francine: good morning from their european headquarters in london. israelis begin labor strikes as hundreds of thousands protest calling for a cease-fire deal. china's growth engines flashed warning signs, highlighting the urgency of government intervention in political parties in germany look to block the far-right after sunday's win in two eastern regions. markets are closed in the u.s. for a bank holiday. here in europe we are seeing stocks retreating. it is about the labor data on friday so it will be a data

intensive week that will cast fresh light on monetary policy by major central banks. the dollar steady. cash treasuries closed for the u.s. labor day holiday. we have gone through some of the data on the fear gauge and it has risen for the past three years according to our own data. you look at euro-dollar, we have pmi's and then brent crude 77.21. we could have looked at wti but i like looking at brent. it is a good measure of oil pushing lower. signs opec-plus will progress with a plan to lift output from october. there is so much to talk about but good morning. is all about the jobs report on friday. >> that is the key. that is a make or break week for the dollar for u.s. assets.

it is the case the quality of the dollar will decide the aggressiveness of any fed rate cuts. on our side the expectation will point to a very gradual cooling down of the market, a potential reversal of the spike in an employment. the market may be leading into dovish for the september fed meeting and buyers on dips into the dollar and the expectation rates will correct but uncertainty will linger. it is the case the market will approach the release cautiously. francine: it does seem the recent fed speak has cemented the fact that fomc is about to cut. it is priced in. >> it is really about how much. recent history would suggest -- the norm has been 25 basis points for the start. in a couple of occasions they did deliver 50 basis points. on our side we think 25 is the

way to go. given the markets are leaning more dovish, 30 basis points priced in, especially after payrolls, i would think the dollar could recoup some ground once the markets realize the fed will move more cautiously. the other thing is about the communication that will accompany any rate cut from the fed. for many clients it seems to be a foregone conclusion that that will be the beginning of a lengthy easing cycle. given the glass half-full u.s. outlook, the fed may be more inclined to deliver something akin to a hawkish cut, emphasizing the data dependence of future policy decisions. francine: do believe markets got ahead of themselves in pricing in fed aggressiveness and how does the fed change depending on who becomes president after november 5?

>> on the first point we expect two rate cuts this year which compares to about four priced in by the markets, 425 moves. with respect to the outcome of the election that is difficult. the fed remains strictly a political. a view clients are sharing is the fact the proximity of the elections make a november decision very difficult to predict and if anything the fed may want to stay out of any political involvement and keep rates unchanged. francine: you could have a president trump that says i want weak dollar policy through tariffs and trade. >> is an interesting point and that is a tough debate. it is about the economy. donald trump spiking a lot of interest. the point being if you look at the impact of trump's policies,

a lot will depend on how resilient the u.s. economy will prove to be. if the economy continues evolving, trump's policies, weak dollar policy could fear or result in sticky inflation, forcing the fed to be less accommodative were more hawkish. it is as you expect into 2025 the u.s. economy does enter into a shallow recession. all of these policies will start having a different impact altogether. a weak dollar policy plus tariffs will ultimately mean tariffs will be seen as tax on consumption. from the fed point of view despite the temporary recovery, they will try to cut more aggressively. francine: what is your take on the canadian dollar? this is quite big. they have been cutting and there is more to come. >> a lot of negative surprises. our own view is the bank of canada may said that out because they've delivered so many rate

cuts already. the point being also the canadian dollar is the biggest short in the market. valuation also favoring further canadian dollar appreciation so we have a more constructive outlook on the canadian dollar. at the moment we express that view not against the dollar because we are more bullish on the dollar against other currency such as japanese yen. francine: that is the big one, right? >> certainly it took us by surprise, the decision in july and they timed it very well. it shook quite a few carry trade's but the point is about the correction. we think it has run its course. from here, also assuming donald trump could be the next u.s. president, we do expect the dollar yen to resume weakness into year end. francine: i think the boj took a lot of people by surprise. how much is there still to be unwound in that carry trade and

does it mean they will communicate things differently because of the selloff? >> it is the case of financial stability and important considerations. the end strength and the nikkei weakness is adding to uncertainty. it will affect communication and their willingness to hike rates further. depending on the how the forecast evolve into october you cannot exclude a rate hike but our view is they are done hiking rates for the remainder of the year. francine: francine: many questions on china. whether there is a stronger chance of deflation worldwide because of the weaker chinese data. it has not been that bad. we are expecting more and we are expecting a bazooka from policymakers that has not,. >> it never comes. we have to make do with what we have. china remains lingering. with regards to deflation it is something for next year where we

have to have the disinflationary trend in the west. at the moment it is still the case there are pockets of inflation heating up. what is interesting is there is domestically driven inflation. until this is out-of-the-way the global impact of chinese inflation will not be felt as aggressively. china represents 25% to 30% of global supply chains. any further downward correction in the chinese price is potentially because of weaker currency would likely propagate and that can make the case for weakening inflation next year globally. francine: september is back-to-school, so in terms of your top charts of what we should be studying, i know you are focusing on swiss flank -- on swiss franc but also looking at australia. francine: australia -- >> australia is the case of the australian dollar.

a lot of negatives in the price of the chinese exposure of the us trillion economy. we think the rba will emerge as one of the least dovish central banks. we do not expect them to cut rates this year. in comparison to the likes of the fed and ecb and other central banks, the aussie could start emerging as a higher-yielding currency. we have a fairly constructive outlook on the us trillion dollar, notwithstanding the fact -- on the australian dollar, notwithstanding the fact that worries about china could continue. in the race to the bottom the australian dollar could emerge as a high-yield. francine: stay right there because i want to talk more about the swiss and also petrodollars. coming up, the latest out of israel as large labor strikes begin in the pressure on prime minister benjamin netanyahu is ramping up. that is next and this is bloomberg. ♪

francine: welcome back. i am francine lacqua in london. happy labor day to our u.s. viewers. u.s. markets are closed for the holiday. it is the friday report and two days before that the u.s. government also the july job vacancies -- the measure of labor demand is seen easing to a three-month low. for the moment vix is ok. euro-dollar 1.1065.

massive labor strikes beginning in israel. civilians are pushing for the government to accept a cease-fire deal after six hostages were found dead in the gaza strip. bloomberg's russ matheson joins us. these strikes seem huge. how much pressure does it put on the benjamin netanyahu to reach a deal for the hostages in the cease-fire? russ: there are sizable strikes and also sizable protests, reminiscent of the protests we saw when the hamas attack happened on israel. there was a lot of pressure on him, his leadership, his many legal challenges in the sense of upset about his handling of the economy and that is all still below the surface. it has been dampened by the need for unity over the war in gaza but frustration many months on, all of these talks that have

gone on about cease-fires to release hostages and get the war towards a close are not progressing in the sense that is netanyahu there to push for a proper deal? the accusation is he is acting in his own political interest because many of his problems will come back to the four and the consciousness in the israel when the war starts to wind down. that is the accusation leveled. his point is it is hamas holding up a cease-fire. you can see the level of frustration going on. francine: how big are we expecting the protests to be and they will -- and will they go ahead? >> it seems like they are going ahead now. they have said they will end their strike this evening to avoid the potential injunction by the government. even if it is a one-day strike, you do see economic impact and

it points to the problems at home because he has tacked heavily to the right as part of his own political survival. now he is bound by that group he is in. the frustration is what will he do for the economy? will he prevent the war spreading further into the west bank and lebanon? people are tired of it at home. there is pressure there. he is made of teflon. he is a political survivor. the question is does this push him or does he double down? francine: i was going to ask about the petrodollars states. the risk of escalation seems to be increasing every two days and then decreasing. where are we? >> we have seen iran not really retaliate for the death of the hamas official in iran, terribly embarrassing moment. you've not seen big strikes against israel so far. perhaps they are biding their time. no one does want a full war in

the region. even iran can see that would be terribly destructive, but they are trying to find holes in different areas. that does come with risks. we have moving equipment with militaries, ships and the areas come is all fraught with peril. you see the daily exchanges of fire with hezbollah into lebanon, that all comes with risk. the markets are watching closely for anything that might truly disrupt oil supply. francine: thank you so much. ros matheson with the latest on israel and hamas. when you look at the concern that opec-plus will have to do more things that changes the dynamic for petra, what does it mean for the currencies? >> you alluded to petrodollars earlier. it is the case that those producers of oil are big buyers and generating a lot of the

revenue into dollars and they stay invested. that has not been very supportive for the dollar of late in part because of the dwindling oil revenues. the bigger picture is the fact that global trade seems to be recovering. that is reflected in the growing surplus in europe and china. in terms of balance of flows, in terms of demand and supply of dollars, that has changed the narrative. there is now more demand for euro or remember the versus the dollar because the european exporters are recycling exporters in dollars back to their home currencies. whether that is sustained will depend on the resilience of the global economy. that will be challenged next year and that set up could become more favorable to the dollar. francine: very quickly come is the swiss franc still a safe haven? >> it is very much one of the preeminent safe havens. a lot of competition from the japanese yen but we do believe

the swiss franc will enjoy a lot of support, especially given the s&p is moving to the -- the snp is moving to the end of its easing cycle. francine: thank you so much. a nice round up of all of the currencies you need to be on top of. more calls for tryon seat -- for policy -- more calls for policy support in china. this is bloomberg. ♪

francine: welcome back to bloomberg markets. i am francine lacqua in london. u.s. markets closed for the holiday but everything else is open. september is tricky. usually a little bit of a negative month. european stocks avoiding a painful august but now they are facing threats from seasonal weakness in september.

volume is quite thin because it is labor day in the u.s.. new york dollar one point in 66. -- brent 77 -- 1.1066. a poll sees china contracting seeing a worsening residential slump. killed eisen joins us. -- jill dyson joins us. what can you tell us about the chinese economy? we have not gotten the bazooka from policymakers we've been expecting. jill: the thing you have to focus on is the weaknesses in the manufacturing data. we have been talking for the better part of this year about how weak domestic demand within china has been and how much they have struggled to lose consumer spending and get the consummate bird -- toluse consumer spending -- to loose consumer spending.

the manufacturing sector was performing well and that seem to be propping up the economy. what we have seen over the last few months is the manufacturing sector is dragging down and you just mentioned official pmi contracting for a fourth month. we also saw some weakness in the private gauge of manufacturing, it measures different companies, sometimes more export oriented. that is performing fairly week as well. this is telling us there is a lot -- there is not a lot of good news, particular when you have bigger problems the chinese economy is dealing with with the real estate sector. now if there are concerns about the manufacturing sector, particular with the uncertainty in the u.s. with the election, if the u.s. will get tougher on china, then this is threatening this idea they can ultimately not reach the 5% growth target by the end of the year. francine: does this raise more

questions about the need for a bazooka or for more stimulus and if it is not coming is it because they think it will not work if they put it in place where they are still trying to figure out what happens to real estate? jill: this has been the issue with china over the last several years. it does seem like policymakers are sent to standpat. for the last decade i think chinese policymakers have been worried about what it would mean to unleash bazooka stimulus because they did so in the aftermath of the great recession to limited effect, particular when it came to building and mounting debt, which the government is still incredibly wary of increasing further. what does that mean for the economy? what policymakers are considering is more targeted efforts to help things. bloomberg just reported last week they are considering revisions do something involving

allowing homeowners to refinance mortgages. we have seen pretty significant measures targeted at the property sector over the last year or so and that has not moved the needle that much. we are not sure what else it would take at this point to get things going. francine: we often talk about china versus u.s. this morning they also warned japan a possible retaliation because of these new chip curves. are they fighting on all fronts? jill: jill: at this point china has come under a lot of pressure. this idea that more of the u.s. eu allies might try to curve some of their chip ambitions. the latest being this warning we reported when it comes to japan. when you look at the totality of measures the u.s. and its allies have taken, it is quite significant. we just hit canada recently.

put punitive actions on ev's in china. we have had the eu come at them strongly and talked about how much the u.s. has worked to curve these ambitions. from china's perspective there try to push back on as many fronts as they can. francine: thank you so much on the latest with china. coming up, more on the markets with geoffrey yu, senior strategist at bny mellon. this is bloomberg. ♪ s. 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.

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francine: welcome back. this is bloomberg markets. i am francine lacqua in london. happy labor day in the u.s..

there is still quite going on in markets. it feels like back to school because we are early september. history shows the coming weeks have a rough patch. in the past five years the stoxx 600 was down about 2% in september. are equities reporter in london has been doing extensive work on this. this week it is all about the payroll number from the u.s.. you can see euro-dollar 1.1070. joining us now is geoffrey yu. bny mellon senior strategist. so good to speak to you. it seems like we are all studying and getting back into the flow of what currencies do and don't do. markets are pricing aggressive moves from the fed and that was reconfirmed at jackson hole. what you expect from payrolls? geoff: payrolls are relative to the official expectations and to whisper expectations.

it'll make the difference between whether it is 25 or 50 but also will make the difference between this narrative of bad news is good news. we have easier financial conditions versus bad news is bad news which seemed to be the case in early august. a very fine line to tread. looking for something along the lines of expectations and for now 25 basis points. if it is lower than we need to reassess. francine: what happens -- we going to the u.s. election and we do not know what that does to the dollar given who is in charge of the white house. expectations could bifurcate. geoff: indeed, and knowing the meeting timing for the november election -- for the november fed relative to elections.

that is our base case, easing, but at a measured case. it will be dependent on how things are. francine: are you confident of the u.s. economy is not a birth -- is not overheating? there are expectations. nvidia had 50% margins and people were disappointed. geoff: in hindsight it does show where markets were positioned in the first place relative to growth but it goes back to this narrative. when it comes to ain tech it is a bit of a settler story. -- when it comes to ai and pack it is a bit of a settler story. the broader u.s. economy -- does this exceptionalism narrative play out? looking at dollar cny, looking at euro-dollar. the dollar is weakening as well. francine: if there is one thing you have to get right is it

really the u.s. economy but also dollar weakness or strength? geoff: it is dollar asset allocation you have to get right. correlations have flipped. ecb pricing is more dovish. it will probably get into the 30 handle for german pmi's. you buy euro on the back of that and dax goes to a record high on the back of that before you talk about the politics? that is where markets need to do a double take. u.s. exceptionalism not performing you strongly in the past. if we are at six or seven it is still pretty good. francine: why do you think the market is behaving that way? >> it is a sign they were over positioned dollar anyway. if you look at long dollar cash and also in u.s. equities and u.s. bonds, they have been outperforming as well. no reason to look at anything else. now there seems to be a shift going on. looking at our cross-border flows, people buying friends debt, -- buying french debt, for

the first time buying chinese equities is outpacing the rest of asia. that tells you where rotation is happening. francine: there is been so much appetite to try to understand what has happened with yan and bank of japan. early august there is a big shot. has it changed communication and how much of the carry trade is still left to be unwound? geoff: a lot is the short answer. if we look at our own data, some of the best position currencies. we need to separate what the carry trade is. there is a dollar-yen trade. some of that has come off. very good real rates in europe. turkish lira very high rates in europe. not necessarily funded as the yen but the broader kerry complex is still strong at heading into a riskier environment in q4.

francine: as we get into september are there going to be traders second-guessing what happens in august? geoff: i think dollar-yen is one of those things you do not need to second-guess because you know where valuations are and where the dollar is. now there is the issue of new leadership elections within japan. looking at bloomberg own reporting the top candidates seem to be fine with the boj policy right now. there is a yen case and a yield case. people want to second-guess the risk positions and dollar exposure relative to the economics and relative to the politics. francine: i know you mentioned -- are you expecting more stimulus for china? geoff: define stimulus. last week the role of the expiration of bonds. some may call that qe. that was the first operation since the end of 2022. that has to be sending a signal. within half an hour the po bc

governor was saying more would be done. people are pricing in, some things are happening on the back of low volumes. i think the risk heading to q4 is if they want to hit the growth target q4 needs to be strong. markets are not position for that right now. it is one of the outliers in terms of positioning. francine: does that because of communication or because the markets are expecting this bazooka that is not in the cards? geoff: that is why the volumes are soft, they want to benefit from it conviction levels are low. back to asset allocations, even for those buying asia it has been moving into the taiwanese market in the korean market. the chip complex is there. i think rotation into em, is where value is. you get more bang from the buck. if the u.s. is soft and china is soft it is hard to see the rest of asia or the rest of em performing strongly. francine: emerging markets, if

you invest in mexico it is not the same. geoff: aipac. aipac currencies are favored. korean, and our data it moves internet long. we have not seen that in quite sometimes. aipac currencies assuming no major move towards the dovish i'd can stabilize -- towards the dovish side, where that trade i talked about will struggle a bit. if there is a china stimulus, we want to see it on the consumer side, not something beneficial for commodities. francine: i was going to ask you about commodities. we had a good conversation earlier about petrodollars given geopolitics. when does that start being repriced? geoff: two aspects. if you look at the current sees these linked to the dollar. it is a u.s. monetary policy story.

markets have been something we've been curious about. four or five months ago if you asked me what are some of the best-performing currencies or frontier markets in terms of fixed income, the egyptian pound, nigeria, places like that. that region very much and focus. people on their dollar assets and have high real rates. if you want to talk about geopolitics, i think it is idiosyncratic. strong fiscal, credible fiscal. turkish lira, no issues on the domestic side, very confident with that. it is about the broader kerry complex. francine: geoffrey yu with bny mellon stays with us. coming up, and other for the -- another humbling for the chancellor. the fallout from germany's state elections. this is bloomberg. ♪

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francine: welcome back.

this is bloomberg markets and i am francine lacqua in london. this is what the markets are doing right now. we have seen a couple of stocks gaining. in general stocks are slipping. global equities beginning on the back foot. happy september and happy labor day for our u.s. viewers. investors prepare for what is considered one of the most challenging months for stocks. all rights on what will see in the u.s. later with the data out of jobs. for the moment european stocks down .3%. in germany olaf scholz ruling coalition has been punished in two regional elections in the east ahead of the upcoming federal elections. joining us from berlin is bloomberg's oliver kruk. bring us up-to-date with what is happening over the weekend. oliver: these two regions in germany are voting in their state elections.

both are former communist gdr countries where you see political extremes expressed within politics. particularly at a time where you have a struggling german economy. what you saw most notably is the afd won the greatest proportion of votes. the cdu came in second. they were down 10%. it is a substantial margin of victory. it is the first time the afd, the extreme right, has won in such proportion in the state election. it is the first time a far-right group has won since the second world war. for many who look back at the parallels of history this is the thing that concerns them when they see the political center collapsing at the benefit of the further right parties. we should say both of the chapters of the afd on the ballot in saxony and thuringia are both the designated

extremist political groups by the german intelligence authorities. really something to pay attention to. olaf scholz in the spd got about 7.5% and 6% in these regions. the fpd that run the finance ministry got so few votes they were booted from the parliament and the same is true for the brains. a poor -- the same is true for the greens. next year we are heading into the federal election and there'll will be real discussions and questions about whether or not olaf scholz can lead the spd into the elections and how unpopular he is at the moment. francine: thanks so much. oliver crook with the latest. still with us is geoffrey yu with bny. the question is is this on immigration or the economy and does this change policies going forward? geoff: i think all of the above.

the economy goes hand-in-hand with social issues. the market will look ahead on the applicable side. is there going to be a shock similar to the case in france? you can say the bar is higher for elections and and terminate the system is different. these conversations will come through. looking at our flows right now, are there equivalents to what could happen to bunds? i would say no. heading into the situation in france our clients were very overweight -- there was a bit of adjustment. why were they overweight? better liquidity and high yields. on asset allocation bases there's not much to sell in the first place. for a global investor come any reason to put more money into europe -- freight global investor, any reason to pour more money into europe? probably not. francine: there is a lot of worry about a potential liz

truss style event when the budget is due in october. geoff: clients are less concerned compared to a couple of weeks ago when the elections were taking place. positioning has squared up. there has been a recovery in buying on the fiscal side. on a broader european union basis, i am not too worried because of the multiyear framework in place since 2020. i am much more concerned about where the ecb is looking at the economy, looking at trends in the economy when headline inflation is coming off. if you focus too much on certain inflation across the euro zone you run the risk of allowing the manufacturing side to hollow out. francine: the boe seems one of the most exciting banks given the economy is better than expected. geoff: i think they're going to be the least dovish central bank out of all of the major ones.

the economy does not need it right now. they want to be cautious about the labor market data. u.k. house balance sheets very strong. francine: thank you so much. geoffrey yu of bny on everything from the u.s. to japan to the u.k.. coming up the u.k. prime minister warning of painful measures to fix britain's public finances. that conversation is up next and this is bloomberg. ♪

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we invent them. we design them. we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪ francine: welcome back to bloomberg markets. i am francine lacqua in london. u.s. cash equities closed for labor day. we are starting to see a move when it comes to european stocks. futures in the u.s. also pointing to a lower start in euro-dollar 1.1068. it is all about the jobs data. u.k. parliament resumes today. the prime minister warns of open good painful measures" to fix public finances.

bill aldrich, bloomberg senior economics reporter joins us now. thanks for coming on again. the concern is their peoples sing the economy is ok, the bank of england is cutting. why is keir starmer so downbeat about the economy? phil: the big thing which has not been working out is the public -- we've seen better growth than expected but the tax receipts have not been any better than was thought. the concern is we do not collect the same amount of tax income and we are spending more money than forecast. we have had four months of data this year and we are 5 billion down on where we should be. there is 5 billion more borrowing than there should be. the economic story is good. we have faster growth than expected. the fiscal story -- he has good

reason to talk things up. obviously they want to talk things down to set up the context for this painful budget where it looks like they are going to do some difficult measures raising taxes. francine: this is a new prime minister in charge since july 5. the first time in 13 years labor are in. how does he measure success over the next six months? is he looking at polling, at popularity, is he just trying to keep things ok? philip: what is labour about? what is their vision, what is their plan. we know they have the national wealth fund and small sums of money. the idea is they will generate growth through capital investment and business investment and changing the

planning rules. these are the growth drivers. can they establish that agenda? that is what will be beginning to happen now that they are their summer break. there is planning reform which is on the table for the legislative agenda. there is the workers right stuff which is upsetting some members of the business community because we will have less flexible labor markets. keir starmer says he wants to celebrate wealth creators yet he is taxing private equity carried interest. there is this disconnect between actions and words. it is building a coherent vision for what the country should be. if they have not established that in six months, people will think what is labor all about? we know stability is important. we need something more than the end of the chaos of the tories

for the last couple of years. francine: they have to calibrate, they have to be pro-business, not scaring away businesses, while at the same time they have to fight money. this is a huge budget for them october 30. market investors understand what they are trying to achieve longer-term. philip: if they are going to be raising taxes there has to be a coherent strategy behind what they are doing. they cannot say they are the champions of wealth creators and tax the wealth creators without looking like it is incoherent. that is this big challenge, how do you raise the money while holding to the narrative? at the moment they have fiscal probity, this is the big argument but chancellor has that we establish our credibility in this way but they also have to establish their credibility in terms of what laid this vision -- what labour's vision for the

u.k. is. francine: we also have the story of right move. shares are up 25%. is this a testament to the strength of the u.k. property market or is the u.k. suddenly going to be taken over by foreign companies and how does the new government react to that? do we know? philip: they want to change the planning rules. if they get the rule changes through this will be good for the housebuilding sector. potentially we are seeing this economic backdrop where growth is picking up. all of these things should be good for the housebuilding shares and buyers and sellers and homeowners. you can see why there is positive momentum there. will we be bought? are we going to be dependent on foreign direct investment?

fdi is of huge importance to the u.k.. we do need to draw a lot of foreign money into the country and we need to give businesses who are here to invest more as well. that is very much part of labour's campaign, that is part of the growth strategy. it is absolute. their entire growth strategy does hinge on private capital because they are saying we do not have the money to drive the investment in the country. how they make sure that we remain attractive given the fiscal constraints, that will be quite critical. francine: a hard question. bloomberg senior economics reporter. coming up, paul christopher of wells fargo and terry haines of

pangea policy. that is next and this is bloomberg. ♪

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tom: good morning from our european headquarters in london. i am tom mackenzie. political parties in germany look to block the far right after sunday's win and two eastern regions. china flashes warning signs highlighting the urgency of government intervention. israelis begin labor strikes as hundreds of thousands protest, calling for a cease-fire. u.s. markets closed for labor day. let's check on markets because the start for global equities to september has been soggy. downside across european stocks.

they hit record highs on friday. european stocks down .2%. markets closed stateside. the scrutiny will be on the data around the labor market with job openings and more importantly than aqaba payrolls print on friday and how that feeds into expectations around the fed decision with a cutprice tin by the markets. euro-dollar currently at 1.10. strength for the single currency. that is impacting the miners in europe. autos and consumer goods on the upside. let's bring in paul differ for insight -- paul christopher for

insights on the market. talk about the data out of the u.k. and how that will inform views out of the federal reserve. markets pricing in around 30 basis points of cut. split where the fed goes in terms of the decision around that cut in september. december 17 through 18th. how does the data feed into that decision? paul: the employment report is the highlight but i would not neglect the ism data that comes out on manufacturing and services. the manufacturing sector has been weak. if we were to see a shift lower in manufacturing that would give the fed more reason to go 50 if they are inclined in that direction. services have been steady and strong. then the labor market. when we saw the revisions much lower than expected and we saw a weak report the beginning of last month.

if you saw another weak report this month that would encourage a 50 basis point cut. looking into the crystal ball that is the fed it is cloudy. they are probably thinking they can afford to do less than 50 unless the data this week that i mentioned, manufacturing data and the fed and the employment report are extremely negative. they can probably afford 25 because the labor market is not that bad off. only if it looks like it is falling off the table -- off the table will they go 50? tom: they probably go 25. would 50 smack of panic? the breakdown in the labor market would have to feed into that decision. what with the equity market reaction be to 50? paul: if you had that very week manufacturing number, the survey number from purchasing managers earlier this week and then you have a very weak employment

number and then 50 basis points of cuts, that could begin to give panic. it is a seasonally weak bump anyway and that we have to get the elections around the corner. that might get the markets free unsettled. what we've been hearing from apollo's they do not feel they need to rush things, that they have time. tom: as we project into 2025, the view for the markets, they're pricing in interest rates in the u.s. by the second half with a three handle. that seem reasonable given where we are right now? paul: we are looking for about 100 basis points between now and the end of 2025. it is a small difference. we think the economy does slow enough that the fed can begin to cut 100 basis points this year, even if it is not 50 right now. we will see the economy continue to slow until we get to a pivot point, probably somewhere near the end of this year or the winter of next year, than the

fed will cut and inflation will slow and those cuts will start to accumulate and give consumers and small businesses incentive to start spending again and that will be the spark the economy needs to resume a stronger and more sustainable growth path. tom: we had a call coming out from jp morgan saying even if you do get that cut from the federal reserve priced in by these markets on september 18, this equity market will likely stall out. does that seem reasonable from the jp morgan call? paul: we have seen some rotational leadership. the magnificent seven have flattened out a little bit and you are starting to see more leadership from defensive, from the defense stocks and from value stocks. that is people positioning for the pivot we are expecting. the fed cuts rates, the

employment data remain soft but not terribly week, then we get into stronger growth next year. people are pre-positioning. you could see volatility as people leave one set of growth positions and go to value cyclicals on the other hand during the month of september. i would not rule out political surprises, either, perhaps in the debates. tom: that crucial debate next week between kamala harris and former president donald trump. we have seen how the debates can reshape the political architecture of the u.s. before we get onto politics, in terms of the broadening out theme, where is the expense from that? where is the funding for that? is it big tech that funds that move into the cyclical parts of the market? paul: partially big tech but also the short-term fixed income instruments investors have been so fond of for the last couple of years with interest rates at

5% and above. certificates of deposit have been popular. short-term treasury bills have been popular. money markets have been popular. with it a lot of money will come out of that and going to stocks as well. tom: what is your view on small caps? is it significant sustained upside when it comes to u.s. small caps in the slower rate environment? paul: we have already made our move from significantly underweight back to long-term strategic levels. we are neutral on small caps in our portfolios. we are waiting for this turn and you can say small caps are not doing much right now, but we are not looking for an immediate response from small caps, we are looking for something that comes as the economy hits the pivot point at the end of the year or early in the winter, then they tend to lead with value stocks. they tend to lead with the rest

of the market as we get to that spark as people start to spend again. we are positioning in small caps but not looking for anything immediate. tom: what is your expectation of pricing power of corporate in an environment where you have lower rates it a consumer that is clearly more cautious? paul: this is a problem for companies that had pricing power while inflation was higher but now inflation has gone down. they may be seeing labor costs increased but they have not had the ability to raise prices. people are very sensitive to prices and they will go to the lowest price they can find and we are seeing companies that can introduce large price cuts will attract large numbers of consumers, so that pricing power is tenuous right now and with that will be some weakness in earnings we are expecting into year end. tom: there were some expectations that europe could catch up, european equities

could catch up with gains in the u.s.. that has not come to pass. 8% year to date for the benchmarks versus 18% for the s&p. to have a view on european equities and what the catalyst would be for a potential catch up? what is your preference when it comes to regional allocation? paul: we are neutral on europe. we still prefer the u.s.. we are watching europe carefully. households have spending power. they are not necessarily using it. if we had to get back into europe it would probably a household led, small-cap led rally. we are not seen that yet to our satisfaction so we prefer to stay in the u.s.. tom: has stateside in treasuries run its course? where are you finding value in fixed income? paul: some of the money out of

tech might going to long-term fixed income. we think that is a mistake. we book on underweight long-duration come along maturity bonds. we have taken money out and put it into intermediate-term. if you have money coming to we will be rotating that into a maturity of three to seven years . it will just get volatile in the long end of the curve, especially with the new congress in january and immediately facing a growing debt ceiling challenge. that will be difficult and create volatility at the long end of the curve. tom: on the politics of the u.s. , it seems whatever the outcome in november, neither party seems to be seriously contending with the issue of the debt and deficit in the u.s. howdy position around that and had your portfolio for that risk? paul: that is a good point. the two presidential candidate

seem so different in every respect but what respect where they are the same is they are not paying enough attention to the growing deficit and the congressional budget office has projections going up to the mid-20 30's that show increasingly large deficits. that has led congress to eventually become more austere. we saw this in the 1980's and the 1990's. we think the same thing as possible again this time, but in order to hedge we will pull back again on some of that long dated maturities and stick with investment grade book pullback on some of the long dated maturities and look for those areas in the three to seven year. tom: where is opportunity with an investment grade? you stay focused on the u.s. or to broaden out regionally when it comes to that particular asset class? paul: we will stay focused on the u.s. another point i could have made in the last question is we still like municipals.

investors were worried about tax consequences and worried about the deficit and the debt could move to those more intermediate positions in municipals here in the u.s.. that would offer tax advantage. we are not looking to go regionally. there is too much volatility in the currency markets. we will stick with the u.s. investment grade. tom: smart stuff. thank you very much for those insights. a bias towards u.s. investment grade. neutral on european equities. a reminder that the ism manufacturing data this week could be consequential in terms of how we form our views about the health of this u.s. economy in the fed's next steps. coming up, we switch focus to german politics, another humbling for olaf scholz ruling alliance. we delve into the fallout from germany's latest state elections.

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and assisting bank tellers on the edge. watsonx helps you deploy ai wherever you need it. so you can take your business wherever it needs to go. ibm. let's create. tom: welcome back to bloomberg markets. i am tom at her european headquarters. u.s. markets closed for the holiday. downside across -- on a sector by sector basis, positivity for the real estate sector on a potential interest and potential bid for a right move in the u.k.. that sector getting 1%. retail consumers and industrials taking a hit. u.s. futures looking to reopen

tuesday, pointing down .2%. european stocks did hit fresh records on friday. euro-dollar seeing strength. iron ore taking a hit. that is weighing on the minors in the u.k.. that is linked firmly to the china story and the weaker data. we will unpack the details on the china theme in the next couple of minutes. before we get there, the politics of germany and another humbling for german chancellor olaf scholz and his ruling coalition in toaster regional elections in the east of the country ahead of the federal elections a year. joining us from berlin is bloomberg's oliver crook who has been following all of this for us in detail. get us up to speed on what this result means for the ruling coalition. what transpired in the state elections? oliver: the two states in east germany under former communist

east are saxony and thuringia. they are parts in germany that have seen a lot of supports for the extremes on the right and the left. why it is significant this time is because thuringia, the afd got the number one number of seats in the local parliament, 33%. the cdu came in second. this is a surge for the afd, the far-right group that began under the angela merkel era and has been gaining steam. for the german population, this is significant because it is the first time a far-right groups has thought this far in the political system since the second world war. thuringia is a region that solomon support for national socialism and the nazi's. this is something that is seen as very significant and also the leader of this faction has been fined twice in the state for using nazi salutes during his speeches.

both of these chapters of the afd are considered by german intelligence to be extremist political groups. these are still state elections. in terms of a reprimand. also to olaf scholz and his coalition, it was brutal in the states. every member of the coalition got single-digit percentages. the ftp that will the finance ministry got so few goats they got booted out of parliament -- got so few votes they got booted out of parliament. i head to the national election, this is a significant moment in the big questions about olaf scholz, whether he is the right man to lead into next year's elections. tom: i want to unpack that with you a bit. the implications for olaf scholz and his coalition. the question about whether or not the centrists, those were concerned about extremism could take comfort from the fact there is this blocking maneuver to

ensure the afd does not wield significant power in these states. how much comfort should be taken from that for those who are concerned about the party? oliver: there has been a lot of debate in the past about whether at the local level how much control some of the mainstream parties have over their delegates. the cdu, there was concern some of the center-right might team up with the far right. what we have heard from the top spokesman from the parties is no way, we'll never work in coalition with the afd. that is an encouraging sign for the mainstream parties. part of what happened in these regions is there's also a far left group unified on one issue with the far right -- no more support to ukraine and no immigrants. there is this new party that started in january, where could she go in terms of rolling coalitions. she has said she will not going to government unless it is with

a government willing to negotiate with russia. you will get complicated coalition building because it is hard to put governments together and we've seen how difficult it is for this coalition to rule in germany, to say nothing of the situation we are seeing in france. it creates a weakened political situation when you also have a weakening economy that needs a lot of work and probably a lot of measures to be forced through, which is hard to do. tom: fascinating to see it on the extreme right and left you have this pro-russia stance. to what extent that might percolate through the broader body politic of germany in months and years ahead. when it comes to olaf scholz, what his next steps will be and what it means for the budget policies of this government, how do you expect those questions to come to the fore in the weeks ahead for the leadership of germany? oliver: what is interesting about germany right now is the economic decline we talk about is a slow one.

it is not what we can call an immediate crisis but a long-term crisis. that means in certain ways the government does not have the cover to do extreme things and they need to adhere to this debt break mechanism which the economy minister of germany has referred to as them boxing with their hands tied behind their backs because it constrains so much of the spending they can make. in some ways of the economy were doing worse they could go around the budget and do things to stimulate the economy more. what is interesting is this government was elected into power at a time there was a brief dip for the cdu support and now we see that back. the center-right is doing very well. going into that election we will see the cdu lead. however there is a different story because the afd is a number does party within germany. how these coalition shakeout will be interesting and crucial for the biggest economy in europe next year. tom: bloomberg's oliver crook on

the latest in terms of the political results, the results of the two key state elections in germany and what it means for the fortunes of olaf scholz and that coalition as well as they had to the national elections next year. thank you very much. now to china, where the remaining growth engines of the world's second-largest economy are showing signs of sputtering while the property market continues to drag on the economy. this is not a new story but a reminder of the challenges of this economy. let's bring in bloomberg's justina lee. walk us through the data that has come through with the data out of china and how it informs our understanding of the challenges facing that nation. >> it has been pretty worrying. on the one hand we have manufacturing pmi's out of the private gauge as well as the official indicator and both shows factory activity are still shrinking, in particular the

official number, that was down for a fourth month and around. on the other hand in terms of the property market, the latest data show that on a year on year basis new home sales are down and the contraction is worsening. that is going to be pretty worrying for beijing given they have made a few moves to boost demand. tom: they have made those moves. it seems on a weekly basis we get headlines crossing the bloomberg. china raising urgency for stimulus. we have handwringing for economists and others saying that the pboc needs to step up and do more. what is holding them back? you have pointed out they push through some policy measures. to the eyes of many it is not enough. justina: everyone keeps waiting for something far more decisive. if you contrast to what western governments have done in the past to save demand, i think chinese policymakers are where your of direct consumer support

and more conscious of the implicit deficit ceiling. we have been hearing a lot from economists that maybe they should relax that. in terms of policies on the table there has been a lot of discussion around allowing a lot of homeowners to refinance their mortgages at lower rates and also have a lot of the local government step in and buy some of these homes and maybe convert them to public housing. there are a lot more measures still being considered. it matters whether policymakers think conditions are so dire they need to take the next steps. tom: there is a view that may be by the end of this year the cumulative effect of all of these measures will come to the floor and put a floor under this economy. the other argument is the consumer is so badly hit they have gone into this function of holding back on spending and that is leading to a deflationary spiral and until

you support the consumer you will not get the uptick in the economy. where you stand in terms of how this shapes up and where the consumer sits in the mind of policymakers? justina: the problem with what china is facing is also the external growth engine probably weaken. even if the u.s. economy stays fairly strong, demand is on a weaker trajectory. with the election coming up, you do not know you will get an even bigger hit in terms of tariffs coming from another president trump. i think the external support is weakening there and at the same time in terms of the consumer there are a lot of structural drags, talking about the demographic trend. as we know from deflationary trends, when that gets entrenched, that can be hard to reverse. tom: wrapping all of that data for us out of china and the consequences as policymakers

look to additional policy support, you would assume, to try to put a floor under that economy. deep concern about the trajectory at this point for many watching the chinese economy. labor day in the u.s. tipping off the final stretch of the race for the white house. terry haines of pangea policy joins us next on how the two parties stand. ♪

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the majority of sectors in over 1% for both sectors. losses of just over .1% after the gains of last week, near record territory as we look to reopen on tuesday. record highs, down point 3% on the european stoxx 600.

in terms of the bond markets, you are looking at treasuries currently at 113 on the 10 year and the dollar index is a bit stronger, up .1% on the bloomberg dollar index. let's bring it around to a deep dive on the markets. ben, we cannot talk about this without thinking about the data that will come through on the labor market of the u.s. from wednesday through to friday. to what extent will this be significant? what is the vulnerability, what is the sensitivity of the equity markets to labor data, or are we just priced in for a cut on the 18th? ben: morning. i think the markets are in heightened sensitivity towards this labor data. the labor data is more important now than the cpi data. what we know about it is that they are converging slowly to the fed target order. if you look at core pce in the

past few months it has averaged .67%, in line with 2024 projections. the labor market, the jobless rate is pushing higher. if it goes higher, the fed will be pressed to cut rates immediately because it sends a note of caution on the economy. this set of data on the economy will be extremely crucial. not so much the headline number, but the jobless rate. tom: ven, you put out a piece on the 30th of august, a couple of days ago, talking about the fact that u.s. stocks came out with a note today. catching up with you, arguing that even if you do get a cut on the 18th from the fed, it doesn't necessarily mean that you will get further upside for the equities. in fact, the equity rally we have seen could stall out. that is the mood from j.p. morgan, echoing your mood put

out on the 30th. ven: absolutely, tom. all the good news that is in there is already priced, it's in the sticker price. what is waiting to be done is the profit to be taken. this is not to so -- not the time to sow the seed, it's time to reap the harvest and that is what investors should be mindful of. the smart money is taking money off the table on their all-time favorites like bank of america, apple, the world's best business , as he called it, taking money off the table. that is sounding a note of caution. looking at the yield curve, it's typically a signal that the economy is heading into a recession. i think that the investors need to pay heed and now is the time to reap the harvest. as i mentioned. tom: reap the harvest, keep an eye on valuations.

keeping an eye on the political risk in the elections in germany for the far right, the afd, how vulnerable is the single currency to political risk across the euro zone? ven: i think that the euro will feel the pinch, to some extent, over these election results in germany and france. it's not -- it's the first time in the history of germany that the far right party is able to win an outright majority for a particular region. it has never happened before. heading into next year's elections, it will cause jitters in the markets closer to the time over what it means for the euro risk assets. over in france, if you look at the political formations, they are not even able to find a premier, despite it being almost two months since the final round of elections. that is, if they cannot even find a premier, how do they talk about a fiscal risk with budget

deficit? political risk is rife in europe. no doubt about it. it has to be tacked on to european assets. tom: political risk, rife in europe. we might get that subprime number coming out of france tomorrow, but it has been a torturous process. that's the political risk in europe and data from the u.s. feeding into market expectations. on the political front in the u.s., the race for the white house is entering its final two months. joining us now is the pangea policy founder for a take on the u.s. political landscape. my goodness, what a season it has been, stateside. where do you stand in terms of what the polls tell us about the likely victor in november? with all the caveats around the polling data and having two long

months left in u.s. politics, no doubt. >> my view on this is pretty simple, it's that i think that harris is 60% likely to win in november as things stand today. i have got five reasons for that. one, much greater voter enthusiasm, particularly on the democratic side. harris has this tabula rasa appeal that allows her to be many things to many voters, enhancing her appeal. frankly, you've got no policy going on. you know, there is now a race between harris and trump as much as anything for how much they can promise in terms of federal support for a variety of things. the bargain, as you pointed out earlier, there is less interest in addressing fiscal debt and deficit issues in the united states for either candidate. also, i think kind of on the

basic block and tackle a politics you got better harris message discipline and better get out the vote efforts on the democratic side that probably adds up to victory. though it will be close. tom: interesting in terms of the analysis on those five points. looking at next week's debate, we learned the lesson that these debates can really matter in terms of how they rewrite the political landscape in the u.s. how do you expect both candidates to be positioned? who has the most to gain? who has the most to lose? tom: harris has the most -- terry: harris has the most again, trump has the most to lose. i say that because harris has not been in the public a lot. they've spent the month that she's been the nominee carefully crafting a message and limiting her unscripted media opportunities. to have her on stage for over an

hour direct to the world will be a new event in the united states. there have been concerns in the past about her ability to master that sort of format. but i look for her to have a serious message discipline and take it to trump. similarly, trump has the most to lose, to me he has always had a ceiling of support. the ceiling of support, combined with a good harris performance, results in trump support starting to leak to some extent. you might be seeing a high water here for trump and a leaking of support afterwards, whereas harris stands to benefit greatly if she has a good performance. tom: terry, do the risks for the market lie with the presidency or with congress, and how the chips and up falling for the house in the senate? terry: well, i'm glad you raised

that, i think it's underappreciated in the markets in the united states, much less the rest of the world. it's not up to the president to dictate policy. congress passes the laws and considers itself an equal partner or more, frankly, in developing those policies. the makeup of congress is as important, if not more important than the presidency. today we have a situation that despite my view that harris is 60% likely to be president, it's 70% likely for it to be a mixed political washington where you have one party in charge of one house, the other party in charge of the other house. in this case, house democrats, senate republicans. the result of that is going to be that if harris is president or trump's president, for that matter, taking off some of the more extreme policies on either end with a remixed status quo

where fiscal continues to spend, debt continues to increase, deficits continue to increase, and, frankly, there won't be any tax relief in 2000 25, like many anticipated in the markets. there is a lot of market negative for them. tom: what's the policy -- and i want more details around the questions of debt and deficit within the u.s. and outside as well in terms of how the government funds itself with so far it seems little risk. in terms of the policy that gets through in that fractured environment, do we have clarity on what policy is likely to get past in a divided white house -- divided congress, i should say, whoever is in the white house? terry: i think that what you have is a continuation of status quo, frankly. what we have had over the past decade to a decade and a half has been fiscal spending

continuing to increase in a minor way, continuing to increase every single year. debt deficits are going up and you will have a situation where neither party wants to pay a great deal of attention to it and they will fight each other to a standstill. one political party, the democrats, want to continue to spend more, fiscally, regardless of the issue. the other party, republicans, have a nominee who hasn't talked about spending less at all on anything, with a congressional party that talked about cutting 1% off of the 30% of discretionary spending that exists. which is, whatever else you think about the need or the desire for that, is hardly a braveheart position if you are looking for fiscal cuts, so i think what you will have is a continuation of the same old, same old on the fiscal debt and deficits, until the market tells them different. tom: is that what it comes down

to, a market tantrum forcing the hands of either party? is that ultimately where the rubber hits the road? terry: i'm sorry to say, but i think that's exactly right. all i can tell you is that we have a long amount of time here where there hasn't been political will to want to address fiscal debt and deficit issues. by all indications, there's not going to be. there is certainly no voter hunger to do this, nothing lighting the fire domestically under politicians to do it, so you end up with situations where absent the political spark, markets will have to provide the direction. tom: there's also the risk of the fact that the market is underestimating the potential around a divided congress as well as the risk of the geopolitical terrain that either president or whoever is in the white house would have to

navigate come january, 2025. terry: quite a bit, yes. it's amazing. you can be amazed at the political scenario i just painted for the united states, but it's equally amazing what the markets ignore. highest geopolitical risk in over 50 years that continues to increase incrementally, daily, with growth concerns manifesting everywhere, as you just discussed. gold prices increasing markedly. market volatility and potential tech downturns, short-term volatility surrounding the end of this week with the jobs report and the midmonth fed decision. so, there is an awful lot for markets to consider, but so far they seem to be more interested in ignoring the signals than acting upon them. tom: possibly because it's

notoriously difficult to price, some would argue. before we let you go, looking at the top of this conversation and your expectations of 60% chance of a harris win. what would trump -- it's remarkable how things have turned around. the trump trade was the flavor of the conversation and that has turned on its head. what would trump have to do to put the odds in his favor? terry: frankly, he'll have to get some message discipline. start talking thematically about exactly what a harris presidency would mean for people on a variety of hot button issues, from the economy to, to the border crisis, a bunch of other things. he's going to have to drive home how he would make those things different. these are two things he has shown himself capable of doing and historically he hasn't done,

hasn't done them in a while. i look back to the june 28 debate with biden, where he did that effectively, regardless of what you think about what he said and where in the first half of his acceptance speech at the mid-july convention, did very well with that. beyond that, he's many scattershot trump that people expect. unless they go through the consequences and talk seriously about why they are a better alternative, he is going to have a same prop -- the same problem on -- as on the others, where there is enthusiasm over harris because he's not biden or trump, the people that everyone were most dreading having to vote for in the fall. tom: terry, we will see if that message discipline comes to the four for trump in the -- comes to the fore for trump in the next debate. thank you indeed.

the latest out of israel as large labor strikes begin, as well as the pressure on netanyahu ramping up once again. stay with us, this is bloomberg. ♪

tom: welcome back to "bloomberg markets," happy labor day if you are in the u.s., of course. checking on your markets right now, close for that national holiday. european markets, down after the fresh records of a hit on friday. u.s. futures are currently down by .1% as they look to reopen on tuesday. euro-dollar, off of 1/10 of 1%. chinese data has been the factor again, factory gauge data

pointing to continued weakness there. the risk sector once again in the front and center in terms of policy concerns with further weakness around prices as a result of the data and china getting a bit of a knock. down 4% weighing on the basic resources sector so far. let's focus on what's happening geopolitically with an i, of course, on israel. -- eye on israel. civilians pushing for a cease-fire deal after six hostages were found dead in the gaza strip. the risk of a wider war and a constant concern for commodity markets. let's bring in our correspondent for the latest on israel and a broader look at the commodity of market. looking at what's happening on the grant -- ground in the gaza strip and the revolution -- revelation that these hostages

were found dead and killed by hamas, israel says. where do things stand in terms of how that has tied into the debate on the ground in israel about the cease fire and prospect for further negotiations? >> as you can see, this strike is probably just a one-day strike at this point with these protests, quite sizable, the largest you have seen against netanyahu since the attack by hamas. you are seeing a sense of frustration amongst israelis at this point that months and months of negotiations have not led to a cease-fire. have not led to hostages being released. frustration that there is no willingness to break through on either side. netanyahu would argue that hamas is holding things up. insisting on certain things that are red lines for him. there is the perception in israel that he is doing this

potentially for his own political purposes as the accusations come in. before the war happened, there were massive protests in israel around netanyahu, questions around his leadership that died down when the war began, a moment of unity. but they haven't gone away. the question is, how will they come back, how serious will they come back, and what's his pressure? tom: it's easy to forget that on the seventh we had those protests, including from members of the military. the defense secretary is clearly not an ally of netanyahu and is challenging him around the policy of the cease fire, putting forward a proposal that would soften the israeli stance. that seems to have been rejected. what is holding back netanyahu? his coalition? himself? to what extent does he listen to the defense secretary?

>> that's a challenge in the way, with the alliances he put on the right keep those people locked in and he has to keep those parties into groups happy. his negotiating room is somewhat limited. it's a somewhat unity government but not really a unity government. he is bound by that to take a hardball on the war in gaza and a hard line against hamas. he cannot allow anything to give them time to regroup, rearm, potentially attack israel again. he can't agree and it might allow hamas to do that and it is a nod to the people on the right he has to keep happy. it has fenced him in, politically, and it's hard to see how he adjusts the course. tom: to how this is playing out in the commodities market, who

the rebels -- houthi rebels have stepped up their attacks on shipping and the red sea. they made it clear they want to see a cease-fire before they stop the attacks. what's the political risk factor around oil in the middle east? or is it more about china? will: the oil market has shown in recent months that they are comfortable with risks in the middle east. they are clearly the voice in the background and we see moves up and down with the headlines. broadly speaking, we have been living in this situation for almost a year now and there has been no real disruption to oil production. there has been some disruption to shipping, but the market has learned to deal with that. unfortunately, production -- fortunately, production has not been harmed and the market is learning to live with these tensions and not react too

strongly. tom: given that fact, with oil erasing its gains year to date, what is the rationale for opec-plus going ahead with the uptick of production this year? will: that seems to be, based on my reporting, those within the firmament indicate they will go ahead with production at the end of the year. it's essentially about opec unity. some members like the uae were keen to seen more oil in the markets. that probably needs to happen to preserve the alliance. that is one reason why prices are fairly weak right now. people know that this market is happening. the bigger picture is that next year people are really starting to worry about the bigger surpluses in the oil market, looking at the balance of supply

and demand with more of a conversation about what the policy needs to be in 2025. yes, the market looks a bit loose and as you say, it comes against the background of a weak chinese economy. tom: wti, 73.51. will was pointing out that the oil markets seemed to be brushing off the risks out of the middle east. the question for many in the region and sitting in washington, the risks around whether or not this expands. that was something that you talk about as well, conflict in lebanon, the west bank as well. where do we stand? how contained, if that's the right word, are we at this point? >> we are still waiting for that retaliation for what they called

the attack on the hamas commander. it's not a full throated retaliation that we are seeing because even iran sees they don't want a full-blown regional war. they don't want this to blow up. a war would be catastrophic for all. but it is risky, because you know, things picking up in the west bank again, attacks still on shipping by the houthis, daily skirmishes in lebanon. there is a lot of military equipment in the area. u.s. warships. it's dangerous ground. even if you don't want conflict, can you tip into one by accident? tom: thank you both very much, indeed, on the tensions in the u.s. -- middle east and how it tips into the markets. stay with us. "bloomberg markets --this is bloomberg. ♪

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we're in your neighborhood and ready to help. schedule your free gutter inspection today, call 833 leaffilter, or visit leaffilter.com tom: good morning. welcome to "bloomberg markets." political parties in germany. the far-right after sunday's win in two eastern regions. hundreds of thousands of protest, calling for a cease-fire deal. china's slowing economy raises urgency for fresh stimulus. u.s. markets are closed for the labor day holiday. european markets down .4%.

they reached record highs on friday. a bit of profit taking so far in the session as markets gear up for the data out of the u.s. the consequences in terms of clarity on the labor market. nonfarm payrolls on friday. how that ties into your views on the federal reserve expected to push for its first cut of the cycle on september 18, but by how much? u.s. futures with modest losses of .1%. euro-dollar at 110. iron ore taking a big hit in the session. you can tie that to softer china data. back below $100 a ton for iron ore. let's bring in caroline short at fidelity. a big week when it comes to data

out of the u.s.. it's been a remarkable month for equities. the caution at the front end of august. record highs for european stocks. a bit of a breather in the session today. a lack of volume given the u.s. is closed. do you lean into the gains we have seen for global equities? what is your conviction there is further upside in stocks? caroline: at the moment we are finding excess volatility in the market. it is due to the uncertainty we have seen at the start of august and that is feeding through and the expectations for the rest of the year. there's a lot of volatility out there. we have got the first box ticked for the fed. this week is the key week. we are looking at labor market data on friday. if we see that in line with expectations, no big shocks, the fed is lined up to make the 25 basis point cut largely expected

in markets. if we get a shock, maybe they are positioned with a more aggressive move downwards. what it means is from a multi-asset perspective we have seen leading indicators slower little. we have lots of data feeding into these indicators, pmi, survey data, shipping price data. it is just slowing a little. we are a little more neutral on the equity markets at the moment. short-term positioning a bit more neutral. tom: tactically neutral given the indicators feeding into your analysis. you talk about the debate around the fed and if they get a more negative print when it comes to labor markets this week. the importance of that and whether or not that leads to a 50 basis point cut. it does not sound like that is your base case that could lead to a jumbo cut from the fed. what with the market reaction be to a cut of that size and scale from the federal reserve on september 18? caroline: it depends on how

market pricing runs in the lead up to it. last week we saw pricing further extended. the probability is more lining with a single cut. we are a few days away still from the decision so things could move significantly between now and then. the market is responding to the minutest of data at the moment. volatility is the theme of the moment. tom: the markets now see rates in the u.s. with a three handle by the second half of the year. a lot of work done and assumed by the markets in terms of where rates get to. does that seem rational at this point? would you align that you were looking at three something by the end of the second half? caroline: things can change quite rapidly but at the moment the fed will adopt a fairly steady pattern of 25 basis point cuts per quarter through 2025. that is the current view. given that the fed is so data

dependent and we are yet to see all the data come through, things could change. tom: we got a call from jp morgan earlier. jp morgan saying that if you do get a cut from the federal reserve, which is likely on september 18, the market could stall out because they would be cutting on the back of a weaker economy. there is caution from the note from jp morgan. a called to be defensive -- call to be defensive. caroline: we think we are in this mid-to-late cycle environment with increased volatility and are leading indicators are showing things are slowing down. in terms of the current positioning, we are a bit more tactically neutral. we don't think we are signaling a big downturn. we are obviously watching it like everybody else. tom: you are finding opportunities in japan as well.

maybe some opportunities in an economy performing better than many had expected. there's the debate around the boj and the next steps in terms of hiking rates and that economy. caroline: you have seen a strong structural story in japan that will play out for many years to come. that sits behind all our views on japan as a structural story. it's an export heavy economy. it is sensitive to the yen. when we have stripped out the impact of yen weakness on earnings growth we still see upside potential. what we are looking for is a focus into the domestic leaning companies. maybe more japanese mid-caps rather than larger companies because they have less of an issue with the yen and the volatility is bringing. tom: you look at japan. you steered clear the exporters

because of the challenge around the yen. you want to focus on domestic players. caroline: we have been exposed to larger companies but we have tilted toward the domestic. we see opportunities in the domestics. tom: when you think about europe you have to factor in china. we had another reminder in the last when he four hours of the weakness in the challenge, calls again. this seems to be on loop for more stimulus coming from beijing. they seem to be reluctant to push significant stimulus. how consequential is that for your views on europe and the medium to long-term? caroline: it is a key point that europe is often seen as a proxy for china. certainly certain sectors in europe, consumer discretionary for example. the difficulty is the property market slowdown in china, the difficulty retail investors are having confidence in their own domestic market, it is leading to some headwinds for

europe and other parts of the world. it is weighing heavy on materials and energy to a certain extent. it is tricky. relying on a policy stimulus, it is difficult to time when you think that might happen. we are cautious on europe. our positioning is underweight europe. tom: and china is a factor there. what other than china would have to change in your view? what a more dovish ecb, european central bank, lead you to be more constructive on european equities? is it the earnings stories and profit margins? what would turn things more constructive? caroline: it depends on if you include the u.k. we like the u.k. more than mainland europe at the moment. tom: is that a defense of call? -- defensive call? caroline: a bit like japan. we have more political stability

in the u.k. that we've had in the last few years. that's positive. physically there are -- fiscally there are challenges ahead. there are definitely challenges in the u.k. in terms of its valuation how it looks versus it's positioned in terms of pricing, there's a potential for catch up in the u.k. particularly. europe has some challenges in the industrial sector. we have seen the pmi's come in and is not a pretty picture for a time. we are mindful of the influence of china and the negative news out of china on certain pockets of europe. tom: let me get your views on fixed income and where you are finding value, if you are finding value. where you have been drawn to. caroline: and certain parts of fixed income there are opportunities but we have seen credit spreads. it is less attractive there. we are shorter duration at the

moment and preferring cash in certain situations. we have moved neutral on government bonds. in terms of absolute level of yields, they are attractive and the u.k. is more attractive than the u.s. and that perspective from an absolute yield perspective, but we preferred to take desperate for -- prefer to take risk at the longer end of the curve. you have political instability. we don't know how it will play out in the u.s. but we have got a new congress and the early part of next year and they will be some debt ceiling's looked at and refinancing of government. the long part of the curve is less attractive to us. tom: another guest with that focus on u.s. politics and making the same case around the long end of u.s. treasuries. you prefer guilds to u.k. -- u.s. treasuries. where along the term in terms of u.k. guilds?

caroline: in the portfolios i managing at fidelity at the initial end of the curve. tom: in terms of the sovereign debt question around treasuries versus guilds. there's not -- you are not attracted by credit. spreads are tight and have been tight for some time. is that a theme that continues? you don't see a blow in spreads with the longer date view in terms of -- dataview on terms of spreads on credit issuers? is that something the market needs to be factoring in? caroline: we are preferring to take less spread duration risk and keep the shorter end of the curve in terms of spread duration as well. credit spreads are tight. we are not pushing it further. tom: you talk about political risk. we had a reminder that with the german elections. france, germany, the political risk is clearly there.

it is difficult for markets to price. it is something you are thinking about, how you navigate political risk around the fiscal impact from some of these governments or political stasis? caroline: we are thinking about political risk globally. it is not something you can ignore and it never has been. at the moment with the election results last night there is a particular nuanced position in germany now. some pretty serious challenges that germany is now facing. we have seen this over the last few years from other parts of the euro zone. we have seen the rise of other political parties. i guess it brings its own challenges to the euro zone to try to navigate not only on an individual country basis but collectively. i don't think that's going to go away. i don't think political risk will ever go away. it is just how that plays out.

we have political risk coming up in the u.s. with the u.s. elections this year. we have a lot of geopolitical risk across some of the areas where there is conflict. not only on the borders of europe. tom: caroline shaw, more with caroline coming up with a deep dive in terms what's happening on ai and the tech trade. caroline his insights as well -- has insights as well. germany's far-right set to win a regional election for the first time since world war ii. we have the latest out of germany next. stay with us. this is bloomberg. ♪

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tom: welcome back to "bloomberg markets." preliminary results from germany's state elections showing a shift to the right. parties on the extreme right and left had more than 60% of the vote in two states in eastern germany. joining us for the details is oliver crook in berlin following the results. get is up to speed in terms of the results we know about from

these two state elections and they tell us about the ruling coalition in berlin. oliver: we got from eastern germany there were under the communist gdr. they tend to be a lot less wealthy economically and tend to go to the political extremes. that is what we saw over the weekend. we saw the far-right afd actually win an election. they came in second in saxony just behind merkel's old party. it's important because of the message it sends out because it is the first time the afd has ever won in a state election like this ever since they have been around for the last 10 years. they came after merkel had accepted a lot of refugees from syria. it's an anti-immigration culturally right-wing party. it is significant because it's the first time a far-right party has won since the second world war and there are different chapters of the afd.

the two that went about this weekend, they are both designated right wing extremist groups by the german national intelligence agency. a significant element from that perspective in terms of the echoes of some of the past extreme politics of germany. it was also just an absolute thrashing for the ruling coalition. the spd, the greens, all got single digits. booted out of both parliaments because at under 5%. same is true for the greens. tom: we want more in terms of the coalition and what it means for chancellor schultz. this is a country you have studied. france. there are mirrors, echoes in terms of how things revolving -- are revolving around green the pen's -- marine le pen's national party. it seems they will be blocked

from power. is there a read across what we see from france versus germany when it comes to these far-right parties? oliver: in france, they have long been a political tradition to block the far-right. marine le pen, to gain political power. you see something similar in germany with the blockade. no party is really willing to work with the afd. where gets tricky is that in the lead up to some of these elections there had been chatter on the local government level that the cdu may be willing to deal with their local chapters. that has been knocked down from the top level of the leadership of the party. it is something that is conscious in people's eyes. there's a new party that was just founded in january, the far left party. she's been running on a platform that's far left but overlaps with the far-right on the issue of immigration and support to ukraine. they want to have deb look at -- diplomatic relations with

russia. that's another wildcard. will she work with some of these parties that have not existed before? she might be an unavoidable part of some of these coalitions. she refuses to go into a government not willing to negotiate with russia. there's a lot of interesting coalition building that will be prescient in terms of what we get next year when the federal election comes at the end of the year. tom: as we count out to the election a year away in terms of the federal elections of germany will olaf scholz still be the head of his party? what are the implications for germany's chancellor? oliver: very good question. it's a debate that will increase. you look at the numbers in the region. 7.5%, 6%. really core as chancellor of the country. as you go towards that election will the leadership continue to back him? they are for the time being and saying olaf scholz is there man. there's no way around the fact there is a really difficult

economic situation in germany right now. many of the mainstream parties don't have a neat and swift solution to that problem. it is something we have been talking about endlessly on bloomberg television. the manufacturing sector, the fallout from the energy crisis from the war in russia. the parties have to get together to make a compelling pitch to the german people. a lot of these populist parties have a much quicker and easier fix, which is what every mainstream politician has said going into this. that doesn't change the fact they are showing a lot of disconnect and disconnect -- this content -- discontent on the issue of immigration. there's a state election on november 22, the last before the federal election at the end of next year. tom: we look towards the end of september in terms of the latest on the local elections in germany which tells us what it could -- how it could inform us about the federal elections next year.

what it could mean for the ruling coalition and the chancellor. let's pivot from the german elections and german politics to what is happening when it comes to the ai trade. caroline shaw still with me from fidelity international. we were talking macro before the break and i want to focus on the micro, at least through the lens of nvidia. nvidia's earnings coming in with a beat. projections coming in higher than many expected. there was a selloff in terms of that stock. to some, including to some here, it is the end of the ai bubble. how comfortable are you now leaning into the ai trade? caroline: i don't think we are at the end of a bubble so to speak. that would imply we have been in a bubble. we have seen the share prices of nvidia go wild. when you look at nvidia's earnings growth and we look at the expectations for that going forward, we think the

expectations are pretty robust. if you look back at the semi cycle and the cycle for semiconductors, it is normally on a two-yearish cycle. you could argue at the back end of that now but there are other ways of looking at that cycle. we think the cycle started a little early. chatgpt came out and maybe started that cycle earlier than expected. the hyper scalars, the big tech companies are investing huge amounts of investing. the cycle might get extended further and we think the capex plans by those hyper scalars look good for 2025. microsoft announced an increase in its capex for 2025. we think there is some robustness around the earnings visibility for company like nvidia. 's largest clients are increasing their capital investment. our own fidelity analyst describes it as a must-have product.

google -- it's an interesting statement. the risks of underinvestment are dramatically greater than overinvesting. we think that a secure through 2025. we think that cycle is extended. tom: the plant annual upgrades from nvidia to blackwell which comes online at the end of this year. that is interesting. do you have to have that view on capex. capex's disdain of 2025 because their questions are on monetization. you think the big players continue to spend. where along the stack the want to be invested? caroline: the data center growth has been growing nvidia. from nvidia's perspective they talked about accelerated computing that will be underway. not just in generative ai but in general. the upgrade and modernization of the whole tech stack. that is where companies looking

at is not just about the front but upgrading the whole of the stack. tom: great infrastructure as well is a place where you're interested in getting exposure. caroline: the data center story runs further. it runs into a need for power. straightaway you are into increased power demands on the grid. not just from data centers but one of our analyst estimates ai data center has a seven times power demand than a normal data center. straightaway we are building more complex data centers and they have a higher power demand. we have a really aging great infrastructure, not just in europe or it's around 40% of the european grid is over 40 years old but the u.s. it is 70% over 25 years old. the climate change resilience issues that are newsworthy in the u.s. we are seeing resilience that's not capable of looking forward 10 years. investment in the grid is going

to be huge. we have to modernize the grids. we have to connect this nubile capacity -- renewable capacity coming online and sometimes that capacity is not located where the population needs the power is located. tom: caroline shaw, thank you and terms for the need to focus on the grid infrastructure and the upgrades that will come around the ai data centers and how to invest along the stack when it comes to the ai theme. caroline shaw at fidelity international. we will be focused on israel after the break. this is bloomberg. ♪

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tom: welcome back to "bloomberg markets." investors bracing for a slew of data this week, including u.s. payrolls on friday. raffaella renconi, founder and managing director at ada economics. she joins us now for the insight as we lead up to the data print out of the u.s.. how comfortable are you leaning into the soft landing assumptions around this u.s. economy? raffaella: good afternoon. i'm quite comfortable. the labor market is softening but softening in line with what we thought we would see. the fed has signaled the easing cycle has coming.

so those two are the critical parts of the critical -- should speak. they underestimate that consumption the u.s. really benefits from strong wealth effects which are nowhere close to what we see elsewhere in the world. fiscal policy will stay loose no matter who wins the election and we have an investment cycle the benefits from the ai technology but again it is unique. we think growth in the u.s. will easily be 2%. >> i want to unpack that view in terms of the 2025 picture for the u.s. economy but before i get there to the here and now of the data out of the u.s. and what that would mean for the federal reserve. that's largely been priced in for that decision. is that enough to put a ring fence around modest cooling we've seen in the u.s. labor market.

>> my view is the first hundred basis points of easing is what switches monetary policy from restrictive to almost neutral. to me what happens in september is that guidance is most important and i don't see any data point we can realistically get that would let the fed down play the need of the first 100 basis points. 25 and september is fine as long as you know that is coming really soon. the issue is beyond that first 100 basis points you would really need to see inflation well behaving or undershooting the target and quite frankly you don't have evidence that that's likely to be the case. tom: that is interesting. so if the consensus is under meeting -- underestimated the growth picturing in 2025 are the markets also overestimating the

extent to which the fed will cut into 2025? >> i think so. i think right now the market is essentially assuming that the fed will go from restrictive toluse, but the inflation picture does not tell you that is where we are going. i think 100 to 150 basis points completely realistic. it takes monetary policy to neutral territory but again this is an economy with ralph -- wealth effects that are powerful, loose fiscal policy. why do you feel the need to go all the way to stimulative monetary stance. tom: on the ecb then switching focus from the u.s. to europe, the linkages are clearly there. does the ecb have a runway given the inflation dynamics in the euro zone. raffaella: my reading of the eurozone data is the risk the economic recovery tilting

downwards and have been for the last few months. the consumer recovery is losing steam, investment is contracting , the industrial sector is -- if anything industrial companies are beginning to think about layoffs. i think the easily -- the ecb is justified and should twist it stands to aggressively more easing bias rather than maintaining its wait and see stance which ultimately is counterproductive right now because what we see is consumers report stagnating expectations about the economy and businesses do not see volumes improving. tom: does the politics of the euro zone impact the political shift we are seeing in germany right now and in france in recent weeks does it impact the economic outlooks for these nations, what accent are we thinking about political risk when we think about our outlook

for the economy and the euro zone? raffaella: i think it will have a material impact especially in 2025 because if you stick to what the policy has been announced by the european union technically the european union is aiming to have a massive investment cycle hopefully starting next year again for the energy transition digital as a defense and so on. but in reality, the mechanism of the eu is strongly driven politics and what we see in germany especially after the recent election is the federal election next year will not deliver a clear mandate to anybody. so you will have complex political in germany, a complex political plot -- political equilibrium in france. i think they will just mean that the eu decision-making will be even slower and in that instance i think the private sector will just keep on hoarding savings

and wait to see what happens next. tom: you touched on this in terms of concerns about the european labor market, which surprised many in terms of its relative resilience, you are starting to see some evidence maybe there won't be layoffs, it with some cooling at the edges. which parts of the labor market are most sensitive and where you expect that to be most pronounced raffaella: what we've seen is hiring appetite at the eurozone area in the last three months of data so june, july and august significantly improved. hiring appetite index current is approaching the point where you could see layoffs, but in europe it is the hiring appetite and the share of shortages of labor that eventually combine into whether you have unemployment or not. right now there is still pervasive labor shortages so what's happened in the labor market is the conditions the

companies offered to employees are worsening and for example you also saw this in the negotiated wage agreements at the euro area which slowed down in the last two quarters so going forward you will see these conditions continuing to worsen, household confidence will weaken and eventually of course the industrial sector stagnation continues you could get into higher unemployment in the area sometime in the summer of next year. tom: stay with us. we will get more views from her and just the next couple of minutes. switching focus right now, thousands are protesting in the streets as israeli workers begin a labor strike demanding the prime minister except a cease-fire deal with hamas. this comes days after six hostages were found by israeli military forces and found two of been killed. let's -- how are the events

unfolding right now? in israel regarding this labor strike? >> the most recent development is an israeli court had just ordered the israeli naval federation to seize this -- sees the strike. as of now the strike has been put to rest, it's no longer going on and the court said the reason they decided that was because the strike was illegal, of the grounds for the strikes were political rather than economic and therefore cannot go on anymore. so it did start today at 6:00 a.m. local time. so we did see several hours of major disruptions, we saw some disruptions at the international airport. some civil servants that did not come into work today, banks and post offices were closed.

some shopping malls and stores and restaurants were closed today. some high tech offices close down to allow their employees to participate in protests. but the bottom line is the impact of the strike because the reasoning was political rather than economic the impact was disruptions but it was not the impact of an all-out strike because some people who were supposed to be involved did not feel they identified with the cause. tom: what is the pressure like on the prime minister netanyahu. is the pressure domestically or is it the external pressure? to what extent are those coming together and could they move the dial in terms of his calculation around the cease-fire negotiations? galit: the protests are an important point and they are something important that's happening now in the sense that we see even today it is a

weekday so we are seeing thousands of people on the streets after we saw hundreds of thousands of people take to the streets last night and what they are asking for is they are demanding the government move forward and promote a cease-fire deal with hamas and it is important to many is raley's because such a deal would not just involve the secession of hostilities but also the release of israeli hostages still alive and held in gaza. there is a notion in the israeli public and large portions of the israeli public but netanyahu is stalling in achieving such a cease-fire deal because he is under political pressure from his allies in the ruling coalition. he has some allies who are very hawkish, there very far right nationalist parties and they are threatening to topple

netanyahu's government if he agrees to some secessions but the security establishment in israel by the way things israel can live with in gaza. for netanyahu to sort of become a matter of political survival, but he would say staying in gaza and not giving up on his demands is important because otherwise hamas may eventually someday have the capability to carry out a second october 7 attack. so when you combine this -- these disagreements in israel and the political system and the establishment in the public with the loss of life on the hostages getting killed in gaza, when you combine these two things you see things simmer and these are the protest we are seeing on the streets. i will say that we do not know how this will play out and we have not heard netanyahu say anything the let's us think he is going on to shift direction

at this point. this is a cross were roads and we do need to see how this will play out. tom: we had seen some progress in recent weeks around these cease-fire talks. where does that process stand at this point? galit: there aren't really any talks happening at this moment but it is important to say that does not mean that talks have collapsed. basically there are two major sticking points now. one has to do with israel maintaining military presence in a corridor that is a stretch of land that goes across the border of gaza with egypt. israel says hamas uses that corridor to smuggle weapons into gaza. so not benjamin netanyahu's government is insisting on israeli military presence there. once a stash once a cease-fire

takes place. some of the mediators have been objecting to that. that's one major sticking point. there is another place on a corridor that sort of bisects gaza a little further up north. israel is also insisting to have some sort of checkpoints there to make sure militants don't go from south gaza into northern gaza and regroup there. these are the main sticking points at this time. there was kind of like an attempt to put the sticking points aside in recent days when talks were still going on and try to focus on things that were more negotiable like the names of the hostages that will be released, the names of palestinian prisoners but will be released in turn. as of now talks of kind of ceased and we are still waiting to see when they are renewed and how they are renewed and what's to be discussed when that happens. tom: in tel aviv with the latest

on the ground out of israel, thank you for the update. china has remaining growth engines showing signs of sputtering once again. we will discuss the latest data out of the world's second-largest economy continuing to weigh on global markets. that is next, this is bloomberg. ♪

can't believe you corporate types are still at it. just stop calling each other rock stars. and using workday to put finance and h.r. on one platform. tim, you are a rock star. using responsible ai doesn't make you a rock star. it kinda does. you are not rock stars. (clears throat) okay. most of you are not rock stars. oooh. data driven insights, and large language models. oh, that's so rock roll. it is, right. he gets it. yeah. tom: welcome back to bloomberg markets pray china was threatening severe economic retaliation against japan. sources telling bloomberg one specific fear comes from toyota. telling officials it could cut japan's access to critical

minerals. the biden administration has been pressing and pressuring japan to align with its campaign to cut off the world's second-largest economy from the advanced chipmaking technology. also out of china markets reacting to sluggish economic indicators. manufacturing production weakening once again. remaining a focus and concern for those with exposure. let's bring in justina lee who has the data. and the potential policy response but may, in the days and weeks and months ahead. get us up to speed in terms of the economic data out of china. justina: we got two worrying sets of data, the manufacturing numbers ending terms of the pmi that's been a contraction territory for a fourth straight month there. the property market, it shows that new home sales have been

deepening in their contract ring. it shows even though china has made some moves to stabilize economic growth this potentially not enough. tom: what additional policy can we expect where we have this response with the weak economic data out of china has been pretty consistent in recent months from those sitting in beijing as well. there needs to be more aggressive fiscal stimulus. is there an expectation it will come through and what form might that take? justina: a lot of people respecting china to refinanced mortgages at a lower rate and the government buying some unsold property and converting them into public housing. a lot of people are expecting more rate cuts to come from the pboc. on this front china could potentially get more room because we are expecting rate cuts from the u.s. so that kind

of relieve some pressure off the currency which gives china some room to cut rates as well. tom: from the u.s. some respite, from the federal reserve possibly unlikely on the trade front. whoever wins in november will be thinking what are the expectations around the external environment and the challenges posed by china? justina: it's hard to tell how that could turn around for the better for china. it's not just u.s. trade policy but also the fact general global demand in europe and the u.s. is supposed to be not as strong as it has been in the past few years. if you think about the fact the external support is weakening that really turns the attention to the chinese consumer here which has been a weak point in the chinese economy recently and that's why people are wondering if we are dennis e policies that are more directly focused on that front. tom: 60% of consumer average

wealth is enacted to the real estate sector. just briefly what are you looking for in the weeks and months ahead when it comes to how we think about china and whether we can find a bit of flaw in this desk floor in this economy. justina: the question is whether there will be more direct to consumer support. in developed countries we've seen measures over the years to put cash directly in consumer's pockets and that measure has been resisted by chinese policymakers spread they are more careful about the budget deficit and on that front are the gunner relax this implicit deficit ceiling. if there's anything in that direction that would signal a big seachange. >> thank you very much indeed enters the context of this economic data out of china and the potential policy response in the days, weeks and months ahead as those challenges remain front and center. still with us sitting patiently

for us. when it comes to the linkages between china and europe how much of a headwind is china right now for europe and its economy. raffaella: it's one of the reasons why we see industrial production europe stagnating. so it is important but europe also trades primarily within itself so it's the combination that currently china is week and next year we don't yet know how much trade barriers will rise from the u.s. and from the eu and the fact the european business sector does not have clarity on how much investment makes sense in 25 and 26 given the external landscape and the policy proposals from the eu. tom: what is the state of

european manufacturing. that base and the weight that sits there in germany. what is the outlook for european manufacturing with china being one of the threads to that outlook. >> the data seems to be indicating you will get in terms of industrial output manufacturing the same amount of expansion you see now. that's can strack -- contraction on a year on year term. a stagnation in terms of gdp growth, pricing power is definitely coming down. and hiring appetite is coming down. so the manufacturing sector has some past resilience, some cash at hand but it is the fact -- it is de facto signaling of order flow did not improve in the next few quarters it will begin to have to scale down its balance

sheet and it's apparently not really keen to invest until it gets significantly better visibility on orders. tom: is there an element of upside for europe and the fact china is consuming slightly less energy than oil and gas prices on slightly less elevated because of softer demand out of china. in terms of the energy play and inputs in terms of costs when it comes to the industrial base of europe. to what extent is that a factor that might be slightly positive for europe or is it offset by other factors. >> i think there is a benefit to that. and the fact that eurozone growth overall as woes german growth has been weak but not really outright recession has benefited from the fact of its lower energy costs and consumer surveys have shown retail spending data have shown that. what i have to repeat is both

consumer surveys and business surveys convey the view it is the lack of clarity that is preventing them from taking bolder stance. so people have cash they just choose to hoard savings. one more important point is europeans have too much cash in hand. if you look at where inflation is lower than before but still sticky and higher than in the past, they are just exposed to negative wealth effect and it's exactly the opposite of what's happening with the u.s.. tom: you've drawn that clear differential between the implications for the euro zone consumer, the consumer in europe versus their counterparts in the u.s. and the relative strength that we are seeing in the u.s. in terms of household and individual ability to spend and see wage increases. when it comes to the services component of the european economy we have seen a

breakdown, the data between manufacturing services, somewhat of a bright spot. is anything we can take from the services part of this economy that can give us some hope in the months ahead. raffaella: they are definitely more resilient than the industrial sector. orders have been slightly better in the last few months and generally hiring seems to be holding up better. but pricing power seems to be softening gradually. if you want to add the third key part which is construction, construction also seems to have stabilized in the euro zone, orders do not really pick up the confidence is definitely improved in the last few months. so the overall picture is one of mild gdp expansion, but with inflationary pressures gradually evading -- updating in a particularly profound way in the

euro area. tom: founder and managing director at aid economics walking through the implications for the euro zone economy as we think about the services sector manufacturing and what is now a cooling labor market in the euro zone and the split we are seeing their in terms of the health of the consumer in the u.s. versus europe. we appreciated and coming up next we will get the views of ben laidler head of equity strategy with a constructive bullish call at view on these global equity markets we will get the taken terms of how to position around global equities as we look ahead to the data out of the u.s. on jobs on friday and the decision september the 18th. ben laidler joining us after the break. this is bloomberg. ♪

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commodities under pressure as china woes continue to bite. and harris and biden in pennsylvania campaigning together for the first time since harris became the democratic nominee. let's check in on these markets. happy labor day to all of you who celebrate. u.s. futures up by 1/10 of 1%. still near record highs but pointing at slightly modestly lower markets reopen stateside on tuesday. a bit of modest pay rates through for the retail and consumer sector. autos taking ahead. commodities softer in the session. as we mentioned euro-dollar up 110. up 1/10 of a percent. pressure coming through on weaker china data. how much will be saying that in the weeks and months ahead. $96 per ton on basic resources

and the miners list it here in the u.k.. let's bring in ben laidler. some softness in european stocks on the session today but of course the context is they had those fresh records on friday. do you lean into the rally we've seen towards the rear end of this august? now in the month of september the pivot we are seeing in these global markets towards the back end of the month of august is that something you lean into is there for the room to go to the upside for global equities? ben: i think absolutely we are in the early innings of a healthily broadening global bond market. it started with tech and now with the fed cutting interest rates potentially later this month i think that sort of the key catalyst to sort of broaden out. a reminder september typically

the weakest month in markets so you have a little bit of opportunity if you missed some of the strength so far but the last few months of the year's were on average make 40% of annual return. more technically i'm pretty bullish as well. tom: you've proven the skeptics wrong time and again. don't sweat the seasonality is the line. to be clear you see that seasonal weakness in september he would buy the dip? ben: absolutely. september is basically the only down month historically for markets. looking back 50 odd years down 0.6%. but it does lead to the strongest three months of the year after that. typically you make 40% year off your return. so if you do see some volatility in september it is a buying

opportunity and as i said i would not sweat it too much pride markets are more fundamentally than technically proven and the fundamentals are that the earnings story is strengthening or broadening out and these fed interest rate cuts will be bullish for the u.s. and even more so for the rest of the world allowing different sectors, different stockmarkets to do better and to take some leadership. tom: you are pushing back on this jp morgan line same even if you get a cut from the fed. that in fact the equity market is likely to stall out. you say the fundamentals are there this is a well anchored rally. ben: we priced them 100 basis point rate cut for the fed this year. 200 basis points for the year. we priced a lot of this in. let's get the actual cut.

i still think it's a little bit more relief if you'd like that we actually get started. i think this is more about the rotation and the leadership of the rally than the rally per se. a completely different group of sectors are most sensitive to these rate cuts and it is not big tech and kumutha different set of countries are sensitive to these rate cuts and it is not the u.s.. i think that broadening, that change in leadership puts this rally on much stronger fundamentals than u.s. big tech stool we've been leaning heavily on. >> do you want a barbell approach with the big tech name on one end and the small-cap stocks. or do you fund that rotation by selling down some of that mega cap tech stateside? ben: i'm as bullish as the next person on big tech.

rates are slowing that they are still fantastic the net cast balance sheets. i think at the moment -- at the margin you're up on that. a little bit of money goes a very long way. and these other bits of the world. the u.s. 65 global equity markets. the magnificent seven alone stocks is 20%. a tiny bit of money out of those sectors, because a very long way in the rest of the world. the last 10 to 15 years, it's very small, very un-grown. i don't necessarily think it's an either or story. the smaller sectors can do well going a long way. tom: that takes you beyond the u.s. borders. where does that take you?

where your regional bias ex u.s.? ben: europe is the canary in the coal mine. first port of call for anyone rotating out of the u.s.. a lot of very well loaned companies. it's very cheap, it is also probably has the most cyclical earnings of any part of the world. europe has just come out of the earnings recession, they could be growing 15% by the end of the year. secondly it's good to be emerging markets. valuations very cheap, the dollar close to year-to-date lows taking a lot of pressure off of e.m.. i the gets europe first and then e.m. second. probably x china and probably leaving japan on the back burner for now. tom: you leave them on the back burner, you don't want to be

exposed to china but europe and e.m. would fit into that basket. weaker dollar could prove beneficial. in terms of the small-cap the rotation trade in europe then, you talk about some of those big sticker names whether it's a luxury goods makers are the automakers, how do you -- how much exposure you want to exposed to those blue-chip european names versus further down the spectrum in terms of how much risk you want to take on? ben: i do not think you need to take an awful lot of risk right now. europe is very cheap, the earnings are at a big inflection point, it's a very cyclical market. financials of the biggest sector in europe. tech is nowhere to be seen. that's where i think you will get the cyclicality. small caps whether it's in europe or the u.s. it's a story for later on. right now it's a sensitivity to

rate cuts. i think the gdp recovery story might take longer. i think that slightly further along. easy money to be making, but the simplest story is just owning large cap cyclicals in europe which will cheat from a little bit of love. this turning of the earnings cycle over the next six to 12 months. tom: very pleased to say we have you for a couple more minutes staying with us on the insights. on the strategy calls coming back in the next couple of minutes. nonstop moving today. prominently slow in the u.k.. shares surging. the most since march of 2022 ever since its considering a

takeover offer. what do we know the proposed takeover and what rupert murdoch sees in this. >> he hasn't actually made an approach yet. this is just saying they might but it has a huge impact on the shares in london this morning we seen the biggest gain on record and looking at the u.k. property market they have about an 80% market share in listings. it is seen as a very attractive prospect as someone looking to get into the u.k. market and of course the market has been subdued, but there are signs it is warming up again so there is that and it allows the company to expand its global footprint which it has been looking to do. tom: a couple of elements we can

pour over witches the expansion for murdoch into this latest space particularly the online function. then there is the u.k. real estate market. let's start there. to what extent are we expecting an improvement in the housing market that surprised many by its relative resilience and higher rate environment. morwenna: it's been relatively resilient and what we are seeing now are signs of higher transaction rates. we have also seen today barclays reduced some of its rates on mortgages in response to the bank of england lowering interest rates last month. we are looking at probably november by another rate cut for the bank of england is with the market is pricing and at the moment. that could see rates fall further. that's good to make it more affordable. to buy homes and is also quite a

lot of increased supply. certainly in terms of rate move. it's really good to be very popular, it's all going to be increasing the transaction values volumes of what's key. tom: i know this is something you focused on as well. in terms of the broader appetite for u.k. assets list are privately held. , please being snapped up or in this case potentially being snapped up by outside interests, what is this tell us about valuations in the u.k., general appetites for some of these u.k. names and whether this is more of a theme coming in. morwenna: absolutely that's one of the things that makes it attractive across, it is quite cheap. u.k. stocks have been for quite some time particular compared to the likes of the u.s..

we have seen a few u.k. companies being the subject of takeover targets or taken over by particularly u.s. companies recently. we've seen others choosing to list elsewhere because they think they can get a vet a better valuation for their shareholders in another market, the ftse 100 is having a pretty good year so far. quite resilient amongst the choppiness we've seen but still on a historical basis it is -- it's stocks are very cheap and that makes them more vulnerable to takeovers and attractive. tom: on this proposed potential takeover, the shares moving significantly. up double digit so far. thanks for the details and what it tells us about appetite for some of those u.k. names. a quick check on oil futures. traders keep in i on opec-plus and china demand.

print at 76.89. wti down 1/10 of a percent. opec-plus reported to be considering it's -- reportedly still considering to increase its output. this is bloomberg. ♪

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tom: welcome back to bloomberg markets. tom mackenzie joining you from bloomberg's headquarters in london. talking about brent as traders digest weaker economic data out of china and signs opec-plus will boost output when it meets next month. joining me for the details, the latest on what we will see, head of the team covering all trading in europe looking at brent trading at just around a little softer in the session down 1/10 of a percent. talk to us about the thinking, the rationale behind opec-plus and its reported not yet decision but its reported expectation or lease leaning towards more on the market in a market that's looking relatively weak. what is underpinning that expectation? >> the decision itself isn't a

slamdunk by any stretch of the imagination. but we come to that i think ultimately opec has got to start to change course at some point it has to the u.s. has been boosting its own output for quite some time seeing a lot of countries outside of opec that are selling more oil and doing well with prices that are ultimately supported by opec-plus. so they are doing something that's good for the price but not for themselves. within the group they will always be a country who are pushing to have more production and saying where's the benefit for us. whether you have production now or later on that dynamic nevertheless exists. tom: who are the players we should be focused on in terms of

how this debate unfolds. is it saudi arabia and abu dhabi and dubai. how are these unfolding in terms of what that decision will be. >> the uae is the one that's been most keen to have the right to produce more. they've been working on capacity within abu dhabi there's a feeling they've been making the sacrifice for quite a while so they are the ones driving the dynamic towards production. going back to the point about that, there have been many surprises. a lot of very often you get to this point and think they'll do something, it may well be did you avoid that production because the market isn't fantastic. tom: part of that dynamic is

down to china. post of course the restrictions on covid, they have disappointed in terms of expectations. to what extent will china remain a drag on these markets? alaric: we seen the talk of need for stimulus. that is important and whether that can happen, you after member china is also going quite fast on the eeev route. a lot of moving out potentially. it's not necessarily a straightforward as boosting the chinese economy, boost the oil demand. it might be more complicated than that mip it's not just one for one. tom: thank you very much indeed. what's factoring into the soil markets. keeping what opec-plus possibly leaning towards barrels on the market.

alaris nightingale with the details and the update. let's bring back in for the equity view and the lens on the equities at the start again on europe, ben, a big factor we've seen year-to-date and you've made the point with a clarion call before the break that you should lean in to the relatively cheap valuations in europe. a lot of the upside is, through from the return of cash to shareholders that's been a catalyst at least, buybacks, dividends. does that continue in the quarters ahead. ben: absolutely and that's the story. while i wait for the interest rate cuts, while i wait for u.s. investors to sort of get on board with tech and start looking at europe, the sort of self-help story has absolutely been very helpful to stop

european returns may be from being worse than they have been for the last sort a few years. but to be clear that's not good to be the upside we see. it's a combination of a strong return of earnings growth, a room for laterals to rerate as investors start to look at europe again for in many cases the first time in over a decade. tom: how'd nuanced does that view have to be? do you buy the index or do you have to put into what you're adding into the basket. are there certain sectors he would avoid or carveout or do you see in a fundamental in terms of upside? ben: the simple answer is you by the index. the biggest sectors in europe, they are very cyclical and the many this earnings recovery. within that i think the big

story is domestic europe, europe sells to the world. i think the real delta will be on the domestic side. significant to the u.s. rate cut with the rest of the world the rest of the world has some combination of more interest rate sensitivity, shorter duration, weaker economies in europe is right there. to the extent the u.s. rate allows the ecb to keep cutting may be going further and europe, it sort of the domestic stocks in europe not the exporters that are most exposed to that. tom: where are your views in terms of u.k.. ftse up with that international course and global exposure are you seeing opportunities in the u.k.? would that be the ftse 100 of the small caps mid-caps. ben: the u.k. has this european

on steroids. two thirds of u.k. stock market sales don't come from the u.k.. if you want to bet on that u.k. recovery, it needs to come from the 250 from small mid-cap. the might be the place where lead in earlier to small caps. the caveat is the banking that will be bringing up the rear on some pace the feds get a move quite aggressively. and the begging little go slowly as well. it's very cheap. this rising tide lifts all boats including the u.k.. tom: so the boe may be slower in

terms of pushing in those rate cuts. before we let you go i look back to your views in terms of eem and china. is brazil an opportunity. we the controversy around brazil and spacex. where do they fit? ben: i think it's a very cheap market which may be 1.5 standard deviations on average. you have an economy, -- humming along. it may not be able to follow the fed and cut interest rates. but i think this is a market which is a very high quality companies. tom: head of equity strategy at bbi with the view this fed cut will comes a time of the 18th out -- and have more the impact outside the u.s..

you could really appreciate the patience and all your time today. joining us with his views in the next couple of minutes. european stocks down 2/10 of a percent. the reopen on tuesday, s&p earnings down 1/10 of 1%. stay with us, this is bloomberg. ♪

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romaine: -- tom: welcome back. let's head back to the u.s. on this labor day holiday as the nation gears up for its election in november, of course. bloomberg originals host emily chang caught up with nba player steph curry and why he decided to publicly endorse vice president kamala harris for president. steph: first, the conviction of what you believe, being active and actually publicly endorsing her, being part of the dnc back in 2020 as well, i approach everything, you know, with decency and humanity. it's not like i'm out here just

casting flames at the other side, is just what i believe in. whether you agree with me or not, we want to be part of a positive conversation. you want to be able to have intelligent conversations about what is actually happening. i do hate the, i guess the inherent backlash you get if you say anything. they don't hear what you say or how you say it, it is just the fact that, you know, people might be against the way you think. not everybody is supposed to think the same. you're supposed to have a level of these heat and humidity to say i respect you, i understand, you know, possibly where you are coming from. you can foster by conversation. that's why i do it, too. you live with that knowing you are not going to please everybody. but that is the spirit i'm trying to come with. tom: steph curry on why he endorsed kamala harris for

president at the dnc. that was a surprise, not on the schedule, coming through with that endorsement. coming out, to discuss the upcoming election, we have someone from andromeda capital management. of course that debate that kicks off next week will be crucial. alberto, where do you stand in terms of thinking about u.s. politics, the november election, and the potential market impact? the swings have been pronounced. alberto: it has been a very close race. we currently see in our simulation that the vice president has the advantage. the swing states are key. however, it is clear that, regardless of the outcome, both parties are very committed to public spending. as a result, what we have seen

in the past few weeks is that there has been a lot of complacency, especially around the idea of soft landing and limited spending, the narrative has shifted toward a slowdown, toward a recession. fiscal policy is still key here, because after elections, we are going to hear about whether that is going to be 6%, 7%, or even higher. that is what it looks like, even from the dnc, not just from the proposals from the trunk side. -- trump side. as a result, we do see the treasury market is a little bit different about spending, regardless of the outcome, again, the vice president has the advantage. we expect fiscal to begin key driver over the coming months. tom: the potential deficit of 6%, 7%, what would that mean?

are you making a clear call, alberto, to sell off or steer clear of the long end of u.s. treasuries at this point? alberto: the forecasts are high, and recovery has some room to exceed those forecasts, you know, again, regardless of who wins here. we do think that, you know, prior to the summer, markets got very serious about the idea of a trump administration tax cuts, and which tax cuts. we might have another swing at that trade, and that trade is driven by fiscal stimulus. so we really don't like the idea of the ratio here, below 4%. we think the fed is rightward inflation, not so much

this year but in 2025. we have a deep cutting cycle already priced income over 200 basis points of cuts in the u.s. between today and the third quarter of next year. expectations have grown a lot since the flash crash of the summer, of august. expectations for a dovish fed have run a lot. in the meantime, we have credit spreads back to record types, back to the meetings, but risk-free assets have not normalized. risky assets have normalized. risk-free assets are priced very bullish late. we should keep some monetization and risk-free assets as well. yes, central banks are careful about markets. they are trying to keep markets afloat and well behaved, but we have a reasonable cutting cycle

being priced already. we think that fiscal is still the name of the game here, and we would be careful about duration when, you know, regardless of the outcome, we are seeing a competition in spending between the two parties. tom: would you go far, then, alberto, to say there is a risk of a debt market tantrum, some kind of blow up u.s. debt if these parties continue to fail to present a concrete plan for tackling this u.s. deficit? alberto: the best-performing this year is gold, and the reason is that you have a fear of excess public spending globally. why do you have that fear? well, there is a rising inequality that has perpetuated, you know, over the last 15 years of quantitative easing, with policies that were essentially

rewarding owners. and governments are spending to tackle the inequality or maybe to put a band-aid on it, to be fair. so it is clear that it is very hard to reduce public spending. someone used to say there is nothing more permanent than a government spending program, and that is essentially what we are seeing. yes, there is some attempts to increase tax rates, but 0.1% or 1% is very hard, is very mobile, so probably that will stay high. and we think that volatility is going to come back. we had some flareup prior to the summer with french elections in europe, then the dollar-yen carriage trade -- carried trade in august. one of the large elephants in the room here is, how will the treasury continue to fund? how will they find in the long range, so deficits continue to be sustained?

assets that have long duration, very little spread, an investment grade credit right now is back to below 50 basis points of spread for a five-year maturity. on the other hand, some of the high yields, high coupon you can find the markets, particularly in europe, can do well. even if the false rates are rising gradually, and then you want real assets, you want things that are not made of paper, so real assets, real estate, gold, commodity. tom: all right, alberto gallo from andromeda capital staying with us. thinking about the deficit challenges for the u.s. longer-term. a quick check of u.s. markets, of course close for the labor

day holiday. u.s. futures and nowhere near those record highs. a little bit of settling coming through, moderated, though, .3%, moderate did -- moderated to about .1%. bottom of the list is retail, currently at .9%. euro-dollar at $1.10. softer economic data out of china. as a check of your market. stay with us. this is bloomberg. ♪

tom: welcome to "bloomberg markets." happy labor day to everyone stateside. one of the most anticipated results of this earnings season of course, nvidia. forecast, still the stock fell. the stock is up over 140%. ed ludlow, jason long in an exclusive interview after the company released those results. investor concerns, production of

his upcoming blackwell chip. jason: we made a mass change to improve the functionality. -- jensen: we made a mass change to improve the functionality, the blackwell systems we have up and running, and we have started volume production, volume production will shift in q4, q4, we will have billions of dollars of blackwell revenues, and we will ramp from there. the demand for blackwell far exceeds its supply, of course come in the beginning, because the demand is so great, but we will have lots and lots of supply, and we will be able to ramp, starting in q4. we have billions of dollars in revenues, and we will ramp from

there into q1 and q2 of next year. we will have a great next year as well. ed: jensen, what is the goal beyond hyper scalars and meta? jensen: we are relatively a diversified. we have hyper scalars. we have internet service providers. we have sovereign ai's, we have industry, enterprises, so it is fairly diversified. outside of hyper scalars is the other 55%. now, the application use across all of that data center starts with accelerated computing. accelerated computing does everything, of course, the models, the things we know about, which is generative ai,

and that gets most of the attention, but at the core, we also do database processing, pre- and post-processing before you use it for generative ai, coding, scientific simulations, computer graphic image processing, of course. so there are tons of applications people use our accelerating computing for, and one of those is generative ai. tom: that was nvidia's jensen huang, ceo, speaking with bloomberg's ed ludlow last week. let's take a look at reaction to the nvidia results. mario: i'm not concerned. nvidia still controls the market and will dominate over the next 3, 5 years. gil: delivering chips at this

rate, at this scale, is fantastic and unprecedented. i don't think there's much of a revenue issue here but i growth issue here. the little bit of a pushback is probably more around the margins situation. olivier: that is not sustainable in the long term. two, it is not necessary in the long term. antoine: shipments as customers wait for chips. tom: ok. on wednesday, we will get another read on ai. the stock up around 47% year-to-date. another gauge on the semiconductor space. let's bring back in alberto gallo, chief investment officer, cofounder of andromeda capital management. with that ai infusion, where do

you stand on this debate? nvidia beat expectations, their outlook stronger than many expected coming at the stock drops. is that a sign the ai bubble is starting to come if not burst, then let some wind out of the bubble? alberto: i think there's lots to do with interest rates. essentially it stays a monopoly, and we are still talking about the whole tech sector in the u.s. they have been for a long time, and if you have growth elsewhere, the alternative becomes appealing, because they are a lot cheaper. or if you have persistently high interest rates. so if we see having a switch from, you know, a very concentrated market to other areas of the market is a positive. and, again, i want to go back to

fiscal policy, because in an environment where you have stocks cut and low interest rates, which is the qe infinity environment of the last few years, you are encouraged to buy growth from people without cash flows. today we have a different environment where we have higher taxes, higher spending, and potentially a broader breadth in the market, a broader flow of public standing to the bottom 50% through handouts, not just through tax cuts, and that encourages also the mid and small caps to do well. so, again, we might see, you know, a lot of flareups. the country was very limited in duration. it lost it for a week or two, than the market focused on other things. it is probably time to focus on fiscal policy again, to think about whether it is correct to have optimism on durations, optimism on tech, versus being in other areas of the market,

and that brings us to our views, which is to be still in high yield and to have optionality on real assets, which are value assets, like energy or banks, which are much cheaper now than the u.s. tech space. tom: on the energy call, alberto, to what extent is energy going to get a lift? you still see the infrastructure play around that demand for ai infrastructure. how much of that is part of your thesis around energy? alberto: look, generally, we want these sectors that do well in a high interest rate environment. we do know that there will be some cuts. we do not think we are going back to 0. high energy firms, including a lot of defaults, the energy, overinvestment over the past few years, and the fracking boom.

the energy firms have done very well with leverage, and they have been used to find a high single digit financing costs. same with banks. . they have been under pressure for a long time. same with a lot of european firms, in the industrial sector, in the auto sector, generally a lot of euro firms have been funding around 7% to low teens for many years. you are getting firms that have survived several forms here that, you know, don't really care about whether interest rates go down to 3% for their survival. they can survive it interest rates remain at four percent or even 4.5%, for example, so they can survive with limited cuts. they do not need a deep cutting cycle. we like those ferns, we like those sectors in an environment were also we continue to see persistent fiscal spending. it is important to see how the fiscal spending from government is changing. it is changing from usg, which

was a very popular trend, to defense,, energy, infrastructure, especially in europe, with the geopolitical risks that are going to continue over the next couple of years. our location is, we think a lot about long-term. we don't just think about, you know, how many cuts will be fed make in the next 2, 3 months? we are thinking about, what works for the next 1218 months? though sectors like energy, autos are still a very good value. tom: you also get, of course, the dividend play, the shareholder, at least the share buyback story, particularly when it comes to some of those european names in sectors like energy. that will be something like a catalyst. we talked to ben laidler about that, something that for him tides you overcome a case back into gear. -- for him tides you over, it

kicks back into gear. do you agree that fundamentals kick back into gear? alberto: i prefer equities, because you can get double digit yields with very limited volatility. it is true that there are some value equities with similar dividend yields, but the equation and credit is pretty compelling here still. when you look at the european space, when you look at some areas of the credit market, which are undervalued or have been unlocked, like banks or energy, when we are talking about high heels, the same you can say around -- hi yields, the same you can say about the evidence, fundamentals and positioning, valuations are not cheap, but they are a little bit less expensive. solid companies are not deleveraging, and the positioning is very important. investors globally are still underway on european assets because of a variety of fears

that they have had over the past year, including recent elections in france, so they are underweight european assets, and that creates more resilience when they have selloff, europe behaves really silly really well. we continue to see -- europe behaves relatively well. we continue to see that in the coming months. tom: ok, alberto gallo ending with that call attractiveness on european credit, alberto gallo of andromeda capital management, really appreciate your insights walking through a number of key things spreading through the global markets. back to u.s. politics right now, because president biden is heading back to the white house today. that's before he hits the road to giving for vice president kamala harris this week. joining me now with the details is bloomberg's eric martin. how significant is this? the countdown is firmly on now. we are two months away from a

former vice president and former president campaigning together. eric: absolutely. this is crunch time for the campaign. we will see in pittsburgh today president biden and vice president kamala harris campaigning, the first time they've been together since she accepted the democratic nomination, a nomination that, for a long time, certainly appeared to be and the great expectation was it would be his nomination. so seeing them together in pittsburgh, a city where they will surely highlight the importance of unions and organized labor on this labor day holiday in the u.s. and their support for u.s. steel, for u.s. steel workers, and, you know, their highlighting of this opportunity economy that vice president harris has said she wants to create, as president biden's successor. tom: eric, where are we in terms of that battle, then, to win ov

er labor and union bosses? where they stand in terms of courting unions? eric: well, certainly we have seen that former president trump has support from some, what we would call, blue-collar workers, some workers in manufacturing. it is really one of the bases that he tries to appeal to come at an individual level, but largely their leadership and organized labor, we've seen a number of unions that are supportive, have been supportive of president biden, have been in line with the biden-here is administration. so they will point to the fact that organizations are encouraging their members to support the democratic ticket. of course, unions and organized labor are a significant, democratic ally and a really important get out the vote effort in terms of mobilizing,

getting people to the polls, getting people to show up on november 5. that is an area where it can be particularly valuable for the democratic ticket. tom: ok, eric martin, i appreciate your time from a us nicely for -- your time, setting us up nicely for a lead up in november. we are going to get the u.s. manufacturing data, really important as to what it tells us about the health of that segment of the u.s. economy. wednesday, we will get pmi's further eurozone and the u.k. on thursday, net eurozone retail sales, and on friday, the big one, the u.s. jobs report, the nonfarm payrolls report, and how that informs our view about the labor market and the fed's next moves. stay with us. this is bloomberg. ♪

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lizzy: welcome to bloomberg markets. i am lizzy burden in london. happy labor day. markets closed stateside. futures pointing towards the downside. historically september is not a good month for stocks, on average the worst month. all the month be the same? we will dive into all of that later. flipping to the european picture where stocks are trading. stoxx 600 a touch lower. the dax flat despite the regional election upset over the weekend. the ftse 100 fled to the upside

declines for the miners china pessimism. we will dig into all of that throughout the program and we can start off with some analysis by aberdeen investment director of luke hickmore who joints me now. happy labor day to you. i want to start with this month of september. we had a crazy august. historically not a great month for stocks, september. do you reckon that will be the case this year? luke: this is my 57 september so i've been through quite a few of these. rate cuts for the fed, for the ecb comer for the bank of england which i think we get through september may save it being particular volatile. the s&p 500 is expensive. if you include the magnificent seven or if you do not, it is

not right. may be saved by central banks. lizzy: in those 37 september's, i wonder what it is that makes this month so bad? is it just that people have come back from vacation and they tighten their belts? luke: yes, and we have had in august were nothing happens and everyone is overthinking things. the fed will cut rates because the economy is collapsing, all of that goes all through august and people go on holiday or the beach. that's put something onto this. i think seasonality becomes important. it does not last very long. as we get later in the year it tends to fade in terms of the negativity. if we get 50 from the fed all bets are off.

lizzy: but about the politics. we have the election jitters. every four years we get those. how would you flame the risk -- how would you frame the risk this time? luke: the polls are so close. kamala harris has overtaken a little bit recently, but not enough to give you a clear outcome. that uncertainty is never great for investors. it will make such a difference in terms of what happens from the fiscal side. the u.s. and u.k. is right up against it on the fiscal side of things. it depends who comes in. you could see more fiscal largess, or such a massive pullback. i think it is really hard. going in with a view that rates will come down is probably the only safe when you have. the shape of the curve coming through the u.s. election is a tough one.

maybe september we will get normal for this as we go through the month and the polls start to clarify how any outcome can fallout. lizzy: you mentioned the possibility of a half-point cut from the fed. it is not what markets are expecting but we get the jobs report on friday. how much of a miss will it take you to convince you a half-point is on the table? luke: in our estimate, nonfarm payrolls, everyone loves it and hates it. i think 130,000, 140,000 is replaceable value. anything below that, if we hit 100,000 as the number that is baked in 50 basis points for the fed. if we get up towards 160,000 or 170,000, jay powell has already said he is worried about unemployment rising. with that number i think they can safely do 25. lizzy: what about the bank of

england? i see you have gone a bit wrote and are seeing a september cut -- i see you are going a bit rogue and are seeing a september cut. luke: real signs of stress in the u.k.. we all get caught up in public sector wage rises. wage rises and then immediately going on strike. in the broader economy, private sector wages are not rising as quickly as they were. we are in positive real interest rate territory, which we do not tend to stay in for a long, and we have close to 2 million people coming off of fixed-rate mortgages, including myself. i think the bank needs to act with haste to get ahead of what will be severe economic problems if they do not. lizzy: you think the bank of england should be more concerned about the labor market?

we have concerns today. that is bad news for andrew bailey as well as keir starmer. luke: we have had the office of national statistics say do not trust our data, which is not help. they are all signs of stress. the companies we talk to it is really tough. there are not a lot of jobs at the moment. if you're not bringing in your early career people across our industry, than a lot of other people are not free and across their industry and you find that falls out that way. you have people in employment companies over the last couple of months cautioning on the jobs market. there is enough out there to worry, as always, and i think again being in positive real territory for rates, the bank of england cannot lead for long. this is not a period that needs to be two or three quarters long.

lizzy: even though the view from up there is lovely. luke: it is lovely. lizzy: you see the fed and the bank of england cutting in september? i presume you also see the ecb. luke: last month it was a bit touch and go whether the ecb would move. signs of a slowing economy, there was stress, notwithstanding italy coming up real well. i think the ecb should cut as well and probably will. that is fairly well priced. barclays priced the fed and the ecb at 25. it done seem like there -- it does seem like there is room for people to take positions. lizzy: we are two thirds of the way through 2024. where are using the opportunities in the last few months of the year? luke: definitely the front end of the u.k. gilt curve.

if we get a cut that could be a 20 or 30 basis point shift in the u.k. curve. steeper curves in the u.s. as we go through what could be an interesting september. even if it is 25 from the fed but more dovish commentary i think that is a steeper curve. credit is hard at the moment. it is difficult to find clear value in investment. there are still pockets like real estate and unusual sectors like our regulated water industry where you can pick through and find value. may start getting interested in european yield, much as equity market starts getting interested in european equities again, i think european high-yield could be quite an interesting space over the next six months. lizzy: luke hickmore, lovely to have you with me. aberdeen investment director luke hickmore, we thank you for

joining us. breaking news across the terminal from volkswagen. weighing its first ever germany plant closures to deepen cost cuts. this is unprecedented and it is in a bid for these deeper cutbacks, it is another blow for chancellor olaf scholz and his government. if you look at the potential measures, they are targeting the main passenger car brand as well as other group entities and they are also trying to end the companies packed with unions to keep jobs secure until 2029. this is according to a statement that has dropped from the company just now. any shutdowns would mark the first closures in germany in this country's 87 year history. it is said to be a clash with these very powerful unions. this is germany we are talking about. you can see the stock price reaction. we will be talking more about the politics in germany later in

the program. coming up, markets closed in the u.s. but where traders are back to work tomorrow they'll be bracing for what is historically a terrible month for equities. we will have more on that next. this is bloomberg. ♪

lizzy: this is "bloomberg markets." i am lizzy burden. it is to: 12 in london. -- it is 2:12. for more on what to expect in

september let's turn to bloomberg opinion columnist marcus ashworth who tends to be an optimist in life. marcus: on certain things. lizzy: on stocks in september? marcus: relatively. i am more in october for stocks. september is more bond markets. there is little bit of an overload of supplies sometimes. that takes a while to work its way through. equity markets, clearly you look at europe. it is going nowhere. i'm worried if economic conditions get worse the value is not going to be sufficient to make it worth it. u.k., everyone is still quite excited and i'm not sure why. the u.s. is in ok shape. it could be in worse shape. i think the economic growth is sufficient that the fed can cut and the economic can handle it.

lizzy: let's say the fed cuts until the end of the year, what will drive the market until december? marcus: it will be when is the next cut and what will that be. if they cut 50 it is clear they want to get on with cutting. if they cut 25 -- i suspect they will go here is your 25, we will think about it and maybe one more by the year end. i definitely think the long end of the bond market are realizing rate cuts are not missing where the front end is still very enthusiastic. i think u.s. rates will get down towards 3% or 3.5%, it is a question of how quickly. lizzy: i enjoyed your column on the bond vigilantes in the u.k.. marcus: i'm glad someone did. lizzy: still swirling around rachel reeves despite the change of government in the u.k.. she is so physically restrained

is it all on the bank of england and its decision on tightening to calm the gilt market. marcus: she is not fiscally constrained except by the unnecessary rules she keeps putting on herself. i think she will ease those up. she is every reason to do so. the bank of england can help or hinder her. we have big retention coming in the -- in this week and we also have the bank of england on september 19, day after the fed. does the bank of england follow? i suspect the ecb cuts on the 12th. the bank of england is a much harder call. quantitative tightening decision is much more important if they decide to continue selling their holdings back to the market. if they continue at the same pace as last year i think rachel reeves will find life very hard. lizzy: we were just speaking to luke hickmore and he thinks the boe is going to cut in

september. just going back to the fiscal, what could rachel reeves doing her budget to calm traders? marcus: she cannot just reach out to the gilt market and expect to increase the weight of issuance. if the bank of inlet is also selling 50 billion that makes her life much harder. -- if the bank of england is also selling 50 billion that makes her life harder. she will definitely increase some taxes but not necessarily individually by much. markets will go away thinking we got away with that, it could get worse. she can increase borrowing. this next quarter is induration terms the most ever, but the gilt is not as predictable. they know where she is coming from and the numbers add up and there is an equal burden, that i think she will probably be fined at the bank of england needs to get out of her way and she can get out of her own way as well

making sure the bank of england knows at a cut in the public sector and debt is excluded as she will do. lizzy: bloomberg opinion columnist marcus ashworth, good to have you with me. speaking of the u.k. you of the ftse 100 currently flat to the downside. the ftse 250 lower .3%. you've seen an outside performance for right move today. shares higher 22%. this on the interest from the murdoch owned rea potentially looking for a takeover of the u.k. property website. right move, the top performer on the stoxx 600 more broadly this morning and this afternoon as well. actually real estate driving the gains on the stoxx 600. we will keep across that and dive into it as well in the program. still ahead, the chip wars heating up as china warns japan against imposing new semiconductor curbs.

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lizzy: this is bloomberg markets. i am lizzy burden in london. china's threat in severe economic retaliation against japan if the country imposes more restrictions on the sales and servicing of chipmaking equipment to chinese firms. this complicates u.s. led efforts to cut china off from advanced technology. you're looking at more details from tom mackenzie, our bloomberg daybreak host and former china resident. we have had this threat to china's threatening severe economic retaliation against japan. toyota potentially in the crosshairs. who could be hit?

tom: there is tokyo electric which is the maker of some of these efficient chip machines. they are facing restrictions and toyota as well, a major player in that japanese economy given how many employees and given the size globally in terms of the automaker and that sector. what we are seeing, it is not a surprise china's threatening retaliation against japan if they go ahead with restrictions. the details and the reporting is significant with the severity of the measure that china might be considering imposing on japan. here is where toyota comes into play. they have been articulating those views. they are concerned they may see a limit in terms of access to critical materials they need for production, not just cars but also their electric batteries in the chips that go into increasingly sophisticated electric vehicles. toyota has been a victim of this in the past. china has restricted access to

these critical minerals to japanese companies and the japanese economy. they are looking back at that and saying this is a warning from china. we have to do something to recalibrate around this. what we are seeing is japan in a pincer move, pressure from the u.s. coming to restrict the sale of these machines into the chinese market and then pressure from china trip try to push back on this. what is happening is the servicing on some of these machines in the chinese market has continued by companies, including japanese companies. u.s. companies have not been allowed to service those machines. they have been lobbying washington to ensure their competitors have equal treatment. that is where the pressure is coming through. more broadly, this is about the continued efforts by the u.s. to restrict access, china's access to cutting-edge machines and software to produce these chips. lizzy: what has been

washington's response? tom: washington's responses they will continue to lobby their allies. they have moved the dial in terms of pressuring the netherlands, working with the netherlands, those are the two made allies within this chip ecosystem providing these machines, whether it is asml in the netherlands or tokyo electric in japan. they have worked with those partners. pressure is one way to characterize it, collaborating is another way, to further restrict access to these equipment -- to this equipment from china. the u.s. thinks there is further to go. there is equilibrium between how u.s. companies are treated and how dutch and japanese companies are being treated. there is no expectation the u.s. will ease up on these measures and there is no expectation that whoever is in power in november will ease back on these restrictions. the expectation is the u.s., under whichever leadership, will continue to tighten the screw when it comes to the ability for

china to access this kit that could make the semiconductors that ultimately the fear is goes into military equipment. lizzy: barely any difference who is in the white house on this issue. we also had a note of china data. we have seen lots of reading on the health of the china economy. what you make of it? tom: we are almost in a groundhog day scenario with china. week after week the data disappoints. week after week we get a reminder china's consumer is feeling very pessimistic. we had the manufacturing data out of the weekend, the official data came in and showed manufacturing contracted for the fourth state month. the private survey that came out early this morning suggested a modest improvement. broadly the reaction from markets and economists was china needs to do more policymakers,

whether is the pboc or the minister of finance in beijing, they need to do more to step up the support and put a floor under the economy. the focus has to be on the consumer and you cannot revive the mood of the consumer without fixing the real estate market. the other data point we have is that the real estate market, the prices around homes, new home sales, continue to cause concerns. the measures beijing has put in place to shore up the housing market have not worked. lizzy: you mentioned that stimulus and everybody wants is likely to come? tom: have learned they will not resort to this 2008 style big bazooka because they have tried to learn the lessons put in place by the government at the time. you have new leadership since then. 2012 is when xi jinping came into power and he and his team

have been adverse to pushing through that scale. they've spent the last years trying to unwind the ill effects , whether the increase in shadow banking, the leverage in the real estate market and beyond. they are going for a piecemeal approach in terms of policy support in the expectation is that will continue. the question is will it be enough when the consumer is trying to hold back on spending and you have a deflationary cycle being at risk for china as consumer stay on the sidelines. lizzy: tom mackenzie, thank you for breaking all of that down for us. we did see the csi 300 down 1.7% in the hang seng down the same. if we check in on european markets we have the stoxx 600 lower. the ftse 100 lower .1%. we will discuss more with chris watling from longview economics next. stay with us. this is bloomberg.

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lizzy: this is bloomberg markets. coming up to 2:30. we have been talking about the possibility of a recession in the u.s. we have to talk the sahm rule. it was triggered by the jobs report coming in weaker than expected. seems a lifetime ago. the economist tuesday mid bears, claudia sahm, says the u.s. is not been recession. she has been writing for bloomberg and says it joins a long list of economic tools skewed by the past four and a half years but the role is still relevant in the risk is elevated . you can see how previous breaches of the rule have triggered recessions. if you flip the board over it

you can see small business hiring plans are in a downtrend and that tends to lead unemployment rise, and then if we flip again to the next chart, you can see bloomberg economics fed sentiment shows the central bank starting to move toward a more dovish tone. there we have the sahm rule. friday is jobs data will be critical. until then let's get analysis from chris watling, chief market strategist at longview economics. let's start small. recession or soft landing? chris: that is the question. that is the guts of every major asset class decision at the moment. bonds, equities within commodities. within sectors of the stock market whether they want to be defensive or cyclical. that is the heart of it in a way it has never been. it is critical across all those

asset classes. our view is soft landing. last piece of the puzzle is labor market and confidence amongst consumers. with a lot of labor market indicators softening that has been the debate at the moment. soft landing is our view but it is interesting you mentioned the sahm rule. if you do it state-by-state it gives you a different message which is interesting. lizzy: which states are you looking at? chris: what we do is we take all 50 states and see which have triggered the sahm nationwide role when you move half a percent above your 12 month lows on the on employment rate. we do that by adding them all up. that indicator was very high into the end of last year. we go up to about 40% of states. it has eased in the last few months.

if you look at the big four states, new york, florida, texas, and california, none of them are triggering the sahm rule. california was a couple of months ago, it has now stopped. i know claudia sahm does not like the state-by-state version but i think it is quite an interesting indicator. it is a very different message, as does one or two other labor market indicators that could challenge job cuts. neither of those is signaling recession. i could totally sympathize. coming out of the pandemic is deeply confusing. the norm or patterns of macro indicators working is not what we are used to. to us it is a soft landing. lizzy: on that theme, it would be interesting if stocks drop, if the payroll numbers shows economic weakness rather than rising because traders are anticipating more easing of monetary policy.

is that what you expect, and how much of a stop drop would you expect? chris: in the short term i still think maybe we have another wave of selling, we have the first wave of selling in the back half of july. we have had a relief rally and it is all done and we can forget about that in late july into that late july selloff into early august. to our minds there's still plenty of risk the market needs to recalibrate. and maybe payrolls will be the trigger. one payrolls data does not mean much. if it is dramatically weaker that would be troubling. it has been softer this year and there were all the downward revisions in the annual revision. the macro data is often the excuse. if you look the nasdaq it has been rolling over the last seven to 10 trading sessions. both of those were the center of weakness in july.

that is interesting. other asset prices are interesting. look at bitcoin and silver. not doing much in the last few weeks. i think there is every chance you get away -- it could start this week. i do not think it confirms the debate between soft landing and recession but i think it may be true based on some of the macro data we get out of this week because there is so much. lizzy: you talk about this recalibration. last week we had the nvidia earnings a beat, they raised forecasts, and yet you have the stocks still following. is that an indication we are the beginning of the end of the ai bubble? chris: that is a signal when a stock beats impressively and then goes down it tells you everyone expects it to be a lot. you can see what i mean. it tells you everyone is an.

-- it tells you everyone is in it. if you look at the magnificent seven and the components within it, the earnings growth starts to slow according to consensus and that does not surprise me. if you look at how much the margins have gone up in two years, to continue that pace would be extraordinary. i think the market is rotating is leadership. it has been with jack and the mag seven. i think it is attending to other areas. the macro view will determine where it goes. market participation will broaden out. critical. lizzy: if you're looking for opportunity outside of the mag seven and you're going on the macro, here is a thesis. you have the bank of england already cutting rates. the of relative political stability. some would argue the fundamentals are strong.

do you come to the u.k. for equities? chris: we have been overweight u.k. most of this year. mid-caps and large caps in the currency is doing the job as well. currency up at one or two year highs. that is one of the most interesting things about the pullback in the last six weeks from july to august. the dollar was weak and the pullback or the relief rally. this is highly unusual. we have been genuinely pretty weak in risk off and risk on. i think the u.k. is interesting. there are macro things that are not perfect. i that will see quite a housing boom in the u.k. over the next one to four years kick started by this rate cuts coming through. there is not a lot of inflation around. the bank of england needs to go on with cutting rates. lizzy: in september?

chris: whether they will or not i do not know, there likely little bit resident -- there likely little bit reticent. they need to get on with cutting rates. we are down 5%. real rates are three ish which are way too high for an economy that has no growth. jobless claims were up sharply. i'm not sure they need to do this as quickly as i think they should. i think once they get going, which they will, with more strength, then we will create this credit and housing boom in the j. -- in the u.k.. that is a good sign housing will start doing better and the next six to 12 months. lizzy: perhaps the right move today. you are not the first to say the

boe should be coming in september. before i let you go i want to turn to gold. since you were last with as you've changed your call. why? chris: gold has had a terrific two year bull run since late 2022 and it had another leg of that starting in late february this year and consolidated into late february. it has had a good run up by 25% since then. to our mind it looks tired as a bull market. a lot of the timing models are back on sale, sentiment is higher. it is a little bit overbought. if i'm right about the soft landing, then we have probably priced in as many cuts as we need to in the states. we may price a couple out in the u.s.. perhaps not in the u.k. but the u.s. and that will be a headwind for gold. it is all of that.

it is technical factors, it is a long bull run. i think the interest rate environment, all the news in the u.s. is probably priced in, particularly if we are right on the soft landing thesis. we are more cautious on gold. interesting see how the price plays out. to hold it for a long time is fine -- up to the next six to nine months to be clear. lizzy: 2500 is where we trade at the moment. chris watling, great to have you with me. chris watling, ceo and chief market strategist at longview economics. coming up we will talk about the ipo market as companies wait public debuts as the u.s. election cycle ramps up and the global race stands to go lower. that is next. this is bloomberg. ♪

lizzy: this is bloomberg markets. i am lizzy burden in london. you are looking at the stoxx 600 trading lower .2%. the cac 40 in paris managing to eke out gains. u.s. markets closed for the labor day holiday. enjoy it if you are celebrating. let's get back to the ipo story because we have companies itching to go public but facing a tough choice as the ipo window opens. do they take the leap with markets near all-time highs or do they wait until next year when the risks around interest rates and the u.s. election may

have faded? you have been looking at all of this. are we likely to see more ipos this year? >> we may see some but i doubt there will be many. this is such a limited time following the labor day holiday until the u.s. election. about eight or nine weeks. there's not a lot of time-to-market ipos, especially europe when there is a long time people for marketing ipos and in europe it is a six week time period so there are not companies -- there is not a lot of time to get ipos away. lizzy: so it is more like a two week window. in that case which regions do they believe activity? >> i think it will be the u.s..

we have ipos ready to go in your i think he'll be the u.s. where there are live filings already. we have stelara. i think we will see a couple more in the u.s.. in europe it is backed by ecb partners, lack of a big publisher. we have a retailer in eastern europe, we have a german meat firm. a couple could come to our market. chinese companies have not been active in the market because there been hurdles and factors to consider. u.s. being the busiest which has been the norm for most of this year and the past couple of years. lizzy: if you look at the u.s. i mentioned the interest rate risk, the election risk. what will it take for the ipo activity to come back in full force? >> i think we will have to get past the u.s. election because no one wants to price in

election risk because we do not know how markets will react, we do not know the outcome, we do not know how volatile markets will turn. i think we will see a busier 2025 with lower interest rates on the horizon. in ventures of war chest to spend for ipo. bankers are anticipating a busy 2025 with the economy being in better shape as well with the rates having come down by then. lizzy: how do you think they are thinking about the u.s. election ? it is really an open race. what you think is making them wait with the election? >> nobody wants to price into the election season because the outcome is so unpredictable and we do not know what markets will react and what markets will be like. the idea is to avoid that window altogether and price ipos before the election comes around and after the election there's no large time is the christmas season so into 2025i guess.

lizzy: keeping us on the edge of our seats until 2025. we thank you. let's look at the week ahead. u.s. manufacturing data tomorrow. euro and u.k. production data as well, and then on wednesday we have pmi's out of the u.k., the euro area. swiss cpi as well. on thursday we have gypsies wage data. it is job openings -- on friday it is the highlight of the week. we have the u.s. jobs report and in europe we have german and french industrial production data. we will keep across all of that for you on bloomberg. coming up next, a blow for olaf scholz. a far right party wins a regional election for the first time since world war ii as the coalition is punished in the

east. the latest details from berlin. this is bloomberg. ♪

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lizzy: this is bloomberg markets . i am lizzy burden. german politics. chancellor olaf scholz ruling coalition set for a landslide defeat in regional votes with the rising populist parties on the right and left.

let's get more from berlin. this is the first time for a far right party a german state ballot into the second world war. i wonder, is it a harbinger of more pain to, for the center? >> i fear so. and though thuringia has always been a center for far right movements. a huge defeat for olaf scholz. all three coalition parties have done really badly. everybody thinks about the national election next year and what will happen. lizzy: what does it mean for national politics? could we see it earlier election? hallett risk is olaf scholz himself -- how at risk is olaf

scholz himself? >> i don't think anyone has a interest in this government to leave this government. my prediction would be the government will continue until the next year or the next election that up the months until that will be painful and very slow moving. there will be a lot of fear and concern the right will go further and a question whether the chancellor will still be the right candidate for next year's election. lizzy: what is that fear about? what are the issues politically that have led to these results? do you think they will have an impact on policymaking in germany? >> indirectly definitely. the biggest topic here has been migration.

there has been this brutal incident almost a week ago wherein asylum-seekers step three people to death and injured many others that hid up many pages. schulz government has tried to adopt some measures to make it easier to send people back to their home countries. they are not there yet the germans just do not trust this government anymore to solve this problem. lizzy: always good to speak with you. thank you so much for that update. i want to get to the market angle in germany. you are looking at the dax in frankfurt flat to the downside. not a huge reaction. the cac 40 in paris is eking out against.

the broader stoxx 600 is lower .2%. the ftse 100 is lower .2% despite the boost to write move we have been talking about and we will get into later in the program come this u.k. property website. if we flip the board to the bond picture. bond yields on the two-year are higher. on the 10 year higher five basis points, 2.3% if we looked at the gilts, is discussing that story with marcus ashworth. the 10 year is higher four basis points at 4.05%. it is interesting you have not seen the fed cut rates yet. the bank of already cut rates. gilt yields rising above u.s. treasuries since keir starmer's

government came to power despite this order of rate cuts. we have talked about the specter of the bond vigilantes hanging over the new u.k. chancellor rachel reeves. can she get rid of them in this upcoming october budget. he says they are not so physically constrained. -- they are not so fiscally reigned. it has been all doom and gloom from keir starmer trying to lay the pitch for tough economic decisions as he puts it. we will see whether he raises taxes. do we see them in the form of inheritance tax changes, capital gains tax changes, we can discuss with our next guest. he will explain why he prefers equities over bonds despite the near an all-time high. looking forward to that conversation with ben gutteridge coming up next. stay with us as we look to u.s.

futures pointing in opposite directions. this is bloomberg. ♪ dell ai. ♪

>> welcome to "bloomberg markets." i'm hissy burden in london. you're looking at the stoxx 600 currently lower .2%. the ftse 100 down by the same amount. the ftse 250 lower .4%, but the cac quarante down in paris as analysts have cut their price targets across the sector. we can get into that later. if we look at the ftse, you've had declines as well for some of the miners, b.h.p., rio tinto. and when it comes to luxury, when it comes to miners, we can tie it all together, because it comes back to china pessimism. and so it is looking like a

mixed picture for european equities this morning, but broadly lower as things stand. we can get into now the look ahead for the u.s. markets closed for labor day, but invesco's investment director joins me now for more. ben, you are pretty optimistic, it has to be said, on the u.s. economy as we head towards the jobs data on friday. the big risk of the week. why are you so optimistic? ben: well, you seem pretty skeptical about my optimism, lizy. i would love to give you something more dramatic, but the sort of mainstream messages of a labor market that's sort of retains some resilience coupled with a more calming phase, these are powerful tail winds. now, i think some of the drama comes from how consensual that

is, and we have some nervousness about that, and, of course, the market price action is together me how consensus that is. not an insignificant, but not a dramatic disappointment on the previous payrolls number, a number that's coming out later this week, really sent markets and other technical factors into a bit of a tail espn+. but nevertheless, as it stands, we are sort of positioned for ongoing economic expansion, and the markets will be sort of infused by that, coupled with mormon tarry policy. on balance,lining into equities still -- leaning into equities still. lizzy: we talked about the rule earlier. have you ruled out a recession? ben: we absolutely haven't ruled out a recession. as i said, the base case is that we avoid it over the next six to nine months. but no doubt the labor market is

weakening. it's just we're not yet too alarmed by the pace of that deterioration. we don't get that much of a signal from the labor market. it's more of a collapse than a gradual deterioration. but nevertheless, what we've seen in terms of strength of the consumer and the tail wind they might enjoy from further falls in inflation and no sign yet of a reversal in savings. the savings were to move higher, that is a show of a weakening confidence from the consumer. absent those signals, we're not minded to believe a recession is an imminent threat, but not ruling it out as a risk, and, of course, players need to be positioned in reflection of the very real risks of recession. lizzy: where does it leave the housing market? ben: well, the u.s. has a market

that does seem to be in, i think, in a moderately weak position. the effective rate will still continue to climb as borrowing is rolled into new levels of financing at a more troubling rate, more punishing rate. and that isn't good news for the u.s. economy. but how damaging will it be? i suspect not, of course, not good news, but we haven't seen the level of overbuild we've seen in prior economic cycles. vacancy rates are still very low. and i still think lots of the u.s. consumer will be less impinged by a weaker housing market, still enjoying their lower rates they've locked in for however more years, much more u.k. borrowers have done, certainly this borrower has

done. while the housing market could be a bit of a problem, i don't think it's enough to tip the u.s. economy into recession. lizzy: let's say growth is resilient, but you don't get as many rate cutses as priced in. how would you expect the market to react? ben: well, i think the markets can deal with it. certainly like a valid debate at the moment is that markets really have a thirst and hunger for interest rate cuts, to keep that enthusiasm going. but if you get the level of rate cuts -- if we get a meaningful level of rate cuts, more dramatic level of rate cuts, it's probably coupled with more troubling growth outcomes, and i think that would dominate the piece and markets would struggle in that environment. we've soon something of a replay behalf we're talking about earlier in the year when we're anticipating rate cuts and didn't get any, but, of course,

the recession risks were postponed or delayed. i think we can see something of a replay of that over the next six months, as recessionary risks continue to be postponed, and you don't get quite the level of sort of speed of rate cuts that markets are currently anticipating, but market are ok with that, growth is ok. lizzy: i want to ask you about the u.k. if the starmer government and the budget that's upcoming radically overhauls capital gains tax, do you think the blowback could be bigger than expected? ben: well, yes, i suspect it would be. because you're talking about a dramatic mood there, and it would be unexpected. we would anticipate some flying, a bit more leaking of the idea, and maybe to get a sense of how the market would react before

anything dramatic was implemented, but i just don't think, of course i could be proved wrong here, it has happened, that the government is wanting to remove any sort of responsible fashion, or, you know, i use the term responsible, if not delivering huge surprises, not trying to be too radical. they've talked about being a safe pair of hands, to make dramatic moves in the first budget, even though paving the way for some relatively sort of austere announcements. i wouldn't necessarily say that was the base case, but second certainly see something a little bit displeasing for those harboring capital gains. lizzy: i'm just really wondering whether it's going to be a sitting point for some sort of exodus of investment out of the u.k. ben: well, i think that would be very much on the government's mind, and therefore, would be

loans to breach that red line. i think the threat of the question, that's why it shouldn't be the base case. to your point, if we do get something radical, then we could well see of that scale, then you could sort of see a market riot. it wouldn't be the base case. i mean, this government, i know it's a very motive subject, but talking about investments and gross, really, not all, but most cuts. so such a turn in policy to discourage investments, dramatic turn doesn't seem like the most likely course of action. lizzy: so was the last talk of government growth. let's see if the measures come through in this budget. ben, always good to talk to you. thanks for joining me this labor day. still ahead, a massive labor strike now underway in israel.

we've got demonstrators calling for prime minister netanyahu to accept a cease-fire deal. we can bring you the details of whether that pressure is working next. stay with us. this is bloomberg. this is bloomberg. ♪ things will go wrong for your customers. but your business can make it right,

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israeli-american hostage. thousands protesting in the streets as israeli workers begin a labor strike demanding that prime minister netanyahu accept the cease-fire deal with hamas t. comes days after the six hostages were found by israeli military forces. let's get more now from bloomberg's paul wallace. he joins us from dubai. we have to start with the human story. what do we know of the hostages who have been held by hamas and the recovered bodies? paul: lizzy, yes, it was pretty tragic news that came out yesterday. the bodies of six hostages were found. israel said they had been shot from close range, essentially executed a short time before, and the i.k.f. found them. there was -- and the i.d.f. found them. there was obviously a huge outcry in israel. people took to the streets immediately, and there was a general strike today. the courts actually ordered it

be ended, but some of them are still going on, and they're still protesting in the streets now. there's a huge amount of anger in the country directed in a lot of ways toward the government and toward prime minister benjamin netanyahu about the government failure so far to reach a cease-fire agreement with hamas that would lead to the release of hostages. pressure is building on netanyahu now to achieve that deal that would see the rest, almost all the rest of the hostages, the remaining ones released. lizzy: do you expect the fresh anger to create enough political pressure on benjamin netanyahu to actually change thinks position here? paul: it's a very good question,

and i think we'll have to see in the coming days what happens as far as more strikes and more protests are concerned. we have in some ways been here before since october 7 in terms of mass protests. a lot of them anti-government protests. and they haven't done much to sway netanyahu, especially the far right members of his coalition who does not want to stop the war in gaza until they think hamas is totally destroyed. netanyahu and some of those far-right members like the finance minister and the national security minister are sticking toe that stance. but it is possible what happened yesterday is a turning point. i think it's a bit too soon to say, but it's something that could turn out to be that. lizzy: the pressures are real in

financing the military effort for israel. surely the strikes are going to hit the israeli economy just when it doesn't need it. how big of an economic impact do you expect here? paul: it's certainly not a good thing for the israeli economy. you had banks shut today. you had the main airport suspending takeoffs for some time. the economy is under strain. it is slowing down a lot this year. it will probably only grow about 1.5% this year, which is far, far slower than pre-war predictions. the fiscal deficit is rising rapidly and there could be a deficit of g.d.p. in 2024, which is huge by israeli standards. if you take out covid, it's the biggest deficit, this will be the biggest deficit this century. so certainly these strikes are not good f. they only last one day, and it's a bit unclear as

to whether there would be more tomorrow, let alone later in the week, then i think that's something the economy can withstand, but it's certainly not good news for israel financially or economically. lizzy: paul, i was just there with you in the middle east. i was there for three weeks, waiting every single day for a cease-fire deal or for a iran retaliation. neither came. you had secretary of state blinken coming and going, leaving empty-handed. where are we on that deal? where do the cease-fire efforts go from here? paul: the cease-fire talks are ongoing, and let's say junior negotiators continue to talk in qatar last week. there's still some sticking points over whether hamas wants any cease-fire to turn into a permanent end to the war. israel doesn't want that. it wants the right to resume fighting, to destroy hamas.

but that is something that the americans are optimistic they can overcome. one of the latest things that is holding up the cease-fire talks is this issue of the corridor, which is essentially the egypt-gaza border. netanyahu wants to retain troops there. hamas is insisting it can't do that in the event of a cease-fire, that those troops would have to leave. that's something that's really vexing mediators. so the talks are ongoing. the u.s. is one of the main mediators. we just heard from joe biden he says and he his administration are working hard to achieve it. it's hard to overstate just how much joe biden wants a deal soon and certainly before he leaves office in january. i think he would find it personally very tough if the war in gaza were still going on by the time he leaves office in

january. because the war isn't over, you mentioned the intentions with hezbollah and iran, they still remain very, very high, and it's hard to see them going down much until fighting in gaza stops. lizzy: looks like potentially these negotiators are running out of time. thank you to paul wallace, who leads our team covering middle east economy and government. we thank you as always. coming up on the program, shares surge after rupert murdoch's group confirms it is considering makingenning an offer for the online property portal. we'll discuss next. that is bloomberg. that is bloomberg. ♪

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lizzy: this is "bloomberg markets." it's 3:21 p.m. in london. u.s. markets closed for labor day. but the biggest mover on the stoxx of hundred by a country mile today is right move, higher 24%. this is the most since march

2022. it's after rupert murdoch's australian company r.e.a. group has said it is considering a takeover offer. we can discuss more now with our deals team. aaron, i've got to admit, i have spent far too long on the property portal that is rightmove. it's perhaps my top hobby. why is rightmove so attractive to a bidder? aaron: i agree, usually i get an alert for property i wish i could afford, but this time it was about a huge m&a potential deal. i think why rightmove is attractive is because it's undervalued if you looks at earnings per share. murdoch's r.e.a. is one of the most valuable in that space rated companies in australia. so they probably see an opportune time to get rightmove at a relatively cheap amount, plus some turnaround impact of possible real estate rebound in the u.k. so that's probably why they're striking now. lizzy: how long have they got to put an offer on? aaron: they've got a put up or shut up deadline until the end of this month.

now everyone is aanxious al waitly to see what the next move is. it rio de janeiro relatively early. i think you can tell that by the statement which said we've not made an approach or offer. now in a way you can ask yourselves, how did the market react for r.e.a.? what's the right share doing? that might also influence whether murdoch moves ahead or not. lizzy: how good of a value is it? aaron: if you look at the p/e ratio, it's good, because r.e.o. is looking to do a cash and share offer. their shares are much higher rated. so that's a strong currency to use. that said, if you talk to the analysts, they made clear that rightmove will probably demand a very high premium. we're talking 30%, could be above that, could be below. but rightmove is not going to sell on the cheap because it thinks it has a lot of potential growth going forward. lizzy: we just talked about the health of r.e.a., said it's really doing well. aaron: it's doing well t. has a different business model.

rightmove is more dependent on real estate agent subscription models. you can argue which one is better, but the reality is r.e.a. trades higher, and they have made the pitch, look, we can invest in innovation, data, and help rightmove expand maybe into commercial real estate something, that they've already said they want to do. lizzy: you know what they should do? get rid of estate agents. aaron: i think you would get 100% approval of that proposal. let's see where that goes. for now, i think everyone is wondering, will the real estate market rebound in the u.k. with rates slowly coming down, with the labor plans, and maybe that's why murdoch wants to strike now before the market rebounds. lizzy: on a serious note, how closely are rightmove's fortunes tied to the health of the u.k. property market? aaron: it depends on who you ask. the view is from investors it is tied, but if you talk to experts they would actually it's resilient and doesn't really matter, because either people are selling or buying, and so investors have made undervalued rightmove because they think it's so connected.

but they like to think they've built a resilient model that's not so effective, but if the numbers, the numbers don't lie, obviously rightmove is valued at less than some people would like. lizzy: all right, aaron, we thank you for taking us through some of the details from the mechanics of that deal that's on the table. let's see if it gets through in time for the deadline. you're looking at the shares still higher 24% this afternoon on the ftse. as i say, it's the biggest mover, the biggest gainer today. let's check in on these markets. you've got the stoxx 600 weaker .1%. ftse actually lower .2%. 250 lower, .4%. but the cac quarante in paris eking out gains. the dak in frankfurt flat despite the political uncertainty that we were just discussing. look at the sectors there, and we have got real estate leading

the gains, higher 1.6% this afternoon. and that is because of this move in rightmove. but you've got about other sectors in positive territory. bottom of the basket is retail. so we continue to monitor as we head toward the european market close. of course, u.s. markets are taking the day off today for labor day, but we've got futures pointing slightly lower stateside as we head toward the jobs report on friday. we can discuss the bigger macro outlook next. jennifer will be joining me, capital economics' chief global economist. she's going to weigh in on what we can expect from the fed meetings and other meetings of central banks coming up this month. we've got the b.o.e., e.c.b. as well, already on this program we've had a couple of calls for the bank of england to cut its rates this december, not what the market expects. but what does jennifer think? we'll speak to her next. stay with us. this is bloomberg. ♪ when you automate sales tax with avalara,

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lizzy: this is bloomberg markets. i'm lizzy burden. it's a big week for data. on friday, the u.s. job supports coming, backended risk in the week. the estimate is for 160 5000 jobs to be added in august. we can discuss with jennifer mckeown who joins us now. happy september, and the worst month for markets historically. i wonder if you are feeling pessimistic even though investors are a lot more reassured about the u.s. economy than they were this time last month. jennifer: i'm just glad mike children are going back to school -- my children are going back to school mainly. [laughter] the payrolls point that you mentioned, weakness in the

previous release was about hurricane beryl, stopping some people going to work, forcing others to work part-time when they would not have ordinarily. we are looking at a 170,000 increase in nonfarm payrolls on friday. that would help to soothe markets, reduce speculation about a possible 50 basis point cut from the fed. there are risks around that. the labor market is absolutely crucial to what the fed will do next. if we see another sock downturn, increase in the unemployment rate, that could mean that a 50 basis point cut is coming in september. lizzy: that's interesting. you think it's possible we could get that half-point move this month. i will come back to the labor market but i want to feed in the politics. we heard kamala harris trying to thread a tricky needle here,

where she has to not trash president biden's economic record but also show that you want to do more to boost the economy. you said her plan would amount to fiscal tightening in one of your recent notes. how much risk which you put that top landing at? jennifer: it would amount to something of a fiscal tightening relative to biden's previous budget plan. but it's important to remember that that plan was never really likely to see the light of day, probably would not have made it through congress. so that was always a fictional kind of scenario. relative to his plans, it seems she doesn't plan on any major spending boost, tax cuts. so we are not looking for a significant fiscal boost from her, maybe just more tweaking

around the edges, increasing the corporate tax rate. what will be interesting from an equity market perspective, if there any antitrust measures that she might apply, trump might apply if elected. those are the biggest thing from that perspective. lizzy: from a bond market perspective, which he be good news? jennifer: relative to what? i guess, given we are looking at a fiscal consolidation, albeit a modest one probably, from her plans. that said, trump has not proposed any major tax cuts either, any significant spending increases. probably those candidates are aware of the state of the u.s. public finances, aware that financial markets are watching quite closely for any reneging on the previous loose commitment to fiscal tightening in the u.s.

we all know the u.s. debt load is set to increase, so it's pretty clear deficits need to be reduced. i think both candidates are aware of that. the bigger risk around trump, given the uncertainty of his presidency, although huge tax cuts have not been talked about, they could be coming out. lizzy: we have talked previously about the effect of undocumented immigration in the u.s. actually staving off stagflation. what a trump presidency do that more than joe biden's current measures already are? jennifer: there are major risks around that. that is the part of trump's policies that are getting less attention than they should. immigration has been a major aspect of the u.s. economy. it has not only helped to support growth but has helped to keep inflation low by raising the labor supply. that is both documented and

undocumented as well, we think has been supporting the economy, keeping inflation lower than it would otherwise be. the policies aimed to restrict immigration, also to reverse some of the immigration we had seen, some previous migrants leaving the u.s., threatens to raise inflation significantly because of the tightening of the labor supply that would cause. one thing that we see is undocumented migration has already come down in the u.s. based on the latest data. perhaps a change from a trump presidency would be less significant that we previously feared, but nonetheless, they are inflation and growth risks around this. lizzy: before i let you go, i want to ask about the ecb. we have this meeting coming up among all the others. do you think it should take note from the bank and go for if but

larger rate cuts? jennifer: the riksbank had an interesting conversation, about the merits of a 50 basis point cut relative to a 25 basis point one. it concluded the benefits of 50 basis points where perhaps limited, given that markets are already expecting significant policy loosening, monetary policy loosening. in sweden and across the advanced economies. the benefits of moving to 50, perhaps low in terms of the impact that you would have on borrowing costs. but the cost is potentially. you risk stoking inflation again. if you move too quickly, there is a possibility you end up with inflation rising again, at least not following, and that is a significant cost from our starting point. i think the ecb will be very

mindful of that kind of trade-off, as well as advanced economy central banks, but in the eurozone case, inflation is still high, higher than in the u.s., for example. i think just over 4% at the moment. it is particularly difficult for it to make a commitment to reducing interest rates aggressively at a time when inflation on these core and services numbers are much higher than target, also when wage growth is still coming in relatively high. lizzy: if we could come back and end on immigration. in europe, we were discussing in germany, the politics over the weekend. the success for these extreme groups, the far right. how much of a risk is that prove in germany, when you have some business groups warning of an economic catastrophe if these political trends continue?

jennifer: it does pose a risk, for sure. 1.2 bear in mind, these extreme parties are unlikely to be in government. for example, the mainstream parties have ruled out forming a coalition. it is very unlikely that they would be governing. but it is pretty clear that their influence, growing popularity will be influencing mainstream policy as well. yes, we will see a continued push back against immigration in germany, a rapidly aging economy. that does spell bad news for potential growth in germany. also the influence of these far-right and also far left parties, will mean very broad coalitions need to be formed in germany as the mainstream parties are losing support. that in turn will mean decisions are difficult to make, that things are slow to come through,

major changes are unlikely to happen. for example, in germany's debt break is likely to remain in place. fiscal policy will remain cautious as in the past. it is unlikely, too, that you will see a fiscal boost to revive the german economy as those policies remain in place, policy is stuck to an extent. lizzy: chief global economist, jennifer mckeown, thank you for joining me this labor day. good to have you on the program. coming up, m&a watch. we will look at the lufthansa ceo's visit to portugal to look at the state-owned airline tap. this is bloomberg. ♪

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lizzy: this is bloomberg markets. i'm lizzy burden. it is 3:42 p.m. the lufthansa ceo have been meeting with government officials in what you're going to discuss a possible investment in the state owned airline tap. for more detail, we can speak to benedikt kammel, who covers this for us. i wonder how much of a surprise this is that lufthansa has to take a stake here? benedikt: not that much of a surprise as they have stated this on the record. klm ieg has said they are interested in the asset. what might be a surprise is how early and how swiftly he is

making his move, the ceo that is. remember, this is a company that only recently managed to get its investment in the italian airline over the line. this is a couple of weeks after that. he is putting a line in the sand, publicly expressing his interest, although it is not public at this point. he is going to portugal for this. we understand he met with a couple of ministers. we are told this is very early days, trying to get a sense of what kind of form the asset disposal might take, whether in chunks, a sense of timing, price, autozone is that we don't know about yet. i guess he is trying to find out himself, whether this is an appealing asset more than. lizzy: you mentioned you just got the deal over the line. is he just being greedy? benedikt: [laughter] you could think that he is being a little greedy but he is probably thinking in for a penny, in for a pound.

the attraction of tap is that europe to latin america root. that is where the attraction laws for this asset. they are strong on the portugal to brazil route, and that is where lufthansa can catch up to some degree. ieg owns iberia, a strong link to that part of europe itself. regulators will take a hard look at who ever put in a bid, will determine is there too much of an overlap here? what kind of market dominance might we see? the fact that ieg has iberia, may make it less appealing to them, but lufthansa may be able to argue this is a missing link. we know how to integrate these regional assets. he has something going for him with his bid. lizzy: that is the lufthansa side. how in need is the portuguese

government of a deal like this? benedikt: it is an attractive asset, therefore, they can probably get a good price for this. they will take a hard look at their budget in the next couple months, determine if this is something that can help them financially. again, they will probably do this in steps, not selling in one fell swoop. what we are hearing, what others have reported, initially, whoever buys them may take a 20% stake, building up over the time. that is the conceivable way of this going down. this is an acid that has been on the market for a while, come back on, come back off. this time it seems more serious. we are hearing early in 2025 is when things may kick off. he is trying to get himself into pole position here. lizzy: benedikt kammel, who

leads our coverage of aviation, thank you for that update on the meeting as we continue to monitor the readout from officials in the portuguese government and from lufthansa itself. meeting on that potential deal to invest in tap. let's check in on the broader markets. stoxx 600 flat to the downside, treading water really. the ftse 100 lower by .2%. the cac around in paris, higher by .2%. the dax in frankfurt higher by .1%. it is labor day, always quiet when you have volumes then like this. stateside, pointing ever so higher on the s&p futures, nasdaq futures. if we take a moment to analyze where we are at, we had a crazy august. this is a very different picture

behind the scenes to where we were last month. a lot more optimism, as you have been hearing from all of our guests, about a potential soft landing, as we await that jobs data out of the u.s. on friday. the risk really weighted to the backend. september historically not a good month for stocks. will it be any different this year? we look ahead for that jobs report for clues as to whether a jumbo cut remains on the table for that fed meeting. if we also look across asset, you have the gilt yield on the two-year higher by a basis point, 4.1%. the german two-year yield is higher by three basis points, 2.4%, digesting that political surprise really that we had over the weekend on sunday that we were discussing, the pain for

the center parties. does it transmit from the regions to federal politics, is the question. does olaf scholz do a macron and call for an early election? our reported does not think so. coming up, we will talk about health. mpox vaccines at the rollout in central africa. we can bring you the latest on the global health emergency. stay with us. this is bloomberg. ♪

>> while look at the technical capability, which is something that we can do very quickly to see whether there is a match, i think the question is whether they will be continuous demand. the main question is, will the

effort pay off? understanding there is a current outbreak. for us, it's important to understand if this is just an initial surge that will go away, or if it will continue. that is the main question we would like answered. lizzy: this is bloomberg markets. i'm lizzy burden. you were listening to the biovac ceo speaking last week. we know mpox vaccines are scheduled to arrive in central africa as that lethal disease spreads, but the push for vaccines comes as the who tries to contain a virus which has already claimed 622 lives in the democratic republic of congo. with us now is sam fazeli, senior pharmaceuticals analyst. we heard from the ceo. which vaccine seems to be in the lead to enter this demand to solve this problem?

sam: if you look at the data we have seen so far, three vaccines are available. two are pretty much the same smallpox vaccines. one of them is a newer version if you like from a danish biotech company. that seems to have the best data in terms of vaccine effectiveness, reducing the risk of hospitalization. it also appears to have the best side effect profile, so you don't get a major reaction when you take the vaccine. if i were to choose one between these vaccines, i would choose the bavarian nordic vaccine. lizzy: come down to the business of it as well. how effective are they, how many doses do you need? sam: the data that we recently had published from the u.k., unfortunately, we had to deal

with the same thing a couple years ago. the u.k. generated quite a bit of information from the vaccine they did. it seems that one dose, in terms of reducing hospitalizations, seems like that is enough. whether that means two doses would give you much longer protection, the same story that we have always dealt with with different vaccines, covid, every year. whether you need two doses is something that we have to wait for more data on, but one certainly does provide that early protection. lizzy: i'm not a scientist but i will ask, what about antivirals? sam: there has been one that has been around for a while. that was recently tested, very recently, in the drc, and it didn't seem to do much. that is the current version of

the virus we are dealing with. at least the clinical data suggests you cannot hope for much out of that antiviral. lizzy: when you are looking through all of this research being undertaken, what do we know now about how mpox is transmitted, what have we learned in the past few weeks? sam: it seems to me, listening and reading as much as i can, there is no major change in the way the virus transmits. union close contact. whether it is skin to skin, or you can get a very close face to face. it is not like covid which spreads from this distance, me breathing, airborne particles with virus. it does seem like you need very close contact. the way that the virus has spread -- for instance, people have been

on airplanes for hours and there is no outbreak around them. hopefully, it is something that requires much closer contact. lizzy: sam fazeli, thank you for trolling through all of that research on our behalf. looking at bavarian nordic shares this afternoon, higher by .1%. we continue to monitor that story, waiting for the vaccine rollout. access is really the problem. seems like the world doesn't learn the problem with access. sam: unfortunately, the world doesn't get over the point, infectious diseases do not know boundaries. lizzy: we have to always say, maybe we can learn this time. coming up on the program, calling graham, head of multi-asset strategies will join me to talk about why equities reflect, valuation remain eye

watering. stay with us for that conversation. this is bloomberg. ♪

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lizzy: welcome to bloomberg markets. i'm lizzy burden. coming up on 4:00 here in london. you have the euro stoxx 600 flat to the downside. views like labor day in the u.s. thin volumes transmitting that sentiment over here, treading water basically. the ftse 250 unchanged. i got carbone and paris, higher by .2%. the dax in frankfurt, higher by .1%. we can dive into all of it. it is a holiday in the u.s. for labor day. u.s. futures pointing a touch higher. let's talk to colin graham, head

of multi-asset strategies over at robeco. i wonder who is right at the moment, bonds or equities? colin: that is the question people are trying to answer. if you actually look at what is priced into bond markets and equity markets, you see very different scenarios that will happen to where the end of the year. you can use high yield for an example, you can argue only a 5% chance of recession being in the price for high yield spreads at the moment. the rules have been triggered, saying there is a slowdown coming. we see that in the labor market as well. there are different scenarios priced into different asset classes. therefore, we have to decide which one is right. lizzy: let's say the fed follows the path markets are expecting until the end of the year, 25 basis point cut in september.

what is the catalyst that will drive markets for the rest of the year, the u.s. election? colin: u.s. election, but also if they only do 50 basis points to 75 basis point by the end of the year, that is a soft landing nailed in. people will be looking at growth is ok so what are corporate earnings doing? that is the more important area to me that we have to look at. policy out of the white house, whoever is the next president, will be significant. however, some policies are aligned in terms of fiscal spending, lower taxes. we can take a read through. some policies will be the same. we are looking at corporate earnings. is the optimism in markets going to be justified by the end of

the year? lizzy: you see a difference between the two candidates. is the u.s. election risk a positive or negative when it comes to treasuries? colin: i don't think so. the same policy will come out, they will both spend. they might do it in different ways but the fiscal budget will still grow under that. i think it will be pressure on treasury -- we think there will be pressure on treasuries. no term premium priced into treasuries at the moment from the shape of the yield curve. from that perspective, we feel that is the market most at risk for any change in the data. we know that powell will be very data dependent. all the investors are looking at each individual number, saying will it be higher, lower, in-line, how do we position? the market have become very

short-term in terms of how they are investing the assets. lizzy: one about gilts, do they need to take a breather? colin: we don't necessarily have a position in gilts at the moment. we prefer the treasury market for steepness, the german bund steepener, as well. we have had positions in the past, but we have taken those long positions off. we are waiting to see what happens with the bank of england. also in terms of the new government in the u.k. we have the autumn segment of the budget coming up, which you have talked about extensively already. from that perspective, we are in wait and see mode for its. lizzy: it is my favorite subject. while we are on the u.k., is it time to buy u.k. equities given the relative instability? colin: from my notes, we have

just taken u.k. equity long off. we saw that as a defensive market. we couldn't predict if there was going to be turmoil. u.k. outperformed. we also think the new government is probably coming to the end of its honeymoon period, significant choices they will have to make. if some of the ideas they are putting forward come to fruition, you will see a very difficult -- it will be difficult for the u.k. market to attract capital if you are under regimes of taxing for capital gains. from our perspective, you have to be aware that the tax system in the u.k. could change, and that will make the attractiveness of u.k. assets different to what it is today. lizzy: that is really interesting. do you think this but could be a tipping point for an exodus of

investment out of the u.k.? colin: to be honest, that would just be a continuation of the trend, given not long ago, the u.k. market was over 20% of the global equity market. you can see this happening in the u.k. market. if you make it more burdensome for investors to invest in companies in the u.k., then you may as well go overseas, where the tax regimes are less onerous. lizzy: i have to end on a more positive note. more optimism today than we did a month ago after the shock of the u.s. jobs report. when the picture is more optimistic than then, why are we not seeing reflected in commodity prices? colin: we have talked before

about what is happening in the global manufacturing cycle. it continues to bottom out but we have been in this downtrend for manufacturing for 18 months now, nasa part of the economy that has really been suffering. that has to do with what is going on with china, europe, as well. if you see that manufacturing cycle turnaround, you see the demand for commodities start to pick up, this is where we get this divergence of views between the markets. on one side, the equity market is saying it will be fine. we should be in the risk. the commodities market is telling you, be careful, because growth will not look that great and demand for commodities is not looking great going forward. then you go to the bond market, pricing in 200 basis points of cuts in the u.s. in 12 months time. that is in line with what happens at the start of

recession. the bond market is beginning to price in a u.s. recession if 200 basis points is the right number of cuts. trying to put all that together with the different markets is very exciting right now. lizzy: brings us right back to that divergence between bonds and equities. we will wait to see who is right. colin graham, always good to have you with me on the program. coming up, we will look to the german politics. the far right side to win a regional election for the first time since world war ii. we will get you the latest from berlin. this is bloomberg. ♪ we invent them, we design them, we build them. and one day, we have to let them soar.

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lizzy: this is bloomberg markets. i'm lizzy burden. let's go to germany now. chancellor olaf scholz's ruling coalition is set for a landslide defeat in boats with rising populist parties on the extreme right and left. we can get more from alan crawford who joins us from berlin.

you have been reporting on this. how much of a shock is this result? alan: although it is initially rather shocking, the first far right party victory in a state election since the wartime, when the nazi party was winning elections. at the same time, the polls pointed to this. this party, alternative for germany, was already the second-biggest force in the two states we are talking about in eastern germany. it was the main opposition in the federal parliament in 2017. shocking but not hugely surprising. lizzy: in a way, they kind of sleepwalked into it. is it a harbinger of pain for the center of politics? alan: it is certainly an ominous sign. to be clear, this party is not entering state government, but

it is a clear indication that the electorate is not happy, especially in the eastern part of germany. with federal elections coming up in exactly a year, september 2025, it's a real warning shot for the ruling coalition in berlin which is already deeply unpopular. lizzy: do you actually think olaf scholz could do a macron, how will he react to this, how much is his position at risk from this? alan: he is bullheaded, so i expect him to charge full speed ahead, not really acknowledge it to some extent. realistically, he has no interest in collapsing his coalition. the polls show that his party would be obliterated, as with the other two in the coalition. i think people hang on. there is another state election in the eastern brandenburg,

surrounding berlin, and his party will probably do better there. i think he will have enough ground to cling on until the federal election in one year. lizzy: beyond that, longer-term, what does it mean for germany? alan: first of all, you mentioned france. this is not france, in the sense that the poll showed it was the center-right party leading the polls, having a chance to win the federal elections next year. they also did ok in these state elections yesterday. at the same time, the country just seems to be in all sorts of political and economic turmoil. you saw the volkswagen story. the economy is really not doing well. more importantly, this coalition seems unable to tackle the problems that voters feel most

obviously at the moment in the east of germany. lizzy: let's dive into what those issues are. do these results actually have any impact on policymaking in germany? alan: at face level, no. the far right party will not be in state governments. in any case, foreign policy, federal policy is not dictated in state parliaments, in these two states. nevertheless, you see the kind of gravitational pull of the right on the mainstream parties. we already see that with some snap decisions made on immigration by the coalition last week. we see in the center-right, christian democrats, toughening up on immigration.

as we did in the u.k. with the conservatives. we see this political dance that happens. i think that will only become more pronounced as the federal election comes closer. lizzy: let me ask you one more question about this volkswagen decision, at least mulling this unprecedented factory closure in germany. how significant is that, how big of a showdown could we see with the most powerful unions here? alan: of course, a decision with so many jobs at risk is hugely political, as well. schultz cannot seem to get any kind of a break at all from the news cycle. but it is interesting because the state of lower saxony, not

to be confused with saxony, which held their elections in the western state, lower saxony, which is home to volkswagen, has a seat on the board, so they have something of a say with company policy. that is a social democratic-run state. so we will see more tensions ahead. it's a very difficult political position to be in apart from the economic squeeze. lizzy: alan crawford, we thank you for the update in berlin. still ahead on the program, we will go to the middle east. joe biden saying benjamin netanyahu is not doing enough to end the war in gaza. thousands in israel's protest for a cease-fire. when is it coming? we will discuss next. this is bloomberg. ♪

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>> i have spoken to the american hostages, spoken to the mom and dad. we are not giving up. thank you. lizzy: that was president biden after meeting his hostage negotiating team this morning. he also said that he think benjamin netanyahu can do more to find a resolution. thousand protesting in the streets at labor market demand that benjamin netanyahu accept a cease-fire deal with hamas. it come days after six hostages were found by israeli military forces. we can get more on this with rosalyn matheson. thanks for joining me. protests on the streets of tel aviv. i wonder how significant the labor strike has been, those protests in israel?

rosalyn: it's interesting because this labor strike turned out to be a single day, we saw some disruption at government offices, at the airport, but it was quite widespread across industry, ministries, across the education sector. that reflects the level of concern about how long these hostage negotiations have gone on for without resolution. the fact that there is no cease-fire to the war in gaza, as you were saying, the revelation that six hostages seem to have been shot dead only a short time before they were found. really casting doubt on the process that israel has been involved in, particularly the role of benjamin netanyahu, whether or not we will get to the point where israel will severe -- seriously significant -- negotiate a cease-fire. the question is does it persuade netanyahu to change course, force them closer to that cease-fire, potential release of

those hostages. it is very unclear what netanyahu will do from here. lizzy: is there any real danger to his leadership from this fresh anger, this political pressure? rosalind: it's interesting because these protests are somewhat reminiscent of the large-scale protest we were sitting before october 7 last year, before the hamas attack on israel. weeks and months of large-scale protest against his leadership, tired of the legal problems he is facing, tired of his tack to the far right in israel. those went down during the war because people wanted to show unity in the minute but they have not gone away. those are still bubbling. the question is are they coming to the fore. people are concerned about the long-term it to the economy,

jobs, wondering if they will get a tax it. they are concerned that he is not pushing hard enough or that cease-fire, for that release of the hostages. will that imperil his leadership? unlikely to think. when the war does potentially die down, those things may come very much to the fore again inside israel. lizzy: you talked about the economic problems in israel. how about the scale of the economic hit from the strike itself? rosalind: it should be fairly minimal. a nationwide one-day strike doesn't tend to have much of an impact but it is coming on the backdrop of months of war on the part of israel. there is the boost to spending that can come from war, but also the depletion of manpower inside gaza. they had the difficulty of getting goods in and out of

israel at the moment. you can see that reflected in the comments by rating agencies. in the longer term, this is a damaging moment potentially for the israeli economy. people are worried about that, were read again about the uncertainty of their lives. those are things that could really come to press benjamin netanyahu in the future, of course, once the war starts to die down, people get back to a semblance of normalcy inside israel. for now, it is unlikely to damage his leadership. however, those questions will really start to emerge, when the fundamentally longer-term hit to the economy will be a friend of mind to people in the country. lizzy: i just spent a few weeks in the middle east. every day i came to set, waiting for a cease-fire deal. you had secretary of state antony blinken coming and going

to the middle east leaving empty-handed, no deal. what has been the u.s. reaction to the hostages, where do cease-fire efforts go from here? rosalind: you can sense that feeling of strong frustration from the u.s. they have been pushing for a cease-fire for months, as have qatar, egypt, other players try to get them through these fundamental sticking points. you saw that clip from joe biden earlier, saying he thinks netanyahu can and should be doing more. but they have been doing that for months and it has not produced a result. the fundamental sticking points, the purposes of the cease-fire, hamas wanted to be the pathway to an end to war. israel wants the right to resume fighting if need be, simply a pause in the war. how do you bridge that gap when it is so significant? really the pressure is on to give further ground on either side.

but we don't have a sense of when talks will resume, when there will be a fresh proposal. it is very unclear if we will ever get to a point where this will be resolved. lizzy: finally, the most important aspect of this story is the human story here. what do we know of the hostages held by hamas, the recovered bodies, as well? rosalind: we know that one of them was a u.s. national. these were people in that were taken in the moment, in the attack by hamas on israel. some came from an area near gaza, others were at that music festival, where a lot of people were abducted. some of them quite young. we don't know the status of many of the other hostages who are somewhere inside gaza. not sure where they are or their status. lizzy: rosalind mathieson, thank you for the update. so important, really good to

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lizzy: this is bloomberg markets. i am lizzy burden in rainy london. our stocks are finishing up the day in european trading. you're looking at the dax in frankfurt higher .1%. the ftse lower .2% in london. if we break it down by sector, we have seen gains for real estate today driven by right move, this potential deal from rupert murdoch's rea to invest in right move. we were discussion that with aaron kirchfeld. right move has hired 27% off the back of this news. real estate hired 1.9%, about

half of sectors in positive territory. bottom of the basket is retail, lower .8%. if we dive into why, partly is because of the luxury stocks sliding. bank of america analysts cutting their price targets for the sector. they say consensus expectations could be too high. they have also had the weak economic data from china, a key market for luxury goods also weighing on these stocks. i am thinking of burberry, lvmh, all of them there. hermes and kerring taken the brunt of it. august will be the litmus test for that demand in the second half according to bank of america. i want to stay on that theme of china because the pessimism around that data has also hit the miners. you have seen a slump in iron ore today.

bhp, rio tinto, glencore as well. rio tinto lower 1.4% as we closed trading in europe. all weighing on the ftse. the ftse 100 lower .2% today. that is where we end trading today in terms of the equity picture. if we take a look at bonds, we have gilt yields on the two-year currently higher one basis point. the german tenure -- the german 10 year yield higher. euro-dollar at 1.10. brent at $76 a barrel. lots of tailwinds as well. traders weighing this plan production rise from opec-plus next month against the lower output in libya and it all comes back to china. those economic headwinds weighing on brent as well. we can discuss the fx story

next. we have kit juckes, society general chief fx analyst. lovely to have you with us. thanks for making time on labor day. we were just talking to our reporter alan crawford based out of germany about the political uncertainty over the weekend, the populist party is stealing the show. i wonder how much that will loom over the euro? we are not seeing it today, evidently. kit: we have been ignoring french politics while doing olympics instead now everyone is paying attention to the political story there as well. i think it is a question of how much it affects the economic backdrop and the reality is we have spent the last couple of weeks watching soggy european data generate soggy german data and getting worried about it. lizzy: speaking of economic

backdrops you've had a better-than-expected economy for switzerland. you see more upside for the swiss franc? kit: some. the challenge with the swiss franc is always that the swiss national bank does not wanted to go up much. they do not need the currency to weigh on inflation, they have inflation back under control. you look at them and think they will start intervening again soon. the move. it is limited. for the last months what we have seen as people have been selling the dollar, they have been buying sterling and swiss franc and just for now sterling has the upper hand because no one will turn around and cut rates aggressively because of the pound strength. there are other alternatives. that is different. lizzy: speaking of the pound, i wonder if you can settle something for me. we've been hearing from the government claiming that if the

chancellor rachel reeves had not scrapped the winter fuel payment for 10 million pensioners to fill a hole in public finances there would've been a run on the pound a la liz truss. do you think that is political hyperbole? kit: i think it is political hyperbole at this point. a liz truss moment has been used lots of times. there was a hit of confidence from a new chancellor coming in and doing something that seemed extraordinarily unwise. what we need from a labor government is a government that comes in with progrowth policies that do not make the fiscal position untenable and the balance of payments untenable. i don't know that they are doing enough on that in general, particular on balance of payments. lizzy: not asking much of them there. have to talk about the dollar. is there any chance of a resounding comeback for the greenback? kit: yes.

in terms of where we are now the market gets data from the ism and the labor market. we had a huge reaction to our soft landing ism under some weak labor market data a month ago that set in motion positions being covered in the dollar more broadly. the yen had started the process but then people talk about what is next. we are pricing 1% rate cuts in the next three fed meetings. somewhere they have to find a 50 basis point move. if prior raise payroll -- if friday's payroll data are not as weak as expected, probably weaker than expected, i don't know if we can hold onto the current pricing of the speed of rate cuts in the near term for long. if you have a big enough correction in the rates markets the dollar will find some support. the rates market is priced for a faster pace of rate cutting that i think makes sense unless the economic data gets a lot worse

faster than seems likely. we could still expect that to happen. the foreign exchange market has turned the dollar lower because the rate cycle has turned in so much money when into dollars. i think it is a straight line decline. if you have the 200,000 payroll number on friday the dollar will probably go up. people like me of talked about the end of the rate hiking cycle and the start of the easing cycle and the end of the dollar bull cycle a few times last couple of years and got it wrong. we have to be humble here. lizzy: i respect the humility. finally, this prospect of fed cuts is giving investors the confidence to take a bit more of a risk, to go for the higher-yielding currency. what is a good pick in your view? kit: the ones that have not been bob so aggressively. the euro has done well but if you look at the rates it is hard to get excited. the australian dollar looks like

the best pick at this time. probably will not cut rates. we have priced in negativity already. the canadian dollar, there is a lot of negative pricing in that as well. we need to be wary of emerging markets currencies and to establish that what is happening is a gossamer soft landing in the united states rather than a faster slow down. if it is a soft landing than they will come back to fashion before long. if you have a huge appetite for volatility you can always go back to the yen, because purchasing power parity would suggest dollar-yen should be under 100. although it needs a long rest, a big calm down after the moves we have had, it could eventually get stronger. those are the ones i would pick. the yen only after a spiff -- only after a stiff drink.

for now australian dollar is my pick. lizzy: we could all do with the big calm down. kit juckes, we thank you as always for joining us. still ahead, labor day in the u.s. kicks off the final stretch of the race for the white house. more on the politics on both sides of the atlantic next. stay with us. this is bloomberg. ♪

lizzy: now for a look at the u.s. election and how each candidate is spending their labor day, starting with the democratic presidential nominee kamala harris. she will be with president biden

today in pittsburgh and we can discuss with bloomberg's eric martin who is on the road, watching all of this for us. we are expecting vice president kamala harris to say u.s. steel should remain domestically owned and operated in this visit to pittsburgh today. i wonder what more we know? eric: this was said a short time ago by my colleague breaking the news vice president harris saying u.s. steel should be domestically owned and operated. this is in line with the policy that president biden has previously talked about. it is the first time she has spoken on this issue. donald trump has said that were he president he would block the acquisition. a lot on united steelworkers and the steel union, which does not

want this acquisition to go through. also politicians like jd vance are against this as well as pennsylvania's cheap senators. -- as well as pennsylvania's two senators. a lot on what would happen to american jobs if u.s. steel were owned by a foreign company. lizzy: what we know about how harris' relationship with organized labor would differ from joe biden's relationship? eric: [inaudible] fight it is the most labor friendly, most union president -- most union friendly president you have seen in the u.s. since -- biden is the most labor friendly, most union friendly president in the u.s. since franklin roosevelt.

harris certainly does have a strong relationship with the teachers union conference. she also has strong report from afl-cio. very much in line with the democratic strength, that relationship with organized labor. lizzy: eric martin, we will leave it there. i feel like i am on the road with you. thank you for covering the campaign. we will stick with politics and go to the u.k.. parliament back in session. back-to-school vibes in westminster and the prime minister warning of "painful" measures to fix britain's public finances. senior label officials telling us they are concerned about the government's gloomy messaging. philip aldrich joins me more for now. we have the chancellor rachel

reeves taking questions in the house of commons tomorrow. over the weekend labor has been saying of the they have not scrapped this fuel subsidy for pensioners there would've been a run-on the power and kit juckes said that was effectively political hyperbole. it is not measured rhetoric. does it undermine the chancellor's credibility as an next boe economist? philip: it was lucy powell who said that on the broadcast round on sunday. it is nonsense according to other members -- other market participants. it does undermine that credibility in the sense that it is unnecessarily over the top. one of the other labour ministers has come out this afternoon and said -- the education secretary has asked to

repeat that claim. it was sunday broadcast round before back-to-school. everyone a bit casual. lizzy: we also had an interesting story from our colleague on your u.k. economy team. he has fresh data on the labor market and it shows this awkward level of wage growth in the u.k. not just awkward for the bank of england, it is awkward for keir starmer as well. you have wage growth and skill shortages in certain sectors like construction and hospitality, what is the government doing to help and is it doing it fast enough? you've written loads about economic activity -- economic inactivity. philip: economic inactivity is one of the big barriers on growth in the country. the conservative government has been pushing up the minimum wage. one of the attractions of doing that is making work pay makes it

more likely people will go off long-term sickness benefits into work if it is possible. labour are proposing a more rapid increase in the minimum wage. there has been issues around the welfare budget, the way it is designed. you can come up your benefits, you get a 70% tax rate. it is a massive disincentive. labour are saying they will look at welfare. obviously there is talk about tax rises in the budget. there are measures which labor would naturally find more difficult to deal with which would be on the benefit side. we might see something october 30 on that. lizzy: we had the prime minister in the rose garden sounding really gloomy. when you analyze the economic data in the u.k. do you think he is justified in being that

gloomy and being so careful about public finances? lizzy: there are -- philip: there are two strings. the economic picture is getting better. we are growing faster than expected. on that point he is wrong but on the fiscal point he is right. despite the faster growth we have seen lower tax receipts than was expected under the slower growth. that means in theory the country is not as tax rich as it should be and that means when it comes to the budget and the opr we have to make these judgments about how much revenue the government can expect to receive and how much is paying out and welfare. that has gone up quite a lot as well. it does look like there is a bit of a fiscal whole. regardless of rachel reeves claims about there being this massive inherited blackhole, there clearly is to do agree -- there clearly is to agree.

the broader question is what is happening with the tax richness of the economy and whether we can afford the spending despite faster growth. there is good and bad but from the fiscal point of view it ends up being a blackhole. lizzy: and what chancellor does not complain about their economic inheritance. we thank you for that insight. another chip giant is reporting its earnings after the ballot on thursday. -- after the bell. we are expecting it to show healthy growth. our quarterly report will be absolutely scoured for clues on the longevity of heavy corporate spending on artificial intelligence. we have the nvidia earnings, we have our interview with the ceo. r&d spending also very much in focus as broadcom looks to entrench its leading position in the high memory market. we will look to those earnings

from that semiconductor supplier on thursday. coming up, more in this space. a wild week for nvidia. shares of one of the most valuable companies on the planet reported those earnings, beating the street, but still disappointing investors. we will bring you the interview with the ceo next. this is bloomberg. ♪ when you automate sales tax with avalara, you don't have to worry about things like changing tax rates, exemption certificates or filing returns. avalarahhh ahhh ahhh

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