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Jeffrey Gundlach believes the U.S. stock market can’t diverge from global equity markets forever.

The bond investor noted the S&P 500 was strangely outperforming the rest of the world’s equity markets since the summer into this month.

“I said [before] … if the global stock [market] is going to take out the low and put in a new low, something bad must be happening. I don’t think the U.S. can hold in there,” he said Thursday on CNBC’s “Fast Money Halftime Report.” “Well what happened as rates broke to the upside … the global stock market ex-U.S. did take a new leg down and did go to a 12-month low. And it’s interesting the S&P 500 did what I said. … That is join the global stock market on the way down.”

Relative performance of S&P 500 (blue) versus Rest of World ex-U.S. (green) YTD

Source: FactSet

On Wednesday, the Dow Jones Industrial Average declined by more than 800 points and the S&P 500 fell by 3.3 percent as investors worried about the negative effects from the rising interest rate environment .

The sell-off came a day after the 10-year note yield traded above 3.25 percent hitting its highest level since 2011. This occurred about a week after Federal Reserve Chairman Jerome Powell said in an interview with PBS that the central bank is a “long way” from getting rates to neutral, which pointed to a possibly more aggressive path for rate hikes.

The iShares MSCI ACWI ex U.S. ETF, which tracks the performance of a rest of the world ex-U.S. equity index, is down 10 percent this year through Wednesday versus the S&P 500’s 4 percent gain.

Gundlach is founder and CEO of DoubleLine. He is known for his investment acumen in the fixed income markets. DoubleLine has assets under management of more than $120 billion, according to its website.

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Boeing heads to Paris Air Show hobbled as 737 Max crisis clears way for Airbus

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A Boeing 737 MAX 8 airplane

Stephen Brashear | Getty Images

Boeing is heading to the world’s largest air show in crisis, giving its rival Airbus an opportunity to steal the show.

Boeing’s best-selling plane, the 737 Max, has been grounded since mid-March after two crashes of the aircraft within five months killed a total of 346 people. Regulators have not said when they expect to allow the jets to fly again, sending major airlines scrambling to cancel flights during the peak summer travel season as the grounding drags on longer than expected.

Boeing is planning to brief suppliers and airline customers about the latest fixes for the 737 Max at the Paris Air Show, which starts Monday. Investigators have implicated the planes’ stall-prevention system in the two crashes, one in Indonesia in October followed by another in Ethiopia in March. Boeing has prepared a fix for that system but regulators haven’t signed off on it yet.

“The air show is an important event for us to meet with customers, partners and suppliers and engage with them on our path forward on the 737 Max and reinforce our unrelenting commitment to safety,” Boeing said in a statement.

An opening for Airbus

With its focus on restoring trust — and getting its cash cow back in the air — Boeing isn’t expected to announce any orders of the plane. The Paris Air Show was also supposed to set the stage for Boeing to reveal that it will offer a highly anticipated new aircraft, but analysts say the company has likely shelved those plans against the backdrop of safety concerns about the 737 Max and questions about its certification.

“If I were Boeing I would not want to launch an aircraft into that kind of environment,” said Samuel Engel, who heads the aviation group at consulting firm ICF. “I would not want to taint my new baby with that doubt.”

Boeing competitor Airbus on Friday hinted in a media briefing that it could soon launch the Airbus A321XLR — an extended-range version of its new narrowbody A321LR plane. Analysts expect the announcement during the show. The single-aisle aircraft would provide range without the expense of operating a widebody plane and could potentially win over customers long before Boeing’s new twin-aisle plane is officially announced. Some existing A321 customers, like JetBlue Airways, which in April announced its first service to Europe, could opt to convert some of its orders for the longer range model.

It was after the Paris Air Show in June 2011 that American Airlines announced a large order for both Boeing planes and for its first Airbus jets it more than 20 years. The Airbus order included 260 planes, half of them for the neo, or new-engine option that provided more fuel efficiency. Two months later, Boeing unveiled the 737 Max, its new fuel-saving update to the line of planes that had been flying since the 1960s.

The new double-aisle plane Boeing is mulling, which it’s informally calling the NMA for new mid-market airplane, is bigger than the 737 Max but smaller than the Boeing 787. Boeing expects it could start flying by the middle of the next decade, but Airbus’ A321XLR would likely make it to market sooner and could steal some would-be Boeing customers.

“I’d say the broad timeline has not changed, but it’s very clear to us that our top priority right now is getting the Max back up and flying safely, and NMA is second to that,” Boeing’s CEO Dennis Muilenburg told investors at a conference on May 29 in New York.

‘Keep their mouth shut’

Following the crashes, Boeing suspended deliveries of the planes and cut the production rate by about a fifth, from 52 to 42 a month. As expected, Boeing this week reported a decline in May orders compared with the same period last year.

“I wouldn’t want to be Boeing at the Paris Air Show,” said Robert Mann, an airline consultant who previously worked at TWA and American. “That has to be a really humbling. They just have to keep their mouth shut and serve champagne.”

The new Airbus A321XLR fits into the manufacturer’s line of A320 planes, the workhorse narrowbody aircraft that competes with Boeing’s 737s. The extended-range version would be a “niche” product and won’t likely bring in the blockbuster orders that the shorter-range versions have, Morgan Stanley said in a note on Friday.

Orders for both plane makers have been weak lately, although some analysts expect announcements of high-value widebody orders coming for either or both manufacturers during the trade show. Boeing is developing

“You put on a brave face with a couple of twin-aisle orders,” said Richard Aboulafia, aviation analyst at Teal Group, regarding Boeing’s presence at the air show.

But aside from the 737 Max crisis issues, many airlines have already ordered narrowbody planes to replace aging aircraft.

“That’s just where we are in the cycle,” said ICF’s Engel.

Boeing has a backlog of 5,546 aircraft, more than 4,400 of them for 737s. Airbus has a backlog of 7,207 planes, close to 5,800 for planes in the A320 line.

Despite the strong order books, challenges like higher labor costs, lower profits and trade tensions are emerging for airlines and their suppliers, the International Air Transport Association warned last month when it slashed its forecast of global airline profits this year by more than 21% to $28 billion.

“Airlines will still turn a profit this year, but there is no easy money to be made,” Alexandre de Juniac, IATA’s CEO and director general said last month.

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China denies Philippines’ ‘hit and run’ allegation in South China Sea

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A People’s Liberation Army Navy fleet  — including the aircraft carrier Liaoning, submarines, vessels and fighter jets —takes part in a review in the South China Sea on Apr. 12, 2018.

Visual China Group | Getty Images

China has rejected Philippine allegations that a Chinese fishing vessel abandoned 22 Filipinos after it sank their boat in the South China Sea, as pressure builds on President Rodrigo Duterte to take a tougher line.

China’s embassy in Manila said the crew had sought to rescue the Filipino fishermen but fled after being “suddenly besieged by seven or eight Filipino fishing boats”.

“There was no such thing as (a) ‘hit-and-run’,” it said in a statement late on Friday, adding it would handle the issue in a “serious and responsible manner.”

The sinking took place on Sunday near the Reed Bank, the site of untapped gas deposits that an international arbitration court in 2016 ruled the Philippines had sovereign rights to exploit. Beijing disputes that.

The issue could complicate what are determined efforts by Duterte to build a strong relationship with China, despite deep mistrust among his U.S.-allied defense apparatus, which remains wary about China’s maritime militarization and what it sees as bullying and denial of Manila’s access to its own offshore oil and gas reserves.

Duterte has made no mention of Sunday’s incident during any of the lengthy and unscripted speeches he has since given. His defense minister, navy chief and spokesman have publicly denounced the Chinese crew and his foreign minister said he had lodged a protest with Beijing.

Presidential spokesman, Salvador Panelo, did not respond to a request for comment on China’s version of events.

Opposition Senator Risa Hontiveros on Saturday called for bilateral ties to be downgraded and said China’s denial was “preposterous” and the story made no sense.

She said Duterte had plenty to say about mundane issues, but should speak up when it came to sovereignty.

“Nothing is more reassuring to the public than to see and hear their own president, the supposed architect of the country’s foreign policy, telling them that he is on top of the situation,” Hontiveros said.

Sunday’s incident is the latest confrontation involving China’s vast fishing fleet, which experts say has been co-opted to serve as Beijing’s militia and augment its constant coastguard presence in waters also claimed by MalaysiaTaiwan, Vietnam, the Philippines and Brunei.

Philippines Supreme Court judge Antonio Carpio, a staunch critic of China’s maritime claims and conduct, said that among its massive fishing contingent were boats with reinforced steel hulls “purposely for ramming fishing vessels of other coastal states.”

“The Filipino people must send a strong signal to China that any new ‘grey zone’ offensive of ramming Filipino fishing vessels … will mean a break of diplomatic ties,” Carpio said in a statement late Friday.

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Hong Kong government reportedly will ‘suspend’ China extradition bill

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Protesters occupy a main road and walkways during a rally against a proposed extradition law in Hong Kong on June 12, 2019.

Paul Yeung | Bloomberg | Getty Images

The Hong Kong government is set to suspend a contentious proposal to allow extraditions to mainland China after mass protests and street clashes shook the Asian financial hub in the past week, local media reported on Saturday.

The proposed bill, calling for Hong Kong to make legal amendments to allow accused criminals to be extradited to jurisdictions with which it has no such arrangement — including China — has led to widespread opposition in the semi-autonomous Chinese territory of 7.4 million people.

Public service broadcaster RTHK cited an unidentified source as saying the the government has decided to “suspend” the plan. The South China Morning Post carried a similar report that a pause was likely to be decided as early as Saturday.

RTHK said that Hong Kong Chief Executive Carrie Lam, the territory’s top official, would meet Saturday with pro-government legislators before holding a press briefing.

Shirley Lee, a government spokesperson, could not confirm the reports when contacted by CNBC for comment.

Hundreds of thousands of people marched in protest on June 9 and another mass rally has been planned for Sunday.

On Wednesday police fired tear gas and rubber bullets at protesters who gathered near the local legislature where lawmakers were supposed to debate the plan with scores suffering injuries.

Lam, the territory’s top official, has been defiant, vowing that the plan must proceed and condemning Wednesday’s demonstrations.

Hong Kong has for nearly 22 years been a semi-autonomous region of the People’s Republic of China with its own legal system and currency — legacies of its time as a British colony.

While the territory was guaranteed a high degree of control over its own affairs for at least 50 years under a “one country, two systems arrangement” after Britain ceded sovereignty to China on July 1, 1997, local unease over increasing mainland influence has steadily grown.

Foreign business groups and governments have come out against the plan amid concerns that any erosion to Hong Kong’s legal system could make it a less attractive place for banks and companies to operate.

It is not clear whether a delay in the plan would satisfy opponents, who have demanded it be scrapped and that Lam resign.

— CNBC’s Vivian Kam contributed to this report.

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