>> everyone is still data-dependent and basically concerned. we don't know where we are going. >> the trend is still up. >> and has been resilient until this point. >> i suspect we will have a strong fourth quarter. >> the bar for a rate hike in september is pretty high. >> this is bloomberg surveillance with tom keene, jonathan ferro and is evermore its. jonathan: live from new york city, good morning. this is bloomberg surveillance on tv and radio, alongside tom keene, i'm jonathan ferro

together with kailey leinz. the--a busy start to wednesday, her can watch in florida. we'll catch up with our meteorologist later, and adp report around the corner this morning. i've got a question based on the data of yesterday and this morning. have we shut the door to a fed hike later this month? have we opened the door to a fed hike onset number 14 or an ecb hike in frankfurt, germany? tom: i said yesterday to myself, boom. that report was a sea change. i did some fancy math on the survey and on the vector of an improving survey in terms of the stock market, the survey, fewer job openings, is three point three standard deviations. we are almost out to the secret, plus two, minus two standard deviations.

jonathan: all of it coming down. big rally in the treasury market across the curve particularly on the two-year. tom: you don't see it in the equity market, futures negative seven. but you are down to one point 83 from one .92. a most 10 basis points. yesterday was boom, a seachange moment. jonathan: have we opened the door to an ecb hike it's on the inflation data? kailey: the acceleration in spain and germany, i took four years of german in high school and we study the map of germany. including the states. but the pressures underlying, it could mean the ecb has to make a move. if we are talking about inflation, tomorrow looks like could be in the ballpark of 5% -- tom: what report? kailey: all europe.

24 hours. tom: i've got orange bowties today. the cavaliers are playing tennessee. jonathan: tennessee or -- tom: it's confusion. they're both orange. -- i want to give a speech, jeremy grantham offered me his airplane to go give the speech. it is truly in the middle of nowhere. kailey: central virginia. jonathan: a nice enclave. jonathan:did you accept it? tom: i did not. i decided to knock it on that private airplane. jonathan: futures on the s&p 500

negative, 0.6%. in the bond market, yields higher by two or three basis points. in the fx market, the euro a little stronger. 1.0 886. kailey: 8:15 a.m. eastern time, we get data for the month of august. looking at 190 5000 as the estimate, much should we be paying attention? the question in july, adp came in at threat to 24000 and payrolls came in later, one hundred 87,000. this is not a direct predictor of what the payrolls report will look like come friday. more economic data coming down, gdp, personal consumption. are expecting the second print of second quarter gdp, unchanged at two point four percent, stronger than anticipated. is going all the way back to 2006. tom: amy came up with this

chart, for those of you on radio, it shows consumption barely nudged off of 07, oh eight banking crisis. and that had direct, it got slammed. kailey: wonderful chart. yes we have seen consumption, but the savings pile is dwindling, almost gone. you see that people are feeling the--effects of inflation, less confident about the labor market prospects as well. 10 :00 a.m. eastern time, pending home sales, we are looking for the impact of mortgage rates north of 7% to show up. we have talked about this in the existing home market, no one wants to let go of a rate that is less than 7%, in the ballpark of three. this is tied up more so to existing home sales. we are expecting a deterioration in the figure. jonathan: did you see the amount of people planning to vacation? i thought it was interesting. we'll talk about it later, but i will share it now.

nearly half of consumers in august were planning a trip in the next six months. is that because they saw photos on instagram or do they have the means? kailey: a good question. in theory, yes, put it on the credit card. we are seeing debt moving higher. but maybe it is fomo. re: seeing pent-up demand from the pandemic linger, ever one is trying to get them out of their system? tom: ed at delta airlines nailed this. i did an interview with him. two her important point, it is a mystery, tony four months. jonathan: record sharing data going back to the 70's, i think it is instagram. seeing the pictures of italy.

tom: i don't disagree. jonathan: you're actually going to go away. tom: i'm not planning. jonathan: portfolio research analyst at franklin mutual, katrina, wonderful to see you. have we close the door to a fed hike and opened the door to a hike in ecb? katrina: i think we have closed the door to a september fed hike. it will sharpen in the rearview mirror. 50 six percent odds of a rate hike in november, as good as a coin toss. going over to the ecb, been watching what the u.s. is doing and they have been data dependent like the u.s.. i think you have another rate hike coming, particularly given what you've seen on the inflation side coming out of parts of the euro area. tom: we'll number one for me is the market is always out front, the bond market out front of the equity guessing that it is out there.

yesterday was important, the sea change. do you believe the markets get out front of economic data? katrina: i think the market anticipates the information it has available to it. two, the market has so many more tools available to it to process so much of this information. so i do think it is an efficient pricing mechanism. it's look at some of the jobs data. we always thought the number was going to be no pressure release valve and you are going to see that number came down as a way of adjusting to any type of economic weakness. i think we are seeing a slight decrease in that and people focusing on the quick great percentage. but if you pull up the long-term charge of the quit rate, it actually is still substantially above where it has been historically.

so i don't think you are seeing at sea change in the propensity to quit. people are not only secure in their jobs, but in their prospects of getting another one. kailey: maybe we are going from a labor market shifting from extremely tight just really tight and it becomes a question of what is sufficient in terms of the thinking of the federal reserve. if you are certain to see some loosening, some inflation pressures easing, but still above two percent, when are we going to know if it is enough? katrina: a lot of the inflation pressures are things we need to be careful. a lot are lagging indicators. that is why the fed is taking a pause, to wait for some of those lagging indicators to come through into the data. are the end of this year you're are going to see inflation with a two point. from that perspective it means the fed does not need to do much more. it is really fulfilling the

mandate of keeping inflation at a manageable level or keeping the labor market fully employed. as we walk around and talk to corporate's, they are not talking about significant layoffs. that is the type of narrative you would think you would see. corporate margins are high and there is a lot of policy support. it is not coming through direct transfers, it is coming through the chips act, the ira. companies have those mechanisms to help them with any economic downturn. jonathan: we saw house price data, again for another month. the housing market in this country is so discounted -- distorted, from the record highs. is that something the fed can and should ignore? katrina: the fed can't ignore it. when you have a tight labor market, you will see people able to move houses and they will do

that for the job and with the idea that the increase in salary that they are getting is going to more than compensate them for the higher mortgage rates. in terms of the rest of the labor market, people are going to be more stuck in place versus the more mobile workforce. but you need to offset that stuck in place trend we've always feared in the past against the fact that zoom and other technologies are making it so much easier for people to be nomadic workforces. from our perspective, you got a very strong housing market. you don't have much new-home supply. on the existing home supply, people are staying in their houses. things are starting to work themselves out. tom: the heritage of franklin templeton is the balance between value and growth. is there growth in value? katrina: where we are seeing value is in companies that can

grow cash flow. that is the big difference between a growth investor that is focused on revenue growth and the type of growth that templeton spoke about. the growth in a company's cash flows. back and come from so many areas. it can come from reducing capex, improving margins. but that is what we tend to focus on. we look at what the valuation of those forward cash flows is and that is how we go about stockpicking here. jonathan: thank you for the update. katrina dudley of franklin mutual, on the back of job openings data in america yesterday, regional inflation prints in europe, a conversation about what happened to the ecb's of september 14 and the federal reserve. later, some from the 20th. an update from the u.s. national hurricane center on hurricane inter alia, strengthening into a category four storm. -- her can italia -- hurricane

italia. there are referring to catastrophic storm surge the could come later. tom: i have lived this directly. there was a hurricane years ago and i was in the heart of it. there was a storm surge, about the height of a hockey goal. there talking much bigger surges here. kaylee: this is going to be the first major hurricane to make landfall in florida since last september, hurricane en, which cost billions of dollars in damage. a lot of these losses could be a uninsured when we think about the economic ramifications. tom: the same with the fires out west. there are some point where the system breaks. i don't know when the system breaks, but there is a point where this does not continue. kailey: this is something the financial stability oversight

council is looking at, they had a meeting about client -- climate risk and insurance, janet yellen talking but this. tom: there was a report on other networks, the bottom line is the hope is it lands in a rural part of florida. but i would not count on that. jonathan: you know it is not just the wind, water could be pushed on shore. in six feet across tampa bay according to our latest reporting. we will catch up with our meteorologist in about 15 minutes from now. the next hour, all spring global investments as we continue to be the drum. from new york city, morning. ♪ wake up, achievers.

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>> a stable relationship can be for our rural relationship.

a stable economic relationship is good for america, china and the world. i am looking forward to our discussion today to discuss some concrete ways we might be able to work together to accomplish business goals and bring about a more predictable business environment, a predictable regulatory environment and a rebel --level playing field for american businesses here. jonathan: gina raimondo speaking in shanghai, saying she spent productive days in china. there's business we can do and there is business to be done, the latest from the commerce secretary. that visit continues to the next when he four hours through thursday. the equity market briefly, negative on the s&p 500 after three days of gains. yesterday on the s&p 500, a decent day of gains on the equity market. treasuries running really hot

off the back of the job openings figure. openings coming in much lower than anticipated. we bounce back by a couple of basis points, on the 10 year, four point 1432. tom: we have gone to the moving average i use, four .5 four -- 4.544 is the three-day move. is it a melt up? no. but it has this to it, the sea change. jonathan: i --fuel for the doves into september. tom: the financial index became more accommodative off of that. this is opposite of what i believe we heard in jackson hole. jonathan: this could all change. an adp report people so they don't care about and then they care about it. payrolls on friday. let's see where we are on

friday, but so far so good based on what we heard yesterday and saw in the data. tom: i think everybody feels this way. jerome powell is the one that matters. i've got to volta the market up to the moving average. futures are negative six. jonathan: monthly loss under 2%. he said that yesterday. the tie looks like the one yesterday but smaller. tom: it is more regal. joining us, head of the u.s. and american program, with a wonderful translated perspective on where we are, i don't know where to begin other than we just observed on television and radio secretary of commerce of the united states of america speaking platitudes, not to demean gina raimondo, but to a

stony, silent chinese audience. what are we doing in china on this four day junket echo -- junket? >> this is an effort for they biden administration since that trip that the cia director took to bring back diplomacy. he was into the u.s. ambassador, he says for the first 15 months that he was in his current position, there was no diplomacy. there were no high-level trips by u.s. officials to china. so the basic point here is that -- to get some guardrails around this relationship. as we move from secretary blinken into the economic focus, it is a signal there has got to be some mechanism for restoring and maintaining trade at a time when it is being heavily focused on security when china is rightfully concerned. there is domestic pressure to

take this. tom: everybody has to be respectful of elizabeth economy, traveling with gina raimondo with all of her work on china. one core theme is she is not nearly as entrenched as people think. is there fragility you observe to his federal power in beijing? >> there are certainly lots of concerns within china about what happens if the economy proves to be as uncertain and un-robust as it is seeming to be relative to past years. there is plenty of concern. from a u.s. perspective, going back to this trip, it is not in the u.s. interest or the interest of the g7 or the west to have china do poorly. it is a hard message to communicate to many people in the united states and the u.k..

the economy is as we know are highly integrated. if you listen to the commerce secretary, she has said there is only 1% of that volume of u.s. china trade that is affected by the various export controls the biden administration is pursuing. part of this is clearly to maintain that engagement for the sake of western economies and the u.s., but also to reassure those in china that the aim of the restrictions being pursued is not to drive the chinese economy into the ground at all. but to try and restore the health of that relationship at a time when investor confidence, u.s. businesses are concerned, not only at what they are facing from the u.s. but what they are facing from the chinese government. kailey: we have heard from the commerce secretary, the idea that u.s. policy is not aimed at

holding china back. you are seeing that being relayed internationally with counterparts in beijing. yet at home you have more hawkish language on the campaign trail, congress, from president biden himself. how are these things balanced, the need to go hard on china at home but befriends a broad deco -- abroad? leslie: it is difficult. for those of us were watching china and can get as much access as we would like to have, the chinese, and his party and china are watching the debate. they see mike gallagher on fox news saying why is the commerce secretary in china? she should not be taking this trip. they have watched the gop debate and they know that the uncertainty coming down the pipeline from the u.s. is strong. so this challenge for diplomacy is domestic, coming from china. and the biden administration

itself is doubling down on the security partnerships in the region. the trilateral partnership with south korea and japan. all of these things are signals that the chinese take on board. they don't disaggregate or draw this line in the sand between hard power, military security and economics in the same way the biden administration has tried to do. just a they have -- can cooperate on climate, health care, science, think that has been thrown in the air more recently, while competing and taking account of national security. those are difficult lines to draw and not ones that china interprets in the same way. not least again when you've got the house committee on china taking a hard line and pushing back so aggressively on the biden administration's efforts to restore diplomacy.

jonathan: leslie, on the relationship between china and the united states. this story i find interesting, the surprise launch of a sophisticated $900 plus huawei technologies smartphone happening just weeks before we are going to get a launch potentially of the new iphone in the middle of september. how that battle plays out within china -- i get the attention of the chinese consumer. however competes in the months to come. fascinating. tom: i don't disagree with that. also floating in this would be samsung. the great work of mark gurman at bloomberg bite mark is samsung on their heels, so maybe huawei puts pressure on the koreans as well. one of the graded samples --great advantages of working with jon ferro is i learned

about european stuff i never do. i want you to think about aaron judge, otani of the angels, done at 20 eight. you live to this with ac milan and this guy was absolutely extraordinary. jonathan: legend. tom: it was the anniversary or something today. tom: 20 seconds here. jonathan: he buys the club, acquires 3 --players, this guy, if you others. one of the best ever do it, he retired early because of injuries at 28. a three-time winner, marco. ♪

jonathan: the price action following the biggest one-day cup on the s&p 500 since may on the nasdaq. the nasdaq negative, zero .2 percent on the s&p 500, negative 0.1. a hurricane update briefly in a moment. the price of the bond market, two year, six consecutive sessions closing about 5%. the two year aggressively lower, yields down on the back of job openings in the coming months.

the data in the united states closes the door on the hike from federal reserve's or september 20. does the data around europe open the door for interest rate hikes leader? talk about the effects market. the euro attached stronger, 184 -- 1.0884 my positive by 0.0% -- 0.04%. 45 minutes away off the back of the numbers yesterday, job openings declining to the lowest figure since early 21. tom: i know adp is redone. maybe a second look of gdp and the core pce -- statistic that comes on at 8:30. a nonstop data flow into friday when you are not working. jonathan: just dropping that in, let me squeeze this in as well. a little later, german cpi

coming in. regional figures popping higher, we are looking for eight year-over-year move lower. the regional figures we've had so far indicating may an upside on germany after spanish inflation accelerated for a second straight month going into september 14. tom: after jackson hole, are we done? have a reach beyond or a better unemployment regime in europe than they were before? i wanted the mix of european data out 2, 3 years, jonathan: we are following this story in great detail, officials according -- upgrading hurricane idalia to a category four storm, wins topping 120 miles per hour as it approaches florida. tom: there was hugo in 1989 and

with the perspective of where we are off the coast of western florida, rob is the king of non-hysteria, who does not stand in boots and what is going on, he just looks at the technology. what do the scopes say this morning? rob: it will make landfall in the next half an hour to 45 minutes just northwest of cedar key and the apalachee bay area, big bend. wins over 130 miles per hour, a moderate to strong category four for -- hurricane. the same scale as hugo. it is smaller than hugo, the hurricane force winds only extend 25 miles out. i'm looking at the data, apalachicola seeing wins about 35 miles per hour. you are seeing tropical storm force winds on either side of the outside of the storm but it

is near the eye where the strongest winds are, they extend about 50 miles out from the center of the circulation. where it is going to go inland in that area, there is a big national wildlife preserve. it is not a heavily populated area, storm surge of 10 to 15 feet. a small hurricane, it will weaken it rapidly and the threat will move from winds of over 130 miles an hour, 10 to 15 with storm surge, to rainfall, 40 inches over florida and georgia. the potential for isolated tornadoes across north florida into southern georgia and heavy rains tomorrow through the eastern carolinas. jonathan: power is comparable to hugo. tell us how the size compares to recent hurricanes. is this something we are used to in florida? >> this is one of what is going to be 15 storms that are category four or five.

have seen storms like this. in regards to the one that hit fort myers last year, this is smaller. even though it is weaker, it is going to fall apart more quickly. the damage from the wind and then storm surge will not extend as far inland as we saw with hurricane ian. the threat becomes heavy rain for northern florida and southern georgia. tom: you are the weather. how do you respond to our insatiable desire to keep building, building in the path of hurricanes? when do we wake up? >> i don't know if we ever do wake up. people love looking out the window and seeing the ocean. i think the big problem becomes insurance companies. how much more of these storms are they going to be able to handle on their books? when they stop insuring buildings is when they're going

to stop getting built. we are starting to reach that tipping point. jonathan: we will touch base with you later, rob of bloomberg on hurricane idalia heading toward the coast of florida. it is precisely what you talked about in the last 30 minutes, katie. esch kailey leinz. kailey: it becomes so expensive, we see increasingly catastrophic events, not just hurricanes but other natural disasters as well. the fires we have seen this year, or gaps in coverage. people just cannot get insurance. that is what he was alluding to. tom: we will continue to cover that with our great team led by brian out of boston. joining us now, senior economic advisor. i saw a moment yesterday, a shift in labor. are you willing to say that the vector of the survey indicates

nonfarm payrolls coming down? >> i think that was an important report. there were two reports that give us important readings, the drop in job openings which suggested the labor market is still tight but we are starting to ease off the extremely tight levels we have seen in the last several months. also consumer perception of the premarket, a drop in the perceived strength. both of those suggest some of the steam coming out of the labor market. i don't think the jobs report on friday is going to suggest the labor market is softening materially. but i think we are starting to see excess demand for labor use. the fed will be encouraged. tom: we have a statistic. in the data today as we go to friday. what is disinflation doing? conrad: on the report we are

going to get today, it is a little old news because it is a revision for the second quarter. but tomorrow, we get the numbers for july, a little more up-to-date. what we are seeing, interesting, we talked about the european year-over-year inflation rates and when it comes to pce tomorrow, we might see that tick up and we are seeing a tick up in some european numbers. headline inflation rates are probably going to take up because of what is going on with energy prices and gasoline. but if we look at the underlying measures we have focused on, we are seeing better momentum in terms of easing. we are nowhere near where the fed wants us to be on inflation. but momentum is easing and the breadth of price gains, if we look at the components of prices, the number that are rising at rapid rates are starting to come down. some encouraging signs. but the inflation rate is

obviously still too high. progress in the labor market is too tight. but we are seeing progress. kailey: a question of how much progress will be sufficient for the federal reserve. how many months of data do you think they need to see? conrad: one or two is not enough. but i think what we have seen is enough information for them to give the chance for past increases in policy rates to do their work. the fed is likely to hold rates steady, that is where the market is also. the fed is signaling they might need to raise rates one more time. my feeling is the fed is probably done and if we continue to see inflation rates come down, we continue to see the demand of the labor market ease, the fed is likely to let past increase in policy do their work.

they are likely to lead the lags have their impact and we might be done here on fed rate hikes. kailey: if the lagged effects are going to start getting, do you think it is going to be revealed that the fed already did too much even if they call the time now? conrad: i do not. you take a step back. we started worrying about inflation in 2020 and we pushed back very strongly on the transitory narrative. we thought the fed was too slow in terms of hiking rates. i talked about momentum and breadth, in terms of policy, we are all looking at the economic data releases and an important one under the wire is the law buck williams update we get tomorrow. it is difficult to determine how tight policy is but the rate we are going to get is one way. the way we have done it, i am

not a big fan of those models, as we look at real policy rates. it is not positive but it is not significantly positive. we are looking at a fed funds rate around 2%. it is enough to give us momentum toward what the fed is trying to achieve, but it not too tight. you look at europe and policy rates are still negative. that is the area where there is still more worry. tom: the heart of writing the economics, revisit that. if we go back to a rate regime as you have protected for decades, life goes on. conrad: i think so. and what gets missed is getting back to the natural rate of interest. if the rate of interest that provide some restraint on the economy, that put stellar pressure on inflation, if that has moved up, a lot of what the

fed has done is kept up with the rising natural rate of interest. i think you can make the case that --the productivity growth was half a percent in 2015 and is close to one .5 now. the evidence is at the rate of interest has moved up. we are judging the current rate of the fed funds rate against the prior perceptions of what a tight fed funds rate was and i don't think that is correct. that is where i think people went wrong with the views we are going to have a recession in the early part of this year, the recession fears we had last year was vocus on this nominal interest rate without taking into account the fact that the natural rate of interest is probably moving up. jonathan: thank you, a conversation the federal reserve did not want to entertain last week in jackson hole. they have made progress, if their objective is to slow down the labor market they have made

progress. the ratio of job openings to unemployed people, at its peak, it was two. two job openings for every unemployed person in this country. it has dropped to about 1.5. tom: someone at jp morgan is an expert. what they've done to the unemployed bit rate of minorities and etc. is wonderful. but what is the cost down the road of all of the stimulus that jumpstarted our constructive real gdp? what is the cost of a housing market that i think everyone can agree is a complete fiction right now? we had a huge response yesterday to a response -- a discussion of the entry point in washington. the bottom line is, things are great. conrad outlined it nice. what is the price of all of the fun we are having with 3% gdp echo -- gdp?

jonathan: they are strong because of fiscal transfers we saw. rates, where they are foreshortened -- for certain corporate's, they walked in the federal reserve. who didn't, the treasury. i am thinking what is the political price, what do the politics of washington look like with generation walked out of the housing market? issues in the treasury market still to come maybe because of the deficit. that conversation into next year. tom: chris whalen, is one volume on the financial history show, the haves and have-nots. jonathan: will see big central bank decisions a month or so away coming up. ♪

get help reaching your goals with j.p. morgan wealth plan, a digital money coach in the chase mobile® app. use it to set and track your goals, big and small... and see how changes you make today... could help put them within reach. from your first big move to retiring poolside - and the other goals along the way. wealth plan can help get you there. ♪ j.p. morgan wealth management. >> all of the strikes and wage negotiations are a reminder that the labor supply is constrained.

workers have a lot of bargaining power for higher wages. even if we sought softer jobs numbers, it could be because of strike affects or because we are in a --labor supply is still an issue. jonathan: the reminder from veronica clark, this is still a tight labor market. we have made progress and on the back of that, a big move in the stock market. the biggest one-day pop on the s&p 500 since june. the market pulling back a touch. the bond market, the front end of the curve, yields higher. four .14 72 on the three year. moments ago, the jobs data from yesterday published, giving the fed what it wished for. drop in job openings give the fed evidence of a softening labor market. payrolls on friday.

tom: you should take the survey. you go from plus two two minus 1.3. maybe a month, maybe two months if the trend continues. you've got a seismic breakthrough and jolts that indicate the softening market. jonathan: they are under waiting job losses. job openings may be revised down further as we think new hires are overstated. curious payrolls on friday. tom: bloomberg data and article on german inflation, the photograph is stunning from 1922, boys are playing with a

kite and they have made it out of depreciated, devalued deutsche marx. he has never made a kite out of the british pound, but joining us, head of ethics strategy at --fx strategy. in europe, is it tangible, do take it back to world war ii and frankly beyond? or have we gone past that to a more rational discussion? >> you have to remember the history of germany is characterized by the hyperinflation of the 1920's. that did characterized monetary policy for considerable periods. there is the recognition and realization that inflationary pressures are an obvious and ongoing historical threat and negative narrative. that has been one of the reasons why the germanic members of the

ecb our focus on that inflationary vector and pushing back against that in an aggressive bias. that really leaves an increasingly large policy conundrum as madame lagarde has to deal with the dramatic core who are very keen on monetary policy tightening. and provide some concerns this morning, the doves are detailing some weakness in terms of the real economy data, the downside risk starting to materialize in the most recent forecast. that leaves the ecb at a difficult challenge. it ups the ante. tom: but off of the speech in jackson hole and her speech in new york in april where she talked about getting the capital markets organized in europe, does the ecb have the tools to commit monetary policy? >> this is one of the

longer-term considerations and pitfalls in the sense of a monetary union process. we have seen a situation which is not necessarily compatible with the broader remix of having the monetary policy. we don't have that unified fiscal backdrop or the unified singular bond market. the tools at the disposal of the ecb are dispersed. we have seen the ecb being creative in its policy toolkits over the last decade or so what has been forced -- or brought forward in order to bring forward some 30 year aggressive measures. the ecb is finding it difficult as it aims to moderate the balance sheets deal with a differential economic and inflationary dynamics. jonathan: the same people talking on the euro a couple months later talking down to 10

five on the euro-dollar. where are you on the single currency? jeremy: i would not be surprised if we had to retreat back to nearly one 05, i would not necessarily expect that level to give way. it is quite conceivable we could head back toward the 106 earlier year lows. the terminal rate in the euro zone is more likely to be 3.75 or four. but that will change if core cpi proves to be resilient tomorrow. core inflationary pressures are going to moderate and it will be significant in the august and september prints. once we see that trough reached, it is requisite in terms of the dollar getting some resilience from the policy backdrop and in terms of the macro momentum. if we do see that threshold tested, we look at that as a base.

in the weakness we see in the eurozone economy does not warrant this. i don't think we will be back in the narrative of parity as we go through. kailey: can i pick up on the dollar resilience, especially in light of the data we have gotten in the last 20 four hours that would suggest we are starting to see deterioration in consumer sentiment in labor markets, in theory the fed would like to see and the thinking maybe won't have to go again and they start cutting earlier. how does that feed into a stronger dollar story? jeremy: we have seen loosening in the data and i listened to john earlier talking about the job openings to unemployment ratio, that has come down to around 1.5. let us above pre-pandemic levels. so there is still further work to do. and labor market environment would help one that is necessarily loose. the wage growth is still remaining sizable.

it is too early to suggest that the fed have desisted. we still have one final fed hike and our forecast profile. but we were not also anticipate that the fed would be keen to look toward easing policy early in 2024. the legacy of the career and the adjustment of policy, which proved to be a policy failure, is something the fed would be keen not to repeat. jonathan: the narrative can change again quickly friday. jeremy stretch, cibc. friday, the payrolls report, 170,000 is the estimate. an adp report later considered to be the appetizer for the main course later this week. hundred 90 5000 is the estimate. the previous figure, three .24. they want jobless claims, 230 five the estimate. we want to see signs of progress

like we did yesterday. tom: one reason people by the bloomberg terminal is the aco screen. i noticed the shock that we had 30 days ago, the big high numbers, people are once again modeling in this. why is it different from 30 days ago? jonathan: let's all forget commencing september 13. a cpi report before the federal reserve meeting a week later. there still some stuff we need to get through before we call it quits on the next move from the fed. tom: there's is a lot to get through before we call it quits. we are right back where we were 30 days ago. we've got this cautious view, the numbers coming in, they come in better. that has been the american way for 18 months. kailey: the point jeremy made it was interesting. the idea that there is an interest --a difference between easing and loose, between progress and arriving where you want to be.

that is the story going forward. is there consistent signs of things moving that is going to give the federal reserve confidence that their work is done? jonathan: we are not at the destination yet. it is a journey. tom: you have to bring in the stars. with powell. jonathan: why don't you take a vacation? tom: i need one. this weekend, i assume you are flying and that is why you're not in on friday. a really old course. are the cars two big? jonathan: no. tom: james garner, monte carlo. tom -- jonathan: they got to fix this. you're talking about me maybe finishing fourth or fifth in a championship. tom: rebels out there. jonathan: strategy, everything.

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>> everyone is data dependent and still basically concerned. we don't know where we are going. >> the trend in global rates is still up. >> they have been so resilient up until this point. >> i suspect we will have a strong fourth quarter. >> the bar for a rate hike in september is high. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz.

jonathan: it is jobs week in america, not jobs day. good morning, for our audience worldwide, this is bloomberg surveillance on tv and radio. i'm jonathan ferro with kailey leinz, the equity market negative on the s&p 500, down after a big one-day pop on the s&p and the nasdaq. on the back of jobs opening data, adp later, claims tomorrow, payrolls friday. tom: i'm going to say it is a wage report. it will be interesting to see what it means for the fed at equity markets, with the wage dynamic is, much more than the non-form that nonfarm payrolls number. that is where the survey came in yesterday, a jolt of the market. the vix under 15, i think that is able market. tom: the biggest move on the nasdaq. that is fuel for the fed data on symptom or 20. that is fuel for the ecb hawks on symptom 14.

kaylee: -- kailey: we're looking out for inflation data. higher inflation than expected. it speaks to the persistent underlying inflationary pressure in the euro zone, that the ecb will have to be paying attention to. we get the full print tomorrow that will inform what they do in september since christine lagarde is not pre-committed either way. tom: you nailed the algebra. we have a positive real rate and europe has a negative real rate. nothing else needs to be said. jonathan: did you get any indication from the opposition you had with the ecb chief of which way she is leaning? tom: we talked about paris off-camera. the boom in tourism. what it means. we talked about the beautiful summer. she has taken like 12 weeks off.

jonathan: is this a long way of saying no? tom: i sense of september 16 but i meant september 14. but you have an agreement before academic conferences. different rules are underplayed. if it was a different interview, --' jonathan: are you saying i'm rude and mean? tom: they're tough questions. jonathan: a lot of people might agree with that characterization of plaintiff he is. we will get feedback later, hurricane idalia strengthening to a category four storm. in the last few hours, winds reaching 130 miles per hour. big stuff.

tom: act 1989, hugo with an asterisk. smaller storm, not like new orleans. tropical winds outside on the edge of the hurricane but near the eye. this could be vicious. jonathan: and we often talk about this, it is not just about the wind but the water damage that comes with it. 16 feet of seawater can be pushed on shore north of tampa. kailey: the storm surge could be catastrophic. you're talking about a storm that is bringing heavy rain and water that could move across the state, it is talking about flood risks, not just the idea of hurricane force weights. it speaks to the insurance cap issue and the consequence of living in these areas that are being pounded by natural disasters. tom: riley from st. louis is down there. there is a on the edge of the water. a radio in the distance across the bridge in the big waves. there is a wall. she is there doing the whole

hurricane thing. she says it is just another hurricane for florida. jonathan: do you know how much i despise that? meaning as the wind. this is dangerous stuff. tom: it makes light of it. i strongly support you. jonathan: it is not entertainment. tom: i've never done it. jonathan: i've never done it either. very little interest. it is dangerous. tom: she is getting a steakhouse afterwards. jonathan: section on the s&p, negative on the s&p 500, softer, lower after a big dave gains in yesterday session. yields a little higher i three basis points on the 10 year after a big move lower in yesterday session. kailey: fueled off economic data. a 15 time eastern is when we get the adp print.

in july, the number was taller than expected, followed by the softer than expected nonfarm payrolls report. how seriously do we take the numbers? hundred nine 5000 is the point we are looking for. another slew of economic data coming. personal consumption is one of the figures as well as the second quarter gdp. you're expecting it to be unchanged, but what does consumer power look like in this economy as we saw softening in confidence? pending home sales, interesting to contrast this potentially with the headline that just crossed the bloomberg on mortgage applications. two .3% last week, rates well north of 7%, so what is the impact ultimately especially in the existing home market that is low in turn food best terms of inventory? jonathan: joining us is margie patel.

big dave gains yesterday. are you still constructive on the equity market in america? margie: yes. we have a strong finish, more moderate returns but still positive. the economy is still strong. tom: i look at where we are on free cash flow. the heart of the matter is there is a generation of people but don't know the rate structure we are in right now. can corporations generate free cash flow and dividend growth from aunt in this interest rate environment? margie: yes. the interest rates are a small part of the cause. if you look at companies since the financial crisis, they have restructured the balance sheet, locked up the fixed rate money. i think they are impervious to these increases in rates. i expect they will continue to maintain profit margins. tom: i like the idea of impervious. if i am a cfo, how do i change

my issuance given this environment? dry extend out duration, stay short? what do cfos actually do in a real rate environment? margie: most of them have already done that for the last five years, particularly in high-heeled markets. we have seen more than half of all the issuance being to extend maturities, payoff bank debt, pre-refund issues coming due in the next couple of years of so-called maturity law. most companies don't have the need to borrow new money. they have enough liquidity to handle their own needs. kailey: we talk about companies and their borrowing and financial position, what is the default cycle going to look like? they have remained low. there is growing call for a soft landing. you seem to think everything is still looking strong. does that mean there's not much

risk in the debt? margie: in the high-yield market in the u.s., it will continue to have low default rates. the default rate now is a little over 3%. in the low market it is over three point 5% because a lot of the issues financed there rather than the high-yield market. most high-yield companies were prudent in the last decade and extended maturity and improved their balance sheet. the quality of the high yield market is good and i think defaults will stay low. that is white yields will stay narrow. jonathan: is there a day of reckoning next year if the federal reserve is not --don't they have to reassure in 2024? margie: most companies have a couple of years before they have to worry about liquidity. i don't think there's a real risk companies are not going to refinance.

is there access rather than the cost? not that many corporations are going to need net new money because of maturities. jonathan: if higher interest rates are not going to buy corporate's in soon, does it extend the cycle and keep rates high for even longer potentially? margie: i think it keeps the economic cycle going. the puzzle is where's the recession? there is no recession insight because everything in the economy is well-balanced. people are affected by the big increase in short rates. the 10 year, drifting up to four point five, those are not rates that choke off economic growth. jonathan: should i be worried about the reinvestment and risk down the road or should i sit in the two-year and relax and know that rates are going to be there the next time we need to reinvest that money? margie: it is likely we will see short rates -- higher than they have been in the last decade. so i think there will be much

more of a return. but if you say the yield of 5, 5 .25 and risk assets -- risk-free assets and the cash flow corporations is 5.5 or more, that says you're better off taking the volatility and looking at equities or high-yield bonds, which have more to offer than short-term risk-free assets. jonathan: thank you, margie patel of global --cash right now. tom: you are loaded up for your conventional 8000 shares. jonathan: birkenstocks. tom: it harkens back to a time when i did this on wall street. i believe there is interest in it. john: --jonathan: it is unique.

kailey: to john's point, this is a unique situation. is it a sign of revival in the ipo market? maybe not so much. though instacart potentially. jonathan: are used to do the quarterly earnings report and catch up with the ceo. tom: but this is about japan and softbank. jonathan: precisely. tom: what is the instacart story? is going public doesn't like -- kailey: it is going public. tom: is it groceries? juliette: -- kailey: it is both. jonathan: hurricane idalia strengthened into a category four storm. it has been downgraded to a

category three storm according to the national hurricane center. more in a moment. if you're just joining, welcome. the s&p 500 and negative by zero .1 percent. in the bond market, yields higher by three basis points, and tons of economic data this morning entering the rest of the week, still to come. tom: i look at brent crude moments ago. 85 .94. watching that toward the $90 a barrel. i think it is on my radar. the swiss franc has not given me any angst. it is fear free. and that yen, pulling away from the 147, may be more constructive around the jewel stock. jonathan: energy equities are about positive on the s&p 500 for the month of august. that with all of these slow down fears taking place in china, a

little bit of a nudge higher. tom: i equate the non-pullback in energy as i do with the spread market. lisa abramowicz is more up-to-date on that. this is maybe the market telling us we're going to get to a constructive placed on the road. jonathan: you mentioned it, the signal from what is happening. tom: i don't have a clue. like singapore. jonathan: people tell you what to say echo tom: yeah. one intern from usc. jonathan: this expense a lot. in the next hour, from new york, good morning. ♪ hey david. connect with an advisor to create your personalized plan. let's find the right investments for your goals okay, great. j.p. morgan wealth management.

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>> i hear about unfairness, arbitrary decisions, a lack of due process, raids on businesses

that go unexplained. tens of millions in fines for reasons that are not clear. my point is that actions speak louder than words. as long as that is happening on the ground, that makes it very risky for u.s. businesses to do business here. jonathan: gina raimondo speaking in shanghai. we will go today four tomorrow. comments happening at the same time that we are reporting at bloomberg that china could be hosting the russian president and his first foreign trip since the warrant for his arrest on alleged war crimes issued by the international criminal court. tom: i was surprised by the headline yesterday. bloomberg had the breaking news and using the three to four day soiree with the secretary of congress. i agree, it seems like we are pushing an agenda that ann-marie can explain. but i don't get what the response is.

what are we looking for in terms of response by the good team? i will bring in an array because you are more up to speed. jonathan: joining us right now, walk us through this, how do you balance this act? the ministration is sending over high-ranking officials from the u.s. to china, a country which we are reporting is going to host a leader of the country facing alleged war crimes. at the invitation of the chinese president. how do you balance those? annmarie: it is difficult for the admin attrition. and the president's press secretary was asked about this and she said she is not going to get ahead of a comment on a potential visit by vladimir putin going over to china. there were hoarding--reporting he will make the trip for the belt and road forum in october. i am not surprised putin is deciding to leave for the first time since the international criminal court has slapped the

arrest warrant on him for alleged war crimes. people speaking to bloomberg have said he wants to make sure he is safe in the country he decides to visit. he had --he told moby he will not be attending the g20. china looks like a safe place to go. remember, three weeks, about three weeks before he decided to invade ukraine, what we had was his last meeting with xi jinping where we decided to have a new no limits friendship. i went back and read through the readout from the russian ministry. there is really no area that could be forbidden in this relationship with these countries. we've also seen xi jinping go to russia. this is a friendship that is only going to tighten. but it is going to be awkward for the ministration and for secretary ray mondo, actually in china yesterday when we broke this story. tom: the whole thing is bizarre.

if president trump or another republican wins in november, how does our relationship with china change? i don't see much difference other than maybe you get a biden theater response different from a trump theater response. they are on the same page, right? annmarie: there are a lot of objects and a lot of bashing of how each party handles china. it is who can out hawk the next one? that is why the rhetoric is going to be ramped up before the november, 2024 presidential election. but you would be hard-pressed to find anyone in washington that does not want a tough stance on china. even if they did not want to, politically they cannot. they must show they want to be tough on china and hostile toward china. at the same time, the global -- the global community and economies around the world want to make sure these are the

largest economies, that the united states and china have a working dialogue. that is what you see the biden administration or any president, republican or democrat, is going to have a balance. kailey: we hear from the initiation, that the u.s. aim is not to hold china back economically. this is just protecting a national security interest. but we were speaking with leslie of chatham house earlier. she was talking at how china has attention to people on the china select committee. did ministration is not the only voice especially when you also have 20 20 four republican candidates in the picture as well. how does that complicate the admin attrition's efforts? -- administrations efforts? annmarie: they could not control what they're saying and they could not control nancy pelosi going to taiwan, which was the start of a domino effect of growing tensions between beijing

and washington. there is not a lot the biden administration controls in terms of the rhetoric. what they can do is try to keep these paths of dialogue open, whether it is gina raimondo and her counterpart or yellen and hers. the secretary of state antony blinken. all of this could potentially culminate into a meeting between biden and xi jinping. there are really only two more moments for the rest of the year for them to meats because next year will be campaign mode. kailey: there is always a split focus on what is going on in china or at home. we are expecting hurricane idalia to make landfall in florida. i know you spoke with senator rick scott of that state yesterday. it raises the specter of the conversation around disaster relief. it started with fires in maui,

when it comes to the hurricane and supple mental funding. up to disasters like this make it easier for the white house to get the ask rented by congress? annmarie: it does. but the funding the white house has asked congress also includes aid to ukraine. this many republicans in congress, some of them infuriated. they do not want these items attached. but fema is in dire need of this funding. of course the federal government is going to spend whatever is needed for these disasters. they're going to have a deficit and they are going to have to replenish the disaster relief fund. as of yesterday, the administrator said it was at three point $4 billion. that is not enough money considering the natural disasters the country is facing. the fight that is really going to happen when the house and the senate comes back in early september is going to be whether or not they are going to ok a

supplemental with other items attached, but it also includes money for disaster relief. jonathan: the latest on the hurricane, coming from the national hurricane center, the most recent update from about 23 minutes ago. weakening to a category three storm as it makes landfall in florida. weight of this morning, we had a quote from the hurricane center, an update about an hour ago. it should we can after landfall. it is likely to still be a hurricane while moving across southern georgia and near the coast of georgia or southern south carolina later. it makes landfall later this morning and start to make its way up the coast. tom: a focus on this in america goes back to katrina in new orleans. a real feeling that it was not handled correctly by a broad set of politicians. there is political history that we don't need to get into. but the answer -- i don't know what it is like in europe.

you are out there in cornwall, in the surf with the polar, looking at the typhoons of the northwest edge. but the politics of this goes back to katrina where we need to really be on top of the story. kailey: now is the conversation in regard to maui and how long it took the president to make a trip there. the optics, but while it obviously is human, it is about the humanitarian impact and the impact on individual lives, there are economic consequences to storms like these as well. last year, when hurricane ian hit florida, it cost 112 billion dollars in damage. because of where the storm is going to make landfall, north of tampa, it may not be as catastrophic. that does not mean it is without consequence. tom: i don't know what the ratios are now. i think you mentioned earlier, there is no insurance and people keep building even if there is no insurance.

jonathan: this is what rob talked about. so long as these can be insured, they will keep building them. tom: it has been a boom. i have read we're going to have more hurricanes. it is only august and the season goes through february. jonathan: it is early. the latest update from the national hurricane center. the hurricane weakening to a category three hurricane as it approaches florida. category four earlier. next, from capital markets on a treasury market yesterday, fuel driven by job openings pulling back more than expected. good morning. ♪

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jon: equities on the s&p decent gains yesterday. biggest one-day rally going back to june on the s&p, nasdaq going to maine. -0.1% on the nasdaq 100, s&p down by 0.06%. the data we got showing further signs of progress for the fed. and the fed meeting on september 20. that meant equities up, treasuries down. they were up too. yields were down. yields are up by three basis points.

.415 on the -- 4.15 on the 10 year. we pulled back aggressively and yesterday's trade. >> price up, yield noun, framing out to 2%. the 10-year yield now 1.86%. it was certainly more than it -- more than a note. jon: yields higher, stocks down. the euro stronger after data out. under surveillance, opening the door for a hike for the ecb next month, higher than readings out of spain and germany. money markets giving the ecb a 60% chance to hike in september with a 20% chance for the fed. it is the story of the morning

so far. the data shut the door on the fed but opened the door for the ecb. >> seeing the pricing of another fed hike potential going down at the same time that maybe that's increasing. certainly the data fueling the hocks at the ecb while the doves got a little bit of fodder in yesterday's data. >> u.s. job openings falling for six consecutive months out of the last seven. the lowest level of openings going back to early 2021, pointing to a cooler labor market. consumer confidence also falling by the most in two years. this is the kind of stuff. you would say this was the objective for the fed. >> absolutely. >> i mentioned this twice. let's call it a hat trick. you know the vectors in place and you say when does it break to a true breakdown of job openings and i'm almost there?

i need another month to say we are finally getting job the economy slipping. jon: katie drew an important distinction. we are making progress. it looks good so far. let's see what this looks like at the endpoint. this is what citi said. the data will give you the impression things look like a soft landing and it will look like a soft landing until it's not. i wonder how fine the line is. tom: veronica clark was on yesterday and the answer is there's a whole crew pushing against those. . a journey. every time there's a journey, someone is trying to take money for me. it's a journey. tom: it's a journey. nailed it. you have no idea.

are we still under surveillance? what are we doing? jon: an update for you following the hurricane idalia. downgraded to a category three storm, expected to make landfall in the next hour, idalia threatening a catastrophic storm surge, tornadoes, flooding across florida and potentially other states. tom: the satellite truck we could not get rigged up in tampa. we will try to get that hooked up in the open at 9:00. this is the interview of the day. and lincoln is washed across all of global wall street. he writes incredibly terse, dense notes. he joins us. i have a ways to go here. one single sentence. friday you call the most influential jobs report of 2023. why? >> the relevance of nonfarm

payrolls product cannot be overstated. the fed has achieved what they wanted to can terms of moderating cpi. the question is have they overshot on the jobs front? we are expecting a relatively benign consensus for headline numbers on payrolls but we do have that jolts print and the >> rate within that is troubling. it's now down to 2.3%, which is the average between 2000 and -- between 2018 and 2019, so what happens for the macro outlook if we have a disappointing job sprint? jon: what concerns you most, the number or the rate of change? ian: if i were given the choice between the outright level and the rate of change, i would say we are at the right pace just getting to levels that are more

concerning, so i would go with the outright levels. ian: if the levels and rate of change suggest the fed's work is getting closer to being more accomplished, the move in the two year yesterday would suggest that that has run perhaps too far. did we see the peak already? hit north of 5% and now we are done? ian: a lot of that comes down to whether or not the fed is able to avoid cutting rates throughout the first half of 2024, even potentially avoid cutting rates until the beginning of 2025. now, i don't expect that will happen, but there's a contingent in the mark of the market that thinks higher policy rates will be in place for the foreseeable future, and if that is the case, we will see to year yield of about 5% again -- c two year yields up above 5% again. annmarie: it is the bar for that even higher than the bar for the

fed to hike again given how the fed has been conditioned by the mistakes it made earlier on? ian: that is a great observation of what i would say is the fed has already signaled that they plan to cut rates by 100 basis points next year but will allow the qt to runoff in the background or continue shrinking the balance sheet, so they are reframing the conversation. so i think they have given selves -- given themselves some flexibility. tom: frame the real rates. the tenure got up to 2%. i have some numbers about that. bracket the real rate right now where it could come back down to that level. now at 1.83%. then bracket up. frame that. ian: if i were to put a range on

10 year real yields, i would put it at 1.6 5% to 2.15%, well with what the fed wants to see. tom: ok. i do not mean to interrupt but this is important. if we pop to 2.15%, what does that do the greater american financial system? ian: that is when we start to see strains in equities, risk assets, and it becomes a much bigger burden for the overall business community. jon: there's clearly a dividing line between the kind of data the fed appreciates and wants to see and what you see as undesirable and you think we are creeping towards the latter and moving away from the former. if that is the case, isn't the 10 year treasury screaming now? ian: it is. i think the path forward for nominal 10 year yields will be lower for several reasons. tom: i have to take notes. ian: one, the fed's credibility is reestablished -- is being

reestablished as an inflation fighter and that will push on breakevens. one reason real yields are where they are is because breakevens have not priced higher. think of jackson hole. they are holding a 2% target, doing everything they can to convince the market they are here for the long haul in the battle with inflation, so if we believe there's still a six to nine month lag of monetary policy actions hitting the real economy, the second half of the year will be pivotal for the effectiveness of what powell has been attempting to do. tom: load the boat on the 97 your austrian? jon: not quite. tom: is that how i translate that? jon: we have to put some numbers on it. difficult to do but i want a better understanding of the direction on what you are looking for. right now, north of 4%. got through 4.30 percent a week ago. what kind of numbers are you thinking about? ian: we get 10-year gilts back

to 3%. i don't think it happens this year. i think that will be a first half of 2024 event but we can easily close in a range of 3.50 percent to 3.75% this year. and that is -- annmarie: and that is not just monetary policy dependent. fiscal as well. how does that factor into this equation? ian: what sets the outright level of treasury yields are the global macros of inflation and growth. the incremental supply considerations will lead to concessions in and around the events themselves and, frankly, the market knows there's a bunch of treasury issuance coming. we have that priced in. the treasury department has been clear in their signaling. and still we have tenure yields at 4.15 percent, not 5.15%. tom: i look at this and i look at what will break. torsten's lock is out this morning with a spectacular look

at how the market has changed and there's a debt servicing cost that's up, but we are also making more on our coupon. mr. slock takes it back to 1959 that this market is out of whack. do you sense that as well, that your world is that out of whack? ian: i think there's a significant mismatch between the primary buyers of treasuries and the incremental players, the people who are fundamentally adding treasuries, whether it's a major central bank or an institutional investor. we have some degree of clarity from the monetary policy side. the incremental investor, people play for a two or three quick trade are more aggressive on the bare side so there seems to be a fair event of mismatch. jon: good to see if it i apologize -- good to see you.

ian lyngen. the ten year treasury a screaming buy. tom: steve major, you know, he has west ham in first place for starters. he would suggest that's where we are going into the only question is the x axis. we are going to see a lower rate regime. jon: maybe 3%. 3.75% by year end. tom: we do have the time to do it. we will do it later but there back to the -- but they are back to the irregularities going to 1959. amazing. jon: welcome to the program. equity markets now just about negative but 0.1% -- negative by 0.1%. let's get to that know by apollo. he says when interest rates increase, the household sector has to pay more for debt, but

household also receive high cash flow and fixed income assets. dividing households interest payments with households interest income shows that debt servicing cost as a share of interest income are the highest level since 1959. both debt servicing costs and interest payments have increased as the fed has raised rates, but debt servicing costs have just increased more. jon: huge dynamic. we talk about standard db -- standard deviation basis. i can't explain how unusual where we are now is on this. it's a basic idea within the dynamics of what we owe versus what we earn, what's going to break in that. that is what they do every day. we see those refinancings kick in over the corporate side. you will see that debt interest service costs go up even more because those guys are still locked in paying coupons from debt issued back in the pandemic. tom: there's huge uncertainty

here as well. you mention how citigroup really pushes against it. jon: they have a different view. tom: different view. jon: there's two ways of looking at it. move in the long end and the left tire in yields -- and the left tire in yields, you believe it's one of two things. tom: yeah. i agree. what i frame now is a 1.86% real yield. above 2% is where it gets messy. jon: seth carpenter of morgan stanley coming up following the u.s. economic data dump and 47 minutes. ♪

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and later after my appearance at the bar, the head of supervision went out the door. are we done with the regulatory outcome of what we witnessed months ago? >> sure. there's fbi see retirements too. it is part of the process. i think the noise and drama is behind us and we are back to earnings as usual for the banks. there's still some struggle this quarter but they are making money and i think the credit quality is good for the industry and the losses are limited.

tom: did the rich get richer? did the big banks get stronger amid the crisis? chris: i don't think so. we looked at market share back to 2019 and it barely changed, so it's up slightly for the largest six banks, but that's a minuscule pickup. back to 2019, it's flat, so we don't think they have changed at all in terms of positive market share. the notoriety has changed and their recognition is too big to fail is more around but not in deposits. annmarie: the deposits have been the concern in the smaller guys and the question maybe should be are they going to get weaker? especially, and i hear what you're saying that we are through it, but a lot of this at this point is just proposals that still has to go through the comment period. it could potentially be years before more of these requirements get implemented,

via the debt or capital and liquidity requirements. when that does head are we going to have to see some of these smaller players consolidate in order to be able to cope with that? chris: they will consolidate anyway. there's consolidation that will happen. we think the relationships and conversations are stronger now than they were two or three month ago. you will see more m&a anyway. the reality is the longer the better in terms of implementation of these rules for the larger regional banks because it gives them more chance to organically earn through the cycle, prepare their own capital with operating earnings, so it's fine with me if they take three years to implement. that will be easier. along the way, the banks will recognize the incremental credit risk. the reality is the smaller banks are paying much more for deposits. customers will do what you pay them to do. the deposit rates have gone way up and i think it's stabilizing

the flows across the industry, particularly with smaller companies. annmarie: so we should no longer be fearful of deposit flight? chris: correct. annmarie: do you think consolidation will be allowed to happen? if this is a matter of survival, does the u.s. actually changes to nonbank consolidation? because they have not been all for it. chris: it would be great if they would speed the process. the issue is less about allowing. it is how much grease are there on the skids to make m&a fast? we used to have deals get done over five months and now it's taking 12 to 15 months, particularly for the larger regional deals. if we can make that process faster, you would see more consolidation. that would be healthy. i don't think that is where the fed or fbi -- or fdic are.

tom:tom: give me your single best buy until . -- tom: give me your best buy and tell me what. chris: a lot of it has to do with affected banks hold deposits for four or five years and there's a spread between the fed funds rate at 5.3% and their cost of funds at 2% and change. over time that advantage is worth a lot of money. the securities portfolio they have is a small and the loan marks they have is modest. the company is a good earner. it is just a very good stock that i think is undervalued. tom: palmer proctor is down there with nicole stokes. they have 2800 employees in georgia. are they managing that bank for merger? chris: i think they are managing for growth. they are really set up for organic growth.

they have a strong commercial and small business lending agent. they tend to take a bite size risks so you don't see a lot of national lending from the company and they don't do shared national credit. it's a simple business model. and they are good at taking deposits. the lifeblood of any bank is the deposit base so i think there organic growth both this year and in the past has been good. jon: let's finish on the chart. the bank index, the s&p 500. we are still struggling to get off the map and it seems to me the profitability headwinds that were highlighted coming through that crisis, if we can call it that, have not gone away. what terms that around? chris: i think you are right and we are in a trading range on these stocks between 40 to 50 and the kre would be the way i think about it. the credit issues have to die down or the banks have to

recognize the risks. we think it will continue the next couple quarters. that will create a bigger treasure chest for banks to write things off. that is the ticket. the more that we push out the recession and delay that recognition of an economic contraction, that's going to help the banks. if we see interest rates falling , that will help the value of bank securities and help tangible book value grow stronger. jon: the move higher has not helped them. chris, thank you. the latest on the banking sector and treasury market. it's been difficult to get off the map for those stocks. tom: it has been. i just continue to look for mergers. the bank he was talking about, your savings journey starts with them. they are having a journey as well. jon: works for me. tom: some of these banks are

popping some real cds. you have 13 months cds at 5% plus, completely different from what we some once ago. jon: we have a guest coming up. we should talk china and their relationship with china. gina raimondo in her journey. tom: she is having a journey. is anybody responding? we never show video when the chinese are talking. are they sending us a message? jon: usually there's a readout. annmarie: maybe they were characterized as productive, maybe they will continue. tom: there's always a slight differences in those readouts. jon: if you are following hurricane idalia, making landfall just moments ago, reports from the national hurricane center suggesting it weakened slightly before making landfall from category four to category three. the latest headline in the last 10 minutes or so, hurricane

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>> markets have been accommodative. >> it is there a surprise, it is

rates have one more push. >> we are expecting a last rate hike. >> the fed could pause but we are not sure they will. >> it's not clear what path the economy will go down. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning. jonathan ferro, tom keene, lisa aronowitz, kailey leinz. i will be here friday. a ton happening before we get there. breaking in germany, a tick higher in year-over-year harmonized inflation. it's a journey they are having with inflation in germany. there's a lot going on between jolts and the shock of yesterday in america and the spanish inflation stock today. >> down slightly from the previous month.

perhaps it leaves the door and for the ecb jamaica move. others leaning that that closes the door on the fed making a move on september 20. the data yesterday fueled ammunition for the doves to take to the table when the fomc gathers. we will see what we get later today. tomorrow, jobless claims, payrolls, friday. so far so good with the data yesterday. tom: it comes off fractionally weaker. let's get back on track with the u.s. something happened yesterday and it was not a jump condition but to me it was boom, maybe things have changed. jon: there's a distinction between progress and undesirable deterioration. ian lincoln suggesting this might be closer to the latter than the former, which is

interesting because we spent the last couple months talking about a resilient economy. the consensus view is we are making the right kind of progress. job openings down back to 2021 levels, quits rate dropping, indicating maybe we are taking heat out of the labor market, the objective of the fed. i would say at a consensus it's hard to say the 10 year is a screaming buy. he things the yield could drop to 3%. tom, where are we now? 4.15 percent on the tenure? tom: i will look at the real yield. it's down from 1.92%. the screaming by mr. lincoln has on the nominal 10-year yield, i'm wondering if he knows where that goes. kailey: he set up to 2.15% is where the field -- is where the

fed would like to see it. at the -- what john is speaking to, the idea that maybe we are starting to see a real deterioration, what ian lyngen was suggesting. will they be comfortable with that when you had loretta suggesting we would rather over tighten than under titan? maybe they already have gone too far but is that would they would have rather done? tom: they have a long way to go. jon: you mentioned citi. j.o.l.t.s. hit by lower job openings. but -- and there is a but -- historically low unemployment and a high ratio of openings to unemployed individuals suggest the labor market remains tight enough to prevent the economy from sustainably slowing. are we making progress? yes. is it sufficient? in the minds of some, no. tom: we will touch on the hurricane.

i have the vix at 14.52%. it's a bear market. jon: losses year to date on the s&p, there are not any. there are double-digit gains. month to date, a little bit lower than 2% a month on the s&p. tom: i have 4500 spx, the dow nudging 35,000. i am not near 16,000 nasdaq, but it's a bear market. jon: equities -0.1% on the s&p. if you are tuning in, that was a heavy dose of sarcasm on. this is a bear market in the bond market, yields higher, 4.14% on the 10 year. one point 95% is the estimate for the adp number -- 1.95 percent is the estimate for the adp number. tom: we have hit land with the hurricane, going from category four to category three.

moments ago, the headline with some confusion. franklin in the atlantic towards bermuda. it is hurricane season. jon: tropical storm conditions heading to bermuda later today. it is her case -- it is hurricane season. tom: full coverage here. thank you to peter scheer for attendance, head of strategy at academy securities. did your journey in the markets change yesterday with the j.o.l.t.s. report? peter: not really. more or less aligned with what we were looking for. the fed is looking for an excuse to not hike so they will be looking at a broad spectrum of data. one area that will disappoint is jobs. there will be downward revisions. the hires rate continues to go down. the hires rate has been very strangely low relative to job openings. i think that will catch up. as jobs slow down, i think the fed will have the excuse to do

nothing, and then it will become a question of willie economists looking for a recession turn out to be right -- of will the economists looking for a recession this year turn out to be right or not? kailey: if we are starting to see the growth deteriorate but inflation is still too far above where the fed would like to be, which they say is 2%, what do they do then? peter: i am not sure it is really 3%. i think it will be looking for excuses to delay. i think we get 10-year yield spac to 4%. then we will need significant jobs data, consumer sales data, real inflation data. you are seeing it finally trickle into the housing market. i don't think they do anything if they can avoid it. jon: we talked about it. home prices in america totally distorted by the last two years and the race more recently of mere decade highs.

can they ignore the distortions of house prices given the contribution to shelter and what might be elevated inflation for maybe the next year or so? peter: i think sadly they will have to -- partly this is location based. if you look at with the homebuilders are doing, they are building in areas that people are moving to. as people continue to leave california, illinois, move to other states, that is where they have been able to take advantage. we are seeing a very regional economy. i think the fed will have to give this time for people either to get forced to move, choose to move, figure out what they will do with their mortgage rates. this all goes back -- they were so slow to react. they allowed this bubble to create itself. they should have reacted much sooner, much earlier, done much more. unfortunately we are here so i think this will just take time to play out. jon: your view sounds like higher for longer. ian lincoln came on and said 10 year treasury yield, 10 year treasury, screaming buy.

he think yields go down to 3%. he indicated -- and i am paraphrasing -- but his characterization of the data was this is not desirable. some of this is undesirable. maybe things have gone too far. what is the counterpoint to that? peter: i am worried he could be right. we get to this 4% on the 10 year, i think that's good for stocks. as we start moving lower, i think it's negative for stocks, because people have to start pricing and is there a potential recession risk. my outlier on the inflation story is on that. what happens with china. if we get inflation -- i'm not worried about the mystic inflation. we are seeing a slowing down in the goods and services market. inflation will not be domestically generated. they will be something that happens with india or china. right now, uncomfortable, yields lower, below 4%, good for stocks. then we will see how the data plays out. tom: your overlay on this, the

geopolitical matrix, academy is acclaimed for putting a geopolitical tinge on my investment. is it steady as she goes or do i need to worry about geopolitics into the next year? peter: i think we need to worry about geopolitics, certainly what's going on with russia. putin clearly showed his hand when he was willing to kill a person who went against him. do not forget what's going on with russia. but for us the real story is still china. people are underestimating china's desire to start selling their own goods, their own brands, possibly denominated in yuan, in emerging market countries. they are clearly experiencing trouble. they will do some things to fix that but i think it will have to be pushing their brands globally. kailey: to your point on china, i was struck by the research that came out in the last 24 hours by our team here talking about china's property sector as being both too big to fail and too big to save.

they say could the government stepped in and rescue the sector? it suggests the load would be too heavy to bear. is china in a position to flex on anything? peter: that is a great question. i think they will come down on the risk. they will try and protect what is left of the middle class and it's going to hurt the rich but i think those are all relatively short-term problems. the real problem they face now is, one, no one really wants to produce in china. people are moving their production out of china that is not going back. it is political and too long-term so they will not be this factory of the world any longer. and chinese customers do not consume the way americans do so their ability to build a real domestic economy is weak. they will have to support the real estate market there so people can spend but they will have to sell their brands offshore. that's the only way they will be able to produce enough to keep people employed.

i also worry -- when things are good in china, they are less likely to flex their political or military muscle. as their economy weakens, they could do something like that, just like we sub putin do -- we saw putin do. jon: what kind of bad things are you thinking about? peter: i think taiwan is off the table. it will not be that. but look for them to flex their muscles in other regions of the world. look for them to expand through their belt and road initiative more access to ports, more access to countries failing to pay on that, and you will hear more and more trade occurring in yuan. we are getting a lot of anecdotal evidence when we talk to companies that they are being pressured to do some contracts in yuan. it is very small but this is not something anyone was talking about two years ago. so i think this trend is there and i think u.s. companies will have to take stock of do we have exposure to selling our products in emerging markets?

because china might become a real competitor. jon: i want to talk about that one step further in china. how are u.s. brands going to compete on the mainland in the domestic market given the things we are discussing? peter: i think it's difficult. it is impossible not to look at one billion customers and say if i could just reach a fraction of this, i will do well. the regulatory hurdles will mean extremely high. i think china will not really be friendly. so you can go there but you want to put limited money in intellectual property and resources because that is not the wave of the future. india is a much more compelling case to me than figuring out how to sell in china. their reluctance to do business with us is increasing. jon: forgive me for bringing single names into it. it has to be said, where does it leave apple and tesla? peter: we are already seeing some of those companies move their supply chains, develop around this.

they are looking at that and i think that's been stage one of this. stage two will be how do we protect our brands in some other countries. i think companies are maybe a little bit behind is a hold dealing with the china issue and what they have to get ahead of is what to do with the rest of the emerging markets because china becomes potentially a competitor. they will flood the market with low cost, maybe lower quality goods, and we have to be thinking about that. companies have done a decent job adjusting to china, but that will be the next phase, adjusting to chinese competition. jon: let's get ahead of this. adp, the number just around the corner. what are you and the team looking for? peter: i'm looking for weak numbers. we have seen significant revisions lately that people have somewhat ignored. i think it will solidify this view that we are the best for

employment behind us. jon: thank you. peter of academy securities. the best on employment is potentially behind us. job openings yesterday down aggressively, quit rates lower. desirable progress. later this morning, 30 seconds away, adp report. 195,000 the estimate, the previous figure 324,000. tomorrow jobless claims, 235,000 the estimate. then it's on to payrolls. the big one on friday. we have seen some monster numbers over the last couple years. we might see some of the numbers we used to before the pandemic. the estimate at the moment 170,000, the previous figure 187,000. equities going into it virtually unchanged on the s&p. here is mike mckee. >> 177,000 jobs were added to company payrolls according to

automatic data processing during the month of august. annual pay up 5.9%. you pointed out the 195,000 forecast from economists for adp. this is difficult to forecast so it does not come out correct usually. we can tell you that adp for the past six months has averaged 116,000 jobs more than the payrolls report for private sector jobs. this is private sector, not total employment, so it tends to overstate this year where we are. that is maybe not great news for friday. right now, economists are only expecting 148,000 private sector jobs, so let's see what ends up happening. by industry sector, we have 23,000 jobs in the goods producing sector, including 12,000 in manufacturing, 6000 in construction, and the story has been a manufacturing that they are starting to get rid of people.

154,000 service providing jobs. of those, 52,000 education and health services. that could mean some seasonal adjustment issues. leisure and hospitality, 30,000. in terms of the size, 18,000 small business, 79,000 for medium, large establishments 83,000, so it's the big ones we are adding. medium change in average pay, 5.9%. 9.5% for those who are changing jobs. so adp comes in lower than anticipated, higher than the forecast for private sector jobs for friday, so we have two days to discuss. jon: this is what the fed calls progress. your equity market slightly higher. just to pick out the bond market, the front end of the curve from the two year yield higher. a little bit lowe.

aggressive rally off the back of job openings. we continue that. 4.89% on the two year after six consecutive sessions above 5%. back down to the 4.80's. you might anticipate the euro stronger, the dollar a touch weaker. very cl -- very close to 1.09. tom: you get the claims tomorrow. maybe that has some greater veracity than adp in terms of affecting the market. what i would note, when i am here friday, what we will note on the jobs report, and what's more important than the fact that i will be here on friday is what you said earlier, the inflation report looms in september. perhaps that's a bigger deal than all this labor dynamics. jon: can we go to that? have we slammed the door shut on a hike in september given we still have payrolls on friday,

claims tomorrow, and on september 13, cpi? mike: i don't want to say that. i saw people were talking about that. you still have got the pce inflation numbers tomorrow and cpi coming up on the 13th of september. those could change the fed's mind. you saw what happened in germany today. cpi comes in higher than expected even though there economy has been contracting or flat, so there's always the possibility of a surprise. tom: you taught me that the j.o.l.t.s. survey matters. when mckee talks, i take notes. you told me the j.o.l.t.s. survey mattered. was yesterday game changing for mike mckee? mike: no. i would say it continues to trend. it was what was expected. a little bit more in terms of job openings going away but still well above the level of unemployment -- of those who are unemployed when you talk about the number of people who are.

so we still have some ways to go. the fed would like to see a 1:1 ratio. i think we have 5.8 million unemployed and you still have a .8 million job openings -- you have 8.8 million job openings. so it's not a slamdunk yet. tom: mike mckee, thank you. leading our jobs coverage. green on the screen. it's fractional but nevertheless a subtle shift in the market. senior vice president soul shifts -- vice president join us now from bloomberg. how does your world change yesterday with the j.o.l.t.s. survey? i was like the cliche. it was not there but nevertheless things changed. >> i look at yesterday is more of a short covering rally than a fundamental move although there are those in the bloomberg sphere, especially in asia,

looking at a two year yield as having peaked, which gets you the front -- the hike cycle and any cutting as well. and they looked at this as, ok, we are at the turning point. we have called turning points different times. i did not look at yesterday as fundamental. >> it's one thing to suggest a turning point as a pivot. there's another suggestion that it may be more of a soft curve. the chief economist of the adp release says after two years of exceptional gains tied to the recovery, we are moving toward more sustainable growth in pay and employment as the economic effects of the pandemic received. movement, yes. arrival, though, is very different. is anything going to be sharp as this cycle changes? >> that's a good question. for me, on a week to week basis, jobless claims are good. it was interesting, some of the

numbers mike mckee was talking about. he talked about 116,000 for services. he also spoke about small businesses being very light. i am what you would call a birth-death model truther, if you will, and at cycle turns, i think that model, which says this is how many firms are adding and this is how many are subtracting, overstates the number. so i look at that paucity in this number as reflective of an overstatement that we are going to see revisions and so the true picture in the labor market is slightly weaker than what we would have thought. >> at the moment, it looks like a soft landing. the more constructive thing would be we are confusing the journey with the destination. it always looks like a soft landing until it does not. >> hold my hand please. >> we got a message from a

terminal follower. targeting a lagging indicator with a leading economic input is a loser's game. how difficult is it to win that game? >> it is difficult because it turns on a dime. when you look at previous recessions, you have had very good growth right up until the quarter that we printed negative, when the recession began. so the numbers we are seeing now are not necessarily indicative awoke -- indicative of what we are going to see in a few months. if you look at what anna wong, bloomberg's u.s. chief economist, is saying, she is saying that actually, we have stellar numbers if you look at gdp now. it is roughly 6% for this quarter. that's going to be payback coming into the fall and the winter. so the game is not over yet in terms of the soft landing. it could be a softish landing and it could also be a hard landing. >> i look at the financial

conditions index and if i am jerome powell i am nowhere near where i want to be. >> that's great. the answer is there's a crew looking for a higher yield environment. john is waxing philosophical about the journey and the destination. baloney. the bloomberg financial conditions index is in no way restrictive. why? >> that is because real yields have not gotten there yet. that is the next mountain to climb for the fed. loretta was talking to mike mckee at jackson hole and she was talking about that as doing the heavy lifting to the degree that we don't get inflation going down over the near-term, i.e., all the base effects have been baked in and we are going to see inflation go higher, it's not going to be able to do that heavy lifting, so it's not a done deal that we do the rate cut for september or november.

i think november is the key. we could get another rate hike, rather, indicative 2023, specifically because we need to get at least according to the dot plot .3 percent per month on the back half of this year on inflation and we may not get there. >> you still consider september a live meeting? >> yes, and november more than anything else. we were talking skip meetings, that kind of thing. we got a hike. maybe we will skip in november and see how things play out and that gives you several more months to the november meeting. therefore they can get the hike they talked about in june, which i expect to still be in the dot plot in september. >> i had no idea you had a new title. subtle shifts. subtle shifts at live meetings. appreciate it. in the next hour, your lineup.

jp morgan asset management, christian of lafayette college, keith lerner of truest. all that coming up with your equity markets slightly positive on the sep -- on the s&p with the adp delivering a slight downside surprise. >> i had major troubles saturday. i don't know what to do. i have uva football and then i have lawn so. >> easy. >> even you are not going to watch. >> do i big little them? >> give me a break. >> kaylee does not want -- does not watch uva football. >> plead the fifth. from new york city, this is bloomberg. ♪ my cpa told me i wouldn't qualify for the erc tax refund, so i called innovation refunds. their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your small business qualifies. wealth-changing question --

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tom: bloomberg surveillance. lisa is off. kailey leinz picked the short straw, is in today, a journey towards her destination. so it begins. j.o.l.t.s., ok, big deal, but at the moment, the onslaught begins. we will see this wednesday. to give us wisdom and perspective is the numbers launch -- as the numbers launch, michael mckee.

what do you see in the first look wednesday? mike: we have some gdp numbers, revision to second-quarter growth down to 2.1% from 2.4%. personal consumption revised up from 1.6% to 1.7%. that will go into some people's estimates of what it will be like for spending in the third quarter. the gdp price index 2% on the month -- i mean come on the year-over-year basis, quarter over quarter. those get overlooked because we will get the numbers for july tomorrow. we do have some numbers that bear on third-quarter growth. the first round of stuff that comes in, advance goods trade balance widens significantly to $91.2 billion from a revised 88.8 billion dollars, wholesale inventories down .1%, down .7% last night, so that will be a contributor to gdp. retail inventories up by .3%,

lower than the .7% gain the month before and lower them what wasn't dissipated -- and lower than what was anticipated. it is only the third -- only the first month of the third quarter. >> look at the revisions as well because we have the market moving. equities is tangential to a weaker dollar demonstrable in euro. yen has made the journey to its destination, one point 47 into 1.45 -- 1.47 into 1.45, stronger japanese yen. sterling out near 1.27. i look at the 10 year really yield -- 10 year really yield. it's different. kailey: a lot has changed over

the course of the last 24 hours as we see these movements in the bond market, the continuation of yields moving lower off the back of data that would suggest that it's playing into the doves of the fed's favor. >> a demonstrable lessening in the gdp price index. what is that? mike: it is the deflator, the price index they used to deflate nominal gdp. so it is coming down. again, that's a quarterly average as opposed to a month by month. the fed wants to look at that to see what the sequential process is. mike mentioned this is the first gdp revision that gives us profits for american companies and this is not all just public companies. this includes private companies. profits decreased $10.6 billion in the second quarter.

in the first quarter, they were down 121 $.5 billion. there was talk going into this year of profit recessions. looks like we had something like that in the first quarter and things are getting better now. kailey: i hear a lot of talk in washington that the reason we are seeing inflation, at least justice -- this is the argument on the democratic side, of -- side, because of price gouging. talk about growth and the risk it poses to the fight against inflation. how much does a move lower in gdp do to ease concerns? mike: it is always a question of what have you done for me lately? the fed will be looking at third-quarter numbers and the atlanta fed comes out with a new update tomorrow. they are at 5.9%. nobody things it will remain at that. you have to bring it down a lot to get -- to trend growth or below. jon: thank you.

equities getting a lift, yields mixed. the real yield 1.83%. brent crude i have been watching. 85 point $80, pulls back from the $86 level. he was not at jackson hole but should have been. he would have done the 31 mild paintbrush divide hike. carpenter darkens the door. many years of experience at the fed. you have -- what is the center mood? the morgan stanley recession meter? >> i would not say we have discarded recession wholesale. there's always a risk. bad things happen to good economies all the time but since the beginning of this hiking cycle, we have tried to say a soft landing is the most likely outcome. the economy will not go into a recession as a base case forecast, and so far that view

has come true. it was not the most popular view of our clients three month ago, six month ago, nyman's ago. on the other hand, things have not slowed down quite as much as we would think either. the downward revision pulls things along the slowing line but still a punchy number, 2.1%, above most people's estimate of potential growth, so we still have a ways to go. we still think there's more drag for monetary policy in the pipeline, but inflation is coming down, job growth is slowing. we get another print friday. our number is around 1.55 -- around 155,000 for private payrolls. so that will be lower. so things are cooling off a bit but not cold. tom: the hallmark of morgan stanley economics was invented by stephen roach and richard berner. what is the point of

conversation around the desk at morgan stanley? what is the thing everyone is arguing about? seth: right now, i would have to say every corner of the world has its own quirky story. for us in the u.s., there's definitely the slowdown, the soft landing, but the data are surprising to the upside in stark contrast to the other side of the world. i'm always in conversation with my team in asia. china's first quarter was superstrong and things have now cooled a great deal so the question is when do we get enough of a policy response to pull things back in? those are the main topics we are debating. kailey: we have talked about china a lot in recent weeks because it seems like piecemeal things they are doing to stimulate the economy. returning to your soft landing thesis and the avoidance of recession, are we really talking about a recession entirely avoided or one that's potentially pushed off, delayed further into the future as we think about these lagged effects?

seth: i think that still remains a key question. for us, we still think it's a recession avoided. that is been our view. the trough looks like it's been pushed off. we think things will come down further. and there are things beside monetary policy that are a downside risk. the student loan moratorium has gone away. if you look at daily treasuries, you see some of those inflows going, so that could weigh things down on ellen's team. sarah wolf is our consumer specialist and she's been all over student loan debt repayments as a key downside risk for the fourth quarter. so are there still risks? there always are but we don't think that is the main story. the labor market slowing but still resilient. >> in october, that will be something of concern. two weeks before that, two weeks from tomorrow, is when we are on watch for united auto workers strike.

how are you thinking about the labor movement in particular, the power of these unions to ask for things? what does that signal to you about the supply issue and ability of workers to demand? seth: i think it's definitely something that will matter a lot. we already have one strike in the books, the screen writers guild, and that will have an influence on friday's jobs report. so we will have to try to read with the underlying trend is in data. the first part of it will be hopefully avoiding being confused by swings in the data if there's a strike with united auto workers. yeah. you have a question of how long are they going to strike, how much does that disrupt production if they are? we know the auto industry was one of the last ones to be able to catch up to supply chain disruptions. now we are starting to see auto prices fall so it's a mixed bag. i think we are going to be trying to watch closely. we will pull in our

equities analysts to see where production is going, but for now, i don't think it is easy for us to forecast weather the strike will happen. tom: bernanke wrote an important paper on our start. we missed you at jackson hole. give us the carpenter start should our audience pay attention to it or is it economic battle and distraction? >> it is hard to avoid the relevance of the confidence of that metric. that has to be fundamental to everything about the economy. but in real time at any specific point knowing where that is with any precision is borderline impossible paired the statistical -- borderline impossible. the statistical models a lot of my colleagues use our really sophisticated ways of showing how much math you know, but at

the end of the day all they can do is say we know where the current level of interest rates is, let's look. is the economy decelerating or accelerating and then we make an inference of where. we are so i don't think there's a lot you can judge for sure. over time, if the fed keeps the policy rate where it is now and the economy not only does not slow but starts to accelerate, you have to have a view. the same thing could be said. there could be an extra push coming on from fiscal policy that does not tell you anything about the permit level that says there's more demand. jon: you have had time to dive into the data. give us one insight here. mike: i will give you an insight that does not have to do with the numbers that came out today but with what you are talking about with seth. the labor department estimates how many people will be subtracted from the payrolls number because they were on strike during the month and we have averaged somewhere around

1000 month this year. for august, 17,800, so there is your screenwriters strike and -- tom: how does that fold into the jobs reports friday? mike: that will take away from total job creation. we will see 17,008 hundred lower jobs and these are all likely -- 17,008 hundred lower jobs and these are all likely. kailey: i have created a monster. >> it will be interesting to say. and if we get aua w strike that will be there. tom: that's the granularity we will inflict on you the next couple days. s&p 500 up two points. we say good morning to all of you with us. dr. seth carpenter of morgan stanley, their global economist,

as we get some final thoughts from him. everybody was calling for a weak dollar. the morgan stanley view on dollar resiliency? seth: i think we have loss of crosscurrents. one reason why some of the dollar bulls had their view is the real economy data had been coming in stronger. the part my colleagues will point out is that anytime you are in a risk off situation because the economy is looking better you can sometimes get a weaker dollar, so you have these crosscurrents that are important. i suspect people feel more or less people know where the peak is for the fed. we think the fed is done and the market is putting some probability on one more hike but it's not like there's a long way to run. i think we are either at or getting very close to the peaks, so that part is there. i thicket will come down to sentiment, positioning, and relative economic performance

. tom: seth carpenter, thank you. kailey leinz and tom keene and me getting you through the hour -- and jon getting you through the hour. the 10 year yield. it could come down lower. kailey: yeah. the two year yield 4.85 percent, down another four basis points after a monster move lower yesterday on the jolts data. no longer are we north of 5%. tom: vix comes in at 14.40%. could we get a 13 handle? that would be shocking. stay with us. this is bloomberg surveillance. ♪

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> at the end of the day, we have had this bearish onslaught of russian news and of china news and what has not gone down

is crude. it is positive in our trend work. i think brent is on its way to $90. look at the stocks after a pretty meaningful pause have regained the flag of leadership. tom: christopher varona starting us strong. we will go to houston in a moment and discuss $90 or higher oil. we can do that with some sophisticates at kpmg. we will get to that in a moment. lift in equities author read on the screen earlier, fractional. it's boring but it's not. friday up, monday up, yesterday boom off the j.o.l.t.s. data and it continues today in a more quiescent way. i'm off to see how that goes. futures up three, dow futures 32, the vix 14.40, brent crude $85.75. with our movers, kailey leinz.

kailey: one stock moving lower, potentially heading for its worst single day in more than a year, hp q the ticker. this stock down 8.3%, cutting profit outlooks, acknowledging a rebound in pc demand does not coming as quickly as hoped. brown-forman also down 2.5%, the maker of jack daniels and other alcoholic libations. missed estimates. march earnings more narrow than expected. i guess tom is not drinking any jack daniels, justin and tonic. vinfast gathering attention, just went public via a spac in august. tom: continue. kailey: it had been out more than 700% since it went public via a spac. this is a vietnamese ev company.

it came back down to earth to the tune of 44% yesterday. backup today by 11%. tom: you go to the terminal and i guess you see the financials. i thought they would come up in the vietnamese currency but they don't. they come up in u.s. dollars. sort of sketchy. it's a spac. i will go back to what you saw with that first stock and apple and the mystery of their relaunch that we are going to see. you wonder how the ipad and personal computers like hp fit into the future. kailey: that's a good question relative to mac and what the upgrade cycle will look like on some thing like an iphone. tom: going to oil. we have ignored this story. it had to do with jackson hole and monetary theory and all that. angie joins us. u.s. energy leader at kpmg.

they have a franchise in houston looking at the market. the view from 60,000 feet, angie , what is the thing we most misunderstand about oil in america? angie: i think the thing that people most misunderstand is just how many factors go into predicting the ultimate will processes -- ultimate oil processes clears the outlook in the u.s., china, political crisis, hurricanes in the gulf of mexico. there are so many things that go into the price of oil that, especially in today's market, where there's a tight gap between supply and demand, any injection of uncertainty creates volatility and that is what we are faced with now. tom: in the 42 page powerpoint, there has to be bullet points. what is the bullet point on demand now.

demand, microeconomics and price theory, what is the mystery? angie: the key thing is demand is still growing. largest countries, u.s., china, india. but questionable continued growth trajectory, particularly coming out of china. kailey: and we are seeing evidence of the struggles in the china growth story every day as we see policymakers there try to take steps to shore things up. that is on the demand side. what about on the supply side? angie: on the supply side, opec and the saudi's believe they are in the driver seat, and as you know, they expended -- they extended their quotas from expiring end of 2023 into 2024, so you have that. the saudis came on top of that and extended another one million barrels per day production cut on top of that, so that is in an effort to boost the price of oil. their budgets to balance their national -- you know, 80's are

kind of a sweet spot for them, so that is helping from a supply front. kailey: on the subject of supply as it relates not to the supply coming from opec but from the u.s., especially in the gulf area, watching storms, like idalia that just made landfall in florida within the last hour or so, how should we be thinking about that potential impact? angie: first of all, our hearts and prayers go out to the people in florida. being a houston resident, i certainly appreciate the stress they are under right now. fortunately for this particular storm, it was further east of where a major production and refinery facilities -- where our major production and refinery facilities are in the gulf coast, but 50% of u.s. production comes out of the gulf of mexico and from a refining capacity the gulf coast refines about 8 million barrels per day, about 40% of our total refining capacity, so it's a

very important region for the u.s. tom: when you are in meetings at kpmg, and there's a lot of discussion here, if they are writing up a story betting on the future of automobiles at kpmg, how does an oil expert like you react to the ev mysteries that are out there? angie: yeah. first of all, the ev play outs -- plays out in different places and regions. what happens in the u.s. will be different than what happens in places like southeast asia or india, where we just have a different economic outlook. but for the u.s., ev's are definitely growing. we are seeing more of a trend towards electrification and power, which for me as an energy person is also important because we have to make our grid more resilient and modernized to

be able to charge all the ev's that will be out there. tom: are ev sufficient? you are perfectly positioned. there's this whole idea that they are efficient and there's a debate with ongoing research of where will we end up. what is your take on the thermodynamics and underlying science of ev's? angie: i have owned one. i'm an energy person and i have owned an ev since 2015. there are some incredible benefits. however, there is a challenge from a minerals, metals perspective on the batteries. it takes a significant amount to produce the ev's. then you think about the recycling of the bees themselves. so we do have a challenge on the back end and front end in terms of finding the appropriate metals, and they are not in places in the world that are really stable from a geopolitical standpoint, so we

have a challenge there if we are going to continue to scale up. then we have an infrastructure challenge.we have to be able to charge and service the charging stations. this is going to be a long journey that will take a number of years for us to transform our energy system. tom: angie, thank you. angie gildea at houston kpmg with some real clarity and knowledge base out of the kpmg, their advisory on ev. this is a huge debate. jon has been good about this, about what actually is the research of destroying batteries, moving on from batteries? it's a huge deal. kailey: absolutely and this is at the heart of the united auto workers question as well. this ev transition and where these employees fall into that, what their jobs look like going forward. tom: and basically right now it is less paid and the union wanted to be equivalent with

gasoline engines. kailey: this is one of the focal points in the negotiations ahead of the contract expiring. tom: i will be alone here friday. kailey: i have learned if i say something once he will keep running with it. tom: that is a theme here. look at the 10-year yield, 4.09%. kailey: two year at 424% as we see more economic data that would seemingly be in favor of the dogs at the fed following the j.o.l.t.s. downward surprise yesterday and a downward revision in the second reading of second-quarter gdp. all of that beating the drum to the data we have yet to get this week, jobless claims tomorrow and the big one friday. tom: we go further on surveillance. euro reaches through 1.09. euro-yen, 1.5936. that would be something. it is an eventful wednesday.

onto our coverage friday, beneath the headline data. the american jobs report. stay with us. this is bloomberg surveillance. ♪ the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

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of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. > after the biggest one-day pop in the s&p since june, let's see we can make this a four day rally. the countdown to the open >> starts now. everything you need to get start for this -- get set for the start of u.s. trading. this is bloomberg the open with jonathan ferro. jonathan: jobs data in the u.s. providing a gift for th