To the downside. This chart of oil. We see the plunge. And lets look at the spike we saw a earlier for oil, at the highs of 2 on a very bullish department of energy report, a bigger drag down for Oil Inventory and gasoline than we expected. But look at the plunge near 1. 20 that scarlet told us about them and we are eying a report that says that the shaft needs to drop by possibly around 150 rigs. Traders are not liking that, but stabilizing above zero at least. F the half a percentage point lets hop into the bloomberg and look at what is happening sector wide here. We see energy is now near the bottom, taking a look at some of those movers in the future. The point we want to make here is that first of all, we have already. Wereong ago, financials higher but now all sectors in the s p 500 are trading lower, and on the bottom, those real estate and telecom companies. That is not something we often see. Fluence, the bonds selloff is showing the 10 year yield is spiking higher. Up five basis points, and it appears to be on the hawkish talks from the Global Central Bank that is causing traders and investors to go in the other direction from bonds. We had been seeing a bit of a rally for a while for bonds, but there could be Something Else at play. We look at the bloomberg and take a look at the longerterm chart here. Net positions on future contracts for bonds, and we see it goes all the way back to 2008, back in 2008 the position was superhigh around the time of the financial crisis. Investors were going toward the safety of the haven bond, and in this range for a better part of the decade. Last year, we had a mass grow loans macro risk, and are at a super, super high, at a decade high, so some of it could be that the pendulum went too that might beo why we are seeing the bonds selloff little bit. But the 10 year yield to your yield is still at 2. 4 . Julia lets stay on the markets. As abigail mentioned, tech stocks taking another hit today, with facebook, amazon, netflix, and apple trading lower. Netflix the one taking the most, 8 10 of 1 . We are talking to conner, who manages the rumored value fund and equity fund, which includes is tech stocks. Grexit is in testing to watch this move back here. It makes me start think this is driving flows back and forth. We see this outpouring were underperforming Interest Rate moves, and the last two weeks have either been up a lot or down a lot each day. Julia are you willing to paris and was worse it with a trade pair some risk or sit with the trade . In the case of facebook, we see and think it looks cheap. If we pull out market value for Facebook Messenger and for their thinkchat service, we that the remaining business, which is really facebook and app, excuse whats me. Facebook and its grammar the only monetizing revenues right now. We think that we are tracing next years earnings come is achieved when you put up the value of the businesses that are not generating revenue. Scarlet but it is hard to see with those other business numbers look like because facebook does not exclude them, does it . It does not. We see people who are using the services and some publicly traded stocks in asia which we can use to value those businesses. We have some visibility, but we do not know what revenue or profit they will generate over the longterm yet. Scarlet you are still looking at technology and also at health care, which is the secondbest performing sector in the s p 500 after technology this year. I have a chart on the bloomberg here that highlight that performance. Line,s the purple information technology, and coming down a bit here since early june. The white line is the health care group, which has come back up and stayed relatively boy and. For a while it looked like people were switching out of tech and into health care. What would you say at this point . It can be both, always. But it is dealing more value to us. One of our Largest Holdings in the states we have been adding too, is gilead. Multiple in earning today, and related to things going on within their business. Health care broadly has been a big trade about regulatory risk, what will happen with the regulatory environment. Our viewpoint on that has been we do not know we do not own too much in biotech because rices might come down in the future, but it is really hard to get legislation done. Even when republicans controlled senate, congress, and the presidency, they cannot agree on legislation for health care. Inrlet so is there a Sector Health care that is safe at this point, no matter what regulation we see . No, probably not. We are try to find that but it is tough. There is some small chance that if you get enough of a backlash against republican moves to cut Insurance Coverage that the democrats take out the mantle of socialized medicine. We need to think about some small chance of socialized medicine, which would be tough for every publicly traded company in this space. We were talking about the market moves when you began talking, and rather seeing up to upper down to down, we are seeing a rotation. And we are seeing rotation of the do things like financial earlier this week. Was an eyebrow raising one. What do you make of the financials here . Do you buy into this idea that we will see a broader rotation, particularly were treasuries are concerned . This is a weird correlation in the market up till now. We like financials. We think that post the great financial crisis, the banks have gotten tighter on lending so they are much more careful about who they are lending money to, and the capitalization, all of the safety ratios look really good at the large banks. We also like the alternative investment managers, and all of those benefits best businesses businesses benefit from arising business environment. That looks pretty interesting to us. On the other side as Interest Rates have started to back up now, we have found for quite some time that a bunch of consumer staples, some things are very expensive. We have had some exposure to things like Interest Rates going up and less exposure to things that get hurt when that happens. Julia and it is a drive to be self sustainable . It seems like an the short term they will be rising, not cutting rates. Scarlet julia mentioned the overall rotation of the bonds inched to stocks into stocks. Today we see both declining and a lot of people worry about what that means. What is your read on when we see both of these Asset Classes decline . Point. Is a great it is hard to figure out what to do in those strategies . Have a balanced portfolio. We have been working on balancing our value fund across three baskets, three different types of companies to allow our stock picking to tell the story. We do not want to be making acrobat on Interest Rates, recession, or continued growth. We want a portfolio that holds up well in any of those environments, but where our individual stock taking will tell the story. Scarlet head to with treasuries, not with equities. Exactly. We think were fully a managers should be doing that as well. Julia what do you think creates a broader shape down here when we are looking at youre talking about a rising Interest Rate environment and greater sensitivity to the tech stocks and positioning in that market. Where is the achilles heel of the market . It does not seem like it will be a tweet. We have seen every tweet. I dont know. It is out there, and it is coming. We have had so many up years in a row, i manage a long short fund, and investors forget they want some protection because the market has not gone down for a very long time. We think the time to think that protection is before the market goes down rather than after, even though that is never the way the market works. It will be something. Scarlet investing overlooking while looking over your shoulder. Conner browne, thank you. Lets check on the first word news this afternoon with mark crumpton. Violence has erected in homburg, germany on the eve of the g20 summit. Police are firing Water Cannons and protesters have been throwing projectiles and running street battles as World Leaders porte in the northern city. Protest organizers call tonights planned demonstration g20, welcome to help. President and mrs. Trump are in hamburg on the eve of his first meeting with russian president Vladimir Putin. Mr. Trump is questioning the veracity of american intelligence about foreign meddling in the u. S. Election. Speaking in poland earlier today, the president said russia was not the only country who may have interfered in that, and that nobody really knows for sure. The president also said that western nations needs to stand up to the twin evils of terrorism and stifling government barack percy. Mr. Trump argued that the can prevail, but only if nations cling tightly to the bedrock values of faith, family, and freedom. The west became great not just because of paperwork and regulation, but because people were allowed to chase their dreams and pursue their destinies. Walter shop, the director of a federal ethics agency, announced that he will resign. He led the federal office of government ethics and challenged President Trump over his plans for dealing with potential business conflicts of interest. Shortly before mr. Trump took office, he had called his plan potentialsing business conflicts meaningless. The resignation will be effective july 19. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im mark crumpton, this is bloomberg. Scarlet . Scarlet thank you, mark. Coming up, we have more on the protests taking place on the streets of hamburg. This is a live shot in hamburg. Leaders convening for the g20 summit in hamburg. Well be following those for you. And whats expected for the highly anticipated first meeting between President Trump and Vladimir Putin . This is bloomberg. Is bloomberg markets, im julia chatterley. Scarlet and i am scarlet fu. Violent protests breaking out in hamburg. Youre looking at a live shot of the streets of homburg. Hamburg. We know that merkel met earlier with donald trump, but this is his first facetoface meeting with Vladimir Putin that will likely make headlines. Joining us live is matt miller, and from washington is kevin cirilli. Matt, let me start with you because as we have monitored these protests taking place on the streets of hamburg, i understand that things have turned violent and police are using Water Cannons and pepper spray. A lot of emotions there as tens of thousands of demonstrators protest on the street. Compare and contrast the emotion on the streets with what we saw between donald and Angela Merkel when they met today . It certainly was not quite as violent. Mr. Trump and mrs. Merkel meeting today. These protesters are set to destroy things, and i think you have to understand german culture of protest and the antiglobalization protesters throughout the last decade to get it. Use they intend to smash store windows and light cars a fire, but the interior minister said at about that about a thousand of these protesters 8000 of these protesters are intent on committing violent acts year. The police have been out in the streets now arresting people by the thousands. A lot of the anarchists, and there is a socalled lack block of an artist project and our guest protester anarchist protesters. The protesters are chanting all of hamburg hit the police, which is an exaggerate ishates the police, which certainly an exaggeration but encapsulates the protest quite well. Julia protests are pretty standard for g20s as well, and i want to move on to how Angela Merkel will handle the distant relationship she has to manage over the next 24 hours. The relationship has been called the axis of testosterone. What is a win here for Angela Merkel . It is quite a difficult task to call anything a win for her, because regardless of what she does, she will displease one side or the other. What she has chosen to do is focus on trying to represent the 19 countries in the g20 state and thelimate accord eu, of course. She is trying to represent germany and europes interest. Interesting to call President Trump a winner at the end of this meeting, but what she wants to do is help him save face a little, keep a bit of dignity, so she will try to keep the term Climate Change out of he communique so that doesnt have to be so isolated. Nonetheless, the u. S. Will be isolated and even russia is remaining in the paris accord. There will be agreement among almost everyone but the u. S. On that. And probably some other subjects as well when it comes to trade. There are disagreements, and of course this donald trump is in disagreement with the protesters. There is also the subject of immigration, which will be a cause of some major disagreements as well as counterterrorism. Even though trump obviously is looking to combat terrorism as well as he can, he is going to disagree with a lot of the leaders here on how exactly to do that. To sort a lot of things through there. Kevin, lets turn to you now, because one of the highly anticipated meeting fully between President Trump and Vladimir Putin of russia. Formdo we know about the in which they will be meeting . Will it be on the sidelines, formal where they will have aides and staff by their elbows . Will be done in english or give us some context here. Be done in english . Give us some context here. Thes will be done on sidelines, and the white house officials i have been talking to have been quite tightlipped about the political optics, so to speak, but every second of their interaction will be dissected, not just by American Media but also global media. And on the eve of this, hours ago, President Trump himself spoke to reporters in warsaw, poland, saying essentially that he is unsure whether or not russia had any impact or meddling into the cyber issues of the 2016 president ial election. That puts him at direct odds intelligence officials, including former department of Homeland Security secretary jeh johnson, who testified more than two weeks ago here in washington on capitol hill that it was in fact there was no question that the russians were behind and and of that cyber attack hacking into Political Institutions and most notably, democratic institutions. So the president is clearly sending another signal with odds putting him at odds with top u. S. Intelligence officials. The president s are set to meet facetoface at the first time. At whichs at a time the u. S. Republicans have almost unanimously passed a russia sanctions bill. Here in washington, the president facing pressure not just from democrats and the Intelligence Community officials, but also from republicans urging him to respond to what is really a unanimous agreement that the russians did have an impact in the 2016 president ial election. Julia it is like a tight rope walk here for donald trump, and we have not even mentioned north korea. Be ais obviously going to source of discussion between the chinese and donald trump amid rising tension there. I know donald trump is having the leaders of japan and south korea. And if you can get help from the chinese, maybe you have to organize something in the region against north korea. We have to remember that when you look at the economy of north korea, you have to look at their exporting and theyre importing. When you look at those numbers ofparticular, more than 80 both north koreas exports and imports, more than 80 , comes directly from china. That is why last week, you stop saw treasury secretary Steven Mnuchin and announcing financial sanctions against that Financial Institution in china, the bank ong. An dong dand if the u. S. Wants to get anything done on north korea economically seeping speaking, they need to go through the u. N. , as we saw with nikki haley. They really have to go through china and go through xi jinping in order to get that done. Now, you have to look at this from a military standpoint. Yes, the North Koreans did have a missile test on independence day, july 4, but hours after that the u. S. Working with south korea sent a signal of their own with a Missile Launch of their own. Julia some very valid points. What an interesting 24 hours this will be. Ray to get your insight. Thank you to matt miller and to kevin cirilli. More bloomer markets ahead. Bloomberg markets ahead. From new york, this is bloomberg. Scarlet this is bloomberg markets. Im scarlet fu. Julia and im julia chatterley. Time for look at some of the biggest business stories in the news right now. , berkshireett hathaways energy unit is pushing a deal to buy encore, one of the biggest electricity transmission errors transmission funders in the country. Nt could be as early as today. Terms have not been disclosed. And 2000 workers are plans to be hired of the next four years for a Technology Hub in north carolina. It is the second of four hubs in the United States were the indiabased company. Expect to have the first 500 workers within two years, and eventually create 10,000 jobs across the whole site. Baskinrobbins is delivering and hopefully fast. Some 600 stores are now bringing ice cream, shakes, and cakes throughout the country with an app called jordache. That is your business update. Ahead, theill commodities close, with a look at what is behind oils wild swing and what led to the Price Movement over the past few days. And as we head to the close, Energy Stocks are among the big decliners in the s p 500, and all major groups in the s p are lower. The nasdaq is also losing about 7 10 of 1 with a lighter than average volume. From new york, this is bloomberg. These days families want to be connected 24 7. Thats why at comcast were continuing to make our services more reliable than ever. Like technology that can update itself. An advanced fibernetwork infrustructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Scarlet from bloomberg World Headquarters in midtown manhattan, this is bloomberg markets. Im scarlet fu. Commodity markets are closing in new york. Gold is rising for a second day. Does not see this lasting. The firm predict gold will drop 1165 an ounce by the end of the year. Investors will face a greater opportunity cost of holding gold as the Federal Reserve drives real Interest Rates higher. And agricultural commodities, we watch red spring wheat, retreating by 6 today after jumping more than 37 this year because of a drought that is showing signs of damaging the harvest. Finally, a check on oil which is holding on to its gains but barely. Welloff the highs of the session. Crudernment report showed inventory falling to their lowest level since january, that sparked the rally today. If you look at it over the last two trading days, oil off i more than 3 , trading below 46 a barrel. Tesla shares are falling for a Third Straight day, a tumble triggered by disappointing secondquarter deliveries and the failure of the model s to win a top safety designation. Forging muster, he says the company has the change potential to change the world over the next 10 years. Compare the tesla model three to the apple iphone. The iphone really set the stage for what smartphones could ultimately be. I think the model 3 has the same opportunity, not just for electric vehicles, but for the opportunity around autonomy. If you think about cars today, think about horses walking on the road. That is essentially what todays typical technology is. This is a radical change, similar to the iphone, when we went from a phone to a smart phone. That is the loose analogy for the model three and the iphone. Good distinction of tesla being a technology company, versus a car company. Has the market made a distinction yet . I dont think so. I still talked to a lot of investors and they really think about the market cap at tesla relative to other automotive companies. Company vision is to accelerate the globes adoption to her noble energy. They even have a master plan even bigger than automotive. That has not set in the mind of investors. Understood where tesla is going to, all the negative news this week, i think, would not have the impact that it has had on shares. A lot of misinformation on the company. One is the cash burn and the other is this idea negative margins. Can you give me the actual numbers . A about a 4 ave operating margin this year. If you look at the street models over the next years, that should gravitate to just about 1 . So they are not making a ton of money here, and that the general concern from investors. Ultimately, they will need to go back to the markets. As the opportunity for the margins longerterm, since we view this more as a technology company, the canonents we think this have a 20 operating margin, much higher than where the street is that at 1 . This gets to one of the other key misunderstandings about the company, what the longer term profitability is. More like an Electronics Company than Automotive Company in terms of profitability. Tesla moses money on every vehicle itself right now. As it sells more, does it lose less money per vehicle or more . Less money per vehicle. You will essentially get leverage in the production. This is one of the negatives that hit this week, production numbers were at the low end of the range, so it begs investors concern about what they can ramp. We believe they will be successful in renting the model three, talking about 500,000 annual shipments in the next three years. Question, as they scale, the model three production, they will start to be profitable on each car. Was a gene munster speaking on bloomberg today. For more on the future of the electric car industry, we are joined by analyst colin the character. His team is out with the latest forecast on the industry which is calling for a dramatic shift to electric cars in the next decade. He joins us from london. What are you looking for by the year 2030 . What we are looking at now is this potent bevy of policy, technology, and economics pushing us toward an electronic vehicle future. On the policy side, you have tightening fuel economy regulations, aggressive targets out of china. On the Technology Side you have falling battery costs, down 73 in the last five years. That will continue. On the economic side, that will push electronic vehicles into cost competitiveness somewhere around 2025 and 2029. Littled us to say, a over 50 of all passenger vehicle sales being electric 2040. 0 by julia jean was talking about the tesla model three and said it is only 13 more expensive over five years from a toyota camry. I wonder where we get to the break mode break even moment what you look at the relative costs of a Combustion Engine and say actually its equal. How long does that take . That generally comes before the crossover point i was talking about, that is the upfront cost. Generally one and three years earlier, depending on the country specifics Committee Energy costs in those countries, it does come a little sooner on a total cost of ownership basis, but consumers do not always look at total cost of ownership. It is something they factor in but upfront Sticker Price matters more. That is why we focused a lot on that in this years analysis. If we have a third of the global auto fleet by 2040 being electric cars, what does that mean for oil . I know you have said a while back that you thought it would be around 30 Million Barrels a day, and now eight. A big number, and why the ship lower . The shift lower, this year, we did a much more indepth analysis of autonomous driving and car sharing and ride hailing. Last years forecast we had really aggressive assumptions. Now we have checked those assumptions a little bit. Autonomous driving does not really start to impact the global fleet, a billion vehicles you have to move, until about 2030 and beyond. A 13 millionwe had barrels a day figure, we thought it may come in sooner. We think there are still a lot and businessegal model considerations that have to be ironed out for autonomy to have a widespread impact. Car sharing ride hailing start to take up sooner and they already are, so we see progress on that coming in the 20 20s. It could still happen faster than that, but we still think there are some bears toward widespread all weather fully autonomous driving. Julia for the viewers, when you talk about displacing eight mirren barrels a day, as a comparison, the saudis export 7 million a day. Julia some sobering numbers for the oilproducing majors. Scarlet as we look at the winners and losers here, im looking at a chart on the bloomberg. Tesla was briefly the most valuable carmaker by market cap that lost the crowd recently. In purple,below bmw General Motors in yellow. The early adopters with a electric vehicles will stay in the lead and end as winners . I think there is interesting race going on now. Some of the Early Company that jump out to a lead like tesla, the best example, there is a race going on. They are trying to get really good at mass manufacturing vehicles with very low defect rates. The big automakers of the world are already good at that part but they are trying to catch up cool and to make ev accelerate their understanding of battery technologies, which tesla has a lead on. I think that is the race. Can tesla get there faster on mass adoption, or can the large oems get there faster on making evs cool and battery pack design. Ultimately, i think you need a large auto manufacturers onboard to get the kind of scale we are talking about in that report. Fromirst 15 you can get some of the early leaders, but you need the Big Companies on board to get real mass adoption. We have to wrap it up, but thank you. Fascinating report, well worth the read. Tomorrow, Morgan Stanley global head of Auto Research adam jonas will join us to discuss his Investment Opportunities related to autonomous cars. I always wonder, the charging units. Scarlet there is that problem. Julia whether those will move at the same speed as the carmakers. They will need to incorporate that into their thinking. Lets get a check on the first word news with mark crumpton. Defense secretary james mattis says investigators are still scrutinizing details of north koreas intercontinental ballistic Missile Launch. He says every missile test conducted north of the Korean Peninsula revives additional information. Secretary mattis says the pentagon was not taken by surprise when north korea fired the missile on july 4. He said the u. S. Was aware as soon as it was launched. Trump is encouraging Eastern European nations to buy u. S. Gas. Speaking in poland today, mr. Trump said the United States will never use energy to coerce your nations. That was a reference to russia who has sometimes stopped shipments overpricing disputes. Poland received its first shipment of american liquefied natural gas last month. The Justice Department is questioning whether some socalled actuary cities are responding honestly when asked whether they follow the law on sharing the immigration status of residence. Attorney general Jeff Sessions says the department is reviewing responses from 10 jurisdictions that are phasing the loss of federal grant money if they cannot prove they cooperate with federal immigration authorities. Global warming might be speeding up, that is the conclusion of two climate scientists at harvard. The Research Published this week predicts that as more time passes, regions wants less affected by Global Warming will get hotter. They say that will accelerate the overall rate of warming across the planet. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Coming up, Liberty Media chairman john malone is putting qvc and hsn under one roof. Details of his latest deal as he tries to compete with the likes of amazon and walmart. From new york, this is bloomberg. Julia this is bloomberg markets. Im julia chatterley. Scarlet im scarlet fu. We want to go to Abigail Doolittle for a market check in. Looking at u. S. Stocks, treasuries, european government bonds falling. That is having a knock on effect on a lot of Interest Rate sensitive sectors. Abigail that is one of the sectors we are looking at right now. Etf,ng at the real estate down 1. 5 , its worst day, on pace for its worst day since december of last year. You were talking about the selloff in bonds. When bond yields are higher, it makes the dividends of these high dividend stocks look a lot less attractive. That is what we are seeing happen today. Some fundamental causes when we look at the apartment reit stocks, big declines. Ubs downgraded Equity Residential and midamerica apartment communities to neutral from buy saying supply fears remain. The Second Quarter could come in a little less strong than expected. They reported the end of the month. Weakness for mall reiremaints. Down sharply for the year. Down 14 , on pace for its worst year since 2008, around the time of the financial crisis and lots of individual mall reits trading down, too. We have a chart that example buys all of this well. A oneyear chart. In blue we have the s p 500 up 15 . Done below we have the reits down anywhere between five and 15 . Amazon in white, up 15 . Investors fear that amazons dominance is hurting those mall dynamics. Julia thank you. It is merger thursday. John malones liberty qvc is , the amountf hsn that it already does not own. The director of north American Research paul sweeney joins us from princeton for more on the deal. Explain to us what is going on with the deal. I look at the numbers and it is creating the thirdlargest Ecommerce Company in the United States. Aul this is really an defensive move by john malone and liberty to consolidate its two Home Shopping companies, the two dominant players in that side of the retail business. As ecommerce has grown, as cord cutting has reduced the pay tv households that typically watch the Home Shopping networks and qvc, these dynamics have created a challenging environment for these networks. Sales growthn slowed dramatically over the last several years. What we are seeing here is john malone the saying lets bring these companies together, lets create some scale on Home Shopping side of the business, so we can perhaps compete better with some of the ecommerce sites like amazon and walmart, and we can reinvest more into the ecommerce side of their business. Scarlet i like how you put it, a defensive move because of the cord cutting environment. Having said that, how do ages and and qvc, which will operate as distinct brands, hound will they go on the offensive, what can they do to bring about growth . Cut a lott, they will of the overlapping cost they have in operating two Home Shopping networks. This could be up to 100 million a year. They will take those savings and we invest into the ecommerce side of the business. Putting these companies together, about 50 of their sales come from ecommerce, so they are already a major player. A distant third behind amazon and walmart, but they are player. I think they believe by taking some of the cost savings from the tv business and reinvesting into the overthetop that forms , they can be a more competitive player in the marketplace. I think they believe theyve have brand value in the Home Shopping brand, but i think they need to migrate those more to the ecommerce platforms. Julia the timing fits for many reasons, structural reasons you described, paul. I want to talk about the price. We have a great chart that shows the divergence between what you can see in qvc after some recent , versus in the orange what we have with hsn, in the white. That divergence shirley played a role in the price that qvc was able to buy with. It created a nice opportunity in the last couple of months for this all stock deal, the type of deals that malone and liberty like to pursue. Still pay ahem to big premium for hsn shareholders come a to entice them to do the deal, but when you think about it, this will be a creative when you think about the cost to qvc. , accretive there are synergies here to be had. The Liberty Media Management Company has a great track record of getting synergies. Retail platform that can compete in a world where amazon seems to be taking over the retail space . Can be aet that they player here, and investors at this point are willing to give malone and liberty the benefit of the doubt. Sense at a 29 premium. Hsn shares losing nearly 9 this year, so maybe cheaper than it may have been. Paul sweeney, thank you. Still to come, double lines Jeff Gundlach making new statements about the bond the wipeout hitting investors. We will be discussing the details next. From new york, this is bloomberg. Julia this is bloomberg markets. Im julia chatterley. Scarlet im scarlet fu. It has been a rough day in the last couple for bonds. It started in europe with a weak auction for french debt. It quickly spread to the u. S. The yield on a 30year breaching its 50 and 200day moving averages. Now you have Jeff Gundlach saying the bond wipeout may be just beginning. Joining us from los angeles is john gittelsohn. Tell us more about what Jeff Gundlach has been saying. He is not predicting the 10 year could move to 3 by the years end . John yes, by year end, it could move toward 3 . He didnt say it would get there necessarily but to war 3 . Definitively3 is bond bear territory. He predicted the bottom of the market would have been a year forwhen 10year was trading 1. 2 , 1. 3 . Theyhave been climbing, have had their ups and downs, as the chart shows. Now it seems like there may be a breakout printer where they will resume their proper trajectory. Julia it seems this began with the european markets, but we got with that stumble from mario draghi, seemingly confirmed by what we got today in the ecb minutes, cautiousness about what they do about the asset purchase program. Did he give you a sense of what the drivers here are in terms of a greater spillover for these markets . Is the u. S. On its own . Did say the problem is there is a diverted between the u. S. And european rates. If you look at how europe has grown, how the u. S. Economy has grown, the projections for where europe is going and where the u. S. Is going, they are very parallel. Reflect whenshould you can earn above economic is,th, so the problem european rates are very, very low, and u. S. Rates have been relatively low. Somewhere they have to get together. I dont understand all the forces at work but there is basically a diverted between the u. S. And europe which would close because of the path of growth of both of their economies. Scarlet there are a lot of Technical Levels at work here that he is a pain tension to. We mentioned the 50 and 200day moving average. What else did he tell us . John it was just a short couple of email exchanges but one thing he wanted to make clear is that he predicted a year ago bond rates had bottomed longterm, that we are going to be climbing, and that this continues. While there have been ups and downs, u. S. Rates are headed up in the 3 direction. I wouldnt say there is no stopping them now, that is where they are going. Julia we shall see. John time will tell. Julia because back to the point that all of these investors have been using bonds as a hedge for equities. Scarlet in the risk parity trade. Julia now they are losing money and equities are falling. Scarlet then people had to sell their longer dated bonds, which feeds on itself. Julia i wonder when this will all retrace and we will be eating our words. The junead of employment report, we go deep inside the job skills get. From new york, this is bloomberg. In new york,3 00 12 00 in london. Im julia chatterley. Scarlet im scarlet fu. Welcome to bloomberg markets. Julia we are live in bloomberg World Headquarters over the next hour. Here are the top stories we are covering on the bloomberg and around the world. The u. S. Labor market coming into view ahead of the june jobs report expected tomorrow. As hiring has slowed, we will tell you why the skills gap could be to blame. Global politics taking a violent turn in hamburg. Thousands of protesters take to the streets ahead of President Trumps key meeting with Vladimir Putin at the g 20 summit. Not relations with russia the only concern at the g20. Eurasia Group President ian bremmer based on the role of north koreas role in talks with china. One hour from the close of trading, lets get a check on markets with Abigail Doolittle. Bonds and equities are down. Abigail we are certainly seeing solid selling pressure here for the major averages in the u. S. , dow, s p, nasdaq down half a percent, on pace for their worst day since last thursday. The nasdaq down the most. Technology is not the worst sector. Lets take a look at the group returned function. A few points here. Tech, even though it is dragging on the nasdaq and s p 500, right in the middle of the pack. At the bottom, real estate and telecom. Yields are higher which put pressure on these Interest Rate stocks. Look at the worst point drags for the s p 500 today, a mixed bag. Aseral electric down 4 jpmorgan has cut its price target to 22, maintaining the underweight rating. They are not happy about the ceo change happening unexpectedly early. They suggest fundamentals are less strong as suggested. Those shares clearly under some pressure. Apple is down as the tech pullback continues. At t, verizon, the high dividend stocks underperforming today. This is when the fed raised rates. Some are considering this to be a hawkish view. Quickly back into the bloomberg. The 10 year yield in a range from the election last year, out of it for a little, and then now back between 2. 3 and 2. 6 . The question is whether it will stay in that range or if we see a dip back down. Technical suggest the latter. Scarlet although Jeff Gundlach would argue that it could go to war 3 by the end of the year. Thank you. When it comes to the economy, hiring has slowed down in recent months. Theres a lot of talk about companys inability to find workers with the right skills. It is not just a hightech story. On the eve of the june nonfarm payrolls data, Michael Mckee joins us from cambridge, massachusetts with more on this socalled skills gap. The forecast is the government will report tomorrow a net 177,000 people got new jobs in june. But that number could be a lot higher. Take a look at this chart. Hiring in the United States is lagging, but job openings are at record levels. Why is that . Theres a big debate. Employers in many places argue there is a skills gap, workers who lose their jobs in, say, factories dont have the qualifications to move directly into the tech industry. There is a skills gap and a supply and demand component as well. I. T. , a lot of the biosciences, high demand, and its a combination of not enough supply. In some courses, not enough capacity in the domestic skill set. So we go into the whole talent access question, which is a talent pipeline. Our u. S. Stem education still needs to catch up to where our peers around the globe are. That contributes to the skills gap. Mike others say the skills gap is more myth than reality. Take a look at this chart. What you see is total average Hourly Earnings for everybody plotted against earnings in the tech sector. For the last two years, the levels are about the same but the rate of growth the levels are different, but the rate is about the same. If there was a skills gap, shouldnt tech earnings be rising faster, they say . A lot of the ceos we talked to say its beginning to happen here. One company we know of offering a 10,000 furled bonus for successful applicants. It will be interesting to see if any of that starts to spill over into average Hourly Earnings for workers nationwide. Julia lets say there is a skills gap. What can be done, what is the government doing, is there an that potential employees are not meeting, even if the skills are there . A bit of both underweight. You have some people who have skills perhaps live in the wrong place. You are seeing two trends. Some people moving but not as many as we are used to in the u. S. You see Company Moving toward them because they cannot find the workers anywhere else. Happening,hing Training Programs are being reevaluated. There has been one put into place to help people that have lost their job due to foreign trade, its been hard to get into and unsuccessful, members of Congress Talking about changing that. Ceos, they to tech say start at the bottom, revamp the Education System so that more people, prepared for the work field of the future. Scarlet the other thing is that not Everyone Needs to go to college to gain those skills. What are you hearing about Higher Education and what they can do to better repair graduates . Cambridge is home to harvard, m. I. T. , obviously. A real problemto of hiring tech workers, even with all these worldclass universities. The universities are teaching old things, is what the tech people tell us. A lot of those people came out of the 1990s tech boom, and now everything has changed. Additional,ike some new curricula here at the universities. Every company they say is a Software Company now, every company has software programs. We should be teaching people some software and coding skills that more people canter can participate. Julia we are too late. What about the impacts of technology and automation, whether or not companies dont need to replace people if they have not got the skills, they find better, technological ways to do it. Mike more and more people are seeing that happen. One of the people here at m. I. T. , one of the economics professors, just did a study that showed for every robot, six humans lose a job and wages go down by about three quarters of a percentage point. I asked if he was pessimistic and he said yes. Over the short run, we may see a lost generation of workers cannot keep up. But in the long run, jobs will be created that we had not thought up yet. He goes back to the automakers. The buggy whips and carriage makers went out of business but we ended up with muffler shops and other things that people were not thinking of at the turn of the 1900s. Scarlet in a brave new world, Michael Mckee. Of course, we will get inside and reaction to the jobs report from that hyman, the chairman that ever core isi. We have some breaking news right now about a rare disease pharmaceutical maker. The company says it is under investigation by the u. S. Department of health and Human Services actually, the agency is saying this in a letter thursday responding to a public records request. It has an Ongoing Investigation into alexion. It did not say what the investigation was about or if other agencies were involved. Investors are punishing the stock, down almost 4 . We will keep you posted on that. To the bond turn markets, where the yield on the german bond is hitting the highest level since january of 2016. We demand for french debt. The selloff today, shall we say. Take a look at the bloomberg. I am showing you the breakout of levels we have seen in 2017. 56 basis points, the yield on the german 10year. Not only week concerning the auction this morning but we also have the European Central bank minutes. Last week, mario draghi precipitated this move higher in european bond yields. Then we saw followthrough in the u. S. When he suggested the european economy perhaps was on better footing. Was these minutes showed there was some discussion, some concern about tapering, tampering with the language in the asset purchase program. The fear was a greater than anticipated response in the market. Here we are. Scarlet shows you how sensitive the bond market is right now. Speaking of minutes, the fed minutes came out yesterday. Matthey basel are combed through those. One thing he found, fed officials are once again feeling relatively pessimistic about the inflation outlook here at home. The number of officials who view the risk of inflation as we did to the downside has shifted to three from one in march. The number who see inflation risks to the outside has been cut in half to two. 11 remaining officials see inflation as being broadly balanced. The net result is this is a huge change from december and march projections which showed more policymakers judged risk tilted to the upside and to the downside. We have not seen this since 2012. It is a huge shift, and we talk about cell phone plans as perhaps being one reason why Inflation Expectations have changed, oil prices, the fluctuations, dramatic savings we have seen there. The fed says it is transitory but there is no evidence it will be. Julia the next data point for them, payrolls tomorrow. And then of course a Monetary Policy report to congress as well. And then janet yellen is testifying before Congress Next week. Julia Stanley Fischer speaking tonight. Youlet meantime, lets get a headline of the nonmarket headlines. Mark crumpton. Mark on the eve of the g20 summit in germany, police and protesters have been battling in the streets of hamburg. Germany secondbiggest city has seen a Massive Police presence with reinforcements brought in from around the country. An estimated 100,000 protesters were expected. The Associated Press cites authorities who say that some of the number includes people considered to be part of europes violent leftwing faction. President trump hasnt ignored that russia meddled in last years election. The president spoke at a News Conference in warsaw. Mystics have been made. I agree, i think it was russia, but i think it was probably other people and or countries, and i see nothing wrong with that statement. Nobody really knows. Nobody really knows for sure. Mark President Trump says president obama was told about russian interference last year but did nothing about it. South korean jets and navy ships fired a barrage of guided missiles into the ocean during drills today, a display of military power days after north korea testfired its first intercontinental ballistic missile. The norths icbm launch has increased security worries in seoul and washington. Leaders from the European Union and japan have reached an agreement in principle on free trade. They have given their approval to an accord that would of the terrace between the two partners. The eu is trying to counter President Trumps protectionist stance on his second trip to europe. Thet is a statement about future of open and fair trade in todays world. It sets the standard for others, and it shows that closing ourselves off to the world is not good for business, nor for the global economy, nor for workers. Mark the eu aims to have a deal in effect are the spring of 2019. Global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. Im mark crumpton. This is bloomberg. Up, we will hear what wto director generals say about solving trade disputes at the g20 summit. That is next. This is bloomberg. Scarlet this is bloomberg markets. Im scarlet fu. Julia im julia chatterley. Time for the Bloomberg Business flash, a look at some of the biggest business stories in the news right now. Costco shares are up today after reporting june sales far outpaced expectations. According to analysts, the membership model and fees which make up 75 of annual profits, show the retailer can coexist with competitors like walmart and amazon. Some 3000is cutting jobs mostly in sales and outside the u. S. Global news 24 hours a cloud software. A Company Spokesperson said workers were being notified today. Recruiting business is booming, tripling to 22 billion in 2016 from seven years ago. This according to american starting association estimates. A 16 year low on employment rates and record high job openings has workers changing jobs more and therefore benefiting. According to the Federal Reserve of atlanta, job switches with salaries were 4 higher within a year. That is your business flash update. Scarlet trade will be a big flash point at the g20 summit this week. Earlier this week, we spoke with the director general of the world trade organization. They asked what would be a conflict at the g20 summit this week. The first thing to bear in mind, this will probably be the first opportunity that all of these leaders have two really have a conversation about their concerns, problems, face to face, and more than a oneonone kind of environment. That is a good opportunity. Right now, when we need is to talk, to listen to each other. There are many concerns, we cannot just ignore and say the other concerns are unreasonable. We all have to understand and figure out solutions. That is the value added of this meeting. Responsibility is to monitor and promote global trade. Give us your report card on where we stand globally. We have heard some things out of the trump administration, not the only place we have heard talk about reducing some trade. Think the trade evolves global problems. For example, the overcapacity in steel production. For example, concerns about distortions, subsidies we are introducing into the economies. All of these are very global. The only way to fix a global problem is to talk with the major players, everyone sitting around the table. Of course, ace face to face decision bilaterally is important, and we have to ignore all avenues because those concerns we have are not easy to fix. I think thats something we have to bear in mind. Concerns about your organization, the president has her first to it as a disaster. What would you say to people who say that about the organization you represent . I have already had a few , we havewith the u. S. Excellent conversations. They had some concerns about the organization. They are concerned, for example, about certain limits imposed by the rules to go she did before. We have to understand a little bit more about what they expect from the organization, how the organization can help those. Many of the things i hear the u. S. Administration saying, there are tools in the wto toolbox that can be used to solve the problems in a constructive way. I think we need to explore that more. Scarlet that was roberto azevedo, the director general of the wto. Julia still ahead, options insight. How to trade one energy focus etf. From new york, this is bloomberg. Julia this is bloomberg markets. Im julia chatterley. Scarlet im scarlet fu. It is time for options insight with Abigail Doolittle. Abigail joining me today is dan deming from kkm financial. He joined me from chicago. Down once again, worst pullback since last thursday, nearing session lows. I want to bring up the nasdaq. Last week we saw that pullback continue into july. The nasdaq had its first down month in eight. Is this the beginning of a trend shift . I think it definitely is the beginning of a trend check. Overseas what led to the catalyst of the selling pressure today was the fact that overseas in europe we had some weakness. You are seeing those mere averages break below their 100day moving averages. You have the nasdaq also breaking down. We are starting to lose some leadership and that is also a trend check when you look at these major averages. Abigail maybe some more bearish trading ahead. Bonds are selling off since the fed raised rates in june. That has some the Financial Sector but today we have yields trading higher, not helping the Financial Sector. What is going on with all the rotations you are watching . Dan it did initially, but you are right, the Financial Sector is starting to get caught up in the selling pressure we are seeing across the major sectors. We have also seeing a significant runup in the Financial Sector as well. I think its a culmination of the fact that we are seeing the bond market continue to move in a positive direction, but they have had a significant premium priced in going into this move. Relative to earnings season, how does that factor in coming up . I think it will be a big factor, we will start rolling out index couple of weeks. Expectations are they will continue this path of meeting or beating expectations. I think that will be significant in the second half of the year. You are seeing now many analysts begin to question valuations and if this market can continue to hold these levels even we are seeing some slowness in the areas, particularly looking at the nasdaq. Abigail i know youve been watching the advanced decliners, possibly a bearish, supporting everything youre talking about. Can you take us through that quickly . Dan that is kind of the breath of the market. It gives you a Broad Spectrum of the what is going on underneath the surface of the market. Today was significantly bearish. If we see that trend continued, that will pick up the momentum in some of those stocks and could certainly lead to a contagion across all of the sectors and lead us lower, particularly when we are losing the leadership in the nasdaq. To your lets get trade, energy, the were sector of the year. What is your trade . Dan xle, a bearish put spread. When you look at the xle, below its 200day moving average for the last six months, oil trending lower, even off the heels of the reserve number. Oil came under some selling pressure this afternoon and we are seeing the xle trade lower as well. When you look at the lower highs and lower lows below the two forday moving average good stuff, we have to leave it there. Some bearish views. You so much. Still ahead, World Leaders are gearing up to hash out their differences. Eurasia Group Resident ian bremmer joins us to talk about his expectations for g20, or g zero, in his words. And then we have the meeting between trump and putin. This is bloomberg. So we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Mark im mark crumpton. Ime for first word news in germany, Angela Merkel met with the south korean president moon jaein. The 2 discussed how divorce kim jongun how to force kim jonguns regime to change its behavior. The point isrkel that north korea continues the Nuclear Weapons program and that we talked about how to react best and uphold pressure on the north korean regime. Says thesident moon crisis should be resolved in a peaceful way. President trump says he is considering what he calls pretty severe things to do regarding north korea, and while in warsaw, the president accused pyongyang of acting in a dangerous manner, but that he does not drop a lines, unlike president obama regarding syria. Several states are joining a legal fight against a widely used pesticide. The states are suing the Environmental Protection agencys
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