olivia: good morning everybody in way bounceback we are seeing in the market right now. u.s. stocks surging higher after the opening. another bloodletting in asia, the chinese central bank intervening and cutting rates for the fifth time since november. new home sales numbers out right now. we want to go to julie hyman who has the numbers. to an a rebounded annual percent. 500-7000 versus the 510,000 rights that economist on average had been estimating. show the biggest

rebounded in a year. we are seeing demand her new house expand as we have been seeing the jobs market expand to some extent. we also have a measure of confidence coming out in the past few moments. that is much higher than the 93.4 the analyst had been estimating. this is higher for the month of august, the survey was done in the early part of the month before the stock market selloff. but this would seem to be an encouraging number, 101.5 is the reading. last time we had this number, it is the highest since january. bead on a big consumer confidence, something else or janet yellen to way.

now we want to go to phil mattingly. wille u.s. federal deficit be laundered previously forecasted for 2015 at 26 team. this number is just crossing now. the cbi's also forecasting that growth in the fourth quarter of comparedill increase to quarter over quarter what did have previously forecasted, now estimated 3.1% versus 2.9%. these deficit numbers, about $414 billion will be the deficit in the fiscal year starting on october 1. that was previously at $455 billion. so we might be a little down on deficit reduction, and of a little bit on growth projections. that is just coming out right now. economisttter than an had forecasted. thank you. we will see you later in the show. let's look at how markets are digesting all this news.

you can see the dow, the s&p, pickingaq, the rally is up a little momentum. but the magnitude of today's rally does not match the selling we saw yesterday. 2 percent.up by -- mastec up nearly 3% nasdaq is up nearly 3%. futures surged higher this morning before the news that the chinese are again cutting their rates. treasury market is having a major turnaround. the yield is rising for the first time in five days. the 10 year eight basis points were trading at a yield of 2.08%. meanwhile, in a lot of movement in the commodities market. oil is kind catching the rebou. at them stillg

trading below $40 a barrel. for a closer look at the global market moves i want to bring in jurrien timmer. thank you for joining us. volatility we are seeing, is it off the table? i think the odds of a hike are now down to 10%, 20%. it was about 50 percent about a does just a few weeks ago. i would hope that the fed will use this opportunity to wait a little bit longer to start is lift off, because we do have some volatility and some market been goingthat has on. my guess is that unless markets really stabilize very quickly from here, that they will push it back until december. olivia: how does the fed is justified not? -- that?

boosting the forecast for u.s. growth. forecast for the deficit for the deficit. sales coming in better than expected. consumer confidence at 101. how does the fed justify waiting? we are pretty healthy data on the u.s. economy. jurrien timmer: that really is the debate. an appointment is down to 5.2%. at or near the inflation threshold of the look at -- that they look at. whyhose measures, that is they have been coming out in the public in saying september his life -- is live. oftainly, that is one side the argument. but if you look at the market indicators, inflation expectations, the tips breaking them, don point 1.1%, the well target, thed 2%

credits have really jumped on high-yield spreads. i think the spread yesterday was 560 basis points. we have some more market volatility. it depends on whether they're looking at market signals or just the economic data. from a market signals perspective, they have waited this long to lift off, and my guess is that the market is telling than to wait a little bit longer. from my perspective, when the fed listens to the market, they are better off doing so. olivia: interesting. you thinkre of what the consequences are of the widening we are seeing in credits threat? : is part of it is the energy sector. that feeds into the stock market, because even though energy is only a part of the s&p 500, it has contributed to an outsized amount of earnings to

the market and the snow taking it away. so we looking at earnings for the stock market is basically flat for 2015. we're looking at the consensus estimate. that is all energy. up about 7% or so. in same thing happens to high-yield, where it high-yield the energy sector is actually about 15% of the market, double of for it usually is. that is because of the shale revolution and all of the capital spending projects that were taking place because of that. a lot of the spread widening in high yield is the result of energy. part of it is also investors taking a more risk off of you, heart of it as part of the fact that in his august and people are on vacation so there's not as much look at it. when you do get selling, it tends to be felt more quickly in the markets. olivia: that is what it felt like yesterday. where do you think we are on equity valuations? : i thinkimmer

valuations before this decline over the past week or so, by my were fair. they were not cheap, but they were not rich. 17 times earnings, they were fairly valued and not a lot of margin for error. with earnings coming down because of oil prices that are below $40 a barrel, like gases that the fair value will come down a little bit, but the market come down more. i would say that the market is getting more attractively valued. olivia: final question on we are the selloff seeing in european equities has been incredible. the dax, and fair territory. possible given that mario draghi and easy be just launched qe? : this is aner unusual occurrence. want to invest in whatever country is best doing inftion.

that is what the ecb is doing with a 60 euro month qe. the markets for a crown that so that the other markets rally well in advance of the qe actually happening in march. it really started last fall when mario draghi wasn't the jackson hole fed conference, employing that it was going to be more action to be taken there. stocks go up, currency goes down, but what we have seen the last series is the opposite. i think that has to do with china. the economy is clearly slowing, i think that is why they are devaluing the currency, that is why they are using. it is a reflection of a slowing economy. if china slows, then the countries that are more affected are of course other emerging markets, countries like result, but also japan, and europe were more directly competing for china's exports and the u.s. is in a relatively

better place. we are relatively closed economy , 13% exports. the dollar goes down because the likelihood of the fed rate hike has been pushed back. all of that has translated into a stronger euro and with the chinese, i am not surprised the dax is down. olivia: thank you so much. still i had him a much more on the bloomberg market day. we minutes into the trading session. -- are just 30 minutes into the trading session. look at where the dow is. ♪

olivia: good morning and welcome back to the bloomberg market day. let's go straight to julie hyman with a look at the markets. julie: let's get the latest check on where the major averages are at the moment. as you pointed out, we are not recouping anywhere near close to the decline we have seen, certainly not yesterday or over the last couple of days. but a strong rebound that we're averages. the major we are also seeing a lot of the individual stocks rebounding. therest time i checked were only 19 stocks in the s&p 500 that were lower, everything else was higher. seeing thehat is snapback effect is apple. for fiveen down session straight, it is now up about five said this morning. wells fargo is upgrading the

stock from outperform. had it seemed to be overdone, and that seems to be the number of estimates. also, you have to put in perspective this move and not the we have seen in stocks and remember, the apple record was back in february. it tried to make another run at that in july. this is july 20 break between there and yesterday we saw 22% rate 20% with the definition of a bear market rate we are bouncing back from that level today. the other notable stock is worth mentioning is best buy. everything else is snapping back, but this is rising on fundamental news. the company coming out with news and possible sales of 3.8%. the applesaid that watch sales are doing pretty well. that is ready different from what we heard from others. olivia: indeed, interesting.

let's look at the headlines crossing the bloomberg terminal. the big story this morning is that china central bank is fraying of money to help if the stock market collapsed and the people's bank of china is cutting interest rates for the fifth time since november. it is also lowering the amount of cash the chinese banks must set aside. the shanghai composite fell more than some sense today -- more than 7% on monday. alibaba's urging workers to stay focused and ignore plunging stock prices. yesterday they fell below their ipo price break the online retailer has now lost $128 billion in market values this november the. telling the alibaba workers that this is not the last time the market will plunge. and saudi arabia is planning to cut billions of dollars from next years budget, because of slumping oil prices.

they named delay and cut back on infrastructure projects i. those are your top stories of this hour. now, china's decision to cut interest rate and lower the reserve requirement ratio signal first steps to maintain liquidity. so how is affecting urge emerging markets -- the emerging markets? whos ask the strategist called the top china staffer in april. he joins us now from bangkok. thank you forgetting on sky with us this morning. what did you see back in april? what was the signal for you the chinese equities were asked their peak? >> i tend to focus on charts. the perception of qe, but there was no qe. fundamentals were sinking, so there were a lot of synergies that were not adding up. 4950, 2000, that

was my window to exit i used them projections at some of the indicators were converting just confirming this and the new high. 2100, andht it at sold at 4950, so that i thought that was good enough. olivia: now there are below 3000. one of the charge you are look again telling of -- what are the charge you were looking at telling you? 31i had targeted about hundred 3000 and i have a revised target. i think near term we've probably racked back up to 3400 or so. around 20700i start to look do not commodities, i know a lot about that.

whether china is going to hit some major loves, there is a lot of pressure in emerging-market currencies right now. u.s.a: how about the dollar? what charts are you watching to inform your analysis? >> it is very interesting and very rare that you see the safe haven of the euro and the japanese yen when the dollar is very strong. we think the euro, the canadian dollar is weak, but the dollar is strong there, so it is quite divided and that has a lot to do with perception of them. olivia: you think the dollar is wobbly for the rest of 2015? >> from this area, maybe i could slip and little bit lower if we go to 104 and then correct back about five months or so. i think it's here you will see

it is equal to one. left.is still more leg market a huge rout in currencies. with one are you comfortable being bullish on? the look at here one as place to be. the turkish lira is a little bit weaker, but if i saw the brazil index and they had a good level, i would be interested in shifting into some of those few are one currencies while .emaining short olivia: let's just stick with the resilient rail for a second and what you think, since they

are in recession? >> a lot of people looking at , and for big from perspective, that was one of the --st currencies i will try to phase in a 3.8 and coordinate that with the equities, that is a technical reversion trade, for the riau. i think interest rates will end up benefiting the type of trade. olivia: this may be a little unfair, but i want to wrap it up with more of a next special question about the market. given all the chart you look at, what is your belief of how correlated developed markets are two emerging-market -- to emerging markets? >> that was one of my key themes

from august on working without they would drag the developed markets in. y areare still links, the below 11,300, and this started to roll into the developed markets relaxing they have another leg down to 1750 were show. i think there is a developed routes still coming that should come at the end of september. and then there is a nice rally in u.s. equities. olivia: thank you so much. coming from a much more including no home sales numbers -- coming up, much more, including new home sales numbers. joe weisenthal joins us to help make sense of what this means. ♪

back to theome bloomberg market day. the markets continue their wild ride, but at least they're bouncing back. he dollar jumping overnight, home prices also up this morning. consumer confidence also jumping. we are joined by joe weisenthal. talkingsettled morning, about how investors are reducing their bets so that the fed will in september. we had a lot of good economic data. how does the fed justify holding off in raising rates we have consumer confidence over 100 great you have the cbo is to get or cast -- listing its forecast. joe: the market volatility has to have some factor, because of their greater you around the world that it will be harder the fed to hike rates in the environment but assumption that is off the table, i do not know

if that is totally justified. in the markets quiet dynamic continue to get the data through the next few, who knows? september still seems possible. olivia: it does when the fed fun futures rates are about 20%. it raises interesting theoretical questions. read you a quote from 1998. that the changes in the global economy and the justice financial markets me -- and adjustments in u.s. financial markets means that it should we slightly lower going forward. now, soellen plan different leadership in but it is the precedent. joe: if the site were to follow the 1998 book, and delay the

ikes due to volatility, the flipside of that was a very fast catch up if they do that again, and they wait until next year, that the expectation would be that it would be an aggressive hiking cycle and would not be in a better. olivia: what do you think of the $40 oil? >> i think they really like that. it is the deflation they like to see. it is fine if it is commodity-based inflation. it makes their life easier. thank you so much. ♪

olivia: welcome back to the bloomberg market day. it is tuesday, august 25. let's take a look at the stories.

the world's biggest electronic , phones, andre tvs major appliances than expected in the second quarter. best buy said in a conference call today it would need more space in its stores to hold apple products. >> we are very excited by the early momentum of apple watch in our stores, which has been a strategic decision to have an accelerated and expanded area. olivia: apple watch doing quite well. it will be offered in all this i locations by the end of september. and hopeful signs in the u.s. housing market this morning. 5% on a euro year-over-year basis -- on a year-over-year basis. stronger spring demand and limited inventory both supported prices. all 20 cities showed a

year-over-year gain, led by two 2% increase. rates nine to 12 months ago, when orders were being placed may have been the cause. a toll brothers house was down to $720,000. debuted withead the biggest audience ever for a new cable series. it attracted more than 10 million viewers. the zombie series is a spin off of the walking dead, one of the broadcastebel networks. let's take a quick look at where the u.s. markets are trading right now. back aftere bouncing the biggest two-day selloff we have seen in u.s. equities as the financial crisis at the dow jones now up 261.

andy mastec is a triple digits right now. went remember that the magnitude of today's rally still pales in comparison to the magnitude of the selloff we saw yesterday in global equities. editor mikeo to regan and matt miller, we will get to them in a moment first let's show you more of what is happening in the markets. a pickup in the commodity market today. risk assets finding purchase on the board. just about $39 a barrel in oil, and treasuries have yields creeping up for the first time in five days. go away, much more coming up when we come back. ♪

olivia: welcome back to the bloomberg market day. with two men who know their markets. what about spec we are seeing in the market -- what about spec we are seeing in the market. catalyst?e is the pboc coming in with the same line? i think it is both. the selling got a little out of hand yesterday and overshot on the downside of what people wanted to do. what is interesting to me is that futures were much stronger than what the cash market looks like now, even before they came

out with their rate announcement. it was a little bit of a disappointment. it is hard to say that with them up 250 points, but i would have elected to city stronger. -- liked it if they were stronger. they telegraph it to you from a mile away. they give people a a lot of time to prepare. china, it is like an improv troupe. there is a lot of policy decisions that take time to get used to. of a great scene from the wire, where this middle manager is teaching the kids how to ihs and they're playing checkers on a test or -- chessboard. you have a nice from china coming and you knock out. it is a difficult game. i do not watch the wire.

it is too depressing. the important thing to keep in mind is that a lot of people were not here yesterday. it was monday, it is in august weekend. readu look at the most stories on the bloomberg terminal in the past eight hours, but the top 10, inc. of them are from yesterday. that tells you that a lot of people are coming into work today and catching up with what happened yesterday. one of the themes that i heard from people that we had on yesterday, and we had a load of -- amazing guests, all of them were saying that china has to do something. we need to see policy moves from china before we move forward to and then he saw yesterday, 23 billion dollars in liquidity pumped back into the market. we saw interest rates cut. isn't enough? that is a question you can debate.

even on the dow, we've lost 1600 tradingn the last seven days. so getting back 300 today is not a huge forward, it is just a sign that the market is seeing the movie and wanted to and is looking toward september. now the question of whether the fed raises rates, that is not a done deal. i do not think it is a done deal that september is off the table. olivia: and this morning we got better than expected. matt: and if we continue to get that, it is no reason that the fed should be worried about a 3% move in china. i do not believe it. , futureshen i woke up were indicating a 600 point move.

now we are at 270 points. mike: futures can send in an exaggerated look. hedging purposes, not a fundamental stance on the market. but on an upside, when you see that much upside in futures, you would expect a bigger bounce and what we are seeing. olivia: we have had some fantastic guest over the last couple of days. we want to play little bit of sound from the most interesting. continues,olatility then the fed will be very confident it will not want to fuel further volatility. >> they will not want to raise rates. >> they will wait. >> they were in a box, and they needed an excuse not to raise rates, because they've missed the window, and they got it in this whole mix up. >> i think they want to raise rates. get over ito

depends because i think they are tired of the artificial rates and being a zero rate environment. >> we do not need rates at zero. >> it interferes with price discovery. >> it is like a two-year-old with a tantrum, if you take away their candy. three or four. >> if they raise rates in september, i think it will provide a certain amount of research to markets -- reassurance to markets. september rate rises off the table. >> it is still a possibility. difficult technically because it is obviously very thin on the liquidity situation for the banks of the holiday. >> i think the global economy can handle it. i think the federal reserve

ought to get going. >> we will see how the data comes in before i think they will make any sort of big determining factor of what it is going to do. olivia: right now, the fed funds futures rates price is a 20% chance that it will raise rates in september. if they wait, how do they justify it? to thehey do point weakness overseas. but it will be interesting to play that mash-up in jackson hole. i wonder if they listen to analysts like this. olivia: it is not part of their mandate. mike: it is not one of their top goals, but they certainly react to it. they took note of the swing and stocks, porsche are commanded to not want this type of volatility. they probably expected a little bit of it before the september meeting. this might be a lot more than they were expecting. matt: i'm surprised we do not hear more from a time in there. he is the institutional investor, number one ranked wall

street economist for 35 years running. they surveyed dozens of hedge funds every week, they are one of the best overviews of the market out of anybody out there. they are not expecting september, they think december is a? question mark. be disappointed with usa if we had push things forward because of the rest of the world. mike: what is 25 basis points way to do to anything? this goes to the point that many make, that we are overplaying when the actual moves occur. as opposed to the slope of rate rises in 2016. matt: why could they not just do it now? what is the difference between going from zero to 25 to 15 in one meeting? it is not going to move mortgage rates that much. what is the problem with moving into -- moving into?

olivia: a lot of people say they is no problem. another question is what is happening in the emerging markets and a lot of things i hear is is this 1998 again? mike: there is some comparisons. the similarities being that currencies could not hold that peg any longer and they had to adjust and the markets freaked out about that. what i have read in the announcements i have seen is the balance sheets of the asian governments are a lot stronger than they were in 1998, for sure. mike: and most of the currencies are not paid anymore. of the emerging markets were pegged, and a lot of them are free-floating because of 1998 the only huge problems you see are the ones that remain pegged releasing that peg now. there has been pent-up issues, and you see the currency in cosmic stan getting released and falling 20%. currenciesng-market

are not paid anymore, and they have a strong -- mike: and the free-floating ones are pretty conservative. but obviously, there are some it is silly to try to model this year after a year in the past, but it still shows there are some similarities that you cannot ignore. the pressure problem was in the end of that crisis, and the problems are on the front end of this one, but there is still this global contagion that you have to worry about. olivia: thank you so much. matt miller, let's give you a flood. -- plug. fun. that was matt: later on in the hour, i have a guy who cut his teeth on the argentinian debt crisis. he knows what it emerging-market debt crisis looks like, and we will look at asking him if using

too many similarities? in the noon hour. olivia: tune in. watch from noon and wait for it. 12:37 p.m., matt miller, you do not want to miss it. [laughter] headlines.review the a new mission. he wants to convince general motors to move headquarters from chicago to new york. -- from connecticut to new york. areyork, texas and georgia among other places in consideration. and they will be able to replace 100% of the water they use by the end of the year, five years ahead of schedule, says coke.

and the owner a pizza made famous in the movie of the same name is admitting he has mishandled a whole lot of dough. he will go to prison for one year. it has been interested traction since the movie was released in 1988. those are your top stories at this hour. it is time to get you caught up on all the market action around the world. i want to go over to asia and look at what happened to the shanghai composite. it is below 3000, falling by 7.5%. the market closing before the central bank intervened. asia.arket turmoil in in ateepest four-day rout

wild. >> another ugly day in china. the psychological line in the sand for investors. it has dropped 22% in less than a week. banks, inn into his intervention to prop up the yen, and that strangeness of why of cash australian stocks rebounded from a two-year low. korea ended the day to percent of. -- 2% up. olivia: hans nichols is standing by and watching a very big market move. andt was a sea of red can it is now a field of green. all of the major indices are up. of more than 4%.

you have to go all the way to the ftse to see something that is of less than 3%. trading has been a little lighter. everywhere except for in germany, there is a little bit more than the 10 day average rate nothing changing on the volume side. when you look at the big gainers in the german market, you have one of almost more than 9%. bmw, they are up 6%. similar for volkswagen, also up 6%. on to currencies, the euro did weekend against the dollar. it is down about 1.2%. you saw a lot of that move on the back. the biggest move of the day on the back of china's rate cutting decision. that is when he saw the big move happen there. the pound took a much more dramatic tumble off of that

caught in china. precipitous drop, so the pound is weakening as well. the story really is to virgins, greek bondsce, are rallying. with that, i will send it back to you. olivia: thank you. pimco's which have years of hell it will pay its executives. ♪

welcome back to the bloomberg market day. pimco is changing the way it pays its executives. they want a more stable cash incentive. why the switch? an effort to retain employees. is very child, an

expert on the goings-on in pimco. this is interesting. it sounds like markets are getting uglier, and pimco is on hinging performance with confrontation -- with compensation. mary childs: it makes some sense. a ton ofrought in talent to assuage concerns about employee retention. that has the weird effect of increasing concerns in some ways because you have these big-ticket names that can be expensive, at the lower-level guys think they are cap level. so you're concerned about who is actually managing portfolios day today, and this addresses the. pimco has a very lucrative option program until july, where growtht this ridiculous projection, and would make a ton of money. those became shares later. those paid out when they were valuable. but now they are just saying here, have some cash.

it pays out every three years, but they here, and we will pay you. just not handed to profit growth, because we will not hit the target anymore. olivia: if i was a client by would be concerned. if i was an executive, i would be happy. what does it say to you? mary childs: it is a smart move. they are not going to clear that anymore. in 2008, 2009, they exploded. , these are out of the money options more or less, so you have this great payout. that is not likely to continue. we have the great rotation of fixed income because of rates and all of these other things we would talk about. that is a twilight for one of the main things that pimco does. nothing goes away, it is nothing to be as waitress growth as it has been. going to be more stable

if you were worried about your compensation structure. olivia: in the heyday of pimco, they had bill gross and mohamed el-erian. his co-still able to recruit and retain the same kind of talent they were able to win those guys were at the helm? mary childs: a great question. it took a little more cash, and more compensation to lower people to newport beach. it is not the cultural center of the new york city is. mbas pushed back when they were trying to get them over there. it is this academic thought leadership, it is a very intellectual ways, and that attracts like-minded people. the question is how they continue to attract the people at the growth prospects are muted. olivia: finally, since your next for the company? -- since you are an expert, what

is next for the company? mary childs: they are trying to lay low and the performance before itself, and they really like setting the agenda and saying new neutral, and new normal. olivia: catchphrases certainly help. thank you so much. in more what is happening the u.s. equity markets right now i want to go over to my colleague julie hyman in the newsroom for a check of the markets. julie: we have this return to volatility, and we have stocks rising the most haven't quite some time because we had the biggest drop in quite some time. the nasdaq is the biggest one-day gain a percentage basis and about two years. the dow, biggest one-day gain since february, and the sba 500 since last december. part --burden course of spurred in part by the chinese rate cut. as we see money go back to

stocks and out of treasuries we are seeing yields a backup up, despite the fact that the september rate rise odds remain very muted here. we are seeing a yield a little bit higher. in terms of what we have been seeing in the dollar, and little bit of snapback as well. we have seen the euro falling versus the u.s. dollar. we will keep you posted all these market moves. we will be right back. ♪ . .

olivia: good morning. it is 11 a.m. in new york city. welcome to the bloomberg

market day. olivia: good morning, i'm olivia sterns. pimm: i'm pimm fox. let's look at how markets are trading right now. let's look at the u.s. stock market and begin with the s&p 500. again of more than 2%. best buy, netflix and michael kors all leading the as the 500 higher. the dow jones estoril average adding more than 2% right now. olivia: it certainly looks like a bit of a relief rally since we saw the biggest two-day drop in the drop -- drop in the dow. that is bad news for treasuries. yields are creeping up -- the yield on the 10 year note of