>> we are growing above trend, seeing surprising resilience in many areas. that may continue. >> we are taking this into the next year. click -- >> we will see you conclusion. >> we think hers quite a bit of bifurcation in the economy. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. just as the first back-to-back games on the s&p 500 of the month, tells you something about august. good morning, for our audience

worldwide, this is bloomberg surveillance right--live on tv and radio, alongside tom keene, i'm jonathan ferro with kailey leinz. takei jobs week begins now. it starts later with job openings in america. tom: we go on to the usual l.a., the claims on the jobs report. for more housing data as well. it is a little grim. we will get the measurement. it is not like china where the government is going to take, headlined by headline. but i have a datastream that is destructive -- deceptive and it is good to start strong. jonathan: on bloomberg, can you imagine the stateside cutting mortgage rates? a lot of people crying about for that one now. tom: there is a real desperation. over here it is about the economic data.

we forget the dregs of august, where you can't get the close have to have opening-day. jonathan: what are you talking about? back-to-school? tom: i have nothing to wear opening-day. first day of school. jonathan: we start late. i'm so holding onto summer. but the weather is good, september as far as i'm concerned is still summer. in china, another headline full of news on the bloomberg terminal. organs rates contentedly -- intentionally being cut. thanks considering blowing -- lowering deposit rates. strengthening fiscal support. what is there not to talk about? kailey: piece by piece is the right characterization. this is policy work they are trying to do to shore things up. for forced desk the latest is on mortgages, first times -- first

homes only. something like 80 to 90% as of the latest data. if they are doing it piece by piece, nothing seems to be a full bazooka. is it going to do anything? jonathan: it hasn't done anything to its market. we had a 5% move yesterday. have you matched today? tom: this is our uva -- jonathan: focus. cutting staff duty, limiting ipos, asking some to buy the market. it has not done enough. tom: i think the market data in commodities, iron ore, is not the panic you see coming out of the domestic affairs. there is a separation of china. which is the domestic

challenges, the 30 year experiment to boost consumption? it has not worked. jonathan: your bow tie isn't mess. tom: it is uva football. jonathan: what is that? tom: it is ancient, like me. it is a look. it is the cavaliers. kailey: i do not ordinate. jonathan: let's get to the price action, the left on the s&p 500, the first back to back gains on the s&p 500. it has been bad in august, could be the worst month of the year depending on how we close up later this week. features -- futures up of the bond market. new yield on the 10 year, 4.1942. kailey: yesterday we saw the highest level in yields we've seen since before the financial crisis, 2006, 2008. expects of the pressure in the bond market. what clues will they take later

from the economic data we're going to get? you talked about the jolts at 10:00 a.m.. 9.5 nine job openings, the third month of it staying stagnant. looking at supply and demand the labor market especially after chairman howell in jackson hole was talking about how the phillips curve may have steepened. maybe you will not see the labor market deterioration as inflation comes down. at 10:00 and -- we are expecting a tick lower. prices at the pump climbing, inflationary pressures sticking around even if the pace of increase is coming down. much pressure is that putting on the consumer? at 10:00, and fbi see open meeting, expected to propose requiring that banks with 100 billion dollars in assets or more issue enough long-term debt to cover capital losses. another regulatory response we can see it to the bank failures we've seen this year. tom: we saw san francisco's

supervision is retiring. that folds right in. jonathan: a little bit better. tom: we reefed my bowtie. jonathan: a technical macro strategist, chris, good morning. is it time to buy the story in china? chris: i would not be sure. think about how terrible the news flow has been the last few years. what hasn't broken down, the iron ore has not gone down. the chinese to year yield i stopped going down. the price action does not reflect the bearishness from the news. as someone who tries to marry how does price action versus news interact every day, it will be difficult for me to be here, sure and comfortable with that, when i gotten every piece of information in the direction of the bears and the price will rake lower. at a minimum, cover your shorts.

jonathan: -- tom: the trend based analysis, the trend you are most interested in is oil. i link oil demand directly to a pacific rim recovery. in right to do that? chris: we can link it to a number of inputs, that being one of them. limited supply. i think the supply side is equally as important. but at the end of the day, we have had this bearish onslaught of russia and china news. what hasn't gone down is crude. it is positive in the trend work. brent on its way to 90. the interview stocks after a meaningful consolidation or pause, they have regained the flag of leadership. when i look sector by sector, there is not another group that has 90% of issues above the 200 day, that has relative leadership inflicting again. that is energy.

tom: what is exxon? it has not gone down as oil went from .20 270, ever, back up to 80 as well. his oil catching up to the equity stocks or do the oil stocks surged ahead of a recovering oil? >> one thing we try to do in our work is understand the regime we are in. therefore, we know what rules to play by. for so many years, every single rally in crude was one you could sell. every time that energy stocks abounds you could sell. we have six months of a benign consolidation of energy and now it is reasserting itself. what i'm encouraged by is a lot of the return to leadership from energy has come without the major integrators doing a lot here. this is been service names, look at some of the big global names as well. they have all reignited in terms of a leadership story. kailey: what about cyclicals,

financial stocks? you are looking at some of the banks we were just talking about, we are continuing to see ramifications of the failures we've seen this year. what is happening? chris: if you told me the bank index will be down, i would not guess the s&p would be up 15%. we were back yesterday and we looked at every major s&p level over the last hundred years. the first time in 100 years, nearly a year off the low last october, where the s&p is up some number and banks are down. in v nor -- more normal -- it would be more normal if they were down -- citigroup is back in the big america is right there, coleman and morgan stanley look weak. i think it is difficult entirely to dismiss that. the benign expo nation is 50% of the s&p is above the 200, 50% below.

what i don't like is on the wrong side of the split tape, there are important groups like banks. jonathan: are we to constructive on the united states? chris: probably to constructive on europe, which i think is deteriorating now. the three-month low, german dax. french cac. what drove the markets for the luxury -- in a way, go back 14 or 15 months, europe was the first to turn up and leave. that seems to be flagging here. for you talk about the u.s. at major risk, there is a change going on in europe. you see it here as well, it has come in sharply as u.s. german rate differentials of change. jonathan: where are your positions the ticket manager that? chris: it is interesting how consensus short dollar is. but it is not going down. it actually makes energy

resilience more noted, that has happened even as the dollar has firmed. it is firming its euro, it's sterling, firm against cnh. it is hard for me to embrace those short dollar call woodard is just not on the charts. tom: i'm looking at a pointed bank index which includes a lot of emerging-market in china. on the trading level of two standard deviations, you suggest it is stronger. chris: if you look pair by pair, it is hard to come up with a compelling short dollar call. even aussie ust, that has been -- usd about that has been soft. the euro has been so strong for the better part of the last year, that seems to be changing. it is in step with the idea that something is changing with china, perhaps a stronger cnh relative to euro is one more

sign in that direction. jonathan: do you have a call for christine lagarde, next month? chris: when i look at german rates as our barometer, they have effectively been in this range for six or seven once. my experience in this business is always surprises break in the direction of the trend. trend in global rates is still up. if there is a surprise it is rates have one less push in them. that would be our guest. jonathan: thank you, chris verrone. goldman sachs out with the call on the fx market. the dollar-yen, 135, now looking for 155 on the dollar-yen. they're going back to the 1990's on the japanese yen. tom: they have a chance to clear the air at jackson hole and from what i can tell, he did not. there is uncertainty. 135 in the goldman sachs call is

what? jonathan: looking for 155. tom: i would say others have heightened at 147, 140. i don't know where you break through 150. but the bank of japan, the ministry of finance will defend the yen on the path to 155. tom: do you have a level in mind? -- he says do you have a level in mind? how much higher? chris: if you look at the dollar-yen chart -- you can't have it both ways. you're going to defend the bond market or the yen, i don't think you can do both. the big winner's domestic japanese assets. if they are doing everything they can to keep money at home, japanese bank stocks reflect that. they're the strongest anywhere the world. i don't think that is an accident. jonathan: we've got to thank him twice, should have stayed on japan a little longer. tom: there is a huge opportunity there.

it is unplayed in the western media. no question. jonathan: a little closer. tom: it is over here. jonathan: coming up in the next hour, looking forward to catch up with our guest. in the equity market, the s&p 500 elevated, gains for the month of august, the first time in yesterday's session. gains on friday. jobs week begins later, job openings in america. then it is on to adp tomorrow, jobless claims and payrolls on friday. from new york city this morning, good morning. ♪ ♪ you know you are retired right? am i? ya! the queen sleep number c2 smart bed is now only $999. plus free home delivery when you add a base shop now only at sleep number.

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>> we agree to establish a new commercial issues working group, a formal working group which will involve u.s. and chinese government officials and

importantly, u.s. and chinese commercial private sector representatives. as we seek solutions on trade and investment issues and to advance u.s. commercial interest in china. jonathan: the commerce secretary gina raimondo speaking yesterday during her birthday visiting beijing, the first of four. the meeting going through thursday for the secretary. plenty of news from china over the weekend. the rhythm of things, we know by now. trying to support the economy and financial markets, they have stock purchases for the first time. the limited ipos, they are leading on some -- leaning on some funds to buy more than a sell. we're talking about maybe cutting rates on deposits to try and juice the economy. attempt after attempt, week after week. tom: if a press by our cemetery of commerce as well as the

council of foreign relations, our ambassador nicholas burns has been doing a quiet steadfast a job under a lot of tension. but if i'm the chinese, am i just like we will take this in, but are we getting to the point where we have to wait for the election? jonathan: based on the amount of visits taking place by this administration to beijing, it is pretty clear the objective is to maintain a relationship with china. i'm sure they want these issues domestically solved in a desk resolved in an orderly fashion. what they're doing on the campaign is different. i think we know that based on what president biden has said to donors. he said this was a ticking time bomb. he referred to the leadership and then going even further, saying when things get tough, bad folks do bad things. there are questions i would be asking of the commerce secretary. tom: i don't see specific negotiations on specific trade

ideas, which is raman does territory -- gina raimondo's territory. i just not sure where we are going with this. kailey: they are trying to maintain a relationship without aggravating beijing as they try to protect national interests. they say this is about national security, you're not trying to hold china back economically. and yesterday she was saying that aim is not to decouple. they had to switch from decouple to de-risk. diversified. they had to be so careful with how they navigate. and knowing how sensitive the u.s. economy will be to any kind of slowdown in the chinese economy. you can't push it too far, you get caught up in the ripple effect. jonathan: on top of that you've got to be hard at the same time because that plays well to basically into an election year -- domestically going into an election year. tom: and there is a massive

plan. but i don't see much getting done other than photo moments, video moments. on the pacific rim and on the dollar, the global head currency a strategy, with a real visceral understanding of the pacific rim. if you are a resilient dollar, what does it mean for the pacific rim? can you imagine 7.29 yuan, here i say 740 or 750? is that possible? >> absolutely. with it being weighed out day by day, it continues to move the dollars weighed. we visit with the highs from october around 733i believe. i can't rule out something close to 7.5. it is may be premature. but i have not used this term

someday times in a long time. they are pushing on this with all of these measures. the last time i used this term someday times was in the early 90's, referring to japan. the parallels are there. they're falling toward deflationary traps, and these measures that are rolling out are not going to do it. they are not growing 8, 9, 10%. a day of reckoning is coming. i don't know when, but it will be. tom: you have been a great student of the international relations. is this where a totalitarian regime essentially capitulates and changes direction politically? win: the policies in china have -- policy makers and china have tried to do it both ways, opening up economically while limiting political fumes. that is in the bargain between beijing and the populace.

what is changed is that the economic prosperity is no longer being delivered. we note youth unemployment is upwards of 20%. they stopped publishing their number. but there is a balancing act that they're trying to pull. they know they can't issue more debt. it will just add to the problem. to me, the endgame is something we saw, huge debt restructuring, bailouts. it is painful. it can be done. i don't think it has been done on this scale before. it will be very painful. i think that is happening sometime in the next two years. kailey: what we are saying -- seeing in the last few days is piecemeal reactions from china. they're looking for them to cut deposit rates, gently on existing mortgages. john already mentioned the ipo restrictions they're looking at putting into place, asking into

dues used by more than they are selling. it is one thing after another. is it all add up to enough? what more can china do to shore things up? win: they are doing what they can. but with the gdp around 300%, we can't go back to the old way of rolling out few -- huge stimulus. at the margin, all of these may add up to a little support, but they're tackling the symptoms rather than the root cause, this huge debt overhang, overextended property sector, that is feeding into the financial sector. that is where this comes unraveled, with the property sector and the financial sector. i'm not trying to be a doomsday or. it is hard to figure out how they get out of this without a really painful restructuring. because of so painful, it will put it off as long as possible. no one wants to do this. they will continue to roll out these measures until it becomes

too much to bear. kailey: that is addressing the domestic problems. what about the problems that relate to the rest of the world in terms of exports, trade, and risking, diversifying, decoupling, try to get to their supply chains out of china? the trade flows changing on a longer-term view. what will that mean for the chinese economy? 's win: -- win: they're trying to promote more to messick activity. they have not taken their eye off of the external sector. it's partly the u.s. measures with former president trump and trade wars. it came at the worst time. he has a more domestic led strategy at a time when it was about to come under serious stress. covid added to the pressures as well. so can they go back to an export

led recovery? is not want to be that easy. most of the major trading partners in the u.s., they have change the supply chains over the last several years to be less dependent on china. imports from canada and mexico have overtaken those from china for the first time in decades. it is not going to be that easy for china to flip the switch. i think xi jinping will continue to focus on the domestic led recovery. think about the global growth outlook, it is quite poor right now. all of these point to a doubling down on the do messick led focus. but unfortunately it will lead to some sort of crisis in the coming years. jonathan: thank you. when -- win thin on china, the latest quote by sure that yesterday. cursing you lagarde and jay powell made it clear they intend to see out the flight -- the fight against inflation.

there'll be no changing of targets and no premature easing. but the earworm i can't keep out is mike tyson, everyone has a plan until they get punched in the mouth. everything will be fine unless china punches us in the face. tom: i agree. i would also say south africa ran through 20, pick any other currency pair. i would totally take the point, there is a point where facts change, i change. jonathan: just about positive on the s&p 500, veronica clark, economist from city, on why the federal reserve is not done. that conversation next. ♪

jonathan: stocks positive on the s&p 500 this tuesday. elevated by not even 0.12%, today winning streak, the longest of the month on the s&p 500 speaking to how bad this month has been. the s&p 500 down about 2.4% in august, the worst month of the year, speaking to how good 2023 has been. tom: it is not a correction, this is just noise. look at the move we have had since october. jonathan: that is what i just said. tom: i don't mean you. but people are thinking it is a

crisis, and meltdown. jonathan: doesn't have the ingredients for one? tom: no. i've got the fix-it 15.11, i'm stressed. that is a victory laughed -- lab. jonathan: i will do this as chill and laid-back as i can. the two-year at beautiful 5%. the 10 year, 42079, yields going nowhere. but things are fine. tom: they're doing pretty well. jonathan:'s of people thing. if you want a mortgage, i will get you one with a seven handle. tom: out there with the housing value, rates have gone up. you have been great about this. the copulations with redfin, 641,000 is what you were buying x amount of months ago.

now 434,000. imagine that taking over. you go from a four bedroom to 1.5. jonathan: it is worth repeating. the distortions you're going to see an economy based on the rate policy of the last couple of years. have we ever seen in the space of two years record low interest rates and the highest rate you have seen in two decades? in the space of 10 years? it is so screwed up. tom: it is. it is a little delayed. it is not like the more recent data. but i agree with you, off the pandemic, the phrase is screwed up. jonathan: it is a new move, the fx market. 108 on the euro-dollar. tom: we go to four digits. jonathan: the dollar-yen. is this work for you? tom: it is peaceful.

jonathan: the dollar-yen. back to the 1990's. tom: do know what it is like to order a 16-year-old to read the scarlet letter at gunpoint? my mood is based on scarlet letter, to write a passage in america. british people north of boston. jonathan: good book? tom: that is open to interpretations. jonathan: why don't you watch the movie? tom: you read the cliff notes. you know what i'm talking about. jonathan: stay with us. china officials back to strengthen policy support and speed up government spending to boost the economy. the officials are calling the foundation for a sustainable

recovery not solid as the current environment is quote full of uncertainties. basically saying it all out. this how difficult things are. kaylee: -- kailey: and that is what we heard from chris. china is doing all it can to shore up growth in the economy, fragility and sony places. jonathan: you have to see it stateside. a week full of jobs data starting at 10 a clock a.m. eastern time. job holdings holding steady. 9.5 8 million job openings. it is about whether we are making more progress, taking some of the heat out of the labor market. tom: and they 4% unemployment rate. was with warren has something to say that i think conservatives and liberals agree with. why are we cheering for unappointed? in my textbooks i'm just not there. jonathan: german towel a year ago said at jackson hole it is

the pain. two required -- it is required to avoid the greater pain. it is easier to say what it is not your job on the line. that is always been my frustration. tom: mccue says jolts are important. that is all i know. jonathan: this is a story i should be on the radar. the work stoppage expected to last up to 11 hours a day from september 7 to some september 13 according to people familiar with the matter. the fact is, off the back of this story over the last couple of weeks or so, the threat of strength in australia, shaking up the gas market in europe, will go to show how the market is right now. kailey: and how energy pressures can feed through inflationary pressures, greeting a difficult proposition for pursuing lagarde and others at the zba. we're talking about energy prices on the rise in the u.s., in the form of prices at the

pump. the ramifications for the inflation picture could be large. tom: going out to wyoming, you get a real understanding of prices at the pump. people drive 60 miles to get milk or whatever. you forget living in manhattan. what i think is important is the sprawl of big oil. this is barrel island, the goron pipeline, 35, 50 miles off western australia. sort of off at 10:00. it is good geography. the australian -- more money, more time, safer conditions and they want more swan logger. we bring up from perth. not the melbourne stuff. john -- jonathan: i think we're done with this. tom: i think we are.

an important interview, veronica clark, economist at citigroup. cut to the chase, are you recommitting to the past to higher interest rates? >> we do. we expect one last rate hike. we expect the fed is going to follow through on the last hike. we get the hike in november. one more to go, a bit higher. tom: what will it do with the american economy? and ambiguity, a high rates signal, vibrancy, an economy that gets used to those rates. you by the benevolent story? >> we thought the economy would be reactive, another 25 basis points not necessarily going to do much to that. at some point as businesses and households reset, will feel the bite of higher rates. but everyone has been surprised

we have been so resilient up until this point. kailey: are we going to see a more signs of the bite kicking in? when you expecting starting today and through the remainder of the week? veronica: i don't know that we will see that yet. it probably looks like the ideal slowing of the labor market, 130 jobs, softer wage growth, the average earnings. back and look ideal. there are distortions in some of this data. we have a strike of hollywood actors that might be showing up. it has been amazing that jobless claims are still so low. we still have the 9.5 million job openings, about 2.5 million higher than pre-pandemic. it is still a strong, tight labor market. kailey: you mentioned the strike, relating to the actors and writers. there's also a strike that could be to come in a couple weeks from now, if there is no meal --

new deal for the autoworkers, they've asked for 40% increase in compensation. how should we be thinking about the union activity we are seeing what the strength of the labor movement and what that is going to mean in terms of wage pressures that the fed is going to have to contend with? veronica: it is an important reminder that the labor supply is still constrained. workers have a lot of bargaining power for higher wages. even if we saw softer jobs numbers, it could be because of strike effects or because we are running out of people to hire supply is still an issue. tom: if we get the hall and horse clark call, what does the 10 year realreal do? do we break and go out to i have one mild active 05, 06, up to 2.2%? to be get there daca veronica: you asked me this a couple weeks again -- weeks ago two. tom: i will ask again.

you can't go after my act. i only have four questions. veronica: no, i do agree with the sentiment that as long as activity is holding up and we are running inflation that is too high, you will have rates higher for longer. that is kind of what powell was trying to get out -- get out in the jackson hole speech, we need to have a restrictive level of rates that means rates across the curve can say high. tom: what does housing due to business investment? this spirit of cfos? veronica: you would think higher rates, the manufacturing sector will be sensitive. we'll see a slowing in investment. it has been incredible. we have seen investment picking up the last couple quarters, some of this related to working through supply chain issues that meant you can produce -- could not produce cars. there is new band for this, traveled -- travel demand

rebounding. you're starting to see investment pickup and your honest acting out in a high rate environment. jonathan: have we really--thought through what it could look like if the generation in this country is locked out of the housing market in the u.k. and homeownership in the u.s. more specifically? veronica: it is incredible. it is pushing a lot of people to rent for longer of course. it is interesting within about what that means in terms of how we look at inflation. we have had high rates that many people don't want to sell their homes. home prices are rising again because supply is so constrained. if you are pushing people into renting for longer, it is technically rent that goes into inflation measures. until you fix that supply side, you could have this upward pressure on prices is still and people that are not owning homes when they may be shed. jonathan: are they going to ignore the cost of shelter when thinking about inflation because of the dynamic deco have distorted this mortgage market, so that we brought up in jackson

hole last week. i just don't see enough coming from the federal reserve about the consequences of that. do you? veronica: it is interesting. powell was asked about it at the june or july press conference, about the dynamics wears urgency in the housing market with prices picking up again. he said we are hoping for a supply correction and that is not exactly the right response you should have after the last couple of years of supply chain -- supply driven inflation. i think there is a level of rates and as people reset into higher borrowing costs there will be dumber pressure on demand and prices. it could just take a while. we have 30 year fixed rate mortgages in the u.s.. jonathan: and might just take a couple of decades. chronicle clark, thank you. there's a difference for the u.k.. and might take a couple of years for that to reset. in the usa could take a long time. because of the 30 year fixed. tom: it is a huge difference. floating versus fixed, almost

cultures if you will. but the distortions are tangible. what i worry about is we love to talk about housing distortions because that is where rich people are. but i would bring it over to the rental market nationally. west of the mississippi, there are -- there is rent disinflation going on. have not seen that here. tom: in the election, where blowing up the so-called american dream, locked out of homeownership. what is the promise? kailey: when you're talking about the biden administration and efforts to get prices down, it is not affecting the grocery store, what you are seeing at the pump. if you're trying to find a place to live, you are faced with high borrowing costs or hide figures, your perception of the health of the economy. it is going to be skewed in a negative direction. the politics of the economy feature into a toy for. tom: i think we underestimate how few houses are being listed.

kailey: all new builds. mark spencer. tom: there is no -- more expensive. tom: in a suburban geography, there's zero. jonathan: we need a citadel internship. $120 an hour. you know what i said about the coming ups driver or american airlines pilot deco an intern for citadel. we can make that work. i might not have the skills to make that happen. i'll get your dry cleaning. ♪

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raising rates in september, but we do see the possibility in november. our belief is that will be the last one for this cycle. jonathan: how best how high is the bar, payrolls on friday, cpi symptom 13. that was the chief investment strategist at cfra and the answer to the question for many people is very high or very very. equity market, looking at the s&p 500, squeezing higher. off the back of the two day winning streak on the s&p 500 and on the nasdaq as well. yields unchanged on the 10 year at 4.20 40. weaker here. 0.08 percent. tom: there is a lot going on in the market. it is quiet versus yesterday. but for those not keeping score, from thursday last, boy have we

moved. jonathan: they're sending about china in august. i'm not sure what it is. it was august, wasn't it? tom: meredith is in charge of this. jonathan: that would be nice. tom: this is what matters. jonathan: we will try to make that happen. we can try and fix that up. have you seen the new song, big ange? what is it about the british football fan coming up with amazing songs? their poets. tom: sometimes. chief emerging football markets strategist here at bloomberg,

where is it in your world? argentina, the brush it aside on the conversation. but where is the derby in the e.m. world where i can make money? >> when i look at fragmentation, i have to look at your favorite asset class, your favorite financial instrument. if you look at china relative to e.m., you've seen the mess of the coupling. the spreads have blown up. but nearly every major emerging-market has tightened significant a. the u.s. downgraded, france, germany, other developing markets have seen these spreads widen. but it is this dislocation that is grabbing me. tom: cvs, credit default swaps. do you play better at improving china or short the rest of the crew as they come toward china?

>> the latter in my opinion. the china growth miracle is over. jp morgan talking about 4.8% year-over-year growth. the bloomberg survey came in at 5.1. everybody is talking about the skull spend. the china fiscal deficit has come down by one third over the first half of the year. 33%. the $477 billion. why? it is spending at the state level because there are no land sales, no tax revenue. they cannot spend. the deficit is shrinking and that is what is going on. that is why we talk about evergrande and country garden, and one of the four largest distressed asset managers in china who may technically be in the volt asphalt because of the financials. these are things i'm focused on. jonathan: you think it is the real deal. >> i thought it was the real deal five or 10 years ago.

something is going to give. it has to. that cannot stoke growth and the dislocations, look at the divergence in just forget about sovereign spreads, and kerry between yields in china and the u.s.. these yield differentials are so wide. it is so easy to fund risk and other asset classes. how long can the game go on until versus? imagine seasonals, but it matters. we are entering the historical period is not been good for risk assets. jonathan: are you thinking last decade, the potential? damien: i hear you are saying. jonathan: we've had moments like these in china. how may times over the last 10 years? and every time, if you have had faith in the policymaker, it has been repaid. there is a worry it may be differed this time. with the keeper the potential to

have dynamics of a balance sheet recession we have been fearing for a long time, trying to work out whether this is the real deal, the prospect of that happening. >> i don't think you can make that call as a new sherry or portfolio manager. we have to realize is that valuations, alibaba, it has come down so significant me. they are generating a ton of cash flow and revenue. maybe on the other side, when things are really bad, if you really don't want to buy, that is the time. that is how people make money in argentina, venezuela, emerging markets. i don't have the stomach for that. maybe that is why you have to look at china. 0% is not the right number but i would not say it is 10 or 15%. kailey: that is what we were hearing from chris verrone, not necessarily time to buy but don't be short. he was saying the fact that you have not seen this -- >> i would agree. kailey: it is may be assigned

you would not want to bet against this market. but when we're talking about you, jp morgan seeing sub 5%, everybody else in the ballpark. china is still growing, just not as it once was. how great is the risk that the growth story is no longer a growth story? >> certainly the 8, 9, 10% growth rates in years past our bond. and it can't grow its way out of this mess like it could in years past. maybe the big bazooka is coming. but the numbers are so large, it is such a big economy. look at the u.s. and their struggles, look at the struggles japan is out. it is not easy to grow its way out of this mess especially with such a lack of economic transparency. tom: since we have last seen you, besides the jets beating the giants, the yen is 1.47. how do you play, speculate?

>> that is easy. i think if you want to look at a proxy for hedging downside and china growth, the aussie yen is probably your best bet. getting it relative to the aussie dollar, because notwithstanding, that has become one of the most liquid ways to hedge your risk. there are others, but that is probably one a lot of people are paying for. tom: i just want to know but the jets. are they for real? damien: they are. i love them. the roster cuts come, your to cut the roster. a lot of people will be looking for your home and the jets have some money to spend. another wide receiver perhaps. the wide receiver they had the second year, that kid named jerry wilson, it is awesome. jonathan: this is great. the green and white.

just a little. i saw aaron rodgers might be dating someone's daughter. kailey: people magazine. damien: he is not going to tuscaloosa or athens. tom: what got me last night, the kicker for the university of virginia cavaliers see milled me. i got a lovely note. jonathan: surveillance van. tom: a lovely note. jonathan: that's what we like to see. that is what winners do. damien: have you been watching winning time? the cast. forget it.

jonathan: where's the streaky? -- where's the streaming? damien: i think max. tom: i have to assume you have a giant tv. it dims when you turn on. damien: my vision is not what used to be soy need a bigger picture. jonathan: has a tiny tv. 23 inches. one of the things you put the canvases on? and easel. he puts a little tv on an easel. tom: a couple of years ago. you know. jonathan: so fashion forward. damien: beautiful. kailey: broncos orange. jonathan: thank you, good to see you. coming up, futures unchanged on the s&p 500. live from new york, this is

bloomberg. ♪

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>> we are currently above trend. we are seeing surprising resilience in many areas and that resilience may continue. >> we can take this into the next year. >> as we look out three years, we will see peak inflation and peak fed. >> this has continued to be moved out. >> we think there is quite a bit of fragmentation in the economy now. >> this is the burke surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: is jobs we get america.

live from new york city, good morning. for our audience worldwide, this is bloomberg surveillance on tv and radio. i'm jonathan ferro. negative on the s&p 500. job openings nadir, adp tomorrow, jobless claims thursday. onto friday, the payroll report. tom: labor day, 3.5 percent on a point rate. if you parachute in for another decade or era, 3.5% unemployment would be unmitigated partisan celebration. why are we so screwed up? jonathan: that is a question for kailey leinz. i throw in gdp, potentially with the three handle this quarter. fed funds at 5.5%. might ask this question, are we sufficiently restrictive? tom: no. i can't remember -- we are not sufficiently restrictive. the bloomberg financial

conditions index, good morning michael rosenberg, .37 positive at the minimum. you got to get that down through zero to a negative statistic. we are nowhere near the market mathematics. jonathan: earnings from best buy, those numbers now. they can so -- they can see full-year adjusted eps, previously 5.70 two 650. 9.5 8 billion u.s. dollars. the estimate at 9.53 from second quarter. 1.07. kailey: in the statement they talk about how the consumer electronics industry remains challenged due to the pull forward and demand we have seen in the previous couple of years, various macroeconomic factors. they go on to say that they expect this year will be the low point in tech demand and that next year the consumer but tronics industry should stabilize and possibly see growth because of upgrade

cycles, tech and. it is not just tom keene trying to upgrade the tv situation in his home. with the idea is the picture is looking better going forward. jonathan: are things ok for retailers or terrible? i guess it depends who you ask. tom: it spends on the market segment as well. i'm in the process of buying a new tv. the price of this stuff is prohibitive. the sound bar thingy that goes under the tv. i think sony. it is a sound bar thingy which costs more than the tv used to cost. it is how they felt it up. best buy notices gross emergency and they mention it is all due to tom keene. gross margin 23.2% and the estimate of a figure below. jonathan: sounds like you went there for the first time in a decade.

the equity market, futures about negative on the s&p 500. can basically call it unchanged following activex gains on the s&p in yesterday's session. the bond market, yields higher, not even by a basis point. on the 10 year, 4.2079. kailey: we will see how the bond market moves off the economic data, a boatload coming about three hours from now. the first being job openings. data expected to come at 9.5 million jobs open in the u.s. that would keep the ratio at about 1.6 in terms of workers and available jobs. we are looking for any clue that the supply and demand in the labor market is coming into better balance. that is what the federal reserve like to see. at 10:00 a.m. eastern time, down slightly from the rating last time. how confident is this consumer still feeling as you are seeing the resilience in the labor market, still inflationary pressures present?

finally, the fbi see holding an open board meeting. they are going to be talking about a proposal to require banks with $100 billion in assets to issue enough long-term debt to cover capital mark -- capital losses. making it apply to some of these regionals as well, given the fragility we have seen in bags of that size and the failures as well, you are seeing a continued regulatory response. tom: the chart was great. on radio it signifies how many miles we are from pre-pandemic. the extrapolation on joints where we were in that had to make screams 2024, 2025. jonathan: the fed wants to make progress. has it made sufficient progress? a different question altogether. the policymaker in china -- let's go through this. these are considerations in china according to people familiar with the matter.

the biggest estate owned banks are considering lowering deposit rates for third time in a year. another consideration is to cut mortgage rates on existing mortgages. in the finance minister in china and other officials bowing to strengthen policy support and speed up government spending. is it enough? joining us, chief market strategist. the first caution to you. things are being with us. is it enough? michael: every day china has new stimulus they are announcing. what we are witnessing is a structural shift in china's relationship with the global economy, especially the united states. you have the leadership of xi jinping that is totally different from his predecessors. i think global investors are starting to get worried. i actually think you can announce all of these measures -- i don't think there is a lot of confidence to believe there is any follow-through. tom: is there an observable bet

by traders into september? is there money being placed on a certain thought? michael: i don't think that is the case. especially after jackson hole, everybody still has their hands in the air and is still data-dependent. everyone is still concerned we don't know where we are going with the uncertainty level, it is extremely high considering we should be at the end of a tightening cycle. but you had the conversation as to whether or not we are restrictive. i don't believe we are either. but jay powell does think we are. you basically have a policy mismatched with where most of the market is. that is a concern. tom: i have to weigh in with the gloom from several its cinch -- lisa abramowicz since she's not here. is there gloom bet i can lay against?

michael: i don't think there is per se. we are seeing more people behave cautiously. magnificent seven drove so many of the gains and they start to undergo a correction this month. apple is a great example of what happened. a stock up 50% year-to-date going to earnings at the end of july. obviously earnings are supposed to be down year-over-year. the market said that is too much. the stock is down 10% since then. that's what we are seeing going on right now. there is no real reason for that to stop in the near term. because we don't know which way we are going with the fed. kailey: this was something mike wilson was talking about. the idea that nvidia earnings, kind of spectacular, could not serve as a catalyst for a rally in the equity market, he thought was telling. in the absence of catalysts like that, which ones are there? is every thing by economic data now?

>> that is the problem. you don't have the leadership of this group, the performance mostly on multiple expansion. we're looking at the economic data, we will have the jobs data on fight -- or friday. we also have pc thursday. but that is kind of a late number because we already saw the july cpi number. but when we get the august cpi, that is keen. the fed could pause but we are still not sure they are done. if you look at where the gdp is tracking for q3, it says we are not restrictive. if the other members of the fomc start to acknowledge that, we have seen from the richmond fed president, saying it doesn't look like we are restrictive. more fed officials acknowledge that and we don't know where we are on the cycle. 2, 3 more? it feels like the fed should be done but they need to keep the markets in check.

kailey: trigger point, chairman powell said that about the neutral rate as well. he does not know what our start is. if the neutral rate is higher going forward, what is the implication for what turns can look like? >> that is where the fed should make an adjustment. you can't say you don't know where it is and then put a longer-term projection fed funds rate in the s&p. you can't cop out like that. it is 2.5%, 50 basis points of a real fed funds rate, real policy rate. if you are publishing that number, there should be a number. how can we say we have the worst inflation of four decades but we are two years in and the number has not shifted up post-pandemic? we don't have that globalization . for the past three decades with china, exported disinflation to the global economy. the number is higher.

if the fed adjust that, the market will then start adjusting the longer-term fed funds rate higher and we won't expect the fed to start cutting every six months. tom: all i know is we've got etf's and index funds. are we playing stocks like we used to? or have we all been packaged into etf's and or index funds -- or in index funds? -- boring index funds? michael: you nailed it. the structure has changed because you had that massive structural index since the global financial crisis. part of that has been accelerated by obviously monetary policy, negative policy rates for the past almost 15 years. those indexes play a big game. that is when you see it names like the magnificent seven. it is a great company so i'm not

minimizing. but they're also flow beneficiaries. that is why one of the biggest trades is who is getting added to what index? it is something that has hurt the active management business. you don't want to be subject to just passive flows that are not discerning prices and values for assets. you want to have active managers trying to set asset prices and allocate capital rather than index close. jonathan: michael burgess there. the index delivered -- the five-year today. it is not over for 2023. tom: nobody cares but my opinion on the market, but exhaustion by huge body that missed the october rally. it is interesting to see how that plays out. jonathan: been saying we might

revisit the low promo 12 months. september later this week. october around the corner. the equity market totally unchanged on the s&p 500. into the bond market, your 10 year, 2020 on a 10 year yield. i'm in up later, 48 minutes away. they've called this market pretty well. andrew from morgan stanley investment management, taking the 5% yield, he wanted to play it equities. tom: i can't emphasize enough the split between those that are allocating out into equities, believed to cash and bonds, whatever the song and dance is versus those that say you can't win financially as a family or institution unless you are in the market every day. you've got to purchase pay. kailey: and this is what you are asking everyone yesterday. three years, what will your return look like? tom: it is not financial tv.

where's was a look at three hours. jonathan: the financial advisor talking up single names. if your financial advisor is on tv, being in and out of the market day today, you should have questions. tom: it is a huge question. but the single names is a private to the sell side and we don't have them on enough to do a great job. they lose sometimes. look at me. jonathan: amh has come to work. she joins us next from new york city. this is bloomberg. ♪

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>> i don't know who was watching the debate and who watches the country closely? china. we are in a cold war with china and a proxy war with russia. divisiveness is a huge business

and you take every cable network, seven by tony for, talking about indictments and 2020 elections, we are not talking about the things we're actually facing as a nation. jonathan: that is because he is not listening to the right network. the north dakota governor republican presidential candidate. what is it about this candidate? kailey: i asked if he can't qualify for the second debate, about 3.5 weeks from now, you have to have 3% in a number of polls to get there. so if you don't qualify, he is that about 1% now, is it time to drop out? he said no. so the field states -- stays wide. in the wider it is, the thinking goes, the better it is for the frontrunner. jonathan: why do they hang around? tom: i don't get it. but i don't think this is, enough in the press.

there was a moment where he and great plains software were a huge national deal. you could do tech in the midwest and get away with it. and that was a new concept at the time. i don't think there is enough about entrepreneurship. this is a guy who is a success and he is almost subsuming this in the wall street and main street tension of the nation. jonathan: i want to run to the price action, unchanged on the s&p 500, going nowhere. yields higher by not even a basis point, 4.2079. excusing market this morning. city publishing. we caught up with veronica clark, veronica and the rest of the team. job openings likely to stay elevated with the data coming up later. this a strong demand for workers, historically low unappointed should keep wage growth strong into friday. meanwhile, to the data point you are looking for, the house

prices, likely advancing close to 10% in june as higher mortgage rates have limited the supply of existing homes. tom: to be clear, i am a huge fan of what they did. bottom line, it is stated. one or two months behind. we're docketing a snapshot of housing. but coming off zero or negative percent, it would be shocking to see that above zero. jonathan: amazing. tom: it is super tuesday today. annmarie hordern, our washington correspondent here. i have no idea how this works. there's going to be super monday in march where the former president of the united states is going to be on some kind of trial and 24 hours later, trump is going to go on to super tuesday. how is that 48 hours going to

happen? annmarie: it looks like the former president, a candidate for the 2024 presidential election, is going to be potentially in court when it comes to super tuesday. it is important because it is the day that all of these states, more than 12 of them, go out and vote. delegate rich states like texas are included. this is going to be happening while a candidate and former president is going to be on trial. we should note this is the trial in washington, d.c., the january 6 election interference trial and the judge basically said she is going to have it in march. you heard from jack smith that they wanted it in january. trump team wanted it well beyond. they wanted it in april of 22a6. she said no, it is going to start in march. we spoke to a former white house counsel under the trump administration yesterday. ty cobb thinks this stands. he says it could move by a week

or two but this timing is looking accurate. tom: looking at super tuesday, biden, maine and massachusetts. michael bloomberg got american samoa. go to the republicans where donald trump crushed the governor of massachusetts. who is he up against, is it time or is it already decided meet marsh with republicans? annmarie: it has not been decided. we are a month away from november. -- we are year away -- right now, trump as of august 28, 49.2% just under him, ron desantis, 14.9%. what you did see from the former president is a little bit of a dent in his polling numbers following the debate. and what you see is also when you look deeper into the questions being asked, amongst these individuals, would you

consider voting for someone else? for a lot of people, they are just getting introduced on a national stage. while it was only that one first debate, there is potential someone could break through. the issue is just when he for hours after the debate, the former president made headlines when he was the first former president to have a mugshot. that was in georgia for another interference case when it comes to between 20 election. it is going to be difficult for someone to break in. but there was movement following the debate. kailey: the one who was thought to pose the most significant challenge initially is ron desantis, off the campaign trail because of potential crisis in florida as a hurricane is billing for the tampa area. it could be a category three when it landfall tomorrow. reminder that this is also an active governor, not just a presidential candidate. how does he balance the two when his campaign is flailing?

annmarie: not only that, governor desantis has really been trying to break through. they've been trying to have this restart because a lot of the big donors are on the sidelines. they did not feel comfortable with what they were seeing at first. maybe he was playing too much into this and tight woke corporation slogan and going after big companies and their employers like disney. that to not sit well with a lot of people. his initial remarks on the invasion of ukraine, calling it a territorial dispute. this could present him a moment. there sometimes moments in a crisis that could present -- percent themselves. for him to act presidential. he had to get on the phone with the current president. these are moments when he can act presidential, to come to the help of his state. we should also note while he is going to be talking a lot, every day they are talking about this hurricane that will make landfall in florida tomorrow, he

was also booed. you talk about the racially charged shooting in florida. there will be moments for him to shine but also for the democratic party to go after him. kailey: we heard a lot from the democratic party and biden on the shooting in jacksonville. quickly on biden and his efforts abroad, jean armando in china as we speak, are we seeing signs of tangible progress on this visit compared to the others we have seen a and officials take? annmarie: the newsletter from ian today says good vibes from -- between the u.s. and china relationship. it seems like compared to all of the others in this meeting, she is making slight progress when it comes to munication. they are setting up a working group to talk about trading investment. a better dialogue when it comes to export controls. this is the quote that stood out. she told the chinese premier,

the number two official according to associated press video feed, quote president biden asked me to come here to convey the message that we do not seek to decouple. this admission has been trying to tell the chinese government we are trying to de-risk. there is one line that they secretary wanted to bring to beijing. that is that foreign national security concerns, we have more to discuss when it comes to investment then when it comes to naturals -- national security. there are a lot of trade and investment that they have to do outside of the national security concerns when it comes to export concerns we could be is guessing. at this moment, china is looking to revamp in terms of global investment as well. it does look like she is getting that message across. jonathan: why is it always u.s. officials going to china and never officials from china going to the u.s.? annmarie: is a great question,

one many republicans have been asking. there's going to be a summit in the united states in november. stay tuned until the end of the year. jonathan: thank you. de-risk, diversify, not decouple. it is about diversifying. tom: i would look at china and say it is not shanghai, hong kong and beijing. there are a whole bunch of other cities flat on the back. coming up very shortly, their premarket unchanged on the s&p 500. from new york, good morning. ♪

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jonathan: two hours away from the open here is your s&p 500 stalling, unchanged. nasdaq negative .10. we've had the back to back gains on the nasdaq for august so far as we close out the month we look at the september with the federal reserve decision around the corner. two year, tenure, all in and around 5%. going into payrolls on friday. at the close the 6th street session where it is closed above 5%. tom: my single statistic through

the data friday is the 10 year real yield. vacillating is a phrase, but to break through high here and revisit 2% would be headline. jonathan: look insincere with your bow tie. tom: very cavalier. in the fx market clinging to one away. the data has not been great. 10 wait .1%. you cut up with christine lagarde and it does not want to give anything away. tom: i think the respectful of the market reaction and in bonds. the bonds there are not like here but with the entire baking instruments, debt instruments in the floating nature of so much of this. they are walking on eggshells to get to september 14.

jonathan: gina raimondo continuing her trip to china with president biden said to come here and conveyed the message that we do not seek to decouple. it's unclear if weather hit she will meet with president xi jinping. we don't want to decouple this has been the message. secretary guillen said the same thing. the words she used was diversified. kailey: after she moved from de-risk. they are trying to feed nagel the language to not indicate that they are trying to cut ties without economy and that trade relationship they say that some of their trying to achieve by protecting national security interest. the question of ramonda will meet with xi jinping as well as president biden they have not spoken. jonathan: is not set for later this year? is that we're working towards? kailey: that would be the indication to get those ties

weren't up. the language to your point on what he has been got that resource. it may not be that helpful. tom: why would they not be coming here? jonathan: the league of china has not traveled much. -- leader of china has not traveled much. the latest out of china so much to talk about the potential we get target rates, fiscal easing. we have not seen these things in a big way support this market with this economy. the other story, the head of fake of supervision in san

francisco has stepped down after the crisis of svb. mary daly is under scrutiny and he will retire at the end of october. the san francisco fed has yet to respond to the departure. tom: i see mary daly a jackson hole and you wonder how it will play out. this is the first step of it. there is a discussion about daly's distance from all of this other than to say, doesn't surprise me at all. jonathan: the surprise of the timing that is taken this long. it seems odd. tom: people would say let's go but the machine move slower and jonathan: that's where we are. jonathan:we will get more clarity on that. in the other story, a hurricane is said to make landfall by wednesday with high wind, storm surge could deal $10 billion

worth of damage. ron desantis expanding evacuation orders for the counties in the pot. this one looks brutal. jonathan: i believe it was north than last time but people on the west coast but many surveillance goes to a places down there, they are getting hammered. a lot of damage. jonathan: we will be on top of that story tomorrow. tom: we will follow this carefully, a movable feast within the gulf of mexico. joining us now on bonds and in the european dynamics of bonds. it is joost beumont abn amro bank n.v. the head of, what did they tell you in the german debt market which is what we follow in new york. what do they signal now? joost: investors are divided

about what they will do. what yield signal is the tamir rice, a bit of flattening of the curve. investors are worried that inflation will be around for longer and that will result in higher rates for longer as well. tom: they just did a ftse the mood of those in yields are people clipping coupons are looking for total return? joost: they are looking for total return but we did an investor survey, we do it twice year we had more than 170 investors responding so a big survey. a wide range of countries a sneak preview showed 10 year yield, investors are saying that

it will end up at 330, so to a different presented. the conditions are so uncertain, it is so unclear what path the economy will go and what central banks will do and that is reflected. kailey: given what you're saying about how uncertain it is in the message that jerome powell was trying to convey in his speech in jackson hole, the cloudy scars, night situation. they just don't know but what you are seeing in the treasury market seems more definitive. john was talking about north of 5% for multiple sessions in the auction yielding the highest since 2006. it is more sure -- is it more sure than the policymakers? joost: in our view, central

bankers talking about the ecb, they are way too optimistic in his latest projections of economic growth. they expect a pickup and growth in the second half of this year. it seems at odds with the following basis, rate hikes and that needs to filter through the economy. we expect much slower growth. we expect a mild recession and they can call it stagnation. at the same time, they expect inflation to remain high for longer while the key here is the labor market and we see signs of it turning. we see wage growth having reached his peak coming down slightly but still strong. we expect inflation to drop quite significantly before the

end of the year. that will set the path for rate cuts next year. kailey: if you talk about the tightening starting to kick in and the economy feeling it what we feel it in a more material world and credits? will we see defaults pick up in a way that they have not yet? joost: there are early signs of talks about big group sees ecb continually rising in the fourth quarter. with a lot of companies and households having the benefit of government compensation schemes is likely much less next year and curb expenses. i think the outlook for bankruptcies is not great and the other question is of course,

can banks cope with that and in that respect the answer should be yes because we had a stress test showing banks are capitalized and can cope with half the things. tom: we have to go, thank you so much with fixed income. you are an expert on this and the thing i noticed in jackson hole and intelligent debate completely ignoring the polarization between germany and portugal. i don't think anything has changed in terms of the tension and michael mckee's conversations a jackson hole. jonathan: president lagarde was right to not think about 1714 because we should not be talking about german business confidence , core apis but more important, the european model has failed. it has failed with germany at the heart of the failure. not italy, greece, spain,

germany. trade, energy, security. we have talked about this endlessly. the outsourced economic security to china. they are in iraq in the hot hard space. with energy, exposed to russia and a strike to australia. that is trade, energy, security for a longer time outsourcing national security to the u.s. and keeping those three things in balance for decades. that has fallen apart. tom: they have less the manufacturing, marginal edge that was always there. i believe london will have extended folks with the professional say about this.

jonathan: with decades of looking down their nose and portugal, greece, ireland, is where the heart of europe where poor decisions were with marco. tom: there is no plan. off the record, dr. pozen make clear they are avoiding the plan because there is not one. jonathan: your s&p 500 slightly negative. in the bond market yields are higher by a single basis point on a 10 year, four point 2138. jay bryson will be here on the u.s. outlook pushing ahead to those job numbers, complaints -- claims on thursday.

tom: on a blended basis dxy is at 1.04 which is the surprise of the summer. remember all of that weak dollar talk? jonathan: yeah china will open up and you will open up and you want money elsewhere? tom: buy more apple. it is been quite a year. kailey: on the subject of bank failures us were looking out for. the fbi seats the ad that requirement to regionals as we think about what will stabilize them going forward. jonathan: what is this headline about here? pharmaceutical bristol-myers squibb, eli lilly, a four way into bargaining with drugmakers. kailey: this is part of the

inflation reduction not to negotiate prices to the drugs that promote this cost. there are 10 drugs the drive this cause. some were anticipated and others indicating that these drugs would be included on the list. you have already seen lawsuits filed against the government. jonathan: the prices may because 50% saving medicare 100 billion. tom: is trump on the same page as biden? they want lower drug prices? jonathan: from new york city this morning, good morning, this is bloomberg. ♪

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going to have a higher mortgage rate than you have now after refinancing a couple of times during the pandemic? with new housing we see a pickup because you can't get an existing home. jonathan: the housing market is a mess. that was dana peterson, it's a mess because in two years we've had record low interest rates and the highest. people with 2% mortgages don't want to move and those facing a percent mortgage cannot afford to buy. tom: is the first in the world housing market and how it falls under rent. i don't think it no -- i don't think i know? jonathan: if you're locked out of home builder ships to what do you think happens to rents? that is the problem. tom: new york is out of control.

it's an absolute disaster but does not speak to the rest of the country? kailey: washington dc is bad too. jonathan: the people loving it is homebuilders. joining us now, the smartest guy on the block. john lovallo did you see this coming. were you pounding the table? john: we came out of the gates bullish. we did not expect it to play out this way. we were looking at stocks are trading at a fraction with low risk to value. tom: now dh horton, executives are unlearning shares, it is a

moonshot. what for the homebuilders? john: we are still bullish is an interesting dynamic playing out, little existing home inventory two-three months which is half of what it should be. couple that with the man is still resilient regardless of the fact that rates are at 7.5% and demand is being funneled to public homebuilders. kailey: how long could that last? if were on the person a percent that has to hit demand for people who are trying to buy new? john: a hundred percent but being a homebuilder you have arrows in your quiver. kailey: incentives. john: they can build smaller footprints, for their way from the city. there is optionality that the market does not have. there are a lot of things that favor being a builder at this point. jonathan: in the u.k. this

correct because the fixed-rate mortgage is an agreement for 2, 3, four years. the u.s. mortgage market with 30 year fixed. are we facing something generational? does this goes over the next decade? what time horizon do you have for this to play out? john: there is a long runway for the housing market. you have massive generational wealth transfer food loan from baby boomers to millennials and chinext. and under built house market and a lot of millennials coming to the market that have been shut out of the market for 15 years and they are saying, i think we do want to own a home? they have the ability to borrow from parents. that capacity and ability is actually there. tom: our housing market is rich

parents giving money to kids? john: it is part of it. the generation coming through is a little better healed than prior generations because they're older, doing things later. there is wealth that accumulated. this is a needs-based product. tom: the fancy people you follow, granite is out. kailey: it's quartz now. tom: why can't we build a starter home that is respectful? why can't we do that? john: the one thing this industry has not done is adopted technology like other industries. they are building a home the same way they did 100 years ago. there needs to be a technology infusion. there are players working on this. tom: we had to ice skate to the

backyard that cut through the linoleum floor and nobody cared. and now it supports counter? what is the cost? kailey: and on cost and the tools being used to build these homes, part of the issue with the raises the inflation to get down driven by supply-chain challenges. are they contending with that? our supply issue still being worked out? john: it has gotten much better. there are still hangups on electrifying communities with transformers but it's getting a lot better than it was. the biggest headwind would be labor. we are in the labor constrained market but public builders given their size and scale have the ability to attract and retain. kailey: as we talk about public

builders and a starter home versus elsewhere. between a lake street player -- luxury player or average consumer? john: we favor the first-time buyer which would be d.r. horton, it's in need based buyer that requires more space. to the extent that person can make the math work they will make it work. public homeowners will make it work. we like the other side, the toler brothers who reported a massive corridor, they are shielded from interest rates. you have people buying a cash. jonathan: how disciplined are home folders -- homebuilders being.

when we can say this could be a 10, 20 runway. my thought is just build. how disciplined are they right now? john: it has what has changed between today and pre-financial crisis. there has been a lot of discipline in the market because of the pain in the past. there are some capacity restraints on the labor front that will not allow them to overbuild. even to the extent that they wanted to overbuild they could not. there are natural governors of growth. jonathan: i can't wait for these high prices for the rest of our lives. john, thank you. headlines on the news. gina raimondo is heading to china. we will wait and see if there's any action from china.

we were able to open u.s./chinese minds for communications. kailey: that is what all of these visits have been about not just for the commerce treasury and john kerry is about line every communication -- establishing a minor communication. it's not about tangible outcomes as continuing talking and laying the groundwork for a conversation between xi jinping and president biden. tom: when they come here will be of lines of communication? jonathan: if they come over here? i get is politics and why the language is important but it's frustrating when it comes to diversify instead of decoupling. what matters to me is action. what are we saying in seeing them do?

they incentivize companies to produce at home and they feel incentivized to move away from china and the dynamic we've discussed is being in china for china. if you have a manufacturing base is not for product for the rest of the world but for chinese consumption. that's big changes that we have seen accelerate in the past three years. tom: i want to go in the pacific rim and were focused on our three cities, the answer is there another china the beijing has to address? i'm looking for domestic dialogues? versus the shanghai dynamics. jonathan: trying to support the economy and property market and finding it difficult to fall into the equity market. andrew slimmon husband bullish with morgan stanley. he is up next in new york, this

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>> the federal reserve probably has one more quarter-point hike up their sleeves. >> i don't think the fed will be raising rates in september but we see the possibility in

november. they will have to upgrade their growth forecast. our expectations that we continue to see inflation when in the u.s.. >> this is bloomberg surveillance with tom crean, jonathan ferro, and lisa abramowicz. tom: good morning, a busy august week. it's the real estate show but we cut to the chase, arlington, virginia, a starter home. 1.9 million. that is the starting price. jonathan: that is the problem in this country. if you're facing a 7% mortgage to buy, you will not be able to buy? this housing market is frozen. you see it from data point to

data point. what will the consequence be over the next decade? tom: forget about the generational stuff that i have given up. send me the issue is how it folds into the surveillance world which is the owner's equivalent rent and metrics. kenneth lay should come down of real estate pushes against it? jonathan: i think it's an important question and he is asking about strikes. recent strike activity in an important reminder of demands with upside pressure on wages. thinking about a potential for strikes and labor disruption to sharpen the job figures. tom: our team in detroit is making it pretty clear that strikes it unw, it needs to be

considered. kailey: not just a strike on one, on all big three simultaneously. 100,000 workers were authorized for a strike should the deal not be reached at what they are asking for they have described is audacious. 46% hike wages, 32 hour work week, pensions. it's a big ask and how do you meet in the middle? tom: that was my angst yesterday, how do you do with 32 we? our bureau chief said it's very european. this is what they do in germany. jonathan: taking shots of germany and france? sometimes you can even receive phone calls and no one contact you. is beautiful. tom: 3 million, the front porch

provides pristine views of the community and his sense of tranquility. kailey: nothing is tranquil about 3 million dollars at 7%. jonathan: this will be the epicenter of the economic vision next year. it's the american dream? tom: with the great team of drivers we had in jackson hole. there was no other talk except for thousand a month for rent. jonathan: totally frozen out. am i going to let it go? tom: i will go to the 10 year real guilt, 1.19% would you say? jonathan: isn't that a song, let it go? kailey: frozen. jonathan: now i get it.

sometimes you just have to talk about. futures are frozen, futures negative 0.1%. yields are higher by a single basis point. 4.2178. tom: this is a joy because he is the one been right and responsible. andrew slimmon joins us from morgan stanley. flying of wrigley field, going into o'hare and looking at wrigley field that is god's country. you are in the market how do you find the courage to be in the market now? andrew: the story of this year is a tragic story.

stocks look forward and people use the rearview mirror and we have a terrible market from last year and that is where you get more bullish after a down year. people looked in the rearview mirror and got pessimistic. it was year of hindsight and he had to put chips and because we had a bad year. what i see now, all of that money that washed on the market has not capitulated back. the sentiment is up but not flows. i have never seen a market where people reverse and flow back into the market. it happened in 2021, money market yields being where they are the key people on the sidelines. i refuse to believe this cycle will not in the same way with everyone in before the bid sinks.

tom: how do you identify a second leg of bull market? i believe in january 1975 we had a moonshot. how do you figure out your beginning a second leg? andrew: in terms of now to year and in further out, we are in a pause. . i suspect we will have a strong fourth quarter. the pain of being out of the market is going to become more acute as we get into the fourth quarter knowing you have to go to your client and report how they have done relative to the market. number two was ernest growth rate is going to reflect from negative to positive later this year and thirdly, i don't think

this gets enough focus. the amount of money the government is going to unleash in the chipset, infrastructure act, ira all in the fourth quarter. that will invert into a positive. all of those will drive the market higher. what i struggle with, how are we going to get back to 2% target with wage pressures? all of this public works spending. i don't see that and that worries me about next year. for this year, it's a good start. kailey: to expand on the point, here's from joe biden with medicare drug negotiation part of the inflation reduction act try to lower costs. to your point on the economic

stimulus that could kick in going forward, does that then become a bad thing when talking about more money being pumped into the economy and what the fed will do to counteract that force? andrew: absolutely. it is a long term negative but look what happened during covid. we pumped a ton of money into the market in the market responded positively. there is a positive response to that spending money and we hear from the companies like industrials that the money is coming. we have projects to do. this will ride a big part of the economy and earnings but it will extend this inflation longer than men expect. tom: jeff currie retiring out of the oil bracket said the new

yield structure and getting us back to 2007 make inventory management and hydrocarbons different. i would suggest we underestimate what inventory management with the real guilt changes corporate behavior. i would say corporations will begin to adjust viscerally to these new yields. do you agree? andrew: there is no question arising yield curve that creates a higher cost of capital that's why rates are going out causes a recession. i don't question that inverted yield curve is also suggesting that. the question is when? and is not good at predicting and what is really going on here is from most of the companies in the s&p 500, higher yields is a net positive because they locked fixed rates but making more on

their cash. right now, is not a negative but it has debt and when it comes to the cost of capital will increase. the other thing that will slow spending because projects are harder to justify it higher yields. that is all to come but i don't think it's this year. jonathan: and she was in the negative for the banks? andrew: is the cost of capital. i think the spread, margins remain higher in what i worry about is will we have another s vb crisis. it doesn't look that way. ultimately, are there other banks that map the duration issue? jonathan: they have just not

traded well, the financials. andrew: there are other places in value i would search for. i think industrials look attractive because with this public works spending coming, i am comfortable that these companies will point to the bank or beat the numbers with the spending that is already been approved. i think that is a cleaner area than financials right now. jonathan: thank you sir, andrew slimmon from morgan stanley. coming out, 8:30, catch up with jay bryson of wells fargo's. a team and is precise. tom: home economics

surveillance, the mortgage calculator in the one point 9 million starter home in washington, 380 thousand down with a 9000 per month and this housing payment of bringing the down payment of 5% year under 11,000. jonathan: how much home can you buy with 25,000 mortgage payment incident average 30 year rate? the previous number, the peak of that in the past five years you could borrow 758,000 worth of the house which is what you could buy $76,000 worth. the house you can buy now it's

$444,000. tom: the reality is here, if concern have parents that can write a big check, it's societal hogwash. kailey: when you talk about people locked out of buying them for us to rent driving rental prices hi sir how do you say for the down payment? -- rental prices how do you say for the down payment? tom: what would you do about taiwan. but this is what matters. jonathan: from new york, this is bloomberg. ♪

as we look out three years, we will see peak inflation we will the scene peak fed and valuation levels will be more reasonable.

maybe if we get a change in washington it all suggest that stocks will be a much better shape. jonathan: let's take a five-minute look at things right now. s 62nd load. this is a flat market after a two day. no trauma on a 10 year. the drama for the moment is reserved for one nation and that has been china. tom: there's no question and it's a nuanced entertainment with the secretary of commerce visiting with ambassador burns and more than that. it's about a domestic discussion which is opaque and unknown captures what's going on in china. jonathan: this is from the

commerce secretary that businesses say china is unenforceable. they have been stung over the years of -- from the policies of china. tom: my own predilection on the experts and eggs for us language. what is it into china? it seems to change and migrate over. kailey: this is what we hear from the commerce secretary she says let's see them react more to open up the markets but some of the policies are not friendly like ip theft empi -- enticed by

law and these are some of the text fine. jonathan: the stuff is been going on for aged. the meetings would always happen between u.s. and chinese officials and because we find out what's going in -- on read that out. even though the u.s. knew it was happening and they met with officials and when we find out about it the cancel. how much of this is about public consumption and look at us were doing hard things. as opposed to actually doing it. jonathan: and why at the chinese going to america as a valid point.

we have our global economy reported. >> there had been a ban on big tour bands leaving china and the capacity has not been laid down for the roots. tom: people are coming here to bringing secretaries to buy gucci in new york, are they welcome? >> it does look like it is more of a conga line of u.s. officials going that direction than the other way around. it will be interesting to see if we see chinese officials come here but project for word on the economic forum in the u.s..

that will be interesting to see president xi will allow? jonathan: does he want to make those trips with a strong economy? >> of course they want a stronger economy and strong foreign investment but they wanted on their terms. we saw president xi to get expansion of the brakes block. it is pulling at the biggest economies. whether or not the authorities are concerned about the stock market is it's an open question but what they do want is a strong economy which is why we are seeing that tony -- tone chained to attract foreign investment. kailey: they will cut the stamp tax.

and is not the only trip information. now we have the news on mortgage rates. from state owned banks. how much further can it go? >> the stock market rally does not reflect what's going on in the economy. there is no doubt that what you need to focus on is the real estate sector. there talking about taking measures that is the ground zero of what's happening the economy. take a look at what is happening to are no prices. they said the demand is holding up better than expected. are we looking at an annual china crisis or something

different. kailey: is it worth something different what are we looking at? >> the difference as john asked but there is a political drop -- backdrop. they are pursuing tough medicine in china and want to go down the road of debt, they know they need to straighten up the retail sector. then there's the political interpretation that they are not focused on reducing growth in their priority is ideology. tom: we never talk about these

chinese cities are they flat on their back? >> the real estate side they are flat on their back and a lot of these places places housing developments are we can going unfinished and those big developers are asking for race. grace period and all of these ripple to the provincial cities. some parts of the economy and not in the doldrums. i am seeing some analyze making a point of what is coming up and there's not too much happening. jonathan: let's finish here, you know the stuff inside out. far better than i do. what are you focused on now? what are you anticipating will be the next move?

given the moves we've already seen? >> just keep in mind what happen with property developers. there could be some kind of bailout and things will shuffle all. just watch how they navigate this hard landing or do they step back and come to the rescue with the flow if you quiddity -- liquidity that we have gotten used to. it's all about the real estate sector and how they respond? jonathan: thank you for the update. down in washington dc off the back of a range of policy moves from the chinese policies. tom: what if on the political sign that is nominated there for

40 years what is he do if he has to. jonathan: on on the internationl stage there was a feeling that the market in the reporting we had done asking for funds to come in and not sell more than they buy buy just to improve the optic. for a visit from president xi jinping. tom: we had a discussion with the south african premier and they were involved in the argument and it was flimsy. jonathan: coming up on bloomberg, amy lou silverman, of capital markets. this is bloomberg. ♪

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tom: bloomberg surveillance, lisa abramowicz us off. she was in norway the last time i heard. kailey: are there polar bears in norway? tom: i think she is somewhere north of canada. a lot of outdoor is going on. michael mckee is joining us. a big labor week but a lot of other stuff going on. our theme today has been the

shock of housing in rent and in america. the moving averages up a hundred 32%. we have evolved up to 7.7% on voters equivalent rent. it can't go up? mike: it can but is starting to fade. because the data you're talking about from year ago what we are seeing is inflation in those numbers and equivalent rent that's backing off. on overall pce and then go back up with prices. in this case, is because of a supply shortage of homes. no one is selling houses. tom: in 20 cities, do you

aggregate housing data or do you look at the neighborhoods and geography? versus the rest of america not seeing those surges? mike: you want to disaggregated look at the market is because real estate is an individual market but a lot of us in 2007, 2008 it can have a national impact. that was based on housing loans rather than prices. we have differences between the prices will be because of demand. kailey: on the subject of prices we will get specificity on those generally. we get the price index and pc coming as well. is that the data that would be important to the federal reserve? does bite the jobs report. -- despite the job report? mike: that would be job creation

and that's what the fed is waiting for. we should be hiring fewer people, we should have built up jobs. we get jolt today at 10:00. the pc looks out for inflation and the core layout. part of the headline, is expected to rise in the month of july? maybe a little bit of a concern but the fed will look at the numbers for pcp very closely. they want to know what is happening and see sequential gains. in this case, they let the numbers come in a little bit higher and they will break it down and look at the categories. kailey: on this idea of sequential's, we see multiple peaks contributing to the same area and story.

what is sufficient? do we have anwhat is sufficient? do we have an understanding how long the fed has to think about it before it sides? mike: i spoke to people in jackson and they don't have a good answer. they say we will know it if we see it but if you get below 3%, they will start to think they are on their way. if you see a significant number of months is within acceptable balance. which it has been lately. tom: does the fed look at the nominal rate or does it look at the inflation-adjusted real estate? mike: the the inflation-adjusted

real estate because the impact on financial conditions but the overall great to see what's happening with the economy. tom:tom: michael mckee and showg authority. and then tomorrow we have more information. jay brysonjay bryson from wells. this sets in your report are real yields, inflation 10 year yield that will drift to 2%. what is the ramification to our viewers and listeners of a list% real rate? jay: the ramification is that exerts headwinds on the u.s. economy. what you look at what the real raterate, that's what matters fr the economy and if the growth rate of the economy, no one knows what it is. you want a real fed funds rate at that or even below. that would be neutral. you get north of 2% that

affects the economy. whether it causes a downturn it remains to be seen? if it's not quite enough and put had swings on the economy and solicit. tom:tom: on bloomberg conditions index, how many rate rises to be need to get restrictive? jay: the index you referred the, there are 10 different variable questions. one would become a credit spreads on corporate fronts, volatility of markets and things of that nature. fronts, volatility of markets and things of that nature. how do you get a more restrictive? if the fed were to become more hawkish. you start to price in more rate hikes that pushes bond spreads wider and all those things

matter for the real economy as well. markmark is have been accommoda. bonds have narrowed stock market is holding in. if we get a bad pce print tomorrow and a really strong labor market. if people start to believe there is even more tech coming. we will see that intact versus financial markets. kailey: even if we get those things, a blowout child support and more inflation pressure the fed would like to see. with that result in a hike in september? we discussed earlier how the board seems quite high will the continue to pause and see him make a call in november? jay: we agree with your sentiment. as you said, the call for a rate hike is high.

-- a pause in the rate hike is high. my concern with the fomc we want we want to see more data. if you get a bad pce, what happens in terms of markets that pushes the probability of rate hiking. that would involve the volatility in the markets. tom: with respect done on the labor markets of the decades. labor markets of the decades. will we be surprised every jobs day where guys like you don't really have a don't really have a handle on accountability of the surveys? jay: we look at our model and thethe bands around that.

in some sense you are throwing a dart and it gets magnified in terms of pandemic. that is what put the volatility in those underlying numbers that you're using to project. that academic stuff starts to fade away. at the end of the day, it's a bit of a guessing game as a release of the labor market. game as a release of the labor market. kailey: headline figures on payrolls and the other components of the labor market, the pressure on wages. we spoke with you earlier on what we are seeing in type of strike activity in the power of labor and pushing for higher compensation. how should we think about that and how should the fed by inclusion? jay: you get headlines with unions and i want to say, i don't know the number off of my

head, the rescission of the labor force is unionized unioniy 6%. we're not talking about the 50's and 60's. there are a lot of headlines but at the end of thethere are a lot at the end of the day, it's an avoidable point. kailey: this study says this is an indication of supply system problems. in theory that goes beyond? jay: that is a good point. the labor market is very tight right now. the push for higher wages is easier when you're unionized with collective bargaining than out there on your by yourself -- by yourself. with everything we have seen whether cpi, average hourly earnings.

all of those things have been deceleration in personal wages. deceleration in personal wages. were above to what we need to be. we are not getting upward pressures that we saw last year. tom: personal income and spending. as it affected in the way? jay: as tight as the labor market, personal income is acting in a normal way. the last 10 out of 11 months we saw positive, real disposable income growth because wages are growing faster than what prices are going for. tom: thank you so much, that's a great summary of our economic. a huge discussion about housing and rental and one of the answers because we live in new englandengland is move.

england is move. what we saw in jackson hole, iowa falls, woodbridge, virginia which woodbridge, virginia which is halfway to the carolinas. it's an hour commute. it is 23 miles southwest of washington. is 23 miles southwest of washington. i would suggest it is at least 50 minutes. i would suggest it is at least 50 minutes. kailey: and this is the conundrum from his city dweller. do you go for the commute every day to get more house? tom: house? tom: s&p futures of negative five, down .1%. this is bloomberg surveillance, jonathan ferro preparing for a 9:00 hour. i look at the data and i would

suggest it would shift in the last half hour. yields are up higher by .3%. small points, 1.9% on the two-year. kailey: dollar-yen, tom: there is a weaker yen and i would suggest that we are at a boj to watch for intervention. kailey: when you look at the bubbles the highest since last year it would suggest that. you would have to have the research of the 155 you? what is the boj do that? tom: we spoke to the tokyo

office and they said there is a rangy discussion of scrapping yyc a short-term yield control of the central bank which they said it was a fiction. tom: are you thinking about moving to virginia? send us your email so we will see it on america's housing crisis. stay with us, this is bloomberg surveillance. us, this is bloomberg surveillance. ♪

tom: all last week we have markets on the move. of friday, monday, we are flat

on the markets. futures, fixes 15.49. it's made up from the august movers. kailey: we have some earning movers. retailers reporting shares are up 2.6%. they are talking about a bottom in the text stance. they think the picture will improve going forward. another when they captured my attention. this ev start of the just went public. tom: what we are writing about how this is evoking memories. maybe you see that showing up.

kailey: zion is a regional bank down 3.5%. we are expecting the ftse to have an open meaning. she went up to long-term debt. they will keep a regulatory response of the failure. tom: the pasta near 40% in you have a 34 if you have a $10 million cowboy bar. just on the ranch. they have this art dealers.

the home of science bank we will look for that today. this is a joy except the headache on housing. sheila kahyaoglu joins us right now. she once dabbled in leveraged finance and she is a twisted financial understanding of this business. my question is, do you change with the behavior of senior managers? are they united, delta, are they not one or two generations ago where they develop a free system of cash flow?

sheila: i focus on equity coverage of aerospace and they get the benefit of covering different segments of the market. it is crazy with what's happening with airlines because of the low-cost operators but southwest of united are better positioned because they're getting that premium customer base versus the low-cost carriers that could see price stop. kailey: we are starting to see a deterioration in the pricing power of these airlines and that suggest that travel demand, post summer. sheila: i don't think the market is stagnating, and 90%.

the cost of airlines, international has big recovering and doing well and nationally with southwest and united are benefiting. honestly, the u.s. domestic flights are up year-over-year. it's now past the 2019 levels and seen prices down. is the market moving international or softness remains there? that's a question from 2024. southwest airlines had an underperformance rating which performed on the stock. kailey: if were talking about

the pricing power going away and it not being on the input side. there is the question of outputting costs in light of the deal they agreed to with their partners. some cost pressures on labor in terms of energy and fuel costs. what will happen to the profitability of these airlines if they have those dynamics happening simultaneously? sheila: how much should profitability shrink? they are saying they have a pilot agreement they can't edgy about what their expenses were. how did it shrinkhow did it shrt

for pilots? that's how it's affecting pricing. tom: airplanes are packed, they are ridiculously packed. every seat is taken. i remember when there were at 75% and i get emails that they are putting on flights internationally and across the pacific. will those plans be full? are they proven add-ons? sheila:are they proven add-ons? sheila: that is where they are seeing the issue. those factors used to be normalized and highthose factore normalized and high status seats. the second quarter was relative it -- relatively lower over the summer. they need to be cognizant of the

global dynamic and of from 2019 levels. tom: i don't know if he saw the story, alex melton was the was y story that matter stay. there will be an adult and child section on airplanes. you have to be kidding me? outlookoutlook party to dfw thel be a children's section on the airlines? sheila: i must have missed that. kailey: here's their context, one european here's their conte, one european airline how to pilot and no kid area you can pay $49 to sit in the $49 to siy

zone? tom: what do you think? sheila: i did not realize you could accommodate that as you fly. tom: thank you so much. thank you so much. sheila kahyaoglu from jefferies llc thank you so. sheila kahyaoglu from jefferies llc . have the fairest come down i guess i did notice it? kailey: yes but from very high levels but that's with the prices everywhere. tom: yes but from very high levels but that's with the prices everywhere. tom: francine has a gulfstream and i was on for flights and there were no empty seats. kailey: empty seats. kailey: none, i got up here and is completely field. tom: i remember with robert robert crandall when he invented this

with american airlines, he said these guys have ai will talk tot that. tom:tom: i have 85.00 on oil. we began bloomberg surveillance with chris moral saying that oil is higher and that gets that oil is higher and that gets my attention. $85 for brent crude. kailey: he was saying 90 could be realistic. from a washington perspective, how does that translate to prices at the pump? tom: will you be here tomorrow? kailey: i will be. tom: we will try to we will tryr

forward on jobs day. the number we talked about three-month t-bills, your market fund five point 44%. bloomberg surveillance on market fund five point 44%. bloomberg surveillance on radio, on tv, good morning. ♪

jonathan: every morning china, china, china. good morning, good morning. equity markets slightly negative. the countdown to the open starts now. reporter: everything you need to get started for the start of u.s. trading. this is bloomberg the open with jonathan ferro. jonathan: live from new york city, hosting the first back to back games since july -- gains since july.