state." he was at united arab emirates, where he spoke to troops. he says the u.s. has carried out 1800 airstrikes against islamic state since october. angela merkel says she hoping for talks to be cut,. angela merkel and other european leaders are holding an emergency summit in brussels today. they want turkey to do more to stop migrants. nancy reagan is being remembered as the first lady who nurtured the political career of her husband, ronald reagan. she died yesterday. the couple met when they were both actors. illegalaigned against drug use and became a advocate of stem cell research. she died at 94. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world, i am caroline hyde. matt: i quickly want to touch on iron ore. i am looking at the generic contract here, but there are a number of different contracts you could follow. here we see a 17.3% jump. there are others where you can chart a 21.5% jump. iron ore is all of a sudden rising by 1/5 of its value in one day, a story that we cannot ignore. we will continue to cover this story. china, and what we heard from them over the weekend, and what they have done over the past few weeks, has sent global markets in a flurry. we are seeing losses across the board. s&p futures down about nine points, dow jones, contracts down 54 points. down by about a half a percent at this point. in europe, if you look at the cash trade, you can see losses across the board. bigger losses than that on the regional index, the main 3 -- ftse, cac, and dax. it is the miners that are coming down. iron ore is sort of a standalone in this huge jump. a lot of the metals already rallied up last week. we saw a huge gain in miners like rio tinto. they are now down after what a lot of investors and analysts have said where rising too quickly. iron ore up 66% since december -- when you think about volatility and what it is doing to investors and traders, a 66% move during choppiness is why traders are having a brutal year. it is like a never ending case of vertigo. matt: it is a massive story. that is one of the things that sent a lot of people into gold. let's look at what gold is doing today. oil is a hot story because it continues to climb. now we see 36.47. nymex crude rising half a percent. 1/10 of 1% this morning. gold has been on fire. iron ore, 66%. , up is enable market itself 21% from its lows in december. it is because of a lot of that volatility that people have climbed into gold. story that weher have been following a lot. copper has been on fire. let me go ahead and pull up a terminal chart for you here. here you can see that the price has just rocketed up and inflows have been an incredible on copper. a lot of people are saying copper is overbought. you can see that copper has gone from weakness to strength in such a short amount of time, that it is now in the overbought position, and a lot of people are saying be wary of that. driving nations to build, and that is what is driving test the question is, how will it hold up to a -- how will it hold up today echo -- how will it hold up today? perverse: here is the part that i know you love. ahead of the ecb meeting, the market tends to hold back and like it because they feel like mario draghi is going to step in with the bazooka loaded up. so while the fundamentals in europe do not look good from a markets perspective, those who own assets are saying come to us, help us out, put the safety net under the market. does central bank intervention help economies, or does it merely help those who hold assets? matt: what is also interesting is the currency. take a look at the euro. 1.0956.w at stephanie, you were out on friday. i said that the euro would fall because of the divergence trade. i lost that debt. --rose up, even after we got i lost that bet. it rose up. level that we.10 were after mario draghi started using his bazooka -- even though we have a fed that raised rates one time and looks like it is still going to one or two times been ecb that has gone negative and could go further negative, there has not really been much action in is not as, or there lot anymore in this divergence trade. i was talking to neil dutta this morning, and he said there is not a lot of room left there, even if you see a little more actual divergence. it has already been priced in. stephanie: if you look at china, we know the chinese government is trying to shift china policy economy, trying to control as much as a possible -- to shift china's economy. trying to control as much as they possibly can. fallen by 29s have billion since january. i turn to you. when you look at china and you say as the reserve keeps dropping, how long can they hold it together as they shift to a new economy? >> of course, they have an enormous amount of reserves, and they can lose billions and billions and still be the largest holder of reserves in the world. i think it is an indication that things are not going so well, but i would not equate debt to china entering a crisis zone. stephanie: we are going to cover a lot more on china in a moment. david: the national people's congress is meeting in beijing. premier outlined the plan before congress. is inerg's haidi lun beijing. haidu: the consensus seems to be that there will be a 7% target for gdp growth, 3% for inflation. it tells us what the priority is with asian policymakers, and the short-term growth is par as -- as opposed to -- and also deleveraging has been a key issue for a number of economists. this range, which we have not had since 1995, is not particularly high and does not give them enough of a buffer space. interestingly, perhaps more so than the topline number, is how beijing uses debt. we have the fiscal deficit being widened, essentially a debt ceiling being raised. and also the monetary by six -- , theonetary basics there nominal gdp is expected to carry along this year. david: what specifics have they given us on how they will reach these targets? is this fiscal stimulus? with the increase in the deficit, is that mainly tax cuts or spending more money? when it comes to these deductions that will be put through, these are fairly small things. boostend to try to consumption because beijing wants consumption to be the new driver of growth. it has not been able to make up -- we did not expect any kind of reform measures coming out of congress.al people's this is not the platform for that kind of thing. looking at fiscal policy, they will stay within a accommodative monetary policy. more will be this borrowing. these will be the drivers of trying to hit that 6.7 percent gdp. bloomberg economists here are saying that the situation is you have debt growing, growth slowing, and it appears that beijing may very well hit that 6.5% target by the end of the year. but in doing so, they will be digging themselves into a deep structural hole. david: part of that issue is reform capacity, particularly with coal and steel. that infringes on unemployment. what has premier least as part of this plan? heidi couc have seen a rise up in pockets where we have had these companies where workers have gotten pretty irate. this was maybe the biggest disappointment from the work report because we had very scant details, saying that they would deal with companies, giving very little color to of the game plan is, not giving any numbers about how many people would be laid off. on saturday,he npc we had report suggesting that up to 6 million workers would be laid off over the next three years. cominge million of those from the steel and coal sectors, which are suffering from extreme overcapacity problems. no sense of timing, implementation, how it would be rolled out. there is an overall sense with the topline growth number that beijing is putting on structural reforms in favor of popping up -- of propping up nearer term growth. david: we have gotten news out of china on their capital reserves, and that they have drawn down at a lower rate than was expected. of -- thatindication their capital flows are reducing? haidi: not as bad as perhaps we have seen, given that we had the record $500 billion worth in terms of the depletion of the foreign reserve pause that china had last year. there is a sense that the yuan is enjoying a couple of months of stabilization. we had the shock devalue of course, wish fake things out a little bit. beijing has not been strengthening or weakening the currency significantly either way. they are also talking up this new currency reserve basket that is a reference point because beijing basically does not want to get into a decision where every time the u.n. depreciates -- every time the yuan depreciates against the u.s. dollar, there is a panic in the market. borrowing costs are staying low, and expectations of further rate cuts will continue to put downward pressure on the yuan, downward pressure when it comes to foreign reserves capital leaving the country as well. david: bloomberg's haidi lun. you talked in your book about the china that we talk about every day here. it strikes me as we look at -- weent xi now remember tiananmen square. that was -- stephanie: even if he follows, can he fill his shoes? jeff: the thing is, it is a different china. deng xiaoping was the right guy for those times. china was starting from a very low base. everything was about growth. everything was about exports. it is a different china and a different world right now. i think that the current president of china really does not feel deng xiaoping -- really does not fill deng xiaoping's shoes. he is trying to follow a very similar model, a tight communist government with an open economy. stephanie: can you have that? jeff: that is the point. you cannot are there is no other major country in the world that sets the growth rate. this is really an old kind of idea. it is from the old soviet five-year plan. you set a target and you make it. david: they had terrible consequences. jeff: terrible consequences. if you hear everything to a growth rate, that is not a market economy. all this discussion that we are growthabout, was the are the%, 6.9% -- reserves going down a couple billion here or there -- that is really not that big issue. the big issue is whether a country this big, this complex, can be managed by a handful of people in a communist party right at the center. sooner or later, i think the answer to that is no. the risk thatt is they create things like these five-year targets, and cynics who do not believe in their data financially engineer their data until they get to those targets? jeff: that is it. they manipulate everything to get to that growth number. so all the other stuff is derivative of a political target , and they cannot make that cannot not make that target, and part because they would lose so much face, and the whole system would be revealed as a sham. sooner or later, they have to get out of this box. from a political standpoint, it is the one thing that the president of china now has copied deng xiaoping, and that tighting that markets, central communist control, and in 2016 and over the next five years, there will be enormous strain on that model. stephanie: i am thrilled to say you will be with us for the rest of the hour. up next comment e.u. leaders are meeting in brussels today. the countries, the people, and the economy affected. ♪ stephanie: you are watching bloomberg television. now it is time for "mobile go." -- for "global go." ryan chilcote is in brussels. a solution cannot possibly be on the table, but what is the hope? what is the goal? the goal is to find a solution, and to find a solution to this refugee crisis that is not sort of an ad hoc buttry-by-country solution, one that all 28 can work together on. they have been trying this for a while he they have not been successful. 1.2 million refugees have arrived since last year. it is probably the biggest european refugee crisis they have seen since the second world war. what they want to do is make sure that they keep the borders within the schengen countries inside the e.u. open because what you have now is countries putting up borders on an ad hoc basis, to stop the flow of refugees. stephanie: how bad has the economic impact been thus far? it has to be the economies that are going to finally drive this to make a change. ryan: yeah. economically speaking, it has been very difficult, in ,articular for some countries let's say in the front-line countries like italy and specifically greece. that is one of the reasons why greece has been saying you need to provide us with financial systems, lean on the tourists to make sure that -- lean on the turks to make sure that -- and even keeping their own country afloat, so you need to get us help from the quartet, the new name for the troika. they have 26 billion of the 86 billion euros they have been promised so far and they want the rest of the money. at the imf another constituents have been dragging their feet, saying now that we have this refugee problem, you do have to help us. now that we head into spring, how much worse is it going to get? greece is in a bad state. ryan: it could get a lot worse, because if you think about the refugee numbers from the last six months, they have been declining from about 7000 refugees making the perilous trip from turkey to greece every single day, to about 2000 per day right now. so the number has been falling. but as you point out, it has been very cold. so year on year, the numbers have been way up. the big concern is as a gets warmer, more refugees will be coming. so the main goal of this conference is to convince turkey to stop the flow of refugees. turkey has already been given 3 billion euros to help in that process. and in addition to that, if you can imagine, jerky getting many of the refugees back that the european union does not want in's -- turkey getting many of the refugees back at the european union does not want inside its borders. ryan chilcote, we are hoping for some process -- some progress out of those meetings. david: over the weekend, bonnell wonp won -- donald trump two states. bloomberg washington chief megan murphy -- who better to explain this then megan? she joins us from washington. starting with republicans, who had a good weekend and who had a bad weekend? megan: it was another topsy-turvy weekend. we saw donald trump prevail in two states he was expected to win, continuing his momentum going into the michigan contest. we also saw ted cruz perform unexpectedly well, especially in maine. ted cruz ended up taking it by a substantial margin. who had a bad weekend was marco rubio. he finished a distant third and fourth, and he seems unable to get the kind of momentum he needs to really solidify his candidacy as the establishment candidacy of choice. he really needs to start to perform much better. he has all his bets on florida, his home state. if he does not win that race, his race is over. david: i heard some talk over the weekend, and it may be just talked, that there might be pressure for rubio to pull out before florida. if he gets beaten there, he may damage himself. is there anything to that? megan: there is pressure in challenging donald trump, people had not expected how much of the antiestablishment wave we would see, not only people going behind donald trump, but in ted cruz as well. voters are saying we are rejecting everything washington and the perceived establishment is selling. rubio also has a money issue. his campaign is not flush. he has not been a successful as many people thought he would in attracting the huge wave of money behind his campaign. there is going to be pressure on him to rethink. is it because the republican party is so splintered? john kasich has been wall street backers, but more wall street money has been put into an anti-trump push. are exactly right. it is splintered, just as the field is. in some cases, the establishment is waiting on the sidelines to really pick someone they can put their money behind. the problem is, that candidate has not emerged. ted cruz is not of a wall street guy. donald trump for now is not a big wall street guy either. they do not want to pour more money after bad, like jeb bush, put in over $100 million and had nothing to show for it. globalization and trade took it on the nose. jeff: at least they are talking about it. one of the big omissions really in the whole debate at the moment, all the people running, is that they have underestimated how significant global forces are to everything that is happening in the american economy. you just cannot talk about the national economy. it is a global economy. stephanie: when you saw last night, was it a reminder for the rest of the country of a wake-up are inow grave things michigan? question, but it was a very high quality debate. stephanie: it was. no name-calling. david: thank you very much for being with us. this week is a big week for central banks. find out what the fed and the ecb have in store for us in the markets per jeffery gardner will be right here by -- jeffrey garten will be right here by our side. ♪ stephanie: you are watching bloomberg go. we are looking at equity futures down in new york across the board. of china following markets in europe, we are taking a leg down. the story of globalization and york, -- in new let's get you some first word news. lyn: the u.s. and south korea have begun their annual military exercises and north korea warns it is targeted both countries with nuclear weapons. democratic presidential candidates face-off in another debate in flint, michigan. front-runner hillary clinton attack bernie sanders over the government rescue of automakers. >> he was against the auto bailout. in january of 2009, i voted to save the auto industry. he voted against the money that ended up saving the auto industry. carolyn: meanwhile, sanders accused clinton of voting for trade deals he says were disastrous for workers. former president jimmy carter says he no longer needs treatment for cancer. less than seven months ago, he revealed he had a cancer moved to his brain. global news 24 hours a day. david: tom, it is time for the morning must-read. nancy reagan, who passed away. bloomberg -- news, a list of influential first ladies always includes -- but not usually mrs. reagan. they have scores of telephone conversations at the expense of many, but as mr. hunt precisely, mr. clark with jeff carter here today, we have some terrific perspective on the power -- powerful first ladies you must have seen in the white house over the years. it is a delicate issue, there is a lot. she wase: he was up -- often given credit for his -- for her husband's public speaking. her credit, saying he could not do it without his partner, nancy. >> the president is surrounded by so many people and the one person that the president can trust is his spouse, hopefully. more times than not, it is the calm in a big storm. there is a new mode for the the speed now, with of news, it is a lot different than the oculus that mrs. reagan used. the more think that complex everything gets, the more simple you have to keep it on the most important things and if you have a spouse that you really trust and someone who is totally devoted to you, that quiet advice can be absolutely essential. david: i don't know what's going on in my own marriage, so i can speculate what's going on somebody else's, but i think i could make an argument that more than any other first lady, ronald reagan would not have been ronald reagan without nancy. she was devoted to him. he knew she was totally loyal. she had his back all the time. i'm not sure he would have been who he turned out to be without her. stephanie: she was also responsible for bringing different people to the white house. we talked about the gridlock in d.c., these political officials who do not move their spouses to d.c. and at so the back of there is such little respect into medication. -- respect in communication. you think about now, if secretary clinton because president, what do we call bill clinton? david: definitely not a shortage of nicknames for bill clinton. [laughter] first saxophonist. time now for econ recon. our look at the week ahead. in theink we are hangover phase from the jobs report on friday and unfortunately on the u.s. docket, there is not going to be a lot of new information to give us clarity and guidance on the trajectory of the economy. the most important releases are second-tier at best but the small business sentiment on tuesday and jobless claims on thursday. next week turns into an absolute deluge with retail sales and whatnot. the most important thing comes this week and those are two fed speeches. vocal noterd from a or of the impact of the strong dollar and some mild push back against tightening policy and we hear from the vice chair when he on theat the conference past, present and future of monetary policy. he could drop some clues of how the fed is interpreting recent events. tom: you have the michigan primaries, tomorrow which have been underplayed. if it is a blue-collar primary in michigan, it comes back to globalization and the thought of silicon and my basic idea is secretary clinton speaks of fair trade. how fair is our trade right now? jeff: the whole discussion about trade is misplaced. you can have trade agreements, but those agreements -- you cannot look to those agreements to solve all of the domestic problems. the real problem that we have is that we negotiate these trade agreements without having the domestic counterpart. you can't think that the trade agreement is necessarily going to deal with all the job problems. we need other kinds of legislation. we need cushions. we need legislation that allows workers to move faster to different kinds of jobs or to have better education. that is not a trade agreement. david: let michigan needed a cushion. that is what happened to flint. when you negotiate a trade agreement, if you don't watch out -- you have to watch out or you are basically exporting or letting people compete with you lessr because they charge for wages, they have lower environmental standards, they have lower weight standards. jeff: that is what trade is all about. if somebody can make something cheaper, consumers will benefit. the trade agreement itself cannot be the whole thing. it is half a loaf. if you have a crummy infrastructure. if you don't have adequate education policy. if you don't have a safety net that allows people to have some time to change jobs, than the trade agreement is going to be very damaging. you can't blame it on the trade agreement unless you think that we live in an insular economy. you need both in the problem is everybody is looking at these trade agreements to be the answer to everything and that is flawed. stephanie: the problem we face is as consumers, we want to buy the cheapest rx possible, and as voters, we don't choose to vote to create job training programs and infrastructure spending, so we don't what to spend more money on goods and services and we don't want to vote in a way that will prepare us to produce those goods at a cheaper rate. we are asking percent, but not willing to spend the money. how you expect any progress? jeff: we don't have the leadership that says on the one hand, we will negotiate this agreement, but before we pass it, we will have the domestic policy that allows us -- stephanie: because we don't vote people into office who are willing to say it. jeff: that is our fault. you can't say trade agreements are flawed in a global economy if you don't have the courage to vote people in who will actually make the decisions that allow us to thrive with those agreements. is the beach read of the year for anyone with a brain. stephanie: thinking brains. tom: this is a superb beach read. what is the rest that we lose the spirit of the atlantic charter? it is getting to be a long ways away and as you look at the last 10 days of political discourse in this nation, are we at risk of losing 40 years of lessons learned? jeff: i think that is the heart of the whole issue in this election. and weo insular looking forgot the fact that the -- over the last 60 years, we have become tied into the global economy in a way that is something you and new york and connected. we cannot build walls, we cannot have 50% tariffs. we can't go around sucking other countries in the face. -- socking other countries in the face. it has become insular looking because there is so much economic insecurity. related,are not being -- being replaced with new jobs, so the dialogue on both the left and the right is fascinating because the mantra of free trade is the best thing certainly has receded and you hear it from the republican speeches, these fullyduals -- yes we were benefit from cheaper products, but that benefit, someone from point or the rust belt will justify, those cheap products are little benefit if you don't have a gzip -- decent job supporting the consumption. stephanie: i was struck by the export import bank discussion, but they said the number of companies in michigan who have benefited with export import bank subsidies and they made that point, that you have to have this for them to have their jobs so they can export. carl: other developed economies are supporting their export sectors and for the u.s. just step back and say you are on your own but u.s. companies at a significant disadvantage. tom: would you let dean know that new york and pennsylvania are not attached when you look at philadelphia flyers? [laughter] but that in the back of the book. -- put that in the back of the book. stephanie: we have to look at the ecb and look at what's happening in europe. we have that meeting coming up on march 10. carl: that is where the direction is going to come from. see thehe head -- we headline of inflation in europe, core inflation not even a 1%. inflation targeting by the central bank is missing its mark. the question is whether they will decide that things are so bad they need to pull a trigger on additional work stimulus measures. -- on additional stimulus measures. potentially additional asset purchases but the deposit rate is more likely. david: the economists were pretty emphatic. bloomberg intelligence chief u.s. economist, thank you so much for joining us. tom, i know you have to go back to radio. eye -- more, go to the biecongo. next we go to the migrant crisis and the pressures on the eu, that is coming up next. ♪ stephanie: you are watching go. coming up in the next hour, our dq economics cofounder and chief economist, taking a deep dive into china. >> this is the bloomberg business flash. the sale of the london stock exchange may turn ugly. -- the 2 -- continental exchange and the cme group may trigger a bidding war by making that offer. the percentage of americans leaving their cars set a record in february. 32% of those acquiring new cars last month least rather than bought. that could eventually lead to a glut of new -- good condition used cars. home sales in hong kong plunge 70% last month to a 25 euros low. fires are being deterred by falling prices and economic uncertainty. home prices are down. that is the bloomberg business flash. david: deals with management dean is with us. look at the, you input of jonbenet who is credited as the chief architect of the eu and it strikes me, we talk about your. every single day without exception. of monet, hedea was not there to implement it, but it is something he wanted to happen in the ecb and it shows the end -- integration the care about as result of his work. jeff: it shows what an extra ordinary influence one person can have, because it was in 1947, europe was on his back, this guy came along and he had an idea that would unify europe and prevent all those wars that have been happening for centuries, prevent that prevent them from happening again, and that was to take all the coal and steel and put it in one organization and pool the sovereignty over resources, and he became the first president of the organization, which was called the european coal and steel community. cap became the european common market which became the european union, and in the euro came. the whole thing can be traced to him. david: he had that in mind, it was not accidental and it has gone so far with the creation of the eurozone and the euro, but now, it feels like it is under siege. you have brexit, greece has gone through crisis after crisis, we now have challenges because of the immigrant problem. is it in danger of unraveling? jeff: the idea was that you would build it step by step and it was also said that europe would ultimately be forced by crisis. it would only take a step forward every time it reached a crisis. you were here, he was look at it and the only thing that would shock him is how many crises have arisen at the same moment. that might give him some pause, but i think that he was right. these countries are too small on their own to really compete in a global economy for you have the united states. there may be some changes in the configuration. for example, i would bet that greece will eventually leave, but i don't think that the european union will disappear. smaller, but that might not be a bad thing because it may have gotten too big, too fast. smaller, it could be tighter and more integrated and if i had to bet over the next 30 years, we will see a stronger european union. david: i wonder if some of the pressures we see now dollar tree underlying weakness in the -- we see now don't or tray underlying weakness -- don't portray underlying weakness. bureaucrats are trying to decide that they can decipher parliament. there is underlying tension about centralized government that you feel somewhat divorced from as opposed to having direct democratic participation. jeff: i attribute that because it got too big. they took in all the countries that we used to call eastern europe and they did it too fast. in a smaller operation, if there were only 15 countries, they could have a parliament, they could have -- in still more democratic institutions. i think that is the future of it. they went overboard because times were really good and they did not face all of these crises. under the pressure of the refugee crisis, the crisis in greece, even the crisis in ukraine which raises the question of a common european policy towards russia, they will make some adjustments. it will be painful and messy, but i don't see a situation where we go back to independent european countries so that it eriod before.e p and he had aonary full european view. merkel is a very powerful leader, but when all is said and done, it is germany. david: you wrote this book about globalization because you are interested in it. globalization feels that it has some headwind right now. talking about the presidential -- presidential campaign, seeing what's going on in the world, barriers going up. you think there is a turn happening with globalization where we go back to more divisions around the world? writing this book, i came to this conclusion. globalization is 60,000 years old. it started when some families in and walked upp out of africa because they did not have enough food and they were worried about their security. 60,000 years, that victory has been in one direction. there have been some swerves and interruptions and we might be in interruption, though trade may be slowing, but the digital world is growing so fast. it is creating all kinds of connections among countries. not all of globalization is slowing, but the long-term trend is only in one direction and that is a world that is smaller, more connected. 10 years from now, we will be talking about all the globalization that is taking place. david: thank you very much, jeffery gardner. congratulations on the book. coming up, bad news for donald trump. that is coming up next on bloomberg go. ♪ matt: we are diving into the misery index, unofficial and -- economic index that could be used to determine which party will take control of the white house. determinedindex have the winner of the presidential election since 1964. carl: every election from 1964 to present with two exceptions have been predicted by this gauge. the misery index is an informal indicator which adds up the unemployment rate and the inflation rate. if either or both of those are increasing, then presumably, households are becoming more miserable. more miserable, they tend to vote the bums out and when they do better, they tend to favor the incumbent party. matt: we have the misery index draft in white. heading up means more misery and the incumbent is out. going down is everything is better and the incumbent can stay. that was more of a watergate referendum for nixon. matt: clinton was an exception as well after george bush. carl: which is ironic because the mantra of the election was it is the economy. we were just coming out of the recession of 1991 and the economy did not feel like it was improving just yet. things were starting to improve and the official data, it would have predicted a reelection for george bush senior, but it just wasn't being felt on main street. sentiment and confidence were locked, so they did not vote for change. matt: we are headed significantly down, meaning there is less misery, there is not much unemployment or inflation. that should be good for the encumbered. -- incumbent. karl, thank you so much. ♪ stephanie: coming up next, john writing of our dq economics. -- ♪ stephanie: nationals p milk -- national people's congress meets in beijing. leaders outline their target. global glut, big moves and oil. active rigs cut to the lowest levels in six years. counter bid for dupont, will lift the rail the planned merger with dow? ♪ -- will it derail the planned merger with dow? ♪ welcome to the second hour of bloomberg go. we are in midtown manhattan. david: jonathan ferro, i'm sorry to say is under the weather. ryding, the is john chief economics -- chief economics -- chief economist with our dq economics. merkel andtephanie: other european union leaders are holding an emergency summit in brussels today. they want to do more to stop migrants are entering europe. islamic state has claimed responsibility in the third bombing in the baghdad area in little more than a week. nancy reagan will be buried alongside her husband at the reagan presidential library. mrs. reagan died yesterday. the couple met with -- when the both were actors. mrs. reagan campaigned against illegal drug use and later became an advocate of stem cell research. nancy reagan was 94. global news 24 hours a day. matt: take a look at futures. across the board with s&p futures off a quarter percent, dow futures down 2/10 of a percent and nasdaq futures down 3/10 of a percent. a little bit of recovery we have seen in the last hour because we were off further. , it'sou see the s&p 500 best three-week rally since 2014. the s&p 500 has been on a roll. 7.25%n see a gain of since valentine's day. good,ry was pretty january was horrible and we continue to pick up better and better. look at the russell 2000. 13.5% since its low in february. the broader indexes and the smaller cap indexes are doing better since the low that we've seen in february. as far as commodities, we are watching them closely. nymex crude oil on a chair, 1.5%. ed morris from citigroup it was way out front as far as the oil bearers -- bears. he has said that now he thinks the bottom may be behind us and that we will start picking up more in the second half of the year. gold futures continue to rise so that fear trade looks like it is slightly on, only 1/10 of 1% or $1.10. it has done very well, almost 21% since its december lows. copper futures are back up to gains. complex ismetals taking up, although copper -- the rsi shows it overbought and we were looking at this pretty closely until iron ore came out and it is way overbought. it is up in the 80's. here is the iron ore price and we talked about the fact that it soared 19%. this metal is only price once a day, so it is interesting to look at. it is up 66% since the logan percent -- in december. over the last year, you can see, not a lot of change so it has come down and back up and a lot of analysts are predicting the fall. david: i wonder if it is related to what is going on in china. matt: and a list that i have been reading are sure it is related to what's going on in china. bloomberg intelligence just put out a great story saying china is going to be focused on holding up near-term growth, maybe at the sacrifice of medium to longer term growth. david: which takes us right to where we want to go. china has rejected fears of a heart lining -- hard landing saying they will focus on growth. london, us now from tim, we have been talking about concerns around the world. has what they have said so far allayed any of those concerns? tim: they did a good job of communicating stability as they went through what they discussed. you think about the range of 6.5% gdp. it is still a healthy clip but gives them a little bit of balance which adds some credibility as opposed to a hard target. they put forward both fiscal and monetary stimulus outlines from the standpoint of a free website -- 3% deficit which is an uptick from last year's target and a little expansion in money supply growth which has been pretty robust. they talk about a number of other, more specific areas such as housing which is critical to the economy or they are introducing some measures to help get rid of the glut in housing supply. stephanie: can they, really? if you look at housing prices, they are headed in one direction, down. david: it sort of depends tim: -- it sort of depends if you look at the broad market across 70 cities in china. housing prices at a little more than half of those cities are still marginally declining. , beijing,ne cities shanghai, shenzhen are just rocketing. what they are trying to do with measures such as reducing the taxes, reducing the down payment , as well as doing some other specific measures is to broaden market priceing gain which would then support the stick builders, the homebuilders. david: john, i want to bring you in here because i am interested in the credit. side of this. one way to put this is they basically borrowed to have growth and there is a limit to how much borrowing you can do to get growth. john: you also have to look at the demographics of china. they were a 40% urban and 60% rural economy. transfer toking to a 60% urban economy and we think about that shipped in 20% of china's population which is well people,s of a billion that requires a lot of construction but also requires a lot of management. is it so surprising that we do areas where they have been people are not moving and the jobs aren't there and we get areas were there have been undue building and strong prices? i don't think we have seen anything like this kind of role, urban shift over a 10 year period in the history of the world. stephanie: one thing we are focused on besides china is oil. oil advanced from its two-month high as u.s. real estate the number of active rigs to the least in more than six years. do you think this is yet another sign of slowing global demand because it was china demanding the most across the board of commodities so as you see more negative news out of china, the response out of -- it has more of us concerned that this is china causing all of this. john: it is supply. north american supply. it became obvious a year-and-a-half ago that the u.s. was a bigger producer of oil in all of its forms than saudi arabia. it was a signal that there and finish it in the oil market that small movements in supply have the impact on price and it is hard to use and store that oil and a less opec responds with an offsetting production, you get those big drops. -- that is supply becomes finding additional supply becomes unprofitable in the drop in the recount which is been a drop from 1200 to 400 is not surprising. what is interesting is the bottom and oil on february 11 also marked the bottom in equity reit -- equity prices. that is an interesting correlation because it is hard to think about the economic causation behind that. david: i want to put matt on the spot. you have a rig count chart which we just talked about. a fairly dramatic reduction in u.s. rates which is driving a lot of this price upturn. matt: i look at big. to take a five-year look, you see this dramatic drop. this is u.s. rigs, oil and gas, but it is pretty interesting to see the problem this has been for big -- for others that operate rigs. this is ray can see an economic problem with the drop in oil prices. john: we are not looking for new oil because the cost of finding the oil is a lot higher than getting the cost of existing oil out of the ground. ellis oil prices come back up, we will do a lot less exploration, -- stephanie: we don't need to. it makes no sense to take it out of the ground when the price of oil is so low in terms of finding new production. as far as economic activity is concerned, it is a small portion of u.s. economic activity. maybe it took half a point off gdp growth last year. matt: you can see that production was continuing to climb. this drop is not brought reduction down that much -- has not brought reduction down that much. we have come down to 9.2 5 million barrels a day. .- 9.25 million barrels a day david: sitter later, the price is going to go up. -- sooner or later, the price is going to go up. we see production going forward because of this drop in exploration in the u.s., maybe balances the oil markets down the road because we are talking about a big increase from such low levels in the price of oil. if you would just oil for welation over the years, have prices at the lowest we have seen since the 1970's. stephanie: we will have more time with john ryding. break,we take you to let's go to a sports announcement -- announcement, , super bowl 50 was his last game. the five-time m.v.p. will announce his retirement, especially today at 1:00 p.m. he has played for 18 -- you and you are remember the face his brother had. peyton manning leads a mountain of records -- leaves a mountain of records. a strong sendoff for peyton manning, what a career. -- make a bid, and derail the dow chemical deal? ♪ ju thelie:, after the chinese said they were willing to take more steps to get the economy going. the fight over the sale of the london stock exchange may get nasty. the lsb -- lsd -- the two largest exchange owners in the world may trigger a bidding war on making their own offers. this week, the european central bank resumes its fight against the risk of deflation. almost three quarters of economists surveyed predict that ecb chief mario draghi will extend the monthly bond purchases. ecb policymakers meet this thursday. basf's recording -- reportedly working with financers and making a counter bid for dupont. the company agreed to emerge with dow chemical. jeff mccracken is here. what took them so long? .upont merger was mid-december jeff: tens of millions pouring in. are stillhat they studying it, you could sail one end, this ship has sailed and it has taken too long and the deal is dead and done. on the other hand, the fact that they are still studying it shows it makes a lot of strategic sense. they're talking to a lot of banks like deutsche bank and citibank over how much money they can raise. david: was anything that happened that triggered this? jeff: basf was both up around that deal and around dow/dupont, so they were exploring both those situations, but they had not done it big deal any long time. the fact that they were a day late and a dollar short just is not a surprise to anybody. -- all of them have been struggling the last couple of years as the agricultural business has been down. shares were down by 12% for basf alone. stephanie: there has to be a tax advantage for them. jeff: taxes would be lowered down to about 22%, a couple hundred million dollars a year in savings. it is not quite as good or big of savings as dow in dupont have. david: they had to have a great -- there is a breakup fee. jeff: a $2 billion break up the. -- see. -- breakup fee. likely --eems less unlikely that they will go ahead with the bid, but they are still studying it and trying to figure out what to do here and there is monsanto, another option. they could do maybe a bigger deal with monsanto. the whole history is consolidating in the chemical space. stephanie: is the story that this is a real threat to the dow dupont deal or that basf has shown up to the table -- jeff: they are exploring the deal and the market would be interested to see if it will go ahead and make an offer. i think it is less likely that they will make an offer. what is interesting is that they were nervous, too late on syngenta and too late on dupont. david: what is the next thing if they can't do the deal? or weprobably monsanto will see with doubt and dupont, they're supposed to do the deal and break apart. maybe some of the parts that break off could be appealing to basf. stephanie: that would make sense for them to show up now, not step in the middle but suddenly, their name is in play as that merger goes through an user to see things spin off. basf is the one. jeff: feel chemical space is consolidating. david: they may just be trying to get into the mix so that as dow and dupont think about how they breakup, they could do a deal with the asf as a part of this. jeff: we will see. basf has been late on a lot of deals that they could have or should have done in the past. david: thank you. we go to matt miller with futures. matt: i want to focus in on gold prices. hovering at 13 months highs, up more than 20% in 2016 as investors rush to havens and midmarket turmoil and uncertainty. joining me now is the head of strategy at cusick advisors. a joint three from the cme in chicago. thank you for joining us. let me ask you how much more steam this rally has in it. from the december lows to now, up more than 20% enabled market, how much farther do you think we can go? bull market, how much water do you think we can go? >> i've been telling all of my clients that we are getting hoppy here. matt: i have a chart here of investors piling it. what it shows is the open interest. anyone with a bloomberg can access this. risen to a record on open interest for the year. a huge rebound from the low that we saw. why do you think that is? is it just volatility, uncertainty? >> there is a couple of things. you see the increase that the chinese have increased their holding -- increased their holdings by -- the thing is, over the weekend you heard that blackrock who has one of the largest i share products focused on the gold product is actually pulling back. they will the longer he -- be making purchases. the other thing to watch out for is the price momentum. it has been 22% in the last three months. thinks a huge move and i last october, i saw this kind of price momentum level. it could have more this week, but i think it is topping out and i'm telling clients to be careful. i'm looking for a potential correction of summer getting back down to below $1200 and it could happen pretty significantly. matt: i understand all of those typical factors play into this bid, probably more in the gold trade. what about the fundamentals of global uncertainty, central-bank andcy not working very well central bankers continue to try everything they have. >> that is an excellent point. it looks like europe is going to potentially, with another rate cut. that is uncertainty, but you have to look at the fundamentals behind me in the futures markets, specifically in equities. i think that the equities still have some upside so as long as that continues, hey, we could see some weakness. the other thing is to watch the dollar. the fundamental behind the dollar, the dollar strength i've noticed over the last of sessions will get in the heart and minds which might hold up gold, but again, only this market overall and gold and i think the bullish case to the apps -- is to the upside but in $1280 is going to be the mark of resistance. thank you so much for joining us. joe cusick from cusick advisors. let's take a look at the top trending stories crossing the bloomberg terminal. you can find it using the function, read go. stocks fallingg, with copper, i will give you numbers re-, elliott ceo mark pearson having a call with analysts raising issues around the company's disclosure. of valeant hadeo stepped down for two months on medical leave. he was reinstated two sundays ago when he took the seat again and he canceled putting up the numbers and the call with analysts and any guidance. here is what he did do. he had one-on-one calls with several analysts who had previously been bullish on the company. we saw the that, shares rise in the issue here is, this speaks to the spirit of rec fd and disclosure. he has been criticized for poor communication, people don't have a good understanding of what is going on in the company. instead of having it open for him, calls people who asked -- who previously like the company and talk to them one-on-one. why isn't anyone saying to have this is the way you do this? this is not the way you do it. stephanie: their board hired about five different law firms. they have bill ackman, why aren't they saying to mike pearson, open the komodo already? david: the -- you need to get some credibility back. choice from read go is this misery index. plus unemployment, when it's going down, typically, the incumbent party gets voted back in. right now, they are both coming down. i really wonder about this stuff because in the past, people have worried about inflation. i'm not sure the misery index actually holds up, anymore. stephanie: it also told us that the trumpet or get ready for hoyer clinton being in office and i don't think that is even in his sight line. thing, will tell you one i don't know anyone in the general public the things lower inflation is a bad thing. it is a central bank of session. session --ion -- of obsession. we see rising inflation break evens, rising oil prices, maybe deflation is an overstated fear. and i think that down the road, we will be looking at higher inflation rates. along the lines indicated by the rise in iron ore. david: what about europe for deflation? john: europe has a tremendous problem. you have a monetary system with no financial system -- no fiscal system in place to support it. thank you very much, john ryding. thank you for being with us. up next, a deeper dive into the chinese budget as the legislature continues its meeting. ♪ david: you're watching "bloomberg go." the futures in premarket are down but really just marginally. i'm david westin, here with stephanie ruhle. we get started with first word news. julie: it has a most become a korean peninsula. military exercises and north korea warns it has targeted both countries with new their weapons. north korea claims the military drills are rehearsals for an invasion. vice president joe biden is planning to "wipe out the evil" that is the islamic state. he spoke to american troops after visiting the grand mosque. he says the u.s. has carried out 1800 airstrikes against islamic state since october. the inventor of modern e-mail has died. it was 1971 when raymond tomlinson sent the first e-mail on arpanet. the aton also chose symbol to collect usernames with addresses. global news 24 hours a day. more than 150 news bureaus around the world. matt: a couple of stocks moving in the premarket. micron was downgraded to a saysed over at nomura who supply is on the rise. nomura think this is an eight dollar stock rather than a $12 stock. they have lowered their price target. , alsoxt stock if we could in the chip sector. the new york post says mardell is open to a sale of the country. marvell rising. stephanie: 30 minutes ago we were at 2%. a strong market response to this. matt: you are following marvell technology's closely. stephanie: i follow the new york post. matt: i see. [laughter] matt: some interesting moves. picking up a little steam. not sure how much marvell technologies is trading. you can see a lot of olive tillie that a lot of volatility. dunkin' donuts was downgraded. stock down 1.6% and analysts have taken can -- have taken can sensitive price targets down. the stock is an important one to watch in the northeast. especially in boston. stephanie: following mcdonald with this paper trying to change their strategy around. a are trying to compete with starbucks so there are several lanes. are they spurting themselves too thin because they are losing ground? matt: mcdonald's should have done all day breakfast 20 years ago. some companies should just stick to what they do best. stephanie: doughnuts. david: coffee was an ad on. it used to be doughnuts. matt: you could not get coffee? david: they made a big push and it gained a lot of customers. .att: because it tasted so good let's take a look at european automakers. european stocks ahead of the u.s. open because they often decide the direction. this is a big move this morning. volkswagen down more than 3% but daimler and bmw are down more than 1% as well. a lot going on in china that could move so many different industry sectors. it looks like they are having an effect on the automakers as well. defense spending, speaking of industry sectors that could be affected, in the united states is seen as a safe haven for some investors. managing director of defense ron epstein, thanks for joining us. let's talk first of all about why defense is seen as a safe haven. i think you noted in your 10earch that of the last recessionary period's we have seen, defense has outperformed the s&p by 9% or 10%. is that roughly correct? ron: thank for having me. defense stocks tend to outperform during recessionary periods. i think if you look at the last exterior or so emerging-market recessions u.s. defense stocks outperformed. during development of, they also outperformed. matt: one of the things i think about because it is a presidential election year, how are these different contenders going to have an effect on this defense spending. you know presidents have the single biggest effect on defense spending of any government officials. ron: we are seeing in the white house -- we're seeing whoever sits in the white house has an impact on defense spending. republicans have been better for defense spending in recent history the democrats. that notwithstanding, the political backdrop can impact it. matt: i wonder about the effect of trade restrictions. the mantra has been, from the republicans that trade is good. now we see some republican candidates saying they want to put up a bunch of tariffs. how much does this kind of trade war and terror talk -- tariff talk have on spending? ron: a bit of a quid pro quo in international spending. if you buy our weapon system we will buy something from you. anything that could be a barrier to that could impact international spending. matt: we have seen a lot more turmoil in the middle east. we have seen more action militarily. you note in your research you think defense purchases could start to come further western with the immigrant problem we are seeing in europe. ron: we are not only in a period where u.s. defense spending is rising. we are back in and up cycle for the u.s. this year, fiscal 16 is the first. most international markets, maybe with the exception of latin america are increasing as well. most of the countries in the pacific rim are spending more on defense. continental europe is spending more on defense. i think this period is unique and probably one of the best backdrops for defense spending probably in close to a decade because not only is the u.s. spending more on defense but most markets are and they are correlated. matt: a fascinating topic. we can get you back. thanks for joining us. epstein, director of defense research. david: we turn now to china. increased debt will be used to fuel growth even as growth slows. policymakers said they expect .dp for 2016 to fall we are joined by donald straszheim and jamie metzl is here on set. unfair but is this good news or bad news for investors? on the one hand they say we're going to do whatever it takes to grow. on the other hand they say we will borrow an increase fiscal deficit, our overall indebtedness. the 250% of gdp. at some point they have to pay the piper? donald: i'm sure at some point but first i would say 6.5 and a half percent -- 6.5% number is just not plausible. i'm sure they will report that. that theys report have achieved whatever target they set out. a gross number closer to 4% is realistic. not and they will continue to kick the can down the road on debt just like they learn from other countries around the world until they cannot kick it anymore. david: let's assume it is 4%, how will we know that? take us forward a year. where we see that discrepancy? donald: you won't see it in official data. they will report 7% number. you will see that discrepancy in weaker economic activity and other numbers that are independent. weakness in electricity consumption, weakness in rail freight, airline passengers, industrial production and consumption of a variety of industrial products like iron or and steel. they will not support that number. jamie: i think the numbers are lower than advertised. already, nobody really knows but could be in the 5% growth rate. we are seeing this slowing and we will continue to see this slowing. the basic problem is china has misallocated pretty much every resource starting with political power. reallocate what they are doing in their economy and move toward greater reliance on services in innovation and consumption. they cannot do it because every time they begin to have this transition they get scared that the gdp numbers are going to go down. they are addicted to this stimulus. it is like a sugar high and they need to constantly get it. the core reason for that is because of concerns of legitimacy. if you support us and keep out of politics, we are going to deliver economic growth. now they have one style of economy and the need to transition to another but they can't do it while keeping up the same high levels of growth even if they are less than what has historically been over the last few decades. david: what you are saying is powerful. there really cannot be economic reform in china without political reform. jamie: i believe that is my core message. economic reform is political reform because at the end of the day what china needs to do is empower people to do different things. to consume, to feel comfortable about their future. if china continues to have a top-down structure, people on the bottom are not going to step up. they are not going to be able to demand their rights other it is for social security, health, environment the production, or anything else. stephanie: the structure is in changing. given the structure is not changing, what is your outlook? jamie: i think that china is going to bumble forward. it's going to be relatively low --wth historically unless the next four or five, whatever it is. china possibly leaders will try top-down reforms and nobody knows -- at the end of the day there's going to be a big choice. i think chinese leaders are naturalistic and smart enough -- are nationalistic and smart enough that at the end of the day they will have to open up in some ways politically. it is a big open question. david: it jamie is right, people do not like to give up our in my -- give up power in my experience. soft landing versus hard landing. this sounds like it is going to take some abrupt to get fundamental change. donald: i would not be surprised that some number of years done the road we will see something abrupt. i agree with jamie. they are addicted to power. every government passed number one priority -- every government number one priority in the world is stay in power. that is the way it is in china. they will continue to be a top-down, commanded controlled economy for a long time. as long as they can maintain that and we have seen that that can be a very long time in many countries around the world. this is not going to be an easy transition, whenever it might occur. stephanie: the whole idea of trying to maintain an impossible balance. if you're a market participant, what can you do besides sit on the sidelines? jamie: you can look at different sectors. there is not just one china. a slowing china. there are pieces of china that are doing well. segment of the economy lend themselves to command and control types of engagement. there is a lot of opportunity in china. for china as a whole, they are kicking the can down the road. they have these two things they know they need to do. they know they need markets to better allocate resources. on the other hand, the government knows it needs to maintain the centrality of communist party control. those things are ultimately at odds and when you are growing at 10% you can hide a lot of sins but when you are growing at 5%, 3%, it is like what warren buffett says when the tide goes out, you see who is wearing swimming suits. china is facing that and that is why the national people's congress, you see these different impulses. we need to support the market and then they are saying we need to reaffirm party centrality which is why they are clamping down on the media and all these kinds of things which are increasing the number of distortions. stephanie: i don't want to see any chinese -- thank you for joining us. early this morning -- thank you for joining us early this morning. the $3 trillion industry that is keeping the sec up at night. if you are flying with delta l lines -- delta airlines in hopes of being upgraded for free, the airline plans on cutting down couple met three upgrades to business and first class sections and introduces a new points system. that does make sense. delta's incoming president said "historically the domestic first-class cabin was a loss , and there was no real compensation to the airline." we will have that and more. sorry for all of you hoping for a free upgrade. your days are numbered. stick with us. ♪ david: i'm in the green room with katie nixon. she will be with us next hour. in the meantime we will battle the charts with matt miller and julie hyman coming up next. ♪ julie: here is the bloomberg business flash. economists are split on the fed's next moves. expect the fed to raise its target for the federal funds rate above the current level by the end of the year. 39% expect two rate increases by 2016 and 17% expect three or more. the ceo of united airlines parent company is returning to work after undergoing a heart .transplant he became ill five months ago and received his heart in january. the percentage of americans leasing their cars set a record in february according to the wall street journal. 32% -- that could eventually lead to a glut of good conditions of use cars and i could put pressure on margins. stephanie: the life of exchange traded funds. they started out as a product but became an industry. one that ultimately is wearing the fec. eric balchunas has a brand-new book on the very topic. the institutional etf toolbox. he joins us now. the fact that you have written a book on etf's, we have seen the etf industry grow 400%. is that massive growth reason enough for the fec to say hold your horses? eric: probably. you have trading, complex products. they are trying to do all kinds of stuff. etf that use smart data. basically everything that you consist of, they are trying to pack into an etf. we talked about junk bonds, a big issue ongoing. the sec is looking at a variety of things. stephanie: in the high space where you have the underlying assets that are not liquid and these massive products which everyone is saying does not add up. eric: high-yield bonds is an illiquidity issue. in the leverage part, that is giving two or three times and index. you can get triple leverage small caps. all of these products are approved by the 40 act and ready for prime time so the sec is thinking, midweek over proved to many products. they are looking at many things this year in order to pick off some places. stephanie: it is not like the sec is outlawing this. if you take us back to six or seven years when we were in the world of cbo's, it was leverage that bit us. eric: the difference between etf and all of these other derivatives is etf's are physically backed. when you create shares of an etf you have to deliver the stocks. it gets stored with a custodian so it is there under lock and key. even if they are levered. the shares trade like receipts on the market. at any given time, even if blackrock went bankrupt, you still have a right to get those securities. there is no counterparty risk with etf's. that probably why they are not a systemic risk but they could have other little risks -- i called a nasty surprises. stephanie: black rocks a specifically -- black rock specifically is halting their growth etf. what is the deal? eric: they needed to get new capacity. they only had 650 million shares accounted for and kept approved. they have to re-up that. it may be an annoying inconvenience not really a big deal. i don't know why they did not anticipate needing new shares and filing earlier. stephanie: did not know the gold rush was coming. eric: everyone was caught by surprise. stephanie: eric balchunas, catch his new book. bloomberg intelligence senior etf analyst. you can read more of this story in bloomberg markets magazine. and at bloomberg.com. coming up, i am rooting for you julie. julie hyman taking on matt miller in today's battle of the charts. ♪ david: it is that time, battle of charts. a julie hyman is in the arena. julie: we will see if i can salvage myself from last time. david: no salvage. your second shot. julie: we have been talking jump.iron ore and the 19% short interest, no shortage of bearish sentiment. you could say are we seeing some short covering that is helping fuel the rally. you are looking at the price of iron ore in blue and the number of short contract in white. you would expect the short interest to come down as we are seeing some of the shorts get squeezed out, maybe we have a lag. it is interesting that you have seen such a surge in short interest. still a lot of bearishness. analystsachs saying think the rally is going to be short-lived. they think iron ore around 64 will be averaging $35 by the end of the year by the fourth quarter of this year unless we see some kind of huge unexpected surge in demand. they think the increase is not really supported by an increase in demand. stephanie: excellent. fantastic. matt: i think that is a great chart. a lot of people are saying there are not the industrial orders to support the rise in price. such a fascinating story. only priced once a day. -- can see julie's chart stephanie: they might need a little -- julie: they might need time to let your sink in. be andhis is the rem and the yen. china has $2.3 trillion in fx reserves that has been building up as the u.n. has been strengthening. this is strength when it goes down because you can buy eight yuan here for a dollar. china thought that went too far so what they are doing is spending money in some months by almost 200 billion. in order to try and get the yuan to weaken. it is working well. they have spent a ton but now they are spending less and less. they spent $28 billion last month area a lot better than the 200 billion they spent in september or the 150 billion they spent in december. julie: this is the individual amounts they are spending by month? matt: their total fx reserves. this is each month how much they have spent. here they are positive and here they are negative. david: mats is pretty but i like julie's because that surprises me. stephanie: the biggest wow for the market. i also really like what she is wearing today. my vote is going with julie. matt: i actually vote for julie today as well. david: unanimous decision. never happens. stephanie: there you go. julie hyman taking it. up next we are talking china and iron ore's big jump with katie nixon. ♪ david: u.s. stocks snapping a three-week winning streak. assessors are assessing the impact for more ecb stimulus later this week. dupont.r bid for we will have the latest on that story. we will speak to one investor who is feeling bullish about argentina. juan sartori joins us later in the hour. ♪ david: just under 30 minutes away from the opening bell in new york. i'm david westin along with stephanie ruhle. jonathan ferro is under the weather. matt miller joins us here for the hour. also with us is katie nixon. katie: thanks for having me. stephanie: we have a lot to cover. i'm sorry you did not win battle of the charts. what are you most focused on? matt: iron ore. julie's chart is fascinating. what happened in china over the weekend is fascinating as well. i want to take a look at markets. futures are off. we areuge drop here but seeing a loss of a points on s&p futures. dow jones down 53 points. nasdaq futures down the most of the three. tech shares to be a weakness. we are off after rallying pretty hard from february 11. from valentine's day on the s&p 7%. up a three-week gain for the s&p. the big game is in the russell 2000. it is up 13% from february 11. that is when oil bottomed out. the russell bottomed out as well. i think john ryding was talking about this earlier. in the past jamie has gone back, my stocks producer, and looked at rallies in the russell 2000 and found there have been three instances this has happened 2009. the russell has rallied this much this past. instances these index has rallied 31% further over the following year. it has been good for the future when we see big rallies like this in riskier stocks or broader indexes like the russell 2000. we have seen oil kind of take a leg down. we are still up 1%, 36. 20. in a note saying oil has bottomed out, the lowest point is behind us. from city, the analyst the first out with the $20 per barrel call. everyone thought he was nuts and other people started joining in the chorus. he says april should be the weakest month of the year for refinery demand. you could see continued seasonal weakness. he takes later this year we will see a rebound in crude. stephanie: are you wearing a new suit today? you look fantastic. david: he lost some weight i think it is fair to say. matt: i was on a diet and february. i do very much. -- thank you very much. some commodities here. old has turned down. the 7.70 -- 1267.70. he thought gold was ready for a pullback. he said he thought we could go down more than 1200. a little under 1200. down as well.ned hillary and i were looking at the rsi this morning. relative strength index is pointing to copper as overbought. iron ore is way overbought. you saw julie's chart. i think that says something about it as well. are we going to look at some of the miners? the premarket, mining moves are not that. unlike over in europe you see some of the u.s. stocks trading higher or some of the companies that trade here, valley is not a u.s. company, but trading here in the premarket, ak steel gaining, u.s. steel gaining. these are positive probably on the iron ore rally and negative on the turnover in copper we have seen affecting european miners. what's go to julie hyman, winner of battle of the charts with our news. julie: i'm sure i will not hold the title for too long. more threats from north korea. the u.s. and south korea have begun military exercises and north korea warns it has targeted both countries with nuclear weapons. north korea claims the military drills are really were her souls for an invasion -- really rehearsals for an invasion. talks will be tough but angela merkel is hoping for a sustainable solution on the refugee crisis. an emergency summit in brussels today. they want turkey to do more to stop refugees from entering europe. jimmy carter says he no longer needs treatment for cancer. less than seven months ago esther carter revealed cancer had spread to his brain. ginny carter is 91 years old. -- jimmy carter is 91 years old. time for the three stories that matter in markets. reservesoreign as markets stabilized in the country took steps to shore up growth. china's leaders cut their growth target to 6.5%. included a range and said they are allowing a wider fiscal deficit to meet the target. fore, you are responsible $226 million of high wealth management. the you take this into account -- i meant to say billion dollars. does this affect investment decisions? katie: of course. we have been looking at china's for exchange reserves as a way to measure how efficiently they have been able to manage currency. as many of your guests this morning have commented, it is tough to look at headline numbers in gdp and draw any conclusions about what is really going on under the hood. we have looked at the fs reserve the fact that they were drawn down less than expected his us that there is more controlled and there had been in the past. it did feel like the pboc was not really being very effective in how they were controlling. at least in messaging and communications. david: what numbers do you look at? we have guests saying they do not believe the numbers on growth. they do not pay attention to that. katie: we look at a mosaic of information. a prior guest talked about electricity usage and industrial production. the one figure we have honed in on especially recently is the fx reserve numbers. we have focused on capital flow out of china as an indication of there may be being more deep issues than the headlines were suggesting. matt: if you look at the onshore offshore spread you have seen it tighten up to almost nothing. we have a btv chart, number 50 on the terminal. if you recall, david, when we started doing bloomberg go, it was a big spread and it was getting wider. now it has come down to basically no spread at all. maybe that's why they have to spend less of their -- katie: that is one chart we have up in front of us all day long because that really tells you what the real value of the chinese currency is versus the official value. the tighter that is, the more we believe the pboc is an tighter control over what is going on. 7 and has to spend less money. -- matt: and has to spend less money. katie: at the same time we are seeing that lesser drawdown in fx reserves, we have seen chinese companies pay off dollar-denominated debt so you have had this reduction in dollar-denominated liabilities and you have had a lower drive down in their dollar in assets. stephanie: if you are comfortable with china, doesn't mean you want to invest there or it simply means that you are comfortable investing elsewhere in the world? katie: i really believe the markets are pretty efficient. at the valuations you are seeing right now in china, a lot of the bad news has been very priced in to these pe multiples. it is important to separate country from company sometimes. we are not buying chinese gdp. we are buying companies that have cash flow and management and growth plans and strategies. we believe it is a good time to be investing in emerging markets in general. specifically in china. matt: thanks to news at a i will kickoff number two. day ore jumped 19% in one three of the biggest one-day gain we have been measuring the price. one analyst saying the market has gone berserk. goldman sachs is warning the rally will be short-lived. i want to point out to terminal users who are watching the program. this is a ticker that might be not so easy to find. o2d2a. we take the price from a website that is kind of the industry-standard. this is for or that has six to content.t -- 62% iron the rally has been incredible but a lot of this is speculation. i wonder what you think about commodities in general because we don't see this across the complex. katie: this is pure speculation, short covering. these kinds of rallies tend to be rare and short-lived. matt: we see oil rallying, gold , copper. katie: you had deeply oversold markets that had significant short positions. people are rushing back into cover. as investors we have to step back and look at the supply, demand, of each individual market. with energy in particular we see continued growth and demand slow but positive. we are seeing cuts in supply. discussions on stabilizing output at current levels or in north america, actual cuts. the supply demand imbalance is becoming less of an issue for the energy market which supports the big surge we had. matt: as john farrell pointed out last week, when inventory goes down, price can go up. david: the signal noise issue you look at these numbers, how much of it is fundamental and how much is technical. do you put any stock in what premier li said about cutting some of the less productive assets such as steel? katie: i think this is a big issue. when we think about what happened over the weekend and what li talked about him a growth is at the top of their agenda and reform is somewhere down below that. i do not know if it is second, third, fourth. we see reform coming but it probably will not be within the timetable investors suggest or even hope for. this is going to be a long-term process and it is a very delicate -- i almost think of it as a teeter totter. you have to maintain that balance which is very difficult to do. reforming some of your zombie bunnies. -- zombie companies. revising your economy toward u.s. consumption-based model. stephanie: i'm going to give you number three. expectations running high for mario draghi as the ecb meets this week on the 10th. most economists surveyed are seeing a boost to qe and investors have priced in a further cut to the deposit rate. the euro is tumbling the most in a week against the dollar and yen today. the ecb has unleashed significant stimulus or do you believe that will keep rocking? katie: draghi set the bar high and he better deliver. based on what happened in december he knows he better at least meet market expectations. further into negative territory. some are suggesting maybe not 10 basis points. it could be 20. an increase to qe. matt: setting ourselves up for a fall, aren't we? katie: very high expectations. of whisper numbers what to come out of the ecb this thursday. you are seeing the market move in advance of that. you mentioned what is happening to currency, it will be interesting to see what happens on thursday. there is a lot of opposition to going more unconventional with monetary policy in europe. matt: i want to point out, we have a chart showing one-week volatility premium for euro futures. you can see on this chart which , we have risen up to a level we have not seen since december 2. the last time the market expected mario to without his bazooka and he disappointed to some extent. kind of a bait and switch almost. david: we will go back to that debate. when you talk about unconventional monetary policy, is it purchasing different sorts of securities or something as dramatic as helicopter money? katie: it is both. some whispers in the market now that they could just not only extend qe from a timetable perspective, expand it from increasing it 10 billion euro a month but also include different kinds of assets. the asset pool in europe is different than it is here in the u.s. it is shallow so they will have to broaden out the kind of assets they will buy, perhaps the break the corporate into some bank debt, high-yield perhaps. a lot of discussion on the different kinds of assets the ecb can buy. the ecb almost has to cut the deposit rate. a lot of the paper that would be eligible for the ecb to buy is now ineligible because of trading at a negative yield. stephanie: there you have it. the stories that matter to markets now. katie nixon is sticking with us for the hour. much more ahead. about 15 minutes away from the market open. u.s. futures in the red. don't think we will get a turnaround before the market opens. we are getting more global pressure. european markets and china, weighing on things. we might talk individual names. topotle, price target raised 5.50. you are watching bloomberg go. ♪ julie: this is the bloomberg business flash. wall street's average bonus fell 9% in 2015 according to estimates by the new york state contra learn. -- comptroller. obama meets with financial regulators today. he wants to get an update on how wall street reforms are being implemented. mr. obama last met with this group in october of 2014. bmw sees a time when you will be talking about the ultimate self driving machine. 100automaker marked its birthday by saying it is on the verge of realizing automated driving. bmw says people will want to get behind the wheel at times to experience the thrill of driving. >> that is amazing. matt: i am not a fan of self driving. i'm happy for everyone else to be in a self driving car. julie: they will still make regular cars because people will want to drive also. matt: i hope so. bmw -- you have experience. david: i do. matt: some of them have electron exterior. david: matt does not trust automatic transitions. matt: i have a bit of a problem. let me get into some of the market action we are seeing. i want to highlight a couple of movers we are watching. chipotle is one of those. chipotle mexican grill, we were talking about getting upgrades again. katie mentioned the lines are finally back. as a regular lunch either there, i noticed that as well. today, chipotle falling a little bit as its target was raised at credit suites. another analyst has a call out today. a down call. it's rating has been lowered at j.p. morgan. as well as the price target down to $22. i think it is a nine month price target. -- pier 1ares trading did better than analysts estimated as far as sales are concerned. 10%.1 is up earnings impressed the market and the stock is up to almost six dollars. i want to take a look at some of the miners as well. u.s. miners that were doing better. european miners seem to have turned around as well. bhp billiton whose ticker is the delicious blt, and rio tinto are on the rise again. down i think almost 5%. stephanie: this glenn core ride never seems to end. we continue to see executives doubling down and buying more but what they need to do is have a wider swath of investor stepping in and that is not what we're seeing. they got refinanced by 39 banks last month, giving a vote of confidence to the company. as we see commodities move day in day out, they move in conjunction. matt: oil was on a tear all morning and has taken a leg down. the commodities complex started out kind of negative sentiment this morning. iron ore headline pulled everybody up. more pain ahead in high-yield or is it time to buy? katie nixon is here to give us her take on bloomberg go. ♪ stephanie: this is bloomberg go. katie nixon, northern trust wealth, with us for the hour. i know you are excited to talk high yields. jeff sherman gave us his outlook and it was pretty bleak. >> there are some decent spots in the risk market. places you could be careful. ,or broad-based market exposure i still think the high-yield market has a little bit more pain in the near term. stephanie: jeff sees pain. clearly high-yield had a rough start to the year due to energy prices. katie: we still like high-yield a lot. it was more than energy prices at the beginning of the year that were a headwind. we had the combination of fears of global recession and this general risk off sentiment. i think what investors need to rest denies -- need to recognize is that high-yield bonds act as equities. we saw that come into stock relief in the first part of this year. subsequently seeing a nice recovery. fears of a global recession have receded. energy prices rebound. a risk on sentiment in the market. what had sold off so dramatically putting high-yield spreads out the points where they have been, i think eight times in history we have had high year that high-yield bond spread post 800 basis points. that was very rare outside of a systemic event or something so substantial, one of the last times high-yield spreads blew out like that was in 2000 in 2002 when you had the telecom meltdown. at that point telecom was nearly 40% of the high-yield bond market. matt: i think howard marks was on saying high-yield has been less volatile than equities historically. absolutely. what we know that is in times of market stress, when people need to occasion -- need ever suffocation, it acts as an equity. stephanie: also a lot more liquidity pain in high-yield than there are in equities. when you want to exit in times of stress, you have that option in the equity market. katie: that was one of the other reasons why there was more broad pain in high-yield beyond just the energy sector this year. we had these massive outflows from high-yield bond funds. the energy high-yield paper had really been hit full force in 2015. in 2016 when bond fund managers had to pick bond to sell, those bonds were selling at $.20 on the dollar. they had to sell higher-quality into liquidity challenge market so you saw the prices gap down and the yield spreads blowout. subsequently we have seen yields come back in about 150 basis points but you are still getting 7% or 8% in high-quality high-yield bonds. i agree with jeff, probably the pain is not completely over yet does we will see some energy defaults. we think it is a good buy opportunity. stephanie: we will be back with more. ♪ stephanie: you are watching "bloomberg ." we are 30 seconds away from the opening bell and katie nexen is with us. rtori with a group that invests in latin america. what's on your radar? there is the bellringing. right now, we see a bottom in commodities. commodityica is a continent. david: you think they have bottomed? >> yes. david: is it a buying opportunity? >> for sure, i don't think we will see $40 gas in the near future. we will see how long it takes to recover but i think it's a moment to get back into that market. said edmorris at citibank this is seasonally weak month for oil. some bouncing on iron ore before that movement. you are involved in private equity so you're involved in buying companies for three years? that were seen prices below production cost whether it's an oil or mining or agriculture and that was not sustainable. matt: so you have a much longer outlook. about thehink commodities bottom? >> i think we have seen the bottom and prices but i don't think we are in for a sustainable rally given the headwinds that are near-term whether it's the refining cycle or whether it's continued questions about global growth. we talked about avoiding a global recession and the numbers we ceasing just very slow growth. we have seen commodity prices go below cost of production and cost of production has come down significantly at the same time. these companies are using technologies to become mean and lean and bring down costs. in the analysis of oil, a company would make the same money it was making at $80 per barrel before at $60. basically, you have a lower price of the commodity. we see indexes down across the board. ,aking a look at the s&p 500 off 10 points and the dow is up 66. the nasdaq is off half a percent. if you take a look at the movement and the bloomberg, you can use the function imap to look at different industries. energy and materials are the only two gainers right now. you can see that energy stocks are up half a percent and materials are up a quarter of a percent due to the positive optimism on oil today. 'note was one of those adding to the optimism on the oil trade and the iron ore headline which blows everyone mind that it rises in just one day. taking a look at bonds and how they are doing, taking a look at the 10 year and the two-year, the 10 year right now it's gaining. it's interesting to see this over two days. people are selling out of bonds to get into riskier assets. it's not u.s. stocks right now. it might be energy and materials. they are selling out of the relative safety of government debt. looking at the underlying oil, 55ies, looking at dollars per barrel -- $.55 per barrel and gold is coming down bit and gold is up 22% from the december lows. copper is down a little bit but it was written last week. copper has done well and you are seeing a little bit of profit taking in both of those metals. going down to the nasdaq, it's looking to extend its first four-day winning streak. stephanie: this would be the first four-day winning streak which is nothing. it doesn't even look like it will happen. matt: what is it look like in times square. >> it will be interesting to see how this plays out. another small gain for the nasdaq on friday, three reversals in a row. it's too early to call how the index will trade today. one stock is off is micron with shares lower after nomura downgraded the stock. checks saysply pricing could go lower. this is in contradiction to eight call about a lot of analysts making a notation on a margin recovery and they say there is likely -- it is unlikely to see that turnaround. this suggests that micron could in jj -- could engage in bearish trading. david: the former president of brazil has some balls running for the country's notes heading that reforms needed to pull the nation out of a recession are looming. , itinvest in latin america seems like it takes courage. we hear a lot of negative things. take us through it's going on in brazil. >> we always joke in latin america that everything is the biggest in the world in brazil. today they have one of the biggest problems. one of the biggest recessions of any major economy on the planet. a big reduction in the price of the currency. almost every single one. almost half of the brazilian congress, the former president, the biggest banker in the country is under house arrest. you don't have the conditions for strong leadership and strong action against the serious institutions. what you are seeing like in america, brazil is the only country in recession. all the other countries are growing. the currency has created a more robust export industry. argentina changed from a left government to a right-wing government, very friendly for business. the same is happening in peru. candidate is leading in the polls. perhaps it would shift into a more market friendly environment. 18 months in south america, much more homogenous continent with more business friendly politicians at the helm and brazil is starting to recover because of the international currency situation. stephanie: where is the best opportunity? >> we like countries like peru which is still growing significantly. it's starting from a lopez. -- from a low base. my home country uruguay which is doing well. foreign investment is flowing back into some of these countries like argentina. it has no foreign investors. now it's open again. investors have a short memory. no one will be thinking of the default. they will think that everything is working out. it's just a new bond market issuing of $15 million that will replenish the reserves. when you look at these encouraging and something that's interesting and may be a safe haven in the world. be,d: as bullish as you may you are fairly defensive in investing, investing in power plants and things like this. >> we had a strategy which included defensive assets like infrastructure and power plants. generate justto as returns are safe. we went very aggressive on buying the stressed assets and commodities with a lot of oil exploration acquisitions. the most risky extreme of the oil market because we believe that these commodities are coming back. the commodities fell to much worse than the commodity price would say in valuations. stephanie: what do you think? >> that makes sense and is important for those who invest in the public emerging markets to recognize two things are important -- one is valuations which got stretched to the general as there was risk associated with emerging markets and a lot of bearishness that got built into valuations. the second is the lows and you cannot underestimate how important asset flows are to these markets. we saw in info into emerging markets last week after many weeks of outflows in the influence for predominantly latin america mets a function of the commodities finding their bottom and gradually rising. where having a nice big bounce off the bottom which tended to pull investor influence and of those markets which worked their way through the equity market. the flows are very important and almost as important as fundamentals. they go hand-in-hand sometimes but flows are very important. in latin america, was it across the board? in argentina there is a flow back in. >> we saw broad taste flows into dts and the only outflows was in asia. -- into etf's. we are starting to see the beginning of investor influence back into the markets that had a nice take bounce off the bottom. half of theyou saw country under investigation, that's an exaggeration, but you saw a rally in the equity market. i've got a chart that you can see on the bloomberg terminal. it has broken through the 200 day moving average. it's rising up to another resistance point so investors took this as a positive. we saw the move in the oil company, petrobras. it was all of a sudden. david: that was the center of the scandal. think of how many were betting against that scandal and people who rushed to protect their position. this was not based on fundamentals. this was based on flows in short coverings. david: you say commodities have autumn doubt, has brazil bottomed out? think it is technical in the financial markets. it could not get much worse. you have a currency effect and evaluation effect catching up at the same time. as soon as the flows come back to the country's, they will help capital markets. the flows come back and you have a big jam in the financial markets. i think the arrest of the president is a sign that could be taken as positive. the institutions and this country are very independent. asbe detaining someone untouchable as the former president was a sign of independence of justice and the investigation should be taken seriously. justpart of granting gaining credibility for brazil. president and founder of union group, thank you for joining us today. katie nixon will stay with us. player may want into a merger. ♪ matt: this is "bloomberg ." tomorrow, you don't want to miss our interview with the sec chair mary jo white at eight at lock a.m. -- at 8:00 a.m. an expense of loss for apple at the supreme court, they will pay $450 million inan ebook pricing case. they say apple orchestrated a scheme to raise the prices for electronic books. the ally baba affiliate will close at second round of financing of $60 billion. the company is controlled by jack ma at alibaba. it runs a huge pay service. the ceo of united airlines parent company is returning to work after undergoing a are transplant. munoz became ill five months ago and received a new heart in january. the world's largest chemicals company, is reworking with banks on a possible counter bid for dupont which agreed to a merger back in december. us exactly what they are up to? will they take this? >> the chance of them moving forward with a real bid is relatively low. i think they are looking at this because they have to. many companies left of scale in this industry to buy in this would give them the footprint that they really want. have agreed to this merger and they are waiting to see if anything happens and if any cracks appear, they will strike. were reports that they had discussions with dupont before the dow deal was done. >> that's right, dupont was talking to other companies. they said this in their proxy statement. one of the meetings they held was one mile from the basf headquarters. they are still looking at it and continuing to explore whether it might make sense. an investor, what do you make of it? is this a bigger opportunity for you? >> it's interesting and it's another reflection of the fact that in a world where global growth is dear, you will look for any signs of growth. urge to merge especially with low rates and capital being readily available. i think we will see more and more of this. there are strategic mergers in an attempt to get some growth. for at the earnings outlook 2016. we see fairly positive revenue growth and we got some incredible headwinds from industrial companies. it's a most a requirement, necessity, to look for a partner. stephanie: does this not seem like too little too late? why didn't they come to the party sooner? >> it does, it reflects that basf is one of the most conservative of the big chemical businesses worldwide. it's watching these mergers and it's saying if we don't do something, we could be left out in the cold. it really wants exposure. it is a question of wire they doing it now but i think if they do wade in now, it would be an interesting fight to watch. matt: how much would this cost them and they -- and do they have the funding? >> they do have the funding. they have spoken to financing backers and have lined up some to do this. it would be expensive. they would have to pay a big premium over what has been agreed to with dow. it could be about $1.5 billion. they don't have that kind of cash and the shares have kind of tanked over the last year so it would be difficult. we have seen this before, it deals where we think there is no way this will happen and it comes out that it does. stephanie: another potential bidding war is the lsc. in and do theyme have the money? >> it's the battle of the acronyms. in it.reporting it's not dissimilar, it's an industry where there are not that many big deals left to be done. publicly,s out there everyone has to join in. lse are in discussions and we think ice are trying to get around this and may restructure this deal to get a tax benefit and now cme is looking at it. all of these companies could be involved. i don't think lse will go for the first effort. stephanie: good for them. quinn has quite a lineup. coming up at the top of the hour, what do you have today? vonnie: we have a nobel laureate with us. he had dinner last night with ifmier lee and we will ask the steps that china has announced will allow them to grow at the pace they want and still urbanized their citizens. we will speak in the 10:00 hour with danny blanchflower. basf deallk to the and much more. stephanie: i want to thank you ed ahmmond and caging a sin. -- and katie nixon. next, we have final thoughts and a look ahead to tomorrow where i guarantee you want to be here. it will be a big day. ♪ matt: taking a look at the early movers, sun edison rising another 8.5%. it could be a short squeeze after the massive rally we saw on friday. it is a volatile stock at $1.93. they settled a lawsuit in investors are happy about that. taking a look at dupont, we have basf talking about the possible move. they have been talking to investment bankers about whether or not a deal makes sense. that stock is up 1.5%. t,king a look at valean what's going on there? stephanie: keep in mind where it's trading. the entry point for many investors on the stock was in the high 100. 's. it is a rallying around a $60 value is probably not a long-term investment. matt: they will put out there numbers last week. i also want to look at the miners quickly. there is such volatility in commodities. gold is off a little bit but newmont mining is gaining. one of these is up like 80%. gold is up 90%. the underlying commodity is only up 19% year to date. newmont is up almost 50% year to date and goldcorp is showing some gains as well. big gainers in the gold miners but across all the mining complex. stephanie: you know what else is big? tomorrow's show. in honor of international women's day, we have got a very special lineup. three hours of the best female executives and thought leaders across industries. you don't want to miss it. i will share a few. mary jo white, sec chair will be with us. the former head of the commodities division will be with us. she is now left the industry. she is running digital assets. to the u.n.assador will join us at 7:00 a.m. and liz myers from jpmorgan and kathy engelbert, ceo of deloitte and touche. melinda gates as well. that's international women's day tomorrow. ♪ vonnie: from bloomberg world headquarters, i am vonnie quinn. mark: this is bloomberg markets on bloomberg television. ♪ ♪ vonnie: we want to take you from new york to london to beijing. u.s. stocks are retreating from a two-month high. investors are thinking and considering about the latest chinese announcement meant, the possibility of new stimulus measures. from the ecb. mark: a commodity comes back today with iron ore growing the most in a single day in what some say this rally -- and why some say this won't last. vonnie: donald trump is ahead in a michigan primary. ted cruz is warning that washington dealmakers should not try to steal

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