47 in about two days. Gold catching a minor bid. Crude getting killed. David we will break those earnings but lets turn to washington. Puty attorney erroneousstein appointed a special counsel between ties between the Trump Campaign and the russian overnment. Marty shanker is here with us. What is next . Well, i think as soon as he gets on the job, hes going to scope out where his investigation should go. Its interesting. I think Rod Rosenstein just by this appointment has cemented his standing and his power within washington. The only way that any influence the white house can have would be to fire him and that would be worse than firing comey. And mueller is known to be a straight laced case maker and hes going to take this investigation wherever it leads including into the white house. David a lot of praise from capitol hill about the appointment of mr. Mueller. Does this take it away from congress . Does this take a lot of the wind out of the sails and say let mueller handle it . I sort of intellectually it seems to do that but there were comments made overnight that the congressional investigations will continue. But and mueller has a reputation of no leaks. So you wont get anything out of that until hes done. So congress will probably try to continue to keep this narrative alive by holding those hearings. So as of right now, theres theyre still on course to do that. David last question. A lot of people in the markets in business want to know does this speed things up or slow things down . Because they Want Congress to get things pack like to tax reform . It probably slows things down. From a standing start, hes going to have to get up to speed on the f. B. I. Investigation. And hes a meticulous investigator. So he will take his time and he will do it right. David marty, thank you so much. Jonathan . Transform to the turmoil in d. C. Ead of g. T. Fx in london and eiffel is here with us. The conversation dominated trading floors yesterday was why was yesterday so different after shaking off episode after episode of b. C. Drama that suddenly, things break . I think if you step back and pretend none of this, you know, horrible news flow we got out of d. C. Over the last week and a half have happened, where will the markets be . With a lot of the technical indicators on confirming upper momentum, were really starting to fade away. And in the absence of any of this bad news flow, we probably see markets go through a digestion process, probably not as violent as what we saw yesterday. But sometimes the markets just need to do this anyway irrespective of the news flow. And the harder work is interpreting, you know, what does all this d. C. News flow really mean Going Forward . So thats really the heart of it. I dont really read too much into the markets were down yesterday. Jonathan yeah, you saw risk. Thats the kneejerk reaction. Why the episode of the 24, 48 hours is different or if its different at all . The fact that at least for some investors, the prospects for lower taxes, Corporate Taxes in the u. S. Has become even more distant whereas a few weeks ago, talking to client, they were still expecting some more clarity on the trump agenda on the tax reform. This time around, intentionally yesterday, especially yesterday, that particular prospect has become quite distant. By imcase, theres some questions about what could then justify the current stock market valuations presumably the earnings justifying those valuations has been partly based on the expectation of lower Corporate Taxes. So with this latest development attracting more and more attention, you would think those valuations may be increasingly doll justify. So thats really what the real risk is from here as well. To what extent were dealing with a temporary dip in the s p and to what extent were going to see a more meaningful correction lower. Jonathan so futures negative. Were down 99 on the dow. Follow through important here that we close yesterday a session lows. Selling into the close. And the question i want to ask you, michael, is whether were selling into the close or are we selling to the close because were worried about the headlines after the close . I think its both. No one knows what the headlines are going to be over the next few days. We had some very jarring ones. At the end of the day, you know, momentum gets momentum. If your risk managers are tapping on the shoulders, you dont want to be the last guy holding the bag after a very strong rally, a very strong yeert yeartodate rally. And lets see how this dip settles out. Is it a 3 dip or is it a 10 dip or, you know, a 1 dip . Alix right. Should be confirmed. Alix the move was unbelievable hitting here from nine to 10 you just saw buying picking up. Yields just finding lower. Now were down below 2. 2 . Was that Short Covering or was that real fear buying . Do you have a real good read on that yet . At the moment, it does feel that a risk aversion may be the key. Positioning is playing a role and it does feel that the markets are long stocks and presumably, they were still short. Some of the treasury market. That said, what could potentially decide to the Market Outlook from here is how the fed is going to go about it. Ultimately what we are seeing at the moment represents tightening in the financial conditions and they choose to ignore that, and proceed with hiking rate or maintain its rhetoric, fact is that could indeed lead to further underperformance, especially in the stock market. Because at the moment as it is, rates are historically low and theyve been grinding lower. So thats the main reason why the Equity Investors could argue that the stocks are fairly priced and it still makes sense to invest all the extra crash. T if the fed doesnt respond in kind by imindicating and maintain its relatively hawk irk rhetoric, that could mean that the stock markets no longer looks as attractive as it seems really not so long ago. So the worry is maybe the beginning of the deeper correction. And by implication for the dollar, that may be the second leg of the unwinding of the socalled deflation trade. The first was the shorts and the treasury market. That seemed to. Unwound morals. But the other leg could be the u. S. Stock market. Alix michael, youve come in at a day that tech was off 3 . Materials getting hammered. Huge bias buyings in yield. What do you do short term that ould potentially get ugly . If you say you look at a month, the vix has been very low as weve talked about extensively. Its not too late to be buying protection. Vols are still low. The vix is at 15, 16, its just not crazy by any stretch. So i think you can do a little bit more of the same. You may be sort of jumping on the herd but momentum is a very powerful force. Youre going to have momentum all the way up and momentum all the way down. If youre not using options, you can just shift into more defensive sectors. With this very strong bond bill as were just discussing, thats obviously going to be very supportive for the yield sensitive equities but also, this is also sort of a judgment about the trump trades, right . The industrials, the anyone exposed to sort of aggressive cap x expansion, infrastructure, all those types of names are going to be hit. Banks are going to be tough here. Theres no question with that yield curve doing what its doing. Thats going to continue to weigh in banks. David in a nutshell, what factors will be will you be looking at . If youre talking about the fx market, the dollar will takes it queue from the markets today, tomorrow and in coming days. Thats really the one support that the dollar could have and thats inherent link towards the fed is going to do in june. The feds decision depends on the financial conditions in the u. S. If those conditions remain at ease, then the dollar will ultimately find some support. However, if the selloff does intensity and intensify, then the fed may have little choice but to delay any tightening and that should work to the detriment of the dollar. Alix well dig more into the fed in the next hour. Youre sticking with us. We do some earnings. Walmart, the biggie. So beating on earnings coming in light on revenue. Earnings coming in at 1. But the big headline number was u. S. Comp sales backing up fuels at 1 4 11 straight period for the company. Online sales rose 69 . The stock was down more in premarket. They also seek their Second Quarter comp sales at the high end of 2 . John . Jonathan alley barber is the top story. Better than expected. Revenue growing 60 in the three months ending march. A buyback at 6 billion over you two years. Coming up, we have two guests to debate on tax reform ahead of todays hearing on capitol hill. From new york city, youre watching bloomberg. Market expectations have falm on the risk off route and the financial conditions tighten but the real damage has been on the outlook for next year and a half. This is where the market expects fed fund futures to end 2018. Thaths white line. Prices have been hiked over the next months. Now were up one hike. The blue line is where we expect fed fund futures to be at the end of 2018. No hikes. The market sees no hikes now next year. So with us is two advisors. This makes the feds job extraordinarily difficult. If they cave to what just happened, then you know you cant trust it. If they done, its they risk more financial tightening. Weve seen this movie before, a little bit with the bank of england after brexit where they were there to backstop Political Risk and the e. C. B. Has been tchiningt as well. D sure, its a very relevant factor for the fed to consider but particularly since one could take the view that theyve been frankly trying to get rates up as much as they can over the ext couple of years. If that is dead in the water because of all the political noise, maybe the fed can actually get away with it there. But i completely agree. I think their credibility here is going to really put to the test. Their job is always complicated. It just got a lot more complicated. Alix if they do still want to go in june what, are we going to have to hear out of the fed in the next with to three weeks to get that market expectation back to 80 . They have to down play the latest political investments. The way for them to do that would be to highlight the latest improvement in the data. If they get lucky, they will have a rosy expectation. So thats forward looking. The comments could front loading of rate hike expectations. Thats set of the flatness of the treasury yield highlighting the fact that the markets has been pared by longterm rate hike expectation. Historically, the spread of the front of the curve really has been the more significant driver of the dollar. And im not sure what the fed can do to in kind of mitigate. The damage has been done. So they have to try hard to get those expectations going again. Jonathan i spoke to someone yesterday who serves on an Investor Advisory Committee for the new york fed. Thats very natural. Thats normal for a process over the federal reserve. The Market Reaction is one thing. What we do know from them, theyve told us many times is they havent banked in any kind of reforms, any kind of regular story agenda in d. C. They havent done that then the forecast isnt going to change, have they . Right. Jonathan even if it goes to two months because theyre not responding to the Sentiment Survey data. So you can have your opinion on the hard data but for them, theyve kept their forecast as follows. Through more hikes throughout the year. Is this an overreaction from the market at this point . The bond market bid has been very aggressive as weve seen and thats probably a little bit of a reflection of the fact that the fed is going to back that Political Risk here. The most obvious play is to be buying bonds right now. Your point is very well made. If its about the hard data here and if the soft data gets softer and the hard data is going to do whatever the hard datas going to do, maybe the fed can get back to its core mission here and go into some sort of gradual replacement from the extraordinary measures its had. David what about this . Is the fed backed in a corner . Its not they said we are not going look at the trump trade in our decisions and that hasnt changed. Indeed. It is the case. Were still expecting two rate hikes this year in june and september. However, one thing that may change and that is the real risk for them. The timing of those hikes in a sense that any tightening in the financial conditions in the u. S. On the back of whats happening in washington, d. C. May indeed force their hands and make them have to wait before they want to have any ongoing tightening in he financial conditions. They are not necessarily that bad. Its one of the best performing economies of the world. From that point of view the fundamental support for the dollar should be there. But at the moment, the key risk here is that any potential sharp risk is an extension of the move we saw yesterday could lead to cause more damage, right . So one, it could trigger unwarranted tightening in the. Conditions and, two it may dampen business and Consumer Sentiment from here. So from that point of view, its going to be very interesting to show how the fed is going to respond to that. If they are lucky, the political issues will subside before long potentially next few weeks so there will be plenty of time to regroup before the june meeting. If that continues, i think that is going to be a very tough call to make to hike rates in june. David youre both going to be staying with us. Coming up, were going to have an exclusive interview with a man who will hold the first hearing on tax reform. And mark warner of virginia will be here. This is bloomberg. Jonathan brazil has plunged back into another political crisis. The president was involved in an alleged coverup scheme with the house of brazils congress. The Office Denies the allegations. Brazils bonds and stocks trading in europe tumbled in europe. Michael purvis, lets see whats happening in e. M. They should be pretty resilient in the market. Sure. Lower rates, lower dollar here. Until this morning, a generally benign political macrobackdrop for e. M. As it relates to the brazil situation, you know, i think some of these a. D. R. s are trading off 10 or more this morning there. But for the e. M. Class, lets not forget that brazil has a pretty small wait. The e. E. M. Are in there in the top 15 holdings but theyre small ones. Jonathan weve got a lot of investors to say buy brazil, buy brazil. Sure. A wakeup call for you . Yeah. Brazil is not exactly, you know, having scandals in brazil is not new news here. And i even have been exactly what these tapes have been revealing. And since he got the job, its always had a sort of several questions about that as his car wash process has been unfolding. Im a little bit surprised by the Market Reaction. I would point out yesterday, emerging Market Equities were a relative safe haven. You didnt see it really in emerging Market Equities. David where are you seeing e. M. Effects . It is the case that the inflation trade has been unwound in months. The up with trade that most clients, if not all clients have is the carry trade. Theyre happy about it. Point being that along those currencies, and if anything, sentiment may claim more victims than the high yielding emerging markets currency could well be among them. Onathan petrol absolutely bassed in the market. Alix and copper down as well. Proper prices in china falling. Theres that issue as well. Are they going to have to do reform, tight monetary conditions . Heres that rhetoric playing out today. Jonathan and they have to do impeachments down there. Alix i thought we were going to have all the risks. Jonathan Political Risks still remain. Valentin, thank you for joining us and michael, thank you as well. Coming up next on this program, Caroline Harris of the u. S. Chamber of commerce joins us to debate tax reform out ofed tos hearing on capitol hill. Jonathan flow, this is bloomberg daybreak. Lets whiff through the mrkt reaction. The unwind continues. Futures soft, soft. Negative. 2 on the s p 500 after the biggest oneday drop on the benchmark since september 2016. We close at an april 21 low. The selling continues by three quarters of 1 and the treasury market is lower by two basis points. The lowest on april 18 which is four basis points away from that. Everything counts in the fx market. The dollar was weak. Now showing some strength against the euro. That is the story in the markets then. Lets get you an update on whats making headlines in the Business World with emma. President trump has insixers there was no collusion between his Election Campaign and russia. Now a former f. B. I. Chief is going to find out. Robert mueller is going to investigate possible coordination between the president s associates and precaution officials. Mueller will prosecute any federal crime he uncovers. President trump was told of the Decision Just 25 minutes before it was made public. Donald trumps Transition Team knew weeks before his inauguration that National Advisory advisor Michael Flynn was being investigated. The times said he was the subject of an investigation for secretly working as a paid lobbyist for turkey. Despite thrkts mr. Trump named him to the Security Advisors position. The u. K. Prime minister admitted her conservative party to a hard brexit outlining the manifesto promising british voters she would develop a clean break and warned no deal with the e. U. Was better than a bad one. Im emma chandra, this is bloomberg. David conk hold its first hearings on tax reform legislationed to. Ere to help us see the agenda, Caroline Harris. Good to have you here. Hi, david. Good to see you. David we spoke with senator hatch and we asked him are they going to get distracted by whats going on with comey, the president and things like. Heandhe said it is a distraction. How does it look from your seat . Absolutely. The chairman said it was a distraction. But i prefer to focus what the house side said which is you see the secretary a