been up you later -- a currency manipulator for the first time since 1994. markets is taking a break from their selloff, the yuan fixing below seven, combing the currency market. and brace for more rate cuts. the fed may cut two more times this year. david: welcome to "bloomberg daybreak" on this tuesday, august 6. there are so many extraordinary things going on. one of them is this letter from four former heads of the in "the wall street journal." alix: all of them coming out and saying, "we are united in conviction that the fed and its chair must be permitted to act independently in the best interests of the economy, free of political pressures and without the threat of removal or demotion of fed leader for political reasons.

that. surprised at david: who do you it was directed to? [laughter] alix: probably president trump. david: you think? alix: but it isn't the first time we have seen resident -- we have seen presidents talk to fed chairs. it is the first time i think i have seen a president say we will fire you publicly. alix: in the markets, if you are an equity trader, you are probably breathing a big sigh of relief. the question is, is this a bit of a relief rally or did we finally find some sort of a bottom? s&p futures up 8/10 of 1% after the worst two days of this year. euro-dollar flat. a record, still seeing low in the bond market, so it feels like the same story, maybe just a pause.

david: now it is time for bloomberg first take. we are joined by stephanie flanders and marty schenker. let's start with this announcement. the treasury department found china to be a currency manipulator. result, secretary mnuchin will engage with the imf to eliminate the unfair competitive advantage created by china's latest actions. those are lofty words. what does it all mean? what will the imf do about it? probably very little. this has been bandied about in previous dump-in -- in previous administrations. the practical implications are really small, but symbolically, it is just another salvo in this

trade war. alix: to that point, the indirect implications, if i am a ceo and saw what happened yesterday and then this, that is going to affect what i am going to do, right? alix: as an economist --stephanie: as an economist, you feel a sense of emergency in the white house. the resident also says china should be paying the price for these tariffs, not american consumers. this is how chinese companies pay the price, by having the devaluation, which then means prices wouldn't go up as much as a result of tariffs in the u.s. but marty is right, this has been around for a long time, and probably except for the last week or so, china has been more of a manipulator in the past than it is now. we know already from last week's announcements from the administration the kind of stalemate in the trade war that the markets were banking on is no longer there. there's actually going to be discontinuing ratcheting up. david: as i understand it, the

imf has jurisdiction, but no authority. they can't actually do anything. so the way this gets resolved is by negotiation. supposedly we are already negotiating, so what does this add to the whole thing? marty: if you are looking for orderly strategic moves on this trade front, you are not going to get it from this administration. i get the sense that donald trump called steven mnuchin and , and make this designation you got yesterday's announcement. stephanie: but you didn't get the announcement using the old law, which doesn't have the same kind of sanctions. it is interesting that the treasury was at least a little reluctant and didn't go for the full law, which would have meant chinatic sanctions, which may not have noticed amid all of the tariffs. get to our next topic, which is the markets. from whenk at the s&p

trump took office to now. this was supposed to be the tax cuts, january 17, 2017 to now. do we still have more juice? we are still up. stephanie: i think we are up from the beginning of the year, but we had that fall at the end of last year. the issue now is that you now have a very dramatic increase in expectations around with the fed is going to do. expectingchs now three rate cuts potentially by the end of the year. atember, we were looking relatively limited ammunition even before we had this reversal of policy. i think if president trump is doing all of this just to get lower rates, which is what some people suggest, i think because is going to be greater than the medicine the federal reserve can necessarily get. alix: does trump have a reaction function to the market from the

selloff? marty: we are sort of waiting for it. he has celebrated the stock market when it is up, and you've pointed out it is up still almost 10% this year. nothing to scoff at. but continued volatility in the markets i think will keep donald trump at bay, trying to take credit for the days it is up and not saying a word when it is down. i think more important is where the economy is going to be in six months, and with the european slow down seemingly on the horizon and uncertainty and volatility in the markets, that could ratchet down economic growth here, and that will be a problem. david: the question is what does this mean for the economy as opposed to the markets? stephanie: we have seen the effect on particularly manufacturing of trade and the tariffs to some extent. that is feeding through.

you don't feel that the white house is necessarily on the side of the economy until the election. if the president has really him to is is easier for go on a bad economy, the fed is causing it, theme. what he's done in the last few months is contribute to weakening and make the outlook a lot cloudier, certainly for companies that might have been doing some investing and producing that kind of productivity in this late stage of the cycle. the markets reacted yesterday, and certainly could possibly more fed cuts coming. the chief economist for goldman growingid, "in light of trade policy risks, market expectations for increasing rate cuts and the possibility of a new little brexit -- of a note brexit, weno deal

now expect a third 25 basis point rate cut in october for a total of 75 basis point of cuts." there are certain people who argue donald trump was absolutely right when he said that the fed tightened to early , whato much, but really he has to be worried about, what jay powell has to be worried about, is the perception he's being influenced by the white house. you never want that in terms of global economic policy. alix: contingent on that call was that goldman no longer expect a trade deal to happen for the 2020 election. how has the view changed in the last 48 hours? stephanie: as we saw back to the election campaign, these first few months of the presidential playing out, you see this choice of whether the president is going to run on the same old

2016, i've got to be there to fix this broken economy, or will he run on the improvements that have happened since 2016? it is much easier for him to run the old campaign and much harder for him to be defending a trade deal. i think that has been the concern for a few months. they're such a decline in the amount of trust across the table in these negotiations. the incentives on both sides have changed, not necessarily pointing in the direction of a lasting deal. david: we always hear that bull markets don't die of old age. they die of policy mistakes. is it possible there could be a different policy mistake here with trade that could end the bull market and even lead us into recession? stephanie: i think so. if you have a white house that does not seem to be putting the economy before their own long-term future, that is a concern. one thing we don't talk about very much, japan and korea. japan now imposing these sanctions or tariffs on korea

for reasons that go way back into world war ii and post-world war ii history. president trump has not only taken actions, he has normalized using trade as a weapon on other fronts. if you throw that in with brexit and concerns with europe, i think the overall effect could produce quite a lot of accidents for the recovery. alix: there's a real, material hit to growth. you could see the s&p fall two a level we haven't seen since 2008. thanks a lot. always great to see you both. you can find all of the charts we just used and more at gtv on your terminal. browse the features, check it out. gtv . coming up, we drill down into the market selloff. how to play the volatility. dean curnutt of macro risk advisors will be joining us.

this is bloomberg. ♪

viviana: this is "bloomberg daybreak." is in talks to sell a timber hood stake -- a 10% stake of universal music to tencent holdings, valued at $36 billion. tencent has the one-year option to double that stake. to findhad planned other partners to buy minority stakes. according to compensation consultant johnson and associates, bonuses for equity traders could fall as much is

from a year earlier. fixed income counterparts could see a and percent drop -- a 10% drop. barney's new york filing early today for bankruptcy protection. at the boutique have squeezed the company. alix: take a look at this. this is the oversold versus overbought level. we went from overbought to oversold in six days, huge move. joining us now, paul siena, bank , bankrica -- paul ciana of america merrill lynch chief technical strategist, and dean curnutt, macro risk advisors ceo.

paul: we expect there could be a bounce. but the bad thing about oversold conditions is it traps longs. these headaches across metro -- across macro and the best other set of oversold indicators that are not really oversold yet, those longs will be trapped, and the sharp move could continue. david: is that your experience, that we are likely to see a bounce back up? when? is a i would say that this little bit unique in the sense that you've got the two local economic superpowers going at it head-to-head with effectively a very dangerous game of currency wars. i think the set up coming into august is actually very important to appreciate. that is a set up of vast hedging fatigue. we may see an index on bloomberg that allows us to look at the difference between implied volatility for options and realized volatility. it gives you a sense as to

whether or not options are a good deal. it was running at about five or six all throughout july. that means it applied -- that means implied volatility was passing five or six volatility points. that's huge. coming into august was, to me, a vastly under hedged market, and leaves a degree of vulnerability. alix: from the vulnerability in the equity market to what we are seeing in the treasury market, you made a call. we thought you were crazy. 1.75 on we would see the 10 year, and we saw 1.75 on the 10 year. what is your call? paul: the bond market, we cannot have a trade war. is withare seeing now the s&p starting to correct, there is a bear case developing.

so if the stock market begins to price in trade war risks, perhaps more like the bond market is, 10 year yield is still going to go a lot lower. 1.35, 1%. you have all of those figures down to the lower side that could be reached. david: 1.35%. paul: that would be a retest essentially of the so-called double bond over the last four years. we blew through that, everybody is going to be staring at 1%. the sentiment is starting to turn that way. a few people have come out to say it is a possibility. the more that happens, the more it becomes self-fulfilling, and maybe we fall short of it. maybe it is 1.1% or something like that. this august-sent, correction is in fact confirming of a bigger top and stocks, bond yields are going to go down.

it is really important how the s&p finishes this much. david: dean, you mention the hedging function. let's put up a chart right now that shows what is happening with real volatility. it is correcting itself across assets, whether it is fx or stocks. what does that due to to the hedging phenomenon right now? dean: the first thing i think we should recognize is that these markets tend to lurch from real stability to something closer to calamity in moments. that was how alix started the segment. that to me is the concern, that we are not in these markets that are traditional in the sense of discounting future economic growth, discounting earnings. we've got some overriding technical factors, so volatility itself becomes part of the equation. a lot of the strategies investors have effectively been utilizing are contingent on the level of volatility. when volatility rises, especially very quickly, it is the trigger, sometimes mandated

in bylaws for equity investors, derisk.lly have to i think we have to watch that specific screen you just pointed to. alix: that is a good point. let's get to another chart which -- to do with dollar-you on dollar-yuan. fixed income came in below seven. what do you see for the future for the yuan? paul: this is a clear sustainable breakout, ending last week about that yellow trendline in the chart. we are above it again this week. barring some major reversal in the next few days where this closes below that trendline again, we would call that a cup and handle pattern, which projects higher into the seven or 7.3. into the 7.20s

it just divides your trend, kind of like a 200 day moving average. redline,ile above that certainly while above that yellow line. david: how much is the markets and how much the government? we had beijing strengthen its rate overnight. how much is in the control of beijing? paul: the government is negotiating. it is partially in control of the government, but partially in the control of financial markets and investors seeking may be more diversified investments outside of china. alix: so what is the best way to trade all of this, if you wrap in a potential breakout for dollar-yuan, lower treasury yields? what's the best way to deal with it? dean: when i was on your program in may, i pointed to what we had observed at macro risk advisors, which is increasing correlation between the vix and the cnh.

the feedback between this very important fx relationship in this volatility metric was starting to increase. that correlation has had a three-year high for our reading. we are supposed to watch that because markets are hanging in the balance on it. with respect to where the cnh is going, i've got no idea. it seems very technical. it seems beijing is a part of it. but i agree there's also market forces and sentiment forces. i think that the weaponization of things like tariffs, things like fx levels, this is something that is new. it doesn't fit in the traditional economics textbook, and i think it is dangerous. i think markets are supposed to respect the uncertainty at this point. david: paul ciana, thank for being with us. dean curnutt of macro risk advisors will be staying with us. rateg up, traders move up cut expectations. more on that next.

this is bloomberg. ♪

david: the escalating trade war between the united states and china hasn't just roiled the markets. nded expectations of further rate cuts. "market expectations for much deeper rate cuts and an increasing global risk related to the possibility of a new deal brexit, we now expect a third 25 basis point rate cut in october for a total of 75 basis points of cuts." dean curnutt of macro risk advisors is with us. is he right? dean: he's right on the market. that helps us quantify the possibilities of an extended number of rate cuts. i think three additional cuts is about 40% at this point. i would have said that was very implausible maybe three weeks ago. i actually think it is

reasonably possible at this point. alix: how volatile will that read be, based on the ecb? dean: i don't know that it is ecb contingent. i think the fed is very focused on trade stuff. i think the commentary that trump is controlling powell not through the twitter account, but sort of this hostagetaking with trade, i think is quite clever. that trump creates the mayhem with trade, financial conditions tightening, and powell and company react to that. i think the fed is concerned about global gross, concerned about the particular risk from trade. you have a market that is running at a seven to 10 volatility that moves suddenly almost on 50, so it shows you just how chaotic things can get. david: and it is a feedback loop. the more the fed cuts, the more the president feels he can be tough on trade. dean: i think so. the codependents specifically

between the market and the fed right now has got us very uncomfortable. alix: the fed has the most room to cut. if you take a look at all central banks and where markets expect rates to go, the fed has the most to get to, so that is interesting. dean curnutt of macro risk advisors will be sticking with us. coming up the u.s. names china a currency manipulator, raising questions about fx intervention. in the markets, you can breathe a sigh of relief, at least for today. minor selling in the bond market on the long end. s&p futures moving a bit higher, rebounding from yesterday. it sure does look pretty in the european bond market. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i'm alix steel. a lethality underway in the markets. is it a real turnaround tuesday, bounce? -- dayat

cap bounce? richard bless low -- richard breslow writing for bloomberg, "bonds will continue to mid me said." german yields continue to move lower, -54 basis points, yet another record low. seeing a little bit of selling in the long end. the treasury curve kind of where we were yesterday when trading started. euro-dollar goes nowhere. it is still the action in the bond market taking the direction. -54 basis points. david: it's amazing. alix: -80 is where hsbc is for the german ten-year at the end of the year. it doesn't seem crazy. david: i'm not even sure what that means. alix: mean either. david: treasury secretary mnuchin cleared china a currency manipulator after markets closed yesterday, something that hasn't happened in 25 years. to explain what it means to be a currency manipulator, we welcome now bloomberg's michael mckee.

michael: people have been making a lot out of these three criteria in the 2015 law, but the treasury department is using 1988 version of the law that basically says if a country is manipulating its currency for trade advantage. is china doing that? it did, but it is not doing it anymore. take a look at the turnover in the chinese foreign exchange reserves that they would buy or sell to manipulative currency. for years and years, you can see that they were accumulating foreign reserves because they were buying u.s. treasuries, and that was pushing down on the yuan. but in 2014, they shifted gears and now has been a net negative. they have been selling, and the yuan has been falling -- getting stronger, rather. i just want to address one thing quickly, and that is why china didn't go farther today in its

yuan fixing. look at what happened in 2015, when there was massive capital flight. they may not want to go too far, too fast. is china manipulating now? was this a response to the president that was deliberate to try to revalue? china says its market pressure. look at this. these are other asian currencies. they had been getting stronger. then the president announced extra tariffs on china on august 1, and look what happened to all of the currencies in asia. so it is not just china. this is market pressure. this is a president who says he never takes a punch without punching back muscle what can the president do now? we know that naming them a manipulator doesn't really work. he can impose more sanctions, but he's pretty much sanctioned everything in china. there's a lot of talk of direct foreign intervention, but that probably won't work, and here's why. there was $5 trillion turnover

in the foreign exchange market each day, so we don't have a lot of money to influence that. how much you want can you buy that how much -- how much yuan can you buy? you can't by any offshore -- you can't buy any offshore because it's a controlled currency. the exchange valuation only has about $43 billion in it right now. they have $12 billion in euros and almost $9 billion in yen. the president has limited firepower. not much he can do, except perhaps to try and ramp up additional tariffs if he can. alix: really great explanation. joining us now on the phone is phelpsampbell, duff & chief strategist. dean curnutt of macro risk advisors is still with us. walk me through the significant

of what mr. managing yesterday did -- of what mr. mnuchin did yesterday. chris: there has been pressure to label china a currency manipulator because of various pressures they put on markets. this is, if nothing else, a huge psychological move from the united states signaling to our trading partners and investors that china is a controlled market, where they don't have free-floating currency, and they perhaps are doing some things that the u.s. government wouldn't do, and we wouldn't want our trading partners to do in the markets. a huge psychological move that hasn't been done for more than 25 years. alix: in your experience, how close might we be to any fx intervention in the u.s. on our

part? i will put up a chart that shows dollar interventions has been quite where. the latest coordinated event was in 2000, really just to prop up the euro. what are the chances? how does it work? know, it is a real challenge because there's no what the chinese have continued to do, picking their currencies to our market for so long for a trade advantage on their part. quibble that the quantitative easing we did postcrisis helped prop up the u.s. dollar, but we were in a global market challenge at that time, so i don't think there is any equivalency to what the united states has done versus china throughout the decades. david: if in fact we are embarking on a currency war, we are not there yet, but if that

is where we are headed, what does that mean for the economy and markets? every country once the currency cheaper to be more competitive. dean: i think some of the previous ones have been more friendly. alix mentioned propping up the euro. there was post japan nuclear accident, there was action to weaken the yen little bit. i keep seeking about the fundamental individual investor who's got a 401k and is looking at their account, or the analyst doing work on a company to try to understand the value of the company. these are so overriding, these type of macro forces. they lead to potentially very correlated moves in prices. i just think it is risky, and i think one of the things investors need to really contemplate is just raising some cash. it is a difficult time to be very invested. we have the fed, in terms of its

support, as potentially a tailwind, but i just don't think that's enough. i think some of these issues are concerning enough and unknowable enough where you're supposed to have a reasonable allocation of cash at this point. alix: what happens now? we are talking about fx intervention. we finally have the currency manipulation tag. now what? the chinese are trying to decide internally whether they think trump gets reelected or not. from their perspective, if i were someone in china, i would be thinking if president trump were reelected, he's going to bring more tools and it will be much more difficult and a lot harder on their part. i also think if the democrats get elected, the chance of getting to a speedy resolution on this is going to be very hard as well because democrats tend to put social issues in greater

prominence. think there's a strong that a denial of access , they can'tmarkets sustain that for very long. they are looking maybe at a real economic challenge, so i think it is much in their advantage to get a deal sooner deramp and later, to de-escalate this. i also suspect that in both countries, they are trying to find equilibrium to tease the hardliners in the anti-hardliners with these measures and challenges, trying to find a way to get a yes.

i really suspect that is what has happening, and beliefs folks in our government are doing that as well. i am really hopeful that we will quickly get to a time when there is equilibrium, and that we can actually find a way to get to a deal sooner rather than later. david: there is a deadline here, the november 2020 election. i suspect president trump does not want to go into that election with the markets in a mass, people's 401(k)s down, and all of the problems we are seeing now. does that give us some solace? dean: i think he does have a tipping point where, if the declines in the s&p are rapid and significant enough, he will back off. the one thing i will say, the vitriol between the right and goodeft, there is bipartisan support for being tough on china. i noted in elizabeth warren's policy prescriptions, she is

very specific about the mechanisms for helping the u.s. worker. david: and people are delivering that message to be chinese, that this is not just a republican issue. democrats are there, too when it comes to getting tougher on china. phelpsampbell of duff & and chris kern it of macro risk advisors, thanks -- chris kern of macroan curnutt risk advisors, thanks for being here. but get the first word news with viviana hurtado. viviana: north korea is threatening to dig a new road in negotiations if washington doesn't compromise. the warning coming less than an hour after north korea conducted its fourth short-range missile test in two weeks. china has made some of its strongest comments yet on hong kong protests. beijing urging hong kong citizens to stand up to protesters challenging the government. official described demonstrators

as "a very small group of unscrupulous and violent criminals," and they predict efforts to get hong kong leader carrie lam to resign would fail. in the u.k., opponents of prime minister boris johnson's threat of a new deal brexit are hardening their plans to stop him. opposition leader jeremy corbyn says he will call a vote of no-confidence next month. another says more conservatives will turn against boris johnson. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm to be on art auto. this is -- i'm viviana hurtado. this is bloomberg. work work withp, we how history has paid off for j.p. morgan in today's wall street beat. alix: if you have a bloomberg terminal, check out tv . watch us online, click on the charts and graphics, and check out anything you may have missed.

this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, larry summers, former u.s. treasury secretary. here's your bloomberg business flash. take-two interactive still reaping the rewards from "grand theft auto." the 22-year-old videogame franchise gets credit for helping results in the latest quarter. boosting its forecast for the year after

president trump blamed "grislyes for shootings." ubs is finding a way to get more fees out of wealthy clients. the swiss bank will charge clients for holding more than 500,000 euros in cash. previously the threshold was twice that much. banks are preparing for a longer than expected spell of low or negative interest rates. those rates are putting pressure on banking margins. i'm viviana hurtado. that is your bloomberg business flash. alix: thanks so much. you know who is getting maybe a bonus or an increase? retail and commercial bankers. david: is that right? alix: it totally shows the shift

within wall street banks of who and how they are bringing in their money. david: absolutely. but there are consequences of negative interest rates, as we have learned. alix: we turn to wall street beat to cover three things wall street is buzzing about this morning. first up, a trading slump hitting wall street. bonuses, we just talked about that, down as much is 15% as they endured the worst first half in a decade. second up, robotic researchers. thanks are turning to algos. and we are going to take a look at adam neumann's relationship with j.p. morgan's jamie dimon. david: joining us now is sonali basak. we just heard some bankers are going to get more bonuses, also private equity and hedge funds, but some other people are going to not get such big bonuses. sonali: there's a lot of people on wall street that will get lower pay. isnson associates' report

only through the first half of the year. david: doesn't it sort of makes sense? when the banks aren't making as much on equity trading, they won't pay their equity traders as much. surprise, surprise. sonali: it makes sense. if you look at the end of last year, banks were coming off of --ord pay and record pay off and record payouts for shareholders, with stress tests going so well. you had a record first four months of the year, i know you are seeing it in the pay. the --s it's a same with is this the same when it comes to ceos? sonali: we will see at the end of this year. if the performance is not doing so well, are they going to be having record payouts like in the past? was last year the top? this year hasn't been looking well so far. david: they have deals that basically link their pay to how they perform. sonali: exactly. not happy, but on

top of pay, we talked about thousands of jobs being cut across the whole industry. so right now, it is not the worst thing to worry about when people are losing their jobs. alix: excellent point. let's get to this great story which has to do with robots. basically, this takes a look at brazil and when they were undergoing pension reform. algoad a bank -- an actually, the attracted away the need for a guy on the ground. sonali: it was tracking about 500 different lawmakers. this strategy of tracking lawmakers, social commentary, and news is very popular among a lot of different hedge funds right now. in fact, we tried to use one ourselves. we outperformed. [laughter] sonali: by using the algorithm, we beat our own by hand method of things. david: but it was a combination of you and the algorithm. sonali: exactly.

in this brazilian case, they were able to predict the outcome weeks in advance. so you have to be sure that this algorithm is going to be right. david: to that point, it is not so much you are going to eliminate researchers. it is just you won't need as many of them. sonali: this is backed by adam howard, who's a little more tech friendly as well, but there's a lot of money going into a lot of these. alix: and they will have to have humans to aggregate and say this is what it means, right? but it is a huge advantage in some ways. david: we will need humans, does not as many humans. big story from sonali basak here . wework and jp morgan, and really quite a lot about jamie dimon. sonali: i looked at jamie dimon's relationship with adam neumann, the wework ceo. jamie dimon is very close to being the number one underwriter on the ipo, but above that, they've been working on the debt

underwriting. they have a long-standing relationship with adam neumann himself. has been taking out loans based on private stock. david: $40 million in mortgages. i'm not sure what i would do with $40 million for houses. this is a big deal. sonali: and with morgan stanley as well. himself is big business, so we work, people are expecting the ipo to lead, but at the end of the day they will need to make more money to fund extension. david: they get enough out of the equities, and then they loan them a lot of money. sonali: contingent on a successful ipo. there's about $800 million that they are trying to line up, according to our sources, but it has to go successfully.

alix: is this unusual for jamie dimon? dimon is known to show up on the biggest deals. he's known to be somebody that if the bankers need somebody to show up for deals, he does show up. david: he's a great banker, but bankers trade on relationships around the country everyday. community bankers know their local businessman. sonali: and this matters for jp morgan and silicon valley. year, itlyft this didn't go that well at the beginning. neither did uber. hitting $47 billion in valuation for wework is going to be difficult. david: bloomberg's sonali basak, thank you. coming up, i'm watching how take auto" helpd theft shares. alix: if you are heading to the

car, you can listen to bloomberg radio on sirius xm channel 119 or on the bloomberg business app. this is bloomberg. ♪

pres. trump: we must stop the glorification of violence in our society. this includes the gruesome and grisly video games that are now commonplace. it is too easy today for troubled youth to surround themselves with a culture that celebrates violence. david: that's what i was watching yesterday and watching today, president trump addressing the tragic shootings in el paso and dayton, saying part of the problem is video games. whichesult, take-two, makes "grand theft auto," plummeted on the news. but they bounced right back up

after they announced earnings after the bell. but there was some hit for videogame makers. alix: i have to wonder, part of it is you could have a conversation about the second amendment and gun distribution, and sales and makers, versus videogames. i don't know how you could ever make a case that the government could fix it in any way possible. david: that is a fascinating point. maybe the government doesn't need to fix it. may be private action can do some thing about it. you pointed out "that your times hasut "the new york times" an open letter to the ceo of walmart, you have the opportunity to put pressure on your gun makers. don't deal with the various people dealing with guns that don't have protective mechanisms. maybe there is a private way to address some of these issues. alix: part of that piece led to the fact that walmart, you put a lot of pressure on your supply chain, so you've proven that you

clearly have the sway and the power when it comes to your own profits, so why don't you use that with other kinds of companies that sell into your store in exchange for more gun control or less easy ways to buy guns? david: given where we are, maybe we need to do all of the above, but we certainly don't want to let the government off the hook. doubt this conversation continued to percolate. doubt this conversation continued to percolate. coming up on this program, larry summers, former u.s. treasury secretary, the guide you want to hear from. 2000, around in 1994 and with the last major currency minute elation label and dollar devaluation -- currency manipulation label and dollar devaluation. this is bloomberg. ♪ hey! i'm bill slowsky jr.,

i live on my own now! i've got xfinity, because i like to live life in the fast lane. unlike my parents. you rambling about xfinity again? you're so cute when you get excited... anyways... i've got their app right here, i can troubleshoot. i can schedule a time for them to call me back, it's great! you have our number programmed in? ya i don't even know your phone anymore...

excuse me?! what? i don't know your phone number. aw well. he doesn't know our phone number! you have our fax number, obviously... today's xfinity service. simple. easy. awesome. i'll pass. ♪ alix: the u.s. --

u.s. strikes back, labeling china a currency minute be later for the first time since 1994. we will speak to larry summers, former head of the u.s. treasury. markets take a break from their .elloff is it going to last? goldman sachs says there will be no trade deal before 2020 elections and the fed will cut two more times this year. david: welcome to "bloomberg daybreak" on this tuesday, alex it -- tuesday, august 6. alix: we went from overbought to oversold in five days, and now we are getting a bit of a relief rally. euro-dollar a little bit weaker, but it is really still the action in the bond market. seeing selling in the long and after the huge rally, where we had 10 year yields hitting a fresh cycle low.

still seeing the safe haven bid coming in. german bund yield at yet another record low. david: larry summers was the undersecretary secretary of the treasury for international affairs the last time the unit six designated china a currency -- theator 25 years ago united states designated china a currency manipulator 25 years ago. be at the most dangerous financial moment since the 2009 financial crisis come up with current element between the united states and china." we welcome secretary summers on the telephone. thank you very much for joining us. give us a sense of how bad the situation is and what has brought us to this path. sec. summers: there is extremely high uncertainty reflected in markets. you see that in all the assets people run to when they're scared going so far up. gold, even.s. bonds,

bitcoin. people areign that very anxious. they are anxious because there's growingg risk that this trade conflict between the united states and japan and china will broaden and get out of control. thererisks were already with the president's latest round of tariff increases. now declaring china to be a spectertor raises the for further retaliation, raises the specter of a situation where it will be more difficult on pride for china to say yes to u.s. demands, and they for -- and therefore raises the risk of a cycle of financial

conflict. is coming at a time when we are already 10 years into expansion. when the fed has already to thezed growing risks current expansion, and when, given how low interest rates already are, if there were to be a downturn, there's much less act for monetary policy to that has been the case traditionally. monetary policy does act reduce rates if a recession starts. we are not going to have anything like that kind of room, and that makes the situation more precarious. designationentioned by secondary mnuchin of china as a currency maybe later.

was there any justification for it? the president basically saying there would be increased tariffs. you saw the pboc we can the rate can -- want -- pboc we pboc weaken the rate for the yuan. sec. summers: we tend to say a currency is being manipulated when a few conditions are met. when the country in question is running a substantial trade surplus. china use to run a substantial trade surplus. it does not anymore. when the country in question is trying to weaken his currency. when it is selling its currency into the market to push its value down. ,n recent months, recent weeks china has been entering the market not to sell its currency, but to buy its currency. really, china has been propping

it up. if we simply let market forces operate, no chinese currency intervention, no controls on the flow of capital. currency would fall very substantially. when you are propping up your currency and not running a trade surplus, you are not manipulating the currency on any definition that is understood and accepted in the financial community. that's why this seems to me to be a problematic designation, problematic in terms of what it meant for the treasury's credibility, problematic in that it is hard to know what the united states could really do to enforce it except shoot itself in the foot was more tariffs, and problematic because the united states has a wide range china where the merits are extremely clear.

north korea, some of the issues involved with trade frictions, cooperating on climate change would be examples. choose, given we only have limited influence with china, to take on an issue like this, i don't really understand. alix: that brings us to the whole question of fx intervention. you were leading the treasury the last time there was coordinated action with the ecb to strengthen the euro for weakening the dollar. what is the possibility of some kind of fx intervention? what do we have to see to make that happen, or is it also just the verbal talking about it, it that would not work? sec. summers: we were asked by

the europeans to respond to weakness in the euro. we did intervene. so did other countries. all of the intervention was buying euro because the euro was weak. it was not trying to sell and trash and denigrate our own currency, which we felt would be very dangerous and would risk raising risk premiums everywhere. bydidn't add credibility being willing to say we wanted a at the stake of desiring a stronger euro. there's really no analogy between that situation and this one. imagine any previous president bush,

president reagan, or president clinton or president obama, engaging in a transaction like buying the chinese currency against the desire of the chinese. you know, virtually all u.s. currency interventions take place cooperatively between the fed and the treasury. toannot imagine if it wishes continue to be respected as independent that the federal reserve would take place, take part in an intervention to buy chinese renminbi in this environment. and if the treasury did it

alone, i think it would do more to reduce confidence in the aberrantand convey the quality of this treasury's decision-making, and it would have a meaningful impact on currency markets. is doing gravet damage to our monetary credibility. without the fed, it is flailing around i think in a fairly useless way. with this administration, one learns to say never say never, but i would be surprised if we saw a currency intervention in mb in the near-term. david: if china stays on the path it is on now, what is the likelihood we will be in a recession 12 months from now? sec. summers: i think it is

probably still less than 50-50, but it is much higher than it needs to be an much higher than it was two months ago. you can often play with fire and not have anything untoward happened, but eventually you get burned. david: thank you so very much for spending time with us today. as larry summers, former u.s. treasury secretary. worstthe s&p had their single day drop since february 2018, moving from overbought to oversold in just about five days. what do you do today? joining us on the phone from , ubsh is mark hafele wealth management global chief investment officer. we are seeing a bounce from yesterday. what would you tell your clients

today? isk: i think the first thing of course not to panic. that's what we saw in the market yesterday, and there were a couple of reasons. most important is that people did not know if the escalation was just going to continue every day. i think we've had something of a fix on today because the chinese currency showed it wasn't going to be another round of escalation happening today, followed by more actions from the u.s. president. i think some of the things we are looking at our first, do you have the balance to your asset allocation that you want? is it time to rebalance given some of the spectacular moves we've had in a variety of asset classes, not just the equity moves yesterday? one of the most important things is in this uncertainty, we still have that central-bank support. addthere opportunities to

more yield or more carry to your portfolio, whether from emerging-market dollar-denominated sovereign bonds were a basket of higher-yielding emerging-market currencies? that is one of the key things we think our clients should be doing at this time. alix: so where in particular? like you point out, the world now has 13 trillion dollars in negative yielding debt. grade arc investment it is now negative yielding. where do you find a pickup in yield without taking on too much risk? mark: i think there's a couple of sources to look at. investment grade credit in europe looks very attractive given central-bank support. in other situations, there might not be -- it might look very rich. emerging-market

higher-yielding currencies we are looking at, indonesia, india, and south africa, versus lower yielding currencies like the australian, new zealand, and a sourcellars, is that many don't have in their portfolio. david: how do you balance the search for yield, which is harder and harder to find right now and has increased risk, and the need to provide for a rainy day? larry summers just said maybe the chance of a recession in 12 months is 50-50, but it is a lot was.r than it mark: that moves into the realm of behavioral finance. the way that we do that is say, look, what are your real liquidity needs for two years, three years, something like that? that is the first step in creating a portfolio where, when you do have a selloff like this,

your first instinct is not, i've got to sell all of my assets to pay my bills. where i have some money aside, and now i can move to be a hunter. alix: what you do with bonds? i mentioned hsbc now sees 1.5% for the 10 years, -80 basis points for the german bund. what do you do for the safety bets that could see more upside in this market? year i think the u.s. 30 still has some characteristics that can be additive to a portfolio to help stabilize things, but obviously in other parts of the world, where you have such a negative yield, you simply can't go there. you do have to move further out on the credit spectrum to get

some yield. if interest rates do continue to fall, you will still get some appreciation despite the lower rates. alix: when you mentioned before, don't panic, but signs do you look for for panic? when do you actually start to get really worried? mark: this is a very interesting time because there are so many moving parts. if the markets hit an all-time bank and theentral president takes what he thinks is strategic action, which has the same effect of taking away the punch bowl, a bit like you would think of from a central-bank, you have to weigh all of these different component parts. one of the things we are looking for is does the tariffs on china

move beyond the 10% to the 25% that has been threatened? where manyituation things will become unprofitable and supply chains will have to be rapidly disentangled. that's when many people think that the risk of recession goes up for the united states. alix: really appreciate your perspective on a day like today. e, ubs wealth management cio. the growthave seen of excitations of future fed rate cuts. "we nowyst writes, expect a third 25 basis point rate cut in october for a total of 75 basis points of cuts." we

nowardson -- we welcome nela richardson, edward jones investment strategist. what do you expect now from the fed? nela: i think the fed is walking a very delicate line now. chair powell attended to convince markets that this is a one and done rate cut, that there would be no more this year. that was almost completely unwound the next day with the announcement of a new round of tariffs. i think that it is basically walking a tight rope while threading a needle, saying on the one hand at the economy is solid, but on the other hand, recognizing the rising risks from slowing global growth to low-inflation, and now a new round of tariffs. punchline is that the fed policy is uncertain for the rest of the year, but my inclination is that the fed will not go further than the markets expect, and the fed will start short of market expectation, and that is why we are thinking that

the rest of the year means more volatility. alix: why? goldman's thesis is that we don't get a trade deal before 2020, and that is why they see more rate cuts. do you see a different scenario playing out? nela: i see a fundamentally strong economic backdrop, and really there is a limit to how far the fed was going to go when you have an amid rates at 50 year lows -- when you have unemployment rates at 50 year lows, wages rising, and inflation that is low, but tame and stable. under these solid economic conditions, you have to question, what is the fed's real mandate here? is it still unemployment, low and stable prices, or are they stretching into a third mandate to keep the expansion running in the space of rising uncertainties? if they are doing that, the risk is not to the economy, it is to its own credibility.

at the end of the day, the credibility of the fed is its currency. that is why i think they are not going to cut rates in lockstep with market expectations, but really what they are seeing overall in the economy. david: is the consumer ahead of the economy or behind? nela: the consumer is carrying the economy. that's what we've seen. it has really been the consumer benefiting from low interest rates, a very strong labor market, and finally, after several years of expansion, rising wages. what is the risk in terms of this latest round of trade tensions? it starts to affect consumer goods. that might be the real weakness coming from trade tensions, whether we can see stable consumer spending. that is what we are watching here. of edwarda richardson jones is staying with us.

coming up, two of the country's biggest newspaper groups combined in a $1.4 billion deal. we will talk about it in bottom line, next. this is bloomberg. ♪

david: time now for the bottom line, we really got three comely's worth watching. first of all -- three companies worth watching. first of all, vivendi is up almost 5% on talks to sell 10% of its universal music group to tencent holdings. they think it will give them access to the chinese market for their music, which is not such a bad thing. alix: it opens it up. let's take a look at google. trump is taking another swipe at the company, basically saying how google is explaining

they are worried about inaccurate news reflecting on google that would not benefit trump in the election for 2020. he says, "we are watching google very closely." whether or not what that means will stop doesn't matter. it is the rhetoric against these big tech companies that may have some long-term implications. it is both sides of the aisle talking about these big behemoths that have too much .ontrol david: d president saying european unfair to republicans -- the president saying you are being unfair to republicans, the democrats concerned about privacy. the third company we are looking at his new media and again at. -- is new-media and gannett. going us to talk about it is brooke sutherland. the twoit is combining biggest newspapers in america.

gannett owns "usa today" and a variety of local dailies. bunchdia brings another of local dailies. that is their path to survival. it is interesting the synergy number here. to make all of this work and keep paying a dividend, they think they can cut $300 million of cost, which means a lot of jobs and facilities. i think it is worth pointing out that when gannett tried to buy tribune, they were starting with a $50 million annual synergy number. what does that mean in terms of the job cuts? companies, gannett has been the tory us for their cost-cutting -- has been notorious for their cost-cutting. i am curious how much more cost they can take out of it. brooke: they have been cutting pretty significantly over the past couple of years. gannett had a play for

buy more of a vicious cost cutter, but the difference was alton global didn't have the financing, whereas new-media is getting a loan to make all of this possible. alix: so where are the cuts? is it also locations? where does it come from? brooke: it is a bit of a real estate play, really. cuts have to come in the administered of costs and consolidating sales and operations, things like that, but the question is, do they cut a newsroom as well? brooke: when you're talking about a 300 million dollar number, you probably got to be looking at some of that. we've already seen so many local newspapers closing down. does this mean some of these papers are going to cease to exist? it is not just a matter of job cuts. david: if there's good news here, it's that they are two

newspaper companies. so they believe in the news. brooke: and they are backed by private equity. fortress investment is the primary backer behind new-media. they've been in this business for a while. it is increasingly becoming sort of a private equity game at the end of the day. you have fortress owning this combined entity. the one that is still out there is tribune. we will see what happens with them. they tried to merge with gannett. we will see what happens with that. i don't really know. alix: brooke sutherland, thank you very much. coming up, the tech heavy nasdaq taking a beating with the first half companies out with earnings. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. the equity markets holding on to their rally in the futures market. the question is whether it continues throughout the trading day.

a brutal day yesterday. in other asset classes is similar in the european bond market because you're buying. with yields down in germany one basis point, another low. in the u.s., selling on the long end. a redux of where we were 24 hours ago. still a wait and see of how the equity moves wind up shaking out. you have the nasdaq seeing its biggest drop of the year yesterday on trade ears and earnings. through the tech dominated results in the index. we want to break it down further with leigh drogan. as we can see from the chart, the selling for tech was happening before last thursday and friday. what did we learn about tech earnings and where we go from here? leigh: they were breaking down the high beta names. that was people getting itchy

about where the market was, overbought in general. when we look at tech earnings, big cap tax blew it out. particularly facebook and google , they put aside the worries about margin pressures associated with potential regulation and that's that everything else flying. then apple put up a good report and people got swirly about what was going on the trade war. havee enterprise side we liked the small and mid-cap enterprise names but it has been a mixed bank relative to high expectations and that set off that high beta pullback we have .een david: the small and medium tech names, to they survive a true trade war with china? leigh: they're good because most

of that revenue is domestic and we have seen the massive split in companies with over half of their revenue coming from domestic versus international. international down 11% in aggregate. the over 50% domestic of 4%. most of those enterprise names are domestic. the problem is if you start coming in to domestic main street companies, which putting tariffs on consumer names in the u.s. will start to do that, that will flow through to those enterprise names. alix: which brings us to where we will see earnings go. bloomberg intelligence had a great chart which shows how third-quarter estimates have rolled over, but you are starting it -- starting to see for the third quarter and the first quarter of 2020. are we too pessimistic about earnings? >> yes. we think earnings will continue to rise. firms have consistently beat the estimates that were laid out for them.

yes, earnings are slowing. it is hard to sustain the 20% year-over-year beat we saw in afternd 2018, especially a $1.5 trillion tax cut. dodo not expect that, but we expect that earnings will continue to climb. we will see a return to normal volatility. we have not seen volatility much in the 20 time dean -- in the 2019 market. we saw a little last week. we still think earnings will outperform bonds. bondses will outperform and earnings are an important component of that outperformance. alix: how you see the second -- david: how you see the second half, it is it one half or two paths? leigh: absolutely to paths. when it comes to the trade war, i do not see them parting ways

amicably until there is a resolution, one of the side saying uncle, which leads me to the downward revisions we are starting to see, specifically in consumer names, retail, that is where will get hurt. the consumer is holding this thing up. we will finish the quarter. unless retail comes in with strong numbers that surprise at a -1% year-over-year number, which does typically give us the earnings recession. in and of itself, does that matter? not really. but that downward revision really hit this things hard and that will shake people's confidence. the other thing is we are adding about 4% year in eps for buybacks. the really yes number, based on net income is -4% are -5%. it is hard to get excited about a market.

multiples are reasonable, but it is hard to get excited if you're seeing downward revisions starting to pick up to the downside more than they normally would over about a month. that is what scares us. alix: to pivot off what lee was saying in terms of the consumers , if we stop to get the consumer names, one of the underpinnings of why the economy is holding up his the consumer. what are you going to be looking for an next couple of weeks? nela: one thing i find concerning come even though the overall positive nature of the bull market that is continuing is the timing of the tariffs, the new round, if they take effect on september 1. that is right at the cost of the holiday season. that is when retailers are poised to make 20% of their sales and revenues. that will impact the consumer in a way we have not seen thus far. we do see that as a risk to our

overall outlet. that is weighed against a positive fed, rock-bottom interest rates, high savings rates for consumers and a strong jobs market. we are basically in this castle between the future -- in this tussle between the future and the current. we think earnings are sustained at a level we can extend the bull market. this bull market is still walking likable, not a bear in our view. is the correlation between the interest rate and the success of retail? leigh: right now inflation is superlow, which is great. it is lower than we perceive it to be because of the technological advantage that a lot of people have with these new platforms, a lot of their expenditures are coming from getting free things. it is a great time to be a consumer.

retail has done very well because of that. tople have extra money spend, although the savings rate has gone up considerably, which is also interesting in this environment. the other thing i want to point out, which makes it interesting is the post earnings factor model are having a banner quarter. it is interesting, what does this mean for the markets? it means the idiosyncratic nature of the beat or miss relative to expectations is mattering more and the reason that takes place is because people believe that beat or miss mean something for the future of the company's earnings growth or decline in that direction. meeting whatever is happening that -- meaning whatever is happening this corner, people believe it will happen more in future quarters. alix: the difference between high and low estimates in the s&p is a huge gap.

does that explain why people cannot get their mind around it? leigh: that is part of it. it is a wider dispersion of potential outcomes and if a company surprises, it is moving more people's opinions in a certain direction and that is why you're getting that drift. drogen, thank you so much for being with us. richardson will be staying with us. let's find out what is going on outside the business world with jan hurtado. viviana: china is responding to a major escalation in the trade war by the u.s.. the trump administration formerly labeling china a currency manipulator. the move is seen as largely symbolic, but today beijing taking steps to keep the yuan from strongly -- from falling further. it plans to sell yuan denominated bonds in hong kong. it has been six weeks since donald trump took his historic first step into north korea.

talks with kim jong-un appear on the verge of collapse. north korea is threatening to take a new road in negotiations if washington does not compromise. the warning coming less than an hour after north korea conducted its four short range missile test in two weeks. the latest mass shootings have some republicans worried about next year's election. they are concerned the party's opposition to new gun limits is making the party toxic to suburban women and college graduates. one republican leader said the party needs to distance itself from the nra, otherwise their extended for -- they are headed for extinction in the suburbs. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. up, it is the tale of two economies. u.s. growth staying strong. the housing market showing signs of showing down. cheryl taylor will join us,

next. bloomberg users come interact with us at gtv . browse the charts and the features. even save some of the charge for future reference. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up later today on "balance of power," anthony scaramucci, former white house communications director. here is your bloomberg business flash. mastercard is making its biggest acquisition ever. it has agreed to buy a payments unit owned by a denmark-based company promised $3.2 billion.

mastercard is getting a electronic billing platform and clearing instant payment services. that will help extend the push and of faster payment. sell a is in talks to 10% share of universal music to tencent. tencent as a one-year option to double that stake at the same price. vivendi plans to find other partners to buy more minority stakes. a google employee writing a memo climate and company discriminates against pregnant women and the memo has gone viral. more than 10,000 employees at google have seen it. manager mayays her discriminatory remarks about pregnant women. when she reported it, she faced months of retaliation. vice it prohibits retaliation. i'm viviana hurtado and that is your bloomberg business flash.

alix: it was quite an article. david: i do not read it all, but i read enough. alix: this is not the first time something like this or discriminatory of backs have come in line for google. david: they had a sit down or walk out to protest that they had all those males leave. boss was a woman, not a man. there was a second incident that made it worse, it was not a male, it was a woman. alix: there was something about i am looking forward to google doing nothing about it. a little snarky. david: time for follow the lead. today, we take a look at the state of the housing industry. joining us from scottsdale, , thena is sheryl palmer

ceo of one of largest homebuilders in america. nela richardson is still with us. we have been talking about what is going on in the markets and a lot has not been pretty. is that affecting your business or will it affect your business in any way, shape, or form? sheryl: good morning. we just reported are second-quarter earnings last week and i think you saw from us as well as many of my peers that we had a very strong second-quarter. the first quarter started off a little bumpy, and then thing settled and we have seen improvement each month. we saw growth each month in the first quarter, but the second quarter we saw consistent and our sales were up 20% year-over-year. our closings were up 30%. the consumer that is coming into the sales office is feeling quite good.

with the recent movement in interest rates, it is creating more excitement on the sales floor. alix: two different areas. on the one hand, i have my mother-in-law talking about her 401(k) and freaking out, but on the other side you have mortgage rates go lower. how quickly does this on the buyer side and on the risk-averse size? nela: the housing market is stable but is underperforming. not getting the grades it should be given the otherwise positive economic backdrop, meeting strong labor markets and low interest rates. we are not seeing first-time buyers pick up the mantle of homeownership the way they would have done under previous conditions, to me what we are seeing is a mismatch in demand, starting at the affordable level. affordability has eroded over ,he course of the last year

even as interest rates have gone down a full percentage point from last year. that is because we are still not seeing inventory for the starter homes and that is where a lot of first-time buyers will want to be. david: looking at a chart that illustrates that. homes havepensive been going up in the most affordable has been going down. there are various anecdotal reports about first-time homeowners going out. they have the money, they have a ,ob, they are getting raises but what is happening with lower third in terms of affordability. sheryl: i'm not able to see the chart you're looking at but i think we are seeing strength across all consumer groups. a couple of considerations of why we are seeing strengthen certain consumer groups. for us, about 90% of our are either the first-time buyer or first time move up or the 55 plus buyer, we call it the barbell effect.

we are seeing strength across we are seeing strength across each of those consumers. if you think about where we were in the fourth quarter last year, we saw a phenomenon where even though people could afford to buy and move, we saw mover rate slow down because there was a psychological impact of rates getting over 5%. today we are quoting rates in the high three and there are number of things that are happening. the most affordable consumer the needs to find a more affordable -- one is availability. we have not had the supply that is needed. uphink today that opens it and it also opens it up for the consumer that wants to sell their house because now with interest rates where they are from it will be easier for them to sell their house. i think it is an exciting time in the sector today, and from an

infrastructure standpoint we definitely do here have a challenge with the amount of inventory. the greatest driver for the reduction of that first-time buyer. that, if welow on are looking at the consumer as the linchpin to the u.s. economy , where do you expect to watch for cracks? sheryl: when you look at what happened this week with tariffs, this is almost a replay of what we have seen happen twice over the last six months. we saw violent reaction in the market, and then the resiliency of the consumer came back quickly, and certainly interest rates assisted that. something on a more global level. i'm not the political person in to know exactly when and how long it takes is to get through this china tariff issue,

but i believe over time we will see that solved because i think what we are doing with is a confidence issue. nela, what does the housing situation tell us about the economy more broadly? when we talk about the economy, people's latest doing quite well, driven by employment and wages. the one asterisk people tend to put in is housing. housing is soft, people say. is that true, and why? it has been subtracting from gdp growth for the last several quarters. what is important to remember historically is housing has led the economy into and out of recessions. this housing market is not playing the same role it has done historically. it is not the leader in terms of the economic cap it has been in the past. right now on this market, all roads lead back to the fed. with lowerdealing

dry powder in terms of interest rate policy because federal funds rate are already so low. his primary mechanism of ample mine policy -- of amplifying policy is the housing market. we have not seen the housing market pickup in important ways and that is homebuilding still underperforming historical averages. that mechanism is not performing as well. housing is not playing the same role it has beenwe have not seeg market pickup in important econ. and i would argue housing is not a great barometer of theit is stable, ah will eventuallye pick up that homeownership demographics show millennialsmantle, but rigt playing on the field. it is still sitting on the bench. alix: what takes its place? nela: we have seen a lot of wealth created through the stock market. before the last week, we saw increases by increases by 20%.

that is creating wealth. we seen wages start to grow. that is creating wealth. nothing can take the place of housing. is the primary mechanism for the middle class to build wealth over time. gains in thenly economy, but equalized gains in the economy, you have to get a housing market that works at the end.nd and the high david: let's come back to the overall situation in the market. to what extent do you see a wealth affected your business? do you get worried when the stock market starts to go down the people be more reluctant to buy a new house? look at wheree interest rates are, i think that is a nice driver of homeownership. i do believe that the first-time just is not buying today as much as a result of lifestages and life experience. the millennials represent about one third of our business, and half of them are buying their second home. that is coming along with marriage and children.

that continues to feed the cycle. i'm very bullish. i do wish we had more supply and we were able to build quicker because there is a demand that is not being met today. think that gives me a lot of think that gives me a lot of bullishness about the longevity of this cycle. alix: sheryl palmer of taylor morrison homes, thank you for much. nela richardson of edward jones, great to see you as well. coming up, what history will tell us about the sustainability of the rebound. if you're heading out of the car, tune in to bloomberg radio at sirius xm channel 119 and on the bloomberg business app. this is bloomberg. ♪

alix: here is what i am watching. futures bouncing back but will it last? we have a great chart that shows what happened after the s&p has

fallen more than 5%. a week after is the orange bar, a month after is the white bar, a year later is the blue bar. basically the takeaway is you have that drop and you have some kind of bounce back. not necessarily dropping into a bear market. what is also interesting is that the bounce back after a year has gotten less and less in overtime , barely seeing a move in 2018. alix: that chart makes you wish it was 1997. alix: i would be in high school and not have bills. it was good times. up, krishna memani will be joining jonathan ferro. this is bloomberg. ♪ ♪

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jonathan: coming up, and uncomfortable calm gripping global markets following the biggest losses of 2019. china's central bank stepping in to support the yuan shortly after the treasury labels china a currency manipulator, contributing to the war of words. good morning. here's your tuesday morning price action. futures all over the place, a three percentage point range in today's session alone. , leavingound .9% behind the biggest loss of 2019 so far. in the treasury market, this is what yields look like. up to 1.75. in foreign exchange, the euro weaker against the dollar. euro-dollar down to 1.1181. let's begin with a big issue. a calm gripping global markets. >> this is becoming serious.