Mark. Pressure is being put on the gulf markets. The oil decline in china woes also hitting emerging market currencies. The russian ruble nears a 2015 low despite efforts from the governments stemming its fall. Hi, everybody. Good morning. Glad that youre joining us today. You would have seen on squawk box that we opened in substantially lower territory. Three minutes into trade this morning and many of our European Equity markets off somewhere in the region of 3 to 4 . The selling continuing today. A lot of nervousness back in the markets despite the fact that were looking at an august lightly quit at this season. Supposedly we saw the most volume of the year on fridays close with all of our indexes in severe negative territory on fridays session. Over the weekend, a lot of people, they were assuming that the pboc in china, that they might do something to stabilize their markets there. They might inject more liquidity, cut the rates. They didnt. Some of what we were seeing this morning is they were hoping for some kind of china move. Whether or not thats the case, whether or not its all down to china. Well be discussing that within the next two hours. The stocks at 600. Lower than 3 on the screen. Weve been open for around an hours time in europe. This is what were looking at so far. All of our sectors trading in negative territory. Off by 5 . Bearing the brunt of the nervousness with exposure to china being the worlds second largest economy, the Worlds Largest metals consumer, thats a worry. People selling out of basic resources. Oil and gas off by about 3 . The big move in wti remember after our session, we saw that dip below 40 a barrel. We havent seen that for quite some time. So all of our sectors negative territory. The best performing sectors off by 2 1 2 . Quite a lot of selling this morning as said. Lets move on. Lets show you the stoxx 50. This is a one week chart. This move to the down side. Real correction territory is what were looking at. Many stocks towards bear market territory. Correction territory when youre seeing an index or stock move, seeing a 10 move to the down side, thats what were seeing here in a lot of the main European Equity markets. The ftse off by 2 1 2 , the dax, the cac 40 off by 2 1 3 and the ftse off by 2 1 2 now. When it comes to commodities, always helpful to see what the Commodity Prices are doing especially given the selling that were seeing in some of these commodity led products. Wti crude off by some 3 , 39. 34. As i said, below the 450 a barrel. Brent crude is off by 2 1 2 . Spot gold saw an astounding run, a push to the up side. We havent seen that for a long time. Rejigging to be selling lower by. 2 of a percent. Well talk about whether the safe havens exist or whether or not well get one of these, throwing the baby out with the bath water scenarios. So, seema, a lot of red on our screens this morning. Were going to be very market focused today. Absolutely. It was an ugly session in asia. The shanghai composite closing down 8 1 2 . Its biggest one day percentage fall since february of 2007. This after beijing failed to deliver a widely expected rate cut. Instead, authorities move to allow Pension Funds to invest in the stock market for the first time ever. Lets get the word with the slatest on todays trading action. Good morning to you. A black monday is how theyre calling it. This isnt me whos calling this phrase. This is official Chinese State media. That give you an idea how ominous this selloff is. Im looking through the perspective of the shanghai composite. This is red for 2015. Great china markets are all now officially in a bear market. As you quite rightly pointed out, it was the absence of any policy support over the weekend that really disappointed the market. So it begs the question, at what point is this going to capitalize a policy response, what form will it take . The sense that i am getting is that we cannot see an ordinary response from the authorities. It has to be something extra ordinary. There is a sense, louisa, this is going to be a defining moment, a real test for the pboc. We need to see shock and awe. We need to see a draghi moment. We have seen no shortage of intervention to stabilize the stock market as well, but theres been quite a lot of misallocation of skap tall. If you talk about the rrr, for instance, it has to be focused and benefit the smes for it to really have a beneficial effect in the real economy. I wanted to flip the boards and show you the fallout in the currencies as well. It wasnt a pretty picture. Especially those currencies linked into the chinese dollar. Aussie dollar got hammered. I keep going on about this, the malaysian money is bearing the brunt. Were down by 1. 5 . This is where it stands right now. The other factor here is that the Central Banks for its reserves are dwindling. If we drop to around 50 billion u. S. Dollars in reserves, that is the real crisis level. At that level, louisa and seema, back in the 90s that is when malaysia imposed capital controls. Very deeply negative picture here. The ball is firmly in the court of the pboc of the Central Banks. Thats where we stand now. Back to you. Sri, good to see you. Back to you. Joining us with the latest out of asia where, again, a lot of selling has been taking place as he was saying. Glancing at the futures, the u. S. Futures and what were seeing. Were being called negatively substanti substantially lower. The nasdaq called off 132 points, 133 points. Implied open, s p 500 down. Dan, good to see you this morning. Good to see you. First of all, i want to start with the point that sri was making. He said, some people are calling on china to come in with big decisive moods, whether they cut rates, come in with stimulus, this needs to happen to stabilize markets. Theyve done it in the past. They should do it again. Should they . I think its possible that theyll make a move. Whether it will be quick enough remains to be seen. Theres still enough fuel in the ammo box for the pboc. The americans and the European Union have already done everything they can do. We should remain confident about what can be done in china. It may be a comment from china, the ecb or the fed that triggers a turn around. If you got a sense the Interest Rate hike was being put off, that would improve sentiment in the markets. A precipitous fall, the shenzhen comp down 7 . What else can they do to stimulate the economy. We saw them move and it doesnt seem to impact the exports yet. On the banking side, do you think a rrr cut could improve the lending side . Does the money go where you want it to go . Hopefully the allocation of capitol will get a little bit more efficient. Its a good point you made of the currency. The interpretation the markets have had about the devaluation of the yuan has spooked a lot of people, its been a big change, but its a good thing. You have an appreciation of the yuan. If the chinese a 00 economy is slowing, were allowing that to happen. We should be encouraged by the devaluation. Is this really about china . The correction today, it happened 2 weeks ago. It brought the devaluation to 3 , Something Like that. I look at whats going on, the china story, were used to these numbers, whether theyre 6 , 7 , maybe 5 1 2 . Does it make that much of a difference to us . I think youre right. Im trying to find the exact cause in terms of whatever you might see for correction is tricky. The point to keep in mind is we know were in an environment with heightened volatility. Whatever the cause may be is not necessarily unimportant but you should know thats going to happen. Were not so surprised. I think the point to keep in mind is we dont see this as a fundamental change. We will have a turn around. We dont see a bear market in equities. Were beyond 10 now. You dont see 20 . No. No. We certainly recovery. Think back to what fundamentally drives stock prices. Corporate earnings. Gth dp develops markets. Developed market Economic Growth is still solid. 3 in the revision for u. S. Gdp, those are good numbers. That will translate into corporate profit. Its nerve racking to watch 1 billion vanish in two days. Does this signal to us investors are okay booking profits sitting on the sidelines while the fed policy and the china market works out . Were near that point. You dont want to be early trying to call when the market volume is going to come. Were seeing a turn around with people with big profits who have better valuations across the board. It is a time to sit back, look at where do you see the growth, what are the relative valuations and i think moving into those markets when you do see corrections of this size . Where would you put the money . Is it gold . Gold hit a sixweek high and today not getting too much love. I think its going to be again focused on developed versus emerging. Ee emergencying look much more attractive but there are more head winds ahead. Maybe a little early for emerging markets but developed, solid growth. Better valuations than we had a couple of weeks ago. Europe still looks good. I think its a matter of checking the equity allocations. You were with us here for the start of the beginning from the start of the show, so by all means get involved in the conversation. Send your emails through dan worldwide cnbc. Com. Find myself on twitter. Good to see you. Good to see you. Good to have you back on the show. I hope its not an omen. Not at all. The bond markets, weve been seeing a little bit of buying in some of these safe havens. Seema mentioning some of these safe haven, quote unquote, trades. U. S. Youre seeing some buying, germany. A yield below 6. 7 . A bit of buying there. Incidentally i was checking a while ago that were seeing some selling taking place in the periphery market bonds. Italy in that portion with a yield of right around 1. 8 . Periphery selling. The fx, it was interesting, hello, euro dollar, back up at 1. 1485. Significant moves weve seen. Where were we on friday . Under 1. 10 . Something like that. Massive jump on friday. Further here in todays trade as well. Dollar yen a bit lower. Aussie dollar against the dollar is off. A big market show coming up. Fixing up financials. We delve into the world of distress assets with j. C. Flowers as opportunity blossoms. Plus, recasting podcasting. Were going to speak to a swedish startup about the revival of podcasts and its revenue potential. Were getting away with murder. Find out how donald trump is going to crack down on hedge funds. Dont go away. Welcome back. The dow dropping 520 points in the session on friday. Its the biggest oneday decline in four years. The dow is now in correction territory along with the nasdaq and the small cap index. The russell 2000. Meanwhile, the vix had its biggest week ever up to 11990. Some other market facts that were going to toss out to you. Friday was the biggest volume day of 2015 with 10. 5 million shares traded. Dow components lost 338 billion of market cap last week. Thats roughly equal to exxon mobil, Berkshire Hathaway or microsoft. Ten dow stocks are in bear market territory which means 20 below their recent highs while 12 stocks are in correction. Now after last weeks market route investors are wondering whether the economy is Strong Enough to withstand a near term fed hike. Senior economic reporter steve leaseman looks at the issues at play. The two that the fed says are job growth and some improvement in job market and the second one being confidence inflation is moving back to 2 but the third one is a little diceyer, which is this issue of can the u. S. Economy withstand at the moment a normalization process . As you know, what markets do is they discount future events. What theyll do is bring future Interest Rate hikes forward into todays reality. So the fed is not gauging the u. S. Economy based on the single quarter point. If that were it, they would do it. If markets didnt look at the future, that wouldnt be a problem. We both know thats not how it works. The yield change will change and the hikes will be higher than the fed wants. The concept of can the u. S. Economy withstand normization, thats what theyre waiting for. Larry summers said liftoff in september would be, quote, serious error. In an op ed for the Financial Times he cautioned against hiking rates before 2016. Summers says tightening in the near future would push down future rates and would impact employment levels. Daniel with us still. There is mounting speculation that the recent market turmoil will push the feds rate hike to december or 2016. What are your thoughts . Think about the different conversations that the fed has. On one hand with growth in the u. S. Solid but not so high above 3 that they need to hike for that reason to start on growth. That would suggest that they could hold off. Inflationary problems lower because of the falling dollar. One of the criticisms with the lower rates was it was starting asset flows. They were chasing higher yield. Thats not so much a problem anymore with retentions weve seen out of those types of funds. It does suggest they can probably afford to wait. I think theyd rather be a little bit late than a little bit early. If the fed waits until december or early 2016 because of market volatility, doesnt that actually tell us the central bank is not data dependent . Theyre keeping into account these external factors . I think the one data point that would change this calculation is anything on Wage Inflation. If we do get this 3. 2 print for u. S. G. D. P. , thats stronger than weve had. Unemployment coming down. If we saw anything indicating Wage Inflation was starting to pick up that might override eight lot of these considerations. Thats the other thing they have to keep in mind besides gdp growth. When do you see inflation rates changing . Many say the central bank is not going to hit the target of 2 . Certainly on the headline inflation number. Its what the pass through is into overall core inflation is not quite so clear. Core numbers most recent was 1. 8 for core cpi. Dont know that whats happening with oil is going to feed through to that. Get back to 2 . If we get to 2 inflation thats not a place where the fed needs to raise rates. As you point out, a big part of the inflation picture is oil. Wti crude below 40. What is the main catalyst behind the drop in oil prices . Is it china or the u. S. Dollar . A lot of it is over supply relative to aggregate demand. Better numbers out of the u. S. , its not as strong as some hoped. Were not likely to get to a 3 run rate which was the initial consensus. Europe clearly not as robust as it was. You dont have quite as much demand as you expected. You have a lot of oil being produced by saudi arabia. We have the wild card with iran. Weve seen this picture before, dan. Remember, just back in february or march of this year oil was in the 40s. Then we saw the astounding move to the up side but, once again, we are trading in the early what was i trying to say, the low 40s that is. Do you think were in for a turn around at some point . More than likely if you look at the future prices, a year out its around 47. It does seem that the market is pricing in a recovery. Well work into balance of supply and demand that we have, better growth and also depends what happens with u. S. Shale. We expect to see recovery. Oil wont fall to 30. The gartman letter, goldman as well. Its hard to tell what it is thats driving everything right now, right . When do you know when you get in and when you start to pick some of the lower hanging fruits . Well, i think our suggestion would be trying to call when the bottom is. You probably rather wait and see that the turn around has started. Its okay if you miss the first 5 instead of the risk of picking up another 10 loss. Theyll want to invest, wait a little bit longer when we do see the bottom and the recovery starting to take hold. Then thats a time to take hold. I dont think people should be over eager in this market. How much are we trading on Interest Rates differential . Is everything in one basket . Certainly for europe and the u. K. Seems relatively stable. The key variable remains the fed. Thats the one that is the tail wagging the dog as it were. I think its indications, nip indication from the fed about a change in their views, comments from the governors could have a big impact on sentiment. Well talk a lot more about the fed in this show. Dan, thank you very much. How would you describe the recent price action . Which word would you use . And what are you doing . I mean, if youre holding a portfolio out there at the moment, how do you view the action thats taking place right now . You might not be happy if youve been long equities heading into this. Right. Were constantly moving back and forth here. Let us know. You can join us on the worldwide conversation by email worldwide cnbc. Com. Find us on twitter, cnbcwex. cnbc or louisa. Talking about how the fed looks dangerous. Mistake if they do hike . Theres no real reason why this should hike. Do you think a september hike is off the table completely . Its getting harder to justify, a compelling reason that theyre going to take the risk. I think its waiting. Unless you see a sudden turn around in oil which theyre not suggesting, thats a good thing for the markets. Which should lead to more buying room . Thats what youre waiting for. Starting to see people taking advantage of the opportunities that this type of change has opened up. You know, they said Something Interesting last week. They said the volatility that were seeing is normal. The real surprise should be if we didnt see volatility in front of the impending rate hike. That tells me we shouldnt worry, this is normal. Not just volatility in the equity markets, vol la timt at this in the equity and bond markets. Ahead of fed hikes you get this type of heightened volatility. What people need to keep in mind in front of that type of market, know where you want to invest, have your allocations in mind and then when they open up, move in. Do you have a top trade for clients this week . As clients are trying to figure out whats happening in the markets . The cyclical sectors, suffering tech are the ones that are more likely than not to rebound. I think you should think about the cyclical sectors in the countries that have solid Economic Growth, maybe perhaps a little less trade dependent. You said tech . Yes. Im interested to see what the selloff in shares means in the private market. Weve been discussing high valuations. You wonder if some of those valuations will be repriced. Well discuss that. This spurs another round of m and a. Perhaps. Daniel, t