>> a. welcome to bloomberg market day. let's go to the morning headlines. thatps the best things investors can save at the third quarter is that it is almost over. we will summon up and look ahead. investors say the worst is over. researchers are facing challenging decisions. we will head to those -- to london for the latest look. by this time tomorrow madison square garden may be trading as two separate companies. we have details of the split coming up. stocks are closing out their worst quarter in four years. at least, right now they are on a high note. let's check in with the julie hyman at a look. julie: that is correct, the s&p 500 is down by over 8%. an increase in the last day of the quarter with rallies at 1% across the board. we have a relief rally.

let's look at the terminal. that thee on the imap broad-based rally is well. the two reels and energy are doing the two worst-performing groups today. we see a plunge in commodities. i want to point out health care is coming in with a 1.5% gain. yesterday we size split. larger stocks were doing well. may break the losing streak today. speaking of commodities, i also want to take a look at gold. .old is lower this morning we had an employment gain of 200,000 private sector jobs. on u.s. payrolls report friday will be an indicator that tracked closely. .old is falling off for the past three months for go -- there we go

-- it is the streak for gold. we have not seen a streak of losses is since 1998 and 1999. it has been a good amount of time for volatility. drop inve seen a stocks, we saw a pickup and volatility. today the big businesses are doing much. ,hen you look at three months you look at a gain of 40%. at month was a record month for the big in terms of percentage gain for the month. also, if you look at this quarter the fixes average is just over 19. that compares with an average of under 15 for the prior year. have this new level of elevated volatility here. we have seen stocks get a lot more rocky. we have growth feeding the volatile market. >> thank you so much.

as julie mentioned, the third investors messy for in global stocks. the s&p 500 is ending down more than 7%. volatility as julie hyman said is a fever pitch in august. it is almost 11 million -- trillion dollars worse. investors then wonder, ok what is next? that is where we have james lou he is the local strategist at j.p. morgan. james, thank you for being with us. just described, if you can this -- is this thought specific when it comes off in the sellout the volatility, are there macro impacts? the biggest cloud over the market is macro nature. ,n monday you had some stocks but you really need the things. it is the federal reserve. alignsk the adp number

with the market report on friday. maybe this is a signal for good news. a good adp report means the market is up. i believe the market will rally. the second issue is china, they have shown some stability. but it is unlikely that they will get back to usual. all we need for stability is the third issue. that is corporate earnings in the u.s.. in 2015 it was basically a throwaway year because of the rally and commodity of global weakness. we do think that will pick up in the fourth quarter this year, and also at 22016. as of that, the equity story is a very long one. i still think the restraint in equities go through next year. >> those are three things investors cannot do anything about. the chinese economy will do it needs to do. you could focus on some industry for me and take

a look at health care. james: investors cannot do anything differently. they have said they do want to raise rates. that doesn't lend itself to different sectors. up from the health care perspective it is more of a policy issue. so, what has happened the last few weeks is that we have some tweets coming up from politicians. we have statements of potential registered -- legislation. in recent days, we have seen some more stability. being able with health care at this point makes sense. what i would over way the cyclical stature of the s&p. i will talk more about discretionary technology. we get the consumer discretionary technology. on to follow on health care. you think there were substantial changes come out of congress? you want, butall

if congress does not change a law nothing will happen. james: i think it is unlikely. i think a lot of this is populism and politically motivated. i do think there are political wranglings in place. based on the elections coming on the pipeline. but, i think it is very unlikely that substantial legislation will take place. phil: let's turn our attention to the consumer discretionary. why that specific segment? james: we think the consumer a strengthened. the store for the last year has been rising prices and improving labor markets. that is much slower to happen than many of us thought. what it is starting to turn around. so, the fact that personal consumption and spending, that is a stable. decline, let's say in oil prices, the declining gasoline prices, will that spurred consumer discretionary sector? james: i think it will. gasoline prices fell low last year.

it did not stay low long. very recently we had prices come back down. the question is how long does it take for the a consumer to adjust to low gas prices. historically speaking, you would say it is about one year. it is taking a look at longest time around. what about opening their pocketbooks to technology echoes james: -- technology? profitability is high in the technology sector. this is one reason why if you look it valuation ratios they are fair in the technology sector. you can even argue they are undervalued. needo the extent that we more capital quit misspending, to the extent that we have these long-term i.t. trends. we feel for that sector. phil: will we see earnings growth come from the sectors? james: yes. i believe he will. a lot of this growth will happen outside of energy.

it will basically, hopefully bounce back. clear, the next quarter that is coming in, will probably be week again. a 3-3 point half percent decline. -- 3.5% decline. , what they did you interested in the energy sector? james: what i would really need to see is earning expectations. the problem with the commodities and energy companies specifically is that stock prices have fallen, but earnings have followed by even more. so, when you look at a valuation do not energy stocks look very cheap at all. so, the way to play the energy sector is to look at specific companies. some refineries do look quite cheap. they have companies that can

profit from increased margins. phil: thank you very much. james lou, the global market strategist asset manager jpmorgan. let's take a look at what is making news. russia launching its first airstrikes in syria. this is according to a u.s. defense official. the attacks started hours after russian lawmakers authorize president that amir putin to use force. -- president vladimir putin. use of artillery started recently at the syrian base. vladimir putin is backing the syrian president. and planes from the us-led coalition are helping afghan troops in a battle the taliban. they are trying to retake a northern city that the taliban captured two days ago. the first provincial capital taken by the taliban since 2001. american companies added more jobs than what was forecast in september. by says private payroll grew

2000 last month. an august report said it was slightly downward. the government's jobs report comes out this friday. and a spending bill that would prevent a government shutdown is expected to reach president obama's desk with time to spare. boats are scheduled today in the senate and the house of the stopgap budget measure. that will keep federal agencies the midnight deadline. but, it is only good for 10 weeks. ,nd inspired by the airlines amtrak is adopting baggage fees. beginning tomorrow, a $20 feet will be charged for each item that exceeds the baggage limit. writers may bring to carry-ons, and to personal items totaling 75 pounds. agis fees have generated billions of dollars the airline industry. -- baggage fees have generated billions of dollars. those are your's top stories. decision not to raise

interest rates is a close call. most bankers are saying they expect an increase. plus, will take a look at tiesdent obama's warming with cuban president castro. but what is the price of doing business in cuba? and just before the clock strikes midnight tonight, madison square garden is expected to have two separately traded companies. both of which began trading on thursday, tomorrow. the stories and more, coming up.

♪ phil: good morning. stocks begin to rally in the united states. let's find out from julie hyman

checking and on some notable movers in the session. retail,et's start and ralph lauren who has been the founder and ceo of the namesake company is stepping down of the company. he is nearing his 76th birthday. he is being replaced by stephane larson who has been heading up the old the navy brand. the gap is lower because old navy had been the outperforming brand in the gap universe. ralph lauren shares are gaining sharply. take a look at the bloomberg terminal, i'm using the rbc function which looks at the relative value. i sorted the 25 closest companies by revenue and look at them on earnings per share. here is ralph lauren. here's the p or group. you can see that it is lagging its peers in terms of estimated sales growth and earnings.

it is expected to have a graph -- drop in earnings growth. you can see it is working better here. estimators -- analysts say this fiscal year should be unchanged. you can see why it might need some change of pace. ralph lauren shares are down 37%. interesting trading that we are seeing here. pymm: thank you very much. i noticed yet something more. , with thegoing to say gem and that has been selected to head that company, is formally from h&m. it is interesting his background in going to ralph lauren which is seen more as a luxury brand. whichms of the turnaround he executed, notably old navy, it looks like that is the expertise that ralph lauren looks to be drawing on. i want to point to one other set of movers are wanted to mention. western digital is when we are watching. you can see the shares are

getting a bump up of 13%. after the chinese unit blender, that is a unit of university. three -- 13% of the company. the ceo stepped up the competitor to western digital and its shares are rising. pymm: thank you very much. all right, looking beyond this week's action in the share price of glencore. the outlook for the embattled mining and commodity trader will largely depend on the copper market. the swiss-based company is the world's biggest copper supplier, and it got 28% of its earnings from the mining of copper in the first half of the year. glencore's share price despite a two-day rally is still down 70% this year. this tracks the price of copper. bloomberg's will kennedy is in london with more. on the give us an update

strategy that glencore has put forth. will: about two weeks ago they realized that they bring have to bring down that far more quickly. the main issue is matching the dividend. they need to sell assets, and they need to sell forward some of the gold and silver production. longer-term, we expect them to put a large stake in the agricultural business. that that money will balance the sheet. i understand that jpmorgan may be sure to $10 billion if they wish to maintain their current credit rating. what is the reaction? today, with the share going up again, it has been an extraordinary week. on monday they were up more than 20% for the last two days. but, you know, if you look further into the future the problem glencore depends on what

prices are going for. , which aeep falling lot of people expect them to do, especially was they raise rates, they might need to come in with an aggressive plan to sell more assets. they might need to come back to the holders or do something like that. pymm: i was just taken a look at the price of copper compared to its high. $10,000 per ton. --e -- now it is $5,000 for per ton. is anybody cutting down on the mining of copper to combat this huge supply? reason why youne might want to be bullish. glencore is taking the lead. they have to of their biggest mines. that, we couldof of the metal rally. if they cut production, they will also reduce their cash flow

for the company bringing in the metal. they need a lot of cash. pymm: hang on, because i want to offer my viewers breaking news that the u.s. senate has passed a stopgap budget bill which will then go to the house. we will have more information for you later on broadcast. the senate has the votes to pass the spending bill in order to avert a government shutdown. that would occur without the bill. it will happen tonight at midnight. kennedy in london. we are talking about glencore. well, if there is a reduction in the copper mining, what will be china's position? with a stockpile it? will: i think china is vital here. they use half the world's copper. they have increased the need of copper consumption. minors such as glencore have risen. not see the problem any time soon with a copper shortage in china, longer-term people could see a deficit in the markets.

given what is going on the chinese economy, i think they have the copper they need. pymm: thank you right will kennedy from london. peter brower the chairman of bloomberg lp is a senior independent nonexecutive director at glencore. , officials ared indicating a rate increase this year. not everybody is convinced. we will tell you why, coming up.

pymm: companies are going on record saying they do not expect an increase this year. howard marks told matt miller last night, he was not so sure.

grexit they seem deathly afraid to raise rates. they keep saying it will probably happen later. they leave --'s they leave through sign language. they leave the commentators to expect it will happen one month after next. then they do not do it. this has been going on for two years. joining us now for more federal reserve's potential to raise interest rate, is a bloomberg intelligence economist carl. good to have you with us. you heard what he said. is it accurate? carl: it is accurate that they have continually delayed. however, i tend to believe that when we are at the point that the economy is sufficiently she strong -- is sufficiently strong to endure it we have not had that uncertainty. jobsill feel it in the report, you will feel it in the inflation numbers. pymm: what was the report today? carl: the report had some of

that feeling. pymm: you did not like the 199? carl: it looked good. there is a shift and the composition of hiring was a little bit troubling. so 200,000 is a good number. significant d steller's asian in the hiring of small businesses. the contagion of that into medium-size businesses. the bulk of hiring happens at large firms. that means we have a question -- it raises the question that this is not sustainable. i'm not sure we can hold a trend in the next couple of reports. that is what the fed is watching out for. pymm: ok, let me go through what i would describe as statistics that might support it. if you do not know anything else and you just look at these numbers. gdp, not bad, not great. but it is growing. carl: not looking good for the current quarter. the training is below growth. pymm: you have the gdp.

unemployment rate. carl: it is close to full employment, but not yet at the level. so, we have further room to run. pymm: the third thing, inflation. carl: inflation is very low. it running at .3% year-by-year. it is likely to backslide further through the years and. gasoline prices. we could see negative headline inflation. that is deflation by the year's end. pymm: for all of the people in the world who are not economist, just the daily people, when they look at these three areas, is there a reason to expect that the economy is so poorly functioning that you need zero interest rates? it is not so poorly functioning, because we are getting close to the point of full employment, close to the employment where we will see some wage pressure. we have seen the latest sneeze

in the financial markets. need to make sure the economy is not getting pneumonia. there is a point where we will get lift off, but they are watching for the blowback. they are also watching for the wealth that was lost in the process. they're waiting to air on the side of caution. pymm: i will ask you another question, but i do not think we have time. you have to wait and see. be interest rate increase? i think it is very possible. it depends on momentum of the market. pymm: well done. thank you. our bloomberg intelligence economist. still ahead. policy makers speaking out this week. we have mixed messages. we have more coming up.

♪ bloomberg is the

market day. a storm in the atlantic is a hurricane. it is called walking and forecasters say it will move up the east coast for the next few days. it is currently packing winds of 75 miles per hour. warnings are up in the bahamas. the united states and china are working together to regulate drugmakers. the fda and officials told bloomberg news that the agency is joining forces with his chinese counterpart. 38 facilities in china are forbidden from exporting drugs to the united states because of concerns about the drug safety. there is new concern that japan may be falling into another recession. industrial production unexpected for the second month. retail sales showed no improvement. ons is likely to depend whether the japanese government should increase spending. and facebook's cfo believes that the company has the power to draw ad dollars away from traditional television. -- charles sandberg

says facebook is reinventing marketing. >> i think the vague issue is could dodays that you a campaign with a 32nd video at argonne. important format. you cannot only do that. if you do that, you are missing a unique opportunity. pymm: facebook has introduced a which lets advertisers purchase online video advertisement the weather purchase tv commercials. and there may be a new rival to the longtime king of television ratings. , score hasternet agreed to by the comstock for $800 million. , score tracks activity on the red -- wed. track movie box office sales. those are your top stories at the moment. this is shaping up to be a busy

week for federal reserve policymakers who will give more than one dozen speeches. all of this fed to speech has given up less information about when they will raise interest rates. two weeks ago, after the central ,ank opted not to raise rates where getting mixed messages from janet yellen. as well as from other policymakers as if the market should prepare for 2016. joining me now is a jewel higgins. he is the managing director at tiaa credit. joe, thank you for being here. what do the yields on treasury debt, what did they tell you about the disposition of the markets. joe: certainly, treasury yields can react not only to markets but to equities as well. a lot of risk

sentiment and a lot of corporate headlines in the vw glencore. weakness in brazil. concerns about china. you mean people sell their equity holdings so they go to the u.s. treasuries? joe: with many of them treasuries will react to the volatility. take a look at the long bond. 30 years. what does that you will tell you about the health of the economy? pymm: the long bond is not reacting directly. joe: that is more reflective at the short end of the care of. the fed is well ahead of any concerns. it will not really rise substantially unless the fed is behind inflation curve. pymm: did you know the three-month t-bill during the week was trading at negative yields? have you ever seen that? joe: we have a lot of issues

going on. we have a lot of liquidity. trade slopes, and global clavicle slow. -- global capital slope. pymm: should people be buying u.s. treasuries? joe: they are viewed as likely to rise modestly. there are better places to be than u.s. treasuries at this time. we have a lot of distortions going on in the market. we have seen a number of missed price values even in high yields for example. they have a lot of u.s. centric investment grade corporate. yet, the risk of default on recaps and things that could hurt investor credit is quite low. you: i noticed in a report said something about the full-service restaurant is one specific industry segment that is worth paying attention to. well, given our views, we

will raise rates. pymm: this year or in 2016? joe: that'll be a rallying point. this year. we may look quite a bit better. we have a third quarter earnings in the last leg. at least as far as the consumer goes, it will continue to support restaurants. we have shorter legacy cnv s. backing shorter duration industries echoed -- industries? joe: we are more sensitive. they tend to be less liquid. in this market they have widened as a result. -- pymm: i want to ask about the subprime auto market. what kind of depth is there? there is significant depth. securities tend to be shorter.

at that end of the spectrum we are seeing improving wages for a decade. jobs are plentiful. including in areas of construction and services that have historically hope that sector. the securities in that sector tend to roll up a little with long-term risk. new interestssome in space long-term. we need to watch that sector as it grows. we are at the short end of the occur. pymm: the short end of the occur for subprime automobile that you liked backed commercial securities. also on the same duration? joe: yes. pymm: same thing with corporate high-yield? spectrum it is just that everything has widened, and it should not have all widened this much. for credit stickers and folks of and someterm view, discipline to ride to this market, there are a lot of

opportunities. pymm: you mentioned liquidity. is there enough depth in the bond market to sustain some kind of increased volatility? answer, wetimate have yet to test the new environment. clearly we have interest rates with a high concern. a lot of them will hold in the emerging market. we have high-yield debt. we do not hold a position as much as we used to. this type of a market is nowhere near crisis mode. that is where we have really tested. need tosay investors make sure that their investments can holds through and it is a sound investment. there is no liquidity we should assume when you wanted. ask oversolde to it to you can i sell a back to you? joe: yes. pymm: thank you very much. right, still ahead on

"bloomberg market day." cuba, yout to go to maybe surprised if you have to go through to get business done. we will find out next.

"bloomberg market day." was go to asia. there was a rally across the board. in china it is rising 1.4%. the shanghai composite finished

up under .5%. one big story out of the region, china is announcing its latest to worrying up sagging automobile sales which have fallen for five months. david ingles has the details from hong kong. to/salesina decided production cost. have engines smaller than 1.6 liters will restock with a 5% stack. relatively -- it is a relatively small cut, but it should go a long way. are usually more sensible. now, investors are obviously loving you. it is good news for the industry. we are not sure about the traffic situation. deals have not been looking good for the past three months. it is good news for buyers. action goes into effect october 1. pimm: thank you. let's head to europe were mark

barton, bloomberg is stating by. quarterocks ended the on a high, but it does disguise the fact that it has seen the worst quarter in four years. how about a look at some of these big industries today, because over a quarter stocks in germany lost 12%. in spain they lost 12%. paris is down 7%. group except for real estate has sunk this quarter. auto and basic materials are the worst. both of them are following the most in 12 years. -- four years. remember an monday when it fell it has since then, brought back all of those gains. we have a rebound in metal. what a statement from the company saying that the company is financially robust area it up 14%.

jpmorgan in chase saying the slump has left the stocks undervalued. what an astonishing rebound. we want to show you what is happening the currency market. before this quarter, sterling had risen to eight consecutive orders against the euro. that was the longest winning run since the inception of the euro. the thinking is that they have been able to raise rates, hence the euro has been rising. today becausewn of weak inflation. it is negative for the first time in six months. what does that mean for ecb qbe? i will tell you. standard posix says there will be more qe. and the program could be extended to 2.4 trillion euros from the standard 1.1 trillion. that's important. over to you. julie: if it is anything like

the u.s. that would mean more gains for the u.s. stocks. seeing a rebound from the selling of private sections, and the quarter today. the bounce today is coming on the heels of a down quarter. let's get the update. game weof today's paired at the decline that we are going into today, we are looking at a more than eight point 5% decline. it is down to 7%. still, it is the worst quarter since the first quarter of 2011. a look, these are the sectors ranked today. energy is doing the worst. health care had a big selloff. biotech, all of the groups are lower except for utilities, as we saw. yields came down the bond market. i want to get a quick check on oil today. we just got the inventory data out. it showed an unexpected build and inventories for last week. however, after an initial drop

in oil prices, they have no rebounded and are up 1%. if you look at the quarter, obviously, it has not been a positive quarter. oil prices are down 23%. gold is lower. copper is also down on the quarter. the quarter is characterized time as commodity selloff. mentioned, energy and materials or the worst-performing sectors for the quarter. let's also take a look at currencies for the quarter to date. we are heading into the close today. the dollar has not seen a huge change for the prior three months. up 1%. not nearly the magnitude of the move we saw in commodity prices. let's look at the yield. the 10 year over the past quarter has declined. you know, it has been such an interesting month. in terms of the federal reserve rate expectations, of course,

federal reserve governors are saying rates are likely to go up. this chart does not seem to indicate a lot of confidence. pimm: thank you very much. good report from the newsroom. now on cuba. cuba is changing for the population. president castro, as well as president obama, they met for the second time in six months. this continues to warm ties and increase trade. world arearound the eager to get in on the potential action. they will have to go through one individual first. bloomberg markets reporter michael smith has the story. he has the story from sao paulo. thank you for your patience. i mentioned that we want you to give it away. it was the one person, that if you want to do business in cuba, you have to meet? -- his name isin

luiz rodriguez. he happens to be raul castro's son-in-law. he basically controls the largest corporate conglomerate in cuba right now. it is a conglomerate of over 57 companies. they are all basically controlled by the military. they feed revenue into the military. he is the commander on that empire. they happen to be the company that does the most business with foreign investors. they will probably be in that role in the future. he is the guy you have to go to. pimm: what we know about tim? -- him. -- him? michael: it is hard to find a photo of him. it is hard to know exactly his age. i think he is 55. ,e grew up the son of a general one of the close generals under raul castro. he grew up in the military communist elite of cuba.

he got close to roll by marrying his daughter about 25 years ago. since then, he has been inside castro's inner circle on the economic side. running some of the state companies and gaining control. then he took over, a few years ago. ever since world took over his empire has wrote -- grown dramatically. distinctionke the that the kinds of business is permitted for individuals come i think there are 200 of them permitted, small-scale businesses. that is quite different than what you are describing as the business empire of mr. rodriguez. michael: that is correct. raul castro has opened up the economy to smaller entrepreneurs. but on a very limited scale. the big money is in control of the military. they run through their companies and the military basically owns.

rodriguez is the ceo of that conglomerate of companies. we are time a tourism, hotels, marinas, etc.. we're talking about import export enterprises. we have goods all across cuba. we are talking about the big money, if you will. we are talking about a huge port they built. it is very close to florida. they have a free-trade foreign investment zone. it and willcontrols decide who does and does not get to do business. pimm: what about investors who want to participate, let's say, in the container port? the facilities being made ready? castro: last year overhauled the foreign investment law. it is much more investor friendly. so, they basically have to go through that entity and comply with the different regulations.

in turn, they have different incentives like tax breaks. but, there is a cautionary tale. there is a history in cuba of foreign investors being hauled off to jail accused of corruption and other crimes. basically they lose everything they have in cuba. that has happened quite frequently. the problem is that there is not a lot of legal recourse. not have aurts do track record of being impartial. so, there are risks when you look at what happened in the past. that they are trying to make things much more open for investors were willing to play by the rules. very much. think you bloomberg markets michael smith joining us from sao paulo. you can read more detail in this story and bloomberg markets on lisa alberto rodriguez. coming up ahead on the "bloomberg market day."

those of the one madison square garden, but tonight it will split into two. more coming up next.

♪ "bloombergis the market day." madison square garden will split into two separate companies. one will contain the sports and entertainment properties. the other one is the sports networks. the new companies will begin trading tomorrow and thursday. joining me to tell us about the significance of this spinoff is our very own david. you have been tracking the story all day. i just given case, nick's, , and tvand one column broadcast in another. david: these are the regional sports networks.

msg, msu networks and msg plus. these companies have interest in madison square garden. they will have a very winning season. here is you're seeing something where you saw a few years back with cablevision. spun off with cap -- medicine in 2010. it is shaping up to be similar into two different properties. pimm: what will be the relationship between the two companies? david: that is where the parallel becomes tenuous. you cannot have a regional sports networks without a team. so, as far as the perspective here the msg networks will still be able to air games, rangers games, other hockey games. are they sharing any executive report numbers? yes, the family will be

involved. james dolan will be in charge of the company. they will continue to have a large voting majority of the board. when you look at who will be running them, their confidence of the family. an activist investor who is advocating for this to happen for a very long time. that the company got too big and its assets were too varied. what you're seeing now is a reaction to that. they have more value to shareholders. pimm: also scott sperling. had thees, you companies having this happen. so, it is played out over the last 1.5 years. split is between the media on one side and sports entertainment on another. it might be the rail splitter. pimm: they like to split things up. will this be beneficial to the cable operation? i always

thought that if you're a cable operator, you need a franchise, a sports franchise because any the programming. david: i think these networks, at least for the time, they will have the show, they will have these games. obviously, speaking to an analyst today, you have the dolan family thinking about the future. you have the announcement that they will take over cablevision for $17 billion. a lot is happening there. pimm: thank you very much. we following the msg story. scarletp, my colleagues will be taking a look at the threat of a government shutdown. and how you can profit from the chaos and our nations capital.

pimm: good morning.

scarlet: welcome to the bloomberg market day. we begin with the morning's headlines. the u.s. government is staying open for now. we will tell you in on the latest move in the ongoing congressional chess match. pimm: it ends at midnight. mergers and acquisitions -- a new venture with a powerful partner. will his boutique thrive at blackstone? scarlet: yesterday, betty liu got to spea take the branded tesla out for a spin. tesla out for a spin. pimm: let's get a look at what's happening in the markets. you are not in a new tesla suv. julie: very perceptive of you. i wish i was in a tesla