by month's end if they don't receive emergency fund. catalonia on when it will declare independence. and the hard work begins in d.c. republicans are set to take their first concrete steps towards delivering a major tax cut in the u.s. from new york city, for our viewers worldwide, good morning, good morning. a warm welcome to "bloomberg: daybreak." i'm jonathan ferro alongside david westin and we welcome back alix steel. futures are dead flat after continuing that winning streak yesterday on s&p 500 and closing out wednesday once again at an all-time high in the fx market, euro, dollar back. really new surprise action in foreign exchange in the g.t.x.-10 space. alix: lots of movement happening in spain and a lot of buying in

to 10-year bond market. yields moving down by six basis points. there were concerns. those have dissipated and the rally is pretty strong. sterling down .5 of 1%. three week low. serious shade being thrown at theresa may today. jonathan: it's one of the cruelest things i've ever had to watch from a politician for quite a while. david: it was an important speech. jonathan: the letters dropping off the wall behind. couldn't have gone much worse. alix: david? david: time for the morning brief. coming up, weekly initial jobless claims and trade balance will be released. and at 10:00, factory orders and durable goods and we're going to hear from several members of the fed starting with jerome paul george john williams and patrick

arker. bond markets trying to sort out the aftermath that president trump might wipe out the puerto rican debt. something they tried to walk become. and overnight, the puerto rican treasurer say they're going to run out of money and had to shut the government down if congress doesn't come out with some healthy cash infusions. joining us is mark palmer. what was the program? -- welcome of the program. tell us what this means for the people who are ensuring all those bofpblets they really took a big hit. >> they did. 15 points on the day. we cover assure guarantee which are municipal bond interest which has exposure to puerto rico's debts. they were hit very hard

yesterday. the reality is president trump's comments really don't have any real impact on the process that's already in place in puerto rico as you said. you already had the governor of puerto rico and the budget director walk back those comments. what trump has the ability to do if he were so inclined is to remove one or more members of the oversight board but they were already inclined to cramp down bond holders. frankly, we still see the status quo in place. david: we just but the graphics up. it shows the puerto rico municipal bonds really dropping off a cliff yesterday but then they came back a ways. what is the market processing at this point? he says they're going to wipe them out and then well maybe he can't? >> it was just sheer panic on the part of bond holders and the equity holders in the municipal bond insurers. once the facts began to play

out, once we began to see what president trump could actually do which is very limited here, there is a judicial process in place in puerto rico, frankly. we believe once we get through that process, it is going to be favorable for bond holders. there is a guarantee for puerto rico for debt holders to get paid before any other expenses are made. also, the law that was enacted last summer provided that all eileens that had been in place prior to the law needs to be respected. the oversight board in puerto rico has not been respecting those liens. we saw pushback from senators cotton out of arkansas and till las saying they're not following the law. as we go through the court process, we're going to see the law brought to bear. jonathan: you have to admit that puerto rico has enough fuel behind them now to push for deeper concessions in court which could possibly lead to a bigger haircut? >> yes, we're going to be looking at lower tax revenue but

if you look at what was already in puerto rico's fiscal plan, they had not been accounting for $1.6 billion from medicaid fund because they said we don't know it's going to be coming every year. that's nonsense. they have come in historically. and they also set aside $600 million for expense overages, a slush fundament that's $2.2 billion. right now, the fiscal plan is only for $707 million in debt service. and it could more than offset any reduction in tax revenues. jonathan: these are the one that is have the direct claim on the revenue from the island. my question is as follows. what is the recovery rate that you think is going to be on these bonds? >> we think it is going to be higher once we get into a judicial process. we begin to look at where are the guarantees and the liens that are in place?

jonathan: much higher where? the 40's, 50's? where do you think the recovery rate is? give me a bracket. i know it's hard to pin it down. we've had an aggressive move from below 50 down to the low 30's yesterday. and i'm just trying to work out where you think the recovery rate is. >> if you look at where we were prior to the hurricane, the hurricane has had an impact with regard to tax revenue flows. there's no question along those lines. but the guarantees and liens are still in place. we have been trading in the 60's before the hurricane occurred. that's a deept anchor in terms of understanding where we can return to. alix: we look at the premarket. is it like the b.p. spill? as long as you get the headlines from trump coming down on the debt holders, as you say puerto rico cannot pay their bills, is that bad news for the stocks? >> you're going to see continued pressure on the stock from those particularly who are using it as

a hedge against their puerto rico debt spofrpblte that's one of the things that's getting missed here is that there is a technical that's rippling through all of these stocks. at the same time war, we're seeing is an awful lot of investors coming in trying to understand what m.b.i.s. is really worth and we think a lot of bad news is based in that. david: mark what, does this mean for bond holders outside of puerto rico if anything? the media said what about illinois, for example? which had a lot of debt and they said this is all municipal bond market is going to be hit. to puerto rico? mark: they haven't seen this as the beginning part of the contagion. this is where president trump's comments are important because at the point on the which we believe the government can step in and begin to erase debt because it's inconvenient, that would have a ripple effect for

the entire market. but based on the comments from puerto rico's governor, from the budget director, you know, toward the end of the day, you began people to see to come to their senses to what president trump can actually do here. david: did this move affect bond insurers outside of puerto rico? mark: no. it was really isolated to puerto rico and those who were looking at the stocks, you know, are laser focused on the outcome in puerto rico which we believe given their rights and the liens, the guarantees in place are the outcome is going to be much better than what many investors have been nticipating. alix: coming up tomorrow, it is job day in america. bill gross and janet henderson will join us with his treeks the september pay rolls data. it is 8:30 eastern time. this is bloomberg.

jonathan: the dispute for catalonia still continues. lewis is refusing to entertain the possibility of talks saying that would set a dangerous precedent. >> if we accept any sort of let's say mediation, with a we are saying is a very dangerous precedent not only for spain but for the whole europe. jonathan: he went on to call the government zphain said that independence would be dangerous or the people.

>> it could affect the current flow. it could affect the quality of the savings of the catalan people. so that's why, you know, we are fully determined to defend to the entirety and the unity of spain. jonathan: joining us now with the latest from barcelona is our reporter. i don't see any sign of progress here whatsoever. do you? >> yeah, no signs of progress but a really tough, strong language to say there is going to be no mediation. you have to drop this now. the administration has gone completely rogue and until you drop it, there will be no talk. they have seen rough patches. bonds really successful. bond auction from spain.

and finally, catalan banks are leading banks. a lot of this has what to with what he just said. this is >> if you look at the number of branches, this is the biggest branch in banks. they can guarantee to zpain the eurozone and the central bank. jonathan: talk to me about what friday is so significant for these talks and the direction of catalonia. >> exactly, john. friday is a significant day because it was the precisely when the catalonia resemble was announced before the civil war. so our understanding was if

there was a major announcement, it will be made friday. however, the government had u-turned on this. the regional precedent -- said i see myself as the leader of an independent nation. we're ready to development we're going to go full speed ahead. just yesterday, he said we want to take a step back and mediate. the spanish government now knows they have the upper hand and they said no mediation. drop this now. david: has the catalan leader eld out an olive branch? >> he might be or you know, you could argue that he's realized he's backed himself into a corner. first of all, domestically, they have no support. he has got the -- he's right on the constitution. he's backed up by the court. the king, that speech he came out saying look, guys, this is not about -- the state of the nation. we all have to come together.

the opposition would have to back him up. no allies coming off and the catalans were hope the european union would intervene after those nasty pictures on sunday. but the european union hasn't changed at all. it's the same line when it comes to catalonia and independents. this is a domestic affair that rajoy needs to deal with. jonathan: thank you. oining us is jan lloyd and nicholas from london. let's begin with you, nick, and i want to talk about the bond markets specifically. in spain, that's where this is played out. how long and what needs to happen if, at all, for that to ? eed out from spain >> well, the market has been very calm. we haven't seen hardly any spillover.

it's been very calm. for things to get a lot worse, you really need to see negotiations break down between p.p. and the parties in catalonia. but i think people worry after the weekend because of the violence from the streets. it was orly handled. but as long as their policies are more sensible, there won't be violence on the street, it should stay pretty calm. jonathan: the headline drops that catalan separatists push for independents and declare independents from the -- independence from the state and madrid. what does that mean? and how do you react on that information? >> we've seen these things before in europe. i'm originally belgian. ultimately, there's a lot of stakes for both when it comes to money and jobs as decent compromise available. catalonia have a different

language. they want to have some say within their own region. there's a lot of emotions at this moment. i think ultimately, the two sides will talk together. some involvement will happen for catalonia. that will be the compromise. this is not a global or a euro issue at all. alix: walk me through the evolution of trading geo political risk. i feel like the again of it was you want to sell it. and you've gotten perhaps you want to buy it. is that what you can take away from what happened the last three days? >> i think the market is not really buying the pull or the risk. they're looking through as nicholas was saying. this is not sell to europe. this is not a brexit. this is not a north korea. this is a local problem. there will be effects on the local banks and local asset prices. i give it another week you want to be buying spain then. alix: nick, what did you make of the auction earlier? we saw pretty strong demand.

yields creeped higher but nonetheless, do you like it? >> yeah, it is very strong. there's a couple of things that robably helped it. it just shows at the end of the day when money starts becoming involved and people think about losing jobs and businesses, it attends to come in mind and the hard line talking about how it ould be insane for the catalonia government acting the same way. the hard line is not going to compromise the catalonia government backed into a corner. it probably gives some comfort to people in the auction and they are quite happy to take that response. david: you said they're looking through, markets are looking through geo political risk. where is the line you're looking through and noirg? at what point is it us a

terrorism? -- alix: yeah what, does it mean? alix: what is the market missing a larger story? >> on brexit, we did. all these local regions, part of now southern countries. the only way they can survive economically when they're a part of a federal europe, the pro european federation. that's the only way that they can survive. it is not europe. it gives you temporary problems. given that we've seen the president on this before, this is not something that i think we ot completely wrong.

david: coming up tomorrow, it is jobs day and we're going to have gary cone. he's going to be giving his reaction to those pay rolls numbers. that's live from new york. and it will be from washington tomorrow. this is bloomberg. ♪

emma: the british owner of legoland has approached seaworld about a potential deal. according to people familiar with the matter, merlin entertainments has made a bid for part of seaworld. found goldman-sachs has a post brissett home in frankfurt. -- brexit home in frankfurt. and that's your bloomberg

business flash. ohn? > what a disaster. u.k. prime minister theresa may faced a heckler yesterday during a speech that many have called disastrous but may did her best to reassure the split will happen saying that the u.k. is preparing to leave the european union without a deal. this ahead of a fifth round of divorce talks in brussels. nick, let's begin with you. this couldn't have been or couldn't have gone much worse tan it did. i don't think anybody's talking about the substance of the speech whatsoever. the letter observe the board behind us is falling off. it was a heckler. then she lost her voice and she needed someone to give her a cough sweet. how long is prime minister may

prime minister may? >> i think she's probably got longer than most people expect and that's because of the alternatives of the conservative party aren't great right now. the labor conference went huge. they've been quiet on brexit. they're not giving the definite opinion of what brexit looked like. and that threat and that fear in the background is probably enough to keep the conservative party united for now. and in britain as well in england, there's a terrible speech and they try to not kick people went they're down. things not not going terribly for her. jonathan: about a month's time, we make it the first rate hike in the bank of england from a decade. they're making their moves. the government doesn't seem to be making moves whatsoever. when is it for the gild market?

>> yields go higher from there and the bank of england will hike. you think about why they cut in the first place and why they put in that q.e.-program, it was a very different environment and it was suggested that wasn't mostly cut. nd since then, many people expecting recession. hardly due to the bank of england's program because in businesses don't take the jobs out of the country overnight. fire people is a very expensive process. we will have to wait to see what kind of outcome and mark carney made an excellent speech last week when he said part of the consequences of brexit is that it's almost like britain is deglobal sizing. and it made the potential growth if the as high as we once thought and that's inflationary.

and lastly, the bank of england has to be concerned about the inancial aspect. and you are seeing this drop in u.k. savings rate. and i think that we'll be concerned about that. and you have the current account that says we're moving back. so hike rates in order to get -- so we do think it will hike. jonathan: thank you, nicholas. next, in the next hour, steve widing will be joining us right here in new york. this is bloomberg. ♪ is this a phone?

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see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit, or go to xfinitymobile.com. jonathan: from new york city and viewers worldwide, this is "bloomberg: daybreak." let's get you up to speed on in the narcotic action. a series of record highs on the s&p 500. another one of the close yesterday. futures pretty muted.

the price action on the screen as you can see. we go nowhere. up about a single point on the s&p 500. over in europe, if you're looking for shot price action, look for the aye becks to snap back there. the story of the bond market really stable 24 hours and 25 we're payroll to be down about .6 of 1% on the day so far. that gives you a foal of the market. let's give you the headline outside of the business world is emma chandra. emma: the girlfriend of the las vegas shooter said she did not know he was planning to hurt anyone. mari mayor mayor -- danley's first -- she said steve paddock had sent her a trip of the philippines and wired her money there. south korea had a free trade agreement with the u.s.

south korea isn't saying how it might be changed. the trump administration has been critical of the deal for increasing its trade deficits. the u.s. is south korea's second largest trade partner. d it is the first time a monarch has ever met with russia. the king wants russia to agree to extend an agreement cushing oil production. the visit underscores a shift in saudi strategies and russian influence. i'm emma chandra, thank you. david: last week, we got the tax plan. and today, we get the first real indication whether that tax plan is going anywhere. and that's when congress takes up the republican proposal. so, kevin what, will we know at the end of the day we don't know

now? >> this is step one and that's how it's being described on capitol hill. they're going to advance this budget today. then comes the hard part because there are a lot of differences among the republicans including on a host of different fronts on the state and tax deductions. that has really become perhaps the most important sticking point right now amongst republicans. but there are some other things percolating beneath the surface as well when we start talking about things like capital gains. so there's no consensus right now in terms of republican unity on how to pay for this tax plan. but things are moving along and today, step one, with the bunk. david: so in order to get to the tax plan, they have to get a budget resolution in place so they can do it with 51 votes. is there any question whether the republicans will get that budget resolution done? >> yeah, i think the expectation is that this budget resolution does get done.

it is essentially the vehicle tax ill move them to the reform. during the health care debate, we had a similar process through reconciliation. they had to pass a bill in order to advance health care. so essentially, all this is doing is saying start your engines. we're ready to talk action form and get through this. but there's also one other hurdle and if you're outside of washington trying to put together the time line for all this, i would still pay full attention to december 8. that is when they had to pass a federal funding bill and raise debt limit as well. there's going to be a lot of political theater and that's really the hurdle now between in terms of procedure and in terms of getting the tax reform. they've got to get through december 8 now. jonathan: lots of hurdle. we're going to try to clear win of them today. alix? alix: take a look at what's happening here on the home front.

the bloomberg u.s. economic surprise index, you can see a big jump up as we've gotten better indicators from the economy. so the question being is the actual risk that we do get tax reform and the economy overheats and it's been coming in real strong. >> indeed. better data are good. and in particular, globally, they're driven by capital spending. they improve in the supply side. and that creates inflation. if you're doing a lot of infrastructure spending, there's nobody left unemployed who can build all these bridges. that is inflationary. yes. so it is purely tax stimulus. the psych will be shortening. we're more likely to overheat

earlier. the fed would have to come in. you get a lot of volatility. i would rather have been given a little bit of tax stimulus, tax reform would be ideal. big deficits, i think you have to think two years out you have a recession. david: what is your base case on u.s. equities based on that outlook? >> we're long. we see them moving up further. driven in large by earnings. multiples have increased. but with upsides on growth, in growth numbers. they are moving up. earnings will be upgraded. i think equities drift up. next year, we don't see double digits. 'm seeing single digits. jonathan: how difficult is it going to be to read this data? and economists are guessing more. and is the payroll's guesses ahead of tomorrow.

the survey conducted by bloomberg and what you see right here is the blue line is the highestest stat math going all the way back to 2009. and the red line essentially is the lowest estimate going all the way back to 2009. and the spread is at the bottom. we have a spread between the lowest estimate and the highest estimate of 305,000. that to me says economists don't have a clue what's coming tomorrow some if you don't really foe what the data is going to be, you can't depend on the data once it comes through. are we flying blind for the next couple of months? >> we're going to look at commentaries around and how much of that number is depressed due to hurricanes? we think about 75,000. our number is 100,000 for tomorrow. but aside from that, we're trying to make a judgment as far as the underlying is 175,000. if it's a lot lower than that,

or if the government says the effect of the hurricane is smaller, you're going to have a negative impact. jonathan: essentially look through it then. are the federal reserves going to do the same thing? >> yes. they will focus a bit more inflation at the moment. but for them, they've seen better economic data. if inflation does not surprise them on the downside. they will give the december hike. alix: that sounds like goldilock. i want to pivot on that. it says what appears to be a goldilock economy can feel low volatility trap where excessive stimulus keeps a set prices rising even though real economy risks are rising. the story is nothing new but the economy risks are rising. less stable rising rising in a corporate level and individual level. what do you see? >> the things you mention right

hand very long term. inequality is for decades. so the low economic volatility is a reality. i think it's a side effect of low growths. world economy dominated by huge corporations invote vacation is low. that gives you low volatility. gives you low risk premium and high asset prices that is not about to be broken. yes, we have volatile politics but in this country, so far, the system as we call it, is working. policies are actually nothing volatile. politics is. david: if you're on the fed, does that argue for hiking rates in the sense that you get asset price inflation because of liquidity and other things in a false sense of security from the low volatility. does it on the margin argue that you should be raising rates? >> yes, it is not a false sense. their low volatility is a reality so far. and the federal reserve, they

don't think about moving to tight point they are worried if they're staying behind too long, they ultimately have another asset volatility. but beyond that, they want to gradually move up all their hiking is going to be the slowest ever. jonathan: you could be describing the european central bank as well. let me give you the highlights. they expressed concern about the speed of recent euro appreciation. and exchange rate volume. not sure how much is out there. on the appreciation side of the story. and the fx rate is 1.1747. we just bounced off session lows. at the same time, the officials pushing forward the agree with the substantial report still needed. we could gauge from the news conference quite clearly the conditions were increasingly fallen into place.

the discussion really goes as follows. do you get more benefit from a longer intended purchase arises combined for the greater reduction in pace or do you have a shorter period of purchase pass and larger monthly volume? and it is that debate, david, that's going to con over the coming months. david: we'll pay attention to every little bit of evidence to try to sort that out. f you're going to -- you can tune into our college over on the radio. "bloomberg surveillance" can be heard in washington, boston, and the bay area and all across the united states on sirius x.m. radio. live from new york, this is bloomberg. ♪

emma: ranking member of the budget committee jan loeys at :30 a.m. eastern time. david: russia and saudi arabia look to deepen their ties. echoing very similar sentiments from russia president vladimir putin. >> i'm saying that we don't know yet whether we are going to extend or not and the question is being asked when we're going to extend it. once we decide to extend or not to extend, that is when we're going to decide on the time frame but overall, it is the end of 2018.

alix: james haren is still with us and jan loeys. james, the rhetoric is no surprise that tear talking up extending those cuts but what's the reality on the ground? >> the reality on the ground is we have to wait until november to find out what opec is going to do. but the signaling from saudi arabia and russia who are really drive the whole opec deal is positive. they're going to happen what's going to happen after march. that's good news when the common deal ends. alix: do we really feed it? if you take a look at the bren curve and this is december 2017 contract versus 2018. the more you get in the green, the more backward dated we are. prices are tighter now than they will be in the future. as long as that stays tight and

you can look at it as a pure look as to what's happening in the oil community, why would we need that cut extension? >> the fact is that the conditions in the oil market now, they really are flattering opec a little bit. we just to in the period of strongest demand where the stockpile declined a lot. going into the first quarter of next year, the balance looks a bit weaker. there's more supplies coming on. you have a season of low and demand. the concern was that opec put in the cuts just as there was this natural seasonal period of surplus in the market anyway which could have a negative impact on prices. alix: fair point. russia and saudi arabia are the nes leading the charges there. what kind of rhetoric do you think we'll see for the other players like iran and iraq but don't have as great of a track record? >> everyone seems satisfied to continue the deal for the moment. for someone like iraq, they've

managed to get away with really only implementing only about half of he cuts they say. iran doesn't have a huge capacity to increase production beyond much of where it is now. they're happy to continue for the moment. some of those calculations may change. but for right now, it doesn't seem like there would be a significant amount of opposition if the saudis and the russians want to extend again. alix: walk us through the other cooperation in terms of oil but also in terms of other areas in the economy. >> well, they signed a bunch of agreements today. nothing particularly binding but they're looking at deepening their cooperation behind just focusing on production cuts. opec gets -- is very keen to buying -- binding russia into the fold so they can have the relationship on a when the cuts are no longer required. opec has -- the staady said the

cooperation with russia has breathed life back into opec and they really want to show them stay and it's part of the family, really. alix: we talk about syria, iran, you know, a little dinner chat there. what's interesting is as we take a look at energy companies versus the price, they have underperformed. the white line is the s&p energy index. the correlation's picking up but at last passive underperformance. do you want be overweight energy? >> we are. exactly on your point, tom. but i wouldn't run it too long because i think oil prices are the ones that are running ahead of the lean of what you see in energy company prices. ultimately, the battle is between shell and with opec. opec is fighting -- they've been disciplining better. that push prices up a bit.

probably get a bit higher in the next month or so. but into next year, we're back into a four handle. david: it feels like a tug of war between shell on one hand and opec and the restrictions on the other. we sort of seen trade within a certain rage. more generally for investors, is it more important where the level of the price is for oil if or is it more important to just not move too much? >> for brod investors, tom, we wouldn't -- ultimately, it's a cost production for a lot of companies. low volatility and commodity prices is ideal. you don't want to have the movement up and down. slow volatility gives you low risks premium. so the level itself, it's a bit -- it's a sector issue. higher prices is better for oil companies. it goes back to $20. we we'll see a lot of capital --

actually see a lot of capital prices going down. around the current level, low vol advertisement alix: we're getting another headline saying king putin is arriving king salman to saudi arabia. what are you making of that? if we have a closer unity between a saudi and russian government what, did you that mean? >> cooperation and talking is great well need more in the world in particular around that. alix: to take away from jih olitical risk? david: good point.

this is bloomberg. ♪

emma: u.s. oil exports hit a record high last week but it won't last for long. gulf coast oil refiners are still recovering from hurricane harvey. lower demand from them forced crude to seek overseas market. it is expected to supply once u.s. refineries come online. e-commerce shopify fell 12%. the most ever after sit ron research said it was short the stock. richon calls shopify a get quick scheme. shopify isn't commenting. and google is introducing a second generation of consumer electronic device. that will be google branded phones, laptops and speakers. one of the devices is a surprise at $249 lightweight camera

called google clip. it can be clipped on to table and chairs and used as a form of artificial intelligence to choose which images to capture. john? jonathan: thank you. i want to look at the top stories around the table today and beginning with prime minister theresa may's speech yesterday to the conservative party conference. it started bad and it got worse and then it got worse. so first, a gentleman handed her a slip. it means you're losing your job. she took hold of that. she ignored the heckler. she tried to move on. then this. >> what -- why we will never -- excuse me. we will never hesitate. jonathan: started to lose her voice. just keep an eye on the background behind you, the f for everyone. the word started falling off. building a couldn't that works for everyone and the words start falling apart. this was meant to be the speech to get the confidence of the whole conservative party behind

her once again. and it just fell apart for her. david: and you have to feel sorry for her. jonathan: i think many people did. david: you don't feel sorry for maggie thatcher and she could have taken control of that situation particularly with the heckler. jonathan: she did not want sympathy. she wanted to be a hard individual to negotiate with europe in the toughest possible way. things have changed radically. alix: you got have some improv, some fluidity in these situations. that was a comic moment and she didn't. especially the coughing. i want to talk about the digital currency. bitcoin is dangerous and dubious according to the e.c.b. governing council. it discussed restricted coin offering. if everyone is freaked out about bitcoin, is that a contrary indicator? david: it shows the it's important. you get china and south korea

and now the e.c.b. leader, it must matter. alix: they're scared. jonathan: if you go to the austrian central bank in vienna, you walk in and you take a right and in reception, it is available for the public's going to see. there is a bar of gold in there that you can reach your hand into and touch. so in austria, they are very much about hard currency and things like gold. alix: like paper currency. jonathan: yeah, the idea of itcoin is quiet far-fetched. david: that's part of the concern of the central banks. they're creating money as it were and they've got lots of money putting together. jonathan: i thought this was really interesting. there is be the only bubble ever that wall street was the last to get in on. because you see that at first and this will be the only bubble where wall street is the last to participate in. alix: they're scared. jonathan: maybe when wall street gets in, that's the top.

david: maybe we won't be the last in. alix: the was the one who wouldn't take a real position although jamie diamond did. how do you hedge your bets? and you need the currency change, right? david: whether it's bitcoin -- jonathan: there we go. alix said it. ming up, global investment chief strategist will be joining us. futures really going nowhere after a seven-day winning streak on the s&p 500. and a record high to close from new york thinks bloomberg. ♪

so we need tablets installed... with the menu app ready to roll. in 12 weeks. yeah. ♪ ♪ the world of fast food is being changed by faster networks. ♪ ♪ data, applications, customer experience. ♪ ♪ which is why comcast business delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver. jonathan: partly and that plunges. -- treasury secretary says

government shutdown by months and if it does not receive emergency funds. the spanish economy minister tells bloomberg he rules out any sort of mediated talks. hard work begins in d.c.. republicans set to take their toward a major tax cut in the united states. a warm welcome. i'm jonathan ferro alongside david westin and alix steel. a seven-day winning streak on the s&p 500, the longest since may of this year with a record high. futures are dead flat, 90 minutes away from the open. up a single point. price action in the treasury market, yields going nowhere. in the fx market, dollar strength starting to come through. euro-dollar now on the back foot by 2/10 of 1%. 1.1736 is where we are at.

alix: you see the ibex up by bond1% as you saw a strong option. potential better news out of catalonia. a 10 year yield. by theg gets hit disastrous speech by theresa may. it gets funnier every time. gold pre-much flat on the day. david: time for the morning brief. we will eastern time get weekly initial jobless claims and trade balance data. at 10:00, we get august factory orders and durable goods data three we'll hear from several members of the fed starting with jerome powell. john williams come and phil duffy fed president patrick harker. in the afternoon it will be -- jonathan: president trump has sending puerto rico is the bond market into disarray.

suggested wiping clean puerto rico's $74 billion debt and bondholders were not the only ones hit hard. bond insurers plunged as well. sent the stock to its lowest price since november of 2016. joining us in new york, steve wieting. it is a tough question but a simple one for me to ask. fromeneral obligation bond rico matures in 2025. in $18 billion universe. for this one right here, yesterday in the low 30's, about $.38 a madonna, what is the root -- $.38 on the dollar, what is the recovery rate? where are you at? steve: individual investors need to realize this is a sub investment-grade security that is the kind of question you should not have to ask about

most municipal bonds. no one is going to have a crystal ball into the future and say exactly how strong will puerto rico's economic recovery be. how much of this will come as a result of assistance from taxpayers across the board in the united states or not? clearly courts will make some decisions and these are not entirely going to be decided at the marketplace. the most speculative corner of what gets done in municipal finance. don't take that particular view and extrapolate that to the entire bond market. sub investment-grade for a long time. the fact that these debts grew to amazingly high levels relative to puerto rico's capacity to repay him even without hurricane, really shows the problem we've had with guarantees. if you want to ask that question, a very wide confidence range around the recovery.

jonathan: $.60 on the dollar, you know there is a problem. that is where we were at about a month ago. i guess my question is if you are puerto rico, you would be feeling pretty confident to go through these courts and push more aggressively for bigger concessions that would lead to a bigger haircut. startingwould say as a point, the difficult thing puerto rico was in as an economy ahead of even this natural disaster, i think that will be their focus. talking about how to play relief relative to a true economic disaster. david: take us through the mechanics of what an investor would look at. you said this is not a safe investment. in a world searching for yield, some people are buying even at lower rates. ? what do you look at? the economy of puerto rico, what's going on in congress? steve: all credit managers will look at the particular entities. this is not something people do

unless they are looking at bond indentures. thanking very carefully as to how they can speculate about the probabilities for what goes on in washington. look how badly that was done over health care, taxes, everything else that is broad. a highly speculative activity when you're dealing with this. when people argue, how can you put this in a portfolio, it all depends on the degree to which you are diversified across the sector. how big a share of your portfolio is it and what other asset classes to you own. you have somebody who has a big stake in this investment, they will give you their point of view based on -- david: are you buying a bond or a piece of the lawsuit? steve: i think that is a practical way of looking at it. this is a distressed situation. it's been that way for years. you're not simply looking at yield relative to the

marketplace. broadly when you take a look at other municipal securities. alix: you mentioned you cannot look at this and extrapolate what it means for the broader muni market. ? why not steve: the idea that you have that kind of financial problem across other issuers, there are some issuers that have economic problems and they tend to have significantly higher yields in the broader market. if you want to take a less concentrated portfolio view of some of those issuers and say there could be problems with some, but in general the is a money good investment that trades at a premium or discount to u.s. treasuries. unless tax laws change significantly and what's going on with income taxes will have some marginal difference into , you look atmunis that and say the broad asset class is not the problem.

heard estimates that damages could be $95 billion. they will not get tax receipts for the for seeable future. how does this play out? steve: this is a story of aid from the broader united states. repair, just like you're dealing with in texas and florida and any other areas where there are disasters and you have to follow that story. natural disasters don't have a life of their own the way human beings that fight wars and create bubbles and busts and the sorts of things. natural disasters have one clear .irection, disaster and repair it should not matter to long-term trajectory for puerto rico. the kind of debt burden they had going into this whole event, over the last 20 years, that is a real question as to whether this has been properly working market. jonathan: that kind of generalization would apply to most economies typically. hereis case, i do wonder

is an economy and an island that has faced population decline over a number of years. post hurricane, this -- there are many economists that suggest the decline will get worse. to say the rebuild effort could turn things around, they will be up against it. steve: you think about what can be done. this becomes a question of federal policy. what can be done to restructure debts, deal with recovery on the ground in terms of this hurricane? let people reconsider. it does not have to be a destiny that puerto rico's population contracts. if the right restructuring and economic policies are in place it could become a place that thrives over long period of time. alix: steve wieting, you will be sticking with us. tomorrow is jobs friday and we have none other than gary cohen joining us to react to the september payroll reports. do you think you will tell us about his new chief of fed job?

jonathan: he has not recused himself from the selection process. you think you might be saying -- david: we got a vice president that way. alix: lots of questions, this is bloomberg. ♪

david: this is bloomberg. a beautiful day on capitol hill as the house gets ready to take on the republican budget proposal. special significance because the path to tax reform passes through that budget process. here to explain his kevin cirilli. we want to get to taxes. the republican plan as i understand it, they will spend

more money on military, save on social programs. what happened to the deficit? kevin: that's the question a lot of republicans like senator bob corker from tennessee, who recently announced he's not running for reelection, they raised this concern about the deficit. when you crunch the numbers, and there's different numbers for how much the president's tax proposal plan would save. some estimates have it at $6 trillion. they have not offered a way to pay for it. senator bob corker has raised the concern and said he is not going to get on board with any type of permanent tax cuts unless they have a way to offset the deficit. 500 $50 billion annual deficit, a $20 trillion deficit, national debt. that has raised significant concerns. all of this will be heating up, but today with the advancement vehicleudget, is the

they can debate this issue of tax reform. senator bob corker essentially laying down a warning sign. it comes just after last week, senator rand paul also has raised concerns about this as well. david: this is sort of setting the stage with the budget so they can get into all of these fights. on the one hand you have corker saying i don't want to raise the debt. one of the ways they will pay for some of it was the state and local tax deduction going away and you have republicans saying wait a second, not in my state, i will lose constituents. kevin: the points i would raise about that, the state and local tax reduction is only about $1.3 trillion in savings out of a $6 trillion plan. regardless of whether or not that becomes part of a plan to pay for it, they still have to make up a hefty chunk of change in order to pay for the rest of it. the second point i would make is senator bob corker is by no means someone who does not like

military spending. he has been strong on national security issues. very interesting that he is someone who is raising these concerns and laying down that morning call. -- that warning call. to paraphrase, a trillion here, trillion there, pre-soon you're talking about real money. alix: do we actually even need those trillions? take a look at the bloomberg. the atlanta fed gdp forecast. they tend to track each other somewhat and we now see a divergence. inflation that just can't pick up. the difference between the real side of the economy and consumer price inflation. joining us as carl riccadonna. and still with us is steve wieting. carl, the data we have out this .eek, killer data

are we overheating except for inflation? carl: i don't think we are. the unemployment rate is grinding lower so we are moving in the right direction for things. until we see inflation pressures perking up in a more material fashion, this tells us maybe the economy is simply undergoing an organic acceleration as we move to lower levels of unemployment. i don't think that's overheating. it's appropriate for the fed to gradually correct their stance toward a less crisis era type of stance for monetary policy. kind of we do get some text stimulus, does that give us the reflation we need? bite: itch strengthens us a -- it strengthens us for a bit. any impact on savings and investment. every time our labor markets have been this tight, have improved this much, wage growth

has been faster than this. what it's telling us is there is more capacity to grow. the phillips curve is remarkably flat and federal reserve officials, when you observe -- rate atn rate which income and wages are growing, we should not be stopping this recovery or shutting it down. we should simply be not stimulating it. i think that is fortunate that we are seeing capacity to grow, even at this labor market. jonathan: can we get 2.9% for the next 10 years out of the u.s. economy with a tax plan that's been put forward as you see it? require an would acceleration in productivity growth and probably a stronger labor force participation rate. i don't think it is outside the realm of reason that you will see a stronger productivity growth rate, see technologies that are promising right now do better than the 40 year low in productivity growth, or seeing

labor force participation, which has had a lost decade here, see that improve. it's at the outside realm of possibility. carl: i think it falls more into the realm of the fed and tax policy. , but if wecan help -- the trends that were mentioned, bending the participation trend and also leading to a rebound in productivity. these things don't magically appear. this happens when you allow the economy to run a little hot using famous that lingo in that regard -- fed lingo in that regard. workers are getting a greater share of total income. if wages are increasing, suddenly you see marginal fence hitters returning back into the labor market when rage -- when wage pressures increase businesses make decisions to control that cost, which is another way of optimizing

productivity growth. if the fed jumps in front of that, they will squelch it. labor economist like janet yellen is sowing the seeds for those trends to turn around, which means maybe we should not be the nattering bobs of negativism. maybe we can go back -- \ jonathan i recall labor market economist delivering the speech you read out which was fed chair janet yellen. she is hardly letting it run hot. carl: certainly we are not running hot but some of the potential candidates we have seen on the shortlist for the next fed chair would have stepped in front of this more aggressively. the john taylor's and kevin walsh's would have applied sooner. steve: the federal reserve would not have the comfort and ability to go as gradually as it is. markets have said it's going to be even less than that of a fed outlook we have. that may not be true.

this is half a tightening cycle if you take a look at what the fed is expected in the next few years. carl: as we heard from the vice chair yesterday in the interview with tom keene, you have to be willing to knowledge when fundamental changes in the economy. david: you say it's up to the fed. at the same time we have a president and a number of members of congress -- we will put up a chart. it plots unemployment and deficit spending over history for the united states. we are at that red spot, 4.4% unemployment. with this new tax plan we would be going to 5%. we would be well off what has ever been done historically. carl: what's critical here is something chair yellen brought up in recent testimony, changing the speed limit of the economy, versus simply giving a cheap sugar high, a deficit funded tax

cut. you can achieve any growth rate you want if you're willing to borrow enough and cut taxes enough to achieve it, but that is not sustainable. this has to be a more comprehensive, long-term approach. jonathan: let's spend the next one hour 40 minutes beating up carl riccadonna. david: he can take it. alix: he would welcome that. david: carl riccadonna, we love having him here. steven wieting of citigroup private banks. going to be staying with us. democratic congressman john yarmouth of kentucky will be joining us to discuss the budget . he's on the budget committee in the house. this is bloomberg. ♪

alix: unrest in catalonia after sunday's controversial referendum on him dependence on

independence. -- on independence. joins us now from london. ruling out seems to be a nice way of saying no way in hell is this going to happen. francine: i think you're right. the tone from the finance minister was stern. we will not start in talking or mediating. the instability may persuade banks to shift out of the catalan region. i did try to press him to try and figure out how this gets resolved. he kept on saying they will not the separatists because this was illegal but he did not give me a firm answer on what the next step can be. catalonia is not going to be independent.

we are not -- we are fully committed to take all the actions and to use all the instruments at our disposal in order to avoid that. fracine: he was very clear. cap saying spain has nothing to discuss with the secessionists until the rule of law is restored. i know there was nervousness on the markets. said you should not be worried. reassure depositors and the banks based in the catalonian region that nothing will happen to them. spain had a successful bond option for five years, coupons. alix: what did he say more about the banks that operate in catalonia? fracine: i asked him repeatedly whether he could give us an idea of the outflows he saw, whether he would say the outflows have gotten worse since the referendum on sunday. he did not want to talk about that, but he -- this is mainly kesha

bank. he said they had spoken about whether they would move elsewhere. outside catalonia it is the richest region but somewhere like much rid -- like much rid. madrid. by moving headquarters, it means that the deposits are much safer for the clients of these banks. jonathan: thank you very much for joining us. steve, the ecb has a decision to make. if you need to drop qe from 60 billion, do you drop it to 40 and have a shorter space and time that the 40 billion is played out over or du drop it to a lower amount and have a longer total time for those -- steve: a fantastic technical question. the amount at which the ecb has

to dial down is significant in 2018. their own view is, by simply maintaining negative deposit rates, by not winding down the size of their balance sheet, that this already does a lot. if you go a little bit in terms of tapering, you will have to go much quicker in terms of winding it down. alix: when it comes to spain in particular there was a story that the ecb will go in and buy more spanish debt. is that rhetoric sort of outdated at this? point steve: a bit outdated. look at how the market is handling this generally. a very long way from the view that there was contagion over any and every issue. spain is the fourth largest economy in the eurozone right now. you think about the impact greece once had on these markets . this is much smaller than that in terms of impact. very much a local issue in the

marketplace right now. appropriately so, that this idea of a separation is a long, arduous process, if it occurs at all. -- veryour markets concerning for international investors in their economy. this is not going to be a euro wide issue. alix: when the theory was you want to buy europe because of valuation and all of a sudden you have markets peeking back in may, what is the trade? visit the for frills like spain and italy that provide the most upside value -- the peripherals like spain or italy that provide the most upside value? steve: all the qe zones of the world have had strong markets. europe always trades discount with the united states. the difference between where europe is in the united states still offers tremendous value. you take a look at financial conditions, ponce versus stocks in europe, it's a buy across the

board. jonathan: it could get more fractured when the italian election takes place. if catalonia does not change the way you think about european assets, will italy? steve: we look at italy independently from spain. what are the dynamics? italy is a huge risk if you're going to identify one. what did we learn from brexit french elections? have we brought europe closer together or further apart? maybe we take a step back from closer together. it seems there is a stronger view post brexit of continuity and agreement to work together. david: overall, is europe moving toward interrelation -- integration? isve: political integration an open question right now. i think the cohesion of the eurozone and willingness to work together on common budgets and to maintain the continuity of thanuro is a lot stronger

where we were in terms of market ratings and politically post brexit i think they feel much stronger about their position of maintaining the euro. david: his macron on the right on on thehis -- is macr right side of this? steve: is any country going to write an open check? i don't think that is the view that will prevail in the eurozone. the fact that they did not buy greek debt at any point in this -- if you wanted a bailout for the weakest economy, it would not be the case that you would cut grease off, and they did. -- the woodcut greece off, but they did. about 60 minutes away from the cash open. futures up 1/10 of 1%. a seven-day winning streak on the s&p 500. yesterday, a record high close.

the story in the bond market for treasuries, yields go nowhere, 233 on the u.s. 10 year. the fx market as the hours go by, some dollar strength emerges against the euro and the pound. a tick lower from the previous number. 200 60,000 against an estimate of 265 -- 255,000. revised $43.6 billion. a slightly narrower trade balance in the united states for the month of august. 60 --l jobless claims, to 260,000. given the hurricane influence coming through september, initial jobless claims don't look as noisy as people thought they would do. saw: that one week where we distortion and it seems to of

not been that terrible. increasing claims in florida came in 8400 that there was a --rease in claims in text where are the distortions i thought we would pay attention to 80 data for two months? getting involved in the situations, the fact that a lot of these things are done online now as opposed to done in person changes the ability of distortions to work their way through in terms of claims numbers. .'m not terribly surprised adverse weather coming through the situation. trade deficit is more of an issue. probably suggests q3 gdp will be better than perhaps the 2.1% i

thought about but i don't like it will be substantially higher than 2.5. alix: exports rose in august while imports fell. as recovery strength took hold you are able to export more. trade deficit narrowing. wieting: if you take a look back to hurricane katrina, it was larger at the time. you saw a catalyst of several weeks of disaster but it came up very fast. the fact that we did get a 60,000 rise in claims shows that we were hurt. we will see that impact in the employment report, but it is not as clear. if you did not lose a job and could not work because of bad weather, that will not have a significant impact but the best but if your business will shut down and you don't have a job suddenly, there is that intact. i is some surveys, auto sales, all of these things rushing to repairs.

jonathan: no one's got a clue what is coming tomorrow from the payrolls report. looking at estimates at bloomberg and i can put up this chart because it captures it. the highest estimate surveyed by bloomberg, the green line. the redline is the lowest estimate surveyed by bloomberg. this goes all the way back to 2000. -- back to 2009. one's got a clue what is coming tomorrow, have they? ricchiuto: they don't. the best forecast to have is an average forecast. in reality, that is payment employment has been growing. if you held onto the average you may not have hit individual points right, you have a good read on where payrolls are going , good read on with the economy is going and it continues to be an economy that's growing at or about trend. david: talking about how many

people have jobs, do i care more about that or how much i'm getting paid as a practical matter if i'm an investor? toting: one possibility is get a significant distortion upn, it could possibly buy the wage data. wages have pointed slightly up from a low starting point. average hourly earnings data, not -- should be looking at the employment cost index. i agree with steve, give us a couple months, we will be back on numbers that are close to the trend of 200,000 per month. august was soft, probably revised up. david: is that where you are on growth? on wage ricchiuto: if you look at the components that make up average hourly earnings, earnings have been basically flat. a function of hours going up not earnings. earnings have been very flat and

they will continue to be very flat because of the way the nature of this economy is. we live in a world of exit supplied. a lot of competition for prices from occurrence active has come down somewhat. we are at a fairly expensive currency and i think all that is working its way through the system. i believe the dollar will continue to come down overtime and that will be important to see where we go in terms of markets going forward. we're at a point in time where it is helping to hold back inflationary pressure. speakingrick harker is . he says u.s. economy is resilient area you need an understanding of the economy and that markets will wind up running to the fed. exports -- you mentioned the dollar. we have the highest level of exports --

ricchiuto: the dollar appreciation has led to a global pick up in activity. a weakening in the dollar will lead to a slowing. and that is how it will be reflected in terms of trade deficit numbers, not necessarily through the currency itself. i think that is one of the key factors going forward, which is why i am less sanguine on the way development are going in europe and why i'm concerned they have papered over a lot of their problems. the growth story starts to weaken again, these stories will start to bubble up to the surface again and we will be back to questioning what's going to go on with greece and spain and italy. i agree with steve. they seem to want to hold the euro together. politically it becomes harder to deal with budget deficits in a weakening gdp story and europe

than in a strengthening gdp story. david: we saw the dollar come down and strengthen a bit in recent days. the fed has benefited from that. it's been a loosening of conditions essentially. wieting: why titan if you want financial conditions to ease? exportsitivity of u.s. to move from the dollar is very low. global growth is not going to be driven by a massive change in europe. we are seeing strengthening around emerging markets. one after the other. brazil has gone from outright significant collapse to growth. all of the oil exporting countries around the world have turned. china is nothing like people feared, being held up temporarily for the 19 party congress then it is all downhill. structural slowing going on but emerging markets growth will be significantly faster this year

and next year and probably beyond. europe has lots of pent-up demand. domestic demand strength in europe is probably going to hold up and it won't be a phenomenal growth rate, but that is not the story of earlier on in this decade. jonathan: i want you to weigh in on the future of the fed and the debate over the next fed chair. depending on which report you go and who dore you at you think is the one that we need to address the issues that we have before us? ricchiuto: i think if we left janet yellen imposition we would do better off than if we transit to somebody else at this juncture. no matter who gets appointed relative to that group, i would throw taylor out of the equation , you will wind up testing them. the problem is you will test them either by markets discounting low rates or markets discounting very high rates.

i think a discounting of low rate scenario is more likely than the discounting of high rate scenario. in that environment, that's one of the reasons we are convinced the dollar is going to continue to go lower overtime. i think at this point in time the best candidate would be to leave janet yellen in place. jonathan: thank you very much for weighing in. steven wieting will be staying with us. steve or shoot oh, thank you for joining best steven ricchiuto, thank you for joining us. >> in response to the mass shooting in las vegas, republican senators are ready to consider limits on the device that can turn semiautomatic firearms into fully automatic ones. the shooter used a so-called bump stock to let him fire more rapidly. the number two republican senate leader says lawmakers should hold a hearing on the device. the trump administration wants to repeal former president obama obama past signature plan for fighting climate change.

the environment of protection agency will argue that the clean power plan exceeds legal limits. the plan orders carpet cutting targets -- carbon cutting targets based on emissions from power plants. first on a monarch from saudi arabia has visited russia. meeting with russian president vladimir putin. the visit underscores a shift in saudi strategy as russian influence in the middle east grows. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. chandra. david: if you can't keep watching us on television, you can tune into tom keene her and david terra on the radio. bloomberg surveillance can be heard in new york, washington and all across the united states on sirius xm radio. this is bloomberg. ♪

emma: i'm emma chandra. --ing up, an interview with 3:00 p.m. eastern. this is bloomberg. david: today is the day congress decides how to proceed on the federal budget. it takes on special significance because the republican leadership wants to use the budget process to move forward quickly on tax reform agenda. at the center of this process is's representative john yarmuth . representative yarmouth is the ranking member of the house budget committee so he is in the center of the storm and he joins us from capitol hill. good to have you.

rep. yarmuth: my pleasure. david: will we get a budget resolution today? rep. yarmuth: the house will pass a republican constructed budget resolution. meanwhile, the senate is working on their own budget resolution. the purpose of doing this is the past reconciliation instructions. those allow the senate to pass a proposal, this one being a tax cut proposal, with 51 votes rather than the 60 it normally takes. the same process they used to try and repeal the afford will care act couple months ago. there's a lot of difference between the budget proposal and the house. and it's going to be interesting to see if republicans -- the senate will pass theirs, it will go to a conference and that it will be interesting to see whether the conference constructed budget will be able to pass with republican votes.

right now, there's a huge difference. are you saying there is a real question whether the republicans will get a budget, that is -- that will make our congress committee? rep. yarmuth: there will be something that comes out of conference. the question is what comes out. the senate bill has spending limits for defense and nondefense discretionary spending that are in line with the budget caps established. the house does not. $621 billion defense appropriation. the senate has a $549 billion. that's a lot of difference. whenever they come out of peoples with, there are who will not want to spend that defense. a house on lot of republicans want to spend more. there will be republicans who want more mandatory spending

cuts, things like snap programs. the question is whether they can get 218 votes in the house for whatever they want to do. i suspect the urge to get tax reform done a strong enough on republicans that they will be able to twist enough arms. it's by no means certain. david: what is your best estimate about when we will know the answer to the question, that we have a budget resolution. when we know the answer to that? rep. yarmuth: you will see a conference committee sometime in the next three weeks. the conference will move quickly . in the meantime, i think you will see more detail with the house and senate tax proposals. we have not seen the actual legislation they are planning to pursue. i'm guessing it will get to an actual debate on the budget committee -- the agreed-upon conference report sometime in

early november. probably get the tax reform debates shortly after that. i know they want to try to get this done by the end of the year. they will have time to do it if they move quickly. a lot of slips between now and then. david: looking forward to the tax reform issue itself, a lot of discussion about how much deficit we are willing to tolerate for the tax package. what is your best estimate of what they can get through? but they can agree on in terms of deficit? rep. yarmuth: the senate tax estimated would result in a 1.5 trillion dollars of additional debt over the ten-year period. the house, not as much, but the house plan makes awfully strange assumptions. they are going to have trouble with republican senator corker implied that $1.5 trillion would

not be acceptable to him. a lot of people in the house side who would balk at that addition to the debt as well. a lot of it has to do with the assumptions you made. republicans want to assume there will be substantial economic growth because of these tax cuts . most economists say you cannot expect much. goldman sachs says may be up to .2% growth, which would not come close to paying for them. it's clear there's going to be in addition to the debt if we pass anything that resembles what we heard about last week. a lot of republicans are not going to be happy with that. david: we've been talking about democrats this time. .est talking about republicans you're a democrat. what is your role in this process? do you sit back and observe? how can you get involved? rep. yarmuth: we really are kind of bystanders, although we are trying to rally much of the country as to what these cuts would mean, who would benefit.

2027 --mate is that by this is based on the outline republicans released. that by 2027, 80% of the benefits of these tax cuts would middlehe top 1%, 30% of income families would see their taxes increase, 45% of middle income americans with kids would see taxes increase. we are out there saying this is what the republicans are proposing to do. they will add to the debt, cut services through these budgets that are important to a lot of american people and they are going to cut investments in human capital in this country. we will be out there making the case, trying to push back against this plan, which we think goes the wrong direction. we would love the support of middle class -- we would love to support a middle-class tax cut that only cut taxes for the middle class. sachs,iting goldman

although they did say they would reduce eps by $15 a share. bloomberg terminal checkout tv go. click on our charts and graphics. go to tv go on your terminal. this is bloomberg. ♪

has found an sachs post brexit home in brantford. the bank has agreed to lease space for 1000 workers in the city's financial district. goldman currently has about 200 workers in frankfurt. exports hiterts -- a record high. oil refiners are still recovering from hurricane harvey grid lower demand forced crude sellers to seek overseas markets. the export boom is expected to decline when u.s. refineries

come back online. alix: convergence of two energy superpowers. with bestingks salman beginning talks with vladimir putin. the first time a monarch from saudi arabia has vision the -- has visited russia. for putin contention after years of attempts to counter u.s. efforts against assad.leader >> you said always will remain. is there anything in the world which is so absolutely constant? i believe everything is ever so changing. the fact thats some countries and our partners are pursuing independent foreign policies, this is a natural thing. alix: joining us is henry meyer in moscow.

problemsat are the with a closer saudi arabia/russia unity? overseas -- obviously for the united states this is a problem. saudi arabia is one of its key allies in the region. this relationship with russia has been developing and the visit is the coleman nation of putin looks atema this as a way to change his country's position in the middle east. it looks as though he's been successful, particularly as american position in the region has been in retreat for many years. alix: what kind of actual money will be put behind this talk of a better relationship? henry: in terms of actual investments, we are not looking

at very substantial investments so there are some deals that will be announced today. dollars.lion it's more in the geopolitical scheme of events that it is significant. the oil supply agreement between opec and russia that has succeeded in keeping prices stable, driving them up, has been a success and it looks as though russia will agree to extend -- to the extent saudi arabia has asked for, probably until next year. in addition to that, there will be talks of a corporation on syria is another major issue for the countries. alix: does a closer saudi russia relationship make you feel good? wieting: geopolitics of oil at a great scale. implemented,ally will continue to augment what is a cyclical recovery in oil. vast the kleins and oil

investment around the world -- vast declines in oil investment around the world. despite the fact that you had a rise in inventories in the united states, that recovery is underway. as oil goes up around the world and price, u.s. shale comes back. shale will be the determinant of how high oil will go and that is a u.s. story. andthan: steve wieting henry meyer, appreciate -- we can you down to the market open here in new york. futures slightly positive. this is bloomberg. ♪

jonathan: puerto rican debt plunges through the treasury secretary says the island faces a government shutdown by month and if it doesn't receive emergency funds. the hard work begins in d.c. as republicans take concrete steps toward delivering a major tax cut in the united states. and economists attempt to guess the impact from harvey and irma which probably slowed hiring last month. from new york city, 30 minutes away from the opening bell. good morning. welcome to bloomberg daybreak. i'm jonathan ferro alongside david westin and alix steel. a seven-day winning streak on the s&p 500. the longest since may of this year. a record high close and futures a little bit firmer. some stability with yields going nowhere. dollar strength as the session progresses. we trade at 11730. we have ups and fedex on

the down front today. you can pretty much blame amazon. amazon is testing its own delivery service trying to cut costs and ease crowding its warehouses. .6% from amazon and fedex revenue as well. not a huge issue. amazon making monster moves in other people's business is at the end of the day. .icrosoft up by about 1% it got an upgrade to buy from hold. investigators are underestimating microsoft growth drivers and potential. legoland owner numeral entertainment will make an approach for seaworld. we don't know if it's to buy the holy see world or part of it.

they operate global legoland parks and there are fears of declining tourism from terror attacks which could explain why berlin might be interested -- merlin might be interested in seaworld. jonathan: some signs of strength. we've gotten a recent wave of strong data including weekly jobless claims which fell 12000 and came in lower than estimate. decent asing data was well. economists are forecasting a week number with only 80,000 jobs added as the impact of the hurricane begins to take a toll. joining us from minneapolis is jim paulsen. great to have you with us on the program. the chart we have been looking at over the last couple of hours. how wild the difference in estimates is going

into tomorrow. to lowest estimate varying -40 5000 and the highest pushing all the way through to 260. the spread 300 5000. we haven't seen a spread as wide as the one between the lowest estimate and the highest estimate ahead of payrolls friday since 2010. ?hat does that tell you so much uncertainty created by the hurricanes. in don't know the timing of how quick they had unemployment claims. how much not only did they hit unemployment claims at how much did it stop hiring in the region. it's just a really difficult thing to handicap. just the timing of it. if it's this month, if it's next month. going tohe markets are give largely tomorrow's number of pass whatever it is with the

idea that this is a temporary distortion and within another month or so we will get beyond it and probably get to the run rate of 160, 100 75,000 payroll jobs whatever tomorrow's number is. what will be somewhat interesting markets will continue to focus on the wage number in particular to see if there's any show of inflationary pressure in the labor market. i think that will get more attention tomorrow. jonathan: i want to establish with you where you think the market biases. given that treasuries have sold off quite aggressively over the last month or so and we have started to see a recent bout of dollar strength. where is the asymmetric risk if we get an upside or downside surprise? have a waysthink we to go on the upside in terms of pressure for this bull market

before we really have significant downside risk. we are back up to a 23310 year or whatever. we will not have a serious risk until we get the 10 year treasury towards three. if a dollar where to go back up to previous highs at the same time that would bring some real pressure. risk until we get the 10 yearright now the dollar is l down year to date to year t. yields are down here today. we are coming off of 3% quarter last year. at 23010 year is going to shut that down. is that we continue on an upward path in the stock market. david: we aren't seeing the overheating yet. what might trigger it? what about $1.5 million tax cut? >> i have concerns about that if

it actually gets passed. there are a lot of things to cheer about the tax cut. it will help profitability. it will probably help boost animal spirit behaviors in the house and the corporate sector. it is an odd time to come out with a tax cut. we are nine years into an economic recovery. we back to full employment. the current deficit spending is 4.4 percent of gdp. that is the largest level of net deficit to gdp that we have ever had when the unemployment rate has been this low and now you are talking about making the deficit even larger on top of an already fully employed economy. at thisct of a tax cut point would do less for real growth that would do more for accentuating overheat pressure. it would probably increase wage and price pressure and lead to market erosion.

it would probably accelerate the fed's exit strategy. it isk a tax cut if really implemented could be one of the things that could prematurely end the recovery. you have generated a chart that plots deficit spending against unemployment rates. even right now we are really getting close to being outside the normal band historically for the united states. if we actually increase the deficit and unemployment rates keep going down we will be well outside what we have ever seen historically. how worried should we be? >> i think it's a concern. nearly every postwar recovery has ended with some semblance of overheat pressures. i think this one will, too. to bring a tax cut when you have a lot of slack in the economy makes a lot of sense because mainland it boosts real growth

and it doesn't aggravate inflation and cost pressures. to bring a massive tax cut at a time when we are at one of the lowest unemployment rate in postwar history i think is just asking to end this recovery because you are going to promote overheat pressures. you are going to necessitate a need to knee-jerk rates up. i think the problem is this tax cut is more brought about by political reasons rather than sound economic reasons. put a tax cut may be over the next several years. not when we are already back to full employment. ask thisate to rudimentary question but how do you trade data points now? as you don't know who the fed chair is going to be in the next three or four months. and the data you have to ignore. how do you treat the data points? -- trade the data points? >> the best advice is to not get

too riled up about politics. volatility.f a lot of news. i'm not sure a lot of it is all that meaningful. of tax cut.lk the odds of something coming out this year are very low. the odds of something coming out next year are higher. it will probably be quite watered down. it won't be near as large as some of the current discussion is. that story is awful good. we are growing on a sustained runway basis in the united states. the rest of the world is now going with us. there are growing in the eurozone. they are growing in japan. they are growing in china. this so far all of without aggravating interest rates. as long as that stays in place i don't care who the fed chairman is. i'm going to stick on this wave and ride it until we see some overheat pressures. you, jim paulsen of

leuthold will be sticking with us. tomorrow, the all-star lineup to react to those september jobs numbers. this is bloomberg. ♪

alix: reverberations from president trump's visit to puerto rico. cleanhe suggested wiping puerto rico $74 billion worth of debt. the unprecedented debt relief comment and the present puerto rico responds tumbling to a record low. also hit bond insurers.

that puerto rico's treasurer saying the government will shut down by the in the month if congress doesn't provide billions in emergency funds. some estimates range to 95 billion and damages from the hurricane. joining us now by phone is lyle itterer and still with us is jim paulsen of leuthold. >> we have not stepped in to buy puerto rico dead yet. until we get a good handle on what we think the economy is going to look like on a go forward basis there is basically too much speculation in terms of trying to make an investment at this point. is, it's bull case going to be fine. they are going to get more money. why is that the runway to be thinking about it? >> you have to look at what's

going to sustain this economy from a long-term perspective. you have tourism and the pharmaceutical industry. we don't know what either of those are going to look like when you come out of this hurricane. i would like to think rebuilding makes the economy stronger. we don't know what the population is going to look like. we don't know what tax revenues are going to look like. to buyto determine what the legals aren't in place to give you enough clarity to say this bondholder is going to wind over this bondholder. paulsen, this is the highest claim on the revenue that comes from the island tax revenue. at the moment $.38 on the dollar. last month it was around the high 50's and 60's. it was messy for the last few years. the most important question. what is the recovery rate as far as you are concerned?

>> i agree with a lot of what lyle says. i think ultimately there is going to have to be some at a minimum restructuring and probably some right off of a lot of puerto rican debt. that was probably the case before the hurricane and it makes it almost certain now. be somethere's going to support that has to come from the united states and ultimately there's the ability to assist and come in with funding to write off some of the bad debts. the real question is is their sustainability in that economy? right now it is so hard to see that when you look at the devastation. how long it would even take to get back to some kind of functioning sustainable revenue generating economy is very difficult to see at the time.

risk to getmuch involved in this right now. i do think eventually there's going to be some sense of a braille out. jonathan: -- bailout. , spain suspends the parliamentary session for monday. the spanish top court suspending the catalonian parliamentary session for monday. euro-dollar has not been the trade for this story over the last couple of days. ibex is up on the session so far and spanish bonds have in good throughout the day as well. we have five basis points creeping up a little bit higher. david: if you are in leadership right now you are feeling pretty lonesome. you don't have many friends whether it's in the eu or madrid. jonathan: they want mediation. they are not going to get it. alix: they want someone to talk to them. david: i don't think the madrid

government thinks they need to give much. last week we were talking about german politics and how the mandate to chancellor angela merkel wasn't as -- as she would like it. -- buthe all of this need all of this this is a segregated europe we have seen for a long time now. many people have become increasingly the list on the continent. how do think the politics are going to play into all of that as the political story starts to reassert itself? there has always been a high degree of political volatility in that region. to overlook what's going on fundamentally in that region. there is truly a recovery. they went with fiscal ox sturdy and basically put themselves back into recession there was real concern about the whole agreement blowing apart.

the politics are on a much better foundation. whenever you have rising and improving economic growth. improving job creation and profit generation. i think more than anything for the political uncertainty the best thing going is there's a recovery in the eurozone and that to me lowers the political risk from what it was earlier in the recovery. to date it has really been a bifurcated recovery. once the catalonian thing is worked out headed into the italian election or you want to be an owner of peripheral bonds? if you look at spreads across the european complex and are fairly tight right now. right now you're supposed to be waiting spain until

you get a little bit more clarity surrounding some of the issues going on in terms of the peripherals. long-term we would agree with jim. waiting spain until you get a little bit more you are seeing sustained recovery in europe. but we don't see the ecb tapering anytime soon. i think we will continue to see them support peripheral markets. spreads don't have a lot of room to tighten but we don't think they're going to widen a lot. that's the play. these are small fractures for europe and certainly from what we have seen over the last five years. i wonder how it's going to shake the ecb as they look to try and step back a little bit from 60 billion to who knows what. at au have to look relative to the same steps the fed is trying to take here in the u.s. nobody knows what the outcome is going to be. it's going to be a very slow

methodical process. they will probably try some things in the marketplace to see what the reaction is. they are still looking at how do we sustain this recovery and that's going to take a while to play out. david: thank you for being with us today. jim paulsen of leuthold is going to be staying with us. tomorrow we will be joined by gary cohn to talk about payrolls . what they mean for the economy and what they mean for his tax reform. live from new york, this is bloomberg. ♪

jonathan: the crisis in as spam'scontinues top court suspends the parliamentary commission intended to take place on monday. joining us on the phone is maria

taddeo. tell us what this means for the current debate. >> this is a crucial development. referendum gave according to the cadillac and regional administration the mandate to create a republic within 48 hours. it's going to be the parliament that enact it. . a sickly this mandate is not going to happen so if they were about to enacted they simply can't because it's not going to be held. jonathan: is this a market positive? yes. the short-term we need to go back to the basics. key go back to the basics. only the administration thinks it is valid and the regional president cannot enact it. he needs to take it to parliament.

the session has not happened. if you are thinking monday was the day it looks like it's not going to be. this is a short-term stopgap positive story. i still don't see how these sides come together. what if they still meet? what are they going to do? nine years into the bull market and some investors are watching for the bear to show up. jim paulsen of leuthold has a note coming out next week. he's giving a preview right now. what is it that you think might bring the bear out? early looks at traditional indicators, it's an old calendar recovery. valuations are high. look at is howo much is the bear attacking the fundamental foundations of this

bull. pillarsbeen three major in this bull market. one is a climbing of the perpetual wall of worry. rotating leadership without any sector catching a wave. the unique character of being able to grow the economy without aggravating inflation or interest rates. if the bear is going to create headway and create real west it's got to attack those major foundations. worry go with the wall of it's not near as steep as it was in 2008 or nine. it is still pretty tall. one chart i think is interesting is the skew index which looks at the assessment of the markets has to a black swan event. and that has been elevated throughout this.

i think if they start to affect the wall of worry, if they start to affect growth without negative consequence then i think the bear will have some teeth. right now the three foundations of the bull market are still intact. the opening bell is coming up on bloomberg daybreak: europe we are about four minutes away. futures are positive. upthe opening bell is coming on bloomberg daybreak. we are about four minutes away. futures are positive. ♪

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gains on the s&p and record high after record high including at the close yesterday. a much bigger move for the upside. the story in the bond market lower.were now they are a little bit higher. the dollar index firming up as well. are strong against everything with the exception of the japanese yen. in the commodity market crude catching a bit of a bid. that's your across asset story. got some record highs happening for the dow the s&p and the nasdaq. i don't feel a lot of enthusiasm. the dow jones slipping into negative territory. you had san francisco fed president williams talking earlier in st. louis saying that

if you have too much growth you could see an asset bubble. the market sort of interpreting it as a little bit hawkish. always great to get that kind of color on the fed president. it's really retail that shines or not. basically getting a nice boom in mexican beer brands. opposite down by .1%. a downgrade at oppenheimer. a tailwind from currency car replacement. there is worries the used car market will not fare as well. come sales fell about 2%. september should the the killer month for retail. we did have a lot of hurricanes. not necessarily a good sign for l brands. talk about some calls in the

market. city had one yesterday. they are going overweight emerging markets. lipstick a look at valuation around the globe. the s&p is the blue line. that's the p/e ratio. you also have the white line which is european stocks and the red line is emerging market index. europe is undervalued compared to the u.s. as well as emerging markets. the question is do you want to bet on valuation and what happens if the global growth story sputters. what's the right trade when it comes to emerging markets and the rest of the globe? jonathan: let's bring in bloomberg intelligence chief equity strategist. still with us is jim paulsen of leuthold. it's a multiple applied to an index which is heavy tech and heavy banking and

heavy health care. is it a valuation trap? to look at it that way? ? >> valuation has been suffering effectively lower than -- significantly lower than -- if you are looking at 51020 years low value stocks tend to outperform. something to consider. frenzy was happening in emerging markets is really a story of the dollar intact. index that is increasingly reliant on tech and that's the underreported story. 20% of emerging market indexes market cap. really strong gains in chinese tech has been part of the story and the reversal of the dollar over the last month has taken out that trade. in the short-term you need to have tech and the dollar really comply.

luckily some of the that excess in tech has been relieved and maybe we will start to see it perform better into the end of the year. jonathan: if you look at european equities health care, financials, the biggest winning tech. i would say energy. basic resources. that has changed a lot recently. does that change the way you look at the index in the universe? there are certainly more of that than there has ever been. that thetill argue rest of world and particularly the emerging world is still more industrials commodity oriented than the united states. one of the biggest things they need that could really turn them is if we get a consistent rise in inflation in the world and particularly commodity

prices in general. some of that is starting to happen. gina mentions the dollar declining. one of the fallouts from a weaker dollar has been a rise in industrial commodity prices globally. been very closely tied to the performance of emerging stocks. rest of thise recovery we are going to see more inflationary bias or of the world and it's going to help the emerging world because of its is more industrial and commodities oriented than the united states market. i love the valuation differential. if you think about political stability which is one of the reasons there has always been a discount multiple come instability in their economies. both of those continue to improve. you could argue there's almost more political instability in the developed world today than there is in the emerging world. i think that is going to contract overtime and it's going to be led by industrial and

commodities in the balance of this recovery which favors emerging. this chart illustrates the point here. my question is when is this going to be corrected. >> we have gone through a major portion of disinflation as you can see in that chart. the decline in industrial commodity prices that went on in the last several years. the relative performance of emerging starks has also started to improve. commodity prices are going to continue to rise. the emerging market is going to continue to close that performance gap to the rest of the developed world. we are a consumer-based country in the united states. more than any other country in the world and we benefit the most of everyone from disinflation.

we get more into overheat and inflationary pressures it's going to benefit the rest of the the unitedthan states and particularly the emerging world more than anyone else. don't you have to make a call on different countries because if you are buying it because materials are holding well that is not necessarily a china story anymore. do you have to start donating like that? you can still buy a diversified edm. you are absolutely right. there is increasing opportunities in the emerging world to delineate and distinguish and take that's beyond how much in the emerging markets versus developed. individualized bets which is what you do in the developed markets across sectors. and different political structures. there is increasing value from stockn the ground

analysis or country analysis coming from the emerging world that wasn't there when it was mainly a china story earlier. we spend the morning talking about how dependable the hurricane impact the data will actually be. investors are waiting for earnings season to begin. where our expectations for earnings coming in in the next couple weeks? >> this should be the worst earnings season of the year. maybe that means the bar is pretty low. so far this year we have had double-digit earnings growth. cycle muchting to better earnings a year ago and that results in single-digit earnings growth probably for the third quarter for the time this year. the good news is that the low bar for companies to hurdle and companies have been reducing their estimates over the last month. the bad news is prices have risen while estimates have

declined. your kind of caught in a situation where prices have already risen. part of that is because of the hurricane story and the anticipation of better numbers going forward from the economy. the earning stream could get caught a bit in the crossfire. of it is cyclicals at this point. text, industrials. the group that bounceback the fastest in the second half of last year start to get tougher comps this year. gina, thank you. you very muchhank to you as well. nine minutes into the session. look at the scores for you very quickly. gains across the board. potentially an eighth straight day of gains. not only a record high. the longest winning streak since

july 2013. from new york this is bloomberg. ♪

>> this is bloomberg daybreak. i'm emma chandra in the hewlett-packard enterprise greenroom. coming up, vice chairman will be discussing the outlook for the bond markets. this is bloomberg. jonathan: if you have been following the events in spain and the divide between catalonia and central government in madrid it continues. the leaders are divided. we learned this moments after learning that spain's top court

has suspended the parliamentary session on monday. for anyone that thought a declaration of independence was imminent that's not happening anytime soon because according to our report they are set to have stalled the independence push is the leaders are divided. can drawort-term we the following conclusion. market positive in the short term. the ibex pushes higher. what you also see is the decent bid going into spanish debt. yields are lower. spanish 10 year yields down six basis points. they have said to stall the independence push is the leaders are divided. alix: just kidding. that whole thing. david: it doesn't feel like the independence movement is getting closer together. jonathan: the independence movement wasn't that together anyway. events of the weekend have

fueled the whole push anyway. david: that's what a large police force will do to you. back to the united states. yesterday we got a report from the senate select intelligence committee and the news wasn't particularly good especially for social media as the committee confirmed that russia had used outlets such as facebook to influence the presidential election. mike quigleywith following the news conference. the facebook ads and watched some of them as well. it clear they were using the most divisive issues that possibly could. the real issue will be how did the target. david: we are joined by burns mckinney. and cameron christ who has appeased out right now on the bloomberg.

this is not just limited to the united states. tech there areat many ways in which they sort of not necessarily break the rules but avoid them or skirt some of the more oppressive regulations. recently in europe we have had issues of the eu. apple,g tax bills on google and most recently amazon for legal invasion. inks they are not terribly happy with. the social media thing is really the interesting one. business model of a social media company is very similar to a commercial broadcaster. they provide content in exchange for advertising revenue. here on commercial broadcasting we have certain locations regulated by the fcc. provide fairy to and truthful news and we can't use industrial language david:

and we can't hide behind anonymity. if we say something people can be sued for it because they know we said it. >> there is one historical precedent of commercial media theg fake news and that's war of the world's in the 1930's. orson welles did a radio broadcast of the hg wells book and they got shut down because streets. on the the latter-day equivalent in terms of social media companies, the ads or the stories that are , there's no repercussions as it were. one of the facebook ads the facebook ads supposedly said that john mccain was a founder of isis. that's the type of thing they were putting up. alix: when you take a look at the tech sector you have to

start incorporating that into your view of big tech. don't you? >> you absolutely have to consider it. in many ways what's going on with the regulatory environment is the exact opposite of what we face for financials right now. deregulation versus on the tech side you have an administration that came in that was always a little bit antagonistic toward the tech sector. one of the reason the tech names have done very well this year is simply playing catch-up from the fact that they lagged late last year. from our perspective as value you can't just lump all technology together. the thing stocks might be most subjective. they also might be the most overvalued. you still see really attractive valuations. it's one of the few sectors that trades at a discount to its 25 year average and about in line

for the s&p for a place where you have good dividend growth. jonathan: amazon isn't even waited as a tech stock on the s&p 500. it's retail. amazon versus facebook, the regulatory hurdles they could face are going to be radically different. who do you think is in the toughest spot at the moment out of these companies? >> i would say probably be amazon is a little bit better positioned. they have been a shape shifter. they have been able to transition time after time to something new and the management has demonstrated the ability to quickly adapt in today's world. with facebook the challenges are probably going to be ongoing. alix: stay with the story from amazon. mosthares falling by the after amazon was said to be experimenting with a new

delivery service. isning us now on the phone logan perk analyst edward jones. first of all, break down what kind of business this would take away from ups and fedex if amazon were to go through with this. it's important to remember amazon is less than 2% of fedex's business and a little more for ups. what's not entirely clear is how much of that third-party business amazon may start controlling moves on fedex or ups's network right now. that -- whatn and can amazon cannibalize for these companies? their misconceptions that the last mile is very profitable and fedex and ups want that.

cap the end of the day that's what amazon is trying to get their hands on more and more of an that's the least profitable part of any move. i don't think ups or fedex will care. alix: how do they wind up altering their business to accommodate for an amazon that is increasingly bigger in making these type of decisions. how do they change their type of business? >> with both companies it is continued investment in their delivery networks. both of them move through business-to-business type volumes. as long as they can present a very competitive time sensitive product which is what their customers value they can have the edge over amazon which is still something amazon has to establish by building a larger and larger network. purk.thank you, logan

if i heard amazon was getting my business i would be pretty nervous. head over to the bloomberg terminal and check out tv . you can watch is online and interact with us directly. this is bloomberg. ♪

jonathan: the september jobs report is out at 8:30 eastern a.m. tomorrow. an estimated 80,000 jobs added. joining us now is carl riccadonna. 80,000 is the estimate. the estimates vary wildly. >> all across the board. is a weather report, not in economics report. tomorrow morning. the best thing to do is turn your screen off and just take a

deep breath when the numbers come out. historically when you have a major storm gulf hurricanes tend to have a bigger impact on the payroll numbers because there is so much industrial activity in the gulf of mexico. florida is a lot of retirees and tourism. normally you get an impact of let's say 100,000 relative to trend. we had two during that period. with some lingering impacts into the first part of september and irma coming during the employee survey week. jonathan: are there any that are less noisy than the headline number? i think the effect could be even larger. my team is below consensus. we are looking for 60,000 on the number tomorrow. we have to be very cautious. payroll obviously distorted by the storm. the average lengths of the work

week could easily be impacted. average hourly earnings were focused on wage inflation. outlier andt a real one of the key drivers will be all of the utility workers shipped in from out of state paid generous overtime rates. you will see a big spike in utility workers which could be distorting the whole story. don'tral of the story is make any judgments or conclusions based on tomorrow's data. as sensitive to the hurricane impact will be the unemployment rate. what will be more relevant is to look back to the revisions to the august numbers. ahead of the august report we kept talking about august is the quirkiest month. revision of 25 to 50,000 august that's telling us

the economy is on sound footing before all of these hurricane distortions muddying the waters. 60,000, no change in the unemployment rate. jonathan: carl riccadonna. that's it for us on bloomberg daybreak: americas it's a quiet free payrolls thursday with futures trading water throughout much of the morning and stocks grinding a little bit higher. the s&p 500 crunching out another record high. we are up .2%. tomorrow it's all about payrolls. treasury market quiet today. tomorrow anything but. higher.ust a bit bloomberg markets coverage continues. bloomberg markets is up next. this is bloomberg. ♪

♪ vonnie: 10:00 :00 in new york, 3:00 p.m. in london. from new york, i'm a vonnie quinn. mark: welcome to "bloomberg markets." ♪

vonnie: we start with lots of breaking economic data in the u.s.. factory orders and more, let's get to julie hyman. ,ulie: factory orders of 1.2% 2/10 of a percent better than estimated excluding transportation, up 4/10 of 1%. it looks like these numbers coming in roughly in line with estimates. these are the august numbers. the durable goods reading is the final one for august. we had an initial reading. recent datamore we've gotten affected by the various hurricanes perhaps not seeing as much of an effect in some of these numbers we are getting for august.