The dow gaining to a record high, but not holding on. The sector groups are performing well today, you can see there are for Industry Groups lower and seven higher. Energy and financials leading the way. Financials expending extending their advance. This is after the big u. S. Banks pass the stress test and got approval to return cash through dividends and buybacks. Plenty of things for investors to like about financials, including rising bond yields as well. Terms of Actual Company specific news, quite a few developments on the m a front. Online personal finance Company Getting taken over by red ventures for 14 a share, and allcash deal. Eq to getting a boost up by 2 took a 12 partners stake in the company. It wants to separate its operations incentivizing bryce energy. And carmakers coming out with news today, elon musk indicating through twitter that the model three sedan is ahead of schedule and will probably come in on schedule. Company hasr the missed to so many deadlines when it came to its production of its electric vehicles. Are higher, now trending down about 2. 5 . The biggest ford rally since january after june sales declined, but less than one analyst expected. Overall ona lift betterthanexpected sales. In the bond market here right now, treasuries as you mentioned to trading low. We got yields of some three to. Ace 34 basis points that one point the fiveyear touching 193, thats the highest been since may 11. With a bit of a forecast increase in june, manufacturing the highest level since august 2014. Some of the data matching some of the rhetoric point we see from the global bank. I want to give you look at whats going on, im looking at the year 25 into 10. The twoyear in the fiveyear is the blue line, the white line is the fiveyear to 10 year charge. Overare treating steeper the last several sessions. Unless we start to see traders ramping up their hikes, its the question if this deepening holds, the curve is already in line with model productions for september of 2018. As you can see based on where we were in december of 2016, a long way to go is the peak in this chart. But its been trending higher. Scarlet the bank really depends on what happens. Lets move on to commodities. We are starting with the biggest mover, not necessarily the most sending games to a fouryear high revising some serious supply concerns because the Weather Forecast of a drought expanding across the northern reaches of the great plains, thats one reason by josh wise spring rate spring wheat isnt rallying. Farmers planted less than expected. So overall by 3 , the lowest level this year at eckstein 11 16. 11. Money managers have been positioning themselves against silver, boosting the short position in silver futures and options to the highest level since mid2015 and crude oil was higher for the eighth straight day, the longest winning streak in three years. Todays catalyst was an excited drop in u. S. Oil rigs. An unexpected drop in u. S. Oil rigs. You put your head in your hands on those. And currency land, we do the dollar index higher, short position trimming as well and weve got yields a touch high. I want to touch on what we are seeing in the dollaryen, 113 and . 37. We did see the japanese bid earlier in the session on the news that Prime Minister abes ruling party suffered a local election defeat in tokyo and reservist reversed some of the gains you can see at. 9 higher dollar versus the end. We want to point out what we are seeing in sterling versus the dollar as well, the u. K. Manufacturing pmi hitting this morning. Given what we are seeing in oil, i want to give you a quick look the dollar stronger across the board, but the relative strength we are seeing in oil is limiting the losses in the Canadian Dollar and the norwegian kroner across the g10. In the dollar ruble as well, the dollar ruble, the ruble specifically having its worst month since 2015 last month. Relative to the dollar. Not only oil going on there. The sanctions we see additionally heading from the u. S. Government. How shes for the ruble ouchies for the ruble. Something for britain for p utin. Now to the numbers. He joins us from the bureau in london, thank you for joining us. The number of things going on in the markets. Not only the shift we saw. From Central Banks, as they take a more hawkish tone. Are the markets prepared, given where asset prices lie at this stage . I dont think they are. Leading two guns five days simultaneous bubbles. The largest bubble in government bonds is in europe with inflation is close to 2 and ppi inflation is close to 3 . In the largest mobile inequities is in the u. S. Markets on the s p, for example, where priceearnings multiples are in excess of 30 times adjusted. In terms of valuations, the market is moving. Lets start with bonds. About how there is usually a call before the storm. When it comes to the selloff we saw in bonds led by european government bonds, that began last week, is that the storm, or was that a precursor to a bigger storm . Mr. Filia i think is the precursor. I dont know if this time around will eventually bust into something bigger than it actually has done. But it could very well be. The 10 year treasuries could continue its ascent and we could see the yield going closer to 2. 8 or 3 , which are the levels it looked like it was pointing to back in march. And then failed. I think we could see that type of movement. The cents. A guide in whenever the past weve seen treasury volatility before, subsequently weve seen that movement in rates very big, close to 100 points. S time around, the race the rate only moved to 20 points. You can see a Bigger Movement from here. Scarlet what would be the catalyst . Mr. Filia bubble of valuations. Near in terms of yield where they should be. Europe andy true in in japan. Look at the case in europe, where the current gdp growth with expectations pointing to a level for boom which are be in excess of a 40 basis points. You look at the fiveyear bubble , these5 points, clearly valuations have nothing to do with fundamentals. They have to do with qualitative easing and centralbank flows. Through peak qe at the moment, Central Banks around the world are printing 300 billion euros every month for 3. 7 trillion euros for year. At some point, they told us they want to exit quantitative easing in this global tapering will eventually allow arms closer to their valuations. Around the fact that these transitions may be denying been mine benign. Is where we are less positive and we dont see gdp coming down the strong as it should be to justify rising rates. Investors have gotten into a habit of assuming whenever anything gets tough or we see come some kind of shakedown from the central bank and sells to try and cool everything down and say we are still going to backstop the markets in the policy we are continuing to play. We saw that with a misinterpretation of what the market did with mario draghi last week, the ecb came out in the market still wants to push the euro higher. I guess there in all those things in mind, how do you make money in the second half of this year . What are the traits to be in given all the risks you talked about . Willilia the central bank try to talk down risk, as part of the job to boost confidence. Its not surprising what they are trying to do. Everything is the market may become more pricing into Market Action is the fact they are running into capacity issues. The Balance Sheet of the ecb is 40 of gdp and the ecb already bonds, German Government bonds as they can. The average maturity of their bonds needs to be shrunk for years now. They are running into capacity issues at the same time germany is experiencing deflation, the 2 inflation and ppi at 3 . The negative real rate the germans have are very prohibitive. Its understandable they put pressure on the ecb for them to exit from quantitative easing. The benefit to the equity markets i think should not be overvalued and the markets should remember how much of the valuation is due to be, at the time in which qe is leaving the door. For the rest of the year, were short equities for quite a decent size. We short bonds of the same time. Equities on the s p. Thank you very much for that. Francesco filia. Very much. Scarlet coming up, we sing a look at risk areas in the Energy Sector for the second half of the year. Thats when Oil Prices Rally for the eighth straight day. From new york, this is bloomberg. Mark im mark crumpton, time for first word news. Angela merkellor is avoiding deeper divisions and Economic Policy and says they should seek what they call winwin solutions. Chancellor merkel was hoping to reach consensus on policies such as trade rules and climate. The u. K. Is dropping its bravado over brexit. Prime minister theresa mays government is taking ciliatory governments conciliatory statements. Chancellor of exchequer will tell Business Leaders are concerns over the split will not be dismissed. He has remained the main cheerleader for business really brexit. Iraqi forces say hundreds of civilians are fleeing muzzle mosul. Civilians have suffered water and Food Shortages for months. Iraqi forces launched the operation to retake muzzle in midjune, the neighborhood is islamic states last stand and iraqi Officials Say they will declare victory within days, but islamic states attempt to distract back using female suicide bombers. At least 15 people were killed in the latest assaults around iraq. Has a formal response to the Saudi Led Coalition that cut poetic and transport links. Of supportingtar terrorism and made 13 demands, including shutting down the Al Jazeera Television network. No word on whether qatar will agree. The u. S. Secretarygeneral Antonio Guterres says achieving Sustainable Development goals by 2030 under United Nations plan will hinge on following the paris climate agreement. Speaking in lisbon today, he said despite the decision by the united rates to abandon the accords, there is optimism and renewed commitment by other nations, including china and india, to meet Climate Change goals. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im mark crumpton. This is bloomberg. Julia whatd you miss . They extended the deadline to exceed to their demands and they have hours to comply with the coalitions 13 points. We have a report from dubai. In the hours before the deadline, Saudi Press Agency deadline. A 24 hour the decision was made after request came in from the america weight, have been acting as mediators, the kuwaitis. Since according to the local news agency there. We understand now the Qatari Foreign minister has arrived in kuwait to hand over the letter. We do not know at this point is the content of the letter. What we are also not sure about is what kind of scenarios are on the table if the demands are not met. If there is no resolution, what kind of escalation could we see . Receive exposure from the Gulf Corporation counsel for guitar . For qatar . The Foreign Affairs minister says with them as needed, the alternative is difficult to resolve. He is welcoming the 48 hour extension and stocks have been rebounding in early trade, the pressure remains on the 12 months forward. Bloomberg tv, dubai. Scarlet whatd you miss . Oil is up for any of straight day. How does that says that for the rest of 2017 . s bring in tina davis gina davis. Bloomberg gon the btv 6100, the blue bars indicate the recount and is difficult to see, but there was a slight dropoff last week. Hard to see. Linet a closer look at the s oil prices. Ever so slightly, there has been a decline. It looks like thats reinforcing the rallying oil prices. Is this the right way to interpret the recent gains weve seen in oil . Recs does not make a huge trend, but it is encouraging to the market. For anyet is looking excuse to run you out of your market entered a few weeks ago. This, coupled with a real dropoff in the rate of shorts from hedge funds this past week. It seems like whatever down move was affecting the markets, everyone is trying to find some glimmers of hope these days. Speaking of a glimmer of hope, i plotted the bci versus the chinese small and mediumsize firm pmi. Scarlet is going to pronounce it for me. Ive plotted these and its quite interesting how there is a relationship here i just wonder whether we should be looking at the demand side of it more, looking at whats going on in china anymore perceived accurate gain of whats going on in terms of the chinese economy to gauge one of the other drivers of oil at this moment. It is a valid point . Article had a nice written by Jason Shanker and his argument was stopped worrying about the supply side, we should be looking at is demand, specifically this pmi gauge. His argument and you can see it in the numbers that just came out yesterday is when its about 50, thats great for oil markets in will see that reverberate through the oil market for the following month. With any commodity, its supply and demand i think one of his arguments being the market as an overly focused on his inventory numbers we have been hammering home have been too high. Scarlet tina davis, managing editor for commodities and energy in the americas. Coming up, we talk about the Federal Reserve and Central Banks. From new york. This is bloomberg. Thelet its time to Bloomberg Business flash, a look of the biggest business stories in that is right now. The mergers of ges oil and gas business with baker hughes closed today, second only incisive schlumberger. The new Company Trades of the taker bht on wednesday. On wednesday. Barclays executives will leave not guilty to fraud charges. On 432uit focuses million paid to the cutter investment Qatar Investment authority. And that is your business flash update. Whatd you miss . Releases today with eyes and meditation coming out and we look ahead to data point later this week, including fed minutes on wednesday. Here with the data is matt boesler. The takeaway was largely positive when you look at todays data, todays economic data. Matt especially with the eyes manufacturing report we got today, very strong data. A lot about take in the percentage of u. S. Manufacturers who are reporting that orders are expanding and im writing this chart which shows exactly that. The white line shows percentage of u. S. Manufacturers that are reporting an uptick in new orders. Scarlet 3. 5 . Matt the blue line shows the percentage of u. S. Manufacturers supporting an uptick in inventories. The fact that this gap is widening points to the notion that we are really wanting running down the existence stock of inventories. That has widened to the widest since 2010. We are burning through inventories right now in a way that was suggested that if this continues going forward, we should see an uptick in production as manufacturers look to replenish the stocks. Thats a really good sign for the economy. What about all the russian side . On the Construction Side . Theres a bit of a concern on some of the nonResidential Construction. Residential is holding up pretty well. Not quite as forwardlooking, but its an interest in story, from my perspective covering the Federal Reserve. One of the things the fed has been worried about is conditions in commercial real estate. Marshall line shows Real Estate Construction spending has actually slowed to the slowest growth rate in four years. If you were worried about that, its coming off a little bit. Maybe thats not as much of a Financial Stability concern at this point. Wheres the red line shows Residential Construction spending, the monthly numbers were little weeks today but on a yearoveryear basis, they are Still Holding up pretty well, which is good, because we are dealing with a shortage in housing, in the Housing Market right now. To the extent that we can continue to build houses and work on alleviating that shortage, maybe it means perhaps lower prices where the rent has been pretty high. You could argue thats a sweet, the Consumer Holding up pretty well if we look at the residential side, some less concerning signals for the fed on the nonresidential. Matt exactly right. You put it all together and its really interesting, over the last several days weve seen a real uptick in the probability the fed will raise rates at home in december, but also now in september 2, starting to come back. The blue line shows the probability of a rate hike in december, which you can see is up to 40 today, which is the most in three months. Pretty much close to even odds of this point. In september, that white line is getting a bit of an uptick. I think that points to the fact that we have three more jobs report between now and the september meeting. If we get three strong reports, bigger we are talking about a hike in september and december. Scarlet do wednesdays fed minutes matter . Things have changed so much. Matt i think they do. They got shockingly weak inflation data on the day of that fed announcement, so wasnt clear how much they had a chance to digest that. Scarlet memos are, thank you so much matt oser, thank you so much. This 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 busine