scarlet: welcome to "bloomberg markets," i'm scarlet fu. rod markets, u.s. stocks continue to stabilize with the s&p 500 and nasdaq going higher for a third day. there is a sense of calm here that seems to have been restored at the moment. the vix is below 20 once again compared with the intraday high, but even with a gain in the s&p 500 that is largely on the back of technology.

little changed right now in yields across the curve, but we see the 10 year still holding below 4%. the yen, which was of course the epicenter of the meltdown last monday is weaker against the major currencies with the dollar being higher against the yen. getting you some mid-day movers, starbucks gaining on star board value taking an undisclosed stake in the company. the latest report showed the company is really struggling with a slowdown in demand along with pressure from existing asked -- existing activist investors. take a look at hawaiian, plunging down after it issued a going concern morning pegging liability losses from the maui wildfires at one point $7 billion. last week the utility agreed to pay almost $2 billion as a part of a settlement to resolve hundreds of lawsuits.

for this week, investors are anticipating a slew of market data and for those who are nervous, perhaps another shoe to drop. wholesale inflation is due out tomorrow with consumer inflation on wednesday, followed by retail sales and weekly jobless claims on thursday. friday, housing starts at michigan sentiment. here's the federated hermes cio earlier today. we are looking at -- >> we are looking at 50 basis points for the year, outside chance of 75, but that is not likely to occur. the fed does not want to signal that they are wrong and have to move faster than anticipated unless they actually believe inflation is under control in the market and the economy are slowing in a way that i think at this point is not expected. eric: ok, -- scarlet: ok, so

joining us now is stuart paul, bloomberg economist. good to speak with you. these economic releases would be a big deal at any time given the wholesale consumer inflation, but there is extra importance this time around because of the fragility of investor sentiment following the market meltdown. what's the mood? have you seen a lot of negative adjustments? stuart: we have seen some upward revisions of people revising their expectations up for recession risk, but we think the data this week will really highlight stagflation, where the narrative was before we had the jobs report that showed the uptick. we are expecting an uptick in the monthly pace of inflation, headline inflation and core inflation allowing the annual measures to come in, which folks might celebrate. the thing that will let matter the most when you look at

wholesale consumer price inflation is the composition and we are going to see underlying factors in both reports that end up feeding into the core pce inflation measure, which matters the most for the fed, and it could cause an uptick in the annual pace of core pce inflation, the last one they see before the meeting that could make the difference. eric: fascinating. -- scarlet: fascinating. this time the release is the other way around. how will the earlier release of ppi shape market expectations for cpi when it comes out? stuart: it is possible it could lull markets into a sense of complacency with a slowing of the pace from 0.4% to 0.2% in july. again, that could allow investors to breathe a sigh of relief with inflation coming down. we will see an uptick in inflation on wednesday that will

be a whipsaw for sentiment across the two days. scarlet: of course, we also have retail sales in there are a lot of questions about how tapped out the consumers are. they were surprised about the downside last month. do you think that the july report will show catch up? stuart: i think so. it will be zero point 4% because of the catch-up spending at auto dealers when they went back to the lot and an increase in gasoline prices. we saw a peculiar decline in june that was weighing on retail sales. if we look under the retail -- under the hood to extend the automobile analogy, looking under the hood and at the control group that strips out building materials and the more volatile components, if we look

at the core of the court of retail sales, i think we will see softness and consumers looking for deals online, consumers who are really tightening their belts. scarlet: absolutely. that has fed into the recession narrative. the july jobs report got us over everyone talking about it again. industrial production is a key indicator for the organization that officially declares recession months after the fact. we got july industrial production thursday, but it felt like an afterthought compared to the other data points. what should we be expecting? stuart: relatively weak industrial production numbers. manufacturing is the backbone of industrial production in the survey data surprise on the downside was the aggregate number of hours worked for nondurable and durable manufacturing producers declined in the month and the stage is set for a 0.3 percent decline in manufacturing production. we could see the headline industrial production number a

little less dismal. we could see 0.1 or 0.2% decline, but that would be because of the utility's output of energy extraction and a part of that is really just because an unseasonably war -- warm july with seasonal factors that don't take that into account. the headline might not be as bad as the manufacturing number, which is what we really care about. scarlet: appreciate you giving us that route known of what to look out for this week. coming up, shares are plummeting as the sec looks into disclosures of one financial firm to its investors. we really dig into that one. this is bloomberg. ♪ ♪ where you grew a dream into a reality. the all new godaddy airo. put your business online in minutes with the power of ai.

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scarlet: this is "bloomberg markets." goldman sachs says investors will have a brief window to buy the dip in stocks in august and it all has to do with funds. natalia has the details. >> systematic funds were sold pretty aggressively not just during the past week, but over the past few weeks with a chart here showing systematic funds with well-controlled funds like the s&p 500 and risk disparity with a huge drop down. those funds, they typically follow market signals on volatility rather than fundamentals. it's really important to keep an eye on that. goldman sachs says that those funds sold about 108 billions in global stocks. it may sound like not such a huge number when you compare it

for example to the market cap of the s&p 500, however when they start selling, you really feel it. so, where it is a go from here? goldman sachs, scott there was correct when he predicted the latest selloff and is getting more tactically bullish with a small window of an opportunity to buy the dip starting on august 30 to early september with two reasons behind it. systematic fund positioning is not as strict as it used to be. second, corporate buybacks will help stocks move higher. however, he has been quite cautious, saying that when this buyback window closes on september 6, he sees more volatility ahead. first of all because of fund flow into the equity market. secondly, anxiety around the u.s. presidential elections. scarlet: it always comes back to

that anxiety. thank you for that. great set up. one stock that investors are buying right now is keycorp as the bank of nova scotia has agreed to purchase a minority stake in the regional lender. joining us for more right now is christine, who covers finance in toronto. thank you for speaking with us. what's the strategy for scotia bank. i see they have one of the biggest international footprints of the canadian lenders. >> that's right, they have long been known for having a big international footprint but unlike its peers, it hasn't had a huge footprint in the united states. it has instead had huge investments in latin america and the caribbean. under their relatively new ceo, scott thompson, the bank has done a strategic review and has looked at repositioning their capital deployment and they are

trying, reevaluating a number of their latin american investments that were underwhelming and are trying to put more into north america, primarily canada, the united states, and mexico. scarlet: so, that is a look from scotia bank, but what does it do for keycorp? it will dilute their shareholders but investors seem positive, so there have to be some advantages that they see. >> absolutely. if you recall they are one of the regional banks that got hit quite hard last year during the regional bank crisis in the united states and part of the reason was the very high costs of funding. the bank has been working to reposition its balance sheet. the ceo, christopher gorman, said today that they would use half of the proceeds they got from the deal to reposition the securities that they own towards

shorter duration hider -- higher yield securities. so, because they will be changing the costs of funding, they are hoping to see a significant increase in net interest income, which is a part of why you are seeing investors really loving that deal for them today. scarlet: the stock up at the moment, christine, thank you for joining us. we are closely watching another firm, shares of brian riley. the founder said that he and the firm received subpoenas from the sec and investigators are looking into whether they gave investors accurate pictures of their financial health and the stock is tumbling as a result. david, bloomberg reported today that the sec widened an investigation on this firm. what precisely is the agency investigating? >> the sec is looking at whether be riley accurately disclosed

financial challenges, whether properly told investors about receivables underlying many of their financial transactions. they are looking at possible insider. so, this is a broadening of previous recording that we had done about the sec investigation. another big aspect of it is relationship between the founder of the firm, bryant riley, and brian con, the former ceo of a company called franchise group, which b riley helped take public a few years ago and private again last summer. scarlet: they've done business, is that the extent of the relationship? >> they have done business in a

real id of relationships with a number of loans in receivables going back tying them together. con is of interest because federal prosecutors in new jersey called him an unindicted co-conspirator in a $294 million investment fraud involving a firm called prophecy asset management. b riley the company said they had no knowledge of any wrongdoing by brian con. they had nothing to do with it. the market of course is punishing them pretty badly today. scarlet: i mean, this is a spider web of relationships being investigated and none of it sounds great, the way you are describing it. where do things stand right now in terms of this being a story you've been reporting on for a while. is there a point at which it feels the shoe is dropping or does this have a long way to go? >> it's not entirely clear how

long the investigators, the sec and prosecutors will continue their work, but investigators seem to be moving quickly. the frg has been downgraded again. this -- these questions about some of the underlying loans, they may outpace the investigators from the u.s. government. scarlet: sell first, ask questions later. david, thank you so much, on the beach here on b riley, whose shares are down by half today. coming up, a look at the next big risk. citadel's head of economic research gives us a look at the european economy. we take a look at all of that. this is bloomberg. ♪

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-- this is "bloomberg markets." one thing to watch for over the next few years, the strength and stability of the european economy according to the head of macro economics at citadel. >> more control and less growth, more control in less growth. if countries trust us more, they are champions and rather than every country having a champion, growth and welfare will be better and there will be less control at the national level. right now each european company wants its own banks, its own large energy companies. why? they want national control. question is, are you willing to surrender some of these controls to european firms, who will be more productive, but give less

control of the national level. >> is it that the direction of travel has been opposite from what you are describing? >> there has not been progress in that direction and in some sense it's the legacy of the european crisis. it was scary to see the defaults and the sudden stop of capital inflow. so, there was a bit of a decision to self-insure. how do you do that? you have your own bank, your own telecom, your own energy. i think that's the issue. there is still a bit of fear from the last decade that is changing the thinking moving forward. >> when you describe a week or europe you are describing a world that's more bipolar. >> more bipolar between the u.s. and china, yes. >> what's the ramification? >> it means that it's less global and more bipolar. another example, i used to work at the imf, a global

institution. could we be going in a direction where countries see those situations like china and that influence withdraws and decides to run its relationships in a different way? we have seen a bit of that in the debate on the common framework and the issue of sovereign debt in less developed countries and we could be going in that direction if europe gets weaker. >> sounds like it would be harder to resolve conflict, both security and economic. >> it gets more difficult because without a shared sense of the rules, as has been happening with the wto, who is on the phone to the conflict? >> draw that out a bit more. imf, wto, wto, let's add nato to the mix. what does it mean for all of these organizations? >> nato is another example that

it goes back to what i said about self-insurance. the world is better off if there is a project where there's joint interests. if there isn't a common project without joint interests, each country says i will take care of myself and do more self-insurance. self-insurance is less optimal. scarlet: usually when we talk about the world, everyone splits it up into team china and team usa, interesting that he brings up europe as its own team. sonali: i was -- sonali: i was thinking the exact same thing. the debate becomes more stark. when you think about trade flow, there are a lot of reasons you would think that many nations in europe might be beholden to china, really forcing them to choose which side. what's more is there was an inkling of big multilateral organizations like the imf, even nato, how strong can they be if

europe begins to get weaker at a greater scale? with populist forces in many countries in europe, it becomes difficult to unify europe as a whole. these are very nationalist forces. at the same time he is arguing for that common prosperity, which is hard to do. scarlet: the question is -- is europe ready to work together? not long ago the people in germany were not excited about subsidizing what was happening in greece. sonali: the other example that was relevant today was that common framework used for debt restructuring for third world nations where china can be a hold out. the success or lack thereof comes in many instances down to a broader discussion that we heard b.i. and walsh, a worry about nations being too indebted, even the u.s. being

too indebted. what does that mean in a world that is flush with death? -- debt? scarlet: sonali: catch sonali's -- that does it for "bloomberg markets." the s&p 500 is up marginally at the moment here. the nasdaq is gaining even more ground, half of 1%. this is largely an advance being driven by technology. there isn't much move on the treasury curve. the 10 year yield holding below 3%. the yen is losing ground once again against all 16 major currencies. from new york, this is bloomberg. ♪

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announcer: from the world of politics to the world of business, this is "balance of power." ♪

live from washington, d.c. joe: kamala harris breathes new life into the debate over fed independence. welcome to the fastest show in politics is the vice president finds contest with donald trump on the role of the position player insider interest rates. we will talk about this coming up. i am joe mathieu alongside kitty in new york. we also have a big pile of polling data to go through. kailey, good to see you. kailey: good to see you too. the new york times released a poll over the weekend, pennsylvania, michigan and wisconsin, the blue wall, harris leading from 53-46. and we have a margin of error to consider. she is not leading on issues like the border and the economy, which makes her fed, so interesting. joe: and more where this came from.