u.s. stocks posting their biggest decline since the brexit vote. all major indexes losing 2%. complacency and global markets ended as central bank starts to question the benefits of further monetary easing. that is causing a whirlwind in the markets. ford is buying into the ridesharing game. record profits and strong sales aren't helping lift the stock as we see a decline going forward. we begin with our market minutes. looking at the s&p 500, the biggest selloff since june 24. the dow industrials losing 392 points.

we talk about the vick sinking to fresh lows constantly. all that is gone. good talking about that streak of no gains or losses of 1%. matt: during those last 40 days of no huge swings in either direction, we rarely saw the imap all one color. i for beginning of the year, that was for the constant. this shows the s&p moves rogan down -- broken down by industries. big stocksers, the were big losers. losing andon all they are so big, they dragged the index down. what i think is interesting is the vick's continue to climb throughout the day. when i looked at this a half hour ago, we want out through

the 200 day moving average. we have now shot up through that. again on the vick's of 4.8 points, a gain of 40% in a single day. the big story is a backup and interest rates. i want to do an extended look today. let's start simple in the u.s. you see higher across the board but the real action at the longer end of the curve. treasuries down, yields higher. particularly at the long end. now let's look at the spread. the spread significantly wider in the last several days. for so long, we talked about the declining spread. some now, we are seeing steepening. let's go to germany and take a look at the german 10 year. actually yielding

something, .01%. we have an ecb meeting yesterday. no hints of an expansion. may some disappointment there. here is a one-year chart of the german 10 year. still incredibly low by standards but up significantly from where we were in july. finally, i want to take a look at the one-year chart of the japanese 10 year yields. we have seen a backup in rates there. itsboj might not continue bond buying program. we also saw it bottom around the same time. this is the defining story in markets right now. assets in thehe chase for yield and the idea you would buy equities based on the rates. any sign of scarlet: jgb leading the global

bond. joe: jgb and germany and now the u.s.. scarlet: we will have met bows or join us in a minute to break it all down. the dollar is doing well. the bloomberg dollar index ending the week with some strains for the week. the u.s. was closed but the rest of the world was trading. i'm looking at the aussie dollar losing as much as 1.3%. we did have data this week that showed a drop in approvals. the housing market is cooling and that would allow the reserve bank to lower rates without sparking another housing boom so that might be another factor. emerging market currencies are in retreat. and the increase in u.s. yield undermines the risk carry trade

of our in dollars to purchase these emerging market assets. joe: the story is everything is down and that includes commodities. crude oil down nearly 3.7%. silver getting smoked down 3% in gold losing a little less because gold has a safe haven characteristics. such a broad-based selloff that even what you would expect, the safe haven is down as well. scarlet: we want to take a deep dive into the bloomberg. you can find all the charts using the function at the bottom of this green. joe: i will show you something you have seen in the past. it is really pronounced here. the unraveling of the bond trade. seeing consumer staples, utility stocks, defensive sectors coming down. they are coming down at the same

time yields are going up. these industries have been positively correlated. we saw stocks rising as we saw bonds falling in consumer staples in the utility sector. now that correlation has not only come down but turned negative. of leadingpan kind the way here for this bond selloff. curve. japan's yield it is the white line and we're looking at this between the two and 40 year bond. the blue line is the japanese banks index. the shape of the yield curve is shifting.

that is an important distinction. the entire curve jumped higher and that would cause market losses on the bank holdings. that is not what we are seeing. joe: banks were down, but they were the best. you have the yield curve all around the country. on days like this, i love the gmf function on the mount monitor. if you look at different columns of equities, currencies, sovereign bonds, everything, you can see this sea of red, there is nowhere to hide. randomly, and the center of the screen the one place that was a check was five-year bonds, some reason rallied either because of currency or inflation. i don't know. it goes to show how ugly today was. there was no place to hide

except this random spot. alix: and also how deep the red is. joe: the deeper the red, more losses. joining us now is the chief international economist at deutsche bank securities. many bonds selling off. that seems to be the catalyst for the market anxiety in places like i just showed. is it worth it to run this yield back up? >> fundamentals have slowly been getting better, not only for the so inut a little bit japan. what we are seeing is that meanwhile, fundamentals are getting better. the carriage rate has kept yields for a long time. i will get to this inflection point where the fed is thinking about new rates, and the ecb is indicating to extend the program not quite yet. there is this context between fundamentals and the 100 yields. matt: how much is it

fundamentals and how much is it three other things? people talk about if the economy isn't great, further bond buying isn't doing the trick, some people expect to seem -- see some other approach. how much is that factoring into this? torsten: that is important. also the fact that the 100 yields and people are changing returns and asset classes for fundamental reasons. it has a very pronounced trade for some time. the market has been confused if we should continue or go back. maybe if the fed is hiking rates, there is inflation. cpi will get another print next week. it may look better. , is it thee time moment where we will see that change? talked about yesterday, we will leave the regime of the carry trade and go back to earnings, and the rentals and economic variables.

volume: equity markets, for s&p and nasdaq 30% lower than the 20% -- 20 day average. have you talk to clients at the bank, what are you hearing -- our people selling stuff, are they participating or scanning back to see whether it continues in the coming days and weeks? torsten: clients and investors have the mindset that rates will never go up. anything like a day like this is a good buying opportunity. so we need to see a much more persistent time and retracted where we see strong hearts. -- hawks. rates are becoming more attractive. equity is dipping down here and saying, the ease will come back. this is not the regime change we have been waiting for the last 10 years. confusingd incredibly

rhetoric. it was bullish enough. we will see if there is a hike this year in september or december. at this point, it looks like there is a good chance we could come back to the hunt for yields even when this mini tantrum is over. matt: can a markets get accommodated -- addicted to come accommodation and extended qe something like the ecb not exiting the program is a must like tightening? -- almost like tightening? torsten: we have become super-sensitive. beestors don't want to caught on the dance floor when the music stops, so they are eager to say, i need to get off more. but is it the time? so far it does not look like we are there, but his anxiety we are experiencing yesterday and today reflects there is a lot of people out there who are

trigger-happy and ready to do something with their portfolios, even in the face of quite confusing fed messages. scarlet: we have a person speaking on monday in a last-minute addition to the fed schedule. will she stop this? torsten: this has been an important development. bottom line is, she is talking on monday. she is one of the more dovish members. so if she thinks about hiking rates, it will be very significant. her speech on monday will be something investor should be watching and equity investors. matt: for the equity slide to continue, you think? there wasn't a lot of anxiety. it did nothing like people were freaking out. it was very orderly. torsten: we have not reached the level of panic yet. if we here at her from 1:00, wait for her and what she says. if she continues with a dovish line, the market will go back and say that it will not hike at

the earliest until december. people find these levels low. they will still be attractive to some people who think rates will never go up in the u.s. scarlet: all right, you will stick with us, chief economist at deutsche bank securities. joe: we have a chart you need to see this is the global on market selloff. ♪

♪ joe: the story and markets this week, bond prices have been in freefall. matt besler has three charts that show just what is going on. days talk about this on a

when we saw a steepening of the curve and interest rates increasing. today and yesterday, and the three biggest bond markets and in the u.s. and japan and the eurozone, we are seeing this awkward move in rates across developed economies, really. if you take that and wait them by gdp, you see they are three of the different sort of countries we were talking about. you can see the u.s. rates are the highest since the right to vote. and then we have japan where rights have been rising for a while and are the highest since march. in germany, they have been going down. over the last two days it went up a bit with ecb easing going on. it is like a global tightening of financial conditions on the margin we have gotten over the past few days. joe: what does that finding -- tightening do for the real

world? torsten: it is hard to be modest, but the question he comes if it is an early sign of something changing, and are we now in the face of the fed hiking rates, or is the market still write them fed will not hike rates as they have been predicting for quite some time? fed looks atow the tightening, but it is not a mandate. how much do they give that? matthew: they give it a lot of weight as opposed to when you had the economy growing 4%. the financial markets could not put it at a cap. now it is 1.0%, it is more important. we are seeing tightening in the u.s. that caused interest rates to fall quite a bit. there was some sort of offset that was needed there. that is the fed story, they did not raise rates as they were expected to. they lost the tightening of

financial conditions. it goes to show you how sensitive they are to live like this. it is not a big move we have, but if it were to continue, it would be worried. torsten: look at the minutes of the meetings, more focused on the nation's ability, financial conditions. the fed is worried about applications of them signaling a moreke and potentially significant correction and financial markets. joe: another chart you have for us, what are you looking at? matthew: you can kind of look at globally what is happening. this is the same chart we were looking at. so this is kind of interesting. you can see in japan how we have had this move for a while, and that has not really been reflected in the u.s. and germany. to some extent what is going on here is the bank of japan has the biggest problem. they really don't have that rate

offset they can use anymore. they have a flag bell curve below zero. it is not much they can do with interest rates. all of these programs we have developed through the crust prices -- host crisis were meant to -- post put crisis are meant to reduce interest rates. this is why we are having discussions about if the bank of japan is going to start tapering bond purchases, is the ecb going to do this? this is really like, in the u.s., we are not quite there yet, but we are getting close to the same conversations because of how flat the yield curve has gotten and the short-term has toded to 0 -- has straighted zero. you talk about how the economy is so different, but the financial market aspect is really converging at the moment. joe: do you see what is going on in japan being particular harbinger -- people talk about

that for a long time, just and is asian -- japanization of the global economy, but what they are contemplating, are central banks going to find themselves in a jam? torsten: the boj is carrying out comprehensive review of their own policies, what it is worth and not worth, what it will look like in the future. ecb is doing the same thing, saying we have to review our programs. they say tell us that we are thinking about what is working and not working. we need more tools, firepower. the risk here is that if central banks start signaling more, markets could get really worried about implications. matt: are we in a completely different position? i was talking with mark fields this morning, ceo of ford motor company. they depend on the u.s. consumer and interest rates as any other. he was not concerned about demand as long as the path is

shallow and the interest-rate increases are low. torsten: this is also a key issue for the fed. as long as they are slow and cautious, we should be size -- fine, that will be ok. , theylation does show up no longer have the luxury of being slow. that is why watching what they do next week and with wages and other inflation indicators becomes important of whether they will continue. joe: i have a chart maggie sent me earlier. this is the 10 year real rate. what are we seeing? at real this is the gdp rate. german, u.s. and japanese together, you see on a global scale -- joe: this is essentially global interest rates. matthew: right. you can see the big collapse from brexit, and then we have been grading -- grinding

sideways until the bad isn report here in the u.s., and that it spiked up. then it spiked up. investors want to see the yield curve steepening but they want to see it steepening after economic data. scarlet: for the right reasons. matthew: not when they come out in a press conference and the markets are going haywire. you juxtapose that with the fact we are getting a yield curve steepening at risky assets like stock-price is a going down , that is that steepening you don't want to see. scarlet: so how does the ecb and the boj go up as they assess policy? you can't find a phd economic model to tell you what to do based on employment. you have to watch and see the incoming data. , thecontinues for longer

fed has another argument. bothall right, thank you for this great conversation about the big story of the day. thank you very much. we ask for your charts, and you responded. we will see you the top charts from viewers. ♪

♪ scarlet: it is time to share your chart. we put out the word and asked you guys to contribute, send us your t chart, so mine is from this person. it shows bitcoin versus the two-year yield. the blue line is the two-year yield but it is inverted. when the line goes down, it is rising. you can see it illustrating the

two-year treasury yield. the white line is bitcoin. and this shows has central-bank policy, mainly the fed, may be influencing bitcoins prices along with every other asset class. people treat bitcoin like gold, as a safe haven, shoulder from uncertain policies. when the fed got priced out from the latest disappointing jobs report, gold went up as did bitcoin. you see the white line. seem soat does not crazy to me. you were asked letting to me, joe was expanding his theory. it makes a lot of spit -- cents. i don't know why you think it is so nuts. it is your own theory. joe: it'd had probably has something to do with rising rates, pressuring outflow of china. bitcoin has a way of getting money out of it. if there is a connection, it is how i would survive. scarlet: and is a popular way of

making china. joe: this chart comes from dan hurley of apex capital. it is called solar city spread. it is the gap between where solar city is trading now and where it would be trading now if investors assumed the merger were a done deal. it is growing ready wide. gap between where solar city is and a nominal takeout. there was a lot of skepticism. people get nervous, everything is kind of like, you run hot and cold because people -- matt: if you buy the merger story, you can buy solar city. or you could get steamrolled. the s&p 500 index, global equities and emerging market assets all tumbled at least 2% in the biggest route since

britain seceded from the european union. more about this selloff. ♪

scarlet: let's get a recap. a lot of red on the screen. the nasdaq a racing to weeks of gains. you can see almost 401 lost. all 30 points for lower. the s&p 500 members have declined. glance, we close that session lows. we are wondering if this session close marks a clues inflection point on whether this is just a breakout from a summer of come treaties. what i think it depends on

they say on monday. this kind of surprised schedule change to bring her out. scarlet: she is a member of the fed. anything hawkish, it could gain some momentum. let's get insight into today's trading with scott. he joins us from st. louis. -- thisno-brainer speech scheduled on monday that is giving investors so much pause and to suspect the fed is ready to raise rates? seems to have taken on a life of its own. interpreted,people some as hawkish. think -- thist would be a poor job on the fes job of prepping the market or a fed hike that is one week away.

i would find it hard to believe they would do this data job of trying to prepare the market. if they are preparing for december, that is one thing. doesepare for a one-week, not make sense to. matt: regardless if the hike in september -- is or anything else driving in? t? >> i think the market would give the fed a rate hike. butong as they pray for it, with the market is not prepared for is a suddenly hawkish fed that talks about mosul interest hikes over a relatively short amount of time. the market would give the fed a rate hike if the markets prepped ahead of time but a series of hikes, the market does not have that price and i don't think it is necessary. tt: we were attacking the

jack ma old today and he pointed out that we were talking about the valuations in a time where earnings are not expected to rise very much. not next quarter but the next couple of years. does that concern you being pulled to market if earnings will not pick up? scott: it has taken seven years to get back to what we would consider fair value. time, it isunt of not fair value and i don't think valuations are stretched so for me, when we look at, earnings growth next year should be 5%, 7%, largely because energy earnings will be flat and gdp will be higher. we have seen the bulk of the gain from this particular cycle and i will tell you this -- into the middle of next year, the s&p

500 looks good. we have 2190 22290 range. we feel good. suggests we may go over the top into the middle part of next year so i don't think there is the bull market is over but we would expect volatility after we have done but gone straight up from the post grexit depth. scarlet: i want to be here about the backups in nields. selloff.continued it probably reassessment of earning prospects for u.s. companies. covering at low levels. i think some sort of backup makes sense. we have been settling into the 1% range so i don't think that is out of line, i don't think that will change much next year.

what you are seeing now -- do not get me wrong -- this was a big move. couldt the equity market trade lower on virtually nothing, just pure noise, maybe 7% lower. this is a noise day. this is a day investors cannot think to themselves that something seriously is changing. this is the type of day where you have to say i have a plan and i need to step in and put money to work whether it is that 2015 area or the some other area you are watching ist selloff opportunities something to buy in and we have outside this stick with the bull market. matt: the one sector that relatively of divorce today was

banks. i'm looking at the s&p banks which has been rising. and the blue line. as we have this fever curve, we are seeing banks outperform. what do you think about the banks? is there in opportunity if we do get a regime change? need higherou inflation, better economic growth and higher interest rates. a combination of those three and i don't think we will get them. uson't think we will say changing that. today, utilities and telecom, defensive sectors, absolutely at the bottom and the cyclicals hanging on top. even though we had a big down day, it is the sector performance on the day. it is only one day. it was the opposite of what people would think/ . matt: utilities and consumer

staples -- the first, the l1 group. they are the biggest losers over the last three months. the big winners rip stocks and then the financials. i want to ask you about the ip stocks. he sees them breaking out. he is a big believer even with all the trouble they are getting from eu watchdogs. do you think tech stocks are really to rally back to where they were at the beginning of last decade? >> i think we will continue to be overweight technology. staples,ruary 11, utilities and telecom have been the worst performer so it is even longer. technology -- i think there are a lot of things going on driving technology and i think we will see more business spending on technology.

i think we will see more consumer spending on technology. when we look ahead over the next six to nine months, we sickened technology and health care out performers. matt: cool to have you for your time. scott, the senior of global equity strategies. let's bring in all of her running. he has brought some charts to give us a little more about the market news. charts but have some i have a piece of paper which i never usually do except in less it is complicated. it is like puzzle pieces. when you look at the markets -- i had to write it down. we woke up and we saw bond yields rising. we saw bond yields in america. treasury jumping up. something we have not seen since

june. on the back of that, you see what is happening sector wise. the utilities, the vanguard dividend, they are trading on two deviations. you look at what is happening here, the description of that. he is right. since february 11, they have been very weak. what is most important is the bottom part. you see ayou see a dip negativeg we are seeing these asset classes move in the same direction. this is a percent daily change so bonds losing and stocks will lose as well. that is a big deal. that is a big deal -- you think about why because of all the flows and capital into the bond second of sector.

i think it is a big deal and the question is what impact those rate sensitive sectors will have. 2.5%? will we move on? or something will move on. it is not just about the fundamental reasons. it is also the momentum. market fell off and it is something we have been focused on because the closed 40 minutes ago but you look at the dollar and it looks higher but not by a lot. it stayed fairly elevated. thehen you think about dollar -- it has a particular kind of relevancy for stocks. when you look at what is and maybe the

us-based companies are going to do better. .hey sold off quite a bit just a rate move today versus sentiment and this is what happened -- we have the small cap selling off quite a bit, even more so. it is a risk off type of play. scarlet: thank you for coming with charts. let's get the first word news with mark crumpton., mark: the united nations security council has an emergency meeting on north korea's latest nuclear attack. the secretary-general called it on acceptable. >> i condemn in the strongest possible terms nuclear tests by the democratic people's republic of korea. brazen yet another

breach of the resolutions of the security council. mark: the council threatened further significant measures if kim john kuhn's regime refuses to stop its tests. the presidential candidates are weighing in on north korea. hillary clinton says the move is outrageous and unacceptable and china needs to increase pressure on north korea; . donald trump says it shows the failures when she was at the state department. paul ryan and nancy pelosi and other members of congress gathered on the steps of the capitol earlier today to commemorate the 15th anniversary of 9/11. speaker ryan says the events of those days should be honored. tune in on sunday for bloomberg television of the special coverage of the commemoration atemony of the 9/11 attacks 8:45 a.m. new york time.

the effects of a crippling drought has been raging across southern africa. those effects will be much worse. the organizations world food program expects it is a double to 14.1 million by the end of this year. let emergency responses until april of next year will cost more than $600 million according to the wf the. dayal news 24 hours a powered by more than 2600 journalists in over 120 countries. this is bloomberg. matt: coming up on what you missed, we talked today to vanguard cofounder jack mobile about everything you can imagine but robo advising i thought were very interesting subjects. what he had to say about it next. this is bloomberg. ♪

index forvanguard 500 decades ago with some $11 million in assets back in 1976. it seemed like a crazy idea but now jack bulbul is having the last laugh. it is now worth $3.5 trillion. scarlet and i spoke to jack about that today. the most of the outlook people -- people leverett it did the outlook for the economy. 2% or 3% of the most, 2.5% of the most actually, for gdp growth and gdp growth has about a 96% growth -- corporate as a nun 6% correlation

with gdp growth. that is a high correlation. corporations make money when the economy is good. they make less money when the economy is growing slowly. case foree the substantial gdp -- that would be ok. it would hardly be sensational and the debris a tough slow to get to three present. high interestaid rates do not make sense at all. you would like to invest in to risks you understand so which of today's risks, whether it is u.s. or japan, do you struggle to get your head around? isk: the most obvious one the political, the political situation in the united states of america. it is deeply worrisome and unbreakable and unfathomable about what might happen come election day and what the consequences be. that is number one.

the world economy, number two, is not doing as well as the u.s. economy, and i don't see europe and japan will do better but i don't see europe and japan of the biggest proponents of the world market. i don't think they can do it as fast as we can even. ofre is always the risk nuclear war. i don't think it is a likely risk but we have lived in a very fragile world. it is something i have no ability to predict. i hope sane heads will prevail but you cannot be sure about that. there is a lot more global warming. it seems to be accelerating. it sure is in philadelphia today. that will be a big problem, i callously problem. feel it are those that

will come upon us on the serious way more quickly than anybody has and stated. matt: we have seen so many incredible changes, some of them good and not so much. a huge rise in the use of easier. what do you think about that and the use of computer our rhythms -- algorithms. it will lead to more -- you might think more index and vexing. how do you view that stuff? advisors -- it is a vanguard index. ,hey are not making big backs they are going with the flow of the market as a part of their stock allocation and i think that is very wise. every day, it is the most widely

traded stock in the world and it turns over 4000% a year or something like that. person thate of thinks a 5% turnover is pushing the envelope so it is very heavily traded. .here are responsible uses they are a gift to wall street and by demolition, not a gift to the investors doing in trading. scarlet: that was jack. volkswagen was a top headline. this is bloomberg. ♪

matt: the latest on the volkswagen emissions scandal. a veteran engineer has bled guilty to conspiring to do the fraud u.s. regulators and customers. jamie butters has the latest. thank you for joining us. is this guy going to jail or will he get off easy because he is cooperating with the u.s. government? latter.ore of the he pled guilty to wire fraud and violating the clean air act. the maximum punishment of five years or $250,000. it could be substantial but i would imagine they will hold that in reserve while he cooperates and they pursue cooperation of other bigger executives. matt: did you think of this all himself and told his coworkers not to tell winterbourne? or do you think other people

knew about it? jamie: there were definitely other people involved. other e-mails involved about the prosecution, the investigation by the california resources board and the epa and discussing how they are in -- sharing information and how they are not accepting answers and to be creative because they are figuring it out. scarlet: tell us more about this engineer. he is 62. jamie: he spoke a little bit in court. thereke in english but was a german translator in k's that would be needed for any technical language. the judge was very careful to make sure he understood what he was doing, the proceedings. understood he did not have the incriminating himself and he chose to because they had a lot

of evidence that he and these other co-conspirators or guilty. matt: are the prosecutors aiming a little higher. >> they want to pursue other people but the understanding is they will not be able to actually by anyone from germany because there is a criminal investigation going on and it is reciprocal understanding between the two countries -- if you are investigating people in your country, we don't take them and reinvestigate them again. they may be limited and they may be able to go to the volkswagen of america level that they need somebody who is here in the u.s. scarlet: they finally have a name. approvedous company $16.5 billion.

>> pretty high -- just in the u.s. scarlet: 240,000 of these cars out of u.s. roads. thank you very much. matt: what you need to know to gear up for next week's trading. this is bloomberg. ♪

let: before fed officials go into silence. a sudden propping up of her speaking engagement that sparked encouragement in the market. people worried if she starts sounding more hawkish, that means they will move. matt: on tuesday come argentina host a business and investment forum. the vp of bob dudley and much

more. >> i will be looking at retail sales on thursday. it will rise 4.0%

donny: i'm donny deutsch. john: with all due respect the donald trump, at least he didn't take the least credible doctor. ♪ >> almost done, almost done. ♪ john: great to see you.