so much from the open rally. oil sinks a second day. what are you going to do with your new 201 k? this is "bloomberg surveillance ," live from our world headquarters in new york. it is wednesday, september 2. i'm tom keene. with me, vonnie quinn. who is the new guy heck of a >> i come back and there is a new microphone on my desk? nothing has happened in the markets, luckily. tom: what is your two-sentence takeaway on jackson hole? brendan: that volatility in the markets does not matter. and that volatility in china does not matter, that has been proven. tom: right now, let's get on the market data with our top headlines. vonnie quinn. vonnie: chinese markets are closed. celebrating these -- the 70's

anniversary of world war ii. there is speculation government controlled funds intervened to stabilize the market. meanwhile, futures indicate u.s. stocks will open higher this after the dow industrials lost 469 points yesterday, 2.8%. the price of oil resumed following this morning. falling one and 3% in new york after an almost 8% drop yesterday. one texas intermediate is dropping. the government is expected to announce oil inventories rose again last week to read iran has made it clear that is putting more oil on the markets. >> we upped production immediately after lifting sanctions. after four months, five months

we plan to increase. vonnie: the iranian oil minister was interviewed in tehran. president obama was one vote away from victory from declaring victory on the iranian nuclear agreement. the president has 33 votes in the senate. he needs 34 to be able to uphold a veto of legislation disapproving the deal. john kerry will outline what the u.s. plans to do to maintain security for israel and allies in the persian gulf. he will deliver a speech in philadelphia focusing on how the deal makes the u.s. and its allies safer. it is a victory for uber drivers in california. a federal judge has ruled the service will have to defend a group lawsuit brought by drivers who want the pay and benefits of employees. if the status of uber drivers is

changed from contractors, they would be entitled to compensation. and andy -- despite a sensational between the legs shot there -- tom: that is the way i do it. vonnie: the volatile australian lost in four sets to andy murray. tom: i was at a resort once, and they literally -- i was so bad. i was a hockey player that faked at tennis. brendan: you kept up trying to scoop them up off the ground. tom: the rackets were wood. we will be focused on the markets through all of surveillance. futures up 16. euro churns, but yen clearly shows a churning maybe a flight

to quality across some of the markets this morning. oil south 44.39. the fix 3140, giving you every indication of the tension -- the vix 31.40, giving you every indication of the tension. sometimes and make charts and i do not know what i am going to see. in 1998 it was more elevated than now, but not as much as i expected. there is 1997, 1998. brendan: the vix is measuring something different in every decade. when you run it back this far the complacency. right there. nothing wrong, we're fine, we have it all figured out. while, we have not paid attention to that. tom: this is the 47 days i felt

i could retire at some point. brendan: when the vix goes low you should be concerned. that is what i take away from this chart. tom: volatility continues. most focus well on stocks but there is great correlation with emerging markets struggling. we see that this morning. the chinese yuan appreciates while brazil and australia seen new currency weakness. jon ferro is in london. we have asked kate moore to attend. she is a strategist. also again, our senior vice president of cell in -- of cell in may and go away mike regan. there is the linkage between australia and china within this market turmoil. jon: it really does tom. there was a politician bragging about how the economy was with

the western financial crisis. they are feeling the pain now. a slowdown in china, their biggest export destination. there is a job in the aussie dollar, south of $.70, a 2009 low, with potentially more pain to come for aussie currency. brendan: jon why did you move to brazil when you had the chance? jon: let's not have that debate. brendan: we are close to 3.07 on the yuan. jon: for brazil, there was a big credit boom over there for the last five or 10 years as well. the slowdown there is not a shock. it has been developing for the last several years. we have to get used to this. tom: quickly, what do you learn

in the european stock market this morning as we look for the dow to open? jon: keep it short. stabilization. tom: i like that. jon ferro, thank you so much. he is into this new one-word response to my question. i hate the guy. michael regan is joining us, and kate moore from j.p. morgan private bank. mike: i would like to bring it back to the vxix. the volatility is becoming its own catalyst now. a lot of the focus is coming to these risk parity strategies, in an attempt to outfox your traditional 60-40 pension style investment, they create an ideal portfolio to reduce the sharpe ratio, and then they lever up on futures in stocks. tom: this gets to the heart of

the matter. is the roulette wheel of the end of august and early september -- is that -- are we beholden to the hedge funds? are they the ones driving the cart? michael: not just hedge funds. tom: the market pros. michael: it is not identical strategies, but they are similar enough that it appears like a crowded trade -- with the volatility as low as it is people got complacent, and now volatility has whipped up, and they are pulling back the leverage to less volatile portfolios. that might be a temporary phenomenon. the question is, obviously the economic data globally is weakening as well, so it is unclear how much of the selling is because of this phenomenon. brendan: let's look at u.s. equities. is there any shelter in this rain? michael: it is a buy, the whole

market, and there is sort of this tension between the fundamentalists who think it has gone too far and the volatility that is still shaking out. tom: kate moore is with us as well, from jpmorgan. i want to bring up a quote from her. she was in central park under an oaks tree it was gorgeous, end of summer as her blackberry was burning up from jpmorgan. tom: why is this selloff, this volatility, different than what we see in 1998? kate: we were lulled into this sense of low volatility complacency for the last couple of years the rate although lots

of us have participated in the markets for years, this is a little bit spooky. we need to see volatility rise a little bit. we need to see greater dispersion in the market. when it happened, everyone backed off at the same time. i am no expert on trading strategies, but everything i am hearing is that most of this is systematically driven. most of the institutional investors are really looking to buy and pick up high-quality stocks during the selloff. tom: one of the great observations when christer kronos -- when chris verrone us -- it is not a crystal ball of what is to come. brendan: we keep looking at the vix. i wish i had a nickel for every time i heard the word volatility in the last month. what is volatility for, kate? kate: volatility at think is eu euphemism for selloff right now. we have not seen the market drawdown in a meaningful way, and this is why we equate

volatility with the selloff that is more traditional in size and scope and nature. i would suggest there are different volatility measures across asset classes that people need to pay attention to. volatility has not spiked as much as the equity volatility. vonnie: what will the catalyst be for the market pick up again? kate: we need to get through this fed meeting. good, solid economic data has not led to people feeling more comfortable about investing over the balance of this year. we need to clear signal from the fed meeting that they are ready to move forward and that they view the economy is being on solid ground. tom: kate moore, and we have a killer chart to use later in the hour on this great bull market. michael regan, thank you so much again this morning. coming up, oil moving as well. funny mentioned it, dachshund

-- vonnie mentioned it. we will do that next. it is "bloomberg surveillance." ♪

tom: futures rebound this morning, up 14. there is other news out there. this is stunning. the australian dollar with a 0.69 handle. what a symbol of this 2015 as australia, ever weaker off economic data. and the challenges with china as well. the morning, everyone. "bloomberg surveillance." let's get the top headlines of vonnie quinn. vonnie: the manhunt in illinois is expanding for three suspects in the killing of a police officer. police are searching a village north of chicago. residents are being asked to stay indoors.

he was facing that she was fatally shot yesterday while chasing three men on foot. he was the fourth u.s. police officer killed on duty in less than two weeks. netflix has its first foothold in asia. it has launched a streaming video service in japan. the company already has plans to produce original programs in japan. and you can call it a prosecutor's best friend when searching for inside trading. it is control-f the function on the keyboard that may allow -- tom: is my bowtie straight? vonnie: let's go off in at this point. conoco phillips has announced it will cut 1800 jobs, a 10% reduction, as the industry prepares for a longer downturn.

oil retreats once more this morning. prices are needed to go lower to clear the market, an energy analyst joins us on the set. wti, under $45 a barrel today. where does it need to go to clear the market? >> probably below 30. if you look at the global low-cost curve, on a cash operating basis it is below 30. if you frame that in the opec sense, in the middle east is rising -- capex is rising. tom: so the distinction here, is in the last three days, did you note a change in opec language policy or posture? andrew: not at all. the usual opec bulletin that came out was really a nonevent. the market was really fixated on it, the market was overly net

short. vonnie: opec said it wanted to talk to other nations with regards to pricing, and it seemed maybe opec was getting hot under the collar about factoring in oil not rising anytime soon. andrew co. i think it was more or less an overreaction. tom: what i want to know about the terminal value of oil, manus cranny this morning had an interview this morning. i am going to -- is everybody coming back down to where you people are? andrew: exactly. the global oil costs are moving down in a parallel fashion pretty much, flattening out to a certain extent. it has to do with twin factors between technology and fx as well. brendan: if we are looking at the rig count in the middle east going up, does that tell us that the pricing power of opec is over?

andrew: more or less, yes. vonnie: conoco phillips is announcing 1800 jobs at its morning. are there more to come? andrew: most of them have been on the oil services side, but if you think about the rest of oil, they are materializing there as well. tom: when do you know when to pull the trigger echo there are all these blue trip -- blue-chip names that you put in your portfolio. when you pull the trigger and say nothing is gloomy and i am buying? kate: we did a little bit last summer. tom: you got hammered. kate: we got out pretty fast. we have had on our watch list the stocks for the last 12 months. but it is hard to see. we have seen come is be really aggressive, yet we feel we have no visibility to where oil prices are going to settle and how fast --

tom: give ms. moore visibility. andrew: we definitely think they are going to remain lower for longer, at least 32016. the world remains oversupplied. we look at the iaea forecast. it does not even include the barrels coming on in a rainy and production next year. we said earlier on we need nowhere price -- we need lower price to clear the markets. tom: jpmorgan international yesterday about concern about continuance of the new mediocre dovetailing into what we see in oil and in emerging markets. andrew, thank you so much for coming in, with bloomberg intelligence. oil on the move. west texas -- 44.36 right now. our twitter question of the day -- thank you for your responses. is the u.s. immune to the

emerging market downturn? look at brazilian real, the australian dollar, both weaker this morning. stay with us, from new york city, "bloomberg surveillance." ♪

tom: good morning, everyone. we go further in our data checks, and that takes us to brazil today. brendan greeley, with his knowledge on this. the real 3.70, rounded up. i cannot begin to convey the urgency of that to the people in brazil and their government. how fragile is the government at this moment? brendan: there is a great piece on the terminal that says you walk in levy, the finance minister -- that joaquin levy, the finance minister the only

one who can do anything is the head of the central bank there. tom: a major shout out to mohamed el-erian, who was way out front on brazilian turmoil. he will join us at 8:30 this morning. this is the interview of the day for me yesterday. louise humana, she is a massive bear. we think it is time to move capital -- tom: is the bull market done? kate: i don't feel be bull market is totally done but this last move in technicals and volatility has caused a little bit of this. tom: how do you as a fundamentalist at a conservative bank use technical analysis?

k: we look at macro, we look at valuation, and sentiment and technical when we look at that bucket, we also get funding close. tom: this is a core thing. vonnie: people are not quite sure how the market is price. more people are looking to technicals as they become sort of in fashion. is that distorting things? kate: it may be, but we want to take care to look at those key things regardless. tom: this is critical. everybody in a foxhole is in technical analysis. brendan: that is true. technical analysis is basically a greater fool strategy. you may these martyr, but you are assuming what they are going to do -- you may not -- you may be smarter but you are assuming that what they are going to do,

you need to take that into consideration. kate: we have a technical allocation. what i did say about the sentiment, technical bucket that we look at, the fund flows have been important. seeing big flows out of equities has been important. brendan: vladimir putin is in beijing today and what is in this relationship for china? this is "bloomberg surveillance" and vladimir putin report on bloomberg television. good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." futures up, dow futures down. i have comments on smart headlines. here is vonnie quinn. vonnie: investors will get a

timeout per chinese markets are closed rest of the week to celebrate the 70th anniversary of the end of world war ii. there is speculation that government controlled funds intervened to stabilize the market. futures indicate u.s. stocks will open higher. that is after the dow jones industrials lost 469 points yesterday, 2.8%. russian president vladimir putin just landed in beijing and is visiting china for two days as a nation marks 70 years since the end of world war ii. the focus of the display will be china's present military power. a wide array of new weapons will be featured tomorrow, most of them never shown in public. cnn is changing the rules for the next republican presidential debate. the network will choose participants by using the most recent polling. that could help carly fiorina who did not help that who did not qualify for the fox debate

last month. the network is struggling to do with the field of 17 candidates. the next debate is 12 days from now. bloomberg news reports xiaomi may create a laptop next month. mcdonald's has been testing an all-day breakfast menu for several months. brendan is rubbing his hands. brendan: this is my all-day breakfast face vonnie. they solve the problem. this is one of the bigger problems in america. it was number three, right after the economy enabled -- and maybe global warming. number three was the inability

to buy breakfast after 11:00 a.m. tom: full disclosure, there is a mcdonnell -- there is a mcdonald's three doors down from our office. brendan: vladimir putin is having breakfast with xi jinping tonight. they are likely to sign a memorandum of understanding on a gas pipeline, and russia's state bank, development bank, once to sell you on-dominated bonds on the chinese mainland. our correspondent is in hong kong. enda what is in this relationship for china? enda: away from the military parade, this trip will be all about keeping economic ties and boosting trade between the two. in some respects russia needs china a lot more than china needs russia.

this year alone, trade is down 29%. part of the trip for vladimir putin will be to re-boost the economic relationship with china. brendan: how has august's collapse in shanghai and shenzhen affected the tone of this meeting? enda: i would imagine it has affected the tone quite a lot because china matters a great deal to russia these days. take the move in the you want. -- take the move in the yuan. china's slowing economy, moscow is oil's biggest export. it will be a conversation topic between the two leaders. tom: i am really taken aback by who will attend the festivities in beijing. the leadership of russia, of venezuela, of south sudan -- it is a laundry list of interesting characters. why isn't vietnam or malaysia or

indonesia there? just set up who will be at this parade. enda: like you say, it is more a question of who will not be there. japan also will not be there. it is an unprecedented commemoration by china in its scale and size. as you say, the global leaders have chosen it because of china asserting its territorial claims around the world. in the south china sea and the east china sea. the anon, you mentioned. when -- vietnam, you mentioned. brendan: kate moore is with us from j.p. morgan and has a question as well. kate: two extent is this coinvestment between emerging markets going to drive this new flow out of this? that is potential support, i with thing, for the chinese market next week when it reopens. one of the big challenges is if

china does not have the support of u.s. or european investors, can they gain support from their partners in the emerging world? enda: don't forget that the china financial market, even if it is rocking the rest of the world, it is still a closed world. it does not draw in much foreign capital because it has a closed capital account. we do not know how it will say or until the -- we do not know how it will fare until the government steps back. we cannot get a true gauge of the health of china's financial markets or the level of foreign investor interest. tom: thank you so much. from hong kong this morning. he chinese yuan appreciating for many days in a row as china tries to adjust to the recent evaluation. our single best chart is on the devaluation in your portfolio. that is coming up, on the standard & poor's 500, this on the ugliness of yesterday

afternoon. futures up 13, dow futures up 1.10. stay with us. "bloomberg surveillance." ♪

tom: we welcome all of you as you wake up in america. futures up 13 points. with what we saw yesterday, you

really wanted the vix closing at -- kate moore of j.p. morgan private bank. this is the standard & poor's 500, more indicative the market and the dow going back to this great unloved bull market. green and blue are the standard deviations, one measure of volatility out. two circles, standard deviations south. by definition, if you get two standard deviations out, get out the phone and a pad of paper and start buying stocks. is that how you feel? kate: i would not say we are buying hand over fist, but this has caused us to revisit our investment thesis. we ask this question, have the month and the -- have the fundamentals changed? has market sentiment move? how do we want to act on it?

the european macro data looks good. earnings, x energy, we are not terrible? tom: is the u.s. market within the entire portfolio a discrete market, or do you have to deed -- do you have to dovetail it into other markets doing worse? kate: we have to think about all markets holistic way. what percentage of the s&p 500 is geared to other markets in a challenging macro environment and slice and dice in a number of ways. vonnie: are you getting cash ready for another selloff? kate: we were looking for better opportunities across asset classes. it was not just an equity call. we recognize that while equity valuations were not cheap, -- we were looking for better opportunities to add across different asset classes. right now we are still overweight equities, and we're

still holding cash as part of a balance to our portfolio. that makes brendan choke. i am most worried about the fed not moving in the second half of this year or in september. i think it would be very negative for sentiment. we are all waiting for that all clear sign from the fed. tom: would j.p. morgan, michael feroli, lead on a new terminal value -- do you ratchet down your return on equity's? bring up the single best chart. this is a work of art. look at that chart. there it is. is it a new terminal rate? is the new 7% 5%? kate: in terms of earnings growth equitation's -- earnings growth expectations? depending on your starting

point, we have to be pretty realistic about what we can get from risk assets over the next 12 or 18 months. we have been more conservative. we think the returns off equities are potentially going to be stronger than fixed income, even if we move down our expectations to mid-single digits over the next 12 months. brendan: i have pulled it together. one of the things that kept coming up at jackson hole was this whole idea of here is where we are in the cycle, this is what should happen in the future unless this time everything is different. what is your confidence that this time is the same as the other cycles? kate: i was obviously not in those fed conversations, and i can only hope that they are not stuck in a hotel california where they have qe forever and that they can never leave. brendan: i am talking about the underlying dynamics, the fundamentals. do economists need to look at the world differently now, or are we looking at the same business cycle than before? kitco it is danger --

kitco it is -- kate: our expectations for what overall growth or trend growth can be has to be different. but i think trend growth is good both in terms of earnings and in terms of the larger economy. we need to accept that. this might be good enough to get rates off the euro. tom: is your next research report titled "this could be heaven or this could be hell"? kate: i do try to bring in song titles to my work. tom: what is the song title to get through this week? whatever anybody says, i do not see blood in the streets yet but there is a lot of emotion out there. kate: maybe we go to jimmy buffett. "come monday, it will be all right." brendan: is that the rolling stones "gimme shelter"?

kate: quantitative easing is getting thrown around in the market a little bit, but at this point it is not a major part of our forecast. -- quantitative tightening is getting thrown around in the market a little bit, and at this point it is not a major part of our forecast. the ecb and japan has not given us their roadmap for 2016. tom: you go right to it, the great distortion, that we are drowning in qe and the ramifications of it. kate: we are stuck in qe in many different economies. the exit plan is less clear. tom: just an observation that jacob frenkel was adamant about the size of qe in japan as being the ultimate distortion. what have we got? vonnie: let's have a look at some photos making news today. president obama is checking off hiking a glacier from his bucket

list. he was staked out in hiking boots and attire. he also met up with tv star and adventurer -- with a tv star and adventurer. he saw global warming firsthand since the glacier that he visited has retreated more than a mile in the last 200 years. they are hanging with the tv crew and the diner dash at the diner down the street. brendan: every time we talk about james bond, you see this. vonnie: speak of which -- top photo in jakarta indonesia. workers and laborers protested outside the presidential palace yesterday against higher prices unnecessary goods and layoffs for factory workers. the rupee has been weakening against the u.s. dollar, which

has been making import goods expensive. a lot of export businesses have been forced to close. brendan: when he was elected there was a spike in equity, and it was exactly because he was expected to do the economic liberalization that is exactly what the people in the streets are protesting. kate: it is a really challenging situation whenever you are trying to get reform to the emerging markets. there are people that benefit from the existing system. we have to give china credit here, too. they are trying to reform. it may not come in the shape or with the kind of can medication we want in the markets but they are at least making an effort and yet everyone is throwing up their hands in panic. brendan: the problem is from indonesia and malaysia and brazil, you have to liberalize when the sunshine's because it is hard to do when -- when the sun shines because it is hard to do when it is raining.

kate: the biggest potential implication is going to be on the sentiment side. so many of our cupboard is our global. if they stash so many of our companies are global. pulling back on capex and -- tom: a must-read -- i put it on twitter yesterday -- an absolutely fabulous article on this. vonnie: top photo -- this is migrants in europe, thousands of them fleeing the middle east and working their way into the balkans and then into northern europe. southern european countries are often pushing them through two countries like germany. 40% of people seeking asylum came from the balkans, not from the middle east or north africa. this is the hungarian train station, which is the route to the international -- boarding trains there in budapest or rallies started outside the station, as we saw yesterday.

an agreement says they have to apply for asylum in the country they arrive in in europe. brendan: there is a questioning of the schengen agreement. it has been the one thing that has been underpinning the european union for two decades. the fact that they are now questioning it, or considering changing it -- this is something european commission is actively talking about -- is tremendous. vonnie: the idea is that you do not have to, if you are a european citizen already -- tom: with your unique abilities, brendan greeley, is there a distinction of a germany with a turkish immigration that they have seen for decades, and that -- and now there is a whole other new wave coming in? brendan: germany is taking an 800,000, many more than any other country in european union. they took a lot of balkans in in the mid-1990's. they were in the small town where i lived in 1993.

germany has experienced -- the turks were brought in as workers. that is a completely different question. if you look at what happened with integration balkan migrants into germany, into swedish society -- sweden's most famous soccer player came in to sweden during the 1990's. tom: it is a topic for september, no question about that. coming up, we are going to try to talk about the markets and what it actually means for you. maybe your 401(k) is a 301 k after we have seen -- after what we have seen in august. kate moore is with us, and we will discuss the ramifications of this market. stay with us. ♪

tom: good morning, everyone. ralph schlosstein nine, air next hour -- ralph schlosstein, next hour. i hope i have time to ask them questions about one of his in previous employers, president carter. markets are on the move. we have had better than good markets.

futures up eight right now. our top headlines with vonnie quinn. thank you so much -- vonnie: take you so much, tom. kim davis says giving a marriage license to gay couples violates her christian beliefs. davis could be held in contempt of court. amazon is looking for ways to find more people for its $99 a year prime service. it is offering members free downloads that can be downloaded to phones or tablets but not to desktops or laptops. controversy has arisen over the new will smith murray -- will smith movie "concussion." the director says no compromises were made for the national football league, which has been accused of hiding the dangers of again. according to dozens of e-mails by hackers sony pictures

deleted or changed some moments that were critical of the nfl according to "the new york times." tom: it is not going away. brendan: it is huge that even if they compromised it, there is -- that they see a market for this movie. that things have changed enough in america that people think they will go see this movie. tom: they don't tackle anymore they hit. it is just that simple. if they went back to tackling, this problem would go away in about two seconds. futures are up eight. they were up a good amount better moments ago. there are some unquantifiable risks. kate moore, it is a mess known as the chinese stock market. what are the unmeasurable's? what are the things that are out there that will adjust your battered 401(k)? we look at the markets and what you need to do. have you changed what a given

401(k) or a trust fund should do right now? kate: we have not changed our allocation. the only thing we have done in the last couple of months is reduce our emerging-market ager -- emerging-market asia exposure. that was the major move that we made in advance of the last decline. tom: it was in august to remember, which everybody filters through their own skill sets. we get a little bit of a bounce here, but the cash flows of underlying companies are still the same, aren't they? or do you mark down revenues, earnings, and cash flows? kate: the big question now is what we do with 2016 earnings. this has been the cloudy part of our forecast because if we have to take down energy earnings another significant league, it is expected over the next four

quarters it will be down another 20%. but if we stay at 40 bucks or god for bid, get to a 30 handle in a sustained way, we will have to take down earnings again. and we have to think what the aggregate numbers look like and how was specific -- how specific we have to be with sector trading. brendan: given what is going on in emerging markets, will we have to continue to draw the distinction? kate: we have had a big part of our equities portfolio in mid-caps. it is a positive investment for us but not just because of the -- it is because of very great m&a activity. the earnings overall have been better than the large caps. tom: this has been great. kate moore, come back tomorrow. a very needed perspective, again, with futures a little bit weaker here. how about the forex market? i find it fascinating. the australian dollar with a 0.69%, and the brazilian real is

the emerging-market of the moment 3.70, which is truly unimaginable. stay with us on global wall street. next, another hour of "bloomberg surveillance." ♪

tom: the dow nears august 25

lows. south ossetia and and venice -- south sudan and venezuela attend a benefit in beijing. we consider the pause of dealmaking on wall street. live from that world headquarters in new york it is wednesday, september 2. joining me is brendan greeley and vonnie quinn. back from jackson hole the shift is september to october? brendan: when you look at the announcement for the fed future rates the likelihood is higher of a september move. done at 26% before jackson hole afterward it is at 32. tom: what a morning -- futures up 8%. our top headlines -- here is

vonnie quinn. vonnie: good morning as celebrations are marking their world war ii victory. major cause for celebration of investors worldwide. china's stocks swung wildly today before closing lower. futures right now point to a higher open for u.s. stocks. the doubt lost 469 points -- 2.8%. oil prices still out of control. crude prices are down sharply in new york. $45 a barrel once again. iran is complicating the world like trading picture. it plans to put more oil on the markets. >> we plan to increase our

production immediately. we plan to increase it another 500,000 barrels. vonnie: opec nations are feuding about whether it should be part of the long-term strategy reports. president obama needs just one more senate vote to seal the deal. they are now backing the deal giving the president 33 votes. john kerry is still pushing the plan to keep atomic weapons out of iran's hands. the secretary of state will addressed -- will address congress today. uber drivers score victory in california. a federal judge says they must

-- the changes in status could mean better pay and benefits. net -- nick kyrios was an unhappy camper last night. he did not like the lighting the fans arrive late, or the outcome of his match against andy murray. the third-seeded murray and second-seeded roger federer also advanced. brendan: i have never understood how precious tennis is about silence in the stands and the perfect atmosphere. every other sport has to operate with yelling crowds and chance. vonnie: they are very close to the players. some people can shut them out easier than others. tom: when i played tennis there was no yelling or screaming. get off the court. ok, a data check.

barclays covers their successful, weaker australian dollar trade. michelle putting up a message -- barclays covers weaker australian trade. we have seen some of those emerging markets weaker this morning. there is a great correlation of emerging markets. it is weaker and weaker at 3.70 and we begin our coverage with jon ferro in london. michael regan to give us perspective on wall street. ralph of ever core. you see this cover a successful trade and he emphasizes that there is more to go. what are these markets linked to? tom: --

jon: that is the easy way out. brazil has the messick issues and you could talk about malaysia. the broad headline is china. it is the commodities headline. it's a 22% depreciation in the aussie dollar and two years. stock jen says potentially even more pain to come. brendan: about 60 different stories you could choose from, which is journeying across the u.s. cross rate? tom: that will be the story in the months and the years to come. it will be the basics. what happens with the euro and the ecb? long janet yellen and short mario draghi? tom: we will keep it this morning.

jon ferro, through the day watching the equity markets. we have been doing this hourly with michael regan of bloomberg news. what was different yesterday. >> you cannot count on this v-shaped recovery we have had in the bull market. this is the most anomalous dip we have seen since 2011. the question to me is -- is that low we set going to hold? we are about 400 dow points above it now. the drop we saw last week -- if you look at the channel at the chart has been in, we really pierced below the bottom of the channel sharply. not just because of the drop last week but the flattening out of the market.

it's a great cliche. i didn't mean to rhyme those. tom: he is talented. brendan: come what may. [laughter] when you look at futures looking at microsoft, apple and bank of america performing the best now. >> people are a little bit confident in the market today but this is not a real robust rally in futures. it doesn't appear to be a v-shaped recovery. it would not surprise me if we make another test at those lows. tom: thank you, so much. with us to provide perspective on wall street. ralph flaustein. not only the founder of lack rock but someone who has minted a new form of calculus.

alden is in therapy over the red sox. >> i am in therapy over the phillies. tom: ralph you have great perspective on who is playing in the market. is this those evil people or those trade constructors causing this or is there a better explanation? >> i think that they may from time to time accelerate the direction the market is moving and reinforced that this is not about black boxes or daytraders. this is about -- number one there is a global growth concern scare which is raising the question about real stock

multiples and whether earnings going forward will be higher than they have been historically and a really important thing which is the more important impact is a questioning of the government and the policymakers's ability to manage the economy. i liken it to -- when we had the debt ceiling extension crisis, and the default on the debt -- our markets were very volatile and went down. it was not a fundamental problem, it was a crisis of confidence. tom: the distinction is that nobody goes on vacation. you have two bloomberg terminals at your summer place. i suggest the august idea is not there. everybody is playing 24/7. in my right? >> i think that is true of not

only markets but everything. there is no downtime anywhere. tom: time for a surveillance correction. good morning, mr. bloomberg. let's do a twitter question that we are asking. we will talk to brendan greeley about that particularly with brazil and the challenges there in the hour. ♪

tom: here is what you need to know. andrew cosgrove of bloomberg intelligence says forget about it. the opec speculation which led to a spring higher in oil prices is maybe not correct. 44.38 -- down 2%. two days in a row. brendan: moving that into credit yields to -- yields. it is performed better than any other sector this month. it's as energy cannot be alone

down there. walk me through this -- energy is a canary for the rest of the market. who will join whom and where? >> yes. [laughter] there will be some combination of both. basically, what these analysts argue is you cannot have this gap and one month. the worst monthly loss since the financial crisis of 2008 while bank bonds and technology bonds deliver positive returns. vonnie: isn't energy in its own sphere? >> is it. the junk-bond market at about 22% if you include metal, mining's and boils -- almost -- and boils -- oils.

what happens if prices continue to go lower and the default rates pickup? they will pull their money. brendan: sandra cosgrove told us to look at the rate count in the middle east but i pulled this chart yesterday -- if you look at that rig count it has reached kind of a bottom. does that mean the carnage in that debt is over or has just become? >> ubs analysts expect the higher-quality names to do better and recommend buying them. there are still a lot of questions about some of the other parts of the industry. there could be more weakness in the broader economy. vonnie: it reaches the bottom until it goes lower. brendan: always darkest before it goes pitch black. vonnie: lisa, thank you so much. we will tweak out your story.

-- tweet out your story. tom: let me get the twitter question of the day in. looking at a weaker brazilian real mexican peso near 17 and the australian dollar linked to china. week australian growth goes from zero to 0.7. that is a huge deal. equity futures up nine. ♪

tom: the 10 year yield, what is it doing? not very much. the story here is that yields have not moved all that much. let's get to our top headlines. vonnie: the manhunt in illinois is expanding for three suspects. they are searching a village north of chicago.

schools in fox lake are closed. the officer was fatally shot yesterday while chasing three men on foot. the fourth officer killed on duty within two weeks. netflix has another building block on its global strategy in place. it has already in the u.s. produced its own programming and purdue -- plans to do the same in japan. prosecutors are using a simple trick to hunt for cheaters on wall street. ctrl s. it helps them search for acronyms that may -- they use terms such as tof -- or talk off-line are being used for insider trades. i didn't know about that. so the investigators are control f-ing tol.

get it? anyway. higher capital requirements will lead to better returns. that is according to our guest. if washington succeeds in breaking up systemic institutions than shareholders when and everyone is happy. is that what you are saying? >> i am not saying this will definitely happen but the additional cushion of capital being required by these systemically important institutions places a heavy burden on them to generate enough of a return from their core businesses to basically produce an adequate return for shareholders. jpmorgan -- they have done a brilliant job. it is the best managed financial

institution in the united states. that is a very high hurdle to jump over to produce great returns. vonnie: can you see jpmorgan breaking up? >> clearly they do not want to do. but the hurdle put on by these capital requirements will require a couple things. it will require a really aggressive attention to expenses because it will cause a redrawing of the line between the return that shareholders get and employees get and it places a burden on them to have really well run effective and highly profitable businesses. if they can't do that the pressure will come not from regulators but from the market. brendan: it sounds almost like

dodd-frank achieves what it set out to. >> i believe we are at or very near a peak in regulation. i have been asked in the past will discontinue higher and higher? i don't believe that. i think we have more than enough at this point. vonnie: how have higher capital requirements benefited the likes of ever core? >> the most important thing for our growth is that we are on -- it's a very attractive place for the most talented people to work. that's it. higher capital requirements lower returns and lower pay. less freedom to serve clients. those are all things that are good for of a court but i am not an advocate of that.

tom: you picked up the number one market economist in the world. how did that happen? >> they had a company very similar to ours in a different business. a pure intellectual capital relationship business. tom: i want the dirt on this. >> it is a little bit like -- tom: you took him to a phillies-red sox game. [laughter] >> if i did that, it wouldn't happen. i think ever core is a very elite advisory banking business and isi had a very elite research program and there is actually an enormous amount of opportunity for those businesses together. brendan: alan greenspan said 20%

capital requirement forget the other regulations -- done to you -- done. did you spit out your coffee when you read that? >> think that is too high. but i agree with the thrust. if you have strong capital requirements and reasonably effective risk regulation everything else that the risk regulators to has little effect on systemic risk. brendan: if not 20% what is the ratio? 15%? >> i think it is lower than that. i would actually say that some of these extra layers of capital -- the world historically tells you that diversification is a good thing. with the regulators are saying is you are more diversified so you need more capital.

brendan: coming up next, john kerry is in philadelphia today talking about the iran nuclear deal. ♪

. tom: off the radar for americans and on the radar for europe. this is a major station within eastern europe. those are police officers on the steps keeping people from the middle east out.

so they cannot go to germany. the district -- distance from budapest to munich is somewhat the distance of new york city to cleveland. that is the distance that europe is transfixed by this morning between hungary and germany. vonnie: to celebrate its one or two victory, china is closing its stock exchange for the rest of the week. china's stocks saw wild trading today before closing slightly lower. they are down 40% from their peak in mid june. futures right now are pointing to a higher open for u.s. stocks. the dow lost 469 points. vladimir putin is joining those world war ii celebrations in china. while the occasion is the path

to victory. most of them never before shown in public. the network will choose the participants using only the most recent polling. that could help carly fiorina. the networks are struggling to deal with the field of 17 candidates. bloomberg news reports that the chinese mobile phone maker plans to roll out early next year. they were founded five years ago and is fourth worldwide in smartphone sales. breakfast time will soon be anytime at mcdonald's. on october 6 it will start offering mcmuffin's all day long. the company says they are responding to years of public demand.

mcdonald's got over 120,000 twitter requests last year for all day breakfast. tom: will this cannibalize the rest of the menu or do they grow it with this opportunity? brendan: who cares. [laughter] vonnie: more bacon. tom: careful analysis there from brendan greeley. the ugliness of recent years all the way back to 1998 and 1997. a little bit more volatility than here. ralph glassosstein is with us. what was the sweat like in 1998 versus now? >> in 1990 -- in 1998 it was precipitated by the failure of long-term capital which as we

recall was a hedge fund that was leveraged well over 100 to one. capital markets and the fixed income markets within spread this fear of failure about many institutions to this is really spurred by a couple of things. number one, we are going from a period of time where the markets have been driven by policy. fed policy and ecb policy and global quantitative easing. we have had a policy affected if not driven market. when policy is kept constant

volatility is always going to be low. we are now shifting from a policy driven market to a fundamentally driven market. fundamentals are by nature more volatile. so i think we will have more volatility going forward and second of all i think the change in policy always injects an increase of uncertainty. tom: will continue that story here particularly a distortion. because asked on ghosted -- kazakhstan posted 12%. that's clearly to protect against inflation is the headline. this is the turmoil of the tenge at 240 versus the cuban real.

-- brazilian real. the euro -- the headline there does nothing. 44.55. all attention on emerging markets. brazil and australia we can. brendan: this is "bloomberg surveillance" i am brendan greeley with tom keene and vonnie quinn. john kerry will give a speech to congress in favor of the deal from iran. john kuhn's signals he will support the deal. >> i will support it because it puts us on a known path of limiting the nuclear agreement. the alternative to me is a scenario of uncertainty and isolation. brendan: william cowan joins us from indianapolis. it looks likely that the president has enough votes to sustain his veto. what does john kerry need to

accomplish when he speaks in philadelphia today? >> i think he has to give one final pitch to solidify the rest of the democrats who are outstanding. i think there are 10 or 11 democrats who are yet to commit and if he can get them to commit that would mean they could not run a filibuster so the republican effort to negate this negotiation would fail so that would be a double victory. i think he will talk up the need to get more on board to support the president if there should be a veto and to see if he can get enough to prevent the passage of the revolution -- resolution disallowing the agreement itself. and secondly he will have to make an argument on this particular effort. it will start immediately

imposing sanctions upon iran which iran might take as a reason to break the agreement itself so the question would be, what will happen then? the rest of the international community is not putting sanctions back on it would be a unilateral effort by the united states and it would put them on a faster track than the 15 years they are currently on a 15-month track. >> what is the thing that this white house can do? >> is not just israel. it is the united arab emirates with the saudi's, with quatar and israel. all of the countries in the region are fearful. so what has to happen is the united states has to have a package of systems and

intelligence capabilities that will make the local capability more resilient and robust against what is anticipated of being the continuation of the destabilizing activities of the irradiance. there will be arms packages and things it will solidify the gcc into a functioning regional power. tom: you are very good at straddling the political debate. vice president cheney suggests we are in the middle of an arms race. is that the consequence? that we end up with an arms race between uae saudi arabia, iran and you name the other parties? >> that is one of the potential offsets. the other countries do not trust iran. we do not trust iran.

that is the reason for the intrusive inspections to ensure they will not cheat. if they cheat, that will get out and the other countries will start to modernize their own capabilities which means gaining a nuclear capability whether they buy it from pakistan or north korea. tom: part of this is the pageantry that we see in china over the next few days. i am stunned at the lineup assisting the chinese. venezuela, north korea, russia sudan and i would like to think there are other parties as well. how large is the chinese military might and its projection across the pacific? >> at this point it is a growing regional power. it does not have a blue water navy that can sale to various parts of the globe and affect

actions on the water, in the air or on the land. they will develop into a blue water navy and will have a global presence which is something we have to anticipate and find ways to manage its impact with countries that do not wish to be dominated. tom: are we budgeting the navy at an appropriate level given the perceived threat of china? >> we are not only budgeting the level of threat for china but the effective use of our military. it is down to some of the lowest levels in recent history and it will have a major impact on morale. if we have to ground planes because we cannot fly them. if the commander in chief called them into action. we have some serious problems that have been inflicted already under the hammer of

sequestration. to the extent that we will really start deteriorating and dropping to a second level of capability over a period of 10-15 years. brendan: this turns to blue water navy and this makes a lot of admirals happy. what is the significance of the carrier killer missile that china is parading in beijing? >> the carriers do present a challenge. they are floating islands and can be targeted and more and more sophisticated whistles are being developed. they would be very hard to stop. but what's that happens you are in a state of war. so the question is, would china run the risk of going to all-out war with the united states by taking on and sinking one of our

ships. that is a question that the chinese will obviously want to take into account. at this point we still have overwhelming superiority. vonnie: if they do get the votes needed, who is best placed in the next administration to continue? >> i think that the next administration, whoever is in that position is going to have to walk tenderly to say i know i made this promise to tear this thing apart but then he is going to talk to his so-called allies and say if you do that you are on your own. we will not impose more sanctions and we are quite happy doing a lot of business with iran. if you take action it will be on your own and you will live with the consequences. i think the next administration

will be hard to pull this down once it gets put into effect. brendan: what is the value of just resuming any kind of diplomatic relationship with iran? >> i think the irradiance would say that -- the iranians would say that we negotiated. a deal is a deal. we are not with you. the british are not with you. the eu and russia and china are not with you. if you want to renegotiate on your own -- but understand these are the countries supplying weapons, money and infrastructure building in our country. you will have to consider that. tom: thank you for the briefing. the former secretary of defense. ralph glossstein is with us now.

i want to go back to the cadet who entered the naval academy in 1943. brendan: surveillance correction, it is called midshipman. tom: forgive me. when i got to get into the navy. you served president carter tell us what the nation should know about this president. >> thank you for reminding me how old i am. but look, president carter was an exceptional man and i would say that whatever one thinks of his presidency, some think highly others less so but i think there is universal agreement that he has been our most successful ex-president. he is dedicated himself to human rights issues in solving conflict locally without war and

i think he has had a remarkable post presidential tenure. tom: you were there in 1979, did you think there was a carter malaise? >> i would say we were not as effective from the president on down in communicating his policies to the country and ultimately that was reflected in the 1980 election. i do think that we saw last week the embrace of this man who is obviously confronting an incredibly serious medical situation and i would be hard-pressed to describe or find someone with more grace or intellect and appreciation for the life he has had.

i would like to make one other point. president carter and vice president mondale, are the longest surviving ex-president and vice president. 35 years. the previous were jefferson and adams -- 26 years. tom: our twitter question of the day and the markets. is the u.s. immune to emerging market downturn? repeat after me -- midshipman. ♪

tom: it is a correction. we are down about 12%. stay with bloomberg television and bloomberg radio all day as we look how the markets wander through. futures up 11 right now. here is vonnie quinn. vonnie: joe biden is not in the presidential race but he looks and sounds like a candidate. he is scheduled to give a speech and lead a democratic fundraiser in florida. a biden super pac is hiring staff. amazon is trying to lower customers into its prime service.

they cannot get some movies free but they can only be downloaded to phone or tablet. not desktop or laptop's. joining costs $99 per year. a new movie about concussions in the nfl was reportedly softened so it would not anger the nfl. the new movie called -- starring will smith about head trauma in pro football. the new york times says hackers found e-mails showing changes were made so it would not antagonize the league. we just happen to mention that dwight clark its headaches from having been in the nfl for so long. tom: it is the real deal and ongoing in togo many other sports as well. what is the price of money? we all know money for nothing. how can investment bankers -- all is fine find the next

marginal car but know what the price of money is now and not into the future. what an odd space. i don't know what money costs because of my central bank. when does this and? >> the fed has been very clear that they wanted to end and they wanted to begin to end in the next few months. my own personal view is that it will be challenging, notwithstanding the positive economic news to that it will be challenging and it in a period of volatility like we are in right now. i will say, very strongly that to me the important question is not when they start. it is the path. the difference between zero and

0.25 for the economy is not a gnat's rear end. tom: can we say that on tv? [laughter] brendan: i think we can. >> what people want to hear is that while we do begin to normalize no one is setting a target of normalization 12 months 18 months or even five years from now. brendan: it is a most as if we have lost perspective of what tightening is. what you're saying is a must exactly what james bullard said. the committee isn't comfortable tightening volatility. culture matters. >> we sat here two years ago and i sat on the air when everybody was aflutter about the removal of quantitative easing. at that time i said, the fed has

been very clear that one of two things is going to happen. either the economy will be strong enough or we will leave it in place because the economy is not strong enough. as i said then and i would say the same thing today both of those outcomes are good for the equity markets. the gradual removal was better because it meant a stronger economy in place. it is not going to happen unless the economy is strong enough to withstand it. that is better for the markets than a week economy with zero interest. vonnie: the fed has waited too long and it will be too little too late. where do you see yields going? will there be some sort of conditioning in the medium term or will things go lower? >> i think we will see a very

slow, data-driven return to normal rates which is probably three to 3.5% and the path will be measured in years, not months. vonnie: what about corporate america? does it have to get the deals done immediately? >> i think that corporate america -- longer rates are certainly somewhat abnormally low because of the short rates anchoring the yield curve or 20% increase is not going to have that much of an effect on rates. tom: you have so much experience, what will it mean for body count as we go to the end of the year where guys like you create budgets and look to the bonus season in february?

does everyone have to get further leaner and meaner? >> i think there is a long-term trend in our industry which is leader driven by technology. you have vast parts of the trading execution business that are becoming electronic which means less jobs like any other industry. the other pressure we talked about earlier is a return on equity in the financial industry that is below that of the utility industry. that is pretty pathetic and that will be addressed primarily not by more risk. vonnie: tom need to get to radio you have a stellar lineup this morning. it is time to answer the twitter question of the day. we asked, is the u.s. immune to

an emerging market downturn? which owes three. better than most but the u.s. will not dodge the bullet entirely. vonnie: that is a reasonable assumption. maybe there isn't downturn maybe it is a global tie out from the fed. brendan: is that what we are looking at? >> i don't think so. maybe we are going to a world where looking at the two drivers of markets, policy and fundamentals it is my colleague who is brilliant on this who says we have been driven primarily by policy with the support of fundamentals. policy can't set the level of a market. you have to have fundamentals so , we are gradually pulling away

that supports of the markets will increasingly be driven by a fundamentals. they are global markets. that does mean a little bit more exposure to economy around the globe and more volatility. vonnie: our third answer is immune -- no, resistant -- yes. brendan: extra points for committing to the metaphor. looking at the australian dollar, vonnie, you pointed out that in september it was at 0.95 and it is that 0.7 right now. the value of trade, exports to china in 2014 was $90 billion last year. just to put that in perspective to the u.s. exports, $10 billion. as china goes, so goes australia. vonnie: my agenda item is the economic numbers coming up.

looking for an increased second-quarter from the previous reading of 1.3%. we some mortgage applications up 11% last week. brendan: the productivity numbers are hugely important right now. labor costs as well. my last agenda, joe biden speaking in florida today. is he saying things that sound presidential? what are his plans. as you just pointed out in the news, he has a team thinking about things in new hampshire. ralph is not running for president but we thank you for joining us from ever core. bloomberg surveillance continues on radio. vonnie: they will be talking about the beige book as well. brendan: tom always scoffs at beige bookers. vonnie: it depends on the timing. brendan: if you cannot find it

in the data, you look for it anecdotally in the beige book. bloomberg continues on television with "market makers." good morning. ♪ . .

erik: good morning, everybody.

it is wednesday. i am back schatzker, here in new york city. -- i am erik schatzker, here in new york city. you are watching "market makers. " stephanie ruhle his on assignment. stocks are shaping up for a better day than yesterday. s&p 500 futures up .75%, more after a 3% decline yesterday, or a decline of almost 3%. for a look at markets globally we will talk about china first. that seems to be leading stocks around the globe. chop -- stocks in china pared losses. there is speculation state funds intervened. again, the golden hour before a major military parade coming tomorrow, or at least overnight. in europe trading is more or less flat. matt miller is back, helping recover the markets. what are you seeing?