[bell] you are looking at a rally. 113 points, the s&p 500 up as well. it is kind of like yesterday. they are looking at consumer staples, telecom, energy, all of those sectors moving forward. they are trying to snap the two-day losing streak. the best day and almost a week. here is a joe weisenthal. >> hi, an exciting day to day. wasock that was interesting that on this day that they banned trans fat. it was a big-time player and natural foods. a big upgrade from the banks.

good is a proxy on the eating trend. alix: are you a healthy eating person? >> i tried to, but usually everyone's and a while i hold. alix: my daughter is organic, but those chips look really good. there was a record high today, a huge move today, a report out from the new york post that -- being out other bidders. the reason i picked this out is because jeffries could be transformative, roughly doubling revenue. -- every company seems to be looking for scale. and on the he and she cried it means trimming down business and focusing on court consumers, what we saw with target the other day.

-- while >> meanwhile, the big story with greece. obviously, according to officials, they are making no progress. they will need a miracle to get a deal, then tsipras gave a speech today where he talked about imf criminality. you don't particularly associate trying to get a deal by accusing your creditors of criminality. there is this a view, that oh god, things are getting bad. i think maybe this serves a useful purpose, it reminds me of the debt ceiling fight from 2011. at the very end, there was acrimony, but it served a purpose, because then when they make final concessions, tsipras can say that they fought really hard. maybe not as bad as people think. alix: it seems like the greek

people want a deal. so who are you moving towards, the far left? it strikes me as odd. but the conversation continues on greece, what happens if, and there was a hypothesis, thinking if greece has to leave, what about euro bonds? , by mark gilbert, it could be a smart way for the eu to swear allegiance to the euro. it euro bonds are done differently in each country, so you might not be on the hook for all that cash. >> it is also interesting that we are starting to see the time itn, for a long was, you don't have to worry about degrees because that's about greece -- worry about

greece. the one thing that people are looking for is the thread between the debt of her feel countries, portugal, spain, and germany. spain-german spread, it is up highest level since last october. the fear is, if something goes bad in greece, we have to talk about effects in other countries. ,lix: i want to bring in mark from pimco, he is joining us from california. the chief u.s. economist. mark, do you care about greece? >> we care about it. it is the topic right now. goodnk we will have implications for the market, there is opportunity to look at the italy-spain government bonds.

basically, they are trading at the same level as tenure treasuries -- 10 year treasuries and inflation is running about 1% below where we think the u.s. inflation rate is, so the greek situation has created an interesting situation. he said about those spread, the spain,between italy and that is about a hundred 60 basis points. that is attractive. and the euro is going to be week your -- weaker, so we think that the fred is going to raise rates and there is a global divergence between the u.s. and europe. think they will come to a deal, because they want a weaker player, but you see this rhetoric continue, so -- is supposedhat it to look like. if it was a boring, nobody would be willing to compromise. we must stare into the precipice, get to the point

where the greeks and the europeans are ready to make sacrifices on both sides. tomorrow, one of the most .xciting days, fed day there is not a lot of expectation, everybody thinks there will be a hike, but we did get some data. what wasing, housing it down, we just had the strongest starts in a long time. where is the data, how is the fed looking at that? >> this is the pause that will refresh the housing sector. taxits were distorted by a revision in new york that led builders to file for permits before the deadline. we look at the averages, we can see that the an upwardctor is on trajectory and it means we will contribute to economic outfit -- output.

it will not be enough to save the economy and the fed. the fed is not going to pull the trigger, not ahead of the greek resolution. so, what the fed does is they tinker with investment, the last meeting they moved toward labor market, consumer activity, this time they will backtrack that they will need to adjust the growth forecast for the year. they are looking for 2.5% gdp growth. that means the economy would have to grow about 3.5% each quarter. in this quarter and the following two quarters. that is not seem feasible, for they will have to scale that down. cpi, i am looking at the the inflation forecast continues

to diverge, and then consumer prices. mark, what do you think the fed will say about inflation? the pce is weighed down. think that the unemployment rate is the leading indicator, inflation lags and this economy is strong enough, and the potential growth is lower because you have less labor supply and productivity growth, jobsu do not need so many per month to keep the unappointed rate constant. if you produce 100,000 jobs that medical cause the unemployment rate to all. -- fall. it has declined two percentage points in two years. pace ofep this 200,000 job creation, you will start to see wage inflation. upsee it from a bottom perspective as we see these companies -- so the reality is

we think the fed has arguments to go in september and we are confident they will do that. : not a lot of people expect hike tomorrow, but there is attention on the dot. how when you explain this to a 12-year-old -- how do you explain this to a 12-year-old? dotegypt. represents -- each represents one person at the fed, one voter. one quick way to look at this is by taking the medium -- the median dot. it shows that there will be to increases this year. i think the fed, with whether they are willing to develop one or two, they will keep that framework intact when we see the new plot tomorrow. what could happen is that long-term. is on the cost -- cusp of dropping.

i don't think that it a consequential event right now, but it would, as a surprise tomorrow. alix: mark, if we do see as carl said, that remaining unchanged, what happens to be two-year and five-year rates? we think those are going to head higher. the market is pricing in at a rate of 1.25%. the end of december 2016, 1.75% rate at the end of 2017. we think that the market is going to normalize rate faster and the fed could get 2% by the end of next year, because the unemployment rate is coming down and you have a strong labor market, a strong housing recovery and the reality is the banking system is flush with cash and you will start to see the consumer come back and so the reality is the wages, they

will pick up. the market is underpricing the risk that the fed may have to go faster, therefore we think the front and of the market, the 2-5-year curve is brought all-pro. -- is vulnerable. alix: thank you guys. mark is sticking around. much more to talk about. it isvolatility and how impacting firms. ♪

alix: welcome back, we want to get right to the breaking news. as julie is standing by.

fox is confirming a leadership confession that the son of rupert murdoch will be the chief executive of the country, that will take effect on july 1. rupert murdoch and another one of his sons will be cochair men, executive cochairman. deputy,rey hit is the he will become the executive june 30th,an through 2016. this has been reported for the past week that this was a succession plan for murdoch, so we are not seeing stock reaction. the company is saying, yes, james murdoch will be the ceo of fox on july 1. alix: we do want to get straight to top stories. yahoo! ceo marissa mayer is says that the company will proceed with the alibaba spinoff.

myers spoke earlier at the bloomberg technology conference. we are moving forward with the plan, based on the understanding of a few things, the contemplated changes don't requests foriously rulings. we have filed for it well in advanced, these changes were communicated. the other thing that gives us confidence is it doesn't seem that these changes are contemplated changing the applicable law, so it is more about the processes around these transactions. said that theso planet should not be affected by regulatory changes. trumpstate mogul donald is running for the republican nomination. he launched his campaign today. he says that the u.s. has become a dumping ground for other people's problems and he vows to

get tough on radical islam. >> radical islam is eating up large portions of the middle east. they have become rich. i am in competition with them some of the just built a hotel in syria. they build a hotel. hotel, ive to build a pay interest. they do not have to, because they took the oil. that is the oil i said we should have taken. now isis has the oil. alix: trap also released a document showing $9.2 billion in assets. a federal probe into money laundering has uncovered violations. said to be serious enough to merit a fine and investigators are looking at lower-level employees at the unit. the investigation is not expected to be finished until

next year. citigroup says that the bank is collaborating. those are the top stories. s, you want more on the market we will get back to julie. julie: let's talk about aig, star international says that greenberg will appeal the ruling, the government ruling yesterday, saying that the government was likely to -- in the bailout of aig, and not rewarding damages to greenberg. the court ruled it is likely that aig holders will perhaps have not gotten anything if the bailout had not happened. they will appeal the ruling, that there is no remedy for the illegal conduct of the government and asked the court of dollars billions

of taxpayers. the government has the ability to appeal for their part as well. both sides can appeal. alix: never ending. it is called the canary in the coal mine for banks. there is a decline in bond trading. mark joiningnow is us from pimco. bondis forecasting, this volatility, how are you dealing with that? >> it turns out that regulation of the banking or can be good for investors. what has happened is basically regulators are requiring banks to hold more capital and improve their liquidity. instead of increasing vivax or paying dividends -- vivax or -- anddividends, they or they are organically building capital every year. for the last five years, the banking industry has doubled their capital.

returns on equity have declined, leveragedly you have the bank, you have made them safer and less risky. as bondholders we have benefited. alix: we have seen blackrock rewriting how they measure risk. is pimco doing something similar? risks,ook at macro sector, volatility, currency, we also look at concentration risk, then we stress test the portfolio under numerous scenarios, so there are numerous risks out there and we are trying to prepare. alix: mark, thank you. we will be right back. ♪

♪ alix: "bloomberg market day" welcome back to "bloomberg market day". stocks, the shanghai

composite has rallied 144% in the past year, sucking in investors. china is one of the biggest buyers of gold, and 4750 metric tons last year. -- 750 metric tons. knife inock fervor a the heart of gold demand. joining me now is jim steele. jim, so good to see you. shanghais it, is the composite killing gold in china? >> gold has to compete with other investment vehicles, not only in china but across the world. the popularity of paper assets, hard assets, it is an old trade-off. anywhere where you have strong equity market gains tens to detract from old prices.

one reason have gold, in case those investments take a turn for the worse alix:. alix. alix: we are seeing a change in gold prices, so if we lose the china demand because of this rally in stocks, what happens to the gold price? >> here you have to, that is the major theme of our outlook, how demand hasntial been, not only for the gold market, but the price and range of price. that is largely why we have $1120 bottom, that is where we see market demand coming in. priceis also a level of sensitivity and what we have found, what we found in 2013, when you have a sharp drop in level ornd the 1150

1100, you usually get a recovery, it is not have to be related to the investment cycle, it could be separate. that is what we would anticipate. alix: and the elephant in the room, the fed. we have seen the balance sheet we saw and at one point, it almost hit $2000, so what happens when the rate cycle begins? >> a lot will depend on currency, we have the view that the market may be in its final phase, according to foreign exchange research. if you look at historical data, in the last four cycles, when the fed gets around to increasing rate, the dollar tends to pull back. if that happens again, but if it does happen again, it is likely to support gold. at least in the gold market,

like every other market, the fed hike, when it does come, has been placed in the market, so i don't expect it will be a great blow. alix: real rates are still negative, so when that happens, coal is still an investment. >> that is a good point. it is a by no means just a u.s. centric game. alix: what is fascinating is have -- u.s. point buyers dropped off the face of the earth. long does that last, what changes that? >> there is a level of price sensitivity, even in one market. the claim market is resell driven. generally you by individuals and i think there will be a price

sensitivity there. that is why we think we will have that cushion above $1150 an ounce. i love talking gold, i should point out that their $1240 -- 1000is $1234. thank you for watching bloomberg market day, have a wonderful afternoon. we will see you back here tomorrow. ♪

>> dick costolo says he wants get in the way. with that means for the search for the next leader. ♪ i am emily chang. welcome to a special edition of "bloomberg west". we are live in san francisco. investors bet on yahoo!. marissa mayer says her plan to spin off the company is going according to plan. we will hear from the most innovative