take a look at what is dragging on the transports. it's worth noting the major averages are on pace for weekly gains. the dow the best since the end of april. relative to transports, weakness for shares of american airlines come united, with a downgrade over and jpmorgan to neutral with analysts saying estimates seem unachievable. royal caribbean down 1.8%. this on a downgrade at credit suisse. analyst cutting shares to a neutral, saying the outlook is uncertain. we had that terror attack in london. that could be impacting some of these stocks as well. at two otherlook big movers, oracle, fax. oracle down 6% after they beat estimates for the quarter but it is that cloud outlook weighing. fax down once again as senator elizabeth moran setting her sights on them, proposing legislation around the company today. shares down once again. overall, it has been a risk on week. this is an index of risk on-risk off. on the week, big risk on. going into the weekend, on that terror attack in london, north korea firing another missile above japan, a little bit of risk off, even though it is not showing in the financial markets overall in the u.s. mark: the stock market proving resilient to north korean event in london. week, fallingthe for the second day in three, though. weekly rise, 1.3%. continuing this trend of weekly rises and losses, alternating. we are down today but we are up for the week. stronger euro, the germany dax index, export heavy, hovering near its low since may 2016 related to the italian benchmark index. s nextneral election i year. dax underperformance provides a good buying opportunity, according to societe generale. germany has its own election on september 24 with chancellor angela merkel slated to win. sterling continuing its rise today post-brexit high against the dollar. membershe more dovish of the boe said he may support raising rates after yesterday they suggested rates could be raised if they continue on the same path. premium to hold call options on the pound relative to puts rising to the widest since 2009. the market beginning to price in to price in two rate increases next year. this september is different to the crisis 25 years ago. known as black wednesday. sterling fell by 4%. nothing to the post-brexit one day loss of 8%. this chart shows you the trade weighted index. over thear the low period, as you can see on the trade weighted index, despite this high of sterling against the dollar. we had some trade data out of the eurozone, july surplus of 18.6 billion for the entire euro zone. the below chart shows data going back to 2000. it is very complex but essentially tells you germany is the backbone of the eurozone, and has the highest trade surplus with non-eurozone countries. the red line is the total eurozone trade surplus. yellow is germany. other countries, much weaker than the surplus. some even have a deficit. great chart on the day. in geopolitical news, north korea sending a clear message of defiance days after the un security council ratcheted up sanctions against the country. pyongyang fired another missile that passed over japan before crashing into the pacific. the missile travel 2300 miles, far enough to put the u.s. territory of guam in range. shinzo abe says a unified response against north korea is needed now more than ever. north korea's act tramples on the international community's will to seek a peaceful resolution. this is absolutely unacceptable. i have asked the yuan to convene an emergency meeting. the international community must send a weird message as one voice against north korea's provocation, which threatens world peace. the yuanhat meeting at is scheduled for 3:00 eastern today. our person whois leads our international coverage. not all leaders are on the same page. does the u.s. need a new position on north korea? >> there was a lot of reluctance heading into the last round of sanctions, particularly from china and russia, about whether further measures would be affected. u.s. made clear, ambassador nikki haley said on monday when they voted on the sanctions, if the international community does not stay together and continue ratcheting up the pressure, the u.s. is willing to go alone. she did not say what that means, but we may get a hint of that at 1:15 today when she kicks off the white house press briefing with national security advisor mcmasters. they may talk a bit about what is coming with north korea, and also, this all happens in the context of the yuan general assembly taking place next week with 150 plus world leaders coming into town. north korea, the tensions there will be high on all of their agendas. just listen to rex tillerson, secretary of state, discussing north korea yesterday. , ai am hopeful that china great country, role power, will decide on their own and will take it upon themselves to use that very powerful tool of oil supply to persuade north korea to reconsider its current path toward weapons development. mark: what surprised me today, the language from the south jae-in, heom moon says we have the power to smash north korea into powder and put it beyond recovery. were you surprised by the chon of the language emanating from south korea? >> very much so, if you keep in mind this is a president that took office trying to extend an olive branch to north korea, talking about ways to maybe send food aid to the north. initially rejecting u.s. efforts -- holding up u.s. efforts to deploy a missile defense system in south korea. president moon has had to change that policy. he has welcomed the full deployment of the missile defense system, has found himself on the front lines of this conflict as north korea continues to respond to each round of sanctions with more provocative test. we have had two icbm tests in august, a large nuclear bomb test earlier this month. now we have this intermediate range missile which looks like it could have hit guam, a u.s. tour terry north korea -- territory north korea threatened weeks ago. vonnie: thank you. let's continue the conversation with retired army major mike lyons, senior fellow at the truman national security project. he joins us in studio. how long can this provocation continue without something seriously going wrong? mike: if north korea makes a mistake, accidentally hits japan, does something to south korea. unfortunately, because of kim father and grandfather, they have made these kinds of mistakes before and we have not responded. that will be a challenge year. this was the furthest he has put one out there, definitely could have hit long. the last few months, these have been many firsts on capabilities of they did not have before that they are demonstrating now. vonnie: president trump has said all options are on the table. if it comes to that, what would a military operation in north korea look like? >> it would have to be a tremendous first strike that would come from air, land, and see from allied forces within the region, only to make sure that he did not respond back. if he has make we are capability, south korea would have to buy off on it. you would have to reposition assets, in the sea, you have to move troops, evacuate civilians. if that is the case, you will see warning. there will be a tremendous heads-up, should we decide to go that route. mark: it has been characterized that both leaders, trump and the leader of north korea are trigger-happy. think, on any level, that is a fair characterization? mike: i think it is. we have to establish to medications. during the cold war, the u.s. and russia put together a phone where they were able to pick it up and talk to the other side if something happened with regard to some kind of an accident. nobody is talking to anybody, that's the problem. as the rhetoric is getting heated up on both sides, our president, the south korean president, the japanese prime minister is very concerned. you see the things that the north korean leader says. it is just absurd. the bottom line is, no one is talking. if there is a hair trigger mistake that takes place, there will not be communications to figure out how to stop it. mark: can you tell me where we are with the technology, how close is north korea to guiding a long-range missile to a target with a nuclear warhead that actually survived the trip? it willt close to where hit the united states with any kind of accuracy, although if the last test proves out to be a hydrogen bomb, takes away some of their accuracy concerns. you can fire that over a city. but they have a ways to go. without having a program, guiding it back into the atmosphere, miniaturizing it to get on top of an icbm -- they have a ways to go. but we cannot sit here saying 25 years from now -- they will have more of those weapons later. now is the time to address this, freeze the program, figure out what they want, and then move down that path, or else i believe you will see some kind of military action. it could start from south korea. there was a report about commando units. that is something that is now being considered more that had not been in the past. commando units getting there and trying to get kim jong un and overthrow the regime that way. vonnie: i want to point to a chart in the bloomberg. it is a great picture of how many missiles have been launched, tests in the last number of months in comparison to last year. this is clearly wrapping up. you mention the first action may become from south korea now. the will in north korea to overthrow the leader? mike: that remains to be seen. you have to figure the chinese have people surrounding the north korean leader that they are paying off, trying to watch, they believe they have access to. but he wakes up every day concern whether he will survive that day. if the chinese government decides to try to take them out, that is something they could do. it doesn't look like they will do that soon. amount of missiles they are launching, he learned something every time. vonnie: russia came out a little while ago and said this tit-for-tat was not doing anything to help, in fact, could be having the opposite effect, egging the north korean leader along. where does russia stand here? mike: they stand to gain. if you have this war take place on the korean peninsula, all of these assets being destroyed, russia stand to gain. they are antagonist in this, they are not our friend helping to settle this. they will be on the side of china and allow the situation to continue the when full well the u.s. has to expend resources toward. vonnie: thank you for joining us. let's check in on the first word news. >> in london, police say a terrorist set up a homemade bomb on a subway train during rush hour. 22 were injured. some had burns and a number hurt during a stampede to get away from the crash. british prime minister theresa may says the country's official threat level from terrorism remains at severe, meaning an attack is highly likely. president trump responded to the attack on twitter. he said -- a former conservative lawmaker in the u.k. says it is inappropriate for an ally to make announcements that share intelligence. meanwhile, the president has signed a congressional resolution condemning white supremacists and other hate groups. congress passed the measure following a white nationalist rally in virginia that turned violent. hours before the signing, the president repeated the claim that there were bad people on both sides during the protest. nasa's casino space craft has nided its journey -- cassi spacecraft has ended its journey in a fiery crash. it collected more than 5000 thousand -- 450,000 images. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. mark: coming up, oil pushing higher, gold heading for a weekly drop. futures in focus is next. this is bloomberg. ♪ vonnie: live from new york and london, i'm vonnie quinn. mark: i'm mark barton. this is "bloomberg markets." futures in focus, oil heading for a second weekly advance on accelerating crude demand. gold drops as north korea missile petit kicks in. is larry shover. is oil going to close above 50 or not? >> really hard to say. you have headlines, hurricanes, enough to make a rally 5%. in the near term, you have the iea coming on wednesday saying we are going to get to a balanced market very soon, opec also very influential with headlines. i think there is a tale when going on because people realize demand, especially india and china has been very good at on the other hand, people realize this era of easy supply. we could definitely see a balanced market in 2017, but it may be short-lived. mark: you are bearish with respect to front month prices? i definitely am, but when i see the spread between brent and wti as wide as it is today, i think i could put egg on my face, where it could incentivize producers to export. reallyink we have gone far really fast and the market needs to catch up. we will be here in a narrow but volatile trading range. gold interesting to see today down for four days and five, the first weekly drop in four, shrugging off north korean concerns. is gold now immune to korean concerns? larry: that is a deeply fascinating trade. up $170 for the year. we could talk about safe haven buying but when you look at asset classes around us, volatility is really cheap. i'm not sure i buy that. i think gold is telling us something that many of us are maybe not listening to. the headwinds for gold right now, the fed is supposedly be raising rates, global monetary policy is supposed to become narrow, should converge. if that is true, gold should be anding at $1250 or below out and it is not. maybe gold is just holding up for that reason alone. mark: have a good weekend, larry. that is today's futures in focus. still ahead, contrary and hedge fund manager hugh hendry explained why he is throwing in a town on his firm after a 15-year run. this is bloomberg. ♪ mark: this is "bloomberg markets." i'm mark barton. vonnie: in new york, i'm vonnie quinn. it is time for etf friday. abigail: joining me here is eric balchunas, senior analyst with bloomberg intelligence. i know today you want to tackle the topic of these relative to etf. i worked on the asset management side for a number of years, spent some time with an investment advisory firm. the constant pressure was that these fees are so tiny. some of the smarter potential clients would talk about, why are we going to pay you? is this the great cost migration you have been writing about? eric: that is my big, fancy term for the downward pressure on fees and funds. we have seen etf's, index funds drive down fees consistently. it is being driven by advisors, they are the ones who are driving the cost migration. they just want the cheapest possible products because now they are fee-based not getting commissions. so it's in their interest to go to the cheapest funds. 90% of all flows into passive are going into products that charge less than 20 basis points. this is hurting asset managers. they don't know what they will do in the future if they have no money. they are saying, advisors, you are still charging 1%, you have not had to take anything on the chin with this cost migration. we will start offering advice. asset managers who offer those products will now offer advice and compete with their own clients in an effort to lower fees. they are charging 30 basis points, 25 basis points, similar to what robos charge, for human advice. this will be compelling for advisers who charge 1%, 1.5%. abigail: i know your work is more focused on vanguard, a beast of its own making. why are you so interested in vanguard? robos are hot, but vanguard has something special, no profit motive. vanguard has a mutual ownership structure, nobody has that. they are not looking for profits, they are looking to gather assets, and any profits they get the lower fees. even his advice service, they have this clear message. they can provide advisor alpha of 3% year using behavioral coaching, rebalancing, etc.. that 3%, you can argue, is the new active management. you deliver 3% n.l. pot and then you use passive products. it is a compelling message for cheap cost and that mutual ownership structure, they will es evene to lower fe below 30 basis points. abigail: great stuff. there is a ton of talk about it in the industry. eric balchunas, thank you so much. vonnie: abigail, thank you for that. still ahead, we are talking washington and geopolitics. this is bloomberg. ♪ . ♪ vonnie: a hazy and almost summer day midtown manhattan. i'm new york and london, i am vonnie quinn. mark: i am mark barton and this is bloomberg markets. the first word news, emma chandra has more from new york. >> the u.k. has been rocked by another terrorist attack, a homemade bomb exploded on the london tube during rush hour and sky news is a probably failed to fully detonate. arenjured and police releasing information as a manhunt underway for the attacker, the fifth terror attack in the u.k. this year. president trump spoke at the white house about the london attack. president trump: terrible thing that just keeps going. we have to be very smart and a very tough. with perhaps we are not merely tough enough. that is an absolutely terrible thing and i will call the prime minister right now. >> a president earlier criticized british counterterrorism efforts, saying terrorists more in the side of scotland yard. the latest north korean missile went further than any other one the regime has launched. it was the second to fly over japan in two months and traveled far enough to put the u.s. territory of guam in range but not unexpected by north korea had vowed to retaliate for new united nations security council sanctions. in brazil, their president has been hit with a second set of criminal charges. the chief public prosecutor has accused her of a fraction of justice and criminal conspiracy. he says she and several aides took $188 million in kickbacks. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am emma chandra. this is bloomberg. vonnie: thank you. a city in mexico with a milestone, santander will bring the closing bell at the new york stock exchange. they will commemorate the fifth anniversary of its listing. this is as donald trump vocal stance on trade and immigration way on mexico's upcoming presidential elections. mexico of santander joins me from the new york stock exchange. how are you advising clients on the upcoming presidential election, which takes place in mexico next july? >> we are telling clients to stay calm. we will not know the rolex -- results until mid-next year and we tell them to continue as they were and with their investments. we see mexico as a great opportunity. near-term, mexico will continue to grow. vonnie: how has the election of donald trump impacted your business over the last several months? >> at the beginning, he impacted, first of all, because of the exchange rate, helped us a lot. the rates have doubled in mexico over the past 1.5 years since the election and cooperation started. undere maintained it control, inflation came up a little bit because of the exchange rate. the economy is growing healthy and consumer consumption is good. people have bought new cars, appliances. we will grow more than 2% this year. we have seen that little by little, people are getting more calm about the situation. grow as expected. vonnie: are you concerned about rising inflation, not just for the mexico economy, but for your business? a -- , because there is a little bit more than 6%. that make ofing mexico is doing the right job in order to help us at inflation shall come down through more normal levels, 3%, 3.5% next year. vonnie: santander mexico, where are you seeing the best loan growth? which units are performing well? >> first of all, we are doing banking.estment a lot of ideas, new companies coming out -- ideas, new companies coming out -- ipo's, to coming out -- new companies coming out. cuervo. you see mexican companies coming out into the market. consumers are doing well. credit cards have maintained the cost of credit. we see a healthy growing their also, consumer loans. -- we see a healthy growing there. also, consumer loans. vonnie: analysts say the bank in mexico -- are you eyeing local growth opportunities? >> i think so. you have a country of 120 million people. once they move into the middle class, this creates a consumer area we did not used to have. more and more mexicans every year have better payrolls. better situations. expandve been able to and you see it in consumption. that is helping us a lot. vonnie: if we look at the bloomberg and major currencies, the u.s. dollar, the peso is the best performing year to date aside from the dollar. are you concerned about the strength of the mexican peso, an indication when it comes to nafta negotiations, which clearly are not over? eso, even though the best performing currency in the market this year, in terms of real terms, probably in 40 years, the lowest it has been in a long time. 22 versus the dollar, it was much more. more or less at the right level. mexico is very competitive. the peso used to be less than 12, 13 three years ago. reflected -- affected inflation as much and we believe the peso is resilient and will continue this way. about are being positive what the conversation with nafta will be. we believe, nafta has been there for more than 20 something years. we believe it is the right way to go. , ringingongratulations the closing bell on the five-year anniversary. mark: fantastic interview. coming up, another macro hedge fund growing, hugh hendry blaming the market rally on the closure of this collective fund. more from that conversation the. vonnie: our stock of the hour, oracle, there may be some fake ups in the move to the cloud -- pickups and their move to the cloud and we will tell you why. this is bloomberg. ♪ ♪ vonnie: live from london and new york, you are watching bloomberg markets. i am vonnie quinn with mark barton. oracle shares falling after the company projected growth in the cloud will slow. the outlook for slowing revenue is overwhelming but was otherwise a positive earnings report. joining us is taylor riggs. taylor: overall positive on the top and bottom line but all about future guidance. expectations for growth in the future, the cloud business expected to slow on revenue growth to about 41%. that would be down from 51% growth the last quarter that just finished, their first quarter of the fiscal year 2017. the slowest quarter since the third quarter in 2016. a little bit of concern about an increase in competition in some of the demand for the services. starting to put some pressure on oracle. big of a is not as business as you look at it as a percent of revenue yet but definitely a push for the company. they get about 60% of their revenue from the traditional software and services. they have been hiring salespeople and making acquisitions to push forward in the cloud space. concerning when you look at the projections for the next quarter. vonnie: there must be other people that are benefiting in the cloud. taylor: citi talked about sap and said they may benefit after oracle earnings yesterday. oracle's cloud strategy relies on converting existing companies whereas sap sells software for existing clients to expand that. and add to their favorite. saying they could see incremental revenue opportunities for s.a.p. vonnie: thank you with our stock of the hour. mark: equities claiming another hedge fund casualty as hugh hendry known for his provocative statements and returning 31% in the financial crisis is closing his electric asset management following a 15 year run that ended with losses and spoke exquisitely to daybreak america's about the challenges that led to the decline of the fund. mr. hendry: i feel like i am here saying i was only getting. -- kidding. i do not think there are many managers who have gone out like this. it is a function of economics. and the cost of running a hedge fund, regulatory and other considerations were to great. -- too great. i died in active combat and the notion -- guy: i do not believe this is it, this is a hiatus, isn't it? mr. hendry: i have had an immense love and appetite for life, specially because it is capricious and i feel i am better tuesday did -- suited to do with the random course of events good and bad which will arrive. guy: when -- are you talking about the markets? mr. hendry: the last three months work harrowing -- work harrowing.-- were returno cousins, their seven mediocre since 2012. there is an avid is to do something -- there is an effort is to do something and there has been high levels of risk to say that we are trying, i was no exception. i ran a lot of risks under the summer and to my great horror i've a claim -- i became deeply core oil to the -- president trump's presidency and geopolitical events and the korean peninsula. that wasn't meant to be like that. while me through how difficult it has been to turn from the bear we knew in 2008 2 people you are now -- to the bul l you are now? >> it has not been so difficult. there was a cathartic event which was november 2013 when i published a letter borrowing from the phraseology of "entourage" the american television theater, what if i was to tell you that i had turned bullish -- is that something you would be interested in? my investor may said not. since 2013, my message has been that i thought the stock market -- the opportunity to find a , there was ades futility in trying to find trades that would do well in the advent of a crisis. today, in the most immediate futures as i look out, i cannot foresee a crisis. the cathartic event was saying the central bankers, we came so barrel- staring down the of this deflationary crisis and we came close to an environment for the american comedy could have endured the horrors of the greek economy. courageous intellectual decisions we have been spared. and i ask at what cost say i do not care about the cost as there is no cost greater than preventing what could have been an immense human tragedy in the aftermath of 2008. >> over the last five years, your performance, not drastically bad with high single-digit returns, mid single-digit returns, loosing of digit returns, some years of losses, why did investors abandon you and go from billions to $30 million? -- i got 15i have years of performance. i can say that we compounded at 6% on average over the course of that journey. you look at it in terms of what i was doing, i was a macro portfolio and a diversify or to funds. my correlation was tightly volatility, when it spiked in 2008, i made this very good profit. over the course of that time, volatility has been low. i have offered a positive carry of 6% while allowing most of my clients have been long volatility and diversify portfolios. i am not your competition. imagine a portfolio on your own -- if you are running a portfolio on your own, i wish you the best and i am curtailed and what i can and cannot do. my role is to diversify your risk portfolio. mark: hugh hendry, eclectic asset management founder here on bloomberg earlier. for more on this take of hedge funds, let's bring in our hedge fund correspondent. the hedge fund industry is losing one of its big characters. would you not say so? >> he has a long-term track record. it was -- i would not say it was just performance that led to him shutting down. primarily, because it was too low that you could sustain the business. there are many macro hedge funds across the globe who are doing worse than him. since they have billions of dollars, they are able to sustain their business and still continuing. in this case, it is incredibly hard to basically run your fund. mark: give us an idea of the hedge funds that have been liquidated this year. last year was a tough year for the industry. how does it compare year on year? >> more hedge funds have shut been started since at least 2015. that trend continues. it is primarily because of the performance and investors have not been willing to wait out. they are pulling out money from losers. not that they are allocating money to hedge funds. this year, $30 billion have come in. mark: macro hedge funds have not done badly this year, just underperformed the hedge fund industry in their entirety. >> of about 3%, about half the returns of hedge funds industry. they are underperforming hedge funds. some of the big and blue-chip names are really doing badly. their losses are close to 10%, between 5% and 10%. in a market which is rallying and hedge funds are doing better. investors are taking a called whether they want to stick around and wait for good times to return or not. mark: thank you for joining us. coming up on bloomberg markets, on sunday, ray dalio, the founder of bridgewater associates, one of the world top hedge funds, he shares rare insights behind the principles that have governed his four decade career as one of the world's foremost investors. 5:00 p.m. eastern on sunday and 10:00 p.m. in london. vonnie: i will be tuning in. brokerage assembling to prepare for the new european union rules that take effect january, a special take on this -- mifid 2. ♪ ♪ vonnie: that is london, it does not look like winter yet, you are looking for to much of a. i am -- too much sympathy, i am vonnie quinn. mark: the new european rules known as mifid ii take effect in january and why banks and brokers have to hurry to comply. stocks and bonds have bounceback since the 2008 financial crisis. the public trust however has not recovered. not with high-speed trading, next lane volatility, and banking scandals creating the sense that financial markets are unfair. many politicians and regular sea level in the playing field as unfinished, close crisis cleanup . a vast set of new european union rules known as mifid ii will force unprecedented transparency on banks and brokers, the eu rules will apply to any institution trading european securities. traders are scrambling to comply with a revision of the eu markets and financial instruments directive. effecthich goes into january and will update the way broker share information and get paid. many of the rules like those were crying brokers to synchronize clocks and store recordings of phone calls, are designed to give regulators information to reconstruct events quickly, if things go wrong. others and rebel conflict of interest like the practice of routing trading commissions to firms in return for investment research. some of the mifid ii guidelines go much further than dodd-frank in the u.s.. banks and brokerages say regulators are overreaching, critics say that by forcing the disclosure of prices, trading may be inhibited and marketing accredited may be reduced and cut into bank profits. authorities say the numerals will help restore trust and strengthen consumer protections while fostering competition and encouraging more independent research. that was a special quick take on mifid ii. foro the bloomberg solutions. , among theid ii eight or 10 subsections you can go to. ,he european closes next following stocks less than 35 minutes until the end of today's session. aeck out stocks, it has been week of gains and a couple of days of little change, up for a week of gains, 120%. the currency board, sterling, the bank of england, ready to hike rates? sterling investors think so and posted to a 15 month high against the dollar. vonnie: for u.s. stocks, the averages are doing not too badly in the first 1.5 hours of trading. invidious, higher by up 5.5% and western digital up 3.1%. no news concerning western digital where nvidia, interest of apple may these sending the shares higher. s&p 500 at a 10th of a percent. .t records the nasdaq leading the way, up half a percent. this is bloomberg. ♪ so we need tablets installed... with the menu app ready to roll. in 12 weeks. yeah. ♪ ♪ the world of fast food is being changed by faster networks. ♪ ♪ data, applications, customer experience. ♪ ♪ which is why comcast business delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. york and00 in new 11:00 p.m. in hong kong. i am mark barton. vonnie: i am vonnie quinn and this is the european close on bloomberg markets. ♪ mark: the top stories we're covering from the bloomberg and around the world. markets shrugging off the latest geopolitical risk factors, including another missile test by north korea. european stocks down here in we will ask michael purves how this lays out in his investment strategy. the sterling rally this year, at its highest since the brexit vote as the bank of england makes hawkish noises. into the boy who cried will territory on u.k. interest rates? we will hear from the alibaba founder, is he getting worried about growing competition from another chinese tech giant? where european