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tv   Bloomberg Surveillance  Bloomberg  December 20, 2024 6:00am-9:00am EST

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>> the fed has to reiterate the commitment to the inflation target. >> the is on an easing path even if it is slower. >> it will be a tumultuous 2025 if we continue. >> the fed has done a lot of work getting us off of ground zero. >> no forecast knows where we will be in 12 months. announcer: this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: let's get you to the weekend, took christmas, the year end, all of the above. good morning to our audience worldwide. "bloomberg surveillance" starts right now.
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a three-day slide on the s&p 500, a three-day losing streak. equity futures on the s&p down, negative about 0.8%. on the nasdaq 100, lower by 1.3 percent. on the s&p, a record streak. annmarie: 14 straight days with more losers than gainers. people are wondering if this is the take back before early next year where they are expecting a boom. a question of whether
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i look back and i was like, wasn't there a pause? a ban on the on the licenses to sell lng over to europe? oh yeah. that's right. this administration, this is a europe that has faced fickle u.s. policy when it comes to whether they want them to buy their lng, their liquefied natural gas or not, whether they want them to really be taking up
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some of the resources. so here's the question. how much does trump actually effectuate this with respect to jawboning europe versus just increasing production in the u.s. at a time where backdrop policies have been shifting and back and forth over the past couple of years. so here's the good news for the europeans. the europeans are already there. ursula von der leyen came out as soon as trump won the election and basically said, we'd like to buy more liquefied natural gas. this is what they want. here's the bad news. i don't think that's going to be enough to close the trade deficit. you have to do a whole lot more than that. so that's where i think there's going to be some space for a little bit more tension in the years to come. and the tension increases because the dollar is so strong. so any exports from the u.s. are going to be incredibly expensive for a lot of these places. meanwhile, i just wonder how much cohesion there is among the republicans themselves at a time where they can't really get themselves together and keep the government open. so clearly. so a real question here about what policies actually do get passed. are we really going to get shut down going into the weekend? i honestly have no idea. the good news is they took a
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1500 page bill and they took it down to 116. they took out some of the wage gains for some of the congress members. the bad news is that they couldn't get a lot of their congress members within the republican party to sign off on it. and basically, you have the situation where house speaker mike johnson came out and said, if any of you can do better, please have at it, because that was his message. i'm happy they've sliced up the bill, and this is why they can all stop pretending that they read bills and they can actually start reading them, because there is no way that these people read those bills that are that long in like, this amount of time, just days. there's no way they do that. okay. but that was the only thing that they accomplished. i think that representative chip roy, who is a conservative from texas, really put it well when he said to congratulate yourself because it's shorter in pages but increases the debt by $5 trillion is asinine. emery down in washington, dc a little bit later this hour. she'll join us in about 15 minutes time. if you're just joining the program, welcome.
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equity futures on the s&p 500. adding to the slide. we're down by 0.8% on the s&p. the good news i guess for the equity bulls in a bear market. in the bond market at least we're not climbing any higher for ten year government bond yields. yields are lower by just two basis points on a ten year. four 5362. coming up this hour we'll catch up with joe quinlan of merrill and bank of america remaining cautiously bullish. we'll speak to doug rediker of international capital strategies. as a u.s. government shutdown continues to loom. and christian wetherbee of wells fargo, as fedex plans to spin off its freight division. we begin this hour with stocks falling as traders weigh the threat of a u.s. government shutdown and await the last major data point of the year. joe quinlan of merrill and bank of america private bank remaining bullish but proceeding with caution, stickier than expected inflation and therefore fewer fed rate cuts than anticipated could cause the bull market to stutter or stumble. joe joins us now for more. joe, is this a stutter or a stumble? i think more of a stutter.
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john. i mean, actually, not. i thought this was going to happen in january. we moved it up before christmas. so the sticky inflation theme is something that our economists have been talking about for quite some time. we saw through the numbers. we got the pce later today. so i think this is a wrestling match that we're going to have to deal with over the course of 2025. but look, inflation is at 2% but it's under 3%. so that's a nice place to be in terms of the overall market. so joe, the federal reserve changed our bullish outlook. we have a cycle underway.
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good nominal growth which means you have a good backdrop for earnings. we are still looking for earnings. that hasn't changed. >> because we have taken some of the froth of some of the areas that have been the high flyers, does that make you more bullish? >> it makes you more comfortable. for the last week or so, our clients have been flabbergasted by the enthusiasm in the markets and increasingly worried. this pullback i think is refreshing. it sets us up for healthier 2025. i take comfort in this pullback because there is some sanity to the market in terms of these evaluations and over enthusiasm. >> i'm going to use that and say it is refreshing. that is what joe quinlan said, refreshing salad. i wonder how you wait the backdrop of the u.s. government that may shut down with haggling over whether or not they get
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their first race in a decade and also the number of pages in the bill. does that register in the different risks you are looking at? >> not really. you know this as well as i do come government shutdowns have happened before. we know the script. it could be hours or days or weeks. they are going to reopen. we will get the continuing resolution. we are going to pay our bills. it is drama that we really don't need in and around the holidays but it is here. if we do shut down tonight, they have the weekend work through. hopefully, they are open by monday. it does not really fundamentally changed our view but like you said earlier, if we went from a massive bill down a few pages, maybe that is progress. >> that might be where we are. i am not as worried necessarily about a government shutdown and how long it takes for them to get the government open. there's a bigger point here which is some people were saying
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with the red sweep, there would be faster path to policymaking. a quicker and more effective donald trump administration to pass some of the more growth -oriented policies. given the fact that a host of different republicans did not vote for this bill and did not go with the president, how concerned are you that that whole case that has been baked into some of the optimism is it reality? >> that was part of my note i put out about what worries us in 2025. the gears grind slowly in washington. there is a new york minute and a washington minute. they are night and day. we have been talking to our clients and say, listen, when it comes to the tariffs, anti-immigration immigration, this is going to take months if not quarters if not all year. curb your enthusiasm. we have it built into our expectations. some of our asset allocation. you are dead right in the since the gears are not as fast as wall street. there is a big difference. jonathan: you can get the
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tariffs on a whole lot quicker than you can get the taxes done. just by definition. >> but even that takes time to layer in and get implemented. you are right. jonathan: january 20, potentially do it almost immediately and do 1, 2, 3. is that the sequencing you expect? that seems to be important for investors. >> the sequencing will be important but also the targets. come right out of the gate and go after china. how does china react? that will be important. you talked about europe. you will know their priorities of the administration right out of the gate. everyone has expected to be china then you go, what products, how much, what industries? a lot of u.s. companies are working behind-the-scenes with the administration, incoming administration to go easy and protect what they have in terms of their supply chains. it is going to be interesting. i don't think it will happen overnight.
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jonathan: enjoy the holidays. joe quinlan of bank of america on the latest it looks like the focus of the moment seems to be on tariffs and spending cuts based on where the focus has been the last few weeks. lisa: tariffs might be easier to get through then say spending cuts of cutting down the number of pages of a bill might be the progress but not necessarily getting that bill passed. jonathan: losing some weight this morning is the stock in orders. it is getting hammered. down by 22%. let's get an update on that and more. >> shares of nova nordness plunging the most. the come to reporting people treated with experimental of the obesity drug achieved a weight loss of 22.7% after 68 weeks. that is below the 25% weight loss novo previously said the drug could deliver. eli lilly shares are getting a boost on the news. up more than 10%.
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present like donald trump the european union with tariffs if they don't increase their purchases of american oil and gas. the eu is already a major buyer of u.s. liquefied natural gas and has discussed purchasing more to deter tariffs. eu officials and member states have been racing for a trade offensive ever since trump's election victory last month. bitcoin is falling today. the price is lower by over 10% from its record high of 108,000 dollars reached just this week. the dow also impacting smaller tokens like ether and deutsch coin. some are offering to take profits and reduce exposure following the hawkish pavement on wednesday by the fed. that is your blue burglary. jonathan: more in about 30 minutes time. equity futures on the s&p close to session lows, down by zero .8%. up next, a looming government shutdown. >> very disappointing to us that all but two democrats voted
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against aid to farmers and ranchers come against disaster relief come against all of these bipartisan measures that had already been negotiated and decided upon. jonathan: fun and games into the weekend. anne-marie has more. good morning. ♪
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jonathan: three day slide on the s&p 500, make eye to four. equity futures negative by three quarters of 1% and place for second week of losses on the s&p. yields have been grinding higher through the week. the tenure, 4.54. -- the 10 year, 4.54. looming government shutdown. >> very disappointing that all but two democrats voted against aid to farmers and ranchers, against disaster relief.
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the only difference on this legislation was we would push the debt ceiling to january 2027. jonathan: the republican-led house rejecting a temporary funding plan backed by president-elect donald trump, setting the stage for a potential government shutdown with government funding such a lapse tonight unless a new solution is found. "their real political issues around members of congress and senators heading home for the holidays when the government is shut down. if the government shuts down, social security payments continue but pay for federal workers, including ministry personnel, cannot be made." doug joins us. annmarie: it looks like we are headed toward that shut down at midnight this evening. is that correct? are we going to be shutting down the government before the holidays? >> unless there's some strike out of the blue. in the trump era, could happen but right now i don't see any
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path. annmarie: what are the options on the table? >> plant a we know did not work. plan b did not work. there is no plan c. there is talk about going back to plan b. the bill that did not pass last night going back and trying it again. i don't know why, the einstein thing about lunacy is doing the same thing and expecting a different result. i don't think you're going to get 38 republicans to change their votes overnight on the same bill, so i don't know what the path is. i think the easiest is probably very clean seo. let's go home for the holidays, do it that in january, keep the government open. but even that is a very tough lived at this point. annmarie: hakeem jeffries and the democrats, would they go along with a clean cr? >> if it were really clean, literally the definition of a washington kick the can down the road, you take all of the issues other than just continuing to
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keep the government operating and you say, let's do this next year. i suppose theoretically that is better than telling people they're not going to get paid over the holidays. despite the republican's, i do not see the democrats are getting blamed for this. this is purely in the camp of the republicans. annmarie: one of the biggest banners was donald trump saying, you need to raise the debt ceiling. and he is now on the same site as some democrats who for years have been calling to abolish the debt ceiling. yesterday, i agree with president-elect trump says the senator from massachusetts elizabeth warren, congress should terminate the debt limit. could you see under a trump administration, maybe if it is not now, abolishing the debt limit? >> i would love to see it. i think it is always this ridiculous specter where as we know it is not about spending new money, it is about paying things -- borrowing to pay for things you already appropriated and spent. it makes no sense to have the debt ceiling in our legal system
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or governing system. having said that, this is probably not the time to do it at the last minute, 11th hour, throw it in, unrelated to the cr's constructed. could i see this happening in the next congress under president trump? sure. they have raised it. it is out there. in the past, these things have been quid pro quo. you don't get something for nothing in this town. even if you say you wanted, that you will get it without giving something else up from the other side. annmarie: where is the president on this issue? >> which president? annmarie: the current president. >> part of me was saying, my god, or the present, gift away again. it is on your watch. part of me said, when your opposition is digging a hole, let them keep digging. i guess i'm sympathetic to the fact biden doesn't have the political capital to spin to contribute to this, which is a sad indictment of the presidency unto itself. he is nowhere. i guess he will sign whatever is
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put on his desk and i think that is too bad but that is the reality. annmarie: we're talking about workers getting furloughed, v.a. benefits potentially not going up. despite any -- does biden need to step in? >> isn't helpful or not. this is all about the republicans. they are trying to indict the democrats and say he was the democrats fault. it is a very heavy lift when 30 republicans in the house voted against is to blame the democrats for this. this is the republicans will stop if biden steps in, there's a chance that political spill gets under his watch. he is probably saying come over to you. annmarie: what does this mean for speaker johnson january 3? does get the gavel back? >> the only reason he gets it back is because either no one else one -- wants it. the entirety, majority for anyone to vote for anyone else. he guided the first time not because he was everybody's first choice but because they went
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through 1, 2, 3 different candidates, all of whom failed. he was the easiest guy to get through that did not offend as many people as everybody else. that might be his ticket to success again in january. annmarie: without a speaker, donald trump cannot get his agenda. i want your take on what are you taking clients on how they should think about next year, the sequencing of tariffs, immigration, and tax cuts? >> tax cuts as we are seeing are going to be hard. we know there is a discussion about whether there would be one or two reconciliation bills. the entire fiscal bang policy doesn't have internal consensus with the republican party, much less across both houses, both parties. you might not need that in reconciliation but within the republicans, that is hard. taxes are going to be a leader in the year kind of thing. i am a believer that trump, when he says something repeatedly as he has on tariffs and immigration, he means it.
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i'm expecting early on whether it is day one, week one, there will be major moves on immigration and on tariffs. i think the markets generally are under appreciating the risks of both of those. annmarie: on tariffs, on trees last night, a large-scale purchase of our oil and gas. do you see this is how trump is going to do deals? you buy this room is that we will be as harsh when it comes to tariffs? >> that is the transactional trump. to some degree come the logic of what he just described is pretty strong. we know europe has been long too reliant on russia for its energy. modestly, the war in ukraine is makes that a much harder lift. the u.s. has an emergent -- enormous amount of elegy capacity we can export. there are logistical issues. you need the terminals and processing. let's say this makes sense. doing that as a threat, either do this or we're going to throw tariffs on you come is probably not the way europeans are going
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to respond most favorably. the logic behind what he is there, assuming the u.s. is beyon -- reliable. annmarie: ursula july did come out days after donald trump was elected and sang maybe we will buy more positive does biden put a permit on lng that is still in place. is there even enough supply? this will take a while. >> that there are a lot of excess lng capacity in this country. there is a logistical problem, certain permitting issues. i am not sure we have as much as europe needs to replace everything that he gets from everywhere else. nobody's going to replace everything with one source supplier anyway, so there is enough lng american supplies could probably make investments if they knew they had long-term contracts in europe was going to agree to those contracts. the problem with lng, to some it
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is clean energy and others it is not clean energy wasn't longer-term, are you boxing yourself in to buying an energy supply that is going to end up being unacceptable to the population of europe, which is very green focused? annmarie: right now the u.s. is number one when it comes to lng exports, imports into the european union. russia's number two. i think the u.s. would say we need a bigger chunk of the pie. overnight you talked about tariffs with your poster previously in the last few weeks, we are donald trump talk about tariffs with mexico, canada, and china. does he do all of these at the same time? >> trump has used tariffs as both a means to an end and an end. if they are an end on jim's -- and to themselves, can raise trillions of dollars on the back of tariffs that are costless to americans. basically his model in that way is we put tariffs on things, other countries paid, and the
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american consumer doesn't suffer any costs through higher taxes or higher prices. i don't believe that is true. but say that is the way trump thinks. the other is as a negotiating leverage. that is where we are right now. the 25% on canada and mexico is stop immigration, stop the flow of fentanyl and i will read think this threat on tariffs. and china, we don't know what he means. the 10% is a more modest tariff threat. china can probably absorb that relatively easily through devaluing the renminbi. the bigger threat out there is a 60% tariffs he has threatened against china. we can probably he would love to sit down with president xi. i don't know what that would look like. president xi is different president then he was eight years ago. i think in trump's mind, two conflicting uses of tariffs. annmarie: thank you so much for your time.
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as we await this potential shutdown, it looks like it will be happening this evening at midnight. jonathan: we will catch up in the next hour. we are not going out quietly come are we coming to the new year. novo nordisk down by more than 22%. experimental obesity shot losing less weight than predicted in a study. that stock is getting hammered. eli lilly up in the premarket by close to 11%. more on the story in moment. trump threatens the eu with tariffs. ♪
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jonathan: coming into friday, a three-day losing streak on the s&p 500, the longest going back to october. negative by 0.8%. down 1.3 on the nasdaq. down 1.4% on the russell. small caps, getting hammered. two year, 10-year, 30 year. 10 year, down by two basis points but up on the week by double digits. 4.54. it is not the shifting perception of the federal reserve and the drop of the e-zine. it is also the data, retail sales, jobless claims,
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consumption numbers. gdp, they have been pretty good. lisa: which is now putting a renewed focus on inflation, which is the reason why the the pce, the key data point that the fed looks at might be pretty interesting. if it surprises to the upside, how much does this reemphasize the hawkish tinge we heard from the fed. jonathan: let's turn to foreign-exchange off the back of those moves we see in the bond market. the dollar stronger against the euro, the japanese yen. dollar-yen has had a 2% move, the third week of begin we can assign dollar strength. lisa: japanese inflation came in hotter than expected. you start to wonder, why aren't they raising rates? they have inflation surprising to the upside. they have a currency issue where they would like their again to appreciate versus the dollar. is it that they would like tourists? jonathan: possibly.
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lisa: i would be an aspiring tourist. this is my shocked face. jonathan: i checked the hotels, around 160. lisa: really. jonathan: out of all the countries in asia, japan. i've never been. culturally, everything is in order. it feels like my kind of vibe. dollar-yen right now, 156.78. stories under surveillance, shares of and orders -- novo nordisk calling. a new drug is below what was previously expected. eli lilly shares getting a boost off the back of this news, up by 9%. lisa: eli lilly versus novo nordisk in a war for weight loss drugs. montero is the one for eli -- it is raising questions about who
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can lose the most weight, like who is the biggest loser? this is the debate between the two. it surged to $24 billion in 2023 alone, and it shows how much is at stake in the dominance of the high flyers because the danish stock market is experiencing its worst day in a long time. jonathan: it is the second biggest waiter on the stoxx 600, which is lower by 1.7%. elsewhere, the u.s. government inching closer towards shutdown and the republican-led house rejecting a temporary funding plan backed by president-elect trump with 38 republicans voting against it. it is set to lapse at midnight. another big story into the weekend. lisa: there are a lot of questions. first of all, what is new about a government shutdown? get them pretty much every time they come up, which is a reason why president-elect trump would like to do away with the debt ceiling. there is a question about what
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this means for next year, 30 republicans vote against this and if one of the hardliners says this is asinine to simply shorten the bill in pages but increase the deficit by 5 trillion and say you are making progress, it highlights a level of uncertainty around how they will cut the deficit. cutting the pages is not enough. jonathan: people are coming out and saying elon musk is running the government. let's take a step back, we have a sitting president. his name is not donald trump for elon musk. where is the president of the united states on this issue? anne-marie asked the question months ago, where is president biden? lisa: and doug reddick or said, is he going to be held responsible if the government shuts down, considering the fact that for all intents and purposes, president-elect trump has taken a mental but he isn't at the mantle yet. it raises the question of, can the government function without
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actually sitting president? jonathan: annmarie hordern join us in 45 minutes time. president-elect trump threatened the eu with tariffs, after the discussed purchasing more fuel from the u.s., the largest producer of crude oil in the biggest exporter of lng. we all remember ursula von der leyen coming out and saying, yes, we are ready to buy it. is this a place where we can make some deals? >> absolutely. there is bad news and good news. the bad news is for european policymakers is getting back to the idea of this truth social newswire being fired up at 1:08 eastern, and the good news is this is in line with european interest and with what europe has been doing the last three years. they have tripled their volumes of imports from the u.s. since the invasion of ukraine by
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russia. we have 50% of all the lng that comes into europe is already coming from the u.s. the other good news is we have had an abstract idea of 10%, 20% tariffs to close the trade deficit between the u.s. and europe. now the europeans know what donald trump would like, what can be done to avoid this. and to italian another story we saw, there is a ukraine-russia gas transit deal with 50 cubic meters of gas that flows from russia into europe. that deal is now dead. that is the deficit of 20 billion cubic leaders, 10% of what russia used to send before the war. that could be closed by the gap. another point, one of the most interesting points, he said he told the european union, but who did he tell? viktor orban, ursula von der leyen? who is going to be the powerbroker in the new political
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architecture. that's the main question. lisa: when i read this from donald trump, i thought to myself, isn't this what everybody would like? when he put a pause on licensing for lng licensing? europe would like to export more, u.s. from producers would like to export more from them. does this have to be i will tariff you if you don't eat your candy? oliver: again, the way that will kennedy put it, this is pushing the open door. this is something that everybody is aligned on and everybody would like to do. from that perspective, there basically will be little resistance, an easy win for governments. they need to secure that energy. there's no way that they will continue to get this russian gas but basically, all of those concepts are dead, so you still
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have another deficit that needs to get plugged, and it is cap most conveniently from a geopolitical standpoint and you can gain favor from donald trump by buying more american. jonathan: they change -- a change of scenery going for him into the holiday. lisa: zoom in. frame area that was only thing. jonathan: jordan rochester joins us for more now on the eu, we hope this would be the same political theater as 2016, but it is the best eu i have got to work with. jordan, welcome to the program. news or noise when you read that statement? jordan: it is news because -- merry christmas, by the way, good to see you. we've had trump come in, and a
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noted clients mysteriously absent on europe, japan, the rest of asia. and we have india this week, then the eu today, and as i put in a note to clients, the tricky thing is if he is serious. if he is, the eu and by more lng, but they will not at all be able to plug deficit in the u.s. from lng alone. oil will help but it is maxed out, too. if you have any purchases made from the u.s., it is already half of the eu lng imports, and the exports of lng from the u.s. have ramped up a lot over the past five years, but it cannot double in the space of this one-year time, and analyzing around $26 billion a year and with the eu buys from the u.s., if it was difficult lng american exports, so it is difficult to add up.
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and the eua will not be able to negotiate a deal on behalf of numbers. and what they did in 2018 was a political charade. there was a memorandum of understanding. it was a loosely worded statement saying we will buy more lng and soybeans, and trump is still complaining. the deficit has gotten wider since the eu has increased lng purposes. but, i think, perhaps, he is giving them away out and maybe have voids tariff in europe to begin with, but it is down to lng in europe. jonathan: we already had a 5% move with the euro through this year. this is another reason and in a long list of reasons to keep sending the euro. jordan: he has a long list.
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cats and dogs, you have what is going on with the tariff situation, the industrial recession and germany keeps getting worse. in the short time, we have been kept in doubt about how far the ecb can cut rates. and it is difficult for services to do well, if you lay off your manufacturing employees. so we have 101. but the key message for my site is that is a view into january 20 and i think that inauguration is at risk itself. it could be very get a list of executive orders from donald trump. if tariffs don't future and that list and he does not start an investigation into raising tariffs, it could be in the room at that moment. and that is why i think we price maximum pay, and if it goes more smoothly and there is not a significant hike on day one of his presidency, perhaps this means reversion in the dollar cells from there.
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lisa: in the past, the dollar has had a self-correcting magnetism where if it gets too strong, things break and then weakness takes over and there is a normalization. at what point do you see that risk coming into play? jordan: indeed. it ties to the fomc response reaction. the fomc kind of rides out for a bit, but when you have a 10% drawdown, it tends to reverse course. that communicates. it feels like 2018. 2018 we had hawkish fed, 10% selloff in the s&p 500 and them he got to january, and powell changed his mood music quickly and public statements, and we had most of the selloff come back in the first part of january. that is the pain threshold where you get members responding and
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they perhaps change your language but it is difficult because macro data supports a much more hawkish fed. a lot of people join this in a race to 4% once trump was elected and we are now pricing that pretty much perfectly in the rates curve, so it could be the case. the risk reward as we price and more cuts than what is now in the market. i think we should be pricing in a cut, on cut by june and march is around 50/50, so we should see some steepening on the back end of it. lisa: we've talked about whether it is the tariffs or whether it is the donald trump risk to a weaker euro and stronger dollar, and then there is the fed response mechanism. which is in the driver seat? jordan: i think the trump trade is in the driver seat for everything in january, it boils down to that. once we know what is happening with tariffs, it is done, and
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there we go back to following what inflation data says, what gdp data sets, and it is difficult for the fed to be dovish when you have gdp at 3%, forecasting higher than that, inflation we are accelerating, and tying this into the lng story, look at natural gas prices. their highs of the month, the arising in a fashion that could bring energy services cpi as a problem for the fed, so altogether, trump is in the driver seat and that pushes up domestic prices, it is inflationary, and then you have a situation through tariffs, which are inflationary and i would suspect are staggering them to reduce the knee-jerk reaction from funds and will raise prices as soon as they news is out, and we are probably going to cfx depreciation in china, and other currencies such as the euro, to help impact any
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tariffs if they come in, so if you have a 60% one on china, that is definitely the driver seat right now. jonathan: if we have a look at where things are, everything is weaker against the u.s. dollar, including the japanese yen with a 10% move. if i do the same thing at the end of 2025, will that screen look any different? jordan: good question. i think it will look different. i think we get dollar weakness by the end of next year but it is dollar up from q2 onwards. and we will see strength come back and as we are still at a rate hike. i'm an optimist for the second half of next year. we have military easing, a potential for stimulus q2, we should see a weaker dollar and that happens. it is such a mild rally. jonathan: thank you.
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merry christmas. jordan rochester of mizuho. you start to look for policy shifts in places like china and beyond. lisa: so there is space for you in february if you would like to take advantage of the window. lisa: what is the hotel like? it looks amazing. it has a good variety -- i'm kidding. i'm saying that basically if it goes to 60, then it will be the other way around. jonathan: that is where tk is. took the long weekend after the federal reserve decision. lisa: he definitely seems like you would enjoy taking his shoes off and sitting crosslegged. jonathan: sushi kind of guy. with your bloomberg brief, let's cross to yahaira hike us. yahaira: president joe biden is
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expected to announce new plans to cancel student debt for 55,000 public-sector workers, totaling more than $4 billion in forgiven loans. this brings the total number of individuals who received relief under the biden administration to nearly 5 million with a total of 180 billion, easing the burden of student it was a key promise of his 2020 campaign. china's bond market is rallying on expectations of policy easing and demand for safe haven assets. one year bond yields are trading at their lowest level in over two decades at .90%. you have to go back to 2009 to see these levels. the stars seem to be aligning for the rally to extend into 2025, amid china will make interest-rate cuts to bolster its economy against the threat of more u.s. tariffs. a big win for boeing, who has security $36 billion order from
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turkey's pegasus airlines. they placed orders for the 737 max 10 models with options to order another 100 more. it will receive the jets and 2028. it is a major blow to its rival, airbus, which was the previously preferred choice. that is your bloomberg brief. jonathan: more from yahaira?'s and 30 minutes -- more from yahaira and 30 minutes. >> it is the most profitable part they've got. it is growing. it is a good business from a macro point of view, but a fedex is a bigger story and has been about something other than the economy. jonathan: the latest on that company next on the program. you're watching bloomberg tv. ♪ to go further, you need to be ready for what's down the road. as energy demand continues to rise, we're harnessing breakthrough innovations
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to increase production in the u.s. gulf of mexico. our latest deepwater development, anchor, produces previously inaccessible oil and natural gas, allowing us to deliver the energy we all need today so everyone can follow their own road. that's energy in progress.
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lisa: what -- jonathan: what happened to that center rally. three days of losses into friday. in could become the four the bond market yields are lower, tenure, 4.54, and it is better than anticipated that in america. lisa: how much of this was an acceptance of the higher inflation we have seen. it truly is higher inflation could affect how much the fed is cut for work next year. jonathan: under surveillance, a fedex spinoff. >> fedex free is the most profitable part they have got, small but growing. they have aspects where they do well. generally, this is a good business from a macro point of view. but fedex is a bigger story. there is always something other
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than the economy, at least the last few years. jonathan: fedex spinning off its freight division into a separate publicly traded company. chris weatherby writing, we believe a fedex freight to spin would be viewed positively in the near term. why is it the right time to execute this move? chris: they have been thinking about the spin of their free business the last six months or so, but when you look at comparable multiples of others in the market, they trade a significant premium to what fedex does. and by spinning this out, they will tap into the relative value difference and you will see upside, which is a smaller piece of the business, 10% of revenue, but it has a better margin, so getting access to that burger multiple provides a big lift from that perspective. lisa: karen you give us a sense of where fedex is in the turnaround plan? shares are down, there has been
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in underperformance as they lose business to the postal service, as well as other providers. how far along are they? chris: we are halfway through the second year of their two year drive program, so we have made some progress so far, about 1.8 billion the first year, looking for two point -- 2.2 billion this year. they seem to be achieving it. there are some headwinds in the market they are facing, so we don't see the benefit come through as a net benefit to result, so they are making decent strides that we saw in the fiscal second quarter. they are expressing it they did post better results than expected. it was the freight segment that was more challenged the second quarter, but it appears they are making progress. they are affecting change where they have the ability, but they are fighting through what is still a challenging environment for people like fedex and ups
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who are moving freight around the world. lisa: it is shocking that i hear they are challenged by a weak consumer when other companies are talking about the strong u.s. consumer. can you square that circle for me? chris: there is some strength in the consumer freight flows we watch on a regular basis. many have been in the double digits for the last months of 2024, and a fairly resilient consumer from a spending perspective, as well. the reason fedex has struggled to some degree is the e-commerce side of it, so fedex and ups don't have access to the parts that are growing rapidly, so folks like amazon, or you have seen lower price discount, and econ players growing rapidly, and it does not have access to that volume growth, so amazon is not a customer, and they are limited and other high-growth categories. you are left with the rest of
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econ, which is growing faster than the broader economy but limited to an extent. that is a the discrepancy. consumer demand generally speaking has been surprisingly good in 2024. jonathan: fedex up by little more than 9% this morning. chris wetherbee of wells fargo on the latest spinoff effort from fedex. that stock again up by more than 9%. welcome. equities getting hammered. ever since the federal reserve news conference, as soon as it started, and chairman powell was asked about why cut interest rates at all? it was a tough call. we have been down since. we are down by 0.9%. next on the program, we catch up with jim karen of morgan stanley -- jim caron of morgan stanley. and we will speak to mary daly, kicking off at 7:30 eastern time. the second hour of bloomberg "surveillance, is up next --
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"surveillance" is up next. ♪
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it's our son, he is always up in our business. it's the verizon 5g home internet i got us. oh... he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kevin's plans for the fall? he's going to college. out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation. heard my name! i swear to god, kevin! -we told you to wait in the car. everyone in my old squad has xfinity. less lag, better gaming! i'm gonna need to charge you for three people.
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>> i don't think the bull cases have gone away, but they continue to have this have and have not economy. >> we think the market at every step has been worried about inflation. >> there are parts of the market that are frothy. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: this is not the year and rally you were looking for. live from new york city, good
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morning, good morning, the second hour of "surveillance" starts now. this is what the price action looks like, down again after a three-day losing streak. 0.9% down on the s&p, -1.3 on the nasdaq 100 and russell 2000. the losses are rounding up. lisa: they're adding up in the wrong ways, given the fact this has been negative momentum a while. we talked about bad breath and we need to continue with that because it has been 14 straight days of more losers and gainers in the s&p 500. the global equity breath remains dire. jonathan: the longest streak on record, according to deutsche bank. i was stunned by that. it is incredible. lisa: it shows how much has been dominant about high flyers. it impacts people who have already been concerned. and you put it well this morning when you say that it is not just that the fed came out and signaled they were going to cut
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rates as much is expected 20 25, it is that we were coming from a high place, high enough to make people nervous by virtue of knowing out there being bearish. jonathan: i would like to give apollo credit, who shared a quote from research, and it read as follows, recent inflation readings shows that inflation is restored and there is a risk of re-acceleration, and the 60/40 portfolio underperform significantly. he is onto something in 2025. lisa: what you are getting this concern that may be yields will be significantly higher than people thought and the fed will not offer the same level as they had before, and at the same time, the good news is you have been baked in, and i get to sequencing and what happens in washington, d.c.? it has to be fraught. jonathan: bond yields are lower
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by a few basis points. there's one stock we are watching. novo nordisk is getting hammered over in europe. it is lower by more than 16%. it is losing less weight than predicted with a new drug, and then who is winning off the back of that? eli lilly up by more than 4%. lisa: this is a heated competition between them over dominance in the weight loss drug category that has been a high flyer. just to give you a sense of how small the margins have to be for this to respond to this kind of way, the shot helped patients lose an average of 22.7% of their weight over 68 weeks, the novo nordisk drug, versus the expectation of 25%, and that was enough to sink them where they are not can, and it shocked the danish stock market the most. this goes back to the breadth, gainers or lifting everybody, and there's a lot of weakness. jonathan: just to be clear, that
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is the danish stock market. lisa: well, yes, and it is also telling that they danish stock market is composed of a stock that sells significant amounts to the u.s., not necessarily to the dates. jonathan: stoxx 600 europe having a difficult morning into the afternoon. coming up on the program, we catch up with jim caron of morgan stanley on the healthy selloff in equities. annmarie hordern joins us from washington, and mary daly on the fed outlook for next year, don't miss that conversation at about 7:30. we begin with stocks on a three-day losing streak ahead of fresh inflation data that 8:30 eastern. we're also keeping an eye on capitol hill as a government shutdown deadline nears. the selloff in equities's healthy, better to happen now when equities are of more than 20% versus early january and start the year on the hole.
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what is healthy about this? chris: -- jim: the markets are overbought in this selloff does not represent a change in trend. as you said earlier, there has been heavy concentration in few names. that narrowness of breadth has widened out, but when you get expectations of earnings still coming in good but not as stellar as people thought of the past, then you get the selloff. the s&p 500 was up 27% on a year-to-date basis, and we owe that to a few set of names. this is starting to broaden out, and as it does, that means the former winners are going to start to decline a bit. it doesn't mean it is the start of a bear market, it just means we are in the adjustment process of broadening out the markets and moving into sectors that are
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more with cap orientated, which is our view that we can do better from an earnings growth perspective. jonathan: did anything change for you wednesday afternoon when chairman powell finished speaking? jim: it is interesting because this is the dilemma for the market, all powell basically did, yes, he announced a slower pace of rate cuts, and the dots moved up 50 basis points across the curve, but that is almost exactly with the market was expecting. if you look at fed funds futures higher to the meeting and that after the meeting, they were a little higher, but they were not materially higher. i think with the markets reaction, it is about the bond market, so effectively, were people are starting to get nervous is from a positioning standpoint. you look at year-to-date returns and bonds, it is in the low single digits around 2% to 3% for most of the ag indices, if you get another 25 basis point rise, just possible, and a
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widening of spreads, bond investors are at risk of losing their whole year in the next two weeks. that is not our forecast or base case, but it does create this riskiness that you could get extended selloffs in the market, yields rising, and there could have a negative impact on equities. so we have to put this into context and understand technicals, as well. lisa: i would like to dig more into that. at what point is that the reason why you are not buying bonds even though they have sold off and generally you are optimistic about the disinflationary narrative? you still think you would like to wait for a greater selloff? what's the point and what is the trigger for you to buy? jim: the place we are looking to lineup and by, really our holiday shopping list will go toward the equity market. we have to understand why is the fed willing to cut rates by less ? probably because the economy is doing better.
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and moving into mid-caps, active overpass of materials, more cyclicals, all of that. in bonnie's, i think -- in bonds , this is an area were bond yields can hang up. i'm looking for and overshoot. 10 year treasuries, let's use that as a proxy to move up to where it is 4.75% before i start to get long duration and extend my positions in bonds because at the end of the day, i think the fed is going to cut a couple of times next year, which means that the upside in yield for bonds is somewhat limited. this is why when you look at a 60/40 portfolio in equities, that it is not quite like 2022. there is some potential upside stopping of yields. we are just not in the same cycle as 2022, so i think the set up right now going into 2025 is much more healthy because it is giving you higher bond yields
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, potentially wider spreads, more value for 2025, and you get a selloff in the equity market in areas that you maybe wanted to rebalance it to in the first place, and here's your gifted opportunity to do that. lisa: putting this together, it sounds overly simplistic to say higher yields causes a selloff in the stock space, so it is not that that alone can make you perish, but that, tied with the context of the highflying aspects of the market is really the reason why. it is not some sort of longer standing turned, is that right? jim: that is right. don't see this as an economic fundamental change in trend. we still think the labor market is reasonably strong in the retail sales data and the broader economy is still doing ok. we don't have a recession forecasted to 2025. the issue we have in 2024 was that we had a significant acceleration in the earnings growth rate for many of these
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mag seven type companies, and top 10 in much of the tech, and we don't expect that kind of an acceleration in earnings for those companies in 2025, so because there is such a high concentration of the index at this point, as their earnings slow to a more normalized pace, that means there is a rotation that ticks down the index because there's a highway to the index, but then it gives you the opportunity to buy other segments of the market that are more cyclical like materials, industrials, that can actually have a chance to go forward and a possible expansion, so that is what 2025 is about. jonathan: we talked about apollo and the risk of a repeat. we are going to get a little more color from you on that, the risk of that developing, stocks and bonds struggling next year. jim: and 2022, we started from a low interest-rate level, and the
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amount that rates could rise was quite significant. we were just earlier in the cycle in 2022. at this point, we are probably later in the cycle, and interest rates can rise, no question if inflation starts to pick up, and you expect inflation to be high single digits like we did back then, but inflation is likely to say we will knock at the targeted 2%, maybe we will stay at 2.5% or go to three, the market has not yet forecasted rate by the fed, so i think that is a big difference right there, in terms of the bond element to this. on the equity side, what we have to recognize is that acceleration higher in interest rates, like what we got in 2022, will bring down -- bring down the present valuations of those equity assets, and we are not likely to get the same exhilaration likely higher in interest rates than we are in 2025 as we did in 2022, and we
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think the earnings set up and the earnings path for 2025 might be a little more muted, but certainly still positive and still ok. i don't think the set up is quite the same as 2022. jonathan: appreciate your time. thank you, merry christmas and happy holidays. jim caron of morgan stanley on the bond market. this morning, down by two basis points on the tenure. 4.54, jim making the case for 4.75. lisa: that is when he would get bullish on duration at a time when there is a real eye toward not providing losses for investors if you are a bond manager. i thought that was a salient point at year-end, given the fact that total returns are 5% to 6% does not give you a lot of room to work with. jonathan: the losses are building, down by 1% on the s&p 500, and potentially a real low.
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with an update on the single stock and more, let's go to yahaira jacquez. yahaira: shares of novo nordisk are plunging with an 18%, wiping out 100 billion dollars of market cap and one of the most anticipated drug studies, their experimental weight loss drug disappointed with patients losing about 27% of their weight after 68 weeks, low 25% of weight loss that they previously said the drug delivered. eli lilly is getting a boost on the news, with shares rising 8.4%. starbucks workers are planning a five day strike after bargaining talks it is snag. -- hit a snag. they will walk out of unionized locations beginning today after failing to reach a deal and better pay, schedules and hours. the union expects the strike spread to hundreds of stores by
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christmas eve, while starbucks claims the union prematurely ended negotiations. the pentagon has shipped antidrug technology to new jersey amid continued sightings of mysterious aircrafts. the defense department said they sent equipment able to detect drones and disable them. the government claimed most of the sightings have likely been commercial drones and has temporarily banned drone flights over nearly two dozen areas of new jersey. the news continues. jonathan: i cannot believe we have not figured this out. lisa: it is like you have a big vest on someone -- big mess, and someone hands you paper towels and get to it. it feels like that. jonathan: annmarie will join us shortly. nobody in washington, d.c., seems to have answers. lisa: i will say that my son got a drone, and i said, not a good time.
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jonathan: what is the purpose? lisa: it is cool, it flies around. jonathan: does it have a camera? lisa: i doubted. i will not allow that. jonathan: tell us more about it on the program. after the break, more on the government shutdown. >> it is really irresponsible for us to on issues that they have already agreed upon. we will regroup and come up with another solution, so stick with it. jonathan: stay tuned. from new york, this is bloomberg. ♪
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jonathan: i'm right there with you. we would like a quiet into the year but we are not getting one. all percent on the s&p 500. this is day four. on the s&p, the nasdaq and
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russell, at least the bond market is picking up slack. under surveillance this morning, a brief on the government >> shutdown. >>it was last spring that the democrats berated republicans and said it was irresponsible to hold the debt ceiling hostage. what changed? it is really responsible for us to risk a shutdown over these issues on things that they have already agreed upon. we will regroup and come up with another solution, so stay tuned. jonathan: here's the latest, government funding set to expire at midnight tonight, setting the stage for a shutdown after the house voted down a stopgap bill backed by president-elect trump, 38 republicans joining a course of democrats who voted against the measure that would have suspended the debt ceiling until 2027. anne-marie joins us for more. is it shutdown our going into
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the weekend? annmarie: it looks like we will see a government shutdown but the question is will it be short or longer and how much into january potentially could this go? some republicans say to shut it down until january 20, the inauguration. a lot of questions that we are waiting for answers today. this hour at 7:45, we will have vice president elect jd vance with the director of the omp under donald trump meeting and speaking in johnson's office with house freedom members, and these are the individuals that voted this down and who do not want to see an extension of the debt ceiling. that is potentially where we could get some tea leaves into what could come next, but they are on a tough place right now because in order to get an agreement through, speaker johnson is going to need democrats to vote for this, if the house freedom caucus members don't go for it, and the democrats already agreed with speaker johnson on a bill that
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president-elect donald trump said he would not like to see compared, so speaker johnson is in a tough place and all of this is coming ahead of the holidays. jonathan: we have seen the pictures, the previous bill was this fact, another new one is this fact, so what got taken out? annmarie: a lot of extras. there is still disaster funding, but things like an increase for a pay rise lawmakers was taken out. more interesting, what was added? an extension of the debt, which is why you have representative chip roy saying, sure, it looks much tinier, but you are adding $5 trillion to the national debt i doing this. so that is why you have 38 republican members come out and if either speaker. lisa: what is the takeaway in terms of the negotiating style of trump and elon musk, when it comes to where the eliminations will happen. that same congress member said
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it would increase the deficit by $5 trillion. is that true question mark is that what we are seeing annmarie:? when it comes to elon musk, we are seeing him wield his own platform, x, to put attentive pressure, not just alone but ramping up pressure from conservatives alike on the platform to put pressure on their lawmakers to vote against the bipartisan agreement johnson got done. elon musk was just here in washington, d.c., with vivek ramaswamy, talking to republicans about ways they can decide to cut spending. the issue now is this is supposed to be, yes, extras were added into it, it was supposed to get them through march, so republicans felt like we can get through march and then we can start connecting our agenda. it does not look likely will be able to get through 2025. lisa: meanwhile, a lot of people are looking to go away. this was supposed to be a quite end-of-the-year.
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what does this mean for travel? annmarie: great question, the tsa administrator tweeted yesterday that this could have impacts on americans who are traveling for holidays. they say that tsa, part of dhs, employees are considered essential, so the majority of workers are essential and they will continue to come to work but will not get paid. so you have people coming to work, they will not get paid, and then the tsa administrator went on to say, personnel prepared to hire high volumes and ensure safe travel, please be aware that in -- that an extended shutdown could mean longer wait times at airports. that is going to get the backs up of most americans. jonathan: we have a president to has to finish, where is he? annmarie: well, i could say crickets. he's pretty much absent when it comes to the debate. i asked the greta gerwig that question -- i asked dou, that
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question, and he said, which president are you talking about? i said, why isn't biden getting involved? he says biden does not have the political capital to do so. we have yet to hear from biden yet, and potentially the government shutting down, which means employees will not get paid. we have only heard from his press secretary who say republicans need to stop lane politics and they said they should keep their word and a deal is a deal. jonathan: there seems to be something unique at this transition at the moment at the absence of the president, and it feels like people are beginning to speak their minds and away where they perhaps should have several years prior. we are starting to see more and more people come up tough about how absent the president has been over the last four years. annmarie: absolutely. there was a damaging report yesterday in "the wall street journal" about how absent and in
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and out the president has been and how the team around him have changed and shifted his schedule to make sure he was able to carry out his duties as president and commander-in-chief, and you will hear more of the stories going forward. lisa: this is something that is a rising concern and a time where we cannot necessarily get anything through. i would like to finish on the idea of donald trump hoping to get rid of the debt ceiling limit, this idea that a lot of democrats have talked about. at what point do you see this as being plausible, given the fact that this shenanigan causes everybody to roll their eyes and most people would like to see it end? annmarie: i think a lot of people would like to see it end. it is pretty awkward in washington when president-elect trump and elizabeth warren are lining up on the same issue, and she tweeted that she agrees with trump that they should abolish the debt ceiling. if trump would like to get this done his next four years, he would need democrats to vote
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alongside with him, so he is going to have to give them something for that, and that likely would be a spending measure they are looking for. potentially it could happen, never say never, but it would require a serious negotiation, and the democrats would have to see leverage going into that. jonathan: we will catch up with you later. it is going to be difficult to get things done in washington, or the you have a red sweep or not, it is hard to get things done. lisa: which raises the question about the hopes a lot of people had are warranted, whether they have all been prematurely big in, i never get to sequencing and now we can get through congress. i think this is important so we can figure out if this is a healthy or welcome selloff. one that highlights the perilous this. it is healthy if you have not been in it.
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jonathan: we are down by a little more than 1% on the s&p 500. next, do not miss this, the san francisco fed president mary daly on the fight against inflation and the outlook for 2025. the fed speak begins in about four minutes. lisa: this time around, it is probably the most important it has been a long time as we seek to clarify what the different tests are, the different fed members have to evaluate whether policy is restrictive, whether the cutting end or they had to think of a hikes. jonathan: 20 minutes with mary daly around the corner. from new york, this is bloomberg. ♪
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♪ ♪
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it's the verizon 5g home internet i got us. oh... he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kevin's plans for the fall? he's going to college. out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation. heard my name! i swear to god, kevin! -we told you to wait in the car. everyone in my old squad has xfinity. less lag, better gaming! i'm gonna need to charge you for three people.
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jonathan: the opening bell is two hours away. equity futures on the sp -- s&p 500, record lows. we are down by 1.1% on the s&p 500, 1.6 on the nasdaq, about 1.2% on the russell. manus cranny, good morning. manus: novo nordisk, if you would like to understand when you have a new experimental drug and it is not hit the benchmark of what you told the market you would do in terms of weight loss, you can lose 22.7% with a new experimental weight loss
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drug, but the benchmark was up here at 25, so that is what you told the market or deliver, you wipe out $120 million of market equity in one fell swoop, down by 120 william dollars at one juncture -- $129 at one juncture. this is about market share finding a eli lilly. this whole family of drugs will be worth $130 billion by the end of the decade, so it is by defending the moat around your product range. the ghost of john donahoe lives over nike. we will come to nike in a moment. apologies. divide and monetize, fedex is ready to hive off different unit worth ready billion dollars -- the freaked unit, about the $8 billion. weight demand in the united states of america in the express business, probably gets to 90. in this is what we have got, 7.6% down because there is a new
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ceo of nike. they are going to tank everything, just get rid of everything, draw a clear line between you and the former ceo. and the guidance here bernanke, low double digits. so elliott hill did not take this opportunity to just tank everything he has out there in terms of stock. he has gone on a world tour but not enough today. jonathan: nike is down by 7.8%. more from manus cranny in the next hour. under surveillance, lawmakers on capitol hill were -- ejecting a funding deal. the u.s. government on pace to shut down tonight, a group of republicans voting alongside democrats saying they would not suspend the nation's debt limit until 2027. lisa: 38 republicans voted against the bill, so people were looking for the cohesion and under donald trump but it isn't
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evident. it speaks to a messy year next year in terms of how fast policies can get through. jonathan: never mind next year, a messy finish to this year. lisa: i do not want to hear what annmarie had to say. take it back. some of the air traffic controllers -- no, tsa members are going to potentially not be getting paid. jonathan: as soon as you got skin in the game, you know it is real. let's turn to u.s. diplomats meeting with rebel factions now in syria, including talks with the group hts, just labeled a terrorist organization by the united states and other countries.the meeting comes after the overthrow of longtime leader buckshot al-assad. -- al-assad. meanwhile, fedex will spin off its $38 billion freight unit, focusing on its core businesses and expressing ground shipping and it could unlock $20 billion in shareholder value.
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that stock is up in the premarket by more than 6%. turning to the federal reserve, cutting interest rates by 25 basis points this month, signaling the path is unclear for 2025. jay powell says he feels good about the economy, but we are in a new phase in the fight against inflation. here is the san francisco fed president, mary daly. nice to see you. you for giving us time. let's start with the forecast. controversy around the forecast. we don't speculate, soon, gas, and then one month later, there is speculation and guessing about policy next year. i would like to talk about your approach to the forecast. was it about the data for the? incoming administration pres. daly: it is about the data, always about the data. we don't with a new administration will do. new administrations always put programs together, and really is a policymaker, i would like to see the net effects once i see
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clarity about what those policies will be. i was focused on incoming information and what it means for the outlook. today, we have policy in a good place. lisa: what happened the past three months that cause the fed and perhaps yourself to be more concerned about the stickiness and inflation? pres. daly: two things have occurred, first of all, the economy remains in a good place and the risks to the outlook are equally balanced between a vista inflation or employment. -- risk to inflation or employment, and the adjusted policy would give confidence that inflation was heading down, and we adjusted policy to ensure we have a balanced labor market that continues. that is where we are, within the data on inflation has been coming in a little slower. i would say not sticky or stalled with that progress is slow relative to what we wanted.
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that is a pattern, it is bumpy as you go from 2.5 to 2.8, it is a bumpy path. lisa: if there was a stickiness, i'm looking right now, we've been cpi now has ticked up for the month of december. from november. there was this question, why did the fed cut at all? pres. daly: sure. i will reassert that it is bumpy. remember earlier in the year, we had two months of data and people said it we accelerated. inflation data, you cannot focus on one or two months. the most important thing for me was we needed to recalibrate policy. i saw this as a close call. was 75 enough to be the recalibration we look for? tamika economy we expect? for the week -- to meet the economy we expect or do we expect more? i feel like we have the recalibration days behind us and we are in the next phase, and that is really looking in at the
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incoming information we can return to a more typical pattern of gradualism for the fed, and we practice that with a lot of uncertainty, you adjust the policy rate, and you wait watchfully i do see what transpires and you make further adjustments. michael: the expectation in the markets was going into every meeting you would be cutting. has that changed? should the expectation be that you will not be doing anything at any particular meeting? from that question close a second question, what are the criteria you need to see to decide to go back to cutting rates? pres. daly: you saw the median projection is two rate cuts next year, so that is already two rate cuts every other meeting. i was comfortable with that median. that makes sense, but we have to remain agile.
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be resolute to achieve dual mandate goals. price stability was our goal when employment has come into the frame, so we are focused on both, but they have to be agile. the world is uncertainty, silly pencil in two, and asked that estimate or projection gets further from when we made it, the accuracy of it probably falls, so we will continuously take more information, consider it, and every meeting is live from the standpoint that you are debating, discussing, thinking, what is the right level of policy? but my projection is that it will take many fewer rate cuts next year than we thought, and we will watch the economy and see if that works out. michael: when we went into the cutting cycle, you said you were concerned about the labor market and we needed to make sure we did not lose the gains we had. pres. daly: absolutely. michael: coming out of chairman powell conference, it sounds
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like the focus shifted to inflation again. are you comfortable with that as this new phase he is talking about? pres. daly: i would characterize it slightly differently. for a long time, a persistent amount of time, we were focused almost entirely on inflation because the labor market was robust and inflation was 7, 6, 5. that was the right way to focus, and then the labor market came into the frame, that did not mean we turn our focus totally to it, it meant after a long time of focusing only on inflation, we were now focused on both. that is still the case, but i see policy is in -- in that position where policy is restricted, it will bring inflation down, and it will do so in a way that does not strangle the labor market break-in, and then give people lower inflation, and that is not what we are trying to do read we are working toward that soft landing. jonathan: you use the word "we"
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a lot when you talk about the federal reserve. we have had people critical of chairman powell's performance specifically with a news conference. one excuse that was given this maybe he was struggling to reflect the lack of a consensus on the committee. how much diversity of thought is there on the committee considering a close call for yourself, but was their disagreement at this meeting? pres. daly: i will not speak about the entire committee. when i say "we," speak about everything we agree on and our efforts to get the price stability. and we had a healthy level of discussion and agreement. you don't want an fomc that things exactly alike. and now the world is more uncertain, and other people are debating and bringing in their views and that is appropriate. when there was a pandemic and when there was interest rates and we got into it quickly, i the place and time there was no
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disagreement, we were all marching up. now you should expect more disagreement and differences of opinion but they are framed for the same thing, how do we get inflation to you and restore people employment? jonathan: when i hear this, i would say it is about the incoming administration. pres. daly: i would disagree because we have a variety of risks we always deal with, and the housing inflation, there is an imbalance in the u.s., the models, data and past experience says housing will come down, but we are uncertain about that. it will not come down as soon as models predicted, so that is an issue. so the labor market and growth is much faster and stronger than people predicted at this point. there is a lot of uncertainty about the natural rate of interest, and then there is geopolitical risks, the risk to
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global growth. that is going to be the backdrop, and then you have a change in administration, so i would say this level of uncertainty is normal in the sense that we have had all those things going on and it is not as excessive as after the pandemic, the financial crisis. those were really big times of uncertainty, so if you are a central banker, you get used to uncertainty and manage it. lisa: before we get into the uncertainty of next year and what it could look like, i'm curious about how you are weighing, how to preserve job gains with the risk of running the economy for too long, and that is something i think people are struggling with, is there an emphasis on the labor market, even at the behest of inflation because it has been deemed better for inflation to be hotter as long as people keep their jobs? pres. daly: i would characterize it differently, but a terrific question, and reserve bank presidents spend a lot of time
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in the field, or our district. i ask people the question, where are you on this? again and again, i hear the economy is in a good place, the patient is coming down, it is gradual, and the labor market is solid, but there is one job for every unemployed worker. that is a perfect balance, and our firms say we can find it. workers are saying we can find jobs, nobody would like that to break. so it people do not want is a recession, and i think one of the reason sentiment has risen since the middle of the year is because the recession risk is now behind us and people's minds, and they feel good about that. so don't get 1/10 off inflation and then rip the economy. we can be patient, but you have to head for two, and we don't want the economy to break. lisa: that is why i thought it was interesting that the
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inflation forecast for next year was shifted upward, even at a time when the unemployment rate was shifted downward. there was a sense that that was ok to have 2.5% inflation at the end of next year note it was above 2%, is that the feeling right now in the fed to be more impatient with inflation because it is thought of as less punitive at a level of 3% as opposed to a rise in unemployment? pres. daly: i will speak to myself, i'm not comfortable with the rate of inflation being 2.5, but we are continuing to work on it, so we might end up cutting rates or not cutting rates last if inflation is as sticky as that, but what i'm also balancing as i do not want to see an unnecessary rise in the unemployment rate just to get a quarter head on the 2% goal. that is a balancing act. ultimately, we were looking at the information coming in and saying there are a lot of risks, inflation could rise, but you will see inflation rising is a part of why the rate cuts held
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back. if absent, even before you saw inflation go up more, and you see the dispersion you saw, which i see it featured on a bug, and otherwise, you would wonder if we were in an echo chamber, but we are not, and you see the dispersion. and that presents what we are facing. we might end up with fewer cuts than two, we might have respond if inflation falls faster receipt significant weakening in the labor market. i'm comfortable sitting in the center core position and waiting for the data to come in, and we will respond as they do. michael: do you think there is a chance you might have to raise rates next year? pres. daly: i don't see that on the horizon now, but we always remain prepared to do what is needed to achieve our goals, i don't see that in the span of the most salient risks right now that i face, but that is something that we never take off
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the table. jonathan: who wins the dot with next year? reveal. [laughter] pres. daly: no, i'm not going to tell you. that is not a holiday gift i'm willing to give you. lisa: are you kidding? jonathan: thank you. mike mckee, thank you, as well. the san francisco fed president, mary daly. let's get you an update with your bloomberg brief with the iraq us. -- yahaira jacquez. yahaira: tensions are building between amazon and teamsters, who called on thousands of workers to walk off the job, and it is now warning more workers will go on strike in the near future ahead of the holiday delivery rush. amazon says it has filed unfair labor practice charges against the union. meanwhile, u.s. yield -- steel shares are falling, the company warning that the fourth quarter earnings will not be lower than
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expected as steel prices remain depressed. it anticipated adjusted earnings of 150 million dollars, falling significantly short of the over $260 million than expected. analysts on wall street are taken the opportunity to say that this underscores why a deal with nippon steel would be beneficial. iphone maker foxconn is putting it interest in nissan on hold while the japanese automaker continues merger talks with honda. the former nissan chairman carlos ghosn tells bloomberg what he thinks the potential merger with honda means for the struggling automaker. >> they have a cash problem, they have investment problems, they are being really hammered in the united states. they are being challenged in china. there is no plan in front of it. yahaira: that is your bloomberg brief. jonathan: more from yahaira
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jacquez in 30 minutes. next, wayne policy uncertainty. -- wayne policy uncertainty. >> some people to take a preliminary step and start to incorporate highly conditional estimates of economic effects of policies into their forecast at this meeting. jonathan: we will dig into that, next. live from new york city, this is bloomberg. ♪
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i can't believe you corporate types are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working. you people are (guitar noises). hand over the air guitar. i've got another one.
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jonathan: welcome back to the program. we are still down by 0.9%. under surveillance, weighing policy uncertainty. >> some people to take a preliminary step and start to incorporate highly conditional estimates of economic effects of policies into their forecast in
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this meeting, and some people said they did not do so, and some people do not say whether they did or not, so people are making different approaches to that. but someone did identify policy uncertainty is one of the reasons who are raining down more uncertainty around inflation. jonathan: that was jay powell who admitted that members weighed policy uncertainty in the forecast, and mary daly is still with us. you are all about the data, not the administration change. how do you approach policies for the incoming administration across immigration, taxes, and tariffs? what is the approach going to be next year? pres. daly: we have all the tools and evidence, and we can think about how these things will affect the economy hurried one of our biggest tools of figuring out how this will affect the economy is talking about ceos and we have already
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engaged in doing that. and i'm spending my time in the 12 district. we are hearing that there sentiment is up, they are cautiously optimistic, they see the fed's interest-rate path falling and they feel good about that. they see the economy as the recession risk is behind us, and they feel positive in general about some of the things they think may change going forward. whether that materializes or not, we will wait and see, but i feel that sentiment alone is causing us to have some enthusiasm, cautious enthusiasm. one thing that we hear is that for firms worried about the immediate impacts of tariffs on their business, they are just building up inventory so that they can have some insurance. so that is what viewers see in the data, already, but i have not seen that in such an
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outsized way and it will change the course of the economy. lisa: you see we have experience from the past, tariffs of some of the immigration bands or limits, but is this timer difficult because of where we are coming from? it was an inflationary time after a stimulus package was ejected into the economy. pres. daly: you are feeling like an economist, the impacts of policies, affected by the state of the economy. one thing on my mind is we already have inflation at 2%, so we have to work hard to get inflation down to 2%. that is an economy that is a little more vulnerable than it would be if we had inflation at 2% or when you came to the curve discussion. the real side of the economy is very strong. so it is on my mind that inflation is already elevated. lisa: does that make it that
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tariffs could be more inflationary? pres. daly: it's hard to say. when you've done the job a while, it depends on the scope, magnitude and timing of tariffs and whether our companies in the u.s. are in position to use substitutes and manage, and you see this happening. we already went through another future that might make it less challenging, and the pandemic, firms reassured and saw a lot of that behavior taking place, so we will see. lisa: and being agile, how concerned are you that people are going to label decisions as political? pres. daly: i don't feel concerned about that. what we have done well is talk to the american people. the chair does that in his meetings, we do not, we tell him we are only focused on inflation and full employment. those are the goals congress gave us, and we will do our best
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to navigate incoming inflation, and make the best decisions, and then be humble about how we made the right one or the wrong one and then redo it, and that is how we are going to approach it. ultimately, people will judge us on whether we are successful. jonathan: you have been generous with your time, to and enjoy the holidays. that was mary daly, the san francisco fed president. donald trump, the incoming president untrue social, if there was going to be shut down, let it begin now. that is the message from the incoming president. also joining us coming up on the program in the third hour of "surveillance," we speak to matt miskin, of john hancock, zachary warring, cfra, and kathy bos tjancic. the third hour up next. ♪
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>> the fed has to reiterate its commitment to its emplacement --
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inflation target. >> is going to be a tumultuous 2025 if we continue down this path. >> the fed has done a lot of work getting us off of ground zero. >> no forecast or knows where we are going to be in 12 months. jonathan: at the end of the year, you want to wrap things up and go into the night and enjoy yourself and into the holidays, and that washington, d.c. happens. headed toward a government shutdown. this from donald trump, if there is going to be a shutdown, let it begin right now. let it begin under the biden administration, not after january 20. this is a biden problem to solve but if republicans can help solve it, they will. lisa: if he is -- he is saying, if this happens it is not for me. there is a real question about whether this will be ascribed to
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them for the republicans. if it continues long enough to stymie holiday travel, it doesn't matter who is to blame. there will be a lot of anger. jonathan: there will be a press conference about a temporary fix. so we will get some more details . who owns the selloff? you decide. equity futures on the s&p 500 down across the board, a three-day slide on the s&p. negative light .8%. the bond market, yields lower by a basis point or two. lisa: you asked the question, who is to blame, who can we ascribe the guilt for taking away the christmas rally that wasn't and a lot of people are saying it was a toxic brew of the federal reserve that came out with a more hawkish view as well as simply angst about high
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how -- how high valuations are. not only have valuations been elevated, but tax time selling, recalibrating or portfolios. there comes a time with low liquidity when there isn't a lot of conviction. that is why we might have seen the worst weekly drawdown going back a few months. huge -- jonathan: huge debates. mary daly on the program making the point that for her it was about data. on the incoming administration, we started to question about tariffs, interesting she had drawn a conclusion about how inflationary incoming tariffs and tariff increases would be and that is an important approach. lisa: people say tariffs are going to be inflationary and it will get passed on to the consumer. the experience from the previous trump administration was people
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but fewer of those items and that is what leads to a slowdown in the economy. this would be a much different type of broader based set of tariffs. we will see, how much patience will they have with inflation running high at a time when they don't want to diminish the labor market that always takes a long time to climb out of downturns. jonathan: how do you bump up the inflation forecasts and cut rates at the same meeting. they say it is a close call, you wonder why it is a close call, why would you use the interest rates. lisa: mary daly also said that the idea that we are entering a new phase and the recalibration phase is over. next year is a new phase of agility. what that means is going to be very different than what the fed has been doing in the past. the key would be how to distinguish from data point
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dependency. how do you factor in policies as you mentioned earlier. interesting questions at a key turning point. jonathan: i would say agility is a fancy word for hyper dependence. lisa: i asked her and she was happy to talk about it but she was saying that you have a longer stretch of data to look at if they wait for longer. it becomes difficult. how do you message it to a public that is looking for some kind of a fall guy? jonathan: the fall guy for this move, sherman powell, down two basis on a 10 year. two years are down. coming up, john hancock, matthew ms. skin. and zachary warring. we begin with equity futures
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slipping. lawmakers on capitol hill on the verge of a government shutdown and looking to core pce. matt mrs. wrote this week is why soft endings -- landings are so hard to achieve. one could make the argument that inflation coming down was less about the federal reserve and what about supply chains normalizing and energy prices falling. it is hard to see the fed is implementing restrictive monetary policy giving -- given that conditions have been as easy as sunday morning. why is the stock market getting hammered? matt: we think the fed was more hawkish. when mary daly and says it is a close call, they are telling you you almost got hit by a bus and you didn't. how will saying i pulled you away from almost getting hit by a bus by not hiking at all and we still went through with it but we are telling you next year , be patient and don't expect a
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lot of rate cuts. the economic projections with no cuts would've been more shocking. overall we have seen a frothy market over the last month or so. there has been 1.5 trillion dollars that have flooded into the crypto space. with seen a lot of speculative behavior. we needed a dose of medicine to calm the more speculative frothy behavior. we think that was a good move by the fed to start to slow down the inflation that was creeping back up. that could be good as we go into next year with a little bit of corrective price action. i know it is tough to end the year like this but it may set you up better for 2025. jonathan: there is a line in your commentary that sounds suitable to the summer to 2022. for the fed to get to 2%, they need to hit economic growth. that was the feeling back in 2022, they have to jack rates up
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and cause some pain. the words of chairman powell himself and then we had the supply side take place that took control of the inflation story for them. you alluded to that in the quote i read out. why do they need to reconsider the 2022 argument into 2025? matt: if you want to present inflation, it is going to be really hard and that is the thing. they keep saying over time, you have to -- you actually had the two percent market in 2026, 2027 and we are running out of patience. inflation, the beginning of each year at is usually a step up in inflation as they were annual increases that go through. when you go to the beginning of next year, you could actually get the fed really having to be more hawkish. there has to be a sacrifice. right now, powell is excited and most of the fomc is very much
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feeling they had a victory because they haven't basically slowed down the economy or had any weakness in the labor market. it is good and i'm not trying to say it is not but if you want to get to 2%, it is going to be harder from here. for us, it looks like they will have to be more hawkish and that will weigh on growth. you go through the cycle in markets over and over where the markets rally, we get speculative behavior, rates come up and that weakens growth and causes economic markets to weaken. it is all over again and that is what we are seeing, a late cycle environment and this is why soft landings are so unusual, historically speaking. the last little bit of inflation you want to get down requires usually economic sacrifice. and that might be what you see into the next couple of quarters of 2025. lisa: it seems like this is a fed that is willing to get patients to get those inflation
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readings down to 2%. given that backdrop, is it good for stocks and bad for bonds? matt: prior to the last meeting that was the case. i would agree they were much more willing to say, if it is around 2% or 3% we are good but now as we get towards the percent, and that could be a reset at the beginning of next year, they clearly are not as ok with it. that is what the last press conference said in the fomc members talking, will be a bit more hawkish. the markets are going to have to digest that into us the speculative parts of the market and the rally, we would trim the strength into less profitable lower quality, like small-cap, u.s. stocks and redeploy into higher quality. i know bonds had a tough end to the year. it is setting up nice yields peered we would consider rebalancing into high-quality
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fixed income. lisa: what gives you confidence that now is the time to buy given the fact that other people are saying kumble on a second. this is a fed that signaled it wasn't as comfortable as inflation where it was but increased expectations for year end inflation next year and downgraded expectation for unemployment. matt: one of my favorite charts of all time, and i am a chart person so this is big, it is the whisker chart. they show all the projections from the fed over time and basically they are all over the place and most of the time they are wrong. we see the projections are often off. they are just like everyone else, like people trying to make their best guesses of where things are going. we wouldn't read into it too much but what happens is basically where the bond market was pricing in more rate cuts, by giving forward guidance that was more hawkish, they actually are in a way hiking rates because relative to what the
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bond market priced in, they are bringing it up. now the bond market is pricing in one cut next year. before it was as much as for cuts. we have seen three rate cuts put back into the bond market and taking away from the bond market and added as a restrictive policy. because of the frothiness of markets and crypto, i think it was the right move. we just have to digest it and be patient into 2025. jonathan: into 2025, you and lisa are on the same page and she asks what to do when the risk is in the perceived risk-free asset. you talked about that in your note when the risk is in the bond market. how are you changing your approach into 2025 with that type of mind? matt: it is tempting to go into credit, bank loans, short-term credit really has held well. we are seeing higher yields start to rise. we have seen 20 basis point rise
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in high yield spreads. and that is for us the music playing in the background. we do not want to turn up the value and go more into credit market so we are managing that risk. we are not really reach more for credit but the other thing to use is the dollar and i like the dollar is another hedge. when rates are rising, that will help raise the dollar for the tariffs we keep hearing about, that is usually dollar positive as well. so either bonds of the dollar usually work out for you if equity risk is coming into play. we have a dollar overweight expressed across all of our views and that is halting. even on the rate side it is harder to use as a hedge. in the next year, one of the biggest things we are seeing is housing is starting to slow and starting to rise. the biggs inflation concern over time has been housing. if that moderate, inflation comes down.
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inflation expectations have not risen that much. don't give up on bonds as a hedge. we will get about 5% plus in income and that is a great starting point and we are using the dollar short term as another way to hedge risk over the short term. jonathan: thanks for everything this year. matt miskin there. lisa: i was just listening to matt and talking about inflation expectations and i'm thinking, i remember will be used to care about the university of michigan 5-10 year inflation expectations, and guess what? i will say we will be getting the latest reading on that in an hour and 45 minutes. jonathan: special government -- special coverage of umch with lisa. if you stick around i will do it.
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the 10 year, lower. big moves out there. let's get one. here is an update on stories with your bloombergtechtv brief. yahaira: shares of novo nordisk plunging in one of the most anticipated experimental weight loss drug was expected to deliver 25% weight loss. instead, patients lost only about 20% of their weight after 68 weeks. that is the results you are seeing. shares rise 6.7% in the premarket. lockheed market on track to meet its goal of delivering at least 130 five jets to the u.s. military this year for this coming as the f-35 program has come under attack by elon musk who thinks manned fighter jets are obsolete. he is advising president-elect donald trump on cost cutting and
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the f-35 has 486 billion dollars total acquisition price tag. apollo estimates the private credit market could reach $40 trillion over the next five years in an interview with bloomberg, they said they are seeing growth mostly on the investment-grade side as well is in assets like mortgages which typically sit on bank balance sheets. while some are staying away, they are eyeing opportunities in europe including in commercial real estate. jonathan: what a year for our friends over at apollo. the stock up more by 80% in a big move. lisa: i have to wonder how much this has to do with the fact that he was rumored to be in the running for treasury secretary, whether that juiced the prospects? jonathan: do you think a little bit? i think it is the future of asset management. lisa: i don't disagree, but you don't think it added anything? jonathan: no.
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lisa: ok. jonathan: just my view. what is it worth? lisa: a lot. jonathan: up next, calls and the turnaround of nike here and we will get a view on the others this commercial break. from new york, this is bloomberg. ♪
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jonathan: just got a message from a bloomberg subscriber. delighted to hear happy christmas on u.s. tv as an irishman, the happy versus mary is more ferocious than fed rate cuts. many of us say happy over in the u.k. lisa: you say happy christmas and not merry. lisa: in the u.s. it is merry
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christmas and happy hanukkah. jonathan: not to offend anyone. i will not offend anyone. merry christmas and a happy holiday to you all. donnie oracle pound -- four unattractive valuation. the stock down by one point 4%. jp morgan rising price tag on fedex to 370 say in the freight spinoff is not priced into shares. the stock up more by 7%. downgrading nike to outperform due to a slower turnaround and limited clarity on inventory. the stock down by 7.5%. let's stick with nike, the company second quarter profits weighing on the forecast. zachary warring cutting the nike
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price take to 80. welcome to the program. how long is this turnaround going to take in your mind? zachary: thanks for having me. we do think it is going to take some time, the new ceo just got into nike a couple months ago. we expect an analyst or investors day at sometime in the spring or early summer. the guidance was pretty poor. i don't think a lot of analysts or investors thought gross margins would compress the way they are fighting for in q3 so a little bit of a negative result to earnings. jonathan: it feels like they are going back to the foundation of the company, running, sports, focus and narrow down and try and repair with a ultimately damaged which was some of the channels including footlocker. how difficult will it be to go back to basics and repair issues? zachary: it will be tough.
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i do think they are doing a good job and working on limiting inventory for the classic sneakers. running isn't doing surprisingly well. people talked about competition from others but running has been stable for them over the last few quarters and they are seeing growth and they said they had growth in women's this quarter. a lot of people were worried and hoping that some of the competition it still has the best brands in the world but they are going through a transition period and it is going to take some time. we have lowered our price target to 80. we have been neutral to 84 a couple of years but you are kind of turning a corner and over the next few quarters or maybe an opportunity to buy shares. lisa: everyday and we talk a lot nike we talk about basketball and jonathan said is the sheen
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of cool kind of fading and the idea of what you have with viewership going down. i make the argument maybe some of it is migrating to the wnba. what is the real story in terms of the nike attachment to basketball and what seems to be flogging interest in the sport? zachary: you have seen that in the jordan brand. this is the first year they have seen jordan decline over the past five or six. i do think there is an issue but i think they will work through that. y have done a good job of capitalizing on women's sports. i think over time they will be fine. in the near term they will continue to see revenues decline in that category. he is focusing on sports and he thinks that is the next growth. i think the issue is now you have seen china decline and they have been in china for a while. how much more growth can they get out of that region. it will be interesting in the
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next few quarters to see if they can turn that region around. it is the focus on sports and will it pay off. they are in plenty of sports and were first movers and a lot of them. it will be interesting to see if they can cut a return to growth. lisa: is there anyone on your wish list for the sports and they have arranged their teams, is there anyone you like to be the front man or woman for products who you think could make a real big difference? i know it sounds silly but sometimes it takes one major star to completely turn an entire brand. zachary: that is tough because they usually do half the biggest in each sport and have done a good job over the past 25 or 30 years to capitalize off of that and they were obviously be leaders in doing that. i don't think there is a one single person right now that could turn things around for them. i think they have got a good strategy in that part of their business. this quarter they had the
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marketing expense up 1% with revenue down 9%. they are still spending on that side. it will be interesting to see over the next few quarters. it is going to be a tough turnaround for elliott. investors should probably stay patient and wait for a better opportunity when you can kind of see the light at the end of the tunnel. jonathan: appreciate your time. enjoy the holidays and have a happy new year. you are right, everyone is looking to the revolutionary athlete all the time, jordan, basketball, tiger, golf, serena, tennis, the likes of simone biles, gymnastics. it might be a struggle to find out who that person actually is at the moment. lisa: sometimes they get in early. sometimes it is not the star that is established. you think about what roger federer did and other brands that have grown up around athletes identified early. it seems minor with a company dealing with tariffs and
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everything else but that is the world we are in, particularly when it comes to athletic wear. jonathan: you walk around the city and go for a walk on the weekend and you see the explosion of running clubs. running has exploded across this country. and then you look at the sneakers that people are running in and you don't see the nike sneakers that you use to. lisa: part of this is the running clubs but what is the handouts?
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jonathan: from new york, this is bloomberg. ♪ (♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com
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jonathan: 60 minutes away from the opening bell and seconds away from economic data in the u.s. core cpe, a at inflation gauge for the federal reserve and then 10:00 eastern when lisa breaks down the umich sentiment. jonathan: with some hits from jonathan who will stay at 10:30. jonathan: i am staying later? here is michael mckee was data.
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michael: a lot of people are looking at this as the last number of the year that matters. it is taking a minute to come up come price index on a month basis up .1%, even less than forecast. the forecast was for 2/10 which is what we saw last month. headline 2.4%, up a tick from october but not as bad as forecast. the court up just 1/10. and year-over-year core up to .8%, same as last month. no increase even though an increase was expected. personal income of .3% and personal spending up .4%, a little less than anticipated but does show people are still involved. this is an interesting number because jay powell gave us the numbers the other day that we didn't all buy into it. it is most important number because it is the fed number for the target and yet by the time
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we get to it, everyone knows where it is going to be. jonathan: it will breathe some life into the bonds, we are down right now. the two-year it down to 4.25. equities inflating a little higher obsession lows. we are down on the s&p by just .5 on the s&p. the euro session highs. lisa: it highlights how incredibly sensitive this market will be with data points next year considering the fact that this is a fed that is agile and we are looking at it saying it is coming down and it raises the question of, how volatile some points will be given how uncertain the economic time is, particularly for economists. jonathan: let's head out to kathy bostjancic who joins us
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now. put it together, retail sales, pmi, jobless claims and the data we got. what is the picture look like from your vantage point? kathy: the economy is strong. we are ending the year with growth somewhere close to 3% annualized for gdp. that momentum, a large part will continue into the new year. we just went to the consumer numbers and they are solid and show that consumers have the wherewithal to spend. and that will drive consumer spending most gains in the equity market over the past two years and home prices being up over a 50% since the pandemic, that turbocharge his things. on the inflation front, these
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are very good readings. i think is somewhat surprising coming on the heels of what people thought was maybe a less dovish fed reaction function on wednesday. but these are great numbers and better than some feared. what does the fed do with all of this? i still think they pause early next year but i think there are disinflationary forces here. what we don't know is what happens on the policy front. jonathan: i would love your thoughts on an issue raised since sherman powell spoke and you can see it playing out in the market. there is some nervousness in equities -- since pair -- since chairman powell spoke and you can see it playing out in the market. there is some nervousness in equities. equities starting to bounce, bounce rally a little more. what is your view on that? how disruptive has the fed easing been over the past few months?
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kathy: they still have that they are still penciling in some rate cuts next year, it is just to but not three or four. the question is, does inflation get into the way of that easing? does it get them to be more cautious? i think the bar for easing has been raised. they still have the easing bias but the ball has been raised and because we have uncertainty of what will happen, particularly on the tariff front and does immigration filter through significantly higher inflation. does the fed look through that, price increases are something more worrisome and that is where the uncertainty is. lisa: remember when we used to care, for a minute this was an indicator that fed chair jay powell was looking at and that
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is inflation expectations for the university of michigan 5-10 year expectation that jonathan said i will be breaking them down and i will not but michael mckee will be breaking them down. but the idea that if there is an entrenchment of inflation expectations among consumers that will change the outlook of the fed in a material way. kathy: they are always important. i would say it more so than market expectations. consumer expectations are important in the long term 5-10 year, as long as relatively anchored the fed has comfort. what they don't want to see is a sharp increase in the 5-10 year but the one year expectation can be moved around by food, energy, slightly higher prices temporarily. but the long-term staying anchored gives them comfort. lisa: how much looking at the data we have seen, personal
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income and spending and you talk about that being a robust, personal incomes have been rising on a real basis. at the same time we hear from retailers a lot of spotty types of performance, maybe cautious consumers. have you noticed changes in the u.s. spender? kathy: consumers are price conscious and certainly if you break it down among the income down middle, lower income households very price conscious. upper income households as i mentioned before, if you are an asset holder and gains are more than keeping pace with inflation, you are feeling flush in spending and traveling and dining out. so that is propelling things and we are coming off remarkable
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three years of strong consumer spending that has propelled the economy. i do think we moderate a little bit and it is tough to continue to see this type of strong growth well above underlying potential and here is the key, the labor market is still strong and churning out jobs and income but concentrated. if you look at the cyclical sectors of the market, they are not generating new job growth and that is what you hear from chairman powell and others that cyclically they are concerned we can get a slowdown and they just don't want it to be too much. jonathan: that is an important perspective and we appreciate your time and contributions. enjoy the holidays. that last point is important, the cyclical areas of the labor market we have seen quite limited growth, highs in the -- housing, autos have been a struggle as well. if the federal reserve is going to work of the headline number and will continue to do it, gdp, unemployment around 4%, then the
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bifurcation see in the economy, disparity between the happen have -- house and house not will be greater. lisa: the idea of hiking rates to torpedo the economy and because the unemployment rate to rise, is that worse or is inflation that also is the most punitive of those on the lower end of the income sphere might be more susceptible. it is choosing between the two evils. jonathan: mike, what jumps out? michael: personal income rose significantly, both in october and november. october revised up to a .7% gain. .3% in personal income overall for the month of november. wages and salaries were up point 6/10 -- were up .6 percent. americans taking home more money was the people who get dividends and the stop payments, interest
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payments who didn't quite get as much this time their savings rate goes down to four point 4% from 4.5%, still seeing people putting money away and that is not going away. that helps a lot overall. at this point, it looks like a pretty good number and the pce inflation index, very low, 0.128. it really does show progress in with the fed is looking for in its main number. jonathan: it pushes bond yields down, down five basis points on tens. you are joining us, good morning. as the front end of the curve changed? >> for the end of the year next year. we are anticipating more cuts next year.
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our economists have not changed their calls and we don't have much in the way of new information. the fed committee recalibrated to just two cuts for next year. the way the economy has been going, you should see a moderation in growth, employment, inflation. the fed might be able to deliver for cuts under the circumstances. but my bias is they deliver less cuts and the market is priced in for a very benign policy but if they deliver it for cuts aligned with the economists call, the two-year could end the year on 3.5%. >> jonathan: we have been having conversations about what forecast that, the data or trump. mary daly, the san francisco fed president told us an hour ago that for her it was the data but
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for others it was also about the policies. what is it for you? what are you basing your calls on? subadra: i think it will be a bit of both and a constant recalibration process as we get new information and there will be a lot of the 3:00 a.m. tweets we have to respond to next year so we have to get ready for that. it is going to be quite difficult depending on how the tears are rolled out the last go around they were over a two-year period and sometimes on specific products. this time it could be a more sweeping tariff regime. we will have to recalibrate as the data comes in. the fed, as we heard from chairman powell, some of the fed members are incorporating some of the changes that could come down and others are not. and that is exactly what you are seeing among economists. lisa: what is your reaction function to the tweets? subadra: it is funny because i
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mentally prepare myself to wake up to the morning that i was not prepared for and having to react very quickly. and our counterparts in asia especially are looking forward to it because they can react to the volatility as it happens because they are awake at 3:00 a.m. new york time to respond to the incoming news. it is going to be interesting. it is a paradigm shift where we were between 2016 and 2020. lisa: do you get more tactical long and how much is it a tactical market because of how obscured what is going on underneath actually is. subadra: it is going to be very tactical and we will have to constantly recalibrate. the past few days we have gone back and forth between whether there is going to be a government shutdown are not based on information from either the trump aids or from trump so you are going to see a lot of back and forth like that for the next two years and then perhaps
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the next four years. jonathan: if you take the example from the morning on the post on truth social at the europeans don't close the trade deficit and buy more, there will be tariffs. the europeans have come out and said we want to buy the lng. it was said earlier that they are pushing on an open door at the moment. they want that to happen. is there enough to close the trade deficit and if they don't you get the trade tariffs. i don't think anything is clear whether you decide how inflationary the cuts would be. there is nothing cut and dried. lisa: even the reactions in the marketing will -- the markets will be different. you're talking about a government shutdown and we did get a tweet from donald trump saying let's shut it down before i get in office because it will be on his head before i get into
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office. what is the response in the fixed income market? subadra: i think you're right in pointing out that the starting point is very different. i am really concerned about that from the inflation perspective because between 2016 and 2028, inflation was not a concern. we had a two-year period where core cpi and pce never exceeded the level. now the starting point is a lot higher. you are looking at core pce around 2.8%. the economy is extraordinary vulnerable to inflationary shocks on the services side. i think that is really the game changer this time around is that if you do see tweets and the market reacts and thinks it will be inflationary, and you will see the volatility in employment x -- inflation expectations. the market is not priced for that. i'm expecting more volatility
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and breakevens next year because of the fact that we are in a very different regime this time around as opposed to back in the trump 1.0 timeframe. jonathan: good to see you. the equity markets down 0.5% on a three-day slide, close to making it a day four. lisa: a shifting from recalibration to the new fed. jonathan: and that is that we don't have a clue for the new year. lisa: is that your branding? jonathan: is not my branding but that is the essence of it. i will see you in the new year. yet -- let's get an update. yahaira: media reports suggesting the house working on
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another plan to avoid a government shutdown. fox news reporting members will meet at 10:00 a.m. on a temporary fix while nbc news is reporting speaker mike johnson expects votes later today. president-elect donald trump taking to truth social saying, if there is going to be a shutdown, but it begin now could government funding set to expire tonight at midnight. the faa has banned drone flights over several parts of new jersey as sightings of mysterious aircraft continue. the agency has temporarily published 22 flight restrictions over critical infrastructure in the state which its said was that the response of federal security partners. the announcement came saturday after the faa want people that pointing later -- lasers at aircraft is illegal after seeing and increase in those types of incidents. improving the construction of a new downtown arena for the 76ers. the plan had met fierce local opposition from local residents
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claiming the arena would demonstrate -- devastate small businesses and businesses in chinatown. they claim it will create many jobs in increase in the area. lisa: did you ever read the books, if you think they should do this, turn to page 69. jonathan: she is not alone. thank you. happy holidays. up next, setting you up for the week ahead. you are watching bloomberg tv. ♪ to go further, you need to be ready for what's down the road. as energy demand continues to rise, we're harnessing breakthrough innovations to increase production in the u.s. gulf of mexico.
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our latest deepwater development, anchor, produces previously inaccessible oil and natural gas, allowing us to deliver the energy we all need today so everyone can follow their own road. that's energy in progress.
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jonathan: the opening bell 39
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minutes away. equities attempted to recover on a three-day slide and trying to avoid making it day for. equities on the s&p 500 negative by the 0.6%, down on the nasdaq 5.9 and the russell by -- 0.9 and the russell -- >> a new weight loss drug, basically saying you could lose 25% of your overall weight over 68 weeks. that comes in at 22 point seven, a disappointment to the extent of 120 billion dollars wiping out there to percent in value, a humbling moment. coming off the lows, all about defending market share against eli lilly, the bid on the back of the disappointment for novo. that market worth $130 billion by the end of the decade. fedex, divide, monetize,
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maximize shareholder value. fed ex will spin off the freight unit. $30 billion, happening in the next 18 months and allowing them to focus on the court business which is the canary in the coal mine of delivery because in the united states, demand for express businesses light, and nike low double-digit growth. elliot hill came out of retirement. this was his moment to take everything, all of the stock he didn't want and draw a clear blue line between him and his predecessor. bloomberg opinion says he missed the opportunity and guiding low double-digit growth. they say it is your stock, your inventory and i have a global plan to rebrand. jonathan: happy holidays to you. as we come down to the holidays
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and the opening bell, the trading diary through the weekend into next week, 10:00 eastern time, university of michigan sentiment, and the deadline to shut down the government. tuesday, durable goods. wednesday, u.s. markets closed for christmas day. congress racing to prevent a government shutdown as we go into the weekend. ann marie is joining us now from washington, d.c. what is the latest? how close are we to a government shutdown? annmarie: so many questions rolling around whether or not we are going to be shutting down. you wake up and you thought potentially that was what we were looking at that there was going to be a government shutdown and then we have how mike johnson coming to the capitol same we have a plan and inspect votes this morning. the issue is there is no bill that has been filed yet, so what exactly would he be breeding to the floor? do we not see it or potentially is he going to try the bill that failed yesterday maybe if he was able to get the 38 republicans
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that voted against it to say yes . lots of questions, not a lot of answers right now and time is of the essence. we could be headed for shutdown just before the holidays. lisa: why not just push the can down the road like they always were going to anyway and let us go on vacation without the worries of extra delays because tsa workers will getting paid? annmarie: they might end up coming to that and it might end up being the cleanest of the cleanest crs and kicking the can down the road. president-elect trump injected himself into the problem which also says to me, did speaker johnson have his buy-in for the bill that he originally wanted to put on the floor that he negotiated with democrats? it doesn't seem like president-elect trump wanted that. it seemed like he wants to clear the decks before next year. he doesn't want to deal with any of this including the debt limit which will become an issue starting in january.
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it doesn't seem like they got the buy-in from president trump and that is causing a lot of problems right now for the speaker. jonathan: i know you are taking over next week but for lisa and i we are. happy holidays. we will talk later. that does it for us. lisa: are you just rubbing it in? you will be here. have a wonderful, wonderful holiday. this has been quite the year. jonathan: hasn't it? lisa: it feels like 10 years. let's hope for a calm year. jonathan: thanks to you at home. we consider you to be the most intelligent audience anywhere on the planet. and thank you to everyone in this building that makes this program happen. thank you. have a very happy holiday at home with the family and i look forward to seeing you in the new year.
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thank you for choosing bloomberg tv. this was "bloomberg surveillance." ♪
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katie: futures in the red at the end of a choppy week. 30 minutes until the start of trading. sonali: matt miller is off today. bloomberg open interest starts right now. katie: novo nordisk plunging after announcing disappointing drug data. on the earnings front, fedex delivered freight spinoff plans as nike tries to get back in the race. the house scrambles to avoid a government shutdown head of

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