Caroline theres no way theyre going to negative rates anytime soon. That seems to be fortunate. I appreciate Stanley Fischer saying it does seem to have some limited effectiveness where is employed, notably, japan and the ecb. Alix he says we are near full employment, pounding the drum as we are three days away from that allimportant job number on friday. Caroline so much focus on that. They are going to be poring over the case schiller numbers as well. Theres so much to do over the u. S. Economic data today. The Housing Market front and center with Robert Shiller joining us later in the program. But first, we have to get on to the markets. To thatthey reacting Stanley Fischer discussion . Alix we are seeing a lot of action in the treasury markets. The yield moves lower by about two basis points. Yields are moving lower by two basis points, and we are seeing buy across the board. As the yield comes down, counterintuitive, considering Stanley Fischer says we are not just one and done. After we saw selloff across the curve yesterday. Move on thepoint twoyear. In terms of the other areas we are seeing reaction is the fx market. You are seeing the dollar hold its games. The bloomberg dollar index is now in a threeweek high. Its not on the board, but the dollar yen is one to watch. Its the biggest losing streak in about five months in terms of winners, south korean yuan is moving higher. Across the board, you are seeing dollar strength. Its a positive risk on day except for japan. They have relatively weaker macro data. The dax is up almost 1 , and russia and emerging markets up almost. 5 . Commodities are not the story today, but we see some weakness when we have a stronger dollar. Relatively flat, as well as copper. Iron or below 60. Done, as pere and Stanley Fischer, the moving towards friday, it will be about the jobs number. And what number would put september more firmly on the table. Caroline they have to be that 180,000 consensus, alix. Tokyo,ng from dublin to we start with the top stories of the day. Is in new york covering the first comments from Stanley Fischer says jackson hole. Guy johnson looking at the euro area confidence data, or lack thereof, and in dublin, Darragh Doyle has been looking at the record tax. Alix Stanley Fischer speaking to bloombergs tom keene. Professor fischer employment is close to full employment. Its about growth. Its largely inoperative a growth, which is and and its hard to control. By policymakers. It depends on what private individuals are doing in their companies. Its very slow at the moment. Alix matt boesler joins us now. What was the biggest take away from the interview . Matt the thing that jumped out at me the most with a, its about a potential one and done scenario. We dont know if the outset when we begin raising rates whether or not we are going to be one and done. That is a pretty sobering message from the vice chair, someone who is presumed to be more hawkish. Even if they raise rates once, they dont know if this is going to raise again. Its not like the 20042006 cycle where they raised rates at 17 consecutive meetings in a row. That explains why Interest Rates are so low across the curve. Alix you pair that with the more hawkish fischer that we heard on television friday. Wrap that up with the Market Reaction that we saw. You didnt see a lot of buying across the entire curve you did see a lot of buying across the entire curve. What does that tell you about how the markets reacting to what he said . Matt people are giving more respect to the possibility of a move this year. Beyond that, they are not moving up. There is continued skepticism. Its worth highlighting productivity. Rates may go up this year, but they are not going to go very far if we dont have more help from the fiscal regulatory authorities to take measures to boost growth that are out of our control. That is the big take away from the interview this morning. And one and done, thank you. The implied probability of a rate hike sitting in the 30s, around 36 . Markets are pricing in some kind of move in september. Its like reading tea leaves. Caroline im reading that data as it comes out through the week. Closer to home, guy johnson joins us from london to look at the eu and u. K. Data. Data is u. K. Interesting. The eu data is probably a little worse. The stock about the eu data. The confidence number dipping people are notnk taking this seriously at this stage. It was a dip that was worse than anticipated. We got down to the 103. We have been reeling from the brexit story and are waiting to see how the data develops. The data are painting a conclusive picture. Economic confidence is dropping, but nevertheless, we wait for mario draghi to give us his take on whether or not it is significant. There will be some effect, but it is at the moment very limited. Ecb,ine in terms of the give us a sense of the united kingdom. We are still seeing the ramifications of brexit not only on the eu confidence, but close to home when it comes to housing. As this number i am not into it the moment. If you look at the data since the beginning of the year, its dropping. All kinds of things have affected mortgage approvals. The number has been going down since the start of the year. The number was down for the last month, and was a little softer than anticipated. The data series has been progressively getting worse. As a result of which, its a combination of factors. Its probably to do with whats happening in the tax changes, and with the fact that actually, people arent moving houses. Factors, one of the and probably isnt the only one. Its a combination of factors. You did say that for the economic numbers as well. We have had terrorism and other factors scraping into the mix. These numbers are not just brexit numbers. They are accommodation of factors. If you think about whats happened over the last few months, confidence has been knocked by number of things brexit is just one of them. The markets reacted very little to these numbers. Caroline maybe that is the summer months going as well. Guy johnson, thank you. Courts,ave to talk eu ordering apple to repay 13 billion euros plus interest after the European Commission said the island after island illegally slashed the tech giants tax bill. This is not a penalty, this is unpaid taxes, to be paid. I think that is very important. It is not a penalty, it is unpaid taxes to be paid. Caroline joining us now is Darragh Doyle in london. Give us a sense of how ireland is reacting to this end a significant amount, 13 billion is no small number. I think there is a significant degree of shock to this figure today. As recently as yesterday morning, it was quoted around 100 Million Euros. To get this number of 13 billion, thats a huge shock to the irish authorities. Let me give you a sense of context, last year ireland created 6 billion in Corporate Tax, this is twice as much, so its a huge shock around this number today. Will it actually get that 13 billion euros plus interest back . Will ireland look to fight this . Apple is saying it looks to appeal this. Ireland is saying it doesnt want that 13 billion euros, even though it could ledgerur entire health for the year or 13 your childrens hospitals. They are worried it would tarnish the expectation the reputation. Shownd needs just [indiscernible] there is significant pressure building up the government doesnt fight this. That pressure is building. At the same time, there is real result in the government to fight this is hard as possible. They are saying we dont want this money. Caroline so many strands to this story. Thank you, dara doyle. Looking in on the movers, but we have got to be focusing on the story. We are delving into it with more guests on the back of apple. 20 on the off 11 german stock market. Alix watching apple ahead of the opening bell. Monda leaves in her shoes. Her shes getting hit hard. Hersheys. Hersheys trust majority owns the company, has about 81 controlling interest. They were trading about 97 before the bid started to come in. Also, lets take a look at Airline Stocks trade theres a management shuffle happening here. United airlines is hiring scott kirby as its new president. Oscar munoz has a heart transplant about five weeks into his tenure. Cfo and a newew chief commercial officer earlier this month. United up on the management change. Taking a look at what is leading euro stocks higher today as they grind a little higher. It really is that European Bank index. Up by over 1 . The sector has been hit particularly hard, down by 23 for the year. Nonetheless, moving relatively higher and helping euro stocks hold on to those gains. Now for a look at what is moving outside of the business world, and the chandra for first world news. Ma doma rosneft failed to sway senator doma recess failed to sway senators during lawmakers on both side of the aisle expect the senate to vote against or later this week. Frances trade minister wants to end negotiations between a trade to open the European Union and the u. S. Paris between the two largest trade blocs are already low. They have a ban on european agriculture issues such as hormone treated beef. The u. S. With that its goal of taking in 10,000 Syrian Refugees a month early. The Obama Administration has said taking in more refugees would gain credit with european allies. They excepted hundreds of thousands of syrians fleeing the civil war. Questionns in congress whether the screening process for refugees is tough enough. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. Alix japan is buying more and more treasuries as foreign buyers of scoop up u. S. Debt. How will the fed get back to normalize rates . Deutsche banks chief International Economist torsten slok will be joining us to break it down. This is bloomberg. Caroline this is bloomberg , im caroline hyde. Stanley fischer speaking with Bloomberg Television earlier. World is fischer the becoming increasingly interconnected, particularly the Capital Markets of the world. But we do affects many other countries. I was always so. It is also true that what they do affects us. We are dealing with interconnectedness, and we are probably the most important of the Central Banks. Caroline fascinating discussion. Joining us now is torsten slok, deutsche banks chief International Economist and director. Really focusing on the interconnectedness of Central Banks. Are they the central mexico the world at how much will a rate hike heard the emerging markets and prevent them from moving are they the Central Banks of the world, and how much will a rate hike hurt the emerging markets and prevent them from moving . Mr. Slok we are getting closer to full employment, which is a key phrase that will move eventually to more inflation. But he says rates are not moving up because of negative Interest Rates, which he also discussed. So unattractive that a lot of money is finding its way to u. S. Fixed income and u. S. Bond markets. That is why a lot of difficulties for the fed is that rates are being held down, because the rest of the world investing so much in u. S. Bonds. It fascinatingd that you say the swell of money coming from abroad is keeping a yield cap on u. S. Treasuries. But why, when you converted into the hedge price, we are getting basically zero yield . Have a great chart on the bloomberg showing you what japanese investors are getting, if you look at a yield for u. S. Treasuries. They are getting precisely zero once they have hedged against the u. S. Dollar. They could get far more from italian bonds or spanish bonds. Wire japanese investors getting are u. S. Debt why japanese investors getting into u. S. Debt once the cost of the dollar gets into it . Mr. Slok the fed has been keen on saying it is slow. If you are told the fed is not going to hike in the near term, then the slow message is saying why dont we continue to cut your coupons on your bonds for another two more quarters, and then we can all run out at the same time. It could have that fear of a huge backup and yields. But that is a very important part of why the fed is so keen on saying they are slow, gradual, hesitant. Investors are now saying maybe treasury rates are so low, the return is in some cases zero, maybe theyre looking at loans or even high yields, because the yield pickup is still relatively attractive. That has come in quite substantially. There are several dimensions, both the fed slowness, but also the fact that you can go out into other fixed income assets. Investment great and high asset, and they will still have interesting levels of yield based on what they can get in japan. Alix that is what we saw happen this morning. A selloff in yields across the curve. Stanley fischer speaking and all of those are pushing yields down. Nonetheless, there is no fundamental reason for that rally. This is a major theme across all investment at the moment. I meet people who say fundamentals are not driving this asset price. It is much more driven by expectations from the fed. This is why fed communication has become so important. Investments are considering continuing the carriage rate, or should i step back and say the train is coming soon, maybe i should be looking out. Whether thisout asset is going to yield fundamental cash flow in the future. This is the tugofwar between the market at the moment saying fundamentals is what i am brought up an educated to look at. And on the other hand, the fed is trying to hold things down. And the doj is pushing things down. Alix give me appreciation, i dont care if it is 1 . I will take the appreciation. Hike, and theyes see some kind of selloff and a backup in yields, how long does that last . The fed cannot control the yield that way. The back end of the curve that way. Its really a way of saying maybe we shouldnt expect rates to go up a lot over the next several years. Maybe they will go up just a little bit. It should be a comfort to those saying im not getting worried about getting run over by a huge train over the next several years. Stanley fischer told me we will not go up as much as we would have historically. It is complicated. We are waiting for incoming data, but used to be the case that the fed says we have some headwinds over the last several years, those have faded, so we should see accelerating growth. They shifted to talk more about productivity, which is subtle shift in the town away from the more bullish view of saying we are about to see a significant acceleration in growth. To say wait a minute, maybe their arguments why rates are not going to go up so quickly. , youre torsten slok going to be staying with us. There will be much more into the reaction from the u. S. Jackson hole put the september rate hike back on the table. And now investors are shifting their focus to fridays jobs report. Will the results be the deciding factor behind a september left off . Torsten slok reveals the key jobs number to look for. That is next on bloomberg. Alix this is bloomberg , im alix steel. Still with us, torsten slok, pushing ahead to jobs friday. The magic number that makes the fed go in september. Mr. Slok something around 200,000 will be enough. The important thing for them as we have seen a fairly nice move up in the job growth over the last several months. They have a good excuse, a good reason to give themselves more ammunition. It will also fit with what fischer just that. Were getting closer to full employment. Alix labor slack is the story. We have a great chart that looks at people who are not in the labor force that want the jobs, plus those who are unemployed, divided by the total number of openings. A heady thought. What does this chart tell you . Mr. Slok in 2006 and 2007, we had a very low level. They were very few unemployed rates versus the number of job openings. Now there are many job openings, and we have few people available to take those jobs that are out there. It is harder and harder to find the right workers, which is by definition, another way of saying were getting closer to full employment. This is the anecdotal evidence everywhere. Companies cannot find the right workers, even for low income groups, its getting easier to find jobs. This is a very up when point for the fed. Their dual mandate is to reach full employment. Alix that trickles through to wages and the overall inflation picture. You have a chart that shows the overall wage growth for people that stay in their jobs and wage growth for people to leave their jobs. Both of those arising. Why is that so key . Switchers,ohn meaning those are changing jobs, nursing wage growth today at the same level at two dozen six. 2006. We are already at the station in terms of weight growth compared to where we were in 2006. That is why fischer is anxious about the full employment. This is telling you that we are now in a situation where full employment is a leading indicator for inflation coming. The question is what is the lag . How long does it take before we see actual inflation . This is the early stages of saying for employment is a leading indicator of inflation. Alix torsten slok, its great to have you. Deutsche Bank Securities chief International Economist and managing director. Crude headed for 17 decline . Our next guest has oil dynamics and how it impacts expectations. Isoline this emma this bloomberg. Im emma chandra. Apple has been ordered to pay up to 14. 5 billion in the eus largest ever tax penalty. The Eu Competition Commission found that ireland illegally the tax bill,shed which they say give the company a Significant Competitive in the antigen. Competitive advantage. That britains decision to leave the eu might finally be reaching companies and households. Washington, Stanley Fischer tells bloomberg that incoming Economic Data will determine the trajectory of Interest Rates increases. He expressed optimism that productivity growth will rebound. That is what you need to know this hour. Alix i want to keep you updated on whats happening across asset classes. In the u. S. , its relatively flat. As an be, but they were much lower in the session. We are not necessarily one and done, but really putting . Marks ong question rates. The ftse is relatively flat and the dax is around highs of the session come up by almost 1 . We take a look at the currency market, it is all about that stronger dollar. Its the longest losing streak for the yen in about five months. All leading up to the boj meeting at the end of september. The yield picture in the u. S. Is fascinating. You have yields about one basis point higher, but it has been a volatile session right a Stanley Fischer spoke. You saw buying all across the curve. The yield came down, now its coming up as investors take profits. It feels like a lot of trading positions around fischers comments into that jobs friday. You have crude relatively stronger today, which is surprising because you have the stronger dollar up by. 6 . Not a lot of money moving into the commodity market. Industrial metals feeling more of the heat today in the markets. Caroline a great look at the market. A key story, the morning must listen. Apple order to pay a record tax bill at a News Conference in brussels. Heres what she had to say. Apples tax benefits in ireland are illegal. Two tax rulings granted by ireland have artificially reduced apples tax burden for over two decades. In breach of rules. Apple now has to repay the benefits were that to 13 billion euros plus interest. Caroline jones, the United States is not liking this. It seems that a lot of u. S. Companies have been caught eu isthis charge that the taking a guess what they consider unfair tax rulings in various eu countries. And now ireland at apple at the latest. This is by far the biggest, is a record for this type of assessment. Interesting to see how it plays out Going Forward. What other companies are thinking now theyre looking at what the eu says. Alix starbucks in and hit to the tune of millions, but not billions. Is this all on apple for the time being . For the time being, its apple. They are already looking at amazon and starbucks and mcdonalds. In other countries in the eu, she said there is more than 1000 of these tax rulings, the special sweetheart deals across the block that they are looking at. From our perspective right now, mcdonalds at amazon. Com seem to be the next ones that are in her focus. She did not say with the timing of the completion of those investigations would be. United States Companies are not liking it. If they star bring home more profits to the u. S. , the government might be more appreciative. Give us a sense of the Irish Government . I they going to start losing some of their Silicon Valley giants are they going to start losing some of their Silicon Valley giants . Jones they are going to appeal this, it will be tiled tied up in the courts for years. Is theylem for ireland want to maintain the ability to set their tax rates and to do their tax policy the way they want. They do it within the country. With the staten aid rules saying you cant do it that way is really flow mixing them in that way. Flummoxing them in that way. In the meantime, we have these other cases we are also looking at. Caroline thank you for joining us. Alix, this is an ongoing debate. Already, apple falling in premarket rates. Alix and what it means for other countries in areas of europe. Oil will not rally from here. That will have big consequent this for inflation at the fed. Thats according to Chris Kettenmann at mastro Macro Risk Advisors chief energy strategist. Recent bounce has not related inflation excitations higher. Chris kettenmann joins us now. You have a 39 and 45 call for the next three years. Lower and range bound. What does that do for Inflation Expectations . It makes it hard for the fed to achieve their 2 target. We walked back and looked at the trend of resource scarcity back from the 1980s through the early part of 2000. What we really saw was the idea that the Big Oil Majors had to expand globally, going to riskier and riskier countries to prove equity reserved and to be approved by the sec to join to grow their share value. The growth of shale oil in the domestic u. S. Has really flipped investor psychology around the scarcity of oil. If you ask anyone in the early 90s, will will be higher in the future . They would say yes. In order to have inflation, you have to have expectations of prices trending higher in the future. We think that has shifted. At the investor level, at the consumer level, i think there is a real question about the idea that crude oil prices being higher in the future and what that means for the fed. Because the fed keeps giving a clause in their language which is saying that oil affects are transitory. Oil effects are transitory. We are bringing up the risk of what it is not . In three years, if we are still at 40 oil, what does that mean for inflation . That will continue to pressure the yield market. Alix in the 90s and early 2000, oil was at 20 a barrel and inflation was around 4 . Why do the two now go handinhand, when we were able to reduce inflation without Higher Oil Prices earlier . Mr. Kettenmann if the expectation of higher prices. In the early 1990s, you had Oil Companies spending up to 30 billion in extremely risky regimes globally. Reducing the idea of scarcity in the market. We knew that there were resources in the u. S. , it just wasnt accessible with the technology of the time it. That has completely changed. There is Disruptive Technology in the market today is not going anywhere. Alix now you can spend a million dollars, and get oil out of the ground. As that is spinning billions of dollars off the coast of mexico. As opposed to spending billions of dollars off the coast of mexico. It feels like you dont want to own anything that has to do with oil at all, if that is the case. Mr. Kettenmann you hit the nail on the head. Last time i was on the show, we recommend the thirdquarter strategy of collecting integrated oil. There was a chase for yield of three presented in on it on was extremely attractive. A 3 yield on exxon was extremely attractive. That role of yield cop was driving market flows into large cap oil. Those are equities, not bonds. You are taking more risk when you buy when youre looking for yield and the dividend. We think that is completely reversed. We want to be out of that group. Risk in theive dividend structures of these big Oil Companies. Alix i thought that was pretty compelling. They are not going to have the cash to be able to put into their resources. They are going to have their debt payments and their, that theretruggle and capex. They will struggle for cash. Mr. Kettenmann the first tier is equity. If we are right on the wheel forecast on the oil , the 12 billion per and of paying on their dividend might be able to borrow to pay it, but you raise a question about sources and uses of capital and capital allocation. Are you really growing value within the company by 12 billion a year in shared distributional, versus investing in projects that are generating a rate of return for investors. Alix dont they live and die by dividends . Mr. Kettenmann they do, but these are unique times. He had a massive selloff in oil prices. Mobil their International Upstream earnings really dominate the companys business model. Its not domestic production. 12 of 2011, they produced 7. 2 billion from international earnings. In two dozen 16, he was 800 million. 2016, it was 800 million. Alix they didnt find oil to replace that. Theyre going to spend even more money to get oil out of the ground. Mr. Kettenmann they had some success exploring in french guiana. That took some heat off their exploration team. Useomes down to source and of capital, and whether or not it makes sense to continue to pay 12 billion dividends, rather than investing that money and generating an internal rate of return to grow shareholder value within the company. Alix chris, some blow call some bold calls. Big oil is out for the count. Good to see you. Chris kettenmann, Macro Risk Advisors chief energy strategist. How does the fed get inflation to 2 . Oil is a key part of that. Caroline a massive key part and also to do with portfolio management. Coming up, we are digging more into u. S. Data. Stanley fischers data plan, no less. He says incoming Economic Data will determine the trajectory of Interest Rate increases. Do we think the economy is healthy enough for a september hike . Find out next. This is bloomberg. Caroline this is bloomberg , im caroline hyde. Breaksup, Robert Shiller down the state of housing. Alix this is bloomberg , im alix steel. We recap tom keenes interview with Federal Reserve vice chair Stanley Fischer. The asks of the work of the central bank is ever done . Professor fischer the work of the central bank is never done. I dont think you can say one and done, and thats it. We can choose pace, but we choose the base on the basis of data thats coming in. I dont think we know at the time we start whether it is one and done, or several. It depends entirely on what is happening in the economy. At your aspen speech, you stated you are an optimist. I want to redefine the comments from jackson hole of pervasive pessimism. It is out there. It exists today. How do you push back against that . Professor fischer what is the pessimism about . Its not about employment. Employment is very close to full employment. Its about growth. Its largely about something thats hard to control. By policymakers. It depends enormously on what private individuals are doing in their companies. It changes from time to time. We do not know when it will change. I expect it will change somewhere down the road. There are remarkable things going on on the technological fronts. But they are not yet in the data. Tom you mentioned the and mitigated blessings of the United States. Certainly, you and chair yellen are running a centralbank distinct from the challenges other Central Banks have. Do you feel going into the september meeting, or the december meeting, the you are the central bankers to the world . Or can you be discreet and look only at United States economics . Professor fischer the world has become increasingly interconnected, particularly the Capital Markets of the world. What we do affects many other countries. That was always so. It is also true that what they do affects us. Were dealing with interconnectedness, and we are probably the most important of the Central Banks. The European Central bank is operating in an area of about the same level of gdp. And what it does matters a great deal. And so on. Have afferent economists primal scream to go back to simpler economic models. To move from the modern mumbojumbo back to simpler models, more hooked into the real economy. The debate and jackson hole in the debate you are having at the fed does it need to go back to simpler models that you taught years ago at m. I. T. . Professor fischer we would all love simplicity. Think, then is, i models which are fundamentally forwardlooking and the future matters, and expectations matter. Or those which are more traditional, but may be very big. The basic model that the fed model, is large and quite obligated. One that one could explain to economic students. Tom explaining out to bankers. I saw a lot of economists talking to each other in jackson hole. Its a whole new system out there. When you look at negative rates or subpar economic growth. Mentioned,ge of you i dont see economists addressing the disruption to the Financial System is. Financial system. Are you sensitive and aware to global financing Global Banking having to deal with negative Interest Rates, just as one example. Professor fischer we are sensitive to what is going on. One hears about it and reads about it and talks about it. Tom you have to look at their stock prices in europe. Professor fischer what is happening in japan, for example. Take all of that into account. We are not in a position where it is razor negative or have to be negative. And we are not planning to do anything in that direction. Where Interest Rates have to be negative. And we are not planning to do anything in that duration. Alix joining us from washington to recap that interview is tom keene, host of surveillance. The pivot from full employment to reaching inflation goals for productivity was a key point in your conversation. Tom it showed the confusion about the start of their show. Talking about the confusion of jackson hole. You can bring that over to modern macroeconomics. Stan fischer is one of the true giants of economics, with his tenure at the bank of israel and his academics. At the Massachusetts Institute of technology. I came out of the interview thinking, boy is there a lot of confusion on september and december. Alix that puts it very societally. You can see that confusion play out in the treasury market. Front and center is the 530 year spread. On the five year yield and treasury, not something you necessarily see if you are looking for a hawkish fed. Tom the yield dynamics are there, but not only yield dynamics. The markets have been eerily calm, its more than a normal august summer. That sets us up for unique volatility in september december. One and done is not part of moisture fishers dialogue worth vice chair fischers thinking. Stan fischer and others dont think that way. Alix tie it all together for us. We saw at jackson hole, the rhetoric seems to be more hawkish. What kind of fischer did we get today versus the speakers we had on friday . Tom we moved on from the polarity of the yellen comments at jackson hole. There will be more data going into the september meeting. The theoretical confusion that we saw at jackson , and theg academics confusion that we witnessed in the markets. Whether it is oil or the negative Interest Rate debate, it is a most interesting time. Always, to speak to stan fischer. Fascinating 2016. Alix federal confusion is what jon ferro calls that. Us, tomciate joining keene from surveillance. Up, which states are seeing a pickup in inflation . That answer may surprise you. We will show you where the wage gains are in off the charts. This is bloomberg. Alix this is bloomberg , im alix steel. The key number for friday will be average Hourly Earnings. Morgan stanley sees that declining to 2. 3 . Heres an charts that may have some upside for Wage Inflation. Great breakdown, the white line is average Hourly Earnings of oil states. The orange line is nonoil states. See at the three months moving average for nonoil states is actually up right near 3 . Even over the fed inflation target of 2 . It really was oil states that were driving those wage gains. Tanked, and are not just above 1 . Those nonoil states drive 87 of National Employment is picking up more steam. This shows wage pressures accelerating across the board. It looks at the percentage of states that have year on year wage growth that is greater than 3 . All states have about 40 , and the nonoil states have almost 50 . You are seeing a lot of , retail jobs,obs all that helping to lead the nonoil rhetoric. , iterms of the oil picture might not be so terrible Going Forward. This is initial jobless claims in terms of oil heavy states. You have seen stabilization, right around 25,000. The idea is as you wind up laying off those workers, if the oil guys want to go back to work , they will need to pay up for those workers. And that leaves us to the last chart. In rig count has picked up the United States, right around here in the last part of 2016. You put more rigs to work, you need your guys to come back to work. Reasonably, they got another job, which means you have to pay them more to come back at work for you. Potential benefits to those oil states. Interest in part is nonoil states could be driving Wage InflationGoing Forward. Caroline fascinating to break that down for us and how much that affects the dollar with oil as well. Coming up in the next hour of , we break down the latest Economic Data and reveals the impact of the rising populist party movement. This is bloomberg. Alix fishers data plan. Stanley fischer says incoming data will determine the directory of Interest Rate increases. All eyes turned to fridays job report. Caroline brings up fallout. Brings it fallout. Brexit fallout. Alix apple ordered to cough up 13 billion euros after the eu says ireland illegally slashed the tax bill. Im alix steel along with caroline hyde. David westin and Jonathan Ferro are off today. Markets like the interpreted it as less hawkish than the markets might have anticipated. Caroline we saw yields coming off their highs. We are still about a basis point. Ing off those in issues those initial moves, interesting we have the breaking news coming from the side of the atlantic as well. German inflation coming in lower than expected. As another headache for the ecb. Dependency, what is the magic number that will make the fed will trigger in september . Caroline is it more than 180,000 . Thats the key question. 100 billion worth of advice for viewers. Michael a stop horn stop michael hasenstab. Alix this is the after effect fischer speaking with tom keene. The bloomberg dollar index still around the threeweek high. Dollaryen and unbelievable move. The lowest level weve seen in five months. In equity indexes across the globe, is it relative ferment. A little bit of a risk on appetite, but not a lot of risk being taken in key data points. The nikkei was the we got a liar outlier across the board. The five years up by 1. 1 basis points. Still well below the highs of the session. We are still seeing money come into the treasury curve. 1. 5 basis points across the curve. In the u. K. K, you have twoyear yields up by about 3. 3 basis points. We will have the boe coming into the market, 9 50 a. M. Eastern time, buying 15 year yields. Will there be enough of them to buy . Libya covered or uncovered auction . Will it be a covered or uncovered auction . We do have weakness in industrial metals. Is the leader. On the downside, crude is relatively stable. Its hard to make a case to want to get involved in any kind of market ahead of those job numbers on friday. Caroline such cautious trading at a head up for that market number on friday. We go around the world for a Bloomberg Team coverage, reporting from dublin to tokyo. We start with the top stories of the day. Matt boesler covering the comments from vice chair Stanley Fischer. Dublin, and vince cigna relevant in new york. Vince cigna rail a vincent cignarella. Professor fischer what is the pessimism about . Employment,l largely about productivity growth. Something which is very hard to control. By policymakers. It depends enormously on what private individuals are doing in their companies. It is very slow at the moment. Oliver renick joins us now. An interesting move, right off the board you saw tons of buying across the curve. The yield came down and we pared some of those gains. Would you make of that Market Reaction . Oliver hes adding onto his comments from last week. It seems like the market has more emphasis on what he said after janet yellen spoke in jackson hole. She was sounding somewhat dovish, and if not dovish, confirming with the market expected in terms of getting in one rate hike this year, but maybe not two. He signaled the possibility for not only just september, but two hikes. There wasnt anything terribly market changing here. Heading into the open with futures stable. This is going to be what we are washing, in terms of the fed speak. Its been a very quiet market with lowvolume. These type of events to have the potential to move markets. If we get clarity on what they expect for rates. Haveate sensitive areas been the ones that are moving. It is financials, utility stocks that have been the most reactionary in a very calm market. Alix looking at defensive shares and the lowball etfs, saying when the crash comes, its going to come in those low volatility stocks. That makes them worried for the future of the stock market. What are you seeing in terms of rotation into or out of those . Oliver thats going to be one of the most important parts of the market. Area that has gone shaky, in terms of the shift from a very popular sector. The leading trade of 2016 up until earnings season, when all thosews staples all of staples had been wrought up to really high levels. Over 22 on staples, 18. 5 on utilities. The question is as people move out of those, if it will induce some sort of market wide jolt or volatility in the us federal funds that became so popular . Investors are removing shares and removing flows. We have the first monthly negative flows in some of those lowball etfs and all those highpaying dividend sectors sliding the rest of the market. Jostlingt seem to be the market out of bed, where you have the flipside of some of the more Cyclical Companies balancing out those losses. To gauge that balance Going Forward, on whether or not the removal and dime down of excitement about those companies is going to jostle the market. Right now, it is pretty quiet. Renick,ank you, oliver stocks reporter. It raises the question of when you mightve seen that rotation into the value play and into the cyclicals. What does that rotation look like from here in u. S. Stocks . Caroline what we are washing here in europe is another u. S. A stock, a tech giant. Eu courts have ordered apple to pay a record 13 billion euros, plus interest. The European Commission said ireland illegally slashed the text giants tax bill. Vestager this is not a penalty, it is a tax bill to be paid. That is very important. It is not a penalty, it is a tax bill to be paid. Caroline joining us is dara doyle, 30 billion euros plus interest is more than many expected. Yesterday,cently as there was estimates as low as 100 Million Euros. There was massive shock around here today when the figure came out. ,e are talking 13 billion euros to give you context, thats twice our entire Corporate Tax take last year. Its about 30 of our entire tax take. Build a lot of hospitals and roads with this kind of money. Ireland is saying we dont want the cash. Caroline they want the jobs. Ireland says they have lowered in many of these tech giants by their low Corporate Tax rate. Are they going to have to take the 13 billion euros . Dara we should take a step back. This is not about irelands 12. 5 Corporate Tax rate, which is drawn Companies Like google and facebook to ireland. It is not directly threaten the Corporate Tax regime, but it could cast a cloud over the wider picture. Are they going to be forced to take the money . Ireland is going to appeal the decision, which could take three to five years. It will have ireland support in their appeal. They will support each other in the appeal. Apple is confident it will be overturned. Ireland isnt quite as confident. We reckon they have a very strong case. We will not know for three to five years. This is really a staging post along the way. Caroline the same question surrounding starbucks and amazon. Dondero dara doyle, thank you. The finance mr. Will be joining us at 11 00 a. M. Eastern. Vincent cignarella. This is the longest winning streak for the dollar versus the yen in five months. Is this going to continue after Stanley Fischers comment . He echoed more of what janet yellen said last friday, as opposed with the market took were his more mark more hawkish statements. Will the rally continue . Back in june that depends. The interesting thing is that this set of data is august. Its very heavily influenced with seasonality. It tends to be revised by the next set of data somewhere, which we will see in october. Whether or not the fed will move in september, those odds increase based on primarily mr. Fischers comments. They may wait for october and those revisions. Its not an easy number. , septembereanwhile back at 36 . Its great to have you, thank you. Is a nonm a tuesday. Mondeleze abandoning their run for her shoes. Hershey;s. Its 81 owned by the trust and not able to get the deal done. I want to take it looking earnings. It was not a good day for g triple i apparel. Missing on profits, sales, and cutting outlooks. He does have a licensing deal dealthe nfl, and the dkny will only be a freedom in the secondary gets that deal. Any kind of hope they have was push off in the longer term. At the highend, 1. 50 a share. The estimate was for over two dollars. A huge rerating down for that stock. Rounding out with signet jewelers, just getting pummeled after earnings last week, getting cut to neutral at j. P. Morgan. A price target is now 90. The original price was 136. Rough across the board for cigna jewelers. Signet. Lets go to emma chandra. Poll highlights problems facing hillary clinton. Ohio, has him tied in with 33 each. Clinton leads narrowly in pennsylvania and michigan. In ohio and pennsylvania, trump has a big lead among independent voters. Frances trade minister wants to end negotiations on a trade deal between the European Union and the u. S. The u. S. Hasnt offered anything substantial in the talks. Tariffs are already low or nonexistent. The talks focused on issues such as u. S. Band european bands processing. This could show a shock from brexit. Economic confidence was less than expected in august. The index had unexpectedly risen last month. Global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Im emma chandra, this is bloomberg. Alix coming up, the twoyear u. S. Treasury note headed for its worst month since november. Funds Krishna Memani gives us his forecast next on bloomberg. Alix this is bloomberg , im alix steel. Stanley fischer speaking out on how the feds next move could impact other banks. Professor fischer the world has become increasingly interconnected, increasingly the Capital Markets of the world. Other do affects countries. Its also true that what they do affects us. We dealing with interconnectedness. We are probably the most important of the Central Banks. Is krishnang us memani, with Oppenheimer Funds. We saw selloff across the curve today, and fischer speaks, and there has to be foreign banks and buyers in there as well. It is really think private investors who are buying treasuries far more than the Central Banks. Its an interconnected world. Capital moves wherever needs to. It one of the innovations that has impacted the feds thinking. Not that the markets are interconnected, but the outside impact that they have on other markets. In the outsized impact the other markets have on the u. S. If rates are going to remain low in europe and japan, the fed really cant tighten. If they tighten, the dollar would spike. They would basically go through 2015, 2016 all over again. That is where the market does not believe any of this talk from Stanley Fischer. Alix you saw the Morgan Stanley the fivet center, buy year because the fed is not going to hike. Caroline we see the probability of a hike coming down slightly, but still at 36 for september. Is september on or off the table from your perspective . Mr. Memani for my sense, september was never on the table. Stanley fischer is a hammer for the fomc. If the markets get too complacent, he has brought out to pull the markets off, more than anything else. The employment report, it is the likelihoodt that it reaches 75 or 100 anytime soon is pretty small, in my mind. Caroline we brought up this chart earlier. I want to revisit it, in terms of foreign buyers. Foreign buyers coming into the u. S. Treasury yields, but why are they . From a hedge perspective, the dollar is so in demand. As with the japanese investor gets in terms of yield. The get negative on the japanese debt, and the purple line is what you get in terms of yield for u. S. Treasuries. Once you hedge the u. S. Dollars, you are getting 0 yield. Why are we therefore seeing continued buying of u. S. Treasuries . Mr. Memani it shows you the desperate need for yield on a global basis. When they could hedge and get an extra yield, they hedge. And now they will probably buy them are not hedged basis. They have no choice. If you have longterm liabilities the required people are in a significantly positive return, and you cant get it in domestic markets, you will take a risk. Fx risk is one of the risks that you take. Caroline fascinating stuff. , oppenheimeri funds. Up, buyer beware. Brazilian corporate debt is outperforming, despite 60 of the borrowers having a negative rating. Rousseff impeachment resilientjor risk in dead. From london and new york, this is bloomberg. Caroline this is bloomberg , im caroline hyde. Dilma rousseff is facing her fate of the Senate Impeachment trial with an impassioned speech. Dilma rousseff twice i came close to death. Once when, for days, i was tortured, suffering aggressions that made doubt humanity and life itself. And when a serious and painful illness almost made my existence shorter. Today, im just afraid about the death of democracy. Caroline impeachment euphoria is blinding bond traders to risk. Bonds are heading investors some of the best returns emerging markets. Krishna memanis Oppenheimer Funds chief investment officer, still with us. Our the winnings to high for brazil . Mr. Memani brazil has done well for Short Covering trades. The underlying fundamentals of stabilized, which is a significant improvement from rapidly deteriorating situations that we had for a few years. In the markets have rebounded. Where they go from here really depends on the Global Growth trend. Growth and global yen growth is better, marginally better, it is not changing fundamentally in a big way. Therefore, i think theyre better off elsewhere than brazil. Caroline give us the opportunities. Mr. Memani if youre looking for e. M. Investing, either in rates, word equities, you basically or in equities, you basically have to go where the underlying growth trend is positive. Valuations are attractive. It comes down to places like india, they have a lot of room for rates. Valuation in indian equities is probably high. Equities dont make that much sense. Chinese equities, for example, are cheap. Chinese ecommerce and Internet Companies are very cheap. , but from agacaps valuation standpoint, relative to what you can get anywhere else, is very attractive. There are lots of really good consumer driven Growth Opportunities all over emerging markets. If you are going to invest in emerging markets, enough to go company, rather than country specific or sector specific. Caroline you cant go into Exchange Rate funds, you cant get into an overall benchmark, you have to be specific particularly towards the consumer. Where would you get out of immediately, krishna . Mr. Memani you can invest in etfs and things like that. But for longterm investors, its going to be leaving a lot on the table. From our perspective, we like emerging markets a lot on multiple fronts. We like emergingmarket equities because the valuations in emergingmarket equities is quite cheap. And Growth Prospects have definitely stabilize as china has stabilized. Emergingmarket rates. Emerging market rates have a lot of opportunity to go down, which is quite positive for older emergingmarket bonds. The biggest risk in emerging markets is really affects fx. And that is entirely dependent on what the fed does. Hi, three libor at a 2009 double rated commercial paper for over three months for Financial Companies is like. 9 . When you want to search for yields, where you go when you have a suggested rate . Mr. Memani we think the libor is gods gift to us. Hopefully it lasts. But certainly the reduction of the amount of capital that is in this market, because of the money market rule changes, have increased those rates. Were taking advantage of it in our funds, or you can buy short assets and cash substitutes. Libor is a ordinarily attractive at the moment. Cp, tier two cp, lots of options. Alix Krishna Memani, good to see you. Coming up, barclays chief economist tells us what this means for the markets. Lots of elections coming up, particularly in germany. This is bloomberg. Alix this is bloomberg go. We want to highlight apple on the move to the downside. The European Commission coming out and charging apple 14. 5 billion was interest. The ec saying apple in ireland apple and ireland are challenging this role, but the ec saying ireland charged a 1 tax rate and that was down to in 2015. 005 were looking at Airline Stocks noted Airlines Getting joining United Airlines. Had a heart transplant five weeks into his 10 year and we have seen some management shakeup of the company. United airlines hiring a new cfo in chief commercial officer as well this month. We also want to highlight one retailer in the red. Abercrombie fitch down 10 after bad earnings across the board. Flagship stores and Stores Locations really leading in the decline, off by 7 . The hollister unit outperformed with samestore sales down 10 , but not enough to make up for the weakness. We will be hearing plenty about this, this retail season. We keep pounding the jobs the drums for the jobs report on friday. Suchpecially when we have headline risk. We get a look at the market repercussions and we are looking at how the treasuries have reacted and stocks reacted. The dax outperforming, making of all of yesterdays losses in the ftse 100 playing catchup after yesterday. Potentially negative rates are off the table, but they seemed a little more cautious with the two year yield currently unchanged. Dollar index up 2 10 of 1 . Big movers into friday. Turning to politics, arizona heads to the polls for Senate Primaries were senator john mccain will be on the ballot. The primary comes a day before a major immigration policy speech from republican president ial nominee donald trump. We go to kevin who joins us from washington. What are we going to hear from donald trump . Kevin everybody is trying to get to the specifics of Donald Trumps immigration plan. Over the past couple of days, we have heard Different Things from surrogates and some folks are saying it is going to be more moderate and others say it will be continued to be more conservative, but yesterday, Donald Trumps new Campaign Manager telling bloomberg exclusively that he will talk about building the wall, that is still a focal point of his immigration plan. He will talk about having no amnesty and the third and final pitch is that he wants to end sanctuary cities. This is a tough spot because he still lags significantly behind hillary clinton. He needs to moderate somewhat to win over independent voters. This issue of immigration is what got him the nomination. Alix we have seen him pare back some of his harsh rhetoric over the last few weeks. Will you expect a more tempered donald trump or will he go in, all guns blazing . Will see a candidate using a teleprompter, which we have seen him do a little bit more the past couple of weeks. We will find a carefully measured tone. If you look at some of the ads that he has released, that 10 million buy in the past 24 hours. He has adopted a much more moderate tone, but it is still the donald trump people have come to expect. He is still weighing in on issues of the day like everything from dwyane wade to anthony weiner. Is still donald trump at the end of the day. Thank you so much, kevin, bloombergs politics reporter. 69 days away from the election. Caroline and front and center across europe, we have so many general elections and that as the European Union continues to grapple with exit as well as populism rises throughout the block. France, italy and germany seem ever more crucial and there could be one even sooner than that, spain. Asked the countrys standing Prime Minister will Ask Parliament for his second term. Loses, a vote of noconfidence will get spains third election this year. Lets bring in the league could philippe. About the spanish elect oral perhaps insignificance. It does not seem to rock the market. Phillipe i dont think this boat is so crucial. Vote is so crucial. The king may appoint someone else. It is unlikely there will be a confidence vote this week. The Prime Minister needs to gather a best majority. Vast majority. We need to keep in mind that at the end of december, there is a local election in two provinces. To p supportually abstain or the government. It is not crucial this week, but the next month is going to be very important. Caroline particularly as we see the Antiestablishment Party do very well. That continues to be an issue facing germany, but also france. Weve got a potential exit of the government. He has been fighting for the rise of the nationalists. What are you say to him potentially leaving government and being a leader of his own separate party . What we have seen in france is very similar to the other countries, which is a fragmentation of the political landscape. For now, it was mostly in favor nationalists, who tend to blame other politicians for the current situations. I think his initiative is something very similar to what we have seen in spain. Of people,ation trying to make some new proposals, listening to people, fighting corruption, it is to immature to determine what he is going to do. I think it is difficult to guess aether or not he will be candidate, but he wants to prepare a new political party, which is neither on the left or the right and claims to make some use proof new proposals to get the people more interested in politics, other than just voting. As an economist, you have to be assessed with politics. Stimulate as soon work nextyou week . Phillipe they are calling repeatedly for other policy areas to take some action in order to support connectivity. I dont think many people noted it, but the french member of the board made interesting speech aftereek, in jackson hole chair yellen, where he did not really comment on the current situation, but he said it was up to see thatns support, otherwise the ecb would have no choice but to use conventional measures for a longer period of time. We currently have a low potential growth, a low potential Interest Rate. I think for the future, it is crucial that government eventually takes action and speeds up reforms and given what was announced in terms of elections, it is going to be very difficult. I think it is premature because we dont have enough information about a potential impact of brexit on the economy, because there are we know there are potential shocks in the next couple of months. In particular, the a tying referendum and it may be easier for them to decide something in december. Caroline we will be listening to mario draghi. He has been silent for five weeks. Im sure he will call for fiscal stimulus as well. Apples tax day, in ireland. Illegally the iphone makers tax bill. We will debate the longterm fallout and preview apples big San Francisco event, next. Alix this is bloomberg go. Coming up, the cio of templeton global macro reveals where he is putting money to work. Caroline meanwhile, the worlds wealthiest company has been paid 4. 5der to pay nearly billion in a tax crackdown. Down inany is trading the free market on the news. Joining us for more, is brian white, a Senior Analyst to currently has a buy rating on a 180 andy 180 price tag run and a 180 price tag run. We have to put this in perspective. U. S. , ireland is going to appeal, apple will appeal. Inle has about 32 billion cash as of last quarter. Bill, it wouldax take about 80 days to generate that much. In the big scheme of things, while it is a huge number and a headline grabber, for apple it is a drop in the bucket relative to their cash position. Caroline lets talk about the almost doubling in share price. Weve got the iphone expected to be upgraded, but talk to me about the news of the day, the ipads which are expected to be revamped with mac changes. Iphone is still the dominant driver of revenue and profits at apple. Ipad, we have the had about 10 consecutive quarters of unit decline, yearoveryear. In mac, we have had about three consecutive years. They were definitely do of some kind of refresher. It has been over a year, and so i think the imac updated last october. They need something to get the mac franchise going again. The last few quarters have been , ander for apple and ipad thinkrger ipad pro, i there is a move away from tablets in general. You have seen units continue to decline in the ipad franchise as well. Caroline the continuing problem goes on. We might expect a new iphone seven, which is going to lie off the shelves, but 60 of your revenue depending on one particular product. Is this not a worry . Apple isg picture on there has been a lot of gloom and doom around the apple story. Is, int stems from fiscal 15, iphone units grew 33 and that was an insurmountable task moving into fiscal 16. We have units down 9 . That with the iphone seven will return the iphone franchise to growth in the Second Quarter of fiscal 17 and also apple will start to return to growth. Therefore, people will look back with the iphone cycle having bottomed in the Second Quarter of fiscal 16, and the sales and profits bottoming in the Third Quarter, that was a great buy. They are negative on it for the wrong reasons. Its comparisons, not that the iphone is not resonating. Caroline great to have you on the show. Alix to another company focused story. Consumer spending rising for a fourth straight month in july, up 4 10 of 1 . Abercrombie fitch getting hammered. For more, lets bring in Morgan StanleyEquity Analyst who covers footwear and apparel. People are spending more, but not on clothes. What does that mean for back to school . Is back tons school has been a bright spot for so many retailers. We will feel the growth rates revert back to what we saw the first half of the year. Backtoschool has benefited from shoppers of starting the season earlier, and also august was very tough, last year as a retailers are benefiting from easy compares. Our expectation is more slow goat slow growth ahead. In a who will outperform Slower Growth retail environment . We like stocks that have really good selfhelp stories that dont depend on the macro environment and also attract valuations. Brands has a very attractive portfolio and a compelling m a story. The stock is trading only 12 times next years earnings. If they deliver on the guidance, this will catalyze the stock back up toward our 34 price target. Side about a 25 of upside. Alix other competitors like under armour and nike, that is a tight war between the three. What is interesting right now is adidas, which is covered by london. They really have the momentum and what is interesting is this past saturday, adidas launched the easy boost 350, a shoe that is part of the collaboration with kanye west. The shoe, which costs 130, it sold out in less than two hours. It is unheard of and it shows the kind of momentum around the adidas brand and something that nike and under armour do not have right now. Alix i would not pay more than 20 for my toddlers shoes. Up, the uns recent stability meeting stability may be coming to an end. I will show you in the battle of the charts ahead of a potential fed rate hike. Caroline this is bloomberg go. Lets take a quick look at the markets and get ahead of the trading in europe. 600. 10 of 1 of the stoxx the dax up more than a percentage point. Jackson hole retreat. The ftse 100 playing catchup. After the Vice President of the us exclusively today, to year yield coming off of its high. King. Is still 1 . Ex crude oil up 6 10 of it looks as though we are trading a little bit higher heading toward that crude and gasoline inventory stockpile. It is the exciting part of the day, battle of the charts. Lisa abramowicz is going to be with none other than alix steel. Give us your best hit when it comes to the battle. U. S. Dollar,g at this is the rate that banks charge each other to borrow dollars in europe. This rate has been rising steadily this year, ahead of some money market rules that are going to come into effect in october, causing investors to pull money from money market funds and causing this rate to surge to the highest ands 2009. This is interesting, what the put this tightening of conditions into context, i compare it to generic twoyear european yield and you can see it has risen to the highest relative to generic twoyear european yields, more than 4. 1 Percentage Points more than this benchmark european yield, since 2008. This is significant because this tighteningonditions and perhaps they are doing the work for the fed. Alixine i want to see how can come up against this. Alix that is going to be hard to beat, but i am looking at potential u. N. Volatility. This white line is a implied volatility, the dollar versus the u. N. Its the biggest monthly increase since january, potentially more volatility over the next three months and that is pivotal when it comes to the dollar yuan. More fixing, lower, looking at key pivotal level that many traders are watching and the question is, if volatility picks up, if we see a decline in the yuan, a steeper decline, you have stability fears. Real remember what happened in january and august of last year. China makes up about 40 , given inflation rates and instability worry in the markets as well, if we end up getting a volatility and a weaker yuan. It has been stable, nothing like what we saw back in august of last year, but you have to watch. Caroline it is a tough one. I am not used to this judging. Libel to be obsessed with back in 2008, but overall, i feel we have a little bit of had some lipservice already kate paid by already alix. Im going to say today, it goes to alix. In all seriousness, billability is nowhere in terms of treasury aspects, but it is slowly picking up with the dollar yuan. Caroline it was great to have lisa on, today. Coming up in the next hour of go, we have a key investment, cio of global macros. We be with us and as we go ahead of that, u. S. Treasury yields coming up off previous highs at we spoke to sammy fisher. Dollar index still strengthening and crude oil up 7 10 of 1 . We break the numbers after the break. Caroline we are 30 minutes from the opening bell in new york. This is bloomberg go. Some crucial breaking data, all about the data. Is the home price index coming in at 5. 13 , an increase from may, also made being resign being revised slightly higher. On a month on month basis, you. 07 , bute of about the trend seems to be stable if not slightly higher, home prices in the United States. In a few minutes, we will be speaking with Robert Shiller on his views on these numbers as well as the strength of the u. S. Economy and what this all means to the fed as we banged that drum heading into jobs friday bang that drum heading into jobs friday. Me well, we are seeing continued strength in the u. S. Dollar, up about 3 10 of a percent in terms of the u. S. Dollar. We have not been moving on the back of that, and Robert Shiller will be digging into how that infects Interest Rate decisions. Germany dax performing up more than a percentage point, currently over three stocks in the red on the dax. The brazilian reality down for tenths of 1 as we had to more than impeachment vote. The british pound is flat. We are up about the recorders of a percentage point ahead of that data coming out on oil inventories. Elsewhere, yields rising on your five year to come on your five year. This is a breakdown of what is that happening in terms of the movers on the gmf option. Gmm function. Alix you might have to fork over about apple may have to fork over a 14. 5 billion tax bill to the eu, plus interest. Ireland saying they will challenge this ruling. The eu accusing ireland of differential tax treatment of apple. They were paying very close attention to this story in the market. We want to highlight some of the retailers. On the bad side, i probably and fit down over 13 . Flagship stores down by 7 . Tourist locations really leading those declines. A stronger dollar not helping abercrombie fitch. Beating onside, dsw earnings, revenue and calm sales com sales. They get about half of their revenue from womens apparel. For moral whats happening in the markets, Abigail Doolittle is here and mark barton joins us in london. A different story when you look apparel maker 3g, a horrible quarter anyway you slice it. G3 apparel shares are plunging in the morning, down 21 in the premarket on a disaster is quarterly report. Disastrous quarterly report. They have seen earnings for the Third Quarter coming in below by as much as 20 , so that disaster you were talking about, dragging on the all year estimates. The gpmexpect be completed by 2019 and this is one that simply got wrong. Most analysts solve more than 20 upside potential for these shares. E is a as for another stock plunging, down 12 , this is another guide down miss type of quarter, specialty technology. The fiscal fourthquarter earnings missed by 28 below sales volume. It looks like it will extend right into the fiscal firstquarter. Wild another one not widely followed, but most analysts recommended buying it, so it will be interesting to see if any of those analysts defend the shares of scansource. Want to check in with mark barton, joining us from london. A relative risk on day. We rebounded from yesterdays losses, europe down for its seventh day. We are up for the seventh consecutive month. Basic resources falling on the back of the dollar strength, everyone else rising. German payments processor upgrading to equal weighted in barclays and barkley says the company has built a strong strategic position on product a regional perspective in the last decade. Shares are up by 5 . Hsbc upgraded the Worlds Largest cement company, raising the price target to 58. Recovery,arket further cash return, the price target implies 13 upside from the current share price of 53. Confidence worsening more than analysts predicted, a sign that brexit is reverberating among households and companies. This index of industry and Consumer Confidence fell to 103. 5 from a revised one of 4. 5 104. 5. Bring on the ecb, next week. Alix thank you so much. Back in the u. S. , home prices are up from last year. We are joined by dr. Robert shiller. Professor, a pleasure to have you here. Personal income just of over 2 . How much more Housing Price appreciation can we see without income rising just as much . Robert there has been a lot of momentum in home prices. They are different from the stock market. They have been going up since 2012, but at a slower pace. That it kind of worried will slow, further. Seasonally adjusted, we are just about flat in the latest month. Half the cities are slightly down. It seems to be a weakening market, but still an apparent of trend. Alix how much more can prices fall . What would be your expectation for the next 12 months . For me, i would Say Something akin to the inflation rate. Something around 2 , so that they would be fixed in real terms. Not as exciting, but not horrible. Caroline i want to bring in the u. K. Perspective. In london, we are obsessed with Housing Prices. The minute we see a cooling down in the u. S. Numbers, panic strikes as we focus so much on what that makes us feel from a consumer point of view. The this felt him Going Forward for the u. S. Economy . Robert doom and gloom is too strong a word, but i agree, housing is a very strong well affect because wealth affect. Held in retirement portfolios, people see it and are aware of these house price movements. It is possible that there could be weakness coming, this fall. When the seasonal pattern no longer boosts home prices, if the fed should raise Interest Rates, it might be a signal that the market is heading down, so there could be a change in confidence. We have not seen it, yet. Alix should the fed raise rates, come september . Robert Capital Expenditures even though Interest Rate have been low, they are not where they should. The we see this weakness in the Housing Market. Wait, if i were there, i would vote against an increase. Mr. Fisher,rd from speaking with tom keene, it seemed like the rhetoric was less hawkish than what we heard last week. What is the fisher that we heard today, where we could be one and done. We might not be, we are data dependent. Compared to fisher the fed speak we heard last week . Robert every talk about the jackson hole conference. Intellectualwas a tech conference. I guess janet yellen was talking positively about a more likely upswing in Interest Rates. The labor Market Reports have been strong, but overall, it is still a nebulous situation. I dont i was not there, but i dont know that i would have changed my opinion listening more to these waivers. Alix you say there is still too much uncertainty. What is a good month . Is it december . Wait a year . 2018 . Robert janet yellen has to be responsive to the latest data. Im waiting for further improvement. Like people are wanting to expand their at a more and hire rapid clip. I still think it is a wait and see situation. It is going to be a harboring or of more weakening harbinger of more weakening. There could be a correction. Caroline we will anticipate that. Thank you very much. Wonderful to have you on, Robert Shiller. Now for an update on the news outside the business world, we go to the first word news. The European Commission has ordered apple to pay more than 14 billion plus interest in a longrunning tax case. It is the largest tax penalty in a threeyear crackdown. This elective tax treatment of apple in ireland is illegal under eu stated rules. It gave apple a significant benefit compared to other businesses. The eu says within 2014, apples tax rate on its european 5 . Fit was. 00 apple says they will fight the decision. And negotiations on a trade deal between the u. N. And the u. S. The u. S. Has not offered anything substantial in the talks. The talks focus on issues such as european bounds on u. S. Agricultural pack practices such as hormone treated beef. In the u. S. , the fbis investigating hacking attacks on at least two state elections boards. Investigation follows an alert from the private division that said the majority of data stolen from one state selection website was taken in july. Global news 24 hours a day. This is bloomberg. Alix still ahead, apples . 5 billion tax bite after eu regulators say ireland illegally slashed apples tax bill. Michael hassan will join us next. Caroline the Federal Reserve vice chairman underlined the fed stated dependency when he spoke earlier this morning, discussing what is what has been holding the Central Banks back. It is not about employment, employment is close to full. Growth, and that problem is largely about productivity growth, something which is very hard to control by policymakers. What private individuals are doing in their companies. It is very slow at the moment. Caroline our next guest believes the fed is behind the curve and that Economic Data shows a healthy curve which justifies an Interest Rate. Michael joins us now from california. Wonderful to have you on the show. Fisher so did little more cautious than he did on friday sounded a little more cautious than he did on friday. Michael i think the point about the risk of getting behind the curve stems from the very criteria that the fed has laid out for years, being the prerequisite for centralizing normalizing Interest Rates and as fishermen jim, we are pretty much at full employment, yet the fed has taken no action whatsoever. There is a discussion of the potential growth rate is lower, which most people would agree the literature supports that. When setting fed policy, it is not their role to increase or even their ability to increase potential growth, that has to do with structural forms and other issues. What the fed is at risk of doing is if we are actually at a new potential growth rate, which is we are closing the output gap and we are now running at or above the potential growth rate, the fed risk dueling inflation, either asset price or real inflation by being too lax. Caroline are you expecting a rate hike come september . Robert it is hard to predict michael it is hard to predict every meeting, despite better data, they can always refuse to hike rates. We are not counting on a rate hike in september, although it is possible. I think the bigger issue to us slacke fed has a lot of in terms of how late they can go, because of global liquidity , forcingown rates certain investors to buy treasuries, which creates an artificial bid for treasuries, so there are a lot of reasons that the market is held at a lower level, despite economic conditions, but at some point when you see headline inflation gets a 3 , employment at full employment, there will be real questions that investors begin to ask about why am i buying a u. S. 10 year bond which is a negative real yield. Alix you were known as making very large oneway bets on things like the yen. Also here and now, shorting u. S. Treasuries, that has not panned out in that every time we seem to have a selloff in treasuries, we seem to have a different liquidity where 1. 5 compared to negative yielding assets over other countries, how do you square your bet against these foreign buyers coming in . Michael that is one of the factors coming in, but we want to take such we dont want to take such huge amounts of investment risk. As we move into next year, we are likely to see expansionary blend policy when you expansionary fiscal and expansionary monetary. There is going to be an inflationary pressure, it is kind of a toxic mist in terms of inflation dynamic, and certainly japanese investors are getting a little bit of a yield pickup over what they are earning in their core market, but we do not want to take such huge amounts of risks betting that this rally can repeat itself. Alix since 2013, it has been kind of a rough ride. When you take a look at how you asset, allocate in a very challenging world, up against returns that are difficult, how do you define your Asset Allocation . Michael we are managing to an absolute return. We only want to invest where we think there are good riskadjusted opportunities. We dont see opportunities in emergingury market, markets have been a nice tailwind for us. The ukraine had a positive contribution to returns despite all the turmoil during that restructuring. It was successful both for the ukraine and for bondholders. Other emerging markets like indonesia, brazil, malaysia have been nice tailwinds. The headwind is not participating in the treasury rally and also our short positions in the euro and the yen. We see the risks that brexit highlighted about the lack of political will for the eurozone to stay together, we think that is a very vulnerable currency. With regard to the yen, a tremendous rally hurt us, but the strong yen is choking japanese economy and will force some sort of aggressive action. Treasuriesckly as rallied, we can expect the returns to come back for us. Caroline we have seen enormous moves made by the boj, what makes it different next time . Michael you need to have the boj easing at the same time or close to the same time that the fed is beginning to make some sort of normalization on rate adjustment. What has happened is at the beginning of the year, the market was expecting significant rate hikes. That all but got eliminated very quickly in the beginning of the year. Even of the boj cut a slight negative Interest Rate, the market cut of u. S. Treasury significant, so there has been some policy miscommunication, but i think with our minister abes political legitimacy based off the summer parliamentary elections, the need for a large fiscal stimulus to be funded by the boj as the former chairman has highlighted for years, a real solution to japans problem is helicopter money and i think they need to move in that direction, and then the yen would weaken significantly. Alix good to have you. Much more coming up, with a templeton macro cio. More on where he is betting in emerging markets. The opening bell is up next on bloomberg go. Taking a look at equity futures. S p is relatively flat. Alix four minutes away from the opening bell, this is bloomberg go. The dollar higher, budding moving money moving into treasuries, we have the opening bell for you. Caroline ahead of the open and what you need to know, the European Commission orders apple to repay as much as 14. 5 billion in back taxes. The dollar strengthens and treasuries stay lower after the fed vice chairman says the u. S. Economy is close to full employment. U. S. Home prices up 5 in june compared to last june. You hear that ringing of the bell, futures have been trading lot towards this open. We are currently going to watch how the stocks open, it is muted for those individual movements. Movers. Alix you are looking unchanged for the dow as well as the s p, and the s p has not moved 1 in 36 days. Huge in thetility, index, however the s p is still up about 3 10 of 1 . That would be the sixth straight game for the index. Take a look at individual movers, we are definitely following the story of apple. In premarket, despite the fact that the European Commission is charging apple with a 14 point i billion dollar tax bill plus interest, accusing ireland of the legally giving a tax break to apple with a tax rate of. 005 . Apple and ireland both saying they will fight this ruling. Investors should be unconcerned of the Committee Full amount, if only equal to dollar . 60 a equal toit will only 60 aars . 60 a share 2. Share. Addould have been hard to to their earnings, right away because they are paying for about half in cash and also following the management shakeup that we are seeing over at United Airlines, american executive scott kirby will over at american, this comes amid United Airlines coming in with a new cfo and she commercial officer as well, added to the company this month. Back with us is the cio at templeton global macro, managing over 100 30 billion in assets. You said youre seeing a lot of risk in the u. S. , give us a sense of where you see the opportunities. Michael one of the areas we have been highlighting for some time are emerging markets, specifically local currency investments in emerging markets, and what is compelling for us is both politically, economically and inoculation wise. Politically, we have seen a greater degree of stability across most emerging markets, and we see in the u. S. , or in europe, with the rise of populism and nationalism on the back of stagnant real Income Growth, there has been a lot of political discord and unease in some of the developed markets. You juxtapose that to emerging markets, which continue to see positive Income Growth as a result, most emerging markets continuing to endorse more orthodox policies, which makes our investments more secure. There are a couple of cases were policy got off kilter, places like argentina and brazil, but those places have come back. Go and are now adopting very orthodox policies. Many countries like mexico or a lotsia or india, are more stable and economically, they have been an excellent job of weathering this changing world environment, where you have seen a lapse in commodity dynamicsanging growth and many feared that this would be the end of emerging markets. The reality is, many of these countries are still growing 3 to 7 despite all of these headwinds. Many of these currencies are trading at the cheapest levels since we have seen for over a decade, cheaper than Global Financial crises, cheaper than asian crises, so a real valuation story as well. That you are the only one has come out and said you like emerging markets. Have echoed ast similar sentiment. Emergingmarket rates have a lot of opportunity to go down, which is quite positive for emerging markets bonds. The biggest risk is fx. That is entirely dependent on what the fed does. Alix fx risk, do you hedge . We see the opportunity in ethics, we cannot make it uniform across all of all emerging markets. Some currency will be vulnerable, in places like turkey. However, the opportunity we see is in places like the current currency in mexico and indonesia, whereby going in unhedged, yields are anywhere from 7 to 12 in currencies that are significantly undervalued. The potential return is really in the currency. There has been this fear of it fed rate hike. That is what pushed these violations to such extremes. We would argue that that has already been priced in, and since the outlook for fed rate hikes is still very moderate, that has already been priced into the market and if the fed is hiking rates because of a more healthy, Global Economic environment and u. S. Economic environment, that is very good for exporters. Unless you were to see disastrous shocks in Interest Rates, i dont think it is necessarily going to be that scenario that many are predicting. Caroline looking at some of the other opportunities you have seen, you short u. S. Treasuries because you believe the fed hike. Will come how high do you think it can go . Michael if you have an economy that is growing 2 to 3 . Typically over history, that would imply a 10 year bond yield of 4 to 6 . I dont think we get all the way there because of financial repression and some of the global liquidity factors of negative Interest Rates. Certainly a move in that direction, so certainly 10 year yield is 100 basis points higher, not out of the picture. Short treasury trade is designed to that we can get a bond fund that actually makes money. When Interest Rates go higher when they go lower, we will not participate, but that is not the environment we are just positioning or positioning for. Positions on the yen factor for a huge chunk, about 20 . As cially michael those are positions that are easy to calibrate with inflows and outflows. That is never an issue. In terms of what would convince us to change those views, it would be a fundamental view change in regards to what we think japanese policymakers are doing or what is happening with the japanese economy. When we look at japan, inflation is coming back. Really has a stranglehold on the economy, it is crushing the equity market, so there is a real motivation for policymakers to reverse that direction. As long as we continue to see that path, we are quite comfortable being out of consensus or having positions that go against us for the very short term as our focus is a three to fiveyear horizon. If we dont participate in some 11th inning treasury rally, we think we will be fine. Alix talk about what you exited, recently. What positions have delivered for you that you moved out of . One of the positions has been out of europe and into latin america, and this was last. Ally true over the couple of years we saw the last of our positions in ireland and hungary, because they had performed well and reached our price targets. We redeploy the capital in places like brazil. Late last year, we became one of the largest buyers of brazilian assets. Would becomeank more proactive and raise rates and control inflation. This Balance Sheet would come to a close and brazil has Great Potential and has started to unfold. A real shift from europe into latin america. The other motivation of shifting out of europe was our concern that what brexit highlighted is that because of the refugee crisis, because of terrorism and stagnant economies, the rise of nationalism, the very things that which it away at the eurozone project are only going to grow, and it has been pretty quiet since brexit, but a lot of that has to do with Summer Holidays in europe, but once we come back into the election cycle into next year, i think nationalism and populism is going to question if the euro zone can stick together and can they maintain a fiscal union and what we are seeing early signs of is that it is starting to deteriorate. Alix so great to get your perspective. Thank you very much. Cao at templeton global macro. Record 14. 5ples billion tax deal. We will look at the possible fallout for other multinationals, next. Alix this is bloomberg go. Coming up on bloomberg west, evan williams, twitter cofounder and median ceo will be joining us on Bloomberg Television9. Caroline lets check in on how the markets are currently trading. Half a percentage point off those record highs on the s p 500. Eed to hit the downside andhe departments or indices. A 10th of awn percent and going into unchanged territory is the nasdaq. Lets take a look at how these markets are performing with Abigail Doolittle. Shares ofg off with the chipmaker, as two firms have taken their price targets higher. Brad erickson has raised his price target by 22 , and he thinks the gopro Holiday Season could be strong, but there is less than 5 of upside potential. We have matt ramsey who took his price target up to 35 by 35 by 30 to 85. He cited many of the same reasons. Another stock trading higher on the open, we are looking at florida net, shares of the Security Company are up. Thinks the owens management focused on enhanced profitability should help the shares with a 25 upside potential on a stock that is already up 14 . Thiswens downgraded software Security Company, this morning. He said the companys fundamentals continue to be challenged. He also thinks it is going to take longer for this company to turn things around, so he is moving to the sidelines on a stock that is down more than 25 this year. Caroline nice tech movers. Lets talk the titan of tech. Being down, currently 7 10 of a percent, on the back of an order to pay 14. 5 billion plus interest by the European Commission and the european Competition Commission ruled ireland had illegally the iphone makers tax bill. Apples tax benefits in ireland are illegal. Two tax rulings granted by ireland have artificially reduced apples tax burden for over two decades, in breach of eu stated rules. Apple now has to repay the benefits, worth up to 13 billion euros, plus interest. Caroline lets get more of this on this with our dublin chief editor. It is to give you perspective, we recently received reports that the find could be as little as 100 Million Euros would have been nothing apple. Today, when we began to hear the figure, i dont think they were prepared that could take it up to 16 or 17 billion euros. We are talking serious sums of money. Caroline serious sums of money for ireland, but not if you are looking at the cash pile that apple has. They are certainly looking to fight this. Apple is sitting on 200 billion. 40 billion euros seems like a lot of money, but apple is determined to take the fight to the death. They will have irelands support. You might wonder why is ireland fighting this, isnt it good that they get the 14 million . The problem 14 billion . The problem for ireland is it risks hurting their national reputation. They say they did nothing wrong, and there would be concerns that they dont fight this case, they could tarnish their refuge reputation. People may worry about irelands commitment to standing by for u. S. Corporate citizens keeping the country afloat. It, therent fight could be a challenge their commitment to standing with you and partners u. N. Partners. Caroline great analysis for us. Later today, we are taking into the story that much more with none other than irelands finance minister. The Company Announcing plans to upgrade their ipads and macbooks, could this actually move the needle in sales . Ipad unit sales have seen declines for nine straight quarters. For more, our tech and hardware Senior Analyst joins us now. What does this actually mean for the market . It is still speculation at this point. The one thing we know is the new iphone is coming. December,ptember and there are probably going to be some refreshes to the computer line, both the macbook air as well as the macbook pro and at the end of the day, the function key to move your graphics tools or whatever have you and at the end of the day, it is one big meh for the products. The fact that they are going to be able to continue this will be a positive thing for them, but if it starts to weaken, particularly in the u. S. , then mac may suffer the same fate as well. The refreshers and not do a whole lot for the platform in the near term. Alix have market three rated apple to that fact, as in is the local no longer the game and has the market compensated for the fact that incremental upgrades is slumping for the tech company . Analysts will tell you that is the case. They think the major problem is the large numbers. When you have this much of an entrenched presence in the mobile phone side and you gained so much share in the last several years, as pcs have weekend with a price that is almost two times that of the average pc, you have done this with substantial headwind. There is only so much room to grow. The other part is pcs are old and weak, they have mechanical parts that need to be replaced. Macs tend to be topoftheline on a relative basis, expensive, but you dont have as much of a huge refresh cycle. Alix youve got the big tech earnings, some did not point to the death of the pc. Some to have some have pointed to the increase of pc cycle. What does that mean for the mac if we get the revision revival . Old pct revives the versus mac debate, and the incremental pce refresher goes back to a mac or goes to a mac, then it is a positive thing for the mac platform, but if they say i need a pc, not a mac, then it is a more specific refresh of old pcs. Alix it really does point to the fact that is apple really a growth company, anymore and has the stock finally been rated to get that value rating in sort of a different framework . Is 60 e when it dependent on the iphone and trying to talk about services and trying to educate a new direction. We have to talk about apple in they will be and talking about that in the next hour. Will be speaking with the irish finance minister on why he wants to appeal the decision and how he is going to go about doing it. We will also be speaking with the eus commissioner, who decided and led the probe. That is at 11 00 eastern. We will be asking her why exactly the European Commission came to this decision and who is responsible for deciding where apple should be taxed and what it should be taxed on. A very interesting subject for discussion with investigations on deals and where companies headquarter themselves. We are also going to a conference in paris and interviewing the ceo of one of the largest chemicals and plastics makers. Terrorist being placed on china chemicals and plastics coming into the eu and how that may benefit. Caroline i look forward to it. Aleix, we want to bring in some breaking news. Is thate breaking news are said to beum in talks about a possible merger. Potash prices have been up over the last few years, meaning companies are scrambling to ready a kind of leverage and growth momentum. We will bring you more details as they cross. It could be announced as soon as next week. We will be right back. Caroline breaking news for you on the back of england, wherever how they beat how they struggled to be buying their longterm bonds, no more struggle. They are buying back the longterm debt from pension holders and insurance. Overall, yields tracking higher y with the u. K. 10 year after they managed to cover the ratio 2. 08. Causing arallying rally all across the curve and bond markets. Nonetheless, money moving into treasuries as we had Stanley Fischer speaking earlier today. A pretty much flat session across the board as we wait for jobs friday. The dollar, the star, at a session high. Bloomberg dollar index near a threeweek high. Individual stocks, keep your eye on acharya mento on potash. Agrium and 10 00 in new york, 3 00 in london, 10 00 p. M. In hong kong. This is bloomberg markets. We will take you from washington dc to dublin and cover story set from germany and france. Consumer confidence out in a few moments. Going to straight going straight to the markets desk where Abigail Doolittle has the latest. It does look like Consumer ConfidenceBeat Estimates coming in at 101. 1 versus the x 97. 3. Expected 97. 3. Interestingly, we going to the bloomberg and take a look at g btv3076