>> the fed is focused on the labor market. >> there is some slowing, but it is not deterioration of the labor market. >> these are still numbers that are very constructive for the labor market right now. >> everything is on the table for this fed. >> the distribution of risks with respect to the labor market are skewed to the downside even after this 50 basis point move. announcer: this is "bloomberg surveillance." jonathan: let's get your trading day started. liver from new york city this morning, good morning, good morning. "bloomberg surveillance" starts

now. well off all-time highs. this equity market rally is firmly on pause. i this morning. we are pulling back by .3% on the s&p. we are down by .4% on the nasdaq. your 24 hours look like this. the next 24 hours, critical for the labor market. 8:30 we have jobless claims. then it is all about tomorrow. payrolls friday just around the corner. lisa: it is hard to make much of the pause, yet it is notable given the fact that we have had the biggest three quarter gain for the s&p 500. in other words, how potentially surprise could this market if growth scares are no longer the floor, but the idea that the fed is not going to deliver on the right because people were expecting. jonathan: the rest of the world leaving to -- leading to an easing stance. this from governor bailey speaking to the press. could become more activist when

it comes to rate cuts. an executive board member at the ecb, we cannot ignore the headwinds to growth. it looks like the ecb and bank of england are preparing to play catch up here. lisa: as long as inflation data remains good they can keep cutting rates more aggressively. isabel was the hawk on the committee, the person that wanted to say, inflation is still a concern. for her to pave the way with a gilded rate cut certainly this month, if not going again, raises the question, is the ecb going to be so far behind the federal reserve by the end of this year? jonathan: the euro a touch weaker, the pound a whole lot weaker. need to pick up on crude as well. three-day rally on wti and brent. 75 on brent. the bti just short of 72. annmarie: the market is waiting for israel's response. there is going to be significant retaliation and it could target

oil production facilities. that is the concern right now and even though we've talked about the fact that there is a lot of supply, there is spare capacity and china's demand is not quite as up to speed. there is geopolitical concern and the fact that there could be escalation is starting to add risk. lisa: some people are asking, what took them so long? why haven't we gotten more of this response in the oil market? putting aside the potential escalation, the fact that suddenly this is -- this has reintroduced this question of, our bonds going to act like a haven asset given the fact that could raise the specter of noisy inflationary pressures in the short term? jonathan: always hard to depend on what the central risk is. you have a very different story in the bond market.

what we need to get our heads around this morning, many barrels are at risk here? if you go after energy infrastructure in iran, are we talking about compromising the whole strait of hormuz as well? annmarie: what does this mean in terms of iranian retaliation? will they go after oil facilities in some u.s. allies? that is why there is a concern. does this become a tit for tat within the energy space? jonathan: coming up this hour, this is what your lineup looks like. he will catch up with matt ms. kenneth hancock. stephen cook of cfr on israel's next move. and jordan rochester. we will speak to him as yen makes a big comeback. investors are awaiting job claims ahead of payrolls tomorrow. matt ms. skin writing, the economic surprise index likely me back from 50 basis point rate

cuts next fed meeting. powell hinted at this in his next speech. matt, this market rally is broadening. do you think the data and the earnings that are still to come will validate this move? matt: we don't believe this data is going to be that strong. i think that the fed is going to have to go back from 50 basis points. powell has communicated this. he has done a good job of it. then this week he is like, look, it is going to be more likely 25. that is what we put in the summary of economic projections. the data is getting better. he is likely going to pull back on the dovish tone. that is going to mean the market is not going to be as happy about this. we are probably going to continue to see chop. the last time we had three great quarters like this october was a tough month. so we expect some volatility here near term. we think there is going to be some stuff to look at in the bond market in particular, to look at as opportunities, but

near term some volatility may be in store. jonathan: just to be clear, are you saying good news might not be good news? matt: unfortunately we are back in the future, or back to wherever that was. it is a phase where good news is bad news, but the bond market had priced in so many cuts and the near term overly optimistic on the cut scenario i think yields could come up a little bit. it will be a buying opportunity for long-term investors. we look at it as an opportunity. but you also have other things. you have geopolitical lit -- geopolitical risk. you have all of these inflationary pressures. it is too soon for the fed to go back to saying, this could be transitory. they already got burnt on transitory before. you can say we have all of these inflationary pressures near-term, we are just going to overlook them. i think they have to be a little hawkish in the short term. lisa: other people who share

your view, matt, also see equity outperformance. they also see this positivity, this better-than-expected economic data will support riskier assets at the behest of bonds that might be range-bound. your view is the opposite. the idea that it is time to go into bonds and be a much more cautious and it comes to risk assets. can you explain how you come to that conclusion? matt: lot of good news is priced in. on a trailing basis on the s&p 500 we are at 26 plus p/e ratio. typically after 26 she go to 27. there has never been a 10-year return that was positive from that level. we are already at peak valuations. i didn't think broadening of the market was going to be chinese equities going up like a hockey stick, but that is where we are. it is a bit of that hot money. we are seeing these signs where

hot money is running around. maybe it is yolo capital, but at the end of the day this money is not a sign or symptom of healthy market behavior. if you get some geopolitical risk, some inflationary pressures, some hawkish fed i think that means short-term some corrective price action. lisa: i look forward to the movie "hot money." the idea of china, you were talking about that is the broadening out that people were not expecting. there are economists in the region that are expecting one point $4 trillion of additional fiscal stimulus, given the reception to get that has been unleashed so far. at what point is this no longer hot money? at what point can you look at the fiscal stimulus and say, this is not tourism, but something that has changed? matt: it comes back to earnings. earnings in chinese equities are where they were in 2011.

it has been over a decade and earnings growth has gone nowhere. the earnings in the chinese equity market has risen of late, but at the end of the day that is why the s&p 500 and u.s. equities have been the dominant equity market. because the earnings growth are the best in the world. it doesn't matter if you are a small cap stop -- stock, at the end of the day earnings growth is what drives equity. stocks followed profits. it is really simple for us. at the end of the day chinese equities need to break out on an earnings basis and they are still caught where they were the last decade. until we see that we think this is more of a value trap, in hot money chasing stimulus headlines, then a fundamental change in the market. annmarie: can we go back to the jobs picture? right now the united states has two domestic issues that is going to affect the job market. the hurricanes and dr. workers.

i'm more interested in the november 1 report. what are you expecting? matt: a lot of noise. great point. the bureau of labor statistics jobs are work was this kind of quality data point. the revisions have been massive overall. you have had to go back over year and change data. every month is revised, and then you have all of this different, maybe it is one-off events, or shorter-term events that are probably going to really cause a lot of data issues. it is almost like you have a blindfold on as it relates to the fed, because then you're trying to make policy based on employment data, which is the most important and you are looking at right now. initial jobs claims have been located if there is going to be some lower quality elements to the data in the next couple of months it is a top time to really be, we are going to take this with a grain of salt.

it is a pivotal time for the fed to really stick the soft landing. if they really want to do that we think they have to cut aggressively, and the data is not going to be easy for them to follow. annmarie: this bad news on november 1 mean a 50 basis point cut? matt: i think so. if the jobs data does diminish i don't think they can give that excuses to say, there is this, that, and the other thing. i think they have to go ahead with the 50 basis point cut. we are going to have a lot of data across the board. the conference boards, consumer survey, you can see jobs hard to get keeps getting harder and harder to find. so, it is all in the mosaic of the jobs data. if you have a couple of bad reports on an they have the ability to brush that off. i think they are going to have to cut. jonathan: matt miskin of john

hancock owing into payrolls tomorrow 8:30 eastern time. i think a lot of people have come on this program and put more weight on the october report and even less weight on the september report we get tomorrow morning. primarily because there's going to be a lot of disruption in the next month and it is going to be interesting to see if this fed comes out and sets up this market to look through what could be week is. lisa: and which way do they look through it? do they err on the side of cutting much more aggressively or on the side of being more tepid? that also will tell people way the bigger concern is and where they are putting their thumb on the scale when it comes to the size and speed of the rate cuts. jonathan: the median estimate, one hunter 50,000. the previous number, 142,000. he was your bloomberg brief with yahaira jacquez. >> the european union reportedly has enough support to impose definitive tariffs as highs 45% on imported electric vehicles

made in china. according to reuters, france, greece, italy, and poland will vote in favor of the tariffs, likely giving the eu enough support to pass the boat. this comes despite the risk of retaliation from beijing. the eu's member states are expected to vote tomorrow. toyota is pushing back plans to start making its first u.s.-made electric vehicle. the japanese carmaker initially targeted late next year to begin production, at the company spokesperson says that has slipped into 2026. this coming as demand for battery-powered vehicles has slowed. toyota says it is committed to making a battery-powered suv at a factory in georgetown, kentucky, and plans to sell as many -- plans to sell leds within the next two years. it is time for china to unleash a fiscal bazooka. that is according to a leading economist in china. china has room to ramp up

support by issuing as much as one point $4 trillion in special debt, underscoring expectations for beijing to expand public spending as part of its stimulus package. it could lift confidence by drastically raising government investment in public projects. that is your bloomberg brief. jonathan: more in about 30 minutes time. woke up in shock, looked at the hang seng, and it was in the right. the hang seng snapping a 13-day rally. over that period we are talking about means of more than 30%. lisa: how many notes have you read saying, we are tourists. we are not committed, we are not settling into chinese equities. that is what you felt. people solve a 30%, they said, we will hold that, and wait to see what else is next. jonathan: the hang seng down by 1.5%. next up, a man-made disaster. >> this is incredibly

consequential. the last thing we need on top of that is a man-made disaster on the ports. we are getting pushed back already. we are hearing from folks that they are getting trouble getting products. jonathan: the latest on the strikes. live from new york city this morning, good morning. ♪

jonathan: this rally stalled. we are down about .4% on the s&p 500. there is a growing sense that once we get over these near-term hurdles this rally can carry on. goldman sachs, i am bullish on equities. i am worried that my 6000 target is too low. in the bond market, yields higher. under surveillance this morning, a man-made disaster.

>> this natural disaster is incredibly consequential. the last thing we need on top of that is a man-made disaster. what is going on at the ports. we are getting pushed back already. we are hearing from the folks that they are having trouble getting products they need to cover the port strike. the owners are making tens of millions of dollars. last thing they need is lost profit off of this. it is time to get the strike done. jonathan: president biden up in pressure for port employers to reach a deal as every major container port on the atlantic and gulf coast remain shuttered. he joined vice president, -- kamala harris in blaming shipping companies with the election just around the corner. kailey leinz joins us for more. how far apart of these two sides? kailey: on wages, according to the transportation secretary pete buttigieg, they are not that far apart. before this strike began on monday the u.s. maritime liens -- lines --

with the union is looking for is a 77% raise over the six years of the contract. and what the starting rate to be five dollars over what the year six term was in the contract that just expired. they want it to go up five dollars for each year, ultimately culminating at $69 an hour by the final year. what the union leader wants is that agreement to be a pre-condition for a return to the bargaining table. the two sides of talking right now. it is unclear when they are going to be back at the table to discuss with the other issues are that the union would like to see resolved, which deal with things like automation or semi-automation at these ports. that is potentially a thornier issue. the other parts of this negotiation that wages, the union says, would unlock, could be more difficult and there could be further distance between the two sides on those issues. annmarie: that is a pretty substantial wage increase. especially when you make -- when

you look at what they are making right now. most of these individuals are making north of $100,000 a year. does the issue come down to automation and that language in this contract? annmarie: yeah. the union says they want ironclad guarantees around automation and that that language is important. to get to the nuanced argument around what the language will be the union is saying, you have to meet those wage demands first. what they are saying about those higher end earners of dockworkers is they have to work incredibly long hours to make that kind of money. they want that factored in. as you talk of this notion that this is pretty sizable increase is what they would point to, what president biden is pointing to his, he is on the side of the union. when he is talking about a man-made disaster he is putting it at the foot of the men and women who control these companies. he said there -- their profits

went up 800% during the pandemic and that workers deserve a fair share. he wants to see collective bargaining as the mechanism for making that fair wage increase happen, which is why this white house is maintaining a will not be invoking taft-hartley to stop this strike, even as we get closer to election day. annmarie: president biden yesterday saying he directed his team to monitor any "price gouging" he thinks these carriers could be going after. joe biden has said he is union joe. tim walz at the debate yesterday said, i'm a union guy. how is kamala harris talking to the unions? annmarie: she has been trying to align herself with this administration. describing them as a pro-union administration. she has made it clear she has made it clear she would not be changing the tune of president biden when it comes to being on the side of organized labor. we are actually seeing her today traveling to states in which organized labor is important. she will be spending most of the day today in wisconsin, then

traveling to michigan. these are these rust belt states in which union workers are incredibly important. as she tries to secure them in order to win the electoral college. this is a tricky line for her to dance here. she wants to be pro-union, potentially when the effects of this strike could be felt, which economists think could be several weeks, it will be a while before shortages are visible to the american people, that could create a problem as that brings us closer to election day. but she also does not want to alienate the labor vote. lisa: biden talked about this as a man-made disaster. it was in contrast with something that was not man-made, and that was the devastation you are seeing in southern states as a result of hurricane helene. there has been a focus on getting federal funding to cover almost all of the spending. some estimate the cost of the storm could be $160 billion. agricultural losses could be $7 billion alone.

how difficult is it to get the federal government to release this funding in short-term at a point where this is just contentious? the idea of spending and where this is going to come from? kailey: the emergency money can come quicker given existing authority. where the disaster declarations have been made, that money is already flowing. i said looking at infrastructure, the transportation department does have money waiting to be deployed wants the actual cleanup is over and they actually start looking at repair and recovery. that said, this white house has made it clear they could potentially need to put in a supplemental funding request to congress. you are absolutely right. visiting the disaster areas yesterday in north carolina, each of them announced 100% federal cost share what the recovery is going to cost.

once we know what that dollar figure is is when we will know how much congress is going to need to be involved here, with the reminder that congress is not scheduled to be back until after the election. members of the house, the senate from these states that were affected have called for them to return to address this. it is unclear whether leadership is going to adhere to that and come back to washington. lisa: there are 33 days left, i believe, may be less at this point, until the election. there are a number of issues, whether it is the strikes, what is going on in the southern states, there it is the potential for the middle east conflict to send oil prices higher, that could cause a shift in the economic backdrop heading into the election. what is the level of concern among people you speak to about that? kailey: it is october. there is always room for surprise. we got three of them in the first few days of october. that is a risk, especially when it comes to those factors you are pointing to, could affect

the economy. democrats are very encouraged by the fact that kamala harris has been pulling better on the economy not just relative to joe biden, donald trump as well. with our latest poll trailing him on the overall issue by just four points and leading him in some areas when it comes to things like housing and helping the middle class. the concern is if we start to see a more material turn in the economy or inflation were to spike again, higher prices at the grocery store, the gas pump, that could deteriorate sentiment. obviously a lot of economic feeling right now may be paid in with less than five weeks to go, if there is a change as voters get ready to head to the booth on election day it is seen that the incumbent administration could feel the most direct blame for that and that could be something that is problematic. on the other hand, those foreign policy-related issues that could lead to a higher spike in oil

prices, the fact that she has been in the situation room is something she and the white house have been playing up, trying to make her look like someone who could be commander-in-chief. disadvantage could come with it too. jonathan: kailey leinz, appreciate the update. from the nation's capital on some of the difficulties facing this country right now. coming up, steven cook from cfr. that conversation just around the corner. equity futures on the s&p down .4%. -- .3%. this is bloomberg. ♪

jonathan: jobless claims, 8:30 eastern time. 24 hours later we will get payrolls in america. futures on the s&p pulling back. the view from bank of america, the risk is to the upside absent a miss. we think slight weakness will be overlooked by investors and sizable mrs. reignite recession fears. you're down by .7% on the russell 2000. if we get to the bond market story, the front end of the curve, the 2-year, in the 3.60's. 3.6580 on a two-year. up a single basis point. lisa: a number of pieces i have

been reading highlight how range bound is the new normal. the upside and downside is relatively balanced. a lot of people expecting that probably we have seen the bulk of the rate cuts being priced in. now the question is how good or bad is the economy. to your point, normally in september we see a ball until month. he saw the best set timber -- a volatile month. we saw the best returns. people snubbing their nose at this idea it is seasonality. jonathan: on a 10 year, in and around 3.80. let's turn to foreign exchange. three days of sterling we this. if we closed here right now it would be the biggest one-day loss going back to march 2023. avenue bailey speaking to the guardian newspaper, the quote coming out of that suggesting he is ready to get more aggressive as inflation heads in this direction. lisa: he says he is going to get more aggressive if they end up with inflation staying where it

is. the key question is, how much of this means that the bank of england and the ecb will be actually on par with the federal reserve? everyone was expecting the fed to move more aggressively, but is it may be the flipside, that you might actually see a bit more dollar strength after a pretty steady streak of dollar weakening? jonathan: this is the u.k.. particularly for the ecb europe is struggling. the executive board member of the european central bank highlighting weaker growth on the continent. lisa: what is shocking to me is that they were talking about weakening growth. we could all see it. we have already about it. it has been visible in the data. but the inflation rate has not been that high, and now we saw it fall below that 2% level in places like germany, in places like spain. you have to wonder, what else do they need?

if they are a single band -- single mandate central bank. jonathan: the trend is lower inflation across the continent, at least for now. under surveillance this morning, our top story, catastrophe modeling. the firm kcc estimated the destruction from hurricane helene will cost insurers $6.4 billion. president biden and vice president kamala harris touring parts of the southeast and announcing steps to bolster recovery efforts. annmarie: devastating photos as the president was surveying the area yesterday. two issues remain that are top of mind for these governors. one is safe drinking water. and also power. still more than one million people are without power in a lot of the states. caught up with someone from governor youngkin's office yesterday and talked about the fact that this disaster declaration was the first time for virginia since hurricane irene in 2011, trying to put into context how bad this is.

they are saying, it is communities of 200, 300 people being washed away. they feel that is why there has not been as much coverage of what is going on in these states. jonathan: also communities across this country, particularly in places like north carolina and tennessee, that you would not anticipate with scenes like this. lisa: we think about $6 billion of insurance costs, that is a pittance relative to the 160 billion dollars of potential damage. people living in some of these smaller towns and saying, why should i spend an extra $6,000 a year for flood insurance? what is the likelihood? we are not in a hurricane zone. yet that is what happened with the tides rising and with three feet of water dropping across the entirety of tennessee as we learned the other day. jonathan: especially when insurance in this country is more expensive than it has been over the last few years. let's get to the trauma in europe. the eu preparing to vote

tomorrow for terraces highs 45% on chinese made ev's. reuters reporting to -- reuters reporting the measure has enough votes to pass. germany indicating it plans to abstain. annmarie: that is a u-turn from what the german foreign minister said to me. she insinuated that germany was not for these tariffs, so i asked her, point-blank, are you on board? she said, of course. but then she did go want to say, the world is not black-and-white. we have to look at different car companies. the issue is the german government and german auto sector are miles apart and it comes to how they deal with china and dumping on the eu market. jonathan: is this because they don't think it is the right policy or they are scared of offending their chinese counterparts? lisa: for the car companies, if you ask them, they are clear about it. some half of their sales are in

china. some significant proportion of their overall business comes from the world's second-biggest economy. this is something they do not want to play around with because their business model would fundamentally shift if china put up the gates in terms of european automakers selling into that country. jonathan: we will be covering this story tomorrow, no doubt. let's turn to israel striking beirut after eight of its soldiers were killed in southern lebanon. the world a writing israel's response to iran a posthumous missile attack, with president biden urging israel to hold off. can you walk us through possible targets? there has been a broader conversation more recently about the prospect of targeting cash prospect of targeting energy infrastructure. how likely is that? >> it seems clear at this point that a reprisal is coming. some of the options on the table could be targeting infrastructure similar to what happened in april when israel went after specific air defense

battery that was a very targeted strike. but then it ended there. this time around there is a feeling that the response will have to be more forceful and it will take the route of even covert operations targeting specific irgc commanders. the other option being discussed is targeting energy infrastructure. just to give you some numbers, iran produces about 3.3 million barrels per day of oil. about half of that is consumed domestically. if israel wanted to inflict economic pain on iran but without causing a massive spike in the price of oil one option is to target specific processing refineries about one refinery on the gulf -- that would take out about 400 to 500,000 barrels per day. the impact would be quite astute for iran, but not necessarily when it comes to global oil

supply. something to bear in mind there. that is one of the options being discussed. then quite literally the last option is the so-called nuclear option, where israel will go after some of the nuclear sites around iran. operationally very difficult. would entail coordination with the u.s.. it is unclear whether israel has the military capability to take out these nuclear facilities and limit their ability to function in a meaningful capacity. add to that u.s. president joe biden was asked about it yesterday he -- and he said, while he supports israel's right to respond, they would not support them attacking these nuclear sites. it seems as though the other options will be more likely. jonathan: quite literally the nuclear option. joumanna bercetche out of dubai on the latest there. steven cook joins us now, at the council of foreign relations. come back to the program. we would love your thoughts on what you -- on where you think

this is going. if you have an idea of what retaliation looks like. how are you thinking about retaliation? steven: all of them. i think the israelis are not going to limit themselves one way or another and they are clearly not listening to the president of the united states. i think there is a menu of options for the israelis that include economic sites, leadership sites, missile sites, up to and including the nuclear program. i don't think the israelis can hope to destroy iran's nuclear program, but they can make a big point by hitting parts of it. i would remind everybody that it is -- that it is the only country that has ever engaged in nonproliferation by force is israel. in both iraq and syria. there is precedent for them to hit nuclear facilities. there were 180 one ballistic missiles fired at israel from iran. that puts this in a much

different situation than we were last april. the israelis are going to make a strong point. i think many of those sites that are under discussion may be hit, and maybe simultaneously. annmarie: yesterday the president said israel has the right to respond, but they have to respond proportionally. does israel respond to the intent of destruction iran does, or the destruction iran got to check up they did not destroy much. all of this was struck down. steven: i think there was probably more damage than the israeli sensors are letting us know, but nevertheless i think that regardless of what the president says, and i know that is an extraordinary thing to say, it is clear the israeli government has not been listening to president biden for quite some time. we are in this interregnum before a presidential election, so whatever the president, whatever people are saying in washington about proportionality, the israelis

are going to choose their targets as they see fit and in-line with the point they want to make and the damage they want to do to iran's ability to threaten israel's security. that puts iran's military bases, irgc headquarters, energy infrastructure, and even possibly the nuclear program, in israel's crosshairs. annmarie: you mentioned the election. i want to get your take on what antony blinken wrote this week. the biden administration's strategy has put the u.s. in a stronger geopolitical position today than it had four years ago. is he correct? steven: it is hard to make that case, particularly in the region i focus on. it is not to suggest the instability in the region is directly related to the biden administration's policies. i think the deterrence the united states has been engaged in throughout the biden administration is something that the trump administration also

engaged in, and something the obama administration ok -- engaged in. this has been a bipartisan affair in which the u.s. has looked at the malign activities and chaos iran has caused route the middle east and decided to respond in minimalist ways, calling for de-escalation, not willing to take on iran directly. i'm not saying we should have gone into iran and engaged in regime change, the iranians have been able to build up to the point that the who these now have leverage over shipping in the red sea. that is a very serious geopolitical problem for the united states and its partners around the world. with all due respect to secretary blinken, when it comes to the middle east, certainly the united states is not in a more advantageous geopolitical position. lisa: what is -- what does a broadening out in this conflict look like? i'm struck the fact that we have

not heard much from saudi arabia. even lebanon. the question of which other countries will get involved, who will align with iran, given that russia is otherwise occupied, and who is going to align to counter iran? steven: it is clear our partners in the golf are not unhappy with the damage that israel has done to hezbollah. all of these would agree that the middle east would be better without hezbollah and hamas. they have been frustrated with the methods the israelis have used my particularly with hamas, but they are not unhappy with this developer. the question is whether they will get directly involved. to some extent they have with their integration into centcom. passing information when it comes to these ballistic missile attacks the iranians have engaged in.

but the saudi's and a maronis and others have signaled that they do not want to be in the middle of an israel-iran war. they are, but dubai is vulnerable to iran's missile strikes. so is riyadh. as a result the a maronis -- maronis -- a conduit, and by association israel in this episode. this is a conflict between israel and iran, and israel can expect support from the united states. technical support from arab governments, but not high profile support, and there might be some support forthcoming to israel and the united states from european powers like great britain and france. jonathan: one quick final question. forgive me, it could be the title of an essay. can you tell me why it has been so difficult for america to establish deterrence in the region?

why that has been so elusive over the last year? steven: it is our hangover from iraq. we went into iraq without -- let's just put it this way. it was a strategic blunder. and now foreign policy, policy makers have been quite careful about the use of force, even when the use of warranted. jonathan: steven cook, thank you, sir. steven cook of cfr. if you are just tuning in, equities just a little bit softer on the back of that conversation on the middle east. let's get you an update on stories elsewhere. here is your bloomberg reef with yahaira jacquez. yahaira: warren buffett is still selling bank of america stock, but not as much as before. buffett sold three hunted $38 million worth of shares this week, a sharp drop from earlier rounds. buffett has not said why he is cutting back on brookshire's

massive steak, but even then the conglomerate still ranks as the top bank of america shareholder. softbank founder mushy yoshi sun is outlining an aggressive timeline for the adoption of ais on -- ai. according to him ai will soon be able to do things like monitor the health of family members, do the grocery shopping, make reservations, and much more. son is known for making bold calls that have led to big wins, but big losses as well. eli lilly's lot poster weight loss drugs are officially back in stock in the u.s. the food and drug administration and announcing the shortage is over. the agency also warning knockoff drugmakers that there is legal restrict -- there are legal restrictions when there is not a shortage. that is a blow to compounding pharmacies that have been able to capitalize on the limited supply of the medications. that is your bloomberg reef. jonathan: up next, yen weakness

back in the spotlight. >> i think the moves from the japanese currency were very much based on questions over policy continuity in japan under the new japanese administration and the administration's direction toward monetary policy. jonathan: worst day for the japanese yen in more than two years. that conversation up next with jordan rochester of mizuho. ♪

jonathan: live from new york, welcome to the program. stocks pulling back by .3% on the s&p. yields up on a 10 year, 3.8075. yen weakness back in the spotlight. >> i think the moves from the japanese currency were very much based on questions over policy

continuity in japan under the new administration. and the administration's direction toward monetary policy. any kind of market volatility for the japanese yen is likely to die down in the coming months. jonathan: the japanese yen coming off of its worst day in more than two years as the prime minister suggests the economy is not ready for new rate hikes. jordan rochester of mizuho looking for the same. that may need to be unwound with higher oil and less fed cost -- cuts poised. joining us now is jordan rochester. welcome and congratulations for a new seat, for a newborn baby, and aston villa. not necessarily in that order. let's talk about this. dollar-yen. tell me if we need the endorsement of the japanese prime minister for the boj to make another move. jordan: you don't need the

endorsement, but it would help. there has been a lot of changes on the political front. a new prime minister, new policies. there is some pushback. combine that with the dollar-yen move. he saw such a huge move over the summer that it could knock off quite a lot from japanese inflation from the goods sector. a simple chart, that is 1% off the headline rate of cpi from the fx move alone. this is a tepid move in the inflation story. i think the domestic data suggests the boj should be hiking. however, the politics and those move in fx mean the near term meetings, quite unlikely to get that rate hike. january is still possible, but you need a weaker yen to make it easier for the bank of japan to do so. it gets a bit circular because boj hikes equals a stronger yen. that is why you see these narrative shifts.

i think there will be more volatility. jonathan: for international markets how ring-fenced is this story in japan? jordan: it is definitely not. the wage story is what makes a confidential boj should be talking about a very gradual every six months or so rate hiking cycle. we are talking up to a terminal rate of 1%. it is not aggressive like you saw in the fed or bank of england. if you have domestic developments, if you have a global recession, they do not need to hike because that will do a lot of the work for them. it remains very much market dependent. if dollar-yen was at 160, it would be easy for them to go ahead with rate hikes. lisa: back in august for there was this carry trade that a lot of people attributed to this incredible spike in volatility across asset classes, because of how much leverage was built up in that. has that in unwound or built right back up as people realize,

maybe we are back to square one here? jordan: in the blank -- banking flows it has not been unwound. in the fx and rates flows it was not just unwound, it was taken the overweight. we went from a massive yen short to it becoming very clear when you had that positive news in august with the rate hike. you also had softer u.s. data. you have massive deleveraging in the fx space and rates. and it went through to massive yen longs. that is why we are seeing yen under pressure during the last couple of days, with the idea of the politics becoming harder for the bank of japan to do that rate hiking cycle. lisa: when you look at positioning one thing stands out. that is the short position on the dollar. this consensus that the dollar will weaken as the federal reserve cuts rates. we have seen a shift in that over the past couple of sessions. the biggest streak of dollar strength going back to earlier this year.

do you expect that to continue? given the fact that it is feasible to see the ecb and bank of england act more aggressively? jordan: i tell you what will continued this mean aversion we have seen in the dollar and the narratives in the market, and that is because the central bankers are more -- or so data dependent you get one nfp print or one soft print, it changes the narrative from the fed, and therefore you have dollar reverse everything it did over the previous month. i think the dollar strength we have seen is on the back of harder data. initial jobless claims has been healthy in the last couple of weeks. i think the nfp will be in-line, and then dollar strength can continue in october. then we get next month's print, you will have the impact of hurricane helene, the strikes, and we might have a softer print. if you guys have to listen to people talk about this everyday, it might be very flip-floppy. i think the u.s. data is better

than europe and the u.k., and i think the european central banks have been way too hawkish compared to the fed. that makes an easy trade from a, looking for short euro and short sterling versus the dollar. annmarie: you are an out -- you are on the outside looking in. when you see people are starting to hoard toilet paper you start to think differently about what is going on. you start looking through this messy payrolls report in november, what does that mean for the dollar? does that mean bad news potentially good news, because it could mean the fed cutting 50 basis points? jordan: it could be bad news for the dollar if you get a dovish response from the fed from non-unemployment report. what we have seen over the past few days is higher oil prices thanks to israel and iran. we have seen pretty healthy jobs figures out of the u.s.. and we have seen a repricing for the next fed meeting. the idea of 50 basis points has been reduced. it was quite the consensus just

a few weeks ago. if we get to the next nfp print it is one of those weird fed meetings where they have the luxury of two pre-prince in a row. if you have a good one tomorrow and a bad one next month it will make a 50-50 tossup whether the fed does that 50 basis points. the problem is it will come during the fed's blackout period. will not be able to hear much from them. we will have to listen for leaks at the wall street journal. jonathan: how good didn't last night feel? i'm just a man with family from birmingham. how good did last night feel for aston villa? jordan: i think the streets in birmingham were electric. historical. could not be prouder of the team. hence, the tie is on, jon. jonathan: jordan rochester of missouri. coming up, jared woodward, adam posen, and jonathan gold, and nila richardson of adp.

the second hour of "bloomberg surveillance," up next.

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>> the economy is pretty resilient. i think we have turbulence ahead. >> it's certainly much lower than it had been. >> we were seeing much steeper slowdown we were anticipating you certainly could get a steeper rate >> of cuts. >>we don't really need that stimulation but looks at we will get it anyway. the fact that they are supportive of the risks really into. >> this is bloomberg surveillance with jonathan ferro

lisa abramowicz and annmarie hordern. jonathan: the second hour of bloomberg surveillance starts now with your equity market pulling back by 2/10 of 1%. scores look like this on the nasdaq just softer as well. on the nasdaq we are down one quarter of 1%. the small caps down by 0.6. for the labor market, it's good to be quite pivotal potentially because tuesday the data was somewhat soft braided later on this morning jobless claims at 8:30 eastern time. lisa: we've been asking this week what is more disruptive to the market and outside surprise or downside surprise. matt of john hancock earlier talking about u.s. economics and prize indexes turning positive. the most positive right now going back to april. it raises this question could this be the source of thanks in markets that may be if the fed starts getting pushed to be more

hawkish or less dovish does that disrupt some of the four a we've been feeling of the past few days. >> it gets much harder to guess them into next month or so we have a strike at boeing. strikes of the ports across the eastern gulf coast. you also have the election anxiety which some economists believe is leading some to backup on hiring as well. early november report we got tremendously difficult to forecast. >> also the effects of the hurricane. people don't have access to clean water they are not going to work. i think when you hear from everyone on friday whether or not it's a good or bad report they will say this doesn't really matter because the next one matters a lot and might be so noisy and difficult but how does the fed communicate that to jordan's point. >> ultimately when risk management business if you believe it's a big problem and the risk management business cut

interest rates. >> we keep talking about this we've been talking about it from before jackson hole and after jackson hole there is no clarity. we don't know what the neutral rate is. we know how far we are from it. austan goolsbee things we are way far away. others are saying hold on note so fast. speaking saying this is a very expensive rate cut and this is a very expensive insurance policy so you start to put this all together and is there the same sort of uncertainty on the fed board that there is among market participants who are completely on opposite sides when it comes to this issue. >> financing is available, real estate prices are going up. to the extent we accelerate the economy and have to go in the other direction that would not be a good day adam post is joining us in just a moment in about 15 minutes time. he still is can a call for rate hikes and 2025. lisa: i want to understand if he seen anything on the ground now that indicates inflation is

starting to rewrap again because we did see in the internals of the adp report there is still this inflation when it comes to wages we see some of the other cpi reports from around the world, a disinflation is more prevalent or is this an expectation of policy and how much it can shift things and how vulnerable this economy is to a reigniting of that inflationary push based on the lack of softness. >> three days and up by 3% the middle east igniting things. annmarie: now there is talk of what israel is going to hit. president biden saying he wants them to stay away from nuclear but maybe it will be energy facilities. what kind of tit for tat with a place on u.s. allies in the region. even though we have spare capacity and supply in the market and demand in china is low. the market is starting to wake up that this conflict can get worse. jonathan: we will catch up with

jared woodard of bear -- bank of america securities. and jonathan gold the national retail federation as he calls on biden to end the port strike. future slipping as investors await jobless claims and payrolls reports. writing big upside for the classic deflationary trades of u.s. tech and treasuries requires big parish economic data. otherwise the report for deflation trades is poor. better to think about when to turn bearish on bonds for 2025. jerry joins us now. let's get straight into that trade. what would you sub to do bonds for an why you believe may be some of the most received commodity markets might be the beginning of something bigger. >> good to see you all. the view from bank of america is that the 2% world in the past few decades is likely giving way to the 5% world of the 20th

century. an inflation rate across the g7 countries in the 20th centuries and i think that level of normal that's been so familiar for many of us in the past couple of decades is where we are headed over the next. the view from a max allocation perspective is can be much less effective for your equities there to give you much lower room to turn and you'll be better off with exposure to higher commodity and credit exposure and higher-yielding parts of the market than has been the trade for the last 20 years. jonathan: to the latest moves increase your confidence around this thesis? >> they do. when you think the signals from china across the ackley market in the near term this is not a game changer from the challenges that the country faces, china's government bond yields are at a record low at 2.3% in september

and the policymakers want to divert attention away from that part of the market and try to spend capital elsewhere. but i think the important thing about it is how different the world is in the past 20 years when it comes to china and relations to globalization, to even disruption was or so deflationary. is now much more of a neutral with the software, the interest markup a pretty easy to scale. these are artificial intelligence that even the tech disruptions, the big deflationary pushes that we think presents pretty good best opportunity. >> how much are you saying bonds just don't have a lot of upside and potentially certain commodities not necessarily even oil but say lithium or gold or copper might be the real beneficiaries of a new investment wave. how much is it saying this is a new inflationary regime versus a different regime.

where they don't have the same characteristics in the reserve world. >> i think the correlation between bonds and equities has been positive for most of u.s. economic history. if you look at the data on average they moved than they have apart. you see strong negative correlations. you really look at the last 20 years and so we think structurally inflation is likely to be higher in the medium-term even in the near term those bonds or could be much less helpful for buyers. we think there's good parts of the equity market where people can allocate away from big indexes so commodities as great places to be as well. and tactically at the moment oil. >> i do wonder what this means for people or putting money in money markets. there been a lot of investors on the show that say it's time to lock in these yields and time to get out of cash.

six point $4 trillion of cash in money markets we are losing out, how much are you saying that's not true and they stand to benefit quite considerably because this is sort of the new normal. cash is an out location. jared: the optionality of cash for allocating into trades as they come along is much higher now than it has been. you can get a meaningful yield, possibly a positive real yield on cash and preserve the ability to take advantage of opportunities, that's a great place to be as an investor and something that's been available for decades. when the fed starts cutting even if you have investors at high tax levels historically they have not been prone to allocate away from the cash equivalent until nine or 12 months after the cutting cycle begins. it's one reason we know a tidal

wave of cash to the equity market in the absence of some other catalyst. lisa: you said present -- annmarie: you said present moment you would be bullish. is there a ceiling on how high these prices can go? jared: we've done a lot of great work mapping out scenarios and further disruption turmoil at $100 a barrel and even higher i think. the thought for us is on a tactical basis we think it's an interesting moment for tactical trade opportunity because it is -- the position is so short. you've never seen such extreme short positioning in oil and there is a risk of further in the way of being disruptive. more on the medium-term this a chance of surgeons next year. this looks like it might be an interesting entry point. >> just short of 72 on wti.

as always, jared of bank of america securities on the commodity market and what you should be doing with your bond positioning. just a programming note quickly bill dudley former new york fed president new column and bloomberg opinion i've been too pessimistic about the risk-based so-called hard line for the u.s. economy over the past few years. we will catch up with bill later this morning so look out for that. let's take a minute to get you updated on stories elsewhere with your bloomberg brief. yahaira: israel launched a strike in beirut overnight after eight of its soldiers were killed in southern lebanon and battles against hezbollah. six people died in the israeli strike on a building with hezbollah in the center of the lebanese capital. the israeli government has not yet retaliated for iran's barrage of missiles on tuesday night. new york mayor eric adams may be charged with additional counts in his corruption case great prosecutors said it is quite

likely other defendants in relation to the additional charges. adam's lawyer has urged the federal judge to dismiss the case calling it flawed as the mayor deals with growing pressure to resign. costco has expanded its lineup of precious metals. the wholesalers launch the sale of platinum coins and one ounce platinum bars on its website for the price of $1089 $.99. it's only available to buyers with a costco membership. if you want when you will have to move past. they're offering sell out almost immediately. that's your bloomberg brief. lisa: i love it because it's really catering to the doomsday errors having gold bars and mercer packages to make sure they are ok. >> it's a trade working out. >> you think about people say that's what they're putting their money into. i wonder how much that's true in the u.s. as well. jonathan: it's true or can we

say that, does that make sense. up next on the program, the risk of re-inflation. >> that's really the biggest concern right now is are we going to over stimulate because in the landing camp we don't really need that kind of stimulation but it looks like we will get it anyway. >> the latest and next with adam of the peterson institute who thinks you should be preparing for rate hikes in 2025 and rate cuts, the conversation up next. ♪

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and more in prospectus at invesco.com jonathan: a bit of economic data to work through. then ism services later after that then tomorrow morning payrolls report at 150 k the previous number by 142. negative by one quarter of 1% on the s&p 500, bond yields higher

by two or three basis points. 38075. under surveillance the risk of reinflation. >> i am in the sticky inflation camp that the long-run inflation rate is probably closer to a three handle if not the three handle them down 2.0%. that's really the biggest concern right now is are we going to over stimulate because in a no landing camp we don't really need that kind of stimulation but it looks like we will get that anyway. >> fresh economic data and fed speak on deck. speaking this morning after jobless claims at 830. adam of the peterson institute with this to say. the fed will stop cutting rates by march of 25 and will be hiking by june of 25 seeing a 40% chance if harris is elected, 85% plus of trump is elected. adam joins us now. welcome back to the program we have a lot to work through. let's start at the top.

why is the outlook for you in 2025 so election dependent. >> thanks for having me back. i think it's election dependent for two reasons. the first is whether it's harris or trump, i think the commentary at a lot of the market people are overestimating the likelihood that a divided congress will prevent fiscal expansion. we will get some fiscal expansion and we will get outrageous fiscal expansion if it's trump. annmarie and i have talked about this on the previous appearance, i think congress is not in a block it either way. the second reason is specifically to do with trump and the peterson institute put this out last week we go through very carefully what his plans in general across-the-board tariffs particularly migration deportation policy and interference with independence would mean. general inflation rate of 4%. >> you've made the argument also

you think the fed should be preparing for two rate risk and should be preparing market participants and the general public for two-way risk as well. the situation the governor was in in 2016, why do you believe that's the right idea? >> i think, thanks for talking about this. you're right about the parallel with the bank of england facing the brexit cost, they don't want to come down politically but it's disingenuous to just sit there and say what will happen. in the end that's what will happen. the fed doesn't invent the politics of the outcomes. but if you are choosing to every meeting at back-and-forth and update people's expectations, you leave a lot of room for volatility and you are going to cause more harm to the economy. sometimes you have to be honest and just say we are knocking to pretend we the fed have a view

on trump versus harris but we think there's a high risk of fiscal expansion and high risk of additional tariffs and disruption in the labor markets either way. and all of that is inflationary or stagflation. so therefore we should not be encouraging the idea that there is either further path of rate cuts in 2025 or encouraging the idea that although risks to the outside. this is different from the clip you just showed. my concerns are about the policy changes and also as i've written about we've talked about that the fed is not as tight now as they think they are. it's not about that they're persistent with inflation no landing it's that new shocks are coming and policy is less tight. >> one thing is they are not as tight as they think they are the question run neutral with a lot of people debate. another thing is how much the fed should try and get ahead of possible policy changes could expand the deficit. how much with the fed be

exposing itself to incredible political risk if it weighed in, what the data is actually showing right now and try to make a statement on whose programs would potentially be more inflationary at a time when the arguments from both sides contradict some of what you're talking about. >> the arguments claim they contradict what the facts do not in the fed starts to follow the facts. i think it is a risk either way. and obviously chair powell and the leadership of the fed has decided the way they are going to manage the risk is they will only talk about the next three months and they are going to focus on that and that was very clear from the chairman speech at jackson hole. so the pushing to that at a minimum admit that's what they're doing and don't let people get notions about 2025 and beyond. the second point is we are seeing a major erosion in politics and stability in the u.s.. and if you look around the world

where there are countries where you have that generally the central bank ends up having to be more outspoken and more principled and more courageous, this is like in south africa, this is like in india. this used to be in italy for the euro. and the central bank has to step up and the fed situation isn't quite as delegate as i think they think it is. it could be per trade. both harris and trump are going to lead to expansions of fiscal policy. both harris and trump are not going to roll back tariffs, they will increase them somewhat. the fed doesn't have to say trump is worse than harris. they can just say the risk to inflationary policy are higher from both. lisa: what would you say about the fact even though people keep talking about the deficit, the bond market has not woken up to it and that they won't.

adam: it's a fair concern. i don't have anything great to say about that because this is the dynamic about it. china is a mess, europe is a partial mass. the europe -- in relative terms the keep investing. you were saying -- seeing a little bit of that on the program about the increased interest in gold and possible selling platinum to go with its meal kits. this is bitcoin, all these things are signs of people having just trying to seek alternatives to the dollar when there is good state level, no great alternative currency. and i think all these investments will ultimately edit -- it gives them more room to run its fiscal policy and its deficits in that part of why my forecast is the deficits were only increase. i think that's good, not because

i think it does no harm what it is likely for them. >> given all you think about the direction of the fed and what they're doing now, yesterday mark told jonathan that this was the most expensive insurance cut but we've seen from the fed in history preyed would you agree with him. i guess -- adam: i guess so. i wouldn't put as negative of a spin on it because insurance cuts are rare in history and i think insurance is good. you have to be prepared once you pay the insurance premium for certain cuts and that's all i would say. i've gone on record saying the fed shouldn't -- should of been cutting this small. given where the short inflation is, which is down, and the risks of a potential recession it's fine to take out insurance. again, insurance is a sunk cost. my only point is to warn people just as you're taking out insurance doesn't mean you're

going in that direction. in fact just because you're taking out insurance you may make it less likely that you will keep cutting. >> ahead of the election your thoughts on inflation how it central to voters given that we've had low inflation before this latest bout for 40 years. who is messaging that the best preyed our voters leaning kamala harris because of bidenomics and they put the blame on biden or is she doing a good job in explaining that tariffs may be inflationary. adam: i think it is more the latter than the former. thank you for engaging with that. i'm not a pollster but i can see that basic fact that inflation has become a dominant topic going into this election of the polling data makes that very clear. people do feel as we look through the data as best we can they notice price level shifts. it's not that they are continuing rising, they are falling. people still feel the relative pressure and we know they always

feel even if wages are going up that stuff they deserve and if prices go off and if prices go up it is unfair. that's how people see it. in this context i think the harris campaign is doing a good job building on some things the biden administration finally said in the last six months or a year which is there a particular tax -- tariffs ra tax on working people. they're inexpensive furniture and electronics are infinitely cheaper because we allow in ports. and we allow competition and we allow choice. so i think that message from the harris campaign that they would not put on a general across-the-board tariffs away president trump keep saying he will is hitting home. there is still a legacy that when you are president you get

blamed just like the fed ever happens on your watch. there is still a legacy of biden that inflation whether or not it was his fault, that does not matter. jonathan: adam, appreciate your presence this morning for you been out front on this issue. we will keep this going into year end and beyond. up next on this program, jonathan of the national retail federation and nela with the impacts of the ongoing port strike sprayed that conversation next. ♪ think scaling your ai pilots is hard?

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jonathan: as things stand we are heading to the first weekly loss on the s&p 500 but still a lot to play for. equity futures are down on the s&p. on the nasdaq we are down by one third. a little bit lighter, down by 0.5% on the russell. lisa: how much of this is simply people hedging bets for october complicated by a whole host of other factors versus true concern about weakening in the labor market or that the fed won't cut rates as aggressively. both sides of the discussion are

still in play and on opposite sides. >> fantastic conversation with adam moments ago raising the risk to 2025 and arguing the federal reserve needs to discuss the risk associated with the prospect of increasing interest rates again next year. lisa: the baseline neutral rate is substantially higher than people expect including the fed that there is more underlying inflationary pressure in growth and that a lot of the policies being proposed will be inflationary and deficit increasing so in order to get ahead of that the federal reserve should be telegraphing they are sensitive to that risk. they are knocking to do that. the first sign people are debating. jonathan: it reminds us of the situation the governor carney found himself in in 2016. the central line he spoke out was the right one. it has done but it wasn't without costs. it attracted the wrong kind of

attention to the institution. we can talk about whether it led to reputational damage. that's the kind of conversation the federal reserve is nervous about having. lisa: we have not seen it play out in the bond market, longer-term yields rise ahead of an increase in the deficit or policy shift. without a bond market freak out you cannot have the central bank step in and say they need to respond to it. the bond market needs to do it first before to give the fed cover. that's one of the popular mindsets. jonathan: bond yields are higher by two basis points. the front end of the curve up a single basis point. very range bound for the week so far. still tons of economic data in front of us. the bank of england it's now governor bailey running that institution and this is what he set about pound sterling. but prospect of getting more aggressive's on rate cuts. the pound down by more than one

percentage point. lisa: he is joining with everybody else finally realizing if inflation is coming down by not cut rates you're facing off with of the potential deterioration. after the united kingdom was left for dead after brexit suddenly at showing more strength than even the euro region and we are seeing positive outlooks from the bank of england so an interesting backdrop as they look to keep that going rather than torpedo it with higher rates. >> perhaps the biggest one-day loss for sterling against the dollar. president biden saying israel must hold off from attacking iran's nuclear facilities and retaliations over the weeks missiles barrage sing g-7 nations agree israel has a right to respond but they must respond proportionally. israel carried out more strikes in beirut overnight. what does that mean in reality? annmarie: staying out of the nuclear facilities. we were talking to stephen and i mentioned this article that the

secretary of state talked about how the strategy from the biden administration has put the u.s. and a stronger geopolitical position. his deputy was talking yesterday and had this to say, the region is balancing on a knife's edge and there are concerns about further escalation which would impair israel and strategic interests as well. you have to think it's the energy market. lisa: they haven't been taking a lot of cues from the u.s. but broadening out what does that mean given the players who do not want to get involved versus the ones who are at the table here. jonathan: we talked about this yesterday, israel has demonstrated superior defense, superior attack and intelligence and it raised the question, why would they start with their enemy -- stop with their enemies who are on the back foot now. lisa: how much more does iran

have and what could they be holding back with respect to the u.s. paid they could potentially withdraw support. basically iran still has a lot of missiles and firepower and ultimately do you want to have a peaceful situation or a full on war where there is a lot of damage and death. jonathan: libya, the oil minister says oil outputs resume thursday. good timing given what we are seeing the last few days. annmarie: this adds to the fact this is why oil even though we are seeing such an escalation in the middle east there is a ceiling on it. there are cheaters with those wanting to hunker down on some of these individuals who are fudging the production output and libya saying we got our act together we will add more barrels to the market so if you are concerned about prices going higher potentially you can wait. >> i wanted to squeeze in this story. openai completing a deal to

raise $6.6 billion in new funding to bingham a valuation of 150 7 billion u.s. dollars print the deal is one of the largest ever private investments and makes openai one of the three largest friendship backed startups. lisa: it's something like tiktok, likes that you've seen with similar types of valuations. you just wonder how much do we understand the application of chatgpt in the future iteration of this. there was one investor who basically started saying it will order dinner, cook your grocery -- cook a, order groceries. jonathan: maybe the company stays private and never goes public. lisa: rather equity that stays private. jonathan: the east coast port strike continuing into its third day. port owners signaling late

yesterday they're open to new talk spread major trade organizations including the national retail federation calling on the white house writing in a letter this is now becoming an issue with economic and national security, the strike will cost the economy billions of dollars a day and painting businesses large and small. only getting the ports open again but work with the parties to resolve the outstanding contract issues. joining us is the vp of supply share at custom policy the national retail federation. who do you blame for this. are you going after the unions or the administration, the white house? >> the parties have been negotiating and are trying to negotiate for the better part of the year and the ila walked away from the table in june. they need both parties back the table to continue negotiation. the administration needs to use all of its authorities to get the ports open and the parties back to the table and get a contract done. jonathan: can you walk us

through where retailers are at with regards to inventories and what the situation looks like compared to what it looked like the last time we had a real supply-side shock. >> many retailers were preparing for this situation, many brought product in earlier impeach shipping season. many shipping to the west coast ports but even with something like preparation there's concern the longer strike goes the bigger impact it will have. annmarie: consumers are soaring to hoard some items like toilet paper print is it warranted? >> not at this point in time. retailers are planning for supply chain disruptions. we want the impacts of the consumers for several weeks if the strike continues. we need the strike to end, ports to get open, but at this point we don't think there's a need for consumer rush. annmarie: are you saying the president should invoke taft-hartley?

>> he should use all the authorities. that's the process they need to use. we saw in 2002 we had an 11 day lockout on the west coast ports. president bush invoke taft-hartley. whatever authority the president can use to get the ports open and get parties back to the table they need to use. annmarie: do you think given the election this administration in no shape or form will do such an act? >> you have to look at the election but also the national economy. jp morgan sing $5 billion it's the u.s. economy. it's not just the port workers but the potential for other industries to get hit significantly as we have reduction through those ports, farmers try to get products to market. all of these companies will be impacted so you have to look at the betterment of the national economy to get these ports back open. >> jonathan appreciate your time. we will continue this with nila richardson. good morning. sharing these numbers if the

strike lasts more than two weeks we estimate the knock on effects could lower october payrolls as many as 80,000 jobs. how do you read between the lines what's going on here for data in america. nela: the bigger effect of a prolonged strike is really in inflation. we talked about how maybe a policy change just a few minutes ago with adam how a policy change could affect the current level crisis, of this strike would have an immediate effect on price changes and that cannot play into an immediate response -- that is going to play into an immediate response. in terms of the labor market for us, it probably won't have an immediate effect of adp. we are counting the number of people on payroll. whether they are striking or not they are part of payroll, they are getting counted. it will probably have a more pronounced effect because they are counting the number of people who are getting paid and

if they are striking they are not getting a paycheck. what does that mean for the economy if you have a significant number of people not getting paid and the knock on effects of other industries and businesses affected by the strike then you have something that's much more vulnerable for what has been a resilient consumer. the more prolonged strike, the more vulnerable the u.s. economy. lisa: it's a stagflationary shock because it could potentially cause inflation to go up and could reduce people spending power. where in particular do you see inflation really rise quickly as a result of this strike sprayed nela: it's hard to predict but if you go back to a triggered inflation in 2021, it wasn't just the fact it was supply chain you couldn't get production. it was the fact you couldn't get people to take stuff off the boat. you couldn't get those things

from the dock into the store. if that returns then we have an inflation picture that's not just based on services which it has been for the better part of the year but goods inflation starts to rise. goods inflation which we thought had solved. that raises another specter and we don't want that. annmarie: when does it start. there's a little bit of a leeway here paid when does it start to hurt. nela: the timing is uncertain. i would think that this last 30 days or more we are starting to get the real price impact but there's no way of knowing right now how long that would take. i think that uncertainty alone has an economic impact. it is funny because we kind of reached a nirvana when you look at the adp data in september. everything came together into this nice equilibrium. that looks like it will last about two weeks.

something else is good to happen to topple us from this equilibrium and that's why the fed really cannot pause or go to sleep, it's very in the moment and data dependent and it cannot think long term now because there are these other things from oil prices to striking workers that could tip the scales again. lisa: yesterday we got the adp report some people are saying it's more accurate these days with respect to predicting out front payrolls, but how vulnerable were those figures to some sort of disruption, to the downside and do you think the risks like the fed are truly skewed to weakening to the downside it comes to the labor market. nela: we went from a revised 103,000 to 143,000 it was the first time nine out of the 10 super sectors we follow all posted job gains. the only one that slumped was information services.

we were cheered by this report. we just had stabilized so we got these job gains without a noticeable increase in pay growth. i call this economic nirvana from the fed. it's what they wanted to see prey to see pray more jobs being created in the big wages paid now i do not know for october what's can happen. we are not -- i am not sure this economic nirvana can be sustained. lisa: andrew on one side saying you could see a real weakening that leads to recession. adam pozen, many others coming out saying the risk is with re-acceleration. if there's a real concern there being two aggressive in their rate cuts. which is more accurate? nela: there is truth in the short and long term. the start thing for the markets to get around. i do believe we are not going

back to sleep on inflation for the next two decades. that periodic bounce of inflation is now part of the new normal. but at the same time we have seen inflation, down a lot. we are not seeing wages pick up. and when we talk to clients at adp both small and large what we are hearing is over the summer was a bit of stasis. i'm not sure, there is so much uncertainty. i do not know when the fed will cut or how much. what triggered it in september and what it looked like is the fed started the rate cut may be i can go forward with my talent management. maybe i can hire those workers and a tick up in the jobs report for jobs openings. and that was good news. now we are getting another about of uncertainty. that might mean the head of the -- goes back on the shelf when it comes to hiring. jonathan: what was said at the

end there was really important, a bit of a real story of the last few months when it comes to hiring. is that can change once we get past november. lisa: will there be the surge of hiring and economic activity as long as there is some conclusion. interesting that the rate cut also police the same type of activity. jonathan: let's schedule a on stories elsewhere. here's your bloomberg brief. yahaira: the british pound weakening against the dollar poise for its weakest day since 2022. this after andrew bailey suggesting the central bank would take more aggressive approach to lowering interest rates. the comments causing investors to bet on quicker reductions from the central bank eroding the currency's appeal. traders thought the boe would be behind its peers on easing policy. small donors are fueling the

trump campaign saying it raised 100 $60 million with the majority of donations under $200. the small donations were not enough to outpace spending. the republican presidential nominee spent $12 million more than he raised during the month. this is the second month in a row that has happened. the campaign kicks off october with 280 $3 million cash on hand. two prominent democratic senators of criticized u.s. fuel ceo over his potential $72 million golden parachute if the sale to japan's nippon steel goes through. elizabeth warren and sharad brown wrote to him over concern saying such payments demonstrate a repulsive conflict of interest in which u.s. steel executives can enrich themselves at the expense of u.s. steel workers. u.s. steel has acknowledged receipt of the letter and says it plans to respond to correct its many inaccuracies. that's your bloomberg brief.

jonathan: you want to talk about going after executive pay now. lisa: i know what you're going to say. jonathan: are we to go through every contract of every ceo on the s&p 500. lisa: i feel like at some of the badge of privilege for some people when they get an elizabeth warren tweet. jonathan: is that what you think? they are proud of it? lisa: i wonder how quickly megan to get this. jonathan: up next, bracing for a splash. >> we've had a moving crude let's talk five or 6% since they retaliated since israel but we are still very much at the bottom end of the range here. jonathan: the latest from citi up next. ♪

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ameriprise financial. advice worth talking about. jonathan: oil up for a third day.

crude right now on wti off session highs four by 1.5%. bracing for a supply shock. >> we heard a moving crude since iran has retaliated against israel, but we are still at the bottom end of the range here in crude. this is not a market that's panicking too much about what will happen if there is a supply disruption and that's because they are focusing on the opec-plus spare capacity. jonathan: oil rising as traders assess risk in the middle east. israel expect to retaliate against iran following the missile barrage. these development add another play or of uncertainty to the oil market with the ultimate impact on oil and prices hinging on the degree of israel's response. eric is with us this morning. let's think about this. if they target energy infrastructure in iran how many

battles -- barrels are at risk. eric: yes but iran is really the starting point. they produce about 4 million barrels a day of crude oil. but compensate so any actual attack to the oil infrastructure would be a big deal it's just that we've seen a number of steps before we can get there. this time we are little bit closer than we were in april when it seemed like both sides were trying to somewhat de-escalate. lisa: aside from just calling if this will escalate it's fascinating to me that you see the upside band of oil prices at five dollars a barrel. you saw the more likely trend downward that you think prices eventually get back to $60 a barrel next year. is this because of u.s. production, because of more use of alternatives? how do you understand the lack of impact that full disruptions

would be this time around at least as represented in the market. eric: markets have been artificially tightened because opec-plus is holding 6 million barrels a day. and they have a plan to bring it back even if they might keep pushing it back with that plan in place with so much oil potentially overhanging the market i think it's providing a bit of a soft ceiling to where prices can go. annmarie: going back to the israel he response if they go back to the energy facilities in tehran, we heard from our reporter in the region talking that they may look for the domestic consumption but then wouldn't the iranians just export into the domestic economy. >> looking at oil it's always like people liken it to a large bathtub. you shift oil around there, other things get impacted. it would get moved around but that would still tighten up availability for crude oil

elsewhere. depending on the size of that. so all of that would be something that causes oil to spike up which is not what everybody wants. jonathan: do you see them willing to come for my some of the trade flows? do you see in iran willing to compromise some of the trade flows? >> to us that's been a low probability high-impact risk. in many ways people push that right into the tail. it seems like it would be very much a last resort where iran would be somewhat of a self-inflicted blow as well but to impact everybody else. so if this does escalate, if iran's own oil, and mastic oil facilities get hit this would be one way they could be struck back at. hurting themselves. lisa: given the potential tail risk you talk about cap to the

upside in the prices as well. what is the cap effectively that could be a ceiling even in some of the tail case scenarios? eric: if israel does hit iran's oil exports it's about 1.5 million barrels a day. opec-plus has a plan to bring back monetary cuts of 2.2 million barrels a day. they are poised to do so there's a lot of talk as to whether they will start in december. but we do think that any sort of supply disruption, tighter conditions in the market and the opportunity to bring back some of that that some of those members are excited to bring back to market. jonathan: i'm sure you read this, what's the risk of going back down to 50 but going to 100? do you share that view? eric: broadly speaking yes.

that's without, this is assuming in our base case we think opec-plus will keep pushing this down the road and they will keep pushing this back because conditions are relatively soft if they bring some back and the supply grows and demand disappoints. you could even see a4 handle. jonathan: eric, appreciate it. 7129 on wti. brent crude at about 75. lisa: highlighting how different it is people recalling -- were calling quickly for $100 a barrel. >> in the next hour bloomberg surveillance wells fargo, tom of rbc, lindsay and former new york fed president bill dudley with a hard landing call. this is bloomberg. ♪

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>> there is some slowing but it's not contraction. it's not deterioration of the labor market. >> these are still numbers

constructive for the labor market. >> everything is on the table for this fed. >> distribution of risks with respect to the labor market are clearly skewed to the downside even after the 50 basis point move. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: 90 minutes from the opening bell, 30 minutes away from jobless claims, the previous number 218. for tomorrow morning for payrolls friday. the previous number 142. best to set up for the next one he four hours. the scores going into that pulling back just a touch. down 1/10 of 1% on the s&p. on the rustles we are down one third. economic data in the next one he four hours including another ism services read in the big focus on the employment component. lisa: given we've seen this component really surprised at the downside, that set i wonder

where the balance of risks is. it's better than expected economic data increasingly coming out most upside surprises going back to april you wonder is the bigger risk for equities that they're nokia cut as much or the idea you get some sort of more serious weakening. i cannot tell based on everybody who talks to us they line up on opposite sides. jonathan: risk cuts both ways. crude, a third day of gains. on brent crude now 75 point 50, up by two full percentage points. i'm talking about supply risk. that cuts both ways. >> ready to add more into the market. keeping a lid on this. you also the number of cheaters but we also talk about risk if such as the geopolitical risk in the middle east waiting for israel to respond. saying holding on to nuclear facilities.

a trifecta of risks right now. in the united states when it comes to hurricane. lisa: there's a question of how much we've seen in some of the affiliations of the associations of asset classes and events. whether it comes to oil and this question of what kind of knee-jerk response there will be because of the structural stiffness in that market or with respect to bonds is a haven asset of the that adam posen raised of inflation. >> navigating the stocks by the skies break letting getting cloudier. >> his iterations of only been, his utterances have only gotten clear so there is this question of what gives. right now these guys are as cloudy as i can imagine. all these incredibly intelligent people who have incredible respect for, on and say the opposite thing from one another. another person saying yes. either could be correct. jonathan: anxiety around the election.

you imagine you can see the job openings you see there in the data this week. lisa: what was fascinating was what neil richardson said. 50 basis point rate cut, gave them the willingness to go out and restart some of the hiring plans. whether that fades quickly with the fact you've got dockworkers and the hurricanes and some of the election is the reason we have no clue. jonathan: equities recovering just a little bit. down 1/10 of 1% on the s&p 500. here is a picture of the bond market up to basis points. coming up this hour we catch up with tracy mcmillan of wells fargo with equities on track for the first week in a month. testers first quarterly sales disappoints investors. on the fed's mixed messaging we begin this hour with stocks on hold at a jobless claims. the appetizer for the fed data

point september payrolls. tracy wells fargo saying september payrolls growth is expected to take higher. that would change the attempt to slower rates at a slow pace we expect another 50 basis points of cuts this year and another 75 basis points of cuts in 25. bottom line now is not a time to rush this with equities. tracy welcome back to the show. where do you want to be in this equity market. >> we see a choppy market from here at least through the election. what we are telling our investors is up through some of the current risks and look out to our 2025 forecast where we do see up site potential for equities so any pullbacks related to these ongoing and emerging risks would be opportunities to position into equity markets.

potentially selling some short-term fixed income, some long-term fixed income and reinvesting those proceeds in equities as we do see some potential pullbacks here. >> let's get into equities is a little bit more. it was large over small. is that still the case or is china changing that story. >> china has not changed that story although we do think the potential there is somewhat interesting. but we believe the longer term more secular challenges the china is facing with their property market with very high employment for their youth population, population declines. those things we think will be difficult to surmount. so we do continue to like developed markets over emerging markets.

we like u.s. over international. lisa: you wonder how much the fed cutting rates aggressively or more resilient economy that leaves the fed cutting rates less aggressively. which is better for your mitt -- more risk on, to fruition in 2025? >> we think it is the latter there. that the fed won't have to cut as many times as the market is expecting because of a reacceleration in growth. we envision that growth will start to slow here towards the end of this year and the end of 2025. and then as monetary policy cut start take hold we will see a reacceleration into the latter part of 2025. lisa: i have to wonder about what's going on with the equity market taking a breather let down by the russell 2000. this is in tandem with a slight tick up in two-year yields.

people in the bond market wondering if they got over there skis looking at some upside surprises. i wonder if the rotation out of large-cap into small-cap and the equal weight can continue if you get a less aggressive fed. >> we do think that is possible. particularly the rotation into small caps and we are starting to build a position in small caps we had been underweight small caps significantly underweight for about two years we are starting to build that position again. as we think lower rates will imply better credit availability and be read accelerating growth will be a better environment for small caps going forward. we also think that's going to foster a broadening of opportunities into quality sectors and cyclical sectors like industrials and materials, energy, communication services and financials we think those

sectors should start to manifest. jonathan: can you pick up on the small caps point how do you recommend people pay -- play that. is it through the index of the russell 2000. how do you do it? >> the russell 2000 is the index to invest in as a whole. because the number of non-orders is rising in that index and approaching nearly half of that index. we would be more selective going with fund managers who can pick and choose within the small-cap universe because not all of those companies are companies we believe are viable. jonathan: in two fridays we will get jp morgan a bunch of other banks as well. i want to go back another of a number of weeks. before the strikes, the issues in the middle east and it's what we heard from ally financial

with their credit issues. we hear from j.p. morgan about managing interest rate and what that might be for the bottom line. what do you think will stand down this earnings season? tracie: we think financials should continue to benefit from the front end of the yield curve moving down. we also think as yields rise we are seeing the 10 year starting to arise, the 30 year starting to rise. that gives banks some ability for the net interest margins. so we believe that is a good driver for the next 12 months for financials. this earnings season the expectations have been ratcheted down and analysts are moving their estimates down. we think that will add to the choppiness for this quarter and again we look for any choppiness or pullbacks particularly if we get to 5400 or below that.

that he represents a good buying opportunity for u.s. large caps. lisa: how much are you waiting for the election to be over and then buying equities. tracie: we are not necessarily waiting paid we see the volatility ahead of the election and we tend to see equities rise following the election. after that uncertainty is out of the market is when we see buyers coming back to the markets so again looking for that volatility this month potentially to reposition into small caps into large caps and into our favorite sectors. >> appreciate the update on the team over at wells fargo. how many people feel that way. lisa: how many other investors are getting options and figuring out where they should enter an saying. >> there's a super tactical

stuff that goldman on the other things. it's worth repeating. starting month and. the six k target is too low. lisa: she said what seasonality praise usually this is a rough season and has been anything but the steady climb the grinding climb sort of belies this feeling of volatility with headlines and narratives. jonathan: a little bit softer on the russell, the nasdaq and the s&p as well. with get an update on stories as well. here's your bloomberg brief. yahaira: the catastrophe modeling from kcc is estimating the structural hurricane helene will cost insurers six point $4 billion. accuweather estimating the total economic damage could hit 160 billion dollars. that would weaken one of the five costliest -- make it one of the five costliest storms. the president and vice president are announcing steps to bolster recovery efforts with the death

toll rising to 166 across six states. new york mayor eric adams may be charged with additional counts in his corruption case. prosecutors say it is quite likely other defendants will be named in relation to the additional charges. adam's lawyer has urged the federal judge to dismiss the case calling it flawed. this is the mayor deals with growing pressure to resign. amazon plans to hire 250,000 people in the u.s. for the holiday shopping rush. the amount is unchanged from last year. an indication the company expects a demand in its biggest market. the online retailer recently said it was raising hourly pay by at least one dollar -- $1.50 for 800,000 of its workers in the u.s.. more than $22 an hour for those workers. that's your bloomberg brief. >> we will catch up with you again in about 30 minutes time. some morning calls plus we catch

up with tom of rbc as tesla's first courtly sales gain disappoints some investors and we will get his views on what's going on with some of the big oil makers elsewhere after some big cuts to the outlook from the european players. that conversation up next. ♪

jonathan: one hour and 15 minutes away from the opening bell paid equity futures pulling back just a touch. let's get you some morning calls. deutsche bank lowering its price target citing negative impacts due to the ongoing machinist strike. the stock is down in the premarket parade second call for barclays downgrading stellantis pointing to inventory issues and eroding market share. the stock is down another 3.5% and truest raising its price

target to 236 with the highest selling prices offsetting low deliveries. stocks down and that name is lower by 1.55 percent in early trading. outperform rating and writing this, the tesla shares to be traded lower on in line delivery print for q3 in our opinion makes no sense. most of our valuation for tesla is in autonomy with repeats consensus estimates by one -- a few thousand vehicles or not. to talk about this industry, tom joins us for more. i think we need to take a step back before we get knee-deep in tesla. a phenomenal few weeks for the industry. we've had two in three months from bw. pain elsewhere as well. how long before we see the same from ford and gm. tom: that's the question everybody wants answered. i think it is a tale of two stocks between gm and ford.

ford interestingly if you look at the dealer inventory levels which is really caused stellantis to cut their guidance , affords inventory levels are above that of stellantis. that's the one we are the most worried about that could profit more next. the consensus around 10.5 billion of ebit for 2024. it could suggest that could be the next domino but we would highlight a lot of the pain in europe is isolated to europe for its europe exposure and also china not as substantial. we do think ford could be next. jonathan: how much excess capacity is in the auto industry right now? lisa: that is -- tom: that is an issue, especially on the ev side. pricing is at all-time highs so they are trying to find excuses to cut production to lower -- to keep pricing higher but as we all know there is only so much

production cuts you can do. eventually people have to buy the cars. so they could try to cut production but we do think discounting will eventually happen and there's another reason why we think especially the european companies are cutting their value and spread lisa: how different -- values. lisa: you saw a different situation, can you elaborate on how much it is? tom: that is true. if you look at how the european automakers cut their guidance, bmw cited supplier issues, mercedes cited china. and vw it was a european consumer it was really the u.s.. but it was really china and europe, there's also an old thesis of leather good -- never let a good crisis go to waste.

why don't you reset expectations. we still think there's a good likelihood it is a price war in the u.s. and see an impact in the u.s. as well. lisa: this idea that not only could you cut the price targets and sales forecasts you could also cut staff at a highly politically charged time particularly in europe, how much do you start to expect some of the cuts we've already seen announced only escalate not only in europe but also in the u.s.. tom: that debate is raging in germany and in europe. we think it is probably more of a european thing. it tends to be some political theater. it's tough to do this in europe because of supervisory boards and corporate governance especially in germany. we think the public debate tends to be more pronounced in europe but certainly in the u.s. if the price war gets worse, they want

to cut production before they cut the price so you could see it trickle into the u.s. as well but we think the political theater seems to be at this point really based in europe right now. annmarie: before going to rachel reeves and the u.k. asking for more subsidies. is subsidies the answers to move these ev's off lots? tom: yes, yes and yes. the reason why european sales are going negative this year which is surprising is because germany especially and other countries pulled their subsidies away at the end of last year. that's the key driver of sales in europe. 2025 is the big co2 regulatory cliff. the companies have to sell. it doesn't look like that 2025 cliff will get delayed. so the answer is the european governments have to step in and

push incentives. that's why the european oems, the car makers want the incentives. they are not calling for the delays, they really want the incentive to come back. people want ev's in europe. it's just that the pricing is too high. annmarie: when it comes to the european market we're supposed to get tariffs on china. what are you expecting? tom: it seems like there will be tariffs and as you notice it is stratified based on the oe oh. for the most part they have worked from the language we have heard so only 1% of sales in germany were chinese ev's. so they seem to be working. the issue will be what happens in two or three years when the chinese manufacture in europe, they trojan horse in there. i think that will be the bigger threat but it looks like the tariffs will probably go through stratified based on which oem

they are talking about. lisa: much of the chagrin of mercedes and bmw they have said in part may be only in part to the fact that they have a huge proportion of their sales in china. what does the business model look like for german auto manufacturers if china puts up walls in response to the walls europe is putting up to their electric vehicles. tom: it is a net negative. most of the production from the german oems in china is localized through jv partners. there is a percentage that is exported from europe so it's definitely a net negative. the bigger issue i do think is the domestic competition in china is intensifying. the domestic players are doing really well than what we solve them the mercedes is they were commenting on softness at the top end. that was not supposed to happen.

chinese consumers favoring the domestics even at the high end. that is something that has the german oems worried. jonathan: where does it leave tesla in that market? tom: tesla is doing quite well from selling cars but certainly it's not great. we have seen what happened to tesla numbers in europe just this past quarter because of tariffs that are already impacting the numbers so look, it is definitely net negative. as you've commented from my report earlier i don't think folks should be really caring so much on tesla deliveries quarter to quarter it's really more about other things and they will collect some regulatory credits because of the co2 cliff next year. i don't think a lot of the oems in europe will be able to make the co2 targets if the ev sales

continue at their pace and if we don't get substantial from the government. jonathan: tom there of our vc on the market. we said repeatedly on this program china, the most competitive market anywhere on the planet. the automakers there in the consumer preferences have shifted big time. lisa: in part because the government is saying you want to buy the national champions, i'm glad you asked about tesla. where does this leave tesla and ultimately tom saying it's not -- you have to be bedding as well as the other technology that really is what will drive this. jonathan: how many times have we said even with capacity and cutting big time, it's kind of one or the other right now. lisa: it's kind of the moment they have to determine which it's going to be. if you think about bmw and

mercedes i understand tom's point you've allowed to master providers with these cars. nonetheless there must be a reason why they have come out against any kind of tariffs or walls for europe to put up to chinese electric vehicles. jonathan: coming up next on the program, jobless claims data five minutes away. we break it down on bloomberg tv with michael mckee and we will catch up with lindsay on the economy and speak with jack manley. from new york, this is bloomberg. ♪

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jonathan: 60 minutes from the opening bell, cash open just around the corner. down for tens of 1%. internet 50 seconds time, jobless claims data. mike mckee this winter break that down for you to year, 360 five. the number we are looking for in our survey, 220 one. the previous week, 218. this crossover to mike mckee. >> one of those mornings for the data are slow coming out, but here we go. 200 25,000 jobless claims last

week, up from 219,000. that was revised up from 218. basically we are in the ballpark of where we have been for some time now, and it really doesn't tell us anything about where we are. in terms of the overall labor market, other than companies are not letting people go. this is obviously a seasonally adjusted number, so we will see. i've got to get the release up, see change -- if there is a make change. in the equity market on the s&p 500, five losses going into this. on the nasdaq, we put the data together this week. we haven't solved the conundrum, this is it. the rate is lower.

the hiring rate is lower, but the layoff still remains low. if you got layoff low, jobless claims lo, we are having the same debate we've been having for months. our layoffs inevitable? >> if you are going into recession, and right now the data shows increase of 1000 in unadjusted jobless claims, which suggests that we didn't see any kind of bond and layoffs that was smoothed out here, continuing claims, 1,826,000 are down from the week before. the jobless claims side of the employment ledger does not suggest that we are seeing a labor market deterioration. lisa: do we care about job cuts that came out earlier this morning? any signs that we are seeing layoffs just picking up just a little bit, or do you think that in general we are sort of in this economist's nerve on a for

the moment that can be pushed in either direction? >> it's kind of a difficult situation to analyze for a couple of reasons. one, they are worldwide. u.s. companies but they are worldwide labor force. and a lot of the job cuts are done through attrition rather than layoffs, so they don't really give you a clear picture of what is going on. you notice they are up by 53%, the job cuts, but also we had amazon announcing it is going to hire one under 25,000 diesel employees and target 100,000. there's a lot of churn in the labor markets. doesn't really provide that much useful information. jonathan: the previous week, a revised 2.19. into tomorrow, payrolls. the previous month, 142. lindsay, let's talk about the numbers that just came out. anything to fear, anything to

worry about looking at the labor market data through this week? >> really not yet. jobless claims seem to be pretty steady. weekly volatility but nothing to indicate a sizable, directional trend. right now we continue to see that the labor market remains tight with some indications of pooling momentum, but again, that cooling suggests the data is simply moving more toward a neutral state as opposed to an indication of mounting weakness, as we look further to the end of the year and turn the page into 2025. jonathan: where do you get any degree of confidence that we would stabilize at this state in this level? >> i don't think we are going to get much competence from jobless claims, at least not the weekly data. they confidence is going to come from more improvement or more stabilization in the nonfarm payrolls report. friday is going to be a very key driver not only for competence for investors, but for the fed

officials looking to make that determination of what is the appropriate next move for november and december? if we see more indications of cooling the mentor him, i think that is going -- momentum, i think that is going to bolster the case for a second round 50 basis point cut. but if we see more steady conditions, more stabilization, that is going to make it pretty difficult coupled with earlier uneven inflation data from the pce to justify anything beyond a 25% basis point cut. and should be see the numbers come into the upside, i think the fed may be willing to sit on the sideline in november. lisa: forgive me because i've been conditioned by my experience. but every time we are heading into a non-form payroll everyone says this is going to be decisive and tell us where we are. on the brink of some sort of deterioration or steady as she goes type of state. and then people find 15 different narratives to justify within that same data. why should this be any different? >> again, it's not the end all,

the deciding factor for november. but it is one of the key pieces. we have a handful of key data points and the fed is going to look at them in their entirety. yes, the pce is a key driver, but it was mixed. the headline retreated, the core showed further upward momentum. we are going to turn our focus to the labor market. if the labor market comes in very clear to the upside or downside, that's going to be a very key driving factor to that decision. but if it comes in mixed, the fed is likely to say we need more indications, we are going to wait for the next round of inflation or the employment data. so it is not that one data point is going to make the decision, but each of these data points becomes increasingly more important as the picture is not yet clear as to what the fed should be doing and the size and the momentum of these policy adjustments that the market is anticipating. lisa: how much salt needs to be

thrown on the next data report on november 1? >> there is going to be some adjustments that have to be taken into account, of course. the port strike, the hurricane. all of these events are going to provide additional volatility, but it is likely that we do see most of that not necessarily hit the november report. it may take an additional month to come through. if we did see that type of distraction or volatility, the fed could also look through that. so yes, there are some amount of needing to look at the data point with a grain of salt given the underlying factors, but the fed is smart enough to look through that and they are going to see the underlying directional momentum and again, that's going to help decide where the fed policy needs to go from here. jonathan: what is your best guess for tomorrow? >> i think we are going to see something similar to what we saw last month.

100 40,000, 150 thousand is very reasonable, keeping us on par with the pace of job creation, raising the three-month average. but the unemployment rate still steady, well below what the fed has designated as that full employment arrangement the sustainable level of joblessness. so i think we did a somewhat favorable report still indicating tight conditions and still indicating the need for a very patient, tempered, controlled reduction of rates is again, inflation, their job of reinstating price stability has not yet been met. jonathan: lindsay, thank you. essentially the message we got from the chairman earlier this week. we are in no rush, not in a hurry. lisa: which is the reason people thought maybe we got ahead of ourselves. then of course jobs data to give direction, basically saying low initial jobless to show layoffs have not picked up, but that may change. he continues to put it 70,000

for tomorrow. which is a different scene. jonathan: mr. 70 k, unreal. far more bullish than that. jack, good to see you. layoffs are low. are they inevitable? >> i like what you said, it depends where you are looking in this economic cycle. i think at the moment the business confidence is there to keep people employed and the layoff numbers that we've been seeing on a weekly basis have been reading or seeing this narrative that the labor market is quite tight for where we are in this economic cycle. people are not losing their jobs. payroll gains are so positive. the unemployment rate is moving higher because of a supply-side problem, not a demand-side problem. i'm not particularly worried about layoffs at the moment, but talk to me in six months. jonathan: we had the conversation this morning whether it would be good news for persephone market. i sense from what you are saying that it would be. jack: i actually think we are

back in this perverse environment where bad news is good news. i think we flipped again because when you look at what is going on, it is unhinged. the market right now is calling for what, 125 basis points of view this year? another 75 after what the fed has already delivered back in september. you mentioned earlier some commentary from the chairman that they are not in any rush, that there is no real worry. how do you adjust the dot plot from 25 to 100 basis points of easing over the course of three months and then add another cut to the cycle by the end of 2026 and say we are not worried about anything? that is very telling about how the fed thinks about what is going on with labor. and what is even crazier to me is that in the aftermath of that june economic projection, the fed tells us 25 basis points, the markets as you are full of it. then the fed says you're right, it's going to be 100. the market says no, it's actually now going to be 125

four 150. if we see payroll gains come in in at 150,000, i think that narrative for 125 basis points of using continues to deteriorate. and when we talk about inevitability's here, i don't know about inevitability with layoffs, but at some point this game of chicken between the market in the fed is going to come to a head. somebody is going to be right on this one. and my guess is the 100 basis points is probably closer to the truth than 125 and as soon as markets come on board you've got volatility in the market. lisa: so let's stay with the whole idea of good news is bad news for equities in particular. that's basically what you're saying. that basically you start pricing out interest rate cuts that are outsized, that is going to be risk off. ok. i guess i'm trying to wrap my head around something. when everyone was telling us it's companies are in a good

economic situation, that is good for these companies. because inflation is a little bit hotter and that is good for corporate earnings. doesn't it all come down to corporate earnings more than anything else? we are basically just rearranging the deck chairs? jack: without a doubt. earnings and what is going on with margins. the differentiator has to be a market vs. pockets of the market. we know that the market, by and large has been driven by a very small handful of names. that story has changed a little bit recently but generally speaking a very small handful of names. gassed up on this idea that ai is going to transform the world. lofty valuations, pretty impressive earnings expectations, but the s&p 493 are much more fairly valued. if we are looking at the market in aggregate, we are worried about valuations in aggregate, this change in expectations may put downward pressure on the overall entity of the s&p 500. but that doesn't mean that the rotation that we've been seeing

is durable. the overall macro trends are actually quite supportive. you have cooling wage pressure which is good news for corporate america. you have easing inflation. i would agree we are not completely out of the woods yet up with inflation stabilizing, that is good news. and we have falling interest rates. anything is better than zero, and that is all good for broadening out of profitability. lisa: basically this is short-term vs. long-term. short-term good news is good for the markets but over the longer term if the economy is stronger, even with fewer rate cuts you still see this rotation into the other 493, into small caps potentially continuing. jack: exactly right. the one other thing i would add to that story that ends up being confusing is we see an economy that is very clearly cooling off relative to above trend growth in the back cap of last year and i think the labor market is an

excellent leading indicator of exactly where that coolness is coming from. how can you make the argument that is slowing economy is going to be better news for the companies that haven't been doing well? i guess my pushback would be if the u.s. economy grew 4.5% annualized in the back half of last year and these companies couldn't do anything, then i guess the proof is in the pudding. higher interest rates, that hot inflation, that warm wage pressure matters more than gdp growth. a cooler economy that avoids recession, that is the biggest thing we have to point out. if there is a recession, the story changes. as long as there is no recession, that trifecta for profitability is great news and the long-term and all of the stuff we are dealing with is noise. annmarie: do you think we get less noise or more clarity after the election? this narrative that a lot of companies are holding back on hiring because they want clarity on november 5? jack: normally i think that is how we would think about things. when we talk about elections and politics in general be always

like to say elections are profound sources of uncertainty markets more than anything hate uncertainty. markets don't care who wins. they just want to know who is in charge, the composition of government they can plan for or around any policy change. in general a good rule is election day happens, and all of a sudden you are back off to the races. this year, i know this time it is different or whatever, but this is clearly a very unusual year. there are a lot of other headlines around out there and i would make the argument that the election is not the thing everybody is most concerned about at the moment maybe it is tied with a few other things but it is not like one status and -- once that is over it is back to sunshine and rainbows. jonathan: jack, good to see you. jack manley of jp morgan. no bad news here. equity futures down to tens of 1% on the s&p. yahaira: recapping that labor

data, u.s. jobless pick up slightly last week. the data is consistent with a limited number of layoffs. initial claims increased by 6200 25,000. -- from 6000 to two hunted 25,000. -- 10th 225,000 --to -- to 225,000. starbucks announcing a farm in costa rica will look into solutions including how technology can help farmers. the other farm in guatemala replicated the challenges facing the small farms that make up 97% of its supply chain. in september, extreme dryness in brazil sent prices for beans favored by starbucks to their highest level since 2011. and people familiar with the matter say mammy dolphins owner stephen ross is working on a deal with private equity for mary's management and

millionaire josias. the deal would include stakes in the team and other assets at $8.1 billion. a potential deal would be the first private equity transaction after the league changed ownership rules earlier this year. the dolphins, the nfl and aries declined to comment. jonathan: thank you, appreciate it. up next, we will set you up for the day ahead and catch up with bill dudley. that is just around the corner. from new york, this is bloomberg. ♪

♪ jonathan: about 40 minutes from the opening bell, we can't you down to the cash open. the trading for the rest of the week, the calendar looks like this.

10:00 a.m., factory orders, goods and services. then more fed speak from kashkari and bostick. then payrolls friday. the next big data point for the fed. elsewhere on the federal reserve, the former fed president bill dudley writing this. i've been too pessimistic about the risks of a so-called hard landing for the u.s. economy over the past few years. although most of my conclusions that led to that theory were correct, such an outcome remains very much in doubt. bill joins us now for more. welcome back to the program. quite a journey for you. an intellectual journey so far. i want to go through a couple of headlines and help me understand why you've changed your thinking somewhat. it was early the summer when you said i change my mind, the fed needs to cut rates now. before the federal reserve meeting last time around, you said i think they will go big. they did. walk us through how you are thinking about things currently and what kind of policy this backdrop needs. bill: my original view was that

the fed would be late to tech monetary policy, check. as a consequence, inflation would go up in the labor market we get very tight, check. then the fed would have to take monetary policy, check. the unemployment rate would have to go up at least half a percent, check. if you look at the gdp numbers, they've been very firm lately. second quarter is 3%, third quarter is tracking 2.5%. so even though i had the story right, it doesn't look like it is going to pan out. that is why the labor market has so much attention focused on it, and i thought it was interesting, the summary of economic projections at the last fomc meeting. in their economic projections they think that the downside risk to the labor market is actually greater now than the upside risk due to inflation. so they are worried about the exact same thing and that is why tomorrow's report is so

important. if the labor market starts to deteriorate, i think the soft landing story will start to come in the question and that is why the fed cut 50 basis points a couple weeks ago. lisa: i think a lot of people share your journey in terms of changing views and not understanding which models are actually accurate this time around. what in your analysis makes you think that this time is different and that some of the classic indicator that traditionally have four sold recession no look --foretold recession no longer work? bill: number one, you had all these fiscal transfers during the pandemic to businesses and households. they are in better shape than they typically are late in the business cycle. people locked in very low mortgage rates during the pandemic. the second thing i think is different is the financial conditions have eased a lot, even before the federal reserve cut rates. financial conditions were at

their tightest about a year ago. since then, they have eased a lot. stock market up, bond yields down. so even the monetary policy is tight, financial conditions have eased a lot supporting economic activity. lisa: what is to say we are landing at all? bill: that's a good question. the fed would like the economy to grow 2.5%, keep the unemployment rate right where it is. the third quarter looks like it is shaping up that way. but keeping on that knife's edge, growth not strong enough to cause a resurgence of inflation, not weak enough to cause a deterioration that would lead to recession. it's going to be tough to keep on that knife's edge. annmarie: what are you expecting for tomorrow? bill: i think the estimates are around 140,000. that seems a reasonable estimate. you have to remember, the bureau of employment has that standard error so you could get something like 80,000 or something like 200,000.

it wouldn't tell you for sure the economy is actually changing momentum. jonathan: how difficult is that november 7 meeting going to be considering how messy the data might be, considering we may not have an outcome from the election? can you think of a time like this one that they are going into? bill: the particular awkwardness as they will be another payroll employment report during the blackout period right before the fomc meeting. i think that most of the momentum is for 25 basis points at this point. towel basically foreshadowed that in his speech. the fact that you had all these people in economic projections that only had one more rate cut in the forecast after the last meeting also tells you it is probably not going to be if the -- b 50 -- be 50. monetary policy is tight, we are still far from neutral so 25 basis points is the most likely scenario. lisa: bill, earlier they said

the fed should be vocal about the fact that they are considering the deficit and potential tariffs as a potential inflationary pressure heading into 2025, and a reason to cut less. what do you make of that? not necessarily the fed weighing in on the issue, but being more cautious ahead of next year because of it? bill: in my experience, the fed doesn't set policy today on things that mayor might not happen in the church. they wait until those things either materialize or not. i think the idea that the fed waited because they are buried that the election could result in a certain outcome that would lead to higher nation, i don't think the fed would hold off because of that. jonathan: bill dudley, appreciate it. his latest piece, my hard landing forecast turned out to be wrong. coming out the other side we are all talking about tax cuts in washington and to reserve just had to wait to see the campaign

promise to become legislative reality. lisa: and they are going to have to wait this time around and essentially everyone saying they are not going to wait in on this. that said, taking out tariffs and the potential for expanding deficit, there is an issue of whether we have under price the nation risk given the fact that everyone is saying this economy looks very different than it has in the past and you are seeing very easy financial conditions. that i think is a real important take away. jonathan: jp morgan and morgan stanley. ubs and mohamed el-erian and a whole lot more. the lineup is absolutely stacked as we can't you down to payrolls friday. this is the number we are looking for. the median estimate, 150. i imagine it result absolutely nothing as we go into the federal reserve decision last month -- next month and a big election still to come. good morning. this was "bloomberg serveillance."

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matt: futures are down volatility is up. katie: sonali basak is on assignment. we start right now. matt: markets are on edge. investors await friday's jobs report for clues on the fed's cuts as tensions remain high in the middle east. levi's slumps as the denim maker lowers its revenue growth outlook for the full year. th