Lower. The Federal Reserve moving to normalize hiking rates a second time this year and unveiling the plan to trim its Balance Sheet, 4 4. 5 trillion there, despite another soft inflation reading. We do have a strengthening economy with policy accommodative, all that were doing in raising rates is moving removing a bit of accommodation heading to a neutral pace china seas Foreign Investment falling for a second straight month this as questions around anbang. And in a stunning turning point in the russia probe, the u. S. Special counsel, robert mueller, reportedly opens an investigation into whether President Trump tried to obstruct justice i kid you not, an hour and 15 minutes ago, we were saying where will we see movement look, an hour and 15 minutes later, an hour into trading we have a decentsized decline on other hands. Down 0. 6 on the euro stoxx 600 at the moment. We should go straight in and look at which countries are being affected the most in terms of this down tick. We have the ftse 100 down ftse mib down 0. 7 cac, despite the fact they have a stable political establishment at the moment, macron will be storming the assembly vote, 0. 9 lower. Xetra dax, a lot of questions raised about the Corporate Structure of deutsche bank, we expect an imminent announcement on that one. 0. 6 lower the ftse seeing 52 points taken off. Not long ago we were trading 75. 50. We have come off a decent bit at incredibly elevated levels compared to just after that brexit vote. Lets look at the sectors. Basic resources, 1. 4 . What is the story on basic resources . Im hearing a bit of rotation. A materials in the u. S. Hit a record high and came off, thats number one factor. The headline about the china fdi, so are we seeing a material slowdown on one side of the ledger and will we see changes to the regulations governing the miners in stiouth africa which could ld to weakening of International Corporations china, south africa and the u. S. Selloff. Telecom 1. 3 lower retail, we will spend a lot of time looking at retail on both sides of the atlantic. Okay lets look at the Federal Reserve then thats the story the Federal Reserve hiked Interest Rates by a quarter percentage point no change there. We all knew that would happen. Citing continued Economic Growth and labo viewing recent softness as temporary, the central bank went ahead with the second rate increase of the year janet yellen said the fomc sees inflation stabilizing over the medium term. With employment near its maximum sustainable level and the labor market continuing to strengthen, the Committee Still expects inflation to move up and stabilize around 2 over the next couple of years in line with the longer run objective. Nonetheless, in light of the softer recent inflation readings, the committee is monitoring inflation developments closely yet the market is disbelieving doesnt matter what janet yellen says the market is disbelieving seeing the tenyear and 30year seeing depressed yields. The fomc stuck to the forecast of one further rate hike this year with rates moving to around 3 in the longer term. It also began plans of unwinding its 4 4. 5 trillion balance shee this year. Lets listen in. We currently expect to begin immre mplementing a balance shet Normalization Program this year. Consistent with the principles and plans we released in 2014, this program would gradually decrease our reinvestments and initiate a gradual and largely predictable decline in other securities holdings. Michael collins is from pgi. Good to see you this morning good morning. Yellen and the fed saying one thing. The market is saying we dont believe you. Someone is very, very wrong on this the fed seems like theyre intent on continuing on this path of hiking rates until something breaks every past fed cycle we lived through, thats their m. O. Keep hiking until something goes wrong. It feels like we might be in the same environment this time so in terms of where you stand come prayered to where the market you have the fed up with its three hikes in 2018, three hikes in 2019. Another left for this year the market doesnt believe it. Where do you see it . Were taking the under as well we have been on the other side of the market for quite awhile thinking that the fed will probably stop this cycle between 1. 5 and 2 . We dont buy the 3 dot. I call that the pipe dream dot maybe in a Perfect World they could get to 3 . This is not a Perfect World. And they have a Balance Sheet to contend with what dont you believe . The employment data, inflation data or all of the above all of the above. Some of the signs on the screens and from china and modi itcommo prices and the yield curve may be telling us that Global Growth already peaked if you think china will gradually slow down, thats our longterm view, you may have seen growth in europe which looks great, you may have seen that peak. On the inflation front, because you are seeing wages trickle up doesnt Mean Companies can pass that through were seeing more signs of deflationary pressures at the corporate level. So no phillips curve. Phillips curve doesnt work. Its broke it means wages go up but not Consumer Prices going up so Profit Margins get squeezed at this point in the cycle in terms of what the market is doing, what the market is not doing, its always Glass Half Full for the market i think. Whether we have trump oscillating on his performance a lot of expectation, so we rallied. Now trump is having a tougher time getting legislation through. We still rallied record after record, materials fell 1 after hitting a record beforehand the markets are seeing through all this its coming out of the election in the u. S like i r yyou said, everybody w euphoric, the markets went up. Now the markets are saying were back to a goldilocks world, slow growth, accommodative monetary policies and that grasp for income and assets continues. I hate this term, but the relative valuation when we look at the bond yields, theres no value there really for longer term investors. Is it because the equity market looks better i dont know. I think all the markets, stock market, bond market, high yield market are telling you the same thing. Theyre pricing in lower returns in the future. Even the stock market with the multiples theyre at are probably going to justify maybe 5 to 6 annualized returns for the next ten years if you get 2 , 3 in bonds, maybe the high yield bond market which is something we talk about relative to stocks you could argue the high yield market could be competitive. Weve been around long enough to know the high yield market is not what it used to be high yield now means 4 . Thats right. Stocks are at 6 thats the world we live in. Mike, you and i used to call high yield junk. I know. I know theyre still junk the credit quality is still junk and arguably getting junkier valuations, thats the hope for corporates, that the earnings season was good double digit on the back of a Strong Energy sector, which will have some problems if the Oil Prices Keep falling. But in terms of growing into evaluations, we talk about the peaks in the economy, how the fed got it wrong, can they still keep growing i dont think so. Im worried. Especially in the highly levered sectors. Were looking at the debt side of it, Corporate Bond market, high yield market, high yield companies are built for ebita growth in a world where nominal gdp is in the low Single Digits not everybody on average will grow into the Balance Sheets. Mike, youll stay with us well talk about the european situation. I mentioned the fed doesnt have inflation but are raising rates. The uk has inflation and is not raising rates. Uk may have hit a uk inflation has hit a 4. 5year high but the bank of england not moving, is it . A few other issues out there like the consumer and brexit gemma, are they hamstrung by the uncertainty politically and how the consumer will fair Going Forward . Are we talking about the uk consumer being maxed out it looks like it uk consumers have had a rough ride even since the bank last met in may the two key pieces of data are inflation coming in at 2. 9 , which is 0. 2 above where the bank thought it would be as eventually as may. Theyre anticipating it to be around 2. 7 looking at wage growth, this is the second month where its been negative on the real wage growth side real wages have not only just recently recovered to the 2004 levels very disappointing all around. Yes, it is felt the consumer is set to suffer, which will have huge ramifications for the uk economy given that twothirds of the economy is dependent on consumer spending. Political developments have taken a negative turn since may. The signals here are more mixed. One thing we need to remember is that the bank did emphasize all its projections were reliant on a smooth brexit process. That was a key assumption for the bank with regards to the election which was clearly a disaster for theresa may, her hard brexit agenda looks like its taken a step back and it could be positive for business and growth we need to remember as well the tory manifesto, which drtheresa may ran with, was decidedly less positive and less pro growth and pro business than it has been in the past mixed messages coming from the government here. Still looking to see what concessions the government or theresa may will need to make in order to stabilize the government so very confusing political situation. Poor economic developments since the bank last met in may im very excited. I have my white tie ready to go. My tails im there. Who will have the best and most controversial speech tonight hammond who clung on to his job or carney . Look, i think hammond has got a bit of momentum. The prospects for him retaining his job were in question by many it looks like not only has he retained his job, but also it looks like the potentially softer brexit he has been angling for, the more business friendly brexit has a bit of a kick start thanks to the outcome of the election. I think he could very well seize this opportunity to step forward and give deliver a compelling argument as to why pro business pro growth brexit, softer brexit at least could be in the interest of the economy and the uk overall gemma, thank you very much for that the chairman of the Swiss National bank said that the swiss franc remains significantly overvalued speaking after the Central Bank Policy was kept on hold, the swiss economy is on the road to recovery but inflation is still very low lets get back to mike collins you gave your concerns earlier on about the u. S. Economy and the chinese economy topping out. The third major block from the world, the eu, is doing all right. Things are on the up it has been doing all right if you look at the leading indicators, china and global trade have been up for the last 6, 12 months i think europe has ridden the coattails of that. Now youre seeing some of those leading indicators roll over we may have seen the peaks in Global Growth and in European Growth as a whole europe is growing terms of investment scenario, are you directing money towards europe if so, where the european credit markets, theres still some value you have this qe from the ecb. They have sucked the life out. Where is the value . They sucked the life out of the bonds theyre allowed to buy. So you buy the bonds that they have not purchased and as a u. S. Primarily investor we can buy the european denominated, euro denominated bonds. Sometimes theyre u. S. Companies issuing in europe what look like low coupons. When we hedge it back, we pick up a decent spread give me an example of the stuff youre looking at. Hertz is a big u. S. Auto rental company theyre having troubles. They did a big euro denominated deal last year fedex has done a big euro denominated deal they have businesses in europe can fund businesses with euro denominated revenues the ecb cant buy those bonds. American investors will buy those, hedge it back and pick up an incremental spread. Were not buying the thing the fed has been buying. Were underweight treasuries and agency backed securities can you shorten this tough . You can short parts of different yield curves one trade we have on, were short the front end of the u. S. Curve and long the back end. As the fed keeps raising rates, and seems insistent on raising rates, and raises rates until something breaks, you will see the curve flat thank you very much for your time mike collins, Senior Investment officer at pgim. Chinas Central Bank LeftInterest Rates unchanged unlike in march where it raised rates within the Federal Reserves rate hike. The yuan rose a dollar after the decision. Foreign investment into china has fallen for the second consecutive month. Fdi into the country fell 3. 7 year on year in the month of may. The fall comes amid fears over chinas mounting debt pile Regional Government level, corporate level, government level and the slowing growth trajectory coming up on this show, the battle over the aramco listing is heating up. A dispute over whether to list in new york or london is reportedly slowing the planned ipo of the oil giant saudi aramco stay tuned for the full story. [vo] when it comes to investing, looking from a fresh perspective can make all the difference. It can provide what we call an unlock a realization that often reveals a better path forward. At wells fargo, its our expertise in finding this kind of insight that has lead us to become one of the largest investment and Wealth Management firms in the country. Discover how we can help find your unlock. Yogigspeed internet. Me . You know whats not awesome . When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids. And these guys. Him. Ah. Oh hello that lady. These houses yes, yes and yes. And dont forget about them. Uh huh. Sure. Still yes you can get it too. Welcome to the party. Introducing gigspeed internet from xfinity. Finally, gig for your neighborhood too. Welcome back to street signs. Maersk was among the biggest fallers in trade after a dirty bomb threat. The u. S. Coast guard says there is no threat and the terminal is reopening. The bomb scare triggered an evacuation of the ship and the search of several containers on board. Maersk the crew is safe. Why do you care about maersk for all kinds of reasons its the Worlds LargestContainer Shipping Company so what you say . This is a big barometer of trade. If you want to see if world trade is picking up to asia, europe, to the u. S. , you have to look at some of these companies. Which quite frank ly has been revamping himself. It had ports and oil and containers of course, maersk line now just going back to maersk line jettisoning off those assets look at this this is a stock which has been under huge pressure. Last year enormous losses. 1 1. 9 billion losses. Back in may, bang. A big rally. Why did they have a big rally . Theyve seen better demand for containers in the First Quarter of this year than theyve seen for years. They have one of their biggest losses in years last year as well First Quarter demand jumped. Thats why we saw the price moving up as well. Company breaking itself up i will hide that block so you cant see it behind me the company is breaking itself up thats a positive scene for investors. But its not particularly cheap. Youre asked to pay 20 times forward on this one. Just a metaphor. If the company says it is transforming itself, then we see the big uptick in the pe as well the analysts like this one strong buyers fall buyers 11. Holders 9. They sellers out there on this stock. I wouldnt normally do this but im doing oil two days in a row. Its interesting we had the api data. Now we have the eia data it doesnt make pretty reading look at the price of brent and light sweet crude. Theyve been as low as 0. 6 , 0. 7 lower as weve seen time and time again, watch the u. S. Open, when u. S. Traders get in there, see if they will pressure it crude trading at some of the lowest levels in months. This is despite the fact that opec has renewed that strategy what happened in this latest bit of data . I thought it was damming because, correct me if im wrong, we had memorial day that was the end of may. Thats supposed to be when the driving season starts. The demand is not there at the moment thats why with the lackluster demand, the refiners, the crack spreads they make between the crude and processed product they are feeling the pinch. There are big inventories left, right and center gasoline stocks are rising crude inventories are falling less than expected very disappointing demand side and added to that, the ei is saying this shale rally, its happening. Its happening with some force its going to put more oil on the market in 2017 and 2018. Talking of oil issues, a dispute over where to list seems to be slowing down the planned ipo of saudi aramco the wall street journal is reporting that powerful saudi officials differ on whether to list in london or new york Company Executives reportedly want to list on the London Stock Exchange but key saudi royals prefer the nyc both are fighting hard for the listing which could value it at 2 trillion u. S. Dollars. Big questions whether you value that on 40 oil or 60 oil. Emanuel macron is calling on gulf states to solve their nishnish issues qatars neighbors have cut travel ties and accused it of supporting terror. Macron said he will hold talks with leaders of saudi ara