>> the reduction in our policy rate could be on the table as soon as next meeting. we want to see more and gain confidence. >> this is a lot of good news. a chairman basically saying we have achieved the soft landing. >> i think they think they will go in september. >> we will see what happens into september. we are expecting 25 basis points in september. >> it's a good possibility we see a unanimous vote. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: nothing ever happens

in august right? u.s. market surprise for policy perfection, good luck with that. what a great start. good morning, good morning for our audience worldwide. let's check out the scores as we kick off the month of august. we look something like this print equity futures positive by one third of 1% on the s&p 500. the nasdaq avoiding the worst month of the year after posting a 3% gain yesterday. the russell delivering the best month of 2024. the russell index, of the small caps closing out july with a -- was close to 10% plus. as for this morning, the day ahead, the calendar looks like this. a bank of england rate decision 8:30 eastern time. jobless claims. later this afternoon's we get earnings for apple and results from amazon. we need to reset and take a step back, a deep breath and talk

about the federal reserve news conference yesterday. a baby step toward september. lisa: changing the balance of risks to a more balanced set that includes what we were seeing in the labor market seems to key off the market's conviction they will go in september. this market is pricing in more than one rate cut in september which raises the question about when the market is ahead of itself or whether they are seeing something the fed is not. >> hsbc cuts are on the table, we are setting up september, bank of america we are not quite there yet but morgan stanley says cuts are coming. it's the difference between now and september. we have payrolls tomorrow morning and then cpi on august 14. september 6 we have another payroll report. then about a week later you get another federal reserve decision. they are the next four big data points for the federal reserve. lisa: jay powell seems to have been listening to us. not us, but a lot of the

wonderful commentary he welcomed getting from all the analysts. basically the idea of the difference between data dependency and data point dependency. it seems like the totality of data seems to be suggesting they are going to go in september and it will take a pretty significant aberration to move away from that. that got people's attention. what is less clear is the idea of proactive rate cuts going ahead of weakness being visible in labor markets. that i did not get a clear answer on. jonathan: a subtle nod to the labor market cracked we've seen in the statement but it was small and subtle. in the news conference he didn't put much weight on it at all. what you think of that acknowledging the sample a little bit moving on and shrugging his shoulders saying this is different. it's interesting the way he characterizes the inflation shock of the last couple of years. saying it was transitory without saying it was transitory. which makes us think they are --

they don't think we're in a new regime. >> we've seen that based on what their neutral rate has been and the projections in their statement of economic projections. it hasn't been as high as the market expects it to be. what i think is notable is how much he was trying to reflect consensus and how it really was interesting he gave a nod to the idea they discussed potentially lowering rates at yesterday's meeting. there clearly is a divide on the consensus. the wrangling of cats. heading into september. >> it was echoed by evercore. we mentioned this in the program yesterday. after the news conference, saying we in practice think it's not very data-dependent at all. we view the cautious evil lucian of the statement as intended to carry hawks along and avoid dissent as was intended and indeed the case today. expect a clear signal a month from now at jackson hole. jackson hole may be the stage is set to take that step towards

september. lisa: we were talking about that yesterday with rich saying it's probably knocking to be that different. best a perfect time to set up a narrative of what the threshold is for them to cut rates and what that path could look like. to me there is a distinction you been talking about for several months about cutting rates in a good circumstance and in a bad circumstance. last month we saw a massive outperformance in the russell 2000 which would be coherent with rate cuts for the right reason. what i've read in all the notes between now and september is is it's good to be for the right reason or the wrong reason and that i think will be what remains to be seen. jonathan: jobless claims later this morning and payrolls on friday. welcome to the program. equity futures with a little bit of a lift up by one third of 1%. i have no idea where july went. yields are higher by couple basis points on the 10-year 4.05 64%. interesting how much 10 year yields cap lower into the close

following that presser with chairman powell. lisa: especially a time when they see -- it's a process of cuts from there. 10 year yields on the month of july were lower by 37 basis points. two year yields were lower by 50 basis points. that's a traumatic shift lower in expectation which is part of the reason the russell 2000 is up more than 10%. >> coming up this hour, the lineup for you. as expected -- expectations for fed cut expectations drive higher. meda's upbeat earnings report and john lieber on rising tensions in the middle east. flipping the calendar to august with the stage set for september. jay powell opening the door to a rate cut next month said -- sending the s&p 500 to its best day since february grade caffrey saying in a soft landing there is more growth to go around for more companies and overpaying for is hard to justify.

the realization that there could be more growth to go around also suggests the stocks that have been avoided for fear of a recession can offer more opportunity to see positive eps revisions. jack, good morning. are you validating the move we see in small caps and elsewhere outside of big tech? jack: i think we are validating the move we knew from the market there was just a magnificent seven to the s&p 500 to increasingly small-cap stocks. so investors are leaning into more risk if you will. because i think as i tried eluding to, when you're less worried about being in a recession you don't need to just worry about businesses gardens the economic environment. that leads to more valuation sensitive is directly wind up having more things to start choosing from and you do have to get the right business at the right price rather than just something you have confidence can actually deliver earnings growth. jonathan: what is the reason for

that? jack: it does feel to some extent like the fed has managed to stick the landing. i've been here several times over the course of the last year and we started talking in january there was a sense we could see five or six rate cuts. and there was going to be some massive decline in economic activity that would prompt that dramatic monetary policy shift. now it feels like we are getting increasing confidence and we will get to 2% inflation which should be a safer environment. it's not scary to the consumer. it doesn't perhaps trigger changes in consumption patterns and you end up having some growth. this might be able to maintain some stability. so you have a fed that shifts from being data dependent to i think looking at you've done it. it's hard for them to declare victory because they are forecasting record has been on checkered by success in the past but one where think things are

lining up to be more positive. >> the investing framework. not just into the idea of leaning into risk, the rest of the s&p 500 small caps but valuation sensitive are you basically saying right now big tech still looks overpriced and that's going to continue to underperform as the rest of the universe starts to look more appealing? jack: when you have seven or eight stocks effectively being 25% of the market those stocks can go sideways and you don't have to sell very much of them to see some really big gains in other parts of other individual stocks. you look yesterday you wind up seeing a whole host of different businesses all between 9:30 -- independent power producers online data companies. nai semiconductor names. you didn't have to see a lot of selling in some of those mega cap names in order to see whole

host of other sectors actually participate in the rally over the past several weeks. rally under the curve if you will. lisa: right now it sounds like you think this is really sort of the goldilocks everyone is talking about. that it is rate cuts for the right reason. jack: yes. lisa: what would make you think it was something else? jack: talk to me at 831 when we see the initial claims are looking like. do we actually start seeing some real shift and re-acceleration but perhaps -- i was trained 35 years ago in monetary policy long and variable lags. i the good should probably apply the same metric we thing about employment in terms of employment results operate with long and variable lags. we are in an election season. we have the possibility of very real policy shifts next year.

and if one of those involves large portions of a population of the united states what is that mean for consumption? what is it mean for laborforce availability. how much do you pay someone to in a hotel or hospital. if the typical workforce that might've done that job in the past is no longer available to you. so i do think we have some things that i can sit there today and say the economic data since i've come to something more stable and goldilocks like. but at the same time i do think we have real possibilities of policy shift moving forward and companies tend to sit on their hands when faced with uncertainty around with their tax policy looks like and their cost structure looks like. 200 years ago we talked about tariffs. now we are talking about them again. i know those are called in today's parlance. those are value added taxes or consumption taxes. it's interesting we might have some fairly large policy shifts.

i'm not sure how to handicap that. jonathan: that's what's difficult. these are incredibly complex issues that are potentially on the horizon but with the emphasis on potentially. what do you do in between? jack: do not overpay. it comes back to when you are faced with things hard to quantify or qualify it comes back to this idea of i want to be more valuation sensitive perhaps than i did in the past because the frame of reference i have to worry about is not what does the initial claim look like on thursday it's will that be a relevant statistic in 6, 9 or 12 months. and we saw evidence of that in 2018 with tax policy it was supposed to drive an investment boom and it started a trade war which halted investment. when we come back to this idea of their difficult things we have to incorporate into markets , some of that can be done

probabilistically, some of it is i can't put a 5% chance or a 15% chance, what i can say is i would rather own stocks that are cheaper with lower expectations and have a better chance of beating low expectations and saying i want to look on companies with high certainty of success have to pay an exceptionally high price for that seeming certainty. jonathan: 8:30 is when we get jobless claims later this morning. tomorrow we get a payrolls report as well. coming into summer you made the point maybe this ai theme is overextended. arm, the conversation around the table. that had some difficulty with the exception of the rally that nvidia rap -- delivered yesterday. the lie was a tough month for some of those names. how do we reset things now and how you view that story at the moment? jack: i think we've seen those companies which are committed to ai are still spending in support of ai and we heard that from

microsoft two days ago, from meda last night. i do think where you're going to see more focused today going forward is starting to see proof statements for how ai is driving revenues and driving profit. right now you are seeing consultants talk about ai and making money off of ai but we're talking i need more proof of concept or delivery of concept and i think it's that second-order which is supposed to be the massive unlock and we are still waiting for show me that money, not the money which goes into the hardware that makes it all possible. show me you can do it. >> jack caffrey, good to see you. equity futures just about positive as we kick off august with positive by one third of 1%. with get an update on stories elsewhere. >> former president trump question vice president, -- vice president kamala harris racial

identity at the national association of black journalists. >> i've known her a long time indirectly. and she was always of indian heritage, she was only promoting indian heritage but i did not know she was black until a number of years ago when she happened to turn black and now she wants to be known as black. i don't know, is she indian or is she black. >> harris condemned the comments as divisive and disrespectful per the new york times is reporting iran supreme leader ordered a retaliatory attack on israel. the warning comes after hamas said israel assassinated its political leader in an airstrike in tehran. israel confirms that until hamas second in command in a july 13 airstrike in gaza. the u.s. is advising citizens to avoid traveling to northern israel and lebanon. united and delta suspended flights in the new york city area and tel aviv. shares of socgen are trading lower in paris today. the bank reported 24% surge

trading revenue in the quarter but its retail unit continues to drag on performance. socgen cut it's for your guidance by more than $320 million for that unit. shares are off by more than 7%. so far this year making it one of the worst performing banks. that's your brief. jonathan: more from dani burger in 30 minutes time. barclays that stock is up more than 50% year-to-date and the others were pretty good overnight. we catch up with the ceo with the data this morning in new york city at about 7:30 eastern time. up next it's all about ai. >> there are jokes about the text ceos get on these earnings calls and talk about ai's because it's actually super exciting it is going to change all these different things over multiple time horizons. jonathan: basically all they do all the time for good reason. live from new york city this morning, good morning. ♪

jonathan: equity futures on the s&p 500 firm or by one third of 1% in the bond market. after five consecutive days of lower yields on the 10 year we bounce by two basis points. 4.05 this morning. >> everybody gamed out a fed with a new paradigm and that was key about jp morgan picking this up saying the commentary the right now it looks like there is a balance of risk between employment and inflation. the removal of the inflation concern as a preeminent one sounded a huge signal to wall street and they heard it loud and clear. jonathan: this nvidia rally. the biggest one-day move, the biggest one-day addition and market cap in the history of u.s. markets.

320 9 billion u.s. dollars added to nvidia yesterday. lisa: it goes to the point yesterday witches and earning signaled this capex investment cycle and every earnings report we've heard whether it's google or from microsoft is massive investment. at this point nvidia is still the winner of a cycle that really is at its beginning stages in terms of applications. jonathan: the stock is up in early trading. it's all about ai. >> there are all the jokes about how the tech ceos get on these earnings calls to talk about ai the whole time. is because it's super exciting over multiple time horizons. at this point i would rather risk building capacity before it's needed rather than too late as we scale these investments we of course remain committed to operational efficiency across the company. jonathan: meda shares rising in the premarket the company reporting better than expected the second quarter offering

evidence the tech giants pushing to ai is paying off. scott of wes bush school moving his price saying we think spending levels are justified giving the benefit ai is driving to the business and the optionality for services long-term. great to catch up. that quote from mark zuckerberg. you put together with the quote we got from the ceo earlier when sundar said it's better to overinvest in this than risk under investing this. mark zuckerberg said at this point i would rather risk building capacity before it's needed rather than too late. what is the urgency here, can you speak to that? what are the ceos talking about? scott: i think they recognize the opportunity in ai is more significant than the opportunity that existed in the internet 25 years ago.

so there is a small number of companies that have the capacity to be able to trying get ahead of this. and to build capabilities in front of it as the monetization comes down the road. that's the consistency you hear from each one of the ceos from alphabet, meta-, you hear that from microsoft and amazon as well. lisa: i wonder about whether this is an application difference for meta-or whether it's a messaging difference for google. in terms of how investors received their spending. it was interesting to me but mark zuckerberg talked a lot about how they are using artificial intelligence in creating more targeted advertising. was this a lesson learned from sundar pichai and the others is saying you have to show more about how it's being monetized? scott: it could just be the timing of the day. sometimes markets move in weird

ways independence of what happening. although it's quarter is quite good with the exception of some weakness. otherwise it was brought strengthen the business and with meta-, there was some company specific issues from last quarter because zuckerberg did say the company was going to increase ai spending without the need to define monetization. when you got to this quarter you had these concerns that were building that it been broadly disseminated now around the ability to drive returns, not to spend money on ai. then you have their specific dynamic with that company having done just that one quarter ago. they beat revenue estimates, beat operating income, got into operating expenses for this year being constant and then raised the low-end of its capex guidance while guiding into a harder. for revenue in the third quarter that has a buy-in of 20% so they kind of checked every box and then zuckerberg on the call to start mapping out some of the

areas where ai starts to impact the business even though it's a duration in nature, you begin to build that visibility, investors get more comfortable. > when they reported they have 3.3 billion users it was up 7% i was thinking at what point will they run out of room to grow considering the population of the united states and beyond. looking forward to amazon apple reporting after the bell, what are you looking for in terms of cap acts, in terms of ai spend and what will be rewarded or punished? scott: capex will be up and likely higher than expectations. that's going to be a theme that really stays around for some time. has been an investor what you want to see his health in the core businesses and this mapping of how each individual company is going to address the ai opportunity. in the case of amazon what you will see is strength in the

retail business, strengthen the advertising business and improvement in aws with increased spending. how that is received my expectation is will be positively received because amazon is finally clicking on all cylinders after transition post-pandemic. jonathan: operational efficiency was a phrase used by mark zuckerberg at a time with all this money on investment. can you speak to how much wiggle room they have on cost? how efficient and disciplined that company is. scott: they cut a lot in that post-pandemic year of 2022 everyone became more efficient. on the digestion of the building from the pandemic. i think meta has more to cut. ai itself brings the ability to manage costs more efficient because there benefits for software developers. the ability to be able to just

provide budget and business objective as an advertiser and meta can do the work to provide the advertising one needs at a level of efficiency from and adds sales and customer standpoint the advertisers themselves and their integration forces to provide lower cost across the industry. i think meta will be a significant beneficiary of that. >> good to catch up. scott on the latest with meta-. that stock is up in the market by 7%. we will speak to john of eurasia with tensions rising in the middle east. this is bloomberg. ♪

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jonathan: in the last couple of days this been a lot of bears on the program so let's hear from a bowl. the foundation of equity markets remains sound, strong payroll growth, easing inflation. fomc cuts on the horizon limit downside. as for the payrolls piece of this, we will see that friday morning, going into at the scores look like on the s&p 500 elevated by 4/10 of 1% on the nasdaq 100 up by one half of 1%. at one point after the close on tuesday the nasdaq was heading

towards its worst month of 2024 and the balance happened. it was quite a big bounce on the nasdaq 100. >> is it just nvidia the powers through everything with more than $3 billion of gains in one day. that's a record in terms of a single day gain for any stock that shows the resilience. we've had a lot of bears on this program but all the bears are still buying it's just that they are not necessarily seeing the rotation as significant as other people. jonathan: who's phrase was reluctant bull, a phrase i heard earlier this year. a lot of reluctant bulls after the rally we've seen particular small caps over the last month. let's turn the page and get to the bond market. the two-year piece of this and the 10 year piece of this. a five-day rally coming into thursday. over that the 10 year yield is down by 25 basis points including a double-digit move in the yesterday session. we began just north of 4%.

lisa talked about the performance in the month of july. a 50 basis point move lower at the front end of the curve on a two-year. it's a small batch to kick off august. let's call it for 28 but that's quite a rally at the front end of the curve through last month. lisa: a huge adjustment did not only when the federal reserve will start cutting rates but how deeply they may cut rates based on the fact we've seen a deterioration in the labor market. there was a nod to that by fed chair jay powell. i'm glad you are focusing today on the 10 year yield and the rally there. maybe it's because when we hear commentary from people it's a process, the beginning of a series of rate cuts. it's not the one and done raphael bostic hinted at a while back. jonathan: switching the board to get to dollar-yen. we just closed out july, a dollar-yen finished a month down, 7%, of the best month we

seen for the japanese yen since 2022. just north of 150 with a brief break and it and yesterday session into the close. the bank of japan doesn't get what it needs with more rate cuts from the federal reserve. lisa: do they have to go again themselves because they left on the table they would potentially cut rates again. they got the perfect kind of outcome. a federal reserve that was interpreted as being on the more dovish side in allowing the dollar to weaken. at the same time they surprised markets by hiking more rates and cutting their bond buying. do they have to move again or does this give legs to pushing out the carry trade that has been dominant? jonathan: back to that board on the currency pair, it's the pound against the u.s. dollar, the pound a little bit weaker going into this bank of england decision in about 27 minutes time. as for the euro, negative by one third of 1%. socgen called the decision to cut interest rates at the ecb

data independent. and yesterday so much was going on, cpi out of the euro zone. i wonder what they have in store for us over the next couple of months. >> 2.6% versus two point 5%. when does this become the main story again at a time when they are looking at weakness and germany flat on its back. it raises the question the reason the bank that will be so important to they join the ecb, to the join the bank of canada and beginning their rate cutting cycle even though inflation still appears to be sticky on the margins. the banking and seems less sticky than the euro region as a whole but this is really sort of the thanks when they're facing off with growth concerns that are more significant in the u.s.. jonathan: the bank of single and rate decision just under 30 minutes away. it's the third major central-bank decision in just two days after the boj hiked rates and they held steady. expect the bank of single to cut

rates by 25 basis points in about 26 minutes time. i remember the first hike, do you room of first hike? i was on vacation. i called it a year and government of the conversation you and i had. we said the important thing here wasn't the first move it's what happens next. how far will they have to go. i think the same applies to coming down in the other direction. the big move is not this one. it is what happens and how far did they take this. the question at the top of the program are we true to giving the new regime of higher inflation or not and how does governor bailey, as to how he thinks about it. he was pretty clear. he things the shock we've seen was transitory due to one-off factors and we are working our way through the other side and things might go back to normal. lisa: the bank of england is more directly exposed to potential political risk especially with the new government and fiscal policies that are trying to get the

fiscal backdrop into order. i say this because the liz truss moment was what caused the bank of england to have to respond and it raises the specter of do they have a fiscal policy that is strong enough but can provide pound strength even as they cut rates. that is sort of the interesting dichotomy at a time when they do export and import so many goods that a weaker currency makes their inflation problem much more difficult. how much is that path determined i fiscal policy much more than they would've otherwise liked. jonathan: this is haunting governments and it's become a self-imposed debt break on the likes of the united kingdom. i would ask this, how skeptical are you of that. do you think it's haunting them or is it a convenient reason to pull back in certain places and become a convenient political excuse to do the things they

want to do? lisa: doesn't matter i would say. people worry about it, it's the justification for people who like to worry a lot about everything. you matter because you are causing some sort of restraint. it's working. i'd flip it around and ask the question is the current currency market responding to the threat of a liz truss moment as being an effective guard from fiscal policy. and that maybe is going to be the real question especially looking at the pound and how it responds to a possible bank of england rate cut. >> closer and closer back to one: -- 130. i wonder if they apply to the united states in the next 12 months. we'll talk about that around this table for next year and well beyond. shares of matter arising. the company reporting better-than-expected second-quarter sales showing evidence its push into ai is

paying off. mag seven earnings continue later today. we are from apple and amazon after the bell. that line from mark zuckerberg at this point i would brass -- rather risk eldin capacity more than it was needed rather than too late. the risk of under investing is greater than the risk of over investing. and supporting some of that, where's his capital coming from. later on we will catch up and this will be a big thing, how much spending will we see. how much investment in this area. >> even if there is overinvestment in certain corners, overall as many of these executives have said it's better to be over invested than underinvested. with meta-day out -- over performed on the topline line numbers but also signaled use cases for ai that were profitable. i think that also is a differential. >> when you direct about how

that's happened make money right now. let's turn to the commodity market recruit rising for a second straight day as tensions mount in the middle east. iran has ordered a direct strike on israel for what it says was the assassination of a top palace leader in tehran. john of eurasia group joins us for more. i want to talk about leadership and the lack thereof. where is u.s. leadership in this story in the last couple of days? >> the u.s. has very little ability to influence israel here. you have domestic pressures that are pushing the israeli leadership to retaliate against hamas for the attacks of october 7. and what's happening is they are clearly more risk accepting then we would've thought a week ago. but the fact of the matter is nobody really wants regional war here. not iran, hezbollah, israel. you want to talk about u.s.

leadership, that's probably where u.s. leadership is protecting itself. is in their ability to credibly threaten they will back israel here in a war losing prospects for all sides. the u.s. is leading through its ability to deter iran from overreacting to these very provocative actions by israel and that ultimately is one of the factors keeping this regional conflict in check right now. lisa: the u.s. approach to has seen an unprecedented divide between republicans and democrats. a lot of democrats particular on the more progressive wing were pretty angry with joe biden over his policy towards israel. is your sense that kamala harris separated yourself from that and created her own platform? >> harris has been able to generate a lot of enthusiasm for the democratic base for a lot of different reasons. some of which are the fact she is not 81 years old and probably

has a path towards beating donald trump but some of that is based on policy and harris has been the face of the more skeptical part of the administration towards israel. it's not to say she's knocking to support israel. it's not, say that israel continued -- wouldn't continue to have strong support from the united states in the harris administration, but she has been the bridge to the progressive wing of the party on this issue and i think that's causing a lot of the progressives that were very unhappy with biden to simmer down for now. >> you said she is producing some sort of real counter case to donald trump and has a real potential to win. this is causing the trump trade whatever it was. or the validity behind it. is there a material shift in her odds versus donald trump of weeks and especially after

yesterday, his interview with the national association of black journalists. >> after the assassination attempt i think the consensus was pretty well baked in the trunk was on a path for an electoral college blowout. in this campaign and that consensus made sense to me. biden just could not prosecute the case against rump and what we've seen since the switch over from biden to harris is suddenly you have someone who can articulate all the things that democratic party doesn't like about trump and all of his vulnerabilities. she's using her record as a prosecutor to make a contrast with his criminal convictions. in trump himself is not doing any favors right now making kind of the types of missteps and controversial statements that were very common in 2016 which is of course a race that he won. trump is a bit savvier than we give credit for but the momentum is on harris's side and odds of

improved. jonathan: after the assassination attempt a lot was asked how the biden campaign was going to pivot and what they have to move away from a central message of their campaign. the only message of their campaign which was the characterize the former president as an existential threat to democracy. the intriguing thing is the campaign has shifted and pivoted. you don't hear much of that at all. in fact what harris is offering, i would like to see the sit down and do it interview answering some questions but with the campaign at the moment has offered is the opportunity to turn the page on the politics of vengeance and retribution and what i saw yesterday with those journalists and former president donald trump was a man seemingly struggling to do that. and the campaign afterwards going into a rally struggling to move on. struggling to change the message.

struggling to work out how to compete with kamala harris pride how will that change in the weeks and months to come. >> i hope harris comes on your show for an interview i would love to hear what she has to say. i think the trump campaign was clearly caught flat-footed by this shift. you've gone from saying trump -- the democrats have gone from saying trump is a threat to democracy to saying that he is weird and it's honestly a better message with -- which resonates with more voters. because they do say a lot of weird things including that lack journalist event yesterday. i don't know what the trump campaign does, i think they were really well prepared to take the fight to president biden and doughnut articulate case against kamala harris. paris has a record in public office, they will say she was a california progressive, and she will say she was incompetent vice president. they've trotted out these messages already and they are

just not landing right now because of the enthusiasm that harris is getting so the question, won the big questions going forward is can trump be the disciplined effective campaigner we've seen for six out of seven months this year and turn that case around and make the case against harris that she is to blame for these biden policies and is out of touch with the american people or do you see trump continue to flail and make these really wild remarks which i think we should point out are targeted at black audiences. he has a target in mind for what he's doing and it's an electoral target, is trying to discredit her with black voters. that's a strategy, it may work, it may not but i think trump is one of the big wildcards as he has been for a long time in this election. jonathan: appreciate your view is always on the latest development not just in the middle east but here domestically in the united states. your bloomberg breeze, let's

cross over to dani burger. >> the democratic national committee says vice president harris is the only person qualified for the democratic presidential ballot. harris secured 99% up dissipating delegates since entering the race less than two weeks ago. as for the timeline going forward, the virtual rollcall that makes her the official nominee will run from today until the fifth. she is expected to announce her running mate by the seventh. 12 days later they hold their convention in chicago. bloomberg has learned applied materials will not be receiving u.s. funding for a long inches rated research funding center. they rejected the application in chips act money saying the project did not qualify. applied materials said the california project would be the industry's biggest r&d facilities. shares of barclays failing to hold onto gains, a down after opening higher. it reported better-than-expected banking revenue in the second

quarter. the british lender announced a $963 million buyback in its guidance for the full year. coming up barclays cap christian with a live interview following those results preyed looking forward to that one. jonathan: we will catch up in about 30 minutes. we will catch up with jim of apollo. their earnings just now in about 30 minutes. we will speak to the berkeley ceo. and then after that, the cormac kansas city fed mr. george on the federal reserve decision of yesterday. on bloomberg surveillance up next on the program was the question. >> the question will be whether the totality with the evolving outlook and the balance of risks are consistent with rising confidence on inflation and maintaining subtle labor market. >> you are watching bloomberg tv. ♪

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jonathan: equities on the s&p 500 following through from the gains yesterday some positive follow-through up a 0.4%, yields are higher on 10 year bonds. after drifting lower. i say drift plunging of the previous five days down by 25 basis points, under surveillance this morning what's the question. >> whether the totality in the evolving outlook in the balance of risk are consistent with rising confidence and inflation and maintaining a solid labor market. if that test is met a reduction or policy rate could be on the table as soon as the next meeting in september. >> the u.s. jobs report tomorrow kicking off a quartet of key data points.

with two more cpi prints and other jobs report before the central bank meets once again. jonathan if ubs writes this, the fomc is unlikely to lower rates at every meeting pace at the start of the process unless the wrist to the labor market more severe than we currently assess or a sharp drop in inflation then we currently project. good to see you. >> good to be here. it's about the totality of the data, the evolving outlook and the balance of risks. haven't we met that test already? >> i think we have. the way chair powell, fielding those questions pretty deftly. the totality he said he wasn't at a hedge on any one data point so it does sound like they are there. barring some huge surprise. it sounds a gets basically a done deal. >> we've been talking about a potentially shallow path of rate cuts.

markets were basically saying just kidding. they are to cut quite a bit and cut quite a bit this year intentionally more than 125 basis point rate cut at the september meeting. do you think it's gone too far. >> i do. we are expecting to 25 basis point rate cuts, one in september and one in december. i have to say i was little surprised in the press conference with chair powell's general comfort with market pricing. he was asked and got a chance to push back. the market is pricing fair odds of a cut per meeting for the first four meetings. which is different than what we've seen in the sep or other communications. >> which raises this question of whether he represents the committee, whether he is an independent and much more dovish actor. do you get the sense that in jackson hole there is going to be a very different set of potential rate cuts late out in terms of the neutral rate and how quickly the labor market is weakening?

>> i do. i think we will get a specific message from chair powell that is going to play out what comes next. what comes after the september rate cut. i think that message is going to be very conditional. as the speaker and leader of this committee i think he's going to have to play out that future cuts, the cuts after september are highly dependent on the ongoing progress of inflation, the confidence that inflation had a sustainable a 2% and the balance against the risk to the labor market. >> we've heard things over the last few years like walking slowly through a dark room, navigating the stars under cloudy skies. all of that stuff. what i heard in the news conference is someone with some clarity that they believe the inflation shock of the last couple of years is transitory. he basically implied by talking about a one-off shock out of the pandemic. do we have a deeper conversation on the destination here. and when we talk about normalization.

what normal actually is based on those comments in the news conference. >> chair powell in his conversation with david rubenstein a few weeks ago did seem to indicate neutral rates were higher but that's not really what we've seen out of the committee. if you think about the press conference yesterday this was not a chair that seems to be saying higher for longer. not at all. but i think to your point the other thing is they do see extremely comfortable with the progress they've made on inflation. and when i look at the statement which all the voting members have to approve, they said inflation was somewhat elevated. they didn't have to down weight the current level of inflation. that's 2.6% on corporate two and a half that makes it sound like this is a committee that's comfortable with the process on inflation. >> one thing i did not hear was we did it, victory. mission accomplished.

was that sort of the implication though because it seems like pretty much every investor on the show says it looks like they did it, they stuck a soft landing. >> it's been pretty remarkable. the economy has been a rapid rate hiking cycle. a lot of progress on inflation. and they've gotten some luck. the extra immigration helping pull wage pressures. it really has been pretty extraordinary experience but i do think given prices are high, inflation is clinical issue. i think it will be a little while before they really claim victory. >> let's see if we get into demand-side problem as we go through. things further this year. the labor market is the one for me. it's are many others as well. employment is above what will be year-end. i'd be intrigued to know what their forecast will be women get an update in september and we have two more payroll reports. i want to know where employment is by the time we get to

september were jobless claims are and we have a different conversation about the labor market in a >> couple of months. >>which is the reason we keep saying this that what could happen between now and september is not whether or not they will cut rates but it's what kind of rate cut it will be in the path going forward. the question goes to the long end and to frankly risk assets. and whether they continue to rally in the face of some sort of rate cut. jonathan: by the time we get there we will be talking about the election. good to see you. coming up shortly, the bank of england rate decision is about four minutes away and we have an all-star rockstar lineup over the next 60 minutes or so. coming up next, jim's altar of apollo, the barclays ceo. and former kansas city fed president as to george. the second hour bloomberg surveillance up next. ♪

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>> i think the fed feels it is it a sweet spot right now, that the data is moving in its direction. >> september will happen unless the economic outlook changes materially. >> to evoke the olympics, this is a fed that wants to stick the landing. >> soft landings look good on paper but getting there can be a hard path. >> if it happens the fed can

bring down rates of fair amount and the markets will continue to appreciate. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. -->> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. a 25 basis point cut. we have some work to do. the second hour bloomberg surveillance starts right now. economists in our survey were looking for a split decision. a split decision is what we got from the bank of england. lisa: which you can see is three voting to hold rates, the other five voting to cut rates at a time inflation has eased substantially. talking about headline inflation around 2%. core cpi came in at 3.5%. they see inflation at 1.7% of 2026 and one point 5% in the

third quarter of 27. jeff rosenberg talking about the potential of disinflation reemerging as a bigger risk. jonathan: a quarter-point cut at the bank of england. governor bill lee cautious on cutting too quickly. the decision that characterizes finely balanced from the bank of england. let's turn to the story in sterling and get to cable. the pound lower, down .7%, 1.2766. i want to cross over to lizzy burden outside the bank of england. over to you. lizzy: they said we were going to get a rate cut this summer, the sun is out and here we are, the first cut in four years for the bank of england. it was what was expected although it was on a knife's edge because headline inflation is back at 2% but services inflation came in hotter than expected, hence the cautious

tone around this decision, particulate from the governor. it is reflected in the boat split. it was what economists expected. if you look to the guidance, no specific guidance on when the next cut is coming, where rates are going to continue. it is a bit reminiscent of christine lagarde. the last ecb meeting, trying to keep the door open. jonathan: some people have criticized the ecb decision to reduce interest rates. socgen called it data independent. how data dependent is this call? what is the data behind this move? lizzy: if they had not cut rates today when inflation at the headline level is back at 2% it would have raised a real credibility issue for the bank of england. if you look beneath the hood, service inflation did come in

hotter than expected. look underneath that and a lot of it is about the taylor swift affect on hotel prices. all sorts of things that are really volatile that the bank of england itself acknowledged last meeting that it is aware of. services inflation is on the way down. you can understand why they have cut rates today. lisa: looking at 10 year yields in the u.k.. to me this was a fascinating statement because it did not just talk about cutting rates in the near term and finally balance risk now. it talked about disinflation that continues into 2025 come into 2026 and beyond. it raises the question whether the long-term neutral rate is basically right back where it was pre-pandemic. can you talk about this idea that inflation will hit 2.7% before retreating but it will go beneath 2% in the years following? lizzy: these forecasts are based

on the market curve but that market curve has been moving over the past 15 days. you have had traders ramping up their bets on the basis of thin air, no new data, no new speeches. the fact they are seeing that down the line tells you about where they see rates coming. it suggests we have more cuts in the pipeline. jonathan: freight work as always. lizzy burden of bloomberg -- great work as always. lizzy burden of bloomberg outside the bank ofme voting foe cut. the vote 5-4. governor bill lee cautious on cutting too quickly or too -- governor bailey cautious on cutting too quickly or too much. it is sort of like a nervous step forward or a step back, however you want to frame it. together with the federal reserve, they are moving slowly and that is the common theme

across all three central banks. it is the pace they are moving. they are moving slowly. do they think they have not slayed inflation? are they worried about inflation reappearing? this is what neil dutta said yesterday about the federal reserve. what is the argument to wait? if the argument is we are still worried about inflation when he to percent in argument inflation can re-accelerate. what is the argument for that? lisa: the argument to wait is they are in a black room trying to feel their way around and understand the new paradigm. the bank of england sees much lower than 2% rates of inflation in 2026 and 2027. this does set up the question of the neutral rate and that is what i want to hear from the fed this month. ultimately the bank of england, ecb, and the u.s. facing up with this existential question. are we in a new regime of inflation post-pandemic that

requires a different kind of caution for central bankers before cutting rates? that question has not been answered and i would argue that is the question causing caution. jonathan: what is the ultimate destination? cable down to 1.2762. that currency pair -.7%. in the british bond market, bonds are rallying, yields lower seven basis points on the front and. on the 10 year down five basis points. for more, joining us -- let's get into the decision. what do you make of what you've seen so far? >> this is very much in line with our expectations. it is a close call. the nature of the split and the people who voted in favor of the cut, these are the names we were looking to. i think what we are going to see in the press conference later is

we will see this continued cautious this continued cautiousness you have just referenced. we are going to see that we have had a cut, it will be more of a hawkish cut. that will be the signal for now. across all of these central banks, it is the services inflation that is remaining quite resilient. services at 5.7% in the u.k. this is above what the npr had been expecting in the last june meeting when the bank of england published their npr previously. the services have overshot while goods prices have undershot recently. of the pandemic drivers mentioned by the fed, these external drivers -- it is really the domestic drivers and labor market that is driving the story. in the u.k. we are seeing a mixed bag but some tentative

signs of loosening in the labor market with unemployment ticking higher. unemployment rates at six year lows. this is all showing signs that may be is time to cut before we start to see changes in inflation as we move into september, october, when you start to get the impact of the price cap and some distortions. today seems like the best time to implement the cut and see. jonathan: i am sure it will be on repeat with that news conference just around the corner. lisa brought up the destination. where is that headed? we need a bigger, deeper conversation about the current environment and the regime we are going into. have we broken out of that pre-pandemic regime of low growth and low inflation and are we going to stabilize at higher levels in does that mean this bank of england interest rate will settle down at a different level than otherwise would have? what are your thoughts on that

at the moment? sree: we are looking at the pace of rate cuts. we are expecting a bit of a pause or may be another rate cut later this year. this is something we will look at today's meeting and the details. longer-term, are we in a new inflation paradigm? there are some supply-side issues in the u.k. economy and really labor market dynamics with higher wages which are quite sticky. they are starting to turn down. that is a question for the bank of england. we do have a new government. we are not seeing any material impact on monetary policy from the policy we will see from the government. we will see a budget at the end of october from the new chancellor. a lot of the measures that have been mentioned so far are longer-term supply-side boost to growth which will be difficult to actually deliver, considering

the hole in the government finances that have been discussed recently. there will be some relative stability there for the next year or so, and material changes from the fiscal side. there is constraint early on in terms of how much they can deliver as a fiscal boost. it does look like we are moving back to the era we were in pre-pandemic, but we do need to monitor what is happening with labor force participation. we are seeing a normalization in terms of some of the distortions and labor supply -- in labor supply. distortions are unwinding. we are quite optimistic we could start to see the pace of easing gathering next year. cautious steps initially and then once we get clarity in

terms of the labor market dynamics, global growth pictures , area growth was weaker. there was some concern how sustainable is the uptick in gdp at the moment? the demand cycle is resilient for now. there is some stability. jonathan: that affect seems to be everywhere. thank you. the first cut since the pandemic for the bank of england. lisa: although cautious and with a 5-4 split. it will be interesting to see inflation expectations down below 2%. there is one question you asked which is we are hearing a lot of caution from the bank of england and the ecb. what is behind the caution? how much is it a currency differential? if they move too quickly ahead of the federal reserve does that make their inflation problem worse and get them into a whole?

i wonder if that is in the back of people's minds as they make the decisions. lisa: the news, -- jonathan: the news conference with governor bailey starting in about 18 minutes. if you're in london our coverage will pick up. the barclays ceo joining us in about 20 minutes and we are also catching up with the apollo president. after that the former pred president -- the former fed president esther george. let's take the opportunity to get you in update on stories elsewhere with your bloomberg brief. let's cross over to dani burger. dani: qualcomm shares lower one and one third percent. concerns the phone market is recovering more slowly than investors hoped. qualcomm did predict stronger sales and earnings in says phone shipments early rebounding gradually. the ceo says they expect units to be flattish or up by single digit this year. shell is up in the premarket, up

1.8%. those results underpinning another resilient stretch for the british energy company. debt fell more than $2 billion. crude prices also help to offset weakness in other areas. shell also confirmed another $3.5 billion share buyback. israel says it confirmed the death of hamas's second-in-command after striking a compound in gaza three weeks ago. the idf had said it was all but certain the leader of hamas's had died in the strike of the city. they had been considered israel's most wanted man for over 20 years and is alleged to have played a central role in planning the october 7 attacks. hamas overall leader remains at large in gaza. that is your brief. jonathan: more from dani it about 30 minutes. up next, the future private

credit. >> private credit is undergoing a real seachange. the asset continue to grow and we'll go from direct lending to asset-based finance. jonathan: that conversation is up next. we'll catch up with apollo after the commercial break. from new york, this is bloomberg. ♪

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jonathan: equity futures higher as we kick off the month of august, up .5%. bond yields up three basis points after a five-day rally. over that period yields dropping 25 basis points on a 10 year, just short of dropping into the threes. under surveillance this morning, it is the future of private credit. >> private credit is undergoing

a real seachange. since the great financial crisis banks have continued to back off money into the middle market. asset managers have stepped into that void. i do not see that reversing. i think this asset class will continue to grow and it will go from direct lending into the middle market to now asset-based finance. jonathan: apollo global second quarter profits coming in just sort of estimates and assets under management rose. apollo copresident writing we continue to see continued strong growth in private credit including asset best -- asset-backed finance and -- as companies look to finance themselves with long-term capital. jim is with us around the table in new york. you have a good story to tell. just short of estimates, what is helped bank profits in the last quarter?

jim: i think the firm's firing on all cylinders. it was a record deployment, record origination. the flywheel live described over the last three or four years is coming into place. the economic cycle is slowing down but from a firm perspective we cannot be happier with where the firm is positioned or the trajectory of the outcome and see a very bright year in terms of our backlogs and our pipelines. >> you seem super confident. $50 billion of debt origination. i want to talk about one deal. the $11 billion investment for intel, helping them find this capex opportunity. i want to put together that deal with some of the quotes we've heard from the tech titans. alphabet sang the biggest risk is under investing, not over investing. mark zuckerberg saying i would like to risk building capacity before it is needed rather than being too late. can we frame how big this opportunity is in front of us and how long the runway is?

jim: it is a great question and it is so much more vesicular opportunity than the conversation about the fed. from our perspective we see a secular global industrial renaissance going on and people talk about ai but is also in power, also in sustainable energy, it is in the auto sector. when you look at the breath of capital that is needed from these high-quality companies it goes back to what happened in the 1920's and 30's with railroads and industrial america. we see the intel transaction as a highlight of the future opportunity and the secular change. what has really gone on in the last decade with the advent of credit is the breath of available capital from traditional financing sources, which with indexes and etf's is all focused on short-term liquidity.

there is a real lack of capital to invest and be a part of these companies over 10 to 15 years. we at apollo are big believers in that. our phone has been ringing off the hook since the intel transaction. it is the example of the complete transformation of our firm as a capital solution provider. lisa: apollo has $700 billion of assets under management. it raises the question of whether you are dealing more with intel than the family dollars. is your phone ringing off the hook with calls from meta-, alphabet, microsoft, all of the big tech giants that are the new clients of apollo, not the smaller firms of tradition? jim: if you look at our firm today, $700 billion, 500 and the credit business, and the majority of that is investment grade risk. what we have done is brought our cost of capital down

dramatically so we are much more relevant to those companies. all of the ones you've mentioned must many others, we are the prime candidate to be in dialogue with those folks as we embark on massive changes. what is interesting about these companies is you identified they are mostly investment grade companies and they do not want to hinder or harm their holding company ratings or issue diluted equity. the ability for us to be very thoughtful and bring a lower cost of capital to the equation and match that solution with investors or pension funds or retirees from around the globe, these are the folks there funding the industrial renaissance. that is the story of the future we get excited about that it shows the flywheel of our business. we deployed 50 billion in the quarter, $200 billion in the last year or two come in from our perspective, we can get that kind of return with a higher rate environment which we are

clearly in, that is the story of the future. that is what gets us excited about apollo and the flywheel in our firm. lisa: you also just raised $34 billion, which i believe is the biggest ever for that type of fund. it raises the question of whether private lending has transformed itself from lending to riskier and smaller companies for much higher yields to lending to safer companies for a higher yield than the benchmark investment grade index but not necessarily the double digits of yore. is that what you're telling investors? do not expect the type of returns because this is safe capital. jim: you are bringing up the conversation a private credit in aggregate versus direct corporate lending for buyouts. we are in both of those businesses in scale. on the private corporate lending for buyouts, we are a major player in that space. there is a cycle going on. that is a smaller park in terms

of the overall total market. certainly direct corporate origination is going to be a long-term tool for sponsors to use text to high-yield bonds and leverage loans. the bigger opportunity is what we are talking about right here, the investment-grade solutions. we called fixed income replacement. in the past if you are in investor you could go into the liquid investment grade markets and spreads are very tight there. you are paying for liquidity you do not need. many of these investors have long-duration capital and they should be investing for five or 10 years, not for an hour two based on an etf. the whole market structure has evolved where it is the student body focused on short-term liquidity and they're are big gaps of capital needs that have been on responded to. we have positioned our firm to be responsive to those longer-term capital needs which

are not being satisfied today in the current debt markets or in the financial services sector overall. jonathan: we have gone through much of the first 10 minutes without talking about the federal reserve. jim: you need torsten slok in the seat. jonathan: he has a great call. your call is that the fed put is back. i wonder how relevant all that is as a backdrop to what we discussed. jim: i think torsten slok's call of no fed cuts was very prescient about how we thought about deployment. witness what we have done year to date because of that call. no doubt the big secular move in rates was the move the last two or three years from zero cost of capital to a real cost of capital. a quarter-point move here or there, we do not spend at your menace amount of time thinking about the impact. we think about the global industrial renaissance. torsten may still be right.

with the news of the bank of england and other central banks taking action, the fed will be the one left out. we do not spend a lot of time with or obey rate cut or two. -- whether it will be one rate cut or two. lisa: we will just break up the whole show and for the rest of the year talk about apollo. [laughter] jim: we are here to talk about it and it is a great story and a lot of topics. our private equity business was incredibly active on offense. five transactions in the last month. from our perspective a lot going on. jonathan: this was perfect. it was good to see you. up next, the barclays ceo. ♪

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jonathan: two hours away from the opening. equity futures positive across the board. on the nasdaq up .6%. on the s&p closing out yesterday for the biggest day of gain since february. switch up the board. yields look like this. yields higher up two basis points. dropping about 50. about 50 basis points for the month of july. just to get to foreign exchange, sneak peak of what sterling is doing. sterling down to about 12767.

negative i .7%. under surveillance, kamala harris search for a running mate nearing an end. josh shapiro meeting with paris team is some labor groups speak out against mark kelly joining the ticket. harris is said to make her tip -- are picked by the bital of next week. iran supreme leader has ordered a retaliatory strike on israel for killing a hamas political leader. the report sending oil higher for a second straight session. brent crude .8%. i want to turn to this story. barclays unveiling a share buyback plan. this is the british lender reported better-than-expected second-quarter investment banking revenue and boosted its guidance for the full year. joining us is the barclays ceo. it is great to catch up with you once again. i will go through the numbers so you can be modest and you don't have to. equity underwriting booming,

equities trading up nicely, the stock is up 50% year to date. there was some weakness i want to get to in just a moment. let's start with the of strength you are in. where did that strength come from and you expected to continue through the year? >> thank you for asking me to join the program. i am very grateful to be here. we are in the process of delivering on the investor planet we laid out in february of this year. it was to have a more balanced bank, bank the returns 12% return on investment by 2026, returning about 10 billion pounds to shareholders by 2026 and rebalancing the bank so the investment bank goes from around 60% of the bank to around 50% of the bank. one part of the investment bank is our markets business and the equity business. we've always had a great strength in equity and as equity

markets have gone through the changes you have seen in the start of this year, our traders have been able to capitalize on client demand, on increasing volatility, and providing innovative solutions they seek from barclays. i do expect as market volatility keeps the pace for our performance in equities to continue. jonathan: i wonder what you can do to turn things around in that part of the business? >> within fic, we are a very strong credit house. typically in the top three. one of the reasons it affects us maybe a little bit more is credit spreads have been muted and credit volatility has been muted. quite the opposite case from equities. in european rates we've improved from the first quarter to the second quarter and securitized products, an important part of fixed income is growing from strength to strength.

our fic has improved from the first quarter to the second and i expect to see more of that improvement as the art goes on. lisa: we have having a debate for several months. our rate cuts good or bad for banks, rate hikes good or bad for banks? a rate cuts broadly good or bad for your profitability at a time when a lot of people are expecting them globally? >> what i would say is very special about this rate cycle is what we are expecting is not a spate of cuts but fine tuning adjustments. the answered your question is i do not think they will make that much of a difference to a bank like ours or the large banks. my colleague who runs macro research for us often says a rate cycle is when you go up an escalator, meeting slow cuts come and come down an elevator and then fast cuts coming down in an elevator. what we have seen this time as

we went up in an elevator, meeting very fast rate hikes come in we may be coming down by the stairs. you saw fine-tuning adjustment by the bank of england this morning. you saw the fed pause, but they are indicating they may go later this year will stop all of these things are trying to adjust interest rates by a small amount because real rates have crept up at a constant inflation which is 2%, which is low. it is trying to overcome the slight impediment of rising real rates. i do not expect this to have much of an effect on the banking sector if any and we are not changing the way we view the world because of this modest rate cut. lisa: you say you are on track to achieve one billion pounds and cost cuts. there are swirling questions around where those cost cuts are coming from. is it simply being more efficient in certain sectors, is it ongoing job cuts, what are you executing? >> we did a billion pounds worth

of structure transactions last year. we have seen the benefits of some of that. we have seen the benefits of a greater focus on productivity and efficiency in the way in which we run the bank and what we are also seeing is the results of investments which we have made, particularly in markets, particularly in trading technology. i am talking to you from our equity trading floor in london. the way we have increased our market share in europe and the u.s. is all the result of past investment. you have to continue to do it but probably at a slower pace than we did the last couple of years. it is efficiency and better investment. jonathan: can i ask you about the advisory business? how's the turnaround going in that unit? >> investment banking, we have done as you've seen the results in the banking side quite strongly. equity capital markets did very well. advisory is improving. we still have a little way to go.

we are seeing the volume pick up, we are seeing our volume increasing and as some of these ideas front to five you will see an improvement in the advisory numbers. >> i would love your view on how business going across corporate america and corporations across europe. i can share comments we have heard from corporate america. p&g seeing slower price increases. mcdonald's talking about the first sale slide since 2020. pepsi said in the consumers becoming more challenged. you've a massive consumer business with the berkeley card business. are you seeing the same kind of slow down from your vantage point? >> what we are seeing which is good for the credit performance of banks as we are seeing both consumers and corporate focusing on efficiency in managing their budgets more carefully. if you are in the consumer business and if you're a consumer oriented company, what

you will see is a lack of pricing power and people economy rising. we see that in our own customers. what that means is even though employment is still very strong in the u.k. and the u.s. people are managing their budgets more carefully which is one of the reasons by and large credit impairment cost for banks have been relatively well controlled. it is good for the consumer to do this and manage their budgets. it is good for the lenders because they are seeing less signs of consumer distress. for the economy, there are winners and losers and that is what you are seeing from some of the people you are quoting. lisa: are you seeing a big difference in terms of consumer strength globally? we've been talking about how the consumer shows restraint when it comes to spending but more so in some of the sectors more leveraged to chinese consumers. how much do you see europe in a

weaker spot than the u.s.? >> the slow down we have seen in china is palpable and chinese demand has effective sectors which are exposed to them. you saw some in the fashion goods industry. tech is a different situation because the trade with china is being intact for other reasons. i think what you will see is people that exposure to china being more affected. you've seen it in the numbers. i think you'll see that for some time. lisa: how much does it affect where you are expanding or not expanding? >> barclays is first and foremost a consumer bank in the u.k., a global investment bank. very strong corporate presence and a wealth presence. all of that is very highly connected to london from europe,

from the united states and from india, singapore, hong kong. we are not a major presence in mainland china so what we think is the impact of what is happening in china is relatively more muted for us compared to other banks with larger exposures. lisa: it does raise a question about some of the tensions politically and internationally in terms of potential tariffs, potential restrictions, changing policies, the elections. how are you trying to get ahead of that. advisory and mergers and acquisitions as not been as robust as people expected it to be. >> is a very good point. the big area where all that comes into play as cross-border m&a and cross-border transactions. you even seen a slowdown within europe itself. for us it highlights one of the things we have done, which is we decided early this year when we

did our investor day and made the decision towards the end of last year to invest 30 billion pounds in the u.k. the u.k. has had its election, we have elected a business friendly government, the transition has been smooth and points to the importance for banks like us to be in places with clear economic policy, the good rule of law, growth, and stable economic policies. jonathan: the year is going well. hopefully the next time you're in new york we can catch up in the studio. the barclays ceo. the barclays stock is up more than 50%, quite a year so far. lisa: they have also pledged 750 million pounds return to shareholders. quite big in terms of dividend payments. jonathan: let's get you and on stories elsewhere. dani: the bank of england has cut rates for the first time since early 2020, dropping the benchmark by .25%.

the decision was a 5-4 split. andrew bailey said inflation had eased enough to cut but the need to make sure inflation stays low and be careful not to cut interest rates too quickly or by too much. another day, another record for nvidia. the chipmaker added 340 $9 billion in value in wednesday's trade, the largest gain for any stock in a single day. it record the company has set many times over the past few months. the 13% rally yesterday a day after a 7% rally that wrapped up $193 billion. in july the shares have seen a lot of swings and drops that accounted for half of the bigots market white belts on wreck -- half of the eight biggest market white belts on records. bill ackman's has withdrawn his u.s. ipo. he had bet is wide following on at would help him raise -- on x would help him raise -- then he

cut to 4 billion and 2 billion in over a week. pershing square says it will reevaluate its structure and report back. that is your brief. jonathan: up next, moving closer to a rate cut. >> arc is already priced me in september with a high degree of certainty. what are you waiting for. why take the risk of the economy deteriorating further? jonathan: that conversation is up next. live from new york, this is bloomberg. ♪

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jonathan: breaking news the last couple of minutes. i will share some of that and go through it carefully. russia releasing wall street journal reporter and former u.s. marine paula wheeler as part of a major prisoner swap with united states according to people familiar with the

situation. as you know these men have been jailed in russia on espionage charges that they in the united states have been denying. they are en route to destinations outside russia. an important development in the last couple of minutes. lisa: we do not have a lot of details yet. the u.s. and its allies are expected to return prisoners to russia they hold under this deal. evan gershkovich has been jailed for several years after being arrested on espionage charges and has been a real cause among journalists eat to get him released. paul welland has been imprisoned for much longer. jonathan: just to confirm the information we have received. russia releasing wall street journal reporter evan gershkovich and former u.s. marine paul wheeler as part of a major prisoner swap. when we get more detail we will bring it to you. moving closer to a rate cut. >> market is already pricing

september with a high degree of certainty. what are you waiting for? why take the risk of the economy deteriorating further? at the end of the day it will not make a lot of difference. given the fact the market expects the fed to cut once the decision is mostly made, you heard today it was mostly made. why are you waiting? michael: investors -- jonathan: investors turning their attention to the data. the july payrolls report tomorrow and cpi coming into two weeks. jay powell waiting for the numbers before committing to a rate cut. esther george writing "i found the chair leaned pretty clearly to confirm market expectations for a september cut it up while september looks like the meeting to take this action i think the room will be patient." esther george joins us. i want to talk about that word you use, patience. why should we have patients?

-- why should we have patience? esther: i view comes on the fact that we are looking at an economy that is growing and by the reeds of the second quarter growing well above its sustainable long-run growth. you have a strong labor market and you still have elevated inflation. i think that combination reminds me the fed's mandate is a long-run objective. the market had priced in a number of cuts and legal pullback. the central bank's job is to pay attention to the data. as that gets closer that will be more difficult for them and they recognize that. jonathan: how big is the risk we take the strong labor market for granted? esther: i think you always looking at this. we do not know with any great certainty where the equilibrium

rate is for the labor market. obviously we came out of the pandemic during the recovery with a tight labor market. as we watch it normalize, the space between normalization and weakening is one policymakers will be very intensive to. we will get a report tomorrow. it will give a clue. i do not expect it will be definitive by any means, but it is the collection, the aggregate of these reports that begin to give the committee a better sense of just where that labor market is right now. lisa: do you get the sense that the federal reserve still embraces the idea of transitory and inflation was largely due to the pandemic and now some of the ramifications are being worked out of the economy? esther: i think that could have a lot to do with it. you did see tremendous supply adjustments. it had been sometime since we

had to pay attention to the supply side of the economy. as we watched supply, that was true on the labor side, certainly good on the good sides begin to adjust, that creates a challenge for the committee in understanding how restrictive is our policy? how do we understand when the economy is approaching equilibrium? as they have noted, they are close. those risks are coming into better balance right now. now judging how tight their policy is relative to the steady state of the economy is the real challenge. we heard that yesterday. too soon versus too late in making adjustments. lisa: it seems like the market really believes the risks are greater on some sort of deterioration in the labor market then an increase in inflation. i am wondering if you think may be fed would have been prudent to push back a little bit on that based on what you are

seeing considering you believe a little bit more patience, a little bit more discipline on the market. esther: i would agree that the labor market is coming into better balance for this committee. it will have to look at some of the subtleties that come in underlying that labor market in terms of the levels of activity and the momentum you see there. at the end of the day, the committee is faced with an elevated inflation rate relative to the target they have establishment and the credibility they seek around getting around that. in the long run as we've heard from the chairman and others, that sets the conditions for a healthy labor market long-run. near term they will be watching a lot of those signals. the real issue at the end of the day is the inflation mandate. jonathan: i want to share a

quote with you and that i would like to lean on your experience on the committee. understanding how all of this works behind closed doors, the stuff we do not see. this is what evercore had to say. we think and practice it is not very did a dependent and view the caution evolution of the statement as an attempt to carry hops along and avoid dissent. when you hear stuff like that, how true is it? how do things come together on the committee? esther: this is a committee that is consensus driven. they must make a decision. the nature of a large committee with differing views is to try to achieve consensus at some point. that does not mean you always get unanimity around that decision. i think any time you begin to approach what looks like better balance, things coming into balance, the decisions get more difficult.

it is not as clear-cut as it was when you know you have to ease or you see an inflation problem emerging you have to address. i expect there is challenge within the committee of trying to reconcile views and trying to bring a solid consensus to whatever the decision will be at the next meeting. jonathan: this was wonderful. hopefully the team gets to see you in jackson hole as we used to. esther george, former kansas city fed president on the latest decision yesterday and the news conference with chairman powell as we take another small step towards a rate cut in september. the committee often comes together. we look -- we would like fed speak to get an idea of how different the range of views is. lisa: what was that? jonathan: we would like a little more fed speak. i miss it for a while and that it all comes back and we are like slow down. lisa: welcome to human nature. it would be good to see where

the daylight is, small minority calling for a rate cut at yesterday's meeting because that was something that was nodded to. this is a different kind of federal reserve committee. the debate is similar. balancing these risks. it is interesting esther george was talking about caution and how they should have had more caution. i'm curious where the balance of risks is within the committee. this is a data point that could pull them away from september or is it a lock. jonathan: we heard a former official who thinks they have reason to be patient. we heard from another former fed official, bill dudley, who has a completely different view. what separates those views is a view of the labor market. we keep coming back to the same destination. payrolls tomorrow 8:30. that will be the difference between having a view on whether they have time and having a view on whether they're running out

of it. lisa: whether the risk asset markets generally in the face of rate cuts or whether rate cut signal something deeper. bill dudley explained why the psalm rule was so important and he said there is a trigger point in economies where an increase in unemployment begets more weakness, basically people get laid off, they do not buy as much because they do not have the budgets to do so. then spending goes down in layoffs increase and it becomes a self-perpetuating spiral. that is why he is concerned about that and that is the reason the employment rate will be key tomorrow. jonathan: neil dutta is right to point this out. are we at the point we can make a stronger argument for higher unemployment than higher inflation? if you are, is that the decision one that should be lower interest rates? that is what they think right now. that is a strong view. lisa: at the same time when you

take a listen to barclays or bank of america ceos, they look to a year of comps that get different later this year. look at housing. think about how much demand there is in the system, especially if the economy is still strong. it is gone a lot quieter. jonathan: you have to have sympathy with the federal reserve. we've all been humbled post-pandemic. you go back two years and take a snapshot of the program we did in jackson hole in august, 2022. if you listen to a lineup of guests, whoever they might be, that month we are all talking about pain, the prospect of unemployment too high. aspirational fed forecasts. here we are with unemployment around 4%. lisa: recession was the base case in 2023. jonathan: we could be humbled again. coming up, jason thomas, sabato shop up, and eric cantor.

that is a to come. this is bloomberg. ♪

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>> reduction in policy rates could be on the table as soon as the next meeting in september. we just want to see more and

gain confidence. >> this is a lot of good news. this is the chairman basically saying without saying it that we achieved soft landing. >> put it this way, they think we will go in september. >> we are still expecting 25 basis points in september. >> it's a possibility we could see a 25 basis point recut. >> this is "bloomberg surveillance." jonathan: if you missed the coverage yesterday, just one word, september. that's basically the take away from yesterday in the news conference with chairman powell. we will see it again in jackson hole. later on this month in august, the third hour of bloomberg surveillance in the first rate cut since it kicked off the month of august with equity futures positive on the nasdaq 100.

july was rough for the nasdaq. that was until right at the end of the month when we ripped into the month and and were supported by a major rally on nvidia. lisa: this fed cycle has not deemed when it comes to ai, if anything it's only accelerating. the same liability that caused alphabet to lose steam is what's supporting nvidia. that capex is exploding and companies more broadly think that they cannot spend enough when they want to restrict. jonathan: the numbers have been phenomenal and we keep turning to that quote from the alphabet ceo, the risk of under investing is greater than the risk of over investing and that is a quote that i think we heard echo itself with the likes of mark zuckerberg over at meta. turning to the day ahead, focusing on payrolls, with what we are about to see it 8:30, that's jobless claims. every conversation we have had

regardless of your view on the reserve comes back to the labor market. if you think we have more time, it's because you think the labor market is strong. if you think you're running out of it, it's because you think the labor market could be getting weaker. later on this morning, ism manufacturing with earnings after the close. two big heavyweights, it keeps coming back to the same thing, jobs in america. lisa: laura yesterday said she was confident that the market was strong in that inflationary pressures are stronger than people think at this point and we asked her what would change your view and she set of claims came in above 300,000. the expectation is for 236000 and a half-hour but that's the difference between a positive soft landing view and people saying that this is looking harder than that and it is the reason why the high frequency data is taking on a new emphasis

at a time when there are plenty of questions around the accuracy of the data and the noisy nest. jonathan: the federal reserve meeting around the middle of september, back and, going into that meeting this is what the lineup looks like, the data between now and then. payroll report tomorrow, cpi report later. september 6 we get another jobs report. when we fill in the numbers around those dates and get to that meeting in september, how different two things look, looking at that totality of the data, how much emphasis or wait with they have to put on the labor market? lisa: great question. that's what people are looking at. in terms of answering the question, people could throw spitballs at me, as we wander around in a dark room, there will be a question about what will be more important, the actual numbers or the unemployment rate. the reason the rates are taking a renewed emphasis is because

the employment market has grown so much. you start to wonder what is an acceptable pace of job creation considering how much the population workforce has grown. so, how do we measure weakness. these are the fundamental questions that people are asking themselves about markets that have been profoundly changed post-pandemic and data that has become more difficult to collect as well, that's something else people talk about quite a bit. jonathan: particularly jobs and jobs openings, people putting big questions over that. jobless claims are the estimate, 230 6000, that's the estimate in the survey. another sneak peek, preview a payrolls in the survey the median is 175 and you know the previous month was 206. a lot of economists if they could take one data point for friday it would be the unemployment rate and that's 4.1 percent again, the median

estimate. the latest moving higher to 4.2 in the previous month of 4.1 percent. turning to price action with equity futures shaping up as follows in the cash open, the first trading day in the first month of august, equity futures are up with yields higher by four basis points after a monster move over five days of gains for a 10-year treasury yield with yields dropping in 25 basis points in five sessions. if you take the whole month of july at the front end of the curve, lisa mentioned that the two-year has dropped 50 basis points in the month of july but let's see what august has in store on the 10-year yield. coming up, catching up with jason thomas as stocks rally around the bank of america earnings from apple. and why wall street isn't playing a central part this year in the presidential election. big issue, stocks are getting a

dovish pivot as jay powell sets the stage for september. the case for the september rate cut being very simple as inflation falls and policy becomes tighter. if base rates are unchanged, cooler labor markets with a nominal slowdown, no reason for tighter policy today. jason joins us now with more. let's talk about base case. it's what happens next, that division over confusion, ultimate destination, what do you think of pricing beyond september for the next 18 months or so? jason: i think it's very aggressive. the big lesson we have learned over the last year is that policy has not been as tight as many expected. entering the year, there were expectations for six or seven rate cuts predicated on the idea that a real interest rate of 2% would absolutely smother economic activity. of course, that is not what we

observed and learning from this experience would suggest that the fed is going to behave very cautiously. in general, the less certain you are of the destination in this case, the more slowly and cautiously you are going to proceed in that direction. lisa: i'm still trying to wrap my head around your recent commentary when you wrote that it might be time for investors to hold contradictory thoughts in their head simultaneously. the time for rate cuts has arrived, but financial conditions are two accommodative for the fed to deliver the scale of easing anticipated by some market participants. can you explain what the fed should do with that and what that means? 4 since -- jason: since the start of the year, policy has tightened by 50 basis. that's what's been observed. there's a strong case for two

cuts. september and december. thereafter, things get murkier. that's what i'm suggesting. you heard talk yesterday at the press conference about normalization. are you cutting rates once or normalizing policy? i found this odd, we don't really know what normal is in the environment. we have massive budget deficits. i don't mean to catastrophize them, but we have to appreciate that right now the after-tax incomes of households and to the corporate sector are $1 trillion larger if you were commanding fiscal policy stabilizing debt to gdp ratio at reasonable levels. secondly, you have the largest concentrated boom we have seen in this country since the telecom boom of the late 1990's. you just mentioned yesterday from alphabet about the risk of under investing. this seems to be something that will persist. finally, you have

deglobalization or the presumption that what we consume in the u.s. will be produced here, of course leading to potentially some upward pressure on prices, the potential for supply shocks and volatile inflation. if you put this all together, it sets up for on one hand certainly some rate cuts coming at the end of this year with september, december, but then thereafter you could have rates that essentially settle in at 4.5, somewhere in that range. lisa: are you saying that is a more likely neutral rate at this point and that the market has gotten ahead of itself in terms of estimating something closer to 4.5 or 3%? jason: i think you have to ignore the experience of this year to think that the neutral rate is still 50 basis points in real terms. so again, this is a situation

where there is a lot of uncertainty. to be so wedded to a neutral rate at these levels that persisted between the global financial crisis and the pandemic is to ignore recent experience. i think that would be very unwise for the fed to take that sort of approach. lisa: this goes to a deeper question that essentially a lot of people are betting that rate cuts are going to support the next leg of growth in the u.s. economy. are you saying that that is not a lever they can really pull in the same kind of way? that may be some of those inflation sensitive strategies look better and some of the ones that rely on inflation coming off and the fed cutting rates are maybe a little fraught? jason: i think that in general if you look at where credit spreads are today, they are tighter than they were at any point since 2007 and if you look at the ration risk premium, the

10 year related to the expected path of the next 10 years, it's effectively zero. if you look at estimates of the equity risk premium based on consensus forecast for dividend and earnings growth, it looks very tight, very narrow. so you know, i think it all suggests that the market has really been priced to perfection to a large extent and going forward, if we have some really unfortunate unforeseen developments in the economy, of course the fed with base rates of 5.3 percent has a lot of firepower and could do a lot to stabilize economic activity, but if things persist as they do today, i think base rates -- the ones i would use as a baseline, nothing lower than 100 basis points from here is a reasonable expectation for growth to persist. jonathan: do you think the federal reserve is good -- getting it wrong? jason: no, i think the case for

cuts is clear. jonathan: i mean in terms of what they think about the economy. i will tell you what i heard yesterday, he almost framed the inflation shock coming out of pandemic as one of the factors that's ultimately fading and what i'm hearing from you is that some of these forces are going to hang around. do you think he is getting that piece of it wrong? jason: force there was an element of inflation that was transitory, but i am surprised, given the second and third order effect that we saw, that people would still be of this mind. with inflation shock you have shortages in a response to that. people over order. if they are expecting 100 units in the fear cut back, the order 200 and you start seeing supporting with downstream price dynamics very difficult to control.

again, when we compare today relative to 2019, we see the fiscal deficit and a capex boom that wasn't occurring then. fixed industrial investment in the united states right now is three times 2019 levels. then again, the shock from the terrace on china in 2019, most people expected they would be rolled back. vice president biden at the time suggested that the policy was unwise. it was harming american consumers and farmers. now no one is speaking like that. the direction around trade friction is only in the direction of more. so again, it's very important too, when we contextualize the current situation and account for all of these massive changes relative to 2019, you are left with much more upside risk should you ask -- act more aggressively over the next six months to 12 months than perhaps

many perceive. lisa: you said that if growth continues, the market is somewhat priced to perfection. which market in particular in this good news is bad news and bad news is bad news paradigm? jason: to be clear, when you look at indexes in the nasdaq, the s&p 500, because so much of the gains have been concentrated in a very small number of stocks , and when you look at the aggregates and the equity risk premiums in the index, then you say it's priced to perfection. looking at the broader u.s. stock market, you are seeing many stocks looking quite reasonably priced, because they have not participated to the same extent. many stocks with earnings growth outside of price appreciation, implying prices have come down and in some cases materially.

so you know, it's a market gravitating from momentum trade. it's focused on the stocks that quite benefited in many cases from higher rates and mega cap companies with negative debt. large cash piles are earning floating-rate interest, excising a relatively low fixed rate liability. it also generates so much cash in the near term that the effects of the rates aren't so great. so, it's quite rational that the market rotates into those stocks. the valuation levels are on a perspective of return basis where people have to start looking elsewhere. jonathan: jason, this was deeply thoughtful, one of those conversations i'm going to listen to again this afternoon. a lot to work through their on the backdrop for the economy, what he thinks will happen in where you want to be with financial markets as well. let's take the opportunity to

get you an update on the other news this morning. dani: russia is releasing two prisoners as part of a prisoner swap with the u.s. according to people familiar. the two men had been jailed in russia on espionage charges that they and the u.s. deny. under the deal, the u.s. and its allies will return prisoners to russia that they hold. toyota shows -- toyota shares falling for the second quarter, 5% in the first six months of 2020 four, most prominently in china and japan. still climbing overall thing to the weak yen and robust demand in north america and despite the headwinds of a government probe into the toyota manufacturing process, analysts expecting record profits this year. katie ledecky has added another gold medal to her illustrious career after dominating any 1500

meter freestyle, tying her with the most metals ever by 8 -- medals ever by a swimmer. she confirmed she wants to compete again in 2028. jonathan: a phenomenal athlete. thank you, annmarie. up next, -- thank you, dani. and coming up, the apple ai rollout. those earnings from apple are around the corner. this is bloomberg. ♪

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positive met -- fashion with yields higher against the grain of the previous five days with a big rally straight on the treasury and yields lower by 25 basis points, just about north of 4% on the 10-year this morning, 4.0 five. price action with morning calls, jp morgan put the price action target on meta-with an overweight rating saying that the tech giant continues to earn the right to spend big on ai with meta-up by 8.6%. morgan stanley lowering their price target with analysts citing revenue headwinds from the ban on their chip sales. a little bit softer there, down 9/10 of 1% with bank of america reiterating the buy rating on apple, analysts expecting earnings beats this afternoon and investors to look past of the results on the upcoming ai features from apple.

for the moment, the stock is higher. starting with this question right here, if we are to look past the earnings and focus on ai developments, i have to ask you when you think we might actually get them, when can i use them, what will they do and look like? >> look, i think the first catalyst is the launch of the iphone and you need to have it to launch the functionality better. second, it's an developer hands at the moment. the beta has been released with some of these functionalities. it's in the works and it won't be day one, it will probably be mid-october. some features won't be available globally, it will be a phased rollout. it just means that consumers have to wait a little longer in some regions as opposed to other regions to get access to the teachers and in the u.s. by

october you will be seeing a bunch of features but remember, continually adding to the sweet of capabilities, we will continue to see more and more of this as time goes on. jonathan: we would like you to frame how big this opportunity actually is. going through your previous research and other conversations, the step functions are similar to the emergence of the smartphone, which is why you and the team have found a new name for it, i think. i want to build on that. i have found repeatedly from apple that this big upgrade cycle is just around the corner. without mentioning artificial intelligence, what will these features allow me to do that i can't do currently that will force me to sit here and say i've got to get a new phone, got to upgrade. wamsi: this is a great question. i think that the in telephone -- intellephone, as we have been

calling it, it means that a lot of tasks that we viewed by switching across multiple apps, say, we will be able to consolidate that by asking siri to do something very specific. if you are curious about the weather in a particular region, you can say what are my plans going to be for the day and those things will be wrapped up together in one request as opposed to going to the weather app and checking the weather or flight times with arrival times. and then you want to purchase that and it can get wrapped up into one thing that enhances productivity by a lot. but we are not there yet, at the moment. but in the next year you think there could be a lot better siri integration that gets us there eventually. what is the hardware support it for that? we have already here -- heard

from people who think the capability is were running more and more and most of those workloads are waiting on that function change we are talking about to change and consolidate a lot of different requests into one request to be able to process that. remember the context goes back to the conversation as well. in terms of the bigger picture for an upgrade cycle, there are one million iphones out there. small shrinkage by a few months of the replacement cycle can mean 10 million to 20 million more iphones sold. we have been stagnant in the 220, 225 million range but we think that changes to 240 or 250 million. remember, there are formfactor's coming, like foldable iphones down the road. there is a lot of excitement

going on. jonathan: appreciate the clarity and update, sir, wamsi mohan, thank you for your time. you can look for the earnings later. we talked about the caret over the stock for the likes of tesla, this is the caret for the next several years, potentially. lisa: this cycle might give more of a sense of how apple will win out in the upgrade cycle as they know a lot of others are coming for them. jonathan: big-time, big time. i just want a phone i don't need to cover for any more. lisa: you don't care if it is a personal assistant, as long as it looks nice? jonathan: just go back to what it used to be. [laughter] ♪

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jonathan: 60 minutes away from the opening bell. some important economic data just moments away. mike mckee will break that down for you. the scores going into jobless claims look like this. on the nasdaq 100, up by .6%. if you get to the bond market we can take a look at the front end of the curve. yields on the session going into the data up by a basis point. let's crossover down to washington, d.c. and catch up with mike mckee. mike: good morning. this is not particularly good news on the jobless claims front, although another warning that july is volatile.

to hunt a 49,000 jobless claims filed last -- to have 40,000 jobless claims -- 240,000 jobless claims filed last week. he also get unit labor costs and nonfarm productivity. productivity rises a lot more than expected, 2.3 percent. the forecast was for 1.8. unit labor costs dropped by .9%. there were up 4% in the first quarter. good news on labor costs and productivity on the inflation side of the fed's mandate, but still some issues on the jobless side. the labor side, continuing claims, 1,877,000. so, more people getting claims, taking longer to get jobs. interesting thing i was looking at today is, we started today with the fed funds futures, the

overnight index swaps, basically where they were on tuesday. everyone expecting at least one rate cut, and now we are pricing in a little bit more than just the one rate cut, because these numbers are apparently something that the market thinks will worried the fed. jonathan: my three basis point swing at the end of the curve, this is how we have responded to that data. we are down about two basis points on the front end of the curve. we were high going into the number i about one. it becomes a four basis points swing at the front and. but you can see how we responded to this. the wrong kind of upside surprise on jobless claims going into payrolls tomorrow. i will go back to the estimate for payrolls. it is 175,000. certainly if you get much of a downside surprise on payrolls, may be an upside surprise on unemployment, it goes back to the conversation we have had repeatedly. got to draw me a line.

tell me what the distinction is between a welcome calling and an unwelcome deterioration in the labor market. lisa: does the fed have time to assess the risks and make a move in september of 25 basis points? i do want to put into scope into context the size and scope of these claims. continuing claims coming in at the highest since november 2021. a market shift upward at a time when people are starting to see those cracks in places. jonathan: we have had a couple of head fakes share when it comes to jobless claims. they have come all the way back in. how much weight would you put on this number this week? mike: because it is such a big move in a short period of time, i would be reluctant to say it is a new trend. let's see what happens next week. we are pretty much passed the plant shutdown month of july, so maybe this does have some validity to it.

certainly there have been concerns about the labor market and how fast it might be slowing. you heard all of the questions for jay powell yesterday. we will be interesting tomorrow to see what happens and if we got a .1% rise in the unemployment rate, that would be an interesting, it would be interesting to see what the markets do with that. lisa: there is this issue going into tomorrow's payrolls report of what is more important, the headline number or unemployment rate? at a time where it is hard to gauge what the correct amount of jobs being created for this market currently are. what do you think is going to be more important? certainly not just for market participants, but also for policymakers? mike: i think the employment rate is what everybody is going to be looking at first. if we get a strange headline, job creation number, very high or very low, that might take precedence over the unemployment rate. the unemployment rate has been

influenced by the size of the labor force a lot in recent months. so, we have to look at that first. we come into this with both probably being important. you just have to see which one dominates. jonathan: appreciate the update. just to recap, jobless claims, the wrong kind of upside surprise. unit labor costs a little bit softer than expected as well. let's push this through the market. we will start with stocks. equities stay elevated, up by .6% on the s&p 500. in the bond market we were not just softer. we are down by about two basis points. directionally you can see how the market has responded to that economic data. the wrong side of upside -- upside surprise on claims. encouraging that idea that maybe this fed is going to go in september. perhaps even for some of you they think they are late already. let's go to foreign exchange. the dollar fades. the euro is stronger, but down on the session by .2%.

lisa, that debate gets a little bit more fuel going into payrolls tomorrow morning. lisa: especially because this is a point in time -- and usually it is not linear. that is what is creating anxiety for people. i'm a little bit confused, because we have people come on this show and say the jobless claims are the most high-frequency data and most dependable data to see and gauge the labor market. and then people say it is noise, you can dismiss it. i'm trying to figure out which is which at a time when the continuing claims are coming in at the highest pace since november 2021. jonathan: we have seen claims pop higher and then fall back. let's get to the panel. greg peters alongside subadra rajappa. you see we see signs of softening, but no immediate need to use the interest rates. where are we in the labor market at the moment? subadra: we are definitely at a

cost. today's number is something worth paying attention to. we want to figure out if it is something idiosyncratic related to barrel in texas or something else. we are hearing other headlines. perhaps intel is looking to lay off employees. this is something worth paying attention to. again, it is hard to read too much into one data point, like michael mckee was saying. you are going to have to look at the totality of data. that is when tomorrow's data becomes important. if you look at the headline number, or economists expect another 200,000-ish jobs being created, and the unemployment rate might take up -- tick up. the most important number tomorrow's going to be there employment rate. if that goes up that is going to send out a lot of barrels. jonathan: are we already in a recession if we go to 4.2%?

subadra: not really. i mean, there are many indicators of a recession, and almost everyone of those indicators has proven not to be a good predictor of recessions. to me, the one metric i track very closely is corporate profit margins. and corporate profit margins are still relatively healthy. as michael mckee pointed out, if it is because there is more people entering the workforce, higher participation rate, then that is something we might want to dismiss. lisa: greg peters of pgim also with us. i'm curious what your reaction is to these numbers, given the balance of risk, the fed believes, is measured. the labor market is a mystery but certainly showing signs of cooling. gergory: the markets have definitely moved from quarries around inflation to worries around labor.

at the same time, those worries should manifest quite differently, and they are not. if the bond market is worried about labor, then that should have an impact on risk assets, and you are not seeing it. for me there is a continued confusion around the data reads. the bond market continues to price in, i think, too much in terms of rate cuts. obviously a weakening labor market has a very different output relative to disinflation coming through the system. risk markets continue trade happily along. i think that disconnect needs to be rectified here over the next couple months or so. lisa: let's build on that. who is wrong? is it the bond market pricing in too much accommodation, or risk assets among who are pricing in too much strength?

greg: the answer is always a little bit of both, but i think the bond market is pricing in too much fat accommodation. -- fed accommodation. there is about 200 basis points of cuts priced in. i think you need to see a real rollover in the economy for that to come to fruition. and if that is the case and risk markets are priced too richly, the disconnect in my mind is more on the bond market side. at the microlevel what we are seeing out of companies and boots on the ground, it is still a robust environment. jonathan: you had said previously at the start of the summer that a macro story is a positive one for risk taking. is that your view still of things as we get deeper into summer? greg: i think it is. i look at the fixed income market. i think we are in a very good place.

while i do think the bond market is pricing in too much, it has been pressing in too much the past several years. and, you know, fundamentals look pretty robust. and less hiring is a very different environment than a lot of layoffs, which is where the somme rule starts to trigger. we have not seen that yet. we are not hearing that from companies. and so, you know, we think we are in a decent fundamental place here, and the bond market is pricing in too much. jonathan: start of the year, consensus trade, the fed is going to cut 6, 7 times, the economy is going to decelerate. july happens, big rally at the front end of the curve. do you agree with greg? do you take the other side of this? subadra: i completely agree. our point has been, for the last few months we thought the fed will be on hold for the

remainder of the year. i feel like the bond market is overpricing cuts for this year. as greg pointed out -- and he tracks this more closely than i do -- you are not seeing a rise in defaults in some of these corporations. the corporate sector seems to be healthy. there is money going into these risky assets and financial conditions are relatively easy. so, this move recently has come from a decline in 2-year yields. and at times it has come from rising long and yields. so, if you see real weakness in the economy you should see the entire yield curve, you know, klein meaningfully across the curve. -- decline meaningfully across the curve. a lot of this is the trump trade, marcus looking at what the impact of elections are going to be. -- markets looking at the impact of elections.

lisa: jason thomas of carlisle was on earlier. you seem to suggest things are priced to perfection on an index level. it seems like greg peters is sympathetic with the idea that there needs to be some sort of coming together with some froth coming out of the risk assets, and may be fewer cuts being baked into the bond market. do you agree that there needs to be a meeting of those worlds and it means mild losses on both? subadra: i think at some point there is going to be a meeting of both those worlds, given the fact that you are seeing some areas of the economy that are slowing down, that are going to perhaps do well, especially sensitive sectors of the economy are going to start doing well when the fed cuts rates. in the question is if they are going to be able to orchestrate a soft landing this time around or we go to the traditional route where the economy slows down too much and they are too late to the party to cut rates, and that leads to a more

meaningful recession. right now there is really nothing in the data that suggests there is any sort of urgency for the fed to cut rates. at some point that normalization will happen, where the economy will slow down and the federal have to cut more deeply. lisa: greg, your final thought. am i characterizing your view correctly that there is a price to perfection feel in markets here? greg: absolutely, lisa. as i mentioned, we are pretty constructive on risk assets. we think the fundamentals are pretty decent for risk-taking. the challenge we have is that it is already priced that way and then some. the risk-reward is quite poor. so, the markets have been front running, as they normally do. but i think it is priced too much for perfection here. it is hard to be on the right side of the trade from a long perspective. jonathan: that was lisa managing to make even the bulls sound bearish.

to the both of you, thank you. well done, brammo. let's get you an update on stories elsewhere. here is dani burger. dani: the democratic national committee says vice president harris is the only person qualified for the democratic presidential ballot. harris has secured the support of 99% of delegates since entering the race less than two weeks ago. as for the timeline, the virtual rollcall to make harris the nominee will run from today until the fifth. harris is then expected to announce her running by -- running mate by august 7. the party holds its convention in chicago the week of august 19. nvidia added three hannah 29 billion dollars in value in yesterday's trade. -- $329 billion in value in yesterday's trade. that 13% rally comes a day after a 7% route, and that was more than $390 billion.

in the last month alone the shares have seen drops that accounted for eight of the biggest market cap wipeout outs on record. it is day six of the paris olympics. simone biles and some of her teammates are set to compete in the event -- individual all-around final. in swimming there are four finals on the schedule. all eyes will be on team usa and katie ledecky after she won her eighth gold medal in the 1500 meter freestyle yesterday. the u.s. is leading in the overall medal count with 31. china has 11 gold medals and 21 overall. that is your brief, jon. jonathan: appreciate it, this morning. he will set you up for the day ahead and get the latest on the election campaign with eric cantor of mullis and moelis and company. that conversation, just around the corner. ♪

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jonathan: counting you down to the opening bell. 42 minutes away. your scores look like this. on the s&p 500, firm or by around .5%. moments ago we had a soft jobless claims print. the wrong side of upside surprise. yields dropped to -- dropped just a little bit. the trading calendar looks like this. at 9:45 we will get the s&p pmi data. manufacturing just 15 minutes later. after the close we will hear from apple and amazon. we will round out friday with the july payrolls report. and the dnc, set to nominate, let harris beginning today ahead of an anticipated vice presidential pick announcement in the next week or so. thus with some thoughts on this

is eric cancer -- eric cantor of moelis and company. this is not a therapy session, but i will ask you about your feelings. how frustrated are you that this campaign is just about feelings and not policy? eric: we have to take a step back and realize where we are operating. we are operating in the ecosystem of the digital universe we are in, and just the incentives, i think for much of the press and journalists, is to invoke a response that will go viral. that is where we are, and ultimately what will happen, the impact of this election will impact families, businesses, sectors, wall street or whatever. in the end we have to get down to this discussion. we are not there right now. lisa: you know what would go viral for me? what is antitrust policy? tariffs are you going to deal with? and what potential framework are you going to come up with for the federal deficit? or all of these questions we don't have answers to come up at the hands of it do not point to

one party being -- hints do not point to one party or the other being the prison -- being the business-from the party anymore. eric: we have seen this year. the year of the election. almost half of the globe's population has gone to the ballot box. which does speak well for democracy. i know there are calls for the demise of democracy, etc., but i will say the common theme in my view is this populism that has taken on a nationalistic fervor. our country is not immune from that either. i look at the left, and they have always been about populism versus business and main street. even my party now, we have seen an increase in the voice which advocates more populous -- populist, more robust government in the economy. you're going to be set up in the republican party for a real debate.

we haven't had one of those in a while. jonathan: what do you think that should be? eric: you have voices who have come to the fore. it has been no secret that our vice presidential nominee, j.d. vance, has taken a very different view than those of us who are classically economically liberal in terms of lower taxes, less regulation, a limited government posture and fiscal discipline. those are the kinds of things i think someone like me would stand for. and then as far as foreign policy, i don't think necessarily the voices that are talking about, you know, isolationism or nationalism, are necessarily those who feel like america needs to lead in the world. i think if it is not for our country i worry about where the world goes and how that impacts us here at home. jonathan: how do you bring that idea back alive in the republican party? it feels like it is dead and buried. eric: i think we are going to

see things play out. i do think we will win the election and hopefully have a unified republican government in washington that can affect change. i still think there is the overwhelming majority of members of my party who will serve in policymaking positions who do share some of what i call the more orthodox republican positions of lower taxes, creating an environment for investment, for risk-taking, to create more jobs, more productivity, and more wealth. lisa: is that what you tell your clients who ask about j.d. vance and some of his comments? in particular about lina khan and the ftc, and how much it has engaged in policy that he thinks is good in terms of breaking up business -- big business? how do you advise them that the republican party will be ultimately pro-business? eric: at the moment many of our clients are watching what is going on in washington, wondering what is going to

happen in the regulatory environment. if you look at this election, it is an election where we are going to have a change from a statutory and regulatory standpoint. because there is no incumbent running. if, let harris were to win, she is not joe biden, so let's see what that means. what i think is going to happen as far as the regulatory outlook is that you will see change, you will see a rotation in asset allocations. we are already seeing so much of that going on in the markets from the s&p into the russell. but i think all of this is going to bring about some more activity in the markets. i know from moelis and company, we are optimistic. lisa: do your clients and colleagues and yourself donate to both parties to cover your bets? or is it picking a sigh? eric: look, it's sort of goes back as long as i have been

attentive to this stuff. wall street, business in general, it is not a monolith. it never has been, and it is about trying to affect the policies that create an environment for growth. if there is an administration like there is now that is very hostile to growth -- i mean, if you look at lina khan, she has tried to pursue this very unorthodox thesis in antitrust, and the courts have pretty much pushed her back on that. and i think that there are many in the business community that do not share that view. it is incumbent on kamala harris to step up and say, how is it she is going to deal differently? jonathan: we would like to see that interview. it is working for her not answering questions. we would like to see that interview, particularly here at bloomberg. one minute. what is the biggest difference between trump 1.0 and trump 2.0. how has changed -- things changed? eric: there is only one person

who could tell you that, and that is president trump. look, the unpredictability factor is something that has worked for him. so, you don't really know. but i don't see any indication to demonstrate that the regulatory environment would be necessarily any different than it was under trump wanda, which was really a the regulatory environment trying to produce more investment and growth in our economy. look, donald trump is a business person. he does understand that washington can either be an adversary or be there to provide and condition the environment for investment. i know that is his goal, to want to win as america. jonathan: we all want that. we all want to win. thanks for dropping by. eric cantor of moelis and company. tomorrow, mohamed el-erian, sarah house, priya ms.. -- priya misra.

thank you for choosing bloomberg tv. ♪

>> futures flying after the fed. i'm katie greifeld. >> and i'm sonali basak. open interest starts right now. katie: coming up, investors cheer as powell said a cut may come in september. meanwhile, up the feeling this rally. all eyes turned to apple and amazon, who report after the bell today. details on how bill ackman ipo dream imploded.