tv Bloomberg Surveillance Bloomberg August 22, 2024 6:00am-9:00am EDT
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>> this is a market whether growth data is now in the driver's seat. >> this is an environment where the fed can start moving policy restrictiveness. >> if godot did not arrive in the last 24 months, why in 2024? >> it is what the fed is going to do. announcer: this is "bloomberg surveillance." jonathan: let's get your training day -- trading day started. live from new york city, good morning, good morning.
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"bloomberg surveillance" starts now. stocks within 1% of all time highs on the s&p 500. your scores look like this. equity futures pushing higher by .05 percent. slightly in positive territory on the nasdaq. slightly into negative territory on the russell. small-cap down by .2%. your day ahead shaping up as follows. the annual fed get together in jackson hole, wyoming. around 7:30 we will bring you some of that conversation. a specular politics. headline act this afternoon will be vice president kamala harris, but the main event for financial markets, eight: 30 eastern time, initial jobless claims. dani burger, as you know, jobless claims has taken on importance over the last few weeks. dani: jobless claims was the thing that saved us. it flipped us from saying we were headed off a cliff to everything was ok. the jobless claims numbers have come in resilient.
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despite the fact we get that huge jobs revisions yesterday that was used as a rush i test. -- rorschach test. jobless claims, if it breaks the trend today a could be bad or reinforce that everything is ok, the rally can continue. jonathan: last week's number was to hunt a 27,000. today the median estimate is 232,000. dani also mentioned that massive revision we saw. from april 23 to march 2024 payrolls grew by about 24,000 month. i'm hearing that it is solid. it is not strong, but it is still solid and this is ok. dani: everybody came into this with their own lens and take away from it what they wanted to. think of american might say it is solid. but neal dunn said it says the job market has been weaker for a while and the fed is even more behind.
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when you have someone like goldman that says it overstates the true number. that they think this will be revised again into the downside. or if you are a government conspiracy theorist there was plenty for you in that report too. jonathan: 20 will talk about later. we need to talk about the release. why it took so long and why some banks were able to pick up a phone and get the number themselves. i've got some questions about whether we go 25 or 50 in september. steve englander of charter had this to say about the minutes, which were incredibly dovish. essentially several officials were ready to go in july and the vast majority are ready to go in september. steve inventor has this to say. it is hard for me to see why they would issue minutes with this tone if powell is going to wrong-foot the market in less than two days by being hawkish. he thinks the door still open for this fed to go 50. dani: what does power gain by
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pushing back on this market? he removes optionality. that is something he wants. especially because they are looking at so many data points like the next labor report. the only thing i would say is, if you listen to powell in the last presser he was specifically asked, how are you thinking about 50 basis points of cuts? his response? it is not something we are thinking about right now. central banks tend to hate to admit errors. going by the last presser, saying they are not even thinking about it, may be admitting an error. jonathan: i have to say, i have wondered a few times, is chairman powell doing a poor job of reflecting the consensus of the committee in the news conference or are they sizing the minutes. they shifting the emphasis to the minutes to catch up? dani: i have heard this argument before, and even as it relates to the jobs revisions that is not the real revision going on. the revision is the fed minutes. that they want to make it match
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more what the market is saying or make it seem like they are not behind. i don't know, that argument certainly exists, because you do see the discrepancy of a powell who is talking about not giving us a firm deadline if they are going to cut in september. jonathan: there is another disconnect we need to sit on this morning. the market expectation, soft landing hopes funded by hard landing rate cuts. how problematic is that? it is striking that the outlook has dimmed to the point of once again pressing in more than 100 basis points of cuts in the absence of a tangible breakdown in the labor market. do you think this market is dreaming about a soft landing but funded by the kind of rate cuts that would typically be associated with a hard landing? dani: the argument you could make in the benefit of the market is we have already had the soft landing, and you need to -- now you need to support it. you need something that looks
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like neutral. if it is something like 3.5% in the fed cuts 25 basis points in every meeting it will not be until june that they would get to 3.5%. that is nearly an entire year it would take to get to neutral. one of the arguments is that it is essentially preserving the soft landing by doing recession-like cuts. because you need to get to neutral quickly. jonathan: we will try to make sense of that. we have a job print september 6. and a week later you have that federal reserve decision. on september 18. welcome to the program. yields a little bit higher by a single basis point. in the euro a little weaker. you will talk about the eurozone pmi's. better than expected, but france doing the heavy lifting with the olympics going on and a fear that that is going to fade.
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euro-dollar, 1.1137. our lineup looks like this. steve chiavarone of federated hermes. annmarie hordern at the dnc. and tom mcloughlin of ubs assessing the impact of financial recession on markets. stocks steady with the focus squarely on jackson hole as the fed's annual get together kicks off. steve chiavarone writing the following. while we remain overweight stocks and expect only a modest slowing of the economy, we do note some warning signs. steve joins us now for more. as time we spoke you use this word, confined. -- fine. that was the start of summer. is everything still just fine? steve: i think it is still fine. again, we expect growth to slow a bit. not a ton. and we expect the fed to start rate cuts at a measured pace. when we think about rate cuts we are thinking one quarter for
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eight quarters, not one meeting. that is different than what the market is pricing in. but the warning signs are, forget about the labor revisions yesterday. the unemployment rate is up .9% from its cycle alone. historically when that has happened you are in a recession. a lot of that has to do with this big surge in labor force. a lot of that has to do with border crossings and the number of non-u.s.-born labor participants. that has to warrant your attention. you have a yield curve that is un-inverting. the political uncertainty is much greater now than it was a couple of months ago when you had two incumbents in office. whereas now you have one candidate with a set of policies that is less certain. you look at those three things together and i think they all warrant attention, especially
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with the market trading at an all-time high. jonathan: relatively sharp increase in unemployment, the distant version of the yield curve, which we -- and the political certainty on the horizon. is that reason to pull back for a moment for a number of months? is that what you are doing? steve: it certainly was on the growth side. growth stocks are trading -- still are trading -- above 30 times. they really only did that during the pandemic and the great financial crisis. and we thought a lot of good news is priced in. if you look at that distant version of the yield curve, the short rates we expect to come down. but we think the long bond is about fairly valued, maybe even a little expensive here. we think about a 2.5% long-term rate, real rate, 100 basis point term premium. that is about a 4% treasury. we think companies that require
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a steeple or -- a steeper yield curve other ones that are going to do better. those are things like financials, things like value names. there we still feel really good because they are trading at regional -- reasonable valuations and starting to assume earnings growth. but for big tech we think things have been as good as they can be and they are getting less good. dani: steve, there are warning signs, as you point out. how do you basically get your head around this idea that a steepening yield curve would be better for small caps, cyclicals, value stocks, the weakening economy would not necessarily be good for them? steve: that is a great question. that is why the mosaic has to come together. if we thought there was a recession on the horizon you would not like those parts of the market. but if you are seeing a modest slowing than that is ok. particularly if it is a modest slowing in the context of rate cuts. whether or not the fed goes 50
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or 25, 50 basis points of cuts this year or 100, you pick the number, think what is more important is there is a couple hundred basis points of cuts coming over the next 12 to 24 months. think it is more like 24, but whatever. it is still 200 basis points coming. and that absolutely helps small caps that have variable-rate debt and it helps companies that are shorter duration, like value names. i think when you look at an economy that is slowing but staying ok -- fine, if you will, jon -- rate cuts that are coming, you put that together, that is pretty good for those parts of the market. dani: one thing i didn't hear you say is momentum, and that had been betrayed before the august 5 turmoil. is it fair to say these frothy names, that that is not the trade anymore? that not only are those value stocks going to do well, but they are going to take over the leadership of this market?
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steve: that is exactly what we are saying. we put our money where our mouth was. we added three to four points near the lows. maybe not quite on the lows, but near the lows. and those names are up 50% from when we bought them, you know, back in last october, trading over early times. again, against the backdrop of rate cuts that should benefit different parts of the market. mag seven was growing 50% year-over-year at the beginning of this year. by the end of this year we think that is going to be closer to 15%. let's call it the forgotten for 93, their earnings were declining 5% at the beginning of the year and we think they're going to be up 20 by the end of the year. with that kind of handoff, with the rate cut regime changing, with the nature of the way the yield curve is un-inverting, we think that creates new leadership. jonathan: that is where the market is going. equal weight s&p 500, all-time
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highs at the close yesterday. small clap with clear leadership in yesterday's session. -- small-cap with clear leadership in yesterday's session. i wonder whether we could be having the same conversation only two weeks ago. steve: as usual, you and i are on the same page. we had a meeting with our macro committee a week ago to talk about all of the things that concerned us and all of the things that comforted us. you know, in four pages of notes across that discussion i think the word inflation came up once. one third of the document was about jobs and the labor market. this is before the labor revision. i think that september 6 really is going to help determine the path of fed rate cuts. if that is a strong number, if that is a better than consensus number, somewhere around that 150,000 jobs level, i think the fed is really going to guide to
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25 basis points in september and get the market comfortable with one cut per quarter. if that number is soft the fed will be forced to come to the realization that they are behind the curve and then i think you are in the rome of the basis points. when you think about that balance of risk -- and the fed has talked about this -- in a balance of risks that were almost exclusively tilted toward the inflation side, i think it is now the jobs market that is key. you were talking about claims and four i came on. -- before i came on. if they break into a 250,000 to 300,000 range, i think you are in a more aggressive cut world and one where you are worried about the labor market. we are not there yet. it is a warning sign. it is a yellow light, not a red light yet. dani: i wonder about these warning signs, be it jobs, be it this inversion of the yield curve, be at the sahm rule trigger. since vietnam we have only had
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11 recessions. that is not a lot of data to work with or get anything statistically significant. when the lights are flashing, the yellows and may be reds, how much faith can you put in them? steve: less. i can set earlier, there is 11 times since world war ii you have -- you have had an unemployment rate up .9%. and every time you were in a recession it would go higher. you look at that, and a lot of analysts made that mistake over the last couple of years, looking at these kind of recession signals and having very high conviction about impending doom, only to be proven that it was in fact a little different this time, at least so far. i think this could be another one of those examples. yes, the unemployment rate is up, but the economy has added 2 million jobs during that period. if you look at the u.s.-born labor force, that might be down. it is really this increase in non-u.s.-born workers. i'm not trying to make a
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political comment on that, i'm just saying, that is different. you have not had that kind of border policy. you have not had that kind of integration -- immigration in these past examples. that is why it is a yellow. it says, this is enough of a deterioration in the labor force that it error it's my attention. i'm not want to be worried about valuation in certain areas, and may be i pull back the size of the equity over right, but i'm still overweight. we still think the base case is a slower but not careening lower economy. but i wake up and look at that labor market data little closer than i used to be and i'm going to be slightly less patient. jonathan: it has made people jittery over the last few weeks. steve, it is good to catch up. steve chiavarone of federated hermes. 8:30 eastern time to get another read on jobless claims. jobless claims over the previous few weeks has been pretty contained. you're looking for about 200 to 2000 later this morning --
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232,000 later this morning. dani: we can live with the flashes, right? we can do ok with that risk and continue to rally. small caps can do well because we are getting cuts in an environment that is consistent with an ok economy. if the labor market turns that is when things start to reprise. the bond market will go from pricing 20% odds of a 50% basis -- two point basis point. the market is incredibly offsides if that is the case given we get closer and closer to her record considering an equal-weight of the s&p is at another record. might be a scary prospect if it starts to weaken. jonathan: within 1% off all-time highs on a market-weighted s&p 500 this money. let's get to your bloomberg brief with higher hack as. >> a fifth body from a sunken yacht off the coast of sicily where mike lynch and morgan stanley international chair jonathan blumer are feared dead.
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search and rescue crews are continuing their fourth day of efforts. they got was hit by a tornado near put the cello, italy on monday. authorities have not yet released any statements confirming the identity of those recovered from the wreck. paramount mergers saga continues. sources telling bloomberg junior has raised is offered to take over paramount global to 6 billion dollars that talk a $4.3 billion bid he made just two days ago. and then a move that could upset paramount's plan to merge with guidance media. that deal includes a 45-day period in which paramount to review other offers. the media executive is expected to argue his proposal. walt disney has appointed james gorman to lead the search for a successor to ceo bob iger. gorman joined ce -- disney's
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board this year and oversaw a succession as morgan stanley. disney is weighing both internal and external candidates to succeed bob iger. his second term as ceo runs through 2026. jonathan: thank you. up next, politics. gets personal. >> you know, when i was teaching every year we would elect a student body president. you know what? those students could teach donald trump what leadership is. >> they always say, don't stick to policy, don't get personal. and yet they are getting personal all night long. jonathan: annmarie live from the dnc in chicago after the commercial break. from new york city this morning, good morning. ♪
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your scores look like this on the s&p 500. up by .1% on the s&p. bond yields higher on a 10 year, 3.819 nine. under surveillance this morning, politics gets personal. >> when i was teaching every year we would elect a student body president. you know what? those teachers could teach donald trump what a leader is. leaders don't spend all day insulting people and blaming others. >> you know, they always say, please stick to policy. don't get personal. and yet they are getting personal all night long, these people. do i still have to stick to policy? jonathan: the final day of the dnc kicking off. i's president kamala harris taking the stage this evening to accept the democratic nomination and deliver the keynote address. donald trump continuing his counter programming campaign in north carolina yesterday, delivering his first outdoor rally following an assassination attempt last month.
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trump now heading to arizona, looking to attack harris on immigration. annmarie joins us now from the dnc. i'm channeling brammo, who is making her way to jackson hole, and she would be saying, can we please make this about the policy and get away from the personal? what are the policies coming out of that convention? annmarie: we are going to hear from kamala harris tonight. when she gets on that stage and formally accepts the party's nomination to be the president. 180, -- 11 80 -- 180 degree reversal from a month ago when biden was the top of the ticket. that is why we are waiting to hear a lot about her policy proposals. i sat down with some members of her team yesterday, and a lot of questions i was trying to dig into, whether it was immigration, i got a lot of, i don't want to get ahead of the vice president. we heard last week from her when he came to the economy potentially we will see her build that out. they want to lean into this
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because they know the cost of living is top of mind of american voters. i would say tonight it is going to be a lot about rhetoric, a lot of personality, and a little bit light on the details. i go back to what libby cantrell told you yesterday. if this is about personality and vibes, kamala harris could win it. if it is about policy donald trump could potentially win it. i would note there is a shift at this dnc when it comes to immigration. to the right for this democratic party. thompson was a got up on the stage yesterday, an of -- an individual who is able to flip his district on long island and said, the border is broken. we heard from connecticut senator chris murphy talking about the fact it is the individual who worked with james lankford to write that immigration bill and said, the bill would have been passed if it were not for donald trump killing it, because he wants the issue. today trump is going to have that issue. when he goes down to the southern border to arizona. dani: i was going to say,
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usually the opposing party during national conventions are quiet because they understand the media's attention is on that. how has trump's success in cutting through that? annmarie: he is going on a number of these rallies to a number of states he needs to win. notably yesterday north carolina, which is now seen as a tossup. it is a state republicans need to win. obama won it in 2008 and before that no democrat had carried that state since 1976. it is notable he is in north carolina instead of potentially using that time in pennsylvania or another border state. he is trying to go after kamala harris on the issues, but trump is at times unable to help himself and also make this personal. yesterday calling her comrade kamala, trying to say she is a communist. calling her the borders are,
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saying she has failed on border policies. instead of going after the issues, which his campaign desperately wants him to do. jonathan: appreciate the update. we will catch up later on this morning. it is obvious why the campaign once the former president to focus on the issues. top two issues in this election, the economy and immigration, on those two issues the democrats pull poorly relative to democrats, which is why those issues should be top of mind for republicans as they campaign. coming up, we will catch up with ford on the company's ev strategy. that conversation just around the corner with equity futures up by about .1%. watching bloomberg tv. ♪
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jonathan: stocks doing ok on the s&p 500. positive by .1%. lies stack -- likewise on nasdaq 100 futures. an all-time one high on the equal-weighted s&p 500. unlike this morning, underperformance on the small caps today. yesterday, outperformance on the russell. this came from rbc. we end the summer of 2024 with increased conviction that august 5 was the low in the recent pullback, even if we get some choppiness. rbc saying, it is likely that
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greeting us at the end will be a 5700 price on the s&p 500. they are feeling good about it. dani: the wall of worry we climbed is remarkable. not even just how far we had to go, but the pace of how we had to do it and what has been rallying. this is the most remarkable part of it. it is not just tech comes back, but it is the breath of it. it is the equal measure of the s&p 500 going to new heights. defensive cyclicals are rallying together. if you go back to before august 5 there was this idea that it was the only -- that it was only the large caps that were bringing us to gains. maybe something has changed. maybe it is, dare i say it, more healthy. jonathan: what are we looking for? we are looking for growth to hold up, solid but not strong. he can cope with that. maybe a deceleration from here, but may be a downturn. at the same time we want these rate cuts. christian was talking about this
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yesterday. are we looking for a soft landing funded by rate cuts typically associated with a hard landing? dani: the fed has been talking about going slow, and they tend to go slow until something forces them. the question this time around, will something force them to go faster? to do 50 basis points of cuts in multiple meetings? and what does it mean for this equity market? it is this disconnect between equity markets and bond markets that somebody people have talked about. there is this argument that maybe they have to go fast to get to something that looks like neutral. jonathan: let's check in the bond market and them make and check in on foreign exchange. at the front end of the curve we are up by two or three basis points. on a 10 year we are up by about two basis points. just to check in on the 30 year maturity, just a little north of 4%. if you switch up the board i want to talk about foreign exchange. let's pick out two of these three, the euro and a sterling. the euro, 1.1138.
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the pmi much better than expected, but the heavy lifting came from france. i will tell you what i mean by that. the preliminary read for the month of august came in at 55.0. we were looking for 50.3. on the composite we were looking for sub-50, and we got 52.7. because i think in a lot of people's minds that services read was supported by what happened with the olympics, that that is going to fade as the year progresses. some people are discounting the importance of this data, so we are back down. the same cannot be said for what is happening in the u.k.. stealing just a little bit stronger. dani: last time you had strong data in the u.k. everyone was saying it was the taylor swift effect. i don't think there is as much of that anymore, because i'm tired of central bankers talking about taylor swift. it feels odd and uncomfortable, but the dollar has been read --
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weakening quite significantly this week. and you have seen maybe the kerry unwind is not over. dollar versus the yen has not moved that much, but dollars swissie moved some 1%. peso versus the yen weakened on tuesday, and then one and a half percent yesterday. george sarah vale is points out some of the strength in the euro has been fed repricing, but something is still going on with this carry trade. jonathan: dxy coming off the back of a fourth consecutive day of weakness, stronger on the session today. if we get a fifth week of weakness, longest weekly streak going back to april 23, that dollar weakness is quite pronounced over the last few weeks or so. let's turn to our top stories. kamala harris taking the stage tonight at the dnc, excepting the democratic nomination and delivering a keynote address. donald trump countering with a visit to the u.s.-mexico border and a rally in arizona.
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i want to turn to this story. a 30 minute delay in releasing the key u.s. payrolls revision was not felt by everyone. ms. zero, bnp paribas, and namor all called the bureau of labor statistics and obtained the data directly after was not released as scheduled at 10:00 a.m. eastern time. a former colleague now at bnp paribas, i love this quote, we call it the public line a couple of times and they give us the number. dani: some of the reporting was that the bls. that maybe they had published on the website so were confused that it didn't. they thought, why not give it to someone on the phone? government clumsiness is especially a problem when it comes to market-moving data, because you have this appearance of giving people an unfair advantage. you have this appearance of giving people favoritism. it is the image that is a problem. this is why, for example, at jackson hole i learned recently
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they do not invite anybody from banks. they don't invite anyone from firms because they don't want to make it look like they're giving people unfair access. it is not necessarily that they are, but it is the appearance of that that erodes ever so slowly the trust in some of these organizations. jonathan: the effort to avoid that is why we ended up in a place we ended up in yesterday. typically these numbers used to be given to news organizations under embargo, then once you got the release time they were released. however when is waiting for the same information. mike mckee sits here waiting for the numbers to drop on the website. it is not how we used to do this. i have asked them directly, because it is not the first time we have had this issue with delays to releasing economic data. early important economic data as well. at some point they have got to do something about it. dani: especially for the job numbers. just because there are a lot of very odd conspiracy theories out there. donald trump was talking about
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yesterday. he called it a massive scandal that they revised some of the labor figures, basically coming that the obama administration had been massaging things in this revision was proof. just weird, because you are not going to reveal that they were wrong. even so, these kinds of figures are important not just for the market, but because, again, of people's trust in these institutions. these types of figures need to be important. you would think they would give extra care to it and checked the website and see that it had not published and do something about it. jonathan: they seemed to be totally unaware. so just the number next time. the fed's annual get together at jackson hole kicking off today. with traders waiting for chairman powell's remarks tomorrow. several officials seeing a plausible case for cutting in july. we will get jobless claims at 8:30 eastern time. how much of a difference to those revisions yesterday make
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to this federal reserve get together this week and the fomc meeting next month? dani: it depends what you already believe. because that is what we did with this revisions data. if you believe the fed should be acting sooner it enforced that the labor market had been weakening for some time. if you don't, it enforced that, still above 170,000, that is goldilocks. considering the fed has been talking about moving gradually they might fall into the latter camp. we learned from the minutes that whether or not they did at the meeting or afterwards, they have now more focused on the risk of the labor market, the risk of not cutting soon enough. jonathan: when you hear that there was a 70,000 per month reduction in average payrolls for the year ending march 2024 at sounds like a lot of jobs. because it is. when you go through the average print of 170,000 against 240,000, 70,000 still seems good. dani: it does.
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40% of the revisions came from business practices. in other words, consulting. i just want to know what is going on with these consulting firms that 44% for professional services. i know they were firing people. this seemed especially bad. it was a weird revision, but that one in particular, i don't know what to do with that information. jonathan: this is a very large economy and they are very bad at finding out how many jobs were added every month because it is a very big economy. we will come back to this later. i want to return to autos as well. ford shifting gears in its ev strategy, scrapping plans for a fully-electric suv in a shift that could cost the company $2 billion. craig trudell joins us now. we have talked about this a million times. it is the latest coming from ford? craig: speaking of things that keep happening over and over again, fort itself just continues to have pivot after pivot.
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i think yesterday's news that they're going to scrap a three-r.o.e. suv is remarkable, because it was not that long ago we heard from jim farley pointing to this product as something that was going to distinguish them from the pack and separate them from a tesla or byd. now that vehicle is going by the wayside. they are pushing up as well. their full-size pickup, the replacement for the f-150 lightning, that will not come for another year. they already had delayed that product. this is a case of a company that has been losing money on its investments in electric vehicles, struggling with getting to scale him struggling with high battery costs. i think they are really wanting to kind of recalibrate, get to where as they are rolling out new models they have greater confidence in the ability for those vehicles to be profitable within a year of launch, which is the expectation you come to
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think your internal combustion engine vehicles would be able to pull off. dani: that is exactly what jim farley told our colleagues. we are waiting for profitability. we need models that can turn our profitability. it needs to be in place for that to happen, and how long might it take until they can see production putting out an ev that does become profitable and year out? craig: one of the aspects of this announcement out of ford is also a change in their battery strategy. they are going to really lean into on-showing battery sourcing. for example, they source some batteries for the mustang marquis, which is selling well. but they source those from poland, and that has hurt their ability to qualify for tax credits in the u.s. by moving their production from poland to michigan they will be able to take it vantage of those tax credits, which, with up to
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$7,500, that is a substantial amount of money for a consumer. and it is going to help their cause. in addition to making that change they are scaling up battery production in other parts of the u.s. that will help, but this is a case of also just having to sort of reassess how ready the consumer is to go fully electric current ford is having much greater success with getting the american consumer into a hybrid as opposed to a battery electric vehicle. that is another aspect of this announcement. rather than bringing a fully-electric three-r.o.e. suv to market they are going to bring hybrids. a be an even -- maybe even an extended range vehicle where the battery does most of the work but it has a small gas engine as it is rolling along. jonathan: what does inventory look like at some of these companies? i'm thinking about people that might be in the business of buying the new ev -- new
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vehicle. i don't know why they would do it when the improvements we could see in the next few years in battery and range could be massive. why would you dump a load of cash into a market that is moving this quickly? craig: that is a great question, and i do wonder how much the consumer is that sophisticated and following things that closely. to the extent that the consumer is doing their homework they are seeing the resale values, just a year or two ago it was a success story. we saw tesla dramatically bring the prices down because tesla is still such a powerhouse in the u.s. market. that has really done a number on resale value. the combination of ev's struggling to retain value, the improvements we are seeing in battery ranging costs on a year-to-year basis, you know, it does not necessarily make a lot of sense to make that purchase
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now, and maybe put it off. that is not helping momentum here. jonathan: forgive me for putting you on the spot, but if i desire -- if i drive away from a dealership on day one what does the falloff look like? craig: it kinda depends on the model, but i think this is generally the case with any vehicle, where off the lot, rough approximation of depreciation is i would say somewhere around 20%. with ev's it is probably more than that at this point. jonathan: brutal. appreciate the update. craig trudell of bloomberg. this is where the market is going to go for now. this is where government officials want to market to go. the journey has changed markedly over the last year or so. dani: it has. also part of the problem is not even, do i wait to buy this because the technology is going to get better, or do i need to wait to buy this until there is infrastructure in the u.s.?
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just why you see these carmakers turn toward the hybrid models. there is still a lot of headwinds to getting adoption, especially when ford does not have a model they think can be profitable. jonathan: these governments have put these companies in compromising positions. they want to support the workers that work there and at the same time they have put these companies in a position where they have to move toward making a tickle that they are struggling to make money on. dani: then you have someone like tesla that gets really reliant on government credits. so that becomes really important for them in order to have a profitability every earnings quarter. and then you put that into a new administration and what that means for these carmakers that previously wanted to double down on ev's. if you want to rely on the government to do that, what happens when you get a government less friendly to these types of measures? jonathan: fortis up in the premarket. here is you yahaira jacquez. dani: sources telling bloomberg news the head of apple's app store, who has run the business since 2010, is leaving in
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october. apple's decision comes in response to regulatory pressure on its app store, with lawmakers alleging it wields too much power. shares of snowflake plunging, down more than 9%. the software developer delivering a sales forecast that delta reinsure -- reassure investors they could gain ground in the market for ai software tools. the company is navigating a challenging environment, including a ceo change and security breaches affecting high-profile clients like at&t and live nation. reports indicate robert f. kennedy, jr. is expected to end his presidential campaign this week. he plans to give a speech about his future tomorrow from phoenix. this coming after kennedy's running mate suggested he could potentially endorse donald trump. that is your bloomberg reef. jonathan: more in about 30 minutes time. up next, opposing outcomes. >> this is an election about personality. about vibes.
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jonathan: live from new york city, welcome to the program. your scores shaping up as follows. your firm or by about .1 percent, adding to yesterday's gains. all-time high on the equal weight s&p 500 at the close yesterday. this morning the market cap, s&p 500 after the close yesterday within 1% of its own all-time high. under surveillance this morning, opposing outcomes. >> down-ballot races, when you talk about the composition of congress, very important to
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markets in terms of fiscal policy. right now the house looks like it is a jump ball. if this is an election about personality, about vibes, kamala harris could do very well. if this is an election, on the other hand, then she is quite vulnerable and you could see trump winning. jonathan: here's the latest. opposing economic visions weighing on outlooks. donald trump proposing steeper terrace. vice president, harris looking to raise the tax rate to 28%. tom mcloughlin and the team at ubs writing, if harris wins but congress is a split we would expect a limited policy changes, and therefore a muted impact on markets. a harris administration would be obliged to rely on executive action and regulatory oversight. tom, good morning. tom: how are you today? we appreciate your time. it's get to some scenario analysis with you. are we seeing objectively that a red sweep would be less bad for markets than a blue suite? tom: yes, but one of the things
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we have to consider is this is a tactical response to the market. over the course of three months we think that is true. over two to three years a lot of that does washout. for private clients who are basically engaged in a portfolio construction for the long term we are very cautious and consistent in our recommendations that they not go ahead and basically respond abruptly to changes in presidential election results. jonathan: let's shift the time horizon to 18 months and beyond. what are the issues you are focused on? the policies you think would change things? tom: we get a lot of inputs that basically confuse a lot of voters. when you look at the trump policies, it is transactional isolationism, wariness of getting involved in entanglements, economic populism, lower taxes, lean regulations, it is border protectionism and trade protectionism. that is the trump policy. on the others, from harris it is
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targeted taxation, it is multilateral engagement and it is emphasis on social progressivism and environmental activism. we do have a clear choice between the two candidates. when it comes to the immediate market reaction you would expect a trump victory might be good for financials and energy. it might be more difficult for consumer discretionary because trump is a big fan of tariffs. tariffs are inflationary. as a consequence you are in a position where it could affect how fast the fed responds to monetary policy, depending on the results. monetary policy is always behind the curve. that is not unusual. it is not specific to this environment. we have seen that over the course of 50 years. when they respond they are likely to take into account the results of the election in december, in january, in february. dani: if i'm a bond market trader my concern is the
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deficit. what sort of mix would you be worried about between congress and the rock -- and the white house? tom: unified government. republican or democrat, it almost doesn't matter. you are hoping for a divided congress because it is going to force a degree of compromise between the two parties. and there is a lot of division in america generally, but also congress. when you get a divided congress you are in a position where the deficit is going to rise regardless. you look at the deficit you have something on the order of 75% of the deficit is six line items. medicare, medicaid, social security, defense, veterans benefits, and interest on the debt. if you are in a position of dealing with the deficit you have to do with entitlements. neither party wants to do it. whether the democrats were to get a unified government or republicans were going to get a unified government the deficit is going to rise faster. that is your number one issue. if the size of the deficit is the principal concern you are
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focused on, then you are rooting for a divided government. dani: with a lot of the policies we are hearing from, a lot of the reaction as to, why not put it into practice, is a difference on what these cap -- these candidates campaign on and what they realistically will put into practice. kamala harris's housing policy has been talked about that way. do you need to take them at face value? tom: i say take a breath. if you go back to 2008 you are seeing a reactive function from those who were disappointed with results. and when you have a reactive function like that you go risk-off and you miss the rally that follows. in 2009, beginning march 9, 2009 we had an equity rally. anyone who went risk off lost out. the same thing happened in 2016. so, you have to take this in the context where there is going to
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be some reactive function in the market, but it is not necessarily going to be so much that you should abruptly change your portfolio construction. jonathan: you think there is a policy of proposal stopping under the radar that might have outsized impact we need to pay attention to? tom: effectively, if you are looking at a harris presidency, there is not going to be a lot she is going to be able to get done unless she has a unified congress behind her. so there is going to be more attention in both cases to specific action by the candidates. here is the interesting thing. we talked about terrace before. terrace, because of prior legislation passed by congress, you actually have a fair degree of flexibility for a president to act on tariffs. even in a unified government it is not going to be that much different. what outside of tariffs it becomes more difficult to go ahead and implement anything dramatic with -- unless you have a unified congress.
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at this point we think the divided congress is probably the more likely scenario. jonathan: interesting. tom, this was great. tom mcloughlin of ubs working through some of the scenarios we need to pay attention to going into november. dani: i think the housing proposal is an interesting one. there are a lot of arguments to say why you should not pay attention to it. that kamala harris needs a unified government. still, there is merit in taking these seriously. especially in housing, you whip up demand by giving people support. it happens when lumber has been cheap so lumber mills closed down? people are not going to be there to build a housing. it is these government policies that don't have this all-encompassing view that worry people. jonathan: the take away, focus on what you can do with executive action, with the expectation being divided government. the next hour ships up as follows, with mohamed el-erian, evan roth smith of blueprint, he will catch up with matt horn bok, and bloomberg's michael
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freaking out about growth. couple of days on a monday, a big washout. everyone is freaking out talking about emergency rate cuts from the federal reserve, maybe even getting to 50 before you make it to jackson hole. all-time highs on the s&p 500. equity futures on the s&p positive. speaking of records, we had another one yesterday. the rest of the mark, -- is the rest of the market catching up? what is in store this morning? a little bit later, 7:30 eastern, 30 minutes away, we will catch up with mike mckee who sat down for an interview with the kansas city fed president. look out for those comments in about half an hour. and then jobless claims at 8:30
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eastern. dani burger and focus in a big, big way. dani: when you think about the many crisis, whatever you would like to call it, and then back to the normal, there are two main pillars of what supported us, one was jobless claims that showed we were not deteriorating. the other was retail, we are concerned about consumer shopping and spending, and the retail earnings have relatively strong. they have shown an economy not falling off the cliff. now we turn our attention to the second pillar. jonathan: the previous week, to 27, scheduled to drop at 8:30. let's turn to the price action more broadly. equity troops on the s&p 500, we are positive by about .1%, yields higher by a couple of basis points, 3.8189.
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pmi out of the euro zone, people expect that to fade, so the euro-dollar in and around 1.1144. the dollar weakness has been a big deal for the last four, five weeks. dani: it has, and it has a concern does the carry trade have further to unwind? we spoke about this to death after august 5, but there is still evidence in the market, the fact that the dollar weakened 1% versus the swiss yesterday, you have the economic winds behind it, a fed that looked like it was ready to cut, and you have a buildup of carry trade's, so it is a storm weakening the dollar significantly. jonathan: the dollar-yen pushing a little stronger. and here is your lineup this hour. muhammad ali area, as jackson
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hole takes off, evan roth smith of blueprint, and matthew hornbach from morgan stanley. we begin with our top story. all eyes are on jackson hole. we are looking for rate cut clues. mohamed el-erian said the stakes are high, writing in a bloomberg opinion piece, "it is critical for powell to take advantage of the golden opportunity has this friday to regain control of the economic and policy narrative." he joins us this morning. morning. we have plenty of time to work through this. pretty extensive andy long list of -- pretty extensive and a long list of extensive asks for chairman powell. you said it is important people come away from wyoming a new picture of the policy rate. the path to that rate and what a
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sustainable 2% target inflation means in practice. are you expecting to get that this week? mohamed: i hope to get one of the three, if not two. it is not just about the price volatility but the narrative volatility. people have moved on the basis of hydric see, noisy data. -- on high frequency, noisy data. and we are lacking robust information, so we hope for the fed to restore the policy. the way you do that is you tell people the way you see the destination and how you think you're going to get there. that is what i think you should do. whether he does or not, i'm not sure. jonathan: let's talk about what complicates it. you called it an ocean of
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genuine uncertainty. how do you provide forward guidance and genuine uncertainty? mohamed: you say this is where i think it is right now as opposed to saying, i'm not going to talk about it, this is what i think it is, dependent on variables, and i will modify it if needed. dani: is it important on how they view the size of cuts, how they view 25 versus 50 basis points? mohamed: the first one is, what does the destination look like? secondly, how will we get there? it is problematic that the market is pricing in so many rate cuts right now. and there is a contrast between what the bond market thinks the equity market, and i love the way both of you have framed a hard landing policy response to achieve a soft landing that has
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got to be reconciled one way or another. i think the market is overdoing it. i don't think there will be 200 basis points or 100 this year. the market is going to have to address this at some point. dani: few people looked to the minutes yesterday and said that the fact that they discussed cutting in july is them realizing that they are behind. did you come away with that with the same idea is to mark mohamed: when i -- same idea? mohamed: when i read the notion that several thought that was possible, i thought to myself, what about the press conference? why didn't we hear that? and then when i heard you discuss the fact that a lot of people are discussing are the minutes reflecting what has happened since? we will not know until we get the answer, but it is interesting that they put that in there. jonathan: there are two options,
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you are quite critical, more than me, of the federal reserve with poor forecasting, confusing communication and lapses. you think this could have large consequences. the fed could further risk damaging its policy effectiveness if countries around the world would look for more ways to de-risk their financial systems that no longer anchors what is still a dollar dominated international monetary system. that is not something you just write lighthearted. that is not something you expect us to ignore. is that at-risk youth is to mark -- is that at risk? mohamed: i do believe it is. they have been able to influence outcomes around the world and lead policy around the world.
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why? because the u.s. seemed to be a responsible steward. that started to be undermined in 2008 and undermined even more in 2017 and even more in 2021 and 2022. and what we are seeing are people starting to hedge away from the dollar. the price of old. record -- look at the price of gold. record after record. look at the central bank buying of the price of gold, so i do worry that unless we regain policy credibility, that you are going to start to see the system fragment, not just for geopolitical reasons, but fragmenting because there is less trust in the way the system is managed. jonathan: that is where i wanted to go, is that driven by one half of d.c., the other, or both? how much is driven by wind and not the other?
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people might say, that is about sanctions from the government, outside of the of monetary policy. how much of it is about that versus what we are talking about right now? mohamed: we have never seen the amount of volatility that we have seen this year. at least you know the two-year, the two here to five-year gets priced off of that, and it has been a roller coaster. so geo policy is a big influence. we have to minimize giving another reason for people to diversify away from the system because they are diversifying not to another system but to fragmentation. there diversifying -- they are diversifying where does not separate as it should. dani: central banks are undergoing structural changes.
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i wonder if powell is able to wrestle back control, cannot be undone or is this the damage that has already been done and you cannot put the paste back in the tube? mohamed: i think the economic side can be undone and you can put the paste back into the tube, as you said. it is a matter of being less backward looking and having the courage to be strategic, as well. in fact, being data dependent has led to this. look how it has moved on frequency, noisy data. that should not happen. jobless claims has become this incredible number. anybody knows that it is incredibly messy but it can turn markets and narratives. dani: i confident the federal change? the language we heard is still
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of data dependence, still looking for the next payrolls print. how much confidence do you have that they will adopt what you are recommending? mohamed: it is in every fed narrative, confidence. my confidence is growing. they are not willing to shift their focus on elements of both mandates. they are a little worried about the inflation part of the mandate, and i think they are a little bit worried about that, but i think they are getting more confidence now that inflation is below 3% on the cpi. i know that is not what they look at. but that is what everybody else looks at the are getting more confidence. i think they will be able to get out of this phase of excessive data dependence. jonathan: we will come back to the inflation point later. mohamed will stick with us the next hour. s&p positive by 0.20%.
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with your bloomberg ralph, here is your higher cashier is our reporter. yahaira: two of canada railways have shut down after failed talks. they account for almost 80% of the national network. the lockout could cost canada up to $341 million per day. more than 9000 employees are locked out after unsuccessful negotiations on negotiating and worker fatigue. kamala harris grew nearly 200,000 more contributors than during the entirety of president joe biden's campaign, it's lasted more than a year. it resulted in $201 million of individual contributions for her campaign and the democratic party, according to the latest euro commissions data. and peloton gave up week
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forecast for sales and subscription quarters. peloton made ed wait and producing -- reducing losses and this is the first report since barry mccarthy stepped down after struggling to turn the company back to pandemic era growth. jonathan: more and about 30 minutes time. next on the program, -- >> it is the owner of my life to accept the nomination for vice president of the united states. thank you for your passion and determination. most of all, thank you for bringing the joy to this fight. jonathan: we will head over to chicago to catch up with anne-marie from the dnc. this is bloomberg. ♪
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i can't believe you corporate types are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar. i've got another one. there are so many tina feys i could be. so i hired body doubles. mountain climbing tina at a cabin. or tree climbing tina at a beach resort. nice! booking.com booking.yeah.
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jonathan: happy to say at the least that they have -- that anne-marie has made it -- that we have made it safely to jackson hole. this is what she sent me, bears in wyoming are more active near dawn and dusk especially near water sources, so she's not leaving her accommodation until it is bright outside. dani: i wonder what she's going to do about the moose. jonathan: it is fine, it is the grizzlies. dani: grizzlies don't have scary antlers. just claws. jonathan: that is the latest from lisa abramowicz. i have no idea where tom is -- i'm not responsible for that anymore. yields are a little bit higher on the 10-year, 3.8237. under surveillance, tim walz
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tina paris -- teaming up harris. >> is my honor to accept the nomination for vice president. we are here for one beautiful simple reason, we love this country. thank you for your passion and determination. most of all, thank you for bringing the joy to this fight. jonathan: vice president harris taking the stage tonight to give the keynote address at the dnc. she has gained a narrow lead in national polls. after a summer of high political drama and pageantry, voters are moving back to preference for substance over --. critical voters are going to be won over on bread and issues addressing price level concerns and border security, says evan rosneft -- evan roth smith. annmarie hordern joins us now. annmarie: 75 days to go until november 5, and evan roth smith
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is talking about the fact that after labor day, it will be a push policy. when can we expect candidates to outline what they stand for? most notably kamala harris? given she has only just gotten the nomination. evan: we are coming out of this summer of high drama, this estimation attempt on trump, the change of candidacy on the democratic side. now it is time to settle down into substance and policy. kamala harris has a lot of work to do to define herself in the economy and convince voters that she is what they would like to see out of inflation and prices, the border. as she has begun to do that. you saw prices highlighted in a big way, and the bread-and-butter concern for working families, highlights from her career, and during her
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speech is, you see she took on companies. we will see that more and more she defines herself as a champion of working people. dani: issue tether -- annmarie: issue tether to bidenomics? polling blames him for high cost of living. evan: and there were huge trust graphs -- trust gaps on measures of inflation, but voters do not associate that with kamala harris. she comes in as a relatively clean slate. joe biden kind of takes that off into the desert with as he retreats from the national state , and voters are interested to hear, what does harris have to say about this? what kind of democrat is she, progressive, wall street democrat? they don't know much about kamala harris and economics. they are starting to learn, they are eager to learn. when we test our facts about what would you like to hear most
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, it is always almost am sort of economic policy. and she has been putting that front and center. annmarie: if trump is pulling better on the economy and immigration, how to see land that punch on kamala harris? you are saying she's not tethered under the past 3.5 years divided -- to biden. evan: voters are not intuitively believing that. i think they need to see something concrete. and donald trump needs to drive a strong narrative the way he is to be able to date after day because of the drama that is involved in the ticket, they have had a whole summer to themselves of headlines, new cycles, first the candidate change, then the convention, and because donald trump and the republicans were riding high so
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long, they squandered opportunities to drive something with the rnc, with domination of jd vance. they seem to be so far ahead and doing well, that they did not feel they had to take advantage. this is a criticism of trump that they were doing so well, he just let it ride, and then the change happened and kamala harris became the nominee, and i think the republicans wish they had moments back because other than the debate on september 10, there will be few moments that change the trajectory of the election. annmarie: but now it is the fall and it is about policy, do any of the polls matter until after labor day? evan: they do because with so much change on the ticket, voters just getting to know kamala harris and jd vance and tim walz, these first impressions for the candidates are. annmarie: who is doing well first impressions? evan: tim walz is close 10
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favorability, despite republican attacks. jd vance is minus 21 and has dropped since his introduction, so we have a 30 point favorability spread between the two vice presidential nominees. voters are not going to spend a lot of time and can about vice presidential nominees they will make your first impression, jd vance said a few things interesting on women, tim walz seems like a nice guy from the midwest, the end, back to the top of the ticket. annmarie: so the criticism about him being loose with words, his military record, those have not landed? evan: no because they don't connect to anything at the top of the ticket. this election is still about the economy, immigration, and border security.
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and jd vance's military service does not -- excuse me, tim walz's military service does not affect interest rates, rents or mortgages. it is not affect any of that, whether you can buy a car or not, so how much are voters going to care about what a vice presidential candidate to 15, 20 years ago? annmarie: do you expect policy tonight or all rhetoric? evan: i expect kamala harris to ticket to price counters and corporate america little bit. that is advisable. there is pent-up anger at corporate america, and whether it is advisable economic policy, i leave to the economists. annmarie: trump is able to take price gouging and say it is price controls potentially when you look at the fact sheet, but he can say that that is communist. why is that a good policy? is it because it polls well? evan: 81% of americans support
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price counters right now. there are some was pent-up anger over high-priced levels that we have pulled all sorts of potential solutions to see what voters embrace from things like stunt stuff, like news conferences saying resort did to address price controls and corporations that were found to be price gouging, and voters would like to see something dramatic. they do not want to hear tinkering around margins, we just need to adjust this tax rate for we have a credit program, they would like to hear, i will put the people ripping you off in jail. evan: evan roth smith, lead pollster at blueprint. i asked officials surrounding the vice president if they can name a single company price gouging and they cannot to evan's point, it is a blame game, do not blame us, it is corporate america. jonathan: when you can identify
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the company, let us know. it is ridiculous, the things they think that paul well, but they know that the policy is not good. dani: and they have to shift the blame to corporate's because they are the ones in power the past four years. but then kroger's gross margin has not changed. jonathan: coming up, michael mckee interviews jeff schmidt. from new york, you are watching bloombergtv. ♪
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jonathan: higher this morning again, up 5.20% on the s&p, by about .30% on the nasdaq 100, the s&p with an all-time highs of the close yesterday, gaining for a ninth day. it has been quite a rally. turning the page to the bond market, the 10 year yield up by three basis points, 3.9635. going into jobless claims later this morning, looking for a number around 230. jobless claims has contributed to the calm since the jobs care of august 2.
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claims have come all the way back in. better data out of the eurozone and united kingdom. 1.3114 on sterling. not holding onto the gains in europe, the french pmi off the back of the vix. it is going to fade as the year progresses. the euro-dollar negative by .1%. bank of japan governor faces scrutiny from longing and is scheduled to answer questions tomorrow after his hawkish signals contribute into a meltdown and global financial markets earlier this month. we are looking forward to your thoughts on the boj and federal reserve. how much of the moves were about this story out of japan? mohamed: i think they were not to the extent people think. the move started on thursday, then friday. it was really triggered by u.s. data. having said that, when the
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deputy governor came out on tuesday and changed the narrative, his objective was not to press the rewind button. he did not want to see more trades, he wanted to pause the situation and calm it down and then continue on the path of normalizing interest rates. so it is interesting to see whether the governor gets back from the pause on the rewind or not. jonathan: do sense that we are still vulnerable to the story out of tokyo? mohamed: the signals are confusing. if you talk to some, they would say absolutely. if you look at how the peso has behaved, the mexican person, it is the opposite, so we don't know. similarly, we don't know the size of the trade, so there were a lot of questions. jonathan: that was really big. mohamed: and that is hard
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because technicals are important. jonathan: the vulnerability around trade, u.s. shippers bracing for the impact of a near-total shutdown in canada is 9000 workers go on strike. it is affecting products like wheat, fertilizers, as they divert cargo south of the border. and we know that we have seen traffic really built over the last few weeks. dani: huge volume, something can to the pandemic your where you had auto like effects. and it is something that everyone still has the trauma of on how quickly things can change, and the fact that they are seeing huge volumes, one is concerns about strikes, and what if demand starts to begin? what if they have all the supply, the picture changes and consumers are not spending? that is what everyone is fearful
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of because we had balloon affecting covid that altered the supply chain. jonathan: what is the biggest risk? what is the riskier? mohamed: circle stagflation, three possible scenarios. first of all, this is a reminder that the supply-side is not as had drawn as it used to be. and we see things that happen domestically and globally that confirm we have to focus on the supply-side. inventory management is really hard because it impacts the crisis and all sorts of things, so companies will not be excited about what is going on right now. i think the fed is right in saying it has shifted weight to the employment part of the mandate. it must also look at the inflation part of the mandate. and that is why i listed out the
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three things i would like to hear more from powell. the third one is what does sustainable 2% mean? you can continue having issues on the supply-side, and that means new risk demand. jonathan: i do not want to put words in her mouth, but i'm just listing the risks, additional fiscal stimulus, increased demand for housing, the upside risk for inflation. you've talked about this a while, you asked the question of chairman powell. you don't think we can get back to 2% sustainably, is that fair? mohamed: if you set the inflation target today and you do not have the legacy of the 2021 stink, you would say around 2.5%, and it will be 2.5% to 3%, consistent with inflationary expectations, which is critical.
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the number is irrelevant. what is critical is do you get expectations? how do you make that transition? the way i would do it is by pushing out to center saying, we have got to get there. jonathan: high expectations for chairman powell at the fed's annual get-together, ahead of his remarks tomorrow. jeffrey schmidt says he would like to see more economic data before supporting decisions to cut interest rates. he spoke with michael mckee yesterday. jeff: i think it makes sense for me to look at the data that comes in the next few weeks. i think this mandate on the inflation side is really important. i think we seem to be getting really good movement in that direction, but before i act or recommend acting, i need to see more. michael: are we on the path to it?
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in other words, as predicted inflation numbers jobs numbers the next month, would you agree it is time? jeff: i like the word path, and it will leave we are seeing some cooling the labor market that can work with that. not exactly sure i would go there just yet. i think it is kind of the nature of what happened with inflation numbers and how much of those inflation numbers were supply driven and how much is the policy restrict. while it is restrictive, i don't know if it is really restrictive. policy implies patients, and i would say, let's be patient. michael: what would be the scenario that drives inflation back up again? jeff: if we get any kind of spark, i go around the 10th district quite a bit. we still have employment
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numbers, unemployment numbers and the 2.5% range. i think a lot of people are looking at how we hire skilled labor over the next 12 months. i still think we could see a little demand pickup if we are not careful about good decisioning. at least from the 10th district standpoint. i'm a fan of the beige book. i tried to see what is happening regionally with the banks, and i think from a trend standpoint, things look good. i still think we have time. michael: what did you think of the report, that your labor statistics put out, fewer jobs? jeff: the first thing that comes to mind is why are we getting the data wrong? the second is, it seems like a large number until you put it in
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perspective of 12 months. so while it is a big number, it is not change the path of the way i think of things when i think about monetary policy and the effect of the labor force. i'm actually really interested in the dynamics of the labor force, really coming out of the pandemic, the behaviors, the compensation structures, the demographics. i think studying those relative of the future labor force, thinking about what generative ai does to productivity, those are important to look at. we have to look at some of the data as far as what we do with policy. the recent print is not of concern here. michael: you would not agree with the argument that the fed is behind the curve? jeff: no, i don't really agree. i think we have got to get as a fed, better at the datasets we
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are using. i'm a new central banker, i would like to see as move toward a more real-time data set versus there still seems to be serious lag in the data we get, so using new technologies, maybe some of that ai technologies, abb get that our data, but we have got to focus on that with our economists and analysts about where is the data coming from and can we rely on it? jonathan: michael mckee with jeff schmidt speaking ahead of the jackson hole get-together. michael mckee joins us for more. the unemployment rate in wyoming still has a two handle south of 3%. is he speaking for his district or the country? michael: i think he was largely speaking for his district, making the point that the 10th
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district has a strong economy at this point and that the ceos of companies in the district are telling him they still see demand and they still see it growing. they don't see a huge slow down. but that is one reason he is still somewhat reluctant on inflation. he sees anna demand that they will tell you, if they had to, they could raise prices. mohamed: he said, "before we act, at least before i recommend that, i think we need to see a little bit more." so he must be with the vast majority of people who would like to cut in september, are you surprised? michael: no. he did confirm he was not part of the vast majority, but this district has always been inflation focused, whether it
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was the president of georgia before him, they always looked at inflation is the bigger problem, so it does not surprise me he takes that view, especially since he hears the reports that amanda is still strong in his district. dani: one of the interesting things i thought he said, if off-topic, he talks about how inflation numbers were supply driven, and to use that as a way to save policies are over restrictive because of the reasons policies are coming down is because of supply issues more normalized. is this them not essentially arguing they do not have a hand in inflation and the work is not due to them and the supply market to all the work for them? michael: i think it is a combination. the economy has improved and inflation has come down, and the fact that supply chains have normalized. they do think at this point, the
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final percentage points is due to the fact that they are finally seeing the tightness in the economy having an effect, and we have seen it in the housing market and autos, the interest rate sensitive sectors that are now reacting, so we anticipate that how we get to 2% is because policy is tight enough. mohamed: he also said there were real lags in the data we use, quote, unquote, and he said we have got to get better at the data set. do you think that is part of the transition away from overly historical data to more current data and even a more forward-looking fed? michael: i do not want to see that they will be forward looking in the sense that they will go back to the preemptive stance, but they are constantly
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talking to me or at least that they are always in conversation with citizens and businesses in the district because they would like to know what is going on and they recognize the setbacks. there is a lot of real-time data being produced these days by private vendors. the government statistics office is starting to blend that in, and so was the fed. they get the wrong numbers, and the crunch them in their own way and they try to get up-to-date data, but it is backward looking, so they need other conversations to give them a full picture over the economy is at the moment. jonathan: looking forward to the team coverage again. thank you. let's get into some of this. if unanimously is important to jay powell, there are a few people who are hesitant to go 25, never mind 50. doesn't that feel like a higher
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bargain than the last few days? mohamed: it really does. i don't think the fed would like to start a cutting cycle with 50. i'm surprised so many people don't think it is a high bar. for me, it is a high bar. you would need something else to happen to get 50. jonathan: it keeps coming back to september 6 and the payroll. the meeting at the moment is 155 k, so we will see how that evolves. an update on stories elsewhere, here is your bloomberg brief. yahaira: td bank missed analyst estimates with underperforming expectations with a surge and experience claims tied to extreme -- insurance claims tied to extreme weather. the bank has also been cutting jobs and real estate and said
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it's restructuring program is not complete. shares are lower 4%. wall street -- walt disney has appointed gorman to lead the ceo succession search. he continues to serve as executive chairman. disney is going internal and external candidates to succeed bob iger. and crayola has been issued a patent for its crayons for the u.s. patent and trademark office. crayola first applied in 2018 and was initially turned down but has now won the bid on appeal. he imagines company in this moment to store aisles to trigger nostalgia and hopefully lead them to buy more crayons. jonathan: how to release nostalgia, i don't know if it will make a by crayons -- if it will make me buy crayons.
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would you? dani: further nostalgia. jonathan: i don't know if that will make them enough money. next, debating how big the fed goes. >> the bar for starting with a 50 basis cut is pretty low. the issue is there have been multiple months where the rates are rising and it is shifting to the labor market. it is not necessarily a mistake but shifting priorities. jonathan: we will talk about the size of a potential rate next. from new york, this is bloomberg. ♪
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pointing percent -- by .10%. 1.1136 is where the euro is. under surveillance, debating how big the fed goes. >> bill barr for starting with a 50 base cut in september is low. the issue is there are multiple months now or the rate is rising. rates are really high here. it is slowing to 25. obviously, we are still focused on the inflation side, but the risks are shifting to the labor market. it is not necessarily a mistake but it is shifting priorities quickly. jonathan: dovish fed minutes, the next data point coming out at 8:30 with the latest round of jobless claims. in the eyes of investors, the inflation data leaves the 25
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basis point versus 50 basis point decision in the hands of the market, fomc participants may not want to start easing cycle with a 50 base rate cut, investors may fear a recession, from matthew horn bl -- hornbach. he joins us now. matthew: i don't think they would like to admit that they relate to the game again. they also do not want us talking about a recession. they have not wanted us talking about inflation for 18 months and they certainly do not want us talking about it today, so they are ultimately going to deliver that 25 basis rate in december. mohamed: i agree, but talk about what happens afterwards. do you agree what is pricing into markets now? matthew: i think the risk is toward larger rate cuts versus smaller because the data is slowing. the question is how fast is it
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slowing? that is the debate in the market. the data has not been conclusive on that. that is where investors are questioning themselves, how quickly are we slowing? mohamed: i noticed that you said 50 to begin with, implying that 50 later is a possibility, is that where you are? matthew: it is a possibility. the data that is slowing is coming in all shapes and sizes, and that is the problem with the economic data we get today. we had a large downward revision taking the preliminary benchmark data we got yesterday and the data we get every month gets revised lower consistently, so we do not know when it will stop. i think markets will have to take that into account when they are trying to price the average policy path going forward. dani: and now they have 200 basis points worth of cuts for the next year. does that say that this is a market pricing in recession or
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is it trying to get ahead of slowing that is already happening but not recession? matthew: the market is pricing the to return to the neutral stance for monetary policy. that is not consistent with a recession, it just is not. you have to take policy rate below neutral to even talk about a recession. in the event of a recession, which is a possibility, they will need to have accommodated polisario -- monetary policy sooner rather than later. dani: if we do get 50 basis i think they are not going to be able to massage that, which is why don't think they will deliver 50 basis point rate cuts in the cycle. but for the market price, which is what unconcerned about as an investment strategist, i have to think about the primary risks about the baseline view. given how the data behaves of late, the risks are skewed to the downside.
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jonathan: how does the boj factor into some of this? matthew: the bank of japan has a long and sordid history of having bad luck when it comes to raising policy rates. august of 2000, june of 2006, i could go on. quite possibly another series of bad luck for the boj. jonathan: do you think they cannot deliver another rate hike? matthew: we do think they will in the first quarter of next year. that is where our japan economist is on the bank of japan. it seems possible to us that they continue to gradually raise the policy. mohamed: so i thought he was going to go to the inflation side of the fed mapping, and asked a question, has the market sworn to far? we are so focused on the employment part of the mandate that we forget where the fed is still thinking of the inflation part of the mandate. matthew: absolutely. if we would like to focus on the
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inflation part of the mandate, look at what markets are pricing for inflation, you start to grow more concerned because the markets are pricing inflation to go well below 2%, and if you look at the trajectory of our forecast at morgan stanley, have inflation getting back down to 2% and then staying there for the foreseeable future. idealistic, that is what we are forecasting, but here again the risks are skewed towards lower inflation versus higher inflation, and i don't believe a 25, 50 or 75 basis points with the rate cuts this year will ow the seeds of -- will sow the seeds of a inflationary policy. how is a 50 basis point rate cut going to re-plate the economy. jonathan: your 2% forecast, is that a hope cast, a federal reserve thing where they
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forecast two, or is that what you actually believe will end up happening? matthew: when you look at surveys like the survey of professional forecasters from the philadelphia fed, you often times exceed -- i don't know if i would call it a hope cast, it is legitimate forecast, but it is assuming that central banks will be able to achieve their goals in the medium to long-term. that is a very good assumption. jonathan: good to see you, matt hornbach on the past -- hornbach on the path forward. the third hour of "surveillance" is next. mohamed will stick with her stomach 35 minutes or so. we will catch up with sam stovall, senator ron wyden, and victoria fernandez. about 94 minutes away from the cash open, positive 5.20%. -- positive by .20%.
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>> it is never about what the fed should do, it is what the fed is going to do. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the third hour of bloomberg surveillance starts now. 90 minutes away from the opening. your equity market on the s&p 500 positive .2% and getting closer to all-time highs, within 1% of a record high. this morning we had more weight to the rally. on the nasdaq up one third of 1%. on the russell up .2%. jobless claims in america. looking for a number close to 230,000 which should keep everyone calm after seeing a similar number the previous week. all of this as jackson hole and daniel fed get together kicks off. bramo give you coverage over the
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next 24 hours in jackson hole. this evening you will hear from kamala harris at the dnc. annmarie hordern on the ground. we need to talk about how high the bar is for 25 versus 50 when the federal reserve gets around the table. we are lucky to have mohamed el-erian alongside dani burger. it's unlike the bar is higher than people thought. mohamed: that is what i think. it depends on the data you look at. it also depends on whether you look at the on monetary policy. fiscal policy is extremely expansionary and we talked about supply-side issues. the fed has to look at the whole set of policies. jonathan: we have had you with us for the last 60 minutes. i get the impression you're thinking we are talking too much
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about one half of the mandate and rejecting the other half. mohamed: we should push back at this notion that we are overly restrictive looking at monetary policy. the fed will have to look at the whole management side and supply-side. jonathan: sounds to me like chairman powell had an easy job. i thought he goes in tomorrow and delivers a speech, a subtle evolution of the language we've already heard from the federal reserve, and walk away. is that not what we will get? dani: he could do that. they will upset a lot of people if he does not give more details. there is a long laundry list you and others have that jay powell needs to hit to regain control of the market. mohamed: i suspected he is tempted to take the minutes, put them in chatgpt, say summarize into a 15 minute speech. jonathan: are you suggesting they do that? mohamed: i'm saying if you saw
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the reaction to the minutes and how calm markets are, that is what you would do. you would reinforce what is in the minutes and push back all of these other issues. jonathan: that address 10:00 a.m. eastern tomorrow morning. equity futures positive .2%. they lived in the equity market. treasury yields drifting higher at the front end of the curve. on the 10 year would look something like this, yields higher by three basis points. foreign-exchange, euro a little bit weaker. after four days of weakness the dollar a little bit stronger. coming up we catch up with sam stovall as markets take a breather. and victoria fernandez on why the labor market is the fed's canary in the coal mine. stocks on hold as the feds annual symposium begins.
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sam stovall saying "investors remain ultra-vigilant regarding fed commentary. full be once, shame on you, for me five times, shame on me. a failure to cut would be very disappointing and could trigger another decline." sam joins us for more. doesn't it feel like a small probability they were not cut at all? sam: i think that would be minuscule in my opinion. it is the fifth time since march. if they do not cut i think investors will be very disappointed. with the revised employment numbers yesterday i think that gives additional reason the fed will cut by 25 basis point. jonathan: that gave more reason for this equity market to rally. what do you think equity leadership in the last few days tells you about the attitude of investors towards taking risk and risk assets more broadly --
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and risk appetite more broadly? sam: risk is on and they are feeling more comfortable about being back in equities because now we are looking at the 155 industries in the s&p 1500 trading above their 50 day, 200 day, and exceeding long-term averages and much higher than we were only a couple weeks ago. i think investors are basically tiptoeing onto the ice and saying it feel safe to me. dani: is tiptoeing onto the ice the same thing is getting complacent? mohamed: good question -- sam: good question. what we will find is wanting is more motivating than having. once the fed does start to cut interest rates the market pretty much treads water. it is the sectors, it is the subsurface performance that tends to do well and it typically is the interest sensitive groups that are outperformers like real estate,
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like communication services, which was the old telecom going back to the been 1990's, and also utilities. mohamed: everybody i know would agree with you and saying there is minuscule probability they do not cut. where they disagree is by how much. 25 or 50. where are you on that? sam: i am on the path of a 25 basis point cut. i do not think the fed wants to emulate the olympic sprinters and explode out of the blocks by having a 50 basis cut. by cutting 25 they are telling the market we are not behind the curve and we will take a slow and gradual approach. the reason being they want to continue to ensure that the embers of inflation have been doused before they feel mission accomplished. jonathan: you feel the equity
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market is price for a world where we get the big rate cut? sam: that is an interesting way of putting it. probably so. when you look at valuations the s&p is at a 30% premium to its 20 year average. technology is in the mid 60% premium. both of these are down from respective readings of 38% and 78%. pretty pricey and therefore expecting a lot of good things to occur with very few bumps along the way. dani: one of the other remarkable things in the market is the amount of money that has gone into cash. epfr has the first half of the month that almost 90 billion. i thought we were in this period where you look at rates going down, the reinvestment risk gets real. how hard is it to convince people to not just pour their money into cash? sam: there are two things you could take from that.
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is all of that cash really going to be going back into equities? i still think a lot of people feel comfortable having cash on the sidelines. i think also with the fed funds rate still being very attractive , money market rates being very attractive, exceedingly so relative to intermediate and longer-term bonds, investors are taking the short route at this point. we have had two declines of 5% or more. 5.5% in april. 8.5% in july. i think investors are like seismologists and they believe may be the seismic activity implies something a little more volatile might be down the pike. i think investors are still playing it close to the vest because the longer the fed does wait to cut rates, the higher the risk of recession. jonathan: have to leave it
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there. sam stovall. september 20, 25 or 50. andrew hollenhorst publishing, saying downward job revisions lower the bar for a 50 basis point cut. there reflect on their visions yesterday and say "less important of the backward revision is the current establishment payrolls data is upwardly biased. we will expect the fed to put emphasis on the unemployment rate, making a 50 basis point cut more likely. downward revisions lower the bar for a 50 basis point cut." how important do you think those downward revisions were yesterday? mohamed: not as important as they were suggesting. you can argue either side. you can argue it is a demand-side issue. you can argue it is the supply-side issue in the fed has to be more cautious. economists do not agree as to what this means. i think the market did the right thing when it basically ignored
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it. jonathan: basically was 170 versus 240 for the 12 months through march 2024. when we hear people say if you get a bad chops number on september 6 this fed will go 50, do we know what a bad number is? mohamed: i think about number has become lower than the consensus forecast. jonathan: anything below the consensus forecast? if we get below 150 people start talking about 50 basis points. mohamed: yes and today if we get a jobless claim above 260 watch what will happen. that is how sensitive we are to the high-frequency data. jonathan: looking for 230,000 in jobless claims. let's look at other stories in your bloomberg brief. yahaira: disease detectives are rushing to quell the mpox in central africa and find the mutated virus spreading in the
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democratic republic of congo's eastern region. in order strain is spreading from infected wildlife and other areas of the country. the world health organization said understanding transmission patterns is crucial. at least three banks managed to obtain key payrolls numbers wednesday while the rest of wall street was kept waiting for half an hour. a government delay whipsawed markets and cause confusion on trading desks. bloomberg reporting -- and got the number directly when the data was finally released. it showed payrolls would be revised down by 118,000 for the 12 months through march. shares of snowflake plunging 10% in the premarket. the software developer delivering a sales forecast that failed to reinsure investors it can gain ground in the market for software tools. the company is navigating a challenging environment including a recent ceo change and security breaches affecting high-profile clients like at&t
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and live nation. jonathan: old school, picked up a phone and asked for the number. if you have gen z on the team, no way gen z picked up the team. dani: mohamed is saying they texted. to be that is what they need to do. jonathan: text the bureau of labor statistics and try to find out the number. next, the morning calls, and senator ron wyden joins annmarie hordern from the dnc. that is coming up next. this is bloomberg. ♪
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lauder to overweight. single reason for the baird thesis to play out further. citi downgrading tjx to neutral. the analysts saying they are valuing the retailer more appropriately. kelsey advisory group downgrading urban outfitters to over perform. saying urban's turnaround plan needs more time. that stock is getting hammered, down more than 13%. there are some of the single movers. equity market just about positive on the s&p. main events later. we hear from chariman powell tomorrow morning in wyoming. at the dnc in chicago, a keynote address from vice president kamala harris. at the dnc is annmarie. good morning.
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annmarie: ahead of that keynote address where we know the economy has been the top issue of the election i am joined by the senior senator from oregon, senator ron wyden. thank you so much for joining me. your colleague senator mark warner called -- called next year tax armageddon. where you see room for compromise in 2025? sen. wyden: we showed in 2024 we wanted a bipartisan approach. i put together a bill that had a child tax credit and hundreds of thousands of units of housing and help her small business and senior republicans did not want to do it. jd vance would not even show up for work. we had a bill that was fully paid for and would've been a big shot in the arm for families, 60 million kids would've been helped, 4 million small businesses. annmarie: 80 bands was campaigning at the time and many
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democrats would say this is a show vote. republicans want to wait to 2025. that is why he would say he did not show up for that. sen. wyden: if he had shown up we could have gotten this past and it would've gone to the president and been a huge shot in the arm for the economy. we are talking about interest rates. this is something that would help families. you have to understand that working families, when they get these breaks, they go out and buy food and clothing. what republicans want to do? they want class on working people. they want to hit them with tariffs. annmarie: let's talk about what could be renegotiated for next year. we know republicans will sign on for an expansion of child tax credit. what about the corporate tax rate? hummel harris says 20% -- says -- kamala harris says 28%. sen. wyden: let's remember
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republicans in campaigns talk about things they say they will do for working people and then give most of the brakes to the well-to-do. let's talk about where we are and things like corporate taxes. i want to make sure we have a reasonable rate that will allow us to compete in tough global markets. we know this is a challenging economy. this 21% donald trump pulled out of nowhere. no one had any discussion about that. a lot of my colleagues do not think the 21% fits the definition of reasonable rate. annmarie: what you think is reasonable? sen. wyden: western civilization will not end with kamala harris proposals. we work to get a reasonable rate and one that will keep our companies competitive. annmarie: that sounds like maybe 25% is something there could be a negotiation around? sen. wyden: there was a lot of
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interest in a 25% rate tied to increased opportunities to do business in the united states. look at big pharmaceutical companies. they generate a lot of sales in the united states. a lot of senior citizens and you go overseas to get a cheap tax break. annmarie: part of kamala harris plan has been talking about price gouging, going after these individuals that are hiking up prices. many are viewing this will usher in price controls. what is your take on this issue and can you name a company that is currently price gouging? sen. wyden: i am glad you asked because i think the vice president is moving in the right direction. we believe in markets. i am the chairman of the senate finance committee. i believe in market forces. when markets are breaking down, you need guardrails. that is what the vice president was talking about.
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i will be going home, flying all night to have town hall meetings. forecastle asked me about the biggest grocery merger in american history, kroger and albertsons. annmarie: do you think it should go through? sen. wyden: i have said i think we should take a timeout. i've been part of the effort to say let's have a recall on this decision for a while in think through how to come up with a fair agreement. what i can tell you is when milk is four dollars a gallon, meat $10 a pound, and the concentration and consolidation we have seen in these food markets is what we have to deal with. dani: prices -- annmarie: prices have come down. walmart is slashing prices. they see higher end consumers trading down to soccer prices.
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that was welcomed by the white house. is that this caused by inflation and not corporate greed? sen. wyden: in my state we are losing choices, even for buying medicine. we have a couple of big pharmacies that consolidate and that is anti-consumer. i may markets oriented democrat. i think when markets are not going very well we need to have guardrails and make sure we protect the consumer. annmarie: senator ron wyden thank you so much for joining bloomberg tv. he is also the chairman of the senate finance committee and will be key to next year's 2025 tax hike. jonathan: i had no idea the people oregon where that interested in antitrust and competitive issues. that will be the number one concern, the kroger's and albertson get together. dani: i want to know how many people in that district know that is a thing. i would be surprised if that is the majority. jonathan: trying to get out of this story. i love what he said about the
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corporate tax rate. 41% came out of nowhere, western civilization does not end with 28 percent. now we are on western civilization? dani: some places in europe have higher taxes and they survived, what is the bar for this? jonathan: at least we are opening the debate and having a conversation on policy. mohamed is next with corporate issues and data. i want to reflect on some of the conversations we have had over the last months and years. we came out of the pandemic and you are looking for inflation to remain higher for longer than the federal reserve was in your northstar on your dashboard was corporate commentary. you are hearing from them saying the same thing. it shaped your views more recently when he talked about corporations warning about a slowdown. what is the signal you take from things now? mohamed: it has become more ambiguous and at a time when people who look at the world
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from a top-down perspective have shifted to concern about unemployment recession, the companies have become less uniform in signaling what is happening to demand. we have seen walmart, we have seen target, we have seen others say it is fine. as long as you cut prices you can sustain demand. the question is are they looking at composition issues, are they benefiting people coming to them from others? that is something i and i suspect others will be looking at very carefully. dani: what are some of the signals you have gotten where this is about strategy and who is exiting -- who is executing strategy way consumer that is managing. mohamed: these are companies that execute strategy well. you've seen macy's that does not do that very well. isn't sitting to -- it is
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interesting to see target saying people are buying new things, they are buying more clothes than before. maybe it is a shift from one type of retailer to another. this is something people do not look at. i was intrigued by what the new president of the kansas city fed said when he said we need better data, we need to look at real-time data, we need to look at data that is capturing how things are happening. i think corporations do a great job of getting us that data. jonathan: you have wanted to see dissent at the federal reserve. are we starting to see signs of that slowly start to emerge? mohamed: we see it slowly emerge and then it disappears at a meeting. i would love to see the transparency the bank of england has. in the last meeting it was five for, 5 against. it is important because it helps people understand how delegate the judgments are. jonathan: i remember a series of
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decisions along time ago at the bank of england and they voted against governor king. he wanted to expand q. week. they were voting -- he wanted to expand qe. they were voting against him. this is nothing you never see at the federal reserve. dani: we have to wait for the meeting minutes to see they were considering july. jonathan: the minutes -- where they were at the time. that is a problem. mohammed, this was wonderful. mohamed el-erian of queens college cambridge. a few days after his birthday. happy birthday again. i did not mention age or anything. people can google. jobless claims coming up next. from new york, this is bloomberg. ♪
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♪ jonathan: jobless claims thursday, certainly taking wanted more weight after the last few weeks after the scare of august 2. jobless claims this morning, the estimate is 232. the number drops in about 10 seconds. the score going into it may look like this on the s&p 500. equity futures posited by 2/10 of 1%. the nasdaq 100 bumped by one third of 1%. let's get over to mike mckee for more. >> well, if you were an economist hopefully you put your money down in atlantic city las vegas because the consensus is the number.
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232 thousand jobless claims, up, bit from 228 last week. it is still a very low number and suggesting the labor market, while it is cooling, is not falling off a cliff. continuing claims up from 1,000,859. a slight rise and we seen that series rise for a little while now, suggesting it is a little harder for people who lose their jobs or who quit their jobs to get new ones, but it is still a low number historically. no problem with the labor market and this is one more data point for jeffrey schmidt to look at as he decides whether he wants to go along with a rate cut were not. jonathan: we had a scare last year as well with jobless claims and it is worth pointing out the journey of the last three weeks. it wasn't just the payrolls number on the friday. the day before we had jobless claims coming at 250. we had this really weak manufacturing number as well, and all of that including the employment component of that particular index, all of that
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basically got everyone in the earful about where the economy was at. do you think the data over the last three weeks has put all that to bed, is that story over? >> i don't think the story is over. we do have a big employment report coming up for august, the friday in september. right now what we are looking at is a labor market that is pretty much the same as it was in june. in july we got a lot of auto plants shutting down. then we had the hurricane in texas, he did rise in jobless claims that has lasted for a while. so we had an unusual seasonal problem with the claims numbers in july. now they've sorted themselves out, we have the pre-july numbers again and it just tells you the labor market is status quo. i was talking to some people yesterday who say basically the reports, and jeff schmidt was saying the same thing, their reporting is that companies are not really hiring so much
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anymore, but they aren't letting anybody go. annmarie: how do you expect these continuing labor figures to color what we hear from fed chair powell tomorrow and the rest of the fomc officials? >> they've argued they didn't need to move quickly because the economy was in good shape, we had a stronger-than-expected retail sales report, we had the jobless claims numbers coming in low, we anticipate we will get a rebound in the jobs numbers and course, inflation keeps going down. there is something to the argument that they didn't need to move as quickly as some people on wall street wanted them to. i expect that powell will not go into that much depth as i just did, but he will say the economy is strong and read that as we don't need to move quickly yet. that may still pushing toward the 25 basis points cut in september. >> michael mckee, you enjoy it over there.
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looking forward to your conversations today and tomorrow. the latest data. if you are just the number, andh the estimate as well. exactly in line with expectations from economists and it just a little bit higher than the previous week, but contained. far away from the 250 from a number of weeks ago. pushing through the equity market, equities still positive on the s&p 500, up by a few tenths of 1% on the nasdaq. if you get to the bond market, yields are a little bit higher at the front end. just a little bit softer this morning. two-year up by five basis points. just getting close to 4% which is where we have been pretty well anchored over the last weeks. annmarie: we have. this confirms what has already been developing, that things aren't falling off a cliff, that equities can continue to climb. but perhaps the best news, no one had to ring up the big deal to get this data. jonathan: well said.
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all of this just introducing a bit more calm going into that address from chairman powell tomorrow morning. joining is not to process it all is bank of america global research. good to see you. is that exactly what you meant the team are looking for? >> this is consistent with their view that the labor market is cooling off but it isn't outright week, and the same as the case of the economy. still on the path for a soft landing, labor market looks good and that is consistent with the fed. yes, we will probably start cutting in september, but there is no need for them to cut by 50. >> can we reflect on the visions yesterday as well? what a steep drop, averaging month on month every single month over the last year through march 2024 to about 170. is 70 k a big difference to you? >> it is a large downward revision, no doubt. what were we worried about in the last two a three weeks?
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we were not worried about january, february and march. we still wouldn't have been worried about the updated data. we were worried about july and april as well. those data haven't been revised and if you look at claims now we are hopefully setting up for a slightly better job growth number in august and july. > what about the argument that the current numbers we've gotten in the months pass are weaker than we thought? >> it's possible, but when you get into the weeds it's not entirely clear that is the case. they now update the model every quarter rather than every year, so maybe because updates have already affected the latest data and it's not entirely obvious that the latest data will get revised. >> so what degree does this suggest that after the print were we all started freaking that about a growth scare, where we all started worrying about the employment part of the mandate, that maybe we went too far in concerns of the labor market after mark does the recent data make it seem like things aren't as bad as we thought? >> absolutely.
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we've been in that can't consistently. one bad jobs print, fine, but the economy still looks pretty solid. look at retail sales of the last three months. when you are really concerned about a slowdown, what you look for is the simultaneous weakening in consumer spending in the labor market because they are a little bit chicken and egg. retail sales come in may, june, july, basically like steph curry in the olympics. hortense, 9/10, 3/10. way above trend, suggesting that things are actually really ok. >> walk us through your rate cut path because we have had people sit as off-site by as much as 100 basis points and that is going to come this year. i know you have a slightly different view. explain that for the fed. >> we have a much shallower path of rate cuts, 25 in september, 25 in december, 25 every order next year. the idea is the fed has gone from a world where there were 100% focused on the inflation
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mandate to one in which they are balancing the two mandates. the question now is to the shift to a predominant focus on the labor market mandate? we don't know if they are there yet and we think the inflation data will be sticky enough and the activity data will be resilient enough that they don't need to go that far, which suggests the certainly supersized rate cuts seem unwarranted at this point, by which any more than 25 at a meeting. a reasonable alternative is that they cut in every meeting by 25 for a while. as not yet the bates case but let's say that jobs come in a little bit softer. inflation comes in a little bit softer, then they could shift. >> you implied what you think inflation might be. what is the underlying assumption for cpi in america? >> the underlying assumption is that the core pce does not get back to 2% until 2026, and yes, you raise your eyebrows, but the entire committee is actually on board with it.
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if you look at the june s&p and after january and september, june suggests that not a single member on the fomc had core pce getting back down to 2% even at the end of next year. >> said you have a slower path of cutting than the market implies. it takes a little bit longer to get to 2%. when do they need to get to neutral in the cycle? i know it is this figure we are struggling to grasp for but in this grand scheme, when makes sense? if we keep going 25, 25, it takes a while to get there. >> we have the cutting cycle ending mid-2026. now, you can ask whether that is actually neutral and maybe it isn't. maybe that is still a little bit of neutral, and maybe that is a sensible terminal rate to get the fed could say look, we've dealt with an extended period above trend inflation, and there's some indications that may be our starters increased as well. for both of these reasons we
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want to earn on the upset and we want to keep racing with bit restrictive, keep a little ammunition for when that next recession actually hits because when it does, the fed is going to cut very fast, we know that from history. jonathan: the revisions that you mentioned, i did raise my eyebrows, you didn't catch that. i'm wondering how drastic they will be compared to where they were back in june. unemployment at 4%, and we are already north of that. what do you expect to see? >> unemployment is probably the biggest one. inflation probably less, to be honest. the big driver of the longer term inflation outlook is going to be housing. it housing doesn't take that additional step down, the math for 2% core pce just was not work. as long as housing is a little bit sticky, i think they are comfortable broadly with where their inflation is. jonathan: a question that would like to ask at the moment given
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that so many people watch this program are still at the beach, do they need to come back to work tomorrow, will there be any drama? >> i think chair powell can give a very clear signal that they will cut in september. usually chairs don't like to front around the committee at jackson hole but this is not really front running because it was very clearly telegraphed in the minutes yesterday. the vast majority think it's going to be appropriate to cut rates probably in september. i don't think it makes any sense whatsoever to talk about 25 or 50 tomorrow because you are waiting for the next job or, waiting for the next few weeks of claims data. jonathan: very true. we are waiting for september 6 for payroll, september 11 for cpi and several weeks wings data. claims this morning exactly in line with the median estimate. that is exactly what we got. equities positive by 1/10 of 1% on the s&p 500.
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if we can just turn to the bond market, a little to do they lift on a two-year by about four or five basis points, approaching 4% again. to continue the conversation, global investments, victoria joins us. last time we caught up you were worried about a slowdown in the second half. are you seeing evidence to back, or evidence to the contrary? >> i think we are still looking at signs that are telling us a slowdown could be coming. i know that the idea of a recession has really been taken off the table for most people, but i think a slowdown on the economy is there. you've got small caps outperforming large yesterday and yet 40% of the russell 2000 hasn't even had a profit. they haven't reported a profit over the last 12 months. you've got the difference between the two year and the fed funds at extreme levels, typically that you only see any recession. you have saving rates coming down while the link with these are going up.
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we know the consumer even though they are spending are being very cautious in what they are spending and i think when we look at the labor market and wages and earning and margins for operations, we can see that start to tighten up a little bit. and i think a good sign, mortgage rates are down 80 basis once, and we aren't even seeing a bump in the housing market. we've seen a refi's go applications, but not homebuyers. i still think there are some struggling going on in this economy and i think we will continue to see it second half of the year. jonathan: enough of a struggle to validate what has been priced into rate cut expectations? >> the fed in my opinion is going to go very slowly, so your last gasp talked about two rate cuts this year. that is where we are as well. 25 in september, 25 in december. i don't think they are going to go more than that which means we may see able to more of a repricing in the bond market. two years right up close to 4%.
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we could see yields start to go back up as some of that is priced out of the market. some of the cuts people are expecting. 3.5, four cuts? similar to what we saw at the beginning of the year when everyone was expecting five or six and they had to come back and reprice the markets in our fixed income portfolios we going close to neutral duration, we are not ready to go long yet at this point. >> is the fed that goes slow with data that is getting weaker, is that also consistent with gold priced at $2500 an ounce? >> it's very interesting because you are seeing this differentiation coming now between gold and bitcoin, where they had been going together for quite a long time. so i think people are going to goal. you're seeing the dollar come down. i know it had a little bit of a bounce yesterday but the dollar is down pretty significantly. if the fed is starting to lower rates, we will see that happen more. people going to go for a safe
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haven play. a lot of gold buying coming out of asia as well. not surprised gold is moving higher or that we are seeing the dollar come down. i think that fits with the story of the fed slowly removing some of the tightness that is there. i think one of the things i like to say is the fed is not the being accommodating over the next few months, i think they are just going to be less restrictive. >> i just wonder what you think the success is in doing that. david rosenberg thinks it is going to go to 3000 sympathy because people don't trust bonds as a hedge right now. they don't trust central bank policy for the guidance, so gold is where you hide out. gold hasn't had the best track record of being a place that he could hold out over long periods of time. so isn't now the time, could now be the time that you can hold onto gold as something that protects you instead of something like bombs? >> it hurts my heart a little bit when you say people don't like bonds because i do manage taxable fixed income.
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i do think you need to have some allocation to bonds in your portfolio. it is a cash flow portfolio. maybe it is not a safe haven in the sense that from the time of purchase to the time of maturity, you don't have market value volatility, you will. but you get a steady cash flow coming from matt. is it ok to have a little bit of gold as a hedge in your portfolio? i think that is fine. do you do a huge allocation shift? i think that is a little much. i don't think anything in the economy is telling us to make that drastic. jonathan: there is one thing you've been saying with runs contrary. i understand that got something to sell so there is sort of a bias in all of this. you are still saying to just sit there and earn money on cash, take 5%. other people as you know are coming on the program to say you got a lot and was available right now because that is not going to be there in several months. why is your approach bit different? >> i think they need to look at it from a barbell approach.
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yes, you can get some of that locked in on the short end. we know that that is going to lower rates. we talked about the difference being quite extreme. that's going to have to narrow at some point. you get a little bit of price appreciation because you will have lower yields going forward. so lock some of that in. but i agree, go out a little bit on the curve. add some of that on the longer end. if you can still get 5% and probably investment-grade, not even having to go into triple v rated bonds, go ahead and put that in there as well. it's part of that cash flow story and sets you up especially if you are trying to match liabilities with assets in your portfolio. it puts you any good place over the next five to seven years. >> i know you see wages and how it relates to consumption is one of the canaries in the coal mine for this economy. what did you make of some of these retail earnings gotten?
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the success of target and the lack of it for something like macy's? >> is an interesting bifurcation that we are seeing. obviously walmart did really well. i think some of the reason you are seeing a name like walmart do well is because they have captured a much larger audience than they used to have. we know that a lot of high income spenders have actually moved into walmart so they are gaining traction. target was interesting. we know that they have pretty easy comps because they have been underperforming for quite a long time. glad to see them coming back. you are seeing better pricing in some of those elements. i know they said clothing was up so that is good, and they also had a big boost from e-commerce. so again, different elements that are helping support, but macy's has been struggling for a while. they are that middle income consumer that is really having to pull back on discretionary spending as some of their more
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nondiscretionary items like food continue to move higher. so definitely a bifurcation that we are seeing in retail. some of your low-cost providers are gaining share and doing better while that middle income consumer store is really starting to struggle. it does come down to wages. wages is the driver of sumption and i think as we see margins start to compress and earnings start to come down a little bit in the next six months or so, we can see wages start to stagnate. that's going to hurt the consumer. jonathan: when did you last go to a macy's? >> it has been a while. i will say i've been to bloomingdale's across the street from you guys but macy's, it has been quite a few years since i step foot in a macy's and that is probably why they are closing a lot of the stores right now. jonathan: bloomingdale's is so close you can accidentally fall into it walking down the avenue. i get it. i feel the same, it is local. , going to make the trip? the trip to go there? no. >> i like it as sort of a
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cleanse. sometimes i go there and just smell the candles. they get furious because they show me candles and then i walk out and don't buy anything so i am probably the worst person. jonathan: you think people go in there for a mind cleanse, to smell the smells? >> i think that is uniquely neat and probably reveals more about myself and i would like to. jonathan: jobless claims r.o.k.. bond yields are a little higher at the front end. let's take the opportunity to get you an update on stories elsewhere. yahaira: the associated press reporting that the italian coast guard has recovered the body of british tech tycoon mike lynch from the scene of a sunken yacht off the coast of sicily. bloomberg reporting italian authorities have recovered at least five bodies. morgan stanley international chair jonathan bloomberg also feared dead. the yacht was hit by a tornado on monday. of the 22 passengers on board, 15 were rescued.
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canada's two biggest railways have shut down after talks with union failed. canadian national railway company eight pacific kansas city account for almost 80% of the national network. for lockout could cost canada up to $341 million per day. more than 9000 employees are locked out after unsuccessful negotiations over scheduling and worker fatigue. bmw is pulling head of tesla in european sales for the first time ever. sales of the fully electric bmw's jumped by around one third in july according to data compiled by. tesla shipments declined 16%. but tesla still dominates the regional sales ranking year today. this all coming as demand for ev's is cooling in europe after countries including germany and sweden pared back or even stop subsidies altogether, prompting
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manufacturers to walk back their ambitions. that is your bloomberg brief. jonathan: up next on the program, setting you up for the rest of the week as marcus away jay powell's jackson hole speech. we will get you some for coverage tomorrow. we will catch up with lisa and the team. up next, we will catch up with anne-marie on the ground at the dnc in chicago. from new york, this is bloomberg. ♪
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♪ jonathan: the opening bell, 36 minutes away with equity futures positive by 0.2% as we count you down to the opening bell. the calendar for the week ahead looks like this. at 9:45 eastern, u.s. pmi's. jackson hole kicking off today. tomorrow you will hear jay powell delivering his remarks at 10:00 a.m. eastern.
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the other main event this week, the dnc concluding tonight with vice president kamala harris formally accepting the democratic nomination. amh is on the ground in chicago. the main event, walk us through the time and the content, the substance. what you will be focused on. annmarie: i think tonight what you can expect is a lot of rhetoric. so far the dnc have been able to pass the torch from biden to harris and now this is harris's moment to really talk about how she envisions the future, especially if she was going to be in the white house. how she potentially envisions some policy proposals. but maybe she talks about the many broadway. we are not going to get the very nitty-gritty details that we are all waiting for, but we do know one of her first policy pages has been leaning into the cost of living, and she has wanted to separate yourself from bidenomics, talking about some specifics. maybe, the more detailed today but i imagine a lot of rhetoric. based on what we saw just 90
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miles north of here in milwaukee, she talked about in this election we face a question and the question is what kind of country do we want to live in? this is going to be about what would be about what libby cantrell said. personality and fives. but when we are off the debate, that is when we are going to get deep into policy discussions. jonathan: we believe that there, looking forward to the coverage later on this evening. the coverage tomorrow looks like this. we will catch up with start kaiser, mike wilson, sarah house as we anticipate that address from jay powell in jackson hole, wyoming. live from new york city with futures positive, thank you dani. thank you very much. long weekend. dani: long week. jonathan: from new york, you're opening bell 34 minutes away. this was "bloomberg surveillance." ♪ ♪ scia,
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matt: we are looking at futures fire across the board. 30 minutes until the start of the cash trade. katie: "bloomberg open interest" starts right now. ♪ matt: coming up, global stocks approach a record high as traders grow increasingly assured the fed is on the cusp of easing. sonali: stocks are getting a boost from the latest jobless claims report. more economic clues this hour ahead of jackson hole tomorrow. katie: from peloton'
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