them they can quickly and do not take little pieces here and there, death by 1000 cuts. Make a huge cut and move strongly in one direction. Alix fair point. The stock is down over 2 , the most since late june. Do not miss Chuck Robbins joining us tomorrow at 9 30 a. M. Eastern. Coming up, carl icahn is warning the market bubble is being created, those comments are next. This is bloomberg. Alix i am here in hewlettpackard enterprise green. Google, vp, and chief internet advance evangelist. Dont miss it. Jonathan we are about 11 minutes into the session right here. Looking at the equity market performance, losses down about one quarter of 1 . Losses over in europe, down about point 5 . 5 . Is not thehere retailers but the commodity complex weighing as the commodity producers on those particular indexes, very quickly, an idea of what is happening, stronger dollar, weaker commodity. Yen, cable rate pulling back to 130. Some broadbased Dollar Strength and broadbased commodity weakness. About. 9 . About four hours and what are we, 19 minutes away from the fo one cs minutes. A little bit lower again, down a basis point to 1. 57 . Maybe even more confusion about what the fed may do in september. Lets get to the nasdaq. Members we do have take in the retail space but we are looking at winners. Shares are sharply higher after the company put up a strong secondquarter beating earnings estimates. Earnings by 20 , a big read there. Better margins helped the performance. Susan anderson expects the better market margins to continue and expects the fashion trends will continue to help Urban Outfitters, a stock up 55 this year. Hasher Apparel Company that really defined the lows of the sharesy more recently, are up nicely after the childrens place raised its fullyear earnings forecast by as much as 13 . Another stock up huge on the year, up 62 , we do have one retail laggard on the day. Staples shares down sharply after they missed Second Quarter Sales Estimates and missed the midpoint of consensus. The ceo is saying the company is dramatic we changing his mindset and is operating out strategy as well. Perhaps a turnaround here as well. David thank you. We have talked about the fed as we get ready for the minute shortly. This is what is happening in our economy. Jonathan money on machinery, equipment, goods, when they have limited visibility on what is going on down the road. The Federal Reserve debate, we have a discussion and this was a positive signal their sending to the world. Fell out of bed china fell. Ut of bed a month later a little bit of deductive reasoning, it tells me they are not happy about what they see in the economy. You are a chief executive trying to run an economy, what message do you take away from that . Alix a great chart lisa showed in the battle of the charts. August is typically really slow. What are they doing it, great vivax, m a. They do not believe in the consumer and others are there to buy it. People can say it will snap backup holding again, but the business spending has been soft for quite a while now and that story continues. They have to build into more machinery. Coming up at the top of the hour, it is humbert markets with vonnie quinn. You will be talking much more all ahead. Vonnie yes. We will speak on Bloomberg Markets about everything you were talking about. Then we will speak with an interesting ceo, michael steinman. We will see what he thinks they will do in the coming months and into the next year. Then a nice little treat for us. They will be with us in new york. Thinks ite how he will be received. You can bring us back on it. Jonathan it is not going to happen. It is not be due to me, not really. , i am ok. S like thank you, vonnie quinn. Coming up, we will bring you what to expect today. This is bloomberg. Jonathan we are 19 minutes into the step into this session. Over in london and on the dax and in europe,. , the stocks down there, i second day of a winning streak. Here is the story. Dollar strength, commodity weakness, and yields lower on the 10 year by one basis point. Yields at the long and down about two basis points, the. Ront and pushing up marginally Federal Reserve minutes a little later. That debate is very much in focus. Or coming, also a fit speaker at 1 00 p. M. Set to speak at a wealth and Asset Management conference. About the fedy shop owning the market to sit or more of a fed rate hike sooner rather than later. David yes. The big event will be the minutes. In a few hours time, we will get the latest read on the fed when they release their minutes from a july meeting. Erik schatzker joins us from washington on what to expect. A lot has happened since july meetings. Erik yes. A lot has happened. Jobs is one piece of data that probably should concern us most and the most recent jobs, 255,000 as months of july kim after the fed meeting on july 27. The minutes are always of interest but suddenly, and even hotter topic after bill dudley, the new york fed president , said yesterday, we are edging closer toward the point in time when it will be important appropriate, i think, to raise Interest Rates further. The most or secondmost influential fed policy maker after fed chair janet yellen. Statement, also bonds. That is why we want to go back to what the fed was thinking. The reason it has not raised Interest Rates over the First Six Months of the year. Thelso talks about jobs in month of june as strong, Economic Activity is moderate, and inflation as low and Inflation Expectations as low. 50 than we referenced a the moreybe significant point is it is a 24 chance of since september. Why do you think that is . Dudley was not telling people they should necessarily expect an Interest Rate hike in september. They communicated and the market took it to her chances of a rate hike or greater in september then perhaps were being discounted by fed funds futures. I guess it really comes down to how you call it. There are certainly some people, that is why you have a 34 they do think we will see a rate hike in september. In large part, it comes down to what we will see today. Review column earlier today talking a lot the five things we should be looking for in the minutes, jobs and wages clearly and productivity, which has been week four months if not years now into the process crisis. Inflation in the controversial remarks by john yms, the president the other day that perhaps they should be thinking about inflation in a and recognizing it is not what it used to be or does not tell us what it used to does not raise the target finally, the effect of fed policies. How deeply does the fed want to look at itself in the mirror . Alix we had paul krugman on talking about the effectiveness of the policy. Here is what he had to say. There is an accumulation of evidence that Monetary Policy is ready ineffective. I did not figure was possible on it turns out, there are all these other things that Central Banks can do but it is not doing much. Becausevish longterm you cannot actually do that much going forward. You cannot. Mystery weig confront as we head toward the minute. Really important that these the fed views on july 27, before the second month of job growth in excess of 200 and 50 cap to much of 50,000. He speaks at 1 00 p. M. This afternoon. Thank you for joining us, erik schatzker. You tune in and get live coverage of the minutes here on bloomberg television. Is, we talkquestion about labor inflation, citigroup winds up pointing out, the data dependency is really mushy. We do not actually know what the data is anymore. A huge problem. The fed president has been out right dovish and said there will be a rate hike for the next two years. When he sat down a week later in london, he said weve got a credibility problem. Now looking at the potential for one and it may be zero and that is a big change. They keep saying over and over that nothing changes and they lose patience. Jonathan four hours away from the Federal Reserve minutes. That does it for bloomberg. Markets is next. Vonnie we will take you from San Francisco to washington. This is Bloomberg Markets. Coming, cisco, will cut as much as 20 of its workforce. Meansl look at what it for the business ahead of the Earnings Report at the u. S. Closing bell. The u. K. Labor market shows signs of resilience. Jobless claims unexpectedly fell 8600 in july. Are the effects of the downturn just further out on the horizon . A new Bloomberg Politics poll showed Hillary Clinton gained ground on a day when donald trump shakes up his management in the latest sign of an uproar. First, we are about 30 minutes into the trading session. Julie hyman has the latest. Julie