bob eiger -- u.s. stocks have been mixed throughout the day. are the bestdwide in four years. but the question is, what did you miss? pujols widens conducted damage the euro. could full wagon scandal -- who pulled wagon scandal could damage the euro. alix: and why china is crucial to the fed. joe: ny capital markets have all the power when it comes to oil. alix: first we will begin with the markets. i cannot believe we are not looking at intercollegiate move on the doubt. joe: did anything happen today? it was so boring. a little decline. moves.e did see the dow but not the volume we are used

to, incredibly light. nevertheless, they have closed at a two-week low, the lowest level since september. most s&p 500 sectors are lower, you have tech, utilities. overall, native data. there was a catalyst or velocity that takes things up. joe: i want to look at my terminal, because something interesting happens you look at features. futures. we said it to pay attention to lookingi, everybody is at this data. --s came out yesterday, whom .oom, the futures dropped well into contraction territory. the market did rebound, but have never seen u.s. futures react like this. down,import prices were

the idea was if you have a lot ,f inventory and not new orders what does that mean for the future, but they recovered which was puzzling. joe: it is solid data in europe, maybe that helped and we looked at volkswagen, we will talk about that later. he couldn't see the eyes of the world on china data and the reaction is instant. alix: we will look at what led markets lower. versusd at the s&p 500 oil prices, the white line is s&p 500 and the yellow line is oil prices. we took a guess at numbers, once digestion came in we saw a big drop. this is definitely an oil specific thing, the s&p 500 was able to diverse throughout the day. and it finished with not 100%

correlation, but oil is leading the market. where it goes, the first thing you look at, the correlation is usually there. joe: oil looks like it would break out or regain strength, but has not been able to drive. it will be interesting -- thrive. it will be anything. one company, old wagon engulfed w engulfed in scandal. this is the second-biggest car manufactured and they are doing nothing for economic optimism and they are undermining the yen.against the dollar and mark, what do you make of this? rockedmpany in germany by scandal could have an effect on global markets? >> look at the euro today, it

rallied against the dollar despite volkswagen news. alix: there is optimism around that. >> think about, remember the ford pinto? joe: i don't. i recall reading about it. >> and just yesterday somebody was indicted for selling food, knowingly contaminated with salmonella. i think that the more interesting story is why is it that we hope that cold --individuals to a moral standard, but we are finding with companies that are violations, it undermines trust in authority, whether it is the bank, the government, and companies. alix: we have seen volatility across the currency markets and if you look at the terminal, you can see what has done to

currency. this is turning volatility for the last week between emerging market currencies and the dollar, this is serious volatility. >> i don't think that it had to do with full wagon, it had to do with china. emerging markets, that fascination last a decade. there are four things, you need to have strong world growth, you have had easing, a weaker dollar, trending higher and you need to see higher commodity prices. fed you need to see the easing, the emerging market currency, if you look at others, they have not done well. why did the said it not give any lists to these currencies -- l ift these currencies? 17 fed officials still expects a hike this year.

they will look at traders, they make a difference. they might wait until september -- december. joe: do you think this is a hawkish hold? it if theyi look at threw us a curve ball, they have been telling us that there have been too many inflation expeditions and now in a statement they say it is market-based. they emphasize international variables, it is essentially a repeat of what happened before. inbody expected a tapering 2013, i didn't but many people did and they said that they would do it, and by december they did it. they are buying time to be extra sure. alix: you are not of the mind that the dollar is throwing in the towel, it seems that for

banks -- 4 banks are now looking at the dollar. >> i do not see it that way. i was never looking at that. it is an exaggeration. lish intill generally bul prices. look at the futures market. you can look at the monitor and see that the euro in the market is still short of major currencies, including the euro, increase in size. joe: looking at market-based measures of inflation, you see declines. if you point out that the san francisco fed came out a note that said inflations are garbage. do you agree, should the fed pay attention? >> this is just the fed talking about market inflation,

market-based measure inflation. there is something that will break even, but this is noise more than a signal. that assumption that the fed hit its target is a bit of editor of future inflation. there is so much noise there. because this is auto correlated. have big data as your forecast. the fed watches inflation, not because we pay for food or energy, because it is a true signal. you want to look at headline inflation coming to use core inflation. those are better than the market-based measures again, the fed earlier in our careers, ofre is -- as the chairman the reserve it was tightening. there was double-digit unemployment. he would say, i don't want to do

this, but these numbers i'm using make me do it. , there'santed to wait gambling for excuses to buy time. they were very weak excuses. joe: ok, you are staying with us. alix: what you get when you divide the price of copper by 1000, it is an important number. when we come back. ♪

mess "what'd you miss?" -- alix: what do you get when you divide the price of copper by 1000? joe: there is a correlation

between copper prices and china's growth, one is it just that they are growing at 5%. china consumes half the world copper supply. the is a little simple to believe. alix: good stuff. the growth outlook in china has worsened after economic data came out overnight. manufacturers going through a six year low. how much more downside is less, these numbers are ugly across the board? >> we have to be careful with this. this is a survey that measures small and medium companies. if they are giving support to the company, it helps the businesses and that is what we will find out next week. i do think my sense would it be that they are stabilizing. they have done a lot of interesting cuts, they have monetary easing and fiscal support, so i would -- i agree,

they are not growing at 7%, i do not think that they are contracting either. look at these numbers. look at the shoppers, i thought that we were good at shopping. and the stock market bubble was part of the housing bubble for us. , thenk a lot of people sentiment swings so widely. one year ago, china cannot do anything wrong, now they cannot do anything right. these extremes are what we have to be wary of. it is never as good or as bad as we think. joe: you think there is a correlation between chinese stocks and u.s. eqties? aboutnormal times, think earlier this year, stocks in china rally. now they are selling off and this is a shock to the world. in many ways, we have one capital market and the chinese

were cut off from that but they are now more integrated. bloombergs function, i look at the percentage in china's market, instead of the s&p 500, they have a correlation that is at the higher end. that is not a stable relationship, i think that the -- we could become uncoupled again. it is better than flipping a coin on which way the u.s. market will go. alix: the yuan and and fixed .n.e has resolved itself -- un n and fixed rate has resolved itself. devalued ine they august, what happens when we see these come together again, the onshore and offshore spots? join, they wants to

could do so, they need an objective, they need a currency accessible, but there are also operational lead. they have to provide a market-based" to the imf. originally -- fixing the spot and the that there was on and offshore. china wants to close them. they will bring back speculators. that is why we see currency strength right now. they'll help close the gap. joe: i want to change the subject. this weekend we will have a regional election in spain, you have written about this. this seems like a de facto referendum, what should we watch for? >> the independent parties will

likely win in some coalition. it is a question of how we will react, and will be the next step. the head of the coalition is now the president of catalonia and has said that there were 18 -- i think i will be a mistake. they will raise prices. other parts of italy want to break away, parts of germany want to break away. they could break away and still be part of the club, that will encourage others to do so. and what does this mean for the december election and all of spain? it is much more exciting. and what i know is that spanish assets, stocks, their underperforming italy. italy is like a paragon of political stability compared to spain. cannot say the last time i could say that. the: i am excited about

election. thank you for being with us. , $4.6hen we come back billion in just two days. what investment led to that? ♪

alix: i am alix steel. joe: i am joe weisenthal. alix: before the break we talked about -- joe: the third-largest shareholder of volkswagen and recently lost $4.3 billion in recent days. check out this one week stock chart of the plunge. this is also the largest investor -- such terrible luck.

$354 million. alix: ugly. top headlines. china's president says that the country will work to remove barriers in property protection. he was in a conference in seattle, the chinese economy has the potential he says and it will not be possible without reform. he spoke before representatives including tim cook, jeff bezos, and warren buffett. joe: joe biden has not said whether he will run for president, but he is getting support from democrats. according to a new poll, 25% of democrats say that biden is their top choice, who but leads with 33% and bernie sanders is at 24%. instagram has surpasses 400 million monthly users, that is more than twitter. many are outside the u.s., the growing growth is from brazil

and indonesia and japan. the last part of our series on capital markets and power in the oil market. joe: things are deciding how much money to loan to companies based on reserves. alix: at the same time, investors are running away from energy debt. they snapped up more than $37 million worth of bonds in the first six months of this year. only 5.9 million has been raised. joe: what happens next? joining us on the phone is the at -- global energy group. what do you expect in the coming determination? >> you will see what the banks have used, they have come down. that is going down from that

that will not go down from 100 to 50, but you'll still see it go down. this will be significant for companies involved. for broader commodity oil, it will not be terribly significant. it is for the oil markets on that front. alix: about 500,000 barrels a day could be shut down, this is the bad assets. can you put that in perspective? oilhe problem for the markets, 200,000 barrels a day are at risk in terms of the companies that are facing stress , capital market tightness is affecting their ability to bridge the gap between cash flow and index. but with the outside the 19th, production is going up. it is looking extremely healthy, even though it will probably get

hit. in a short-term, this is not solved the problem for the oil markets. joe: one area expected to get wells,d was the stripper what are they and why will they get slammed? >> not to many of them in your, but in oklahoma and texas, you wells, they nodding are producing 1-30 barrels a day. that is high-cost. that is a nice legacy, but if it is taking $100, you don't mind paying $20 to operate the thing. but that could end up negative. joe: so much oil comes from those stripper wells? >> over one million barrels a day. alix: it is not nothing. happennes up having to

up having to happen, how does that trickle, what is responsible for the bulk production in the u.s.? >> you are not going to see those guys running into the same kind of constraints that the little guys are. the problem for the industry is if you have a plot of guys versus leverage and what they are responsible for, those guys account for minimal volume. bulk who account for the volume are in good shape. not only that, but they are strongly heading to cash flow positivity, there is an awful lot of private equity money and big oil money that is looking to get into the space. if there was a prospect of distress for big players, there would be a lot of money there to bail them out. alix: that keeps oil flow going.

that is the definitive fourth-quarter outlook, tmmodities have not trust -- roughed yet, how do we get to rough?ust -- >> opec keeps doing that. shale will go down a bit, but they shouldn't break even. it will not be shale, it will have to be non-opec. all of these areas, the problem for the market now is what we have seen hasn't done nothing to dent that supply. to see a bottom in oil you have to see bankruptcies in the shale sector. you will need is the company's reigning in cash flow more materially spurred on by equity

markets. and crucially will need to sleep non-opec production getting fit. a few will have a plot of oil coming from iran next year, so opec will have to take a hit to see the bottom. joe: thank you. alix: before we head to break we want to show you a mass held by pope francis in washington dc. with being celebrated 25,000 people. he is making 18th-century franciscan saint a site. we will bureaucrat. -- we will be right back. ♪

joe: what did you miss? janet yellen speaking at umass amherst after the controversial decision. ♪ (ee-e-e-oh-mum-oh-weh) (hush my darling...) (don't fear my darling...) (the lion sleeps tonight.) (hush my darling...) man snoring (don't fear my darling...)

(the lion sleeps tonight.) woman snoring take the roar out of snore. yet another innovation only at a sleep number store. >> the chinese president met with business leaders and said that the relationship has enormous potential on the same day that we learn about records of federal workers that are stolen. how is obama to approach friday? ♪ emily: this is bloomberg west. bloomberg