>> you at least want to keep an eye on the labor market. >> it is the unemployment rate that is probably the single biggest data point. >> i don't think things are as common the labor market is a latest seems to view. >> it is cooling. it is softening. >> the fed cuts really come out on the table or if it is a really weak number, they will probably say maybe the economy is not as strong as we thought it was. >> this is "bloomberg surveillance." jonathan: live from new york

city, good morning, good morning. coming into friday facing down a week of losses. on the nasdaq, down by .2. the first big data point of 2025, payrolls report just around the corner. below, 100. high, to 68. lisa: it is unclear how to read this data. what is the threshold for the fed to cut rates again? right now people are saying that threshold is incredibly high at a time we still see robust job growth. at the same time it is slowing. the bigger question to me is what was that threshold for this bond market to rally big time and for people to retrace some of their inflationary concerns over the past month? jonathan: part two is next week. cpi is around the corner. we since the discomfort with the inflation story over the past week or so.

discomfort with the inflation story. lisa: basically saying, kansas city fed president saying the rates already might be very close to neutral. really reassessing just how much they are done with the recalibration and going toward that careful assessment. alberto but -- saying the fed has to be much more fragile even that he thought back in september. jonathan: only a few months ago. bond market move 100 basis points is than on a 10 year yield. on market is doing a lot of work for them. once you get past cpi on the 15th, it is onto inauguration day. based on our reporting on day one the president is ready to go. lisa: a lot of executive orders have to do with immigration, budget, taxes. he will be putting everything out there. equally -- the key question is, what sticks?

what can get through what he starts talking about deporting criminals, tightening the border? at the same time, this is where the volatility comes into play and the reason why people say sometimes the year starts then. jonathan: welcome to the program. the 20th, 10 days away. equity futures on the s&p negative by .2%. joining us this hour, catching up with christopher verrone. ed mills will join us. and sarah house singh moderation in the labor market. we begin with stocks falling. payrolls at 8:30 eastern. rates are at a redline for risk. 10-year gilts remain in the uncomfortable zone, about 4.5%, and intent on challenging the key 4.75 percent level from last april. equities did not like it and it does seem to keen about it today. chris, good morning.

the bond market. we have asked this a few times, given the fact you believe we are in the uncomfortable level, the danger zone according to hsbc, are we at the point where this event becomes self-limiting? >> look at what the homebuilders have done, look what the rates have done. i think the market is telling you you are at some level where you are pushing your luck on what level to 10 year yields a rates begin to hit the economy. i think that is the question. it doesn't matter if it is 4.75% or 5.13%. where are we in this conversation at what levels do rates have a meaningful effect on the economy over the next six or 12 months? jonathan: is this the new normal? can we handle interest rates at this level? >> i think the key for that question is how can cyclicality fair with rates in this ballpark. put homebuilders aside for one moment. unbalanced cyclicals have generally held their own. i think financials are key.

they have not been as weak to the same potion this time around as they were in march or april of 2023 when higher rates were really hurting the banks. i think that will be a key tell. remarkably benign to this year also. that could change quickly. credit can move like a heart attack. we are on this fine moment here where i don't think we want to push our luck on yields much higher. lisa: let's say if yields go much lower on the heels of today's labor market report because it is disappointing, is that good or bad for stocks? >> this is the tricky part of the call. i have never been sympathetic to the view of hoping for weeks data or routing for weeks data. it typically means if you are helping in this business, you are on the wrong side. i think we have to be careful. my best guess is we wanted in line or even a decently strong number two validate what bond yields have done. i think the worst combination is bond yields up with weakening data, ironically what you've had

a little bit since the december fed meeting. softer data as bond yields have gone up. that is an unattractive combination. i think you what the data to validate what bond yields have done. i think you what cyclicality. i get very uncomfortable would cyclicals are we getting an rates are going up. that was second-half 2018. remember what happened in october, november, december of that year. in rig -- lisa: 2017 or 20 82 trump's administration sequencing of the incoming policies, etc. i am glad john part of the day one of policies. -- brought up day what a policies. cuts across the government has been one of the mainstays of the herring we have seen in this labor market. how are you evolving your thinking around the policies and whether they are bullish or bearish right now for the overall risk appetite? >> if you go back 2016, 20 17,

20 18 cadence, i think what people forget is as the tax cuts were being debated in 2017, it was a pro risk, procyclical moment. the tax cuts put the top in cyclicality. early 2018 this would cyclicals began to lose their oomph. it almost seems like we have skipped 2017 and we are right in the 2018 moment we higher bond yields have kind of disrupted some of the cyclical moment in this market. i think that is the fine line. we don't want to lose cyclicals. we don't want to lose credit. to what extent does the administration must facilitate these things? jonathan: how we lost the rest of the world? it is a very different story now. what do you make of things? >> it is certainly bifurcated. one thing i'm struggling to reconcile, why there are some parts of europe that seem to be firming here a little bit. european luxury comes to mind. i am surprised by this.

i will take the markets opinion over my own. jonathan: the whole of last year. >> hermes broke out this year. this may be responding to weaker currency. nevertheless, there are some modest improvements. where we are getting more bearish -- this is interesting with respect there is a very consensus view that if trump were to when or if trump won, extremely bullish for india. the indian markets are rolling over meaningfully. they deteriorated in are trying to work. the consensus is still very comfortable being long there. we are not. jonathan: let's move over to china. it is a complete opposite story in china compared to the united states were yields have been lower. a question about what the government is spending enough. any signs of stabilization? >> i think you need a clearing moment in currency. that is one of the big lessons.

we talked about 1992 earlier off air, central bank or country being pushed to the brink where there is only one option left. i think the only option here is devaluing the currency. i suspect we will lose that here. 7.80 would be the level i would focus on. we have seen the move in the rates. it has been extraordinary. i think there's a clearing moment to come in global fx that will be dominated by this move in dollar. i think that is the prerequisite for growth ultimately bottoming and turning in that part of the world. lisa: is that something that really is focused on china? are you talking about a clearing event with dollar strength that could also maybe clear out some of the bearishness around here as well? >> i think if you want to hypothetically lay out the case of what could turn rest of world or turn europe or turn emerging asia and second-half 2025, a clearing event of global currencies in the first half of 2025 -- which i think we are in

the middle of. aussie's back to basically where it was at the covid lows. we talked about sterling before. 1.23 today seems too high. we have seen euro. this is the event that has to happen to kind of reset the playing field here and put rest of road in the position to outperform? i know it is fashionable for every year to say, this is the year that rest of world outperforms. i don't think that can happen until this clearing moment in fx is upon us. lisa: this is a fascinating point of time where people are looking at that level of the dollar strength becomes a breaking point. it is interesting at a time where people are saying a strong dollar could impede some of the earnings for u.s. companies at a time where that needs to hang in there for this american exceptionalism story to continue. how far away are we from that moment? >> i think the irony about -- i think maybe the irony of the america first policy is creating

change in other parts of the world. look at canada, germany, u.k. that to me is the irony. does that set the stage for a robust may be second-half in parts of the world? with respect to the dollar, we did some work last week, the three-month rate of change in the 95th percentile right now. you have not seen great forward s&p returns over the next six to 12 months from that condition. i want to be mindful of that. i also want to be aware, everyone i know is a dollar bull. it has pushed to the extreme here, particularly cad, euro. i think if you got some flush here, that would be my signal to cover the dollar shorts are covered dollar longs and maybe think about the other side of the story. jonathan: have to recognize how quickly this has built up. this summer, bearish the u.s. dollar. lisa: i also remember what happened after the fed cut. 50 basis points. i think that move really highlighted the shift where,

wait a second, not so fast because maybe this wasn't the right call. jonathan: chris, good to see you, sir. thank you. christopher verrone of strategic. breaking news coming from cnn that chinese hackers breached see if in december. chinese hackers breaching the u.s. government office that reviews foreign investments for national security risks according to three u.s. officials familiar with the matter. lisa: the concerning think it has built the other hacks we have heard about that are becoming increasingly exposed. there isn't a clear message on how they are being prevented going forward at a time where some basic systems have been breached with some basic infrastructure that have been put in place years and years ago. jonathan: we will go to washington, d.c., in a moment. stories elsewhere with your bloomberg brief, dani burger. dani: president biden has increased federal assistance to california to combat the wildfires emerging governor

newsom to spare no expense. pres. biden: today i'm announcing the federal government 100% of the cost for 180 days. they will pay for things like hazard material removal, first responders salaries, and all necessary measures to protect life and property. dani: the president also announced 400 additional federal firefighters and over 30 firefighting helicopters and planes to support california. the department of defense has also authorized 500 wildfire ground clearing personnel. tsmc shares are rising in the premarket. the chipmaker reported quarterly sales that topped estimates. revenue growth accelerated in december thanks to its key role as a supplier to tech giants like nvidia and apple. shares have risen nearly 9% over the past 12 months with market value also doubling in that time period. tsmc will report is full

earnings next thursday. sources tell us executives at top investment banks plan to work toward -- award 10% hikes or more expected for many firms like bank of america, morgan stanley, jp morgan. sources say increases might be even higher at goldman sachs. it is to help retain talent but also reflect business optimism for the year ahead. that is your brief. jonathan: thank you. up next, warming up to tiktok. donald trump closed up tiktok in this country for security reasons or they will be sold. we did go in tiktok and we had a great response with billions of views. they said, we have to keep this sucker around for a little while. jonathan: a big change. we will discuss that next. on this payrolls friday, good morning. ♪

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jonathan: equity futures on the s&p are negative. check out the bond market. yields higher by almost a basis point. on the successions without a single day of declining yields. warming up to tiktok. pres. trump: we will either close up tiktok in this country for security recent or it will be sold. i have a warm spot in my heart for tiktok because i won youth by 34 points. there are those that say tiktok had something to do with that. we did go on tiktok and we had a great response. billions of years. we said, maybe we got to keep the sucker around for a little while. jonathan: the latest, the supreme court hearing arguments today a bipartisan law that would ban tiktok in the united states. bytedance facing a ban january

19 if it does not divest. the day before trump's inauguration. anne-marie joins us from washington with ed mills of raymond james. annmarie: good morning. the clock is literally taking for tiktok. today they're going to have their day at the supreme court to try to combat this bill. they will either be banned unless they divest away from bytedance, this chinese company. what you think happens? >> i think on january 19, tiktok ceases to exist here in the united states. i think the wildcard here is that under the law, the president of the united states has any ability to extend one time for 90 days, so the question i have is, january 20 the next day, does trump activate that 90 day extension? is there a deal worked out? annmarie: it sounds like he is going to because he has flip-flopped since his first time in oval office when he

talked about security concerns of tiktok. now he thinks actually in an interview with my colleagues over the summer talking about the fact on tiktok, meta is too big, understands a lot of people get their news from there. it seems like he wants to keep it around. what are the options? >> after the 90 days, one thing we went to the statute at raymond james yesterday, published a report about this, ultimately, it is up to the president to declare that what has happened with the investment or for foreign ownership has met the needs of the law. as long as the president declares it is ok, the problem for trump, though, is if there is not underinvestment, a $5,000 per user fee gets kicked in. i don't think the app stores that apple or google or oracle's hosting of this once to exist. if you look at the number of users, i add that up to about $85 billion fine. unless you change the law or you

have this divested, it will cease to exist, assuming it is upheld by the supreme court. annmarie: this is an even like elon musk buying twitter. this is an incredibly expensive company. >> i assume the money would be there. the bigger question for me is, while the chinese government allow it to be sold? annmarie: they said no. >> you can open up the hood, look in come in everything the national security folks have said about keystroke capture, geolocation, the algorithm potentially manipulating the users of tiktok -- all of that will be very apparent and we will know even more of how the chinese have been spying on americans using a very popular app. annmarie: trump will be breaking with this national security advisor and secretary of state. >> and? trump will break with his administration whenever he wants. i think it is important you highlight the animus that he has had toward meta and the

potential benefit toward instagram because of this. it does look like some of that animus might be reduced over the actions by meta, mark zuckerberg and recent weeks. annmarie: do the concerns grow on a day like today that cnn says chinese hackers breached in december? not really a surprise as jonathan said because we do know there was chinese hackers reaching the treasury department. but doesn't this become even more of a national security council earn? what is going to be the response from 2.0 -- trump 2.0? >> extraordinary act. we knew there were chinese hackers that access treasury. it was downplayed by janet yellen recently. but for them to have hacked into cifius, there was a deal that was pending, a bond still trying to u.s. -- to buy u.s. steel. we're looking at the potential security concerns about that.

for them to be looking for exactly what was happening at cifius at that time is a huge concern. that is why i have almost -- i've said, the only place you don't want to be is being seen on china's side. annmarie: except for potentially one. we are waiting for commerce department to come out -- this was a bloomberg scoop but i know you've have been writing about it for months -- about ai chips from nvidia. all roads lead to china when it comes to making this export controls tougher, correct? >> as early as today, between now and january 20, there will be a final export control rule that comes out from the biden administration. this will be focused on the number of ai chips that are going to countries that we have concerns about. we have blocked almost everything going to china or to russia. we will allow everything to continue to go to our closest allies. but there will be a tier 2

country list where we will put caps on how much can the middle east get, how much can south east asia received. generally speaking, i would've expected this to be bipartisan but you have ted cruz queried -- tweeting out last night strong opposition, nvidia with strong opposition. annmarie: going to allies or the timing? >> they will restricted going into some southeast asian and middle eastern countries. the real issue here is almost all of our export controls usually deals with the physical location. but when you're developing data centers and you can access that via the cloud, it might not matter if that ai chips can't go into china if you build that data center in malaysia or build that data center in the uae if they had that crowd access to it, they have essentially have that technology. so the chips are going to be limited and there is going to be new rules related to data centers to make sure they are certified and verified they are not giving this technology to china. annmarie: you have republican

saying, we don't want to see this happen most of the biden administration is doing it literally on their final days in office. does trump reverse it? >> i think it will be hard for him to reverse. d.c., it goes into effect immediately, but an opportunity for the trump administration to put the final tweaks on that. if the caps are too low, look for foreign governments to be very transactional. i think saudi arabia will put a lot of pressure that if there cap is to look in other gulf countries, other parts of the tariff conversation come this could be a tit-for-tat, hey, i am willing to do x, y, nz to avoid tariffs including trying to remove these ai caps. it is going to give trump a new tool in his negotiations globally in terms of what does the u.s. have that these other countries want. annmarie: you are talking to everyone on the hill about the process of how his agenda gets accomplished. the bond market is focused on

the price. what do you think we are going to see in terms of how vague this bill is going to be? >> i put the over under as it relates to both an extension of the tax cuts and if we do an immigration, energy, defense bill. at one point, 9 trillion dollars. that was the cost of the american rescue plan. i don't see republicans doing a bill bigger than build back better for biden. i think we are on the under of that. annmarie: tax cuts -- >> $4.6 trillion. for five years of the tax cuts, about $1.5 trillion. what would you do? i say because four or five years. the original was eight. we say we did have as good in trying to get those other things. people of into focused on the 10 year extension. i think it ends. with a short extension. annmarie: ed mills, thank you for joining me. jonathan come along list of issues at the incoming trump administration is going to deal with. tiktok come export controls. trying to get this agenda

through that ed mills could be under $10 trillion. jonathan: we are 10 days away. then we can talk about the consequences. lisa: there is this outward message from the trump administration the first 100 days is a fiction and yet what we are seeing is maybe it is not such a fiction and they will be doing quite a lot in those first days with executive orders in particular. jonathan: hitting the ground running and washington, d.c. coming up, jordan rochester. that conversation is coming up next. ♪

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jonathan: equities down .1%. negative on the week as well. that could all change in two hours time. when we get the payrolls report. nasdaq done also -- down also. a sixth session with declining yields. heard from a range of fed officials. we talked about a few of them. all signaling discomfort with inflation at the moment. the outlier is governor waller

who becomes more of an outlier the more you hear from other officials that are uncomfortable with inflation. some are concerned about incoming policy changes. governor wilder is not worried about tariffs. lisa: this is why people are wondering is he trying to line up behind the idea of 2026 being fed chair. they go to the point of who are the people taking into account the policies incoming. b, how inflationary or not are they going to be? there is someone else, i'm thinking of patrick harker of the philadelphia fed who sees us in a downward policy rate path. it is how they message that. jonathan: is he auditioning as well as the next fed chair? delta airlines kicking off earnings season for the fourth quarter. passenger revenue was $12.8 billion. a range of $.70 to one dollar.

the stock is higher by 1.8%. lisa: this is coming from ed bastian. we have pretty good visibility through the first quarter and into the spring. pair this with other commentary we heard on domestic focused airlines. delta has done well with business travel, with overseas travel when people take advantage of the strong dollar. you hear about european and asian adventures people are going on. you wonder how much the gains are consolidated in the bigger lines that can take advantage of that. jonathan: as for the supply-demand balance, let's strip out the mckinsey. a load of capacity and demand so we can charge higher fares, right? lisa: basically because boeing has not been able to deliver the airplanes there has been a robust demand for airbus and you end up in association where they can charge.

they have the luxury of charging more and not having any competition. that is expected to change through the second half of this year. that is probably a good way to put it. jonathan: how packed is the delta airlines lounge these days? lisa: i don't know. i wouldn't know. i have not been an adult to lounge in a long time. jonathan: your focused on work. -- you are focused on work. lisa: i don't have access anymore. jonathan: fix that. delta up now by .1%. fire fighters making progress in controlling wildfires across los angeles. the canyon fire is now 35% contained an pacific palisades blaze showing early signs of control. the death toll has climbed to 10. lisa: is a huge tragedy unfolding. a lot of people starting to put into wrong numbers what type of damage this is going -- raw numbers with type of damage this

is going to cost financially. up to $150 billion of damage. insurers might be on the hook for $20 billion. picklist of the heart of the question who's going to pay for this one summoning insurance companies have bowed out of the state because they were not allowed to raise their premium enough to compensate for the potential risk. a significant part of these homes destroyed were not insured at all. they lost their insurance or drop their insurance in the past year or two. jonathan: you can see the backlash against local authorities already brewing. i don't think they can hide behind climate change on this issue. competency will be front and center for the mayor, governor newsom, all of them. why were they so slow to respond? why didn't they have the things they needed to do something about this? lisa: your point is a good one. there will be a larger discussion of how to come up with realistic plans to counter what some people called natural disasters that are happening all over because there are changes

in the weather patterns. how do you come up with competent plants to mitigate some of the damage -- plans to mitigate some of the damage and mitigate the ability for people to exit in an orderly fashion? jonathan: the shocking pictures are shocking. our thoughts are with the people of los angeles and beyond. let's turn to nvidia slamming new restrictions the vibe administration is expected to announce soon, sang the white house is trying to undercut the incoming trump administration. it would cap the sale of usa ai chips. lisa: some of the statements coming out of the policy represented from nvidia are basically trying to shame president biden into reversing. this is not looking good for your legacy. this hampers the ability for the united states to be the dominant

technology around the world. all this will do is increase the competition from others. the issue is who are our friends? we talked about this yesterday. this is the dominant technology and this ban would potentially illuminate the u.s.'s ability or nvidia's ability to build data centers around the world. jonathan: they are making the argument for the republicans that the outgoing president is looking to undercut the incoming president. lisa: we have seen a lot of unusual things. some people would argue this is trying to cater to the trump presidency. jonathan: who is making this push inside the administration? there's a question about the cognitive ability of the sitting president right now. people are speaking about it openly. who is making the push on the policy front? are we saying president biden says i want to do this, this and this? are people try to squeeze things through and get him to sign off? lisa: on the larger point there

is a concern, especially when you have these breaches, these hackers getting into u.s. technology. it is a bipartisan concern. how you approach this will be important at a time when you have u.s. tech that is dominating and also looking to expand overseas. it's a very difficult needle the threat. jonathan: president-elect trump is preparing to issue a host of executive orders. the plans centered around immigration, energy, federal workers and regulatory reform, including tighter restrictions on border crossings and putting mechanics in place for mass deportations. lisa: the issue i have is this will require quite a bit of money. i have all -- i am curious on jobs day. they are looking to shrink the federal workforce. if you look at the drivers of the major market growth, it has been the labor market -- the

government workforce that is a pillar of the u.s. labor market. when you look at these effects you have to wonder what that does economically in ways we are not accounting for. jonathan: it is payrolls friday. the u.k. will be focused on the jobs number in the united states. struggling to begin confidence in the market. stocks continuing to fall after 10-year yields -- bonds continuing to fall after 10-year yields hit their highest level in a decade. "something that will be harder this time as a lot of the selloff has been driven by u.s.-european factors." you framed it quite nicely. internal factors, forces and external factors. where are the biggest problems right now? jordan: within the united kingdom, the problem is the mood music around the tax hike for

employers for insurance. that came from the budget in october and that will slam employment intentions, which is what we are seeing in surveys. it's a mess when it comes to the impact of that budget. it was supposed to be growth boosting. if you see employers, one of the biggest tax raising measures in u.k. history. 22 billion pounds from that national insurance tax hike on employer contributions. it will lead to slower progrowth and lower growth and wages in the long-term. it is typically a dovish reason. because of the external factors, the u.k. is in a painful place. natural gas is rising, boosting short-term cpi forecast. oil is made up for it and is breaking higher. it is hard for us to be dovish on cpi prints for january. we will see some strong numbers out of europe and the u.k.

the u.k. cpi could be on a 3% handle and that's the problem. it is external factors driving the markets to price out rate hikes which puts the chancellor and a painful position. the interest costs are now ballooning to a level where it breaks her new fiscal rules are ready just a few months in. what she needs to see is external factors going the opposite way. we see the selloff in u.s. rates we have seen. hopefully that calms down. i don't think it will. or, energy prices turn over. the growth leads to recession, but the external factors, the u.s. bouncing back makes it hard. jonathan: it is a toxic mix. a toxic brew when you see yields up. people are thinking about 2022. what is the key difference between now and 2022? jordan: there are a few. the one that is the most useful for the chancellor is the bank of england is in a cutting cycle.

the last time around and 2022 they were in a hiking cycle. it was difficult for the bank of england to respond devilishly to the -- respond to the gilt selloff. this time around they don't need to do those operations again. they can simply cut rates to help momentum and remind markets they are in a cutting cycle. what we are seeing priced out can be put back in for what is priced in february. i think they will cut rates in february. the data suggest they should. lisa: we were speaking earlier in the show. we are getting closer to some sort of reckoning, some breaking point on the heels of a stronger dollar. especially in light of what is going on in places like the u.k. with sterling, like china with the renminbi. is that what you are seeing now, especially as you see

policymakers forced to accommodate some pressure? jordan: i agree, lisa. there will be a breaking point at some stage. donald trump's policy mix with tariffs is not basically good for global growth. what is happening with the range bound price action we had reflects the uncertainty. you have the business deregulation, the tax cuts. that boosted equity sentiment after the election. when it comes to tariffs, it's a big negative for multi-nurse national -- multinational firms. jon listed a few day one plans already. tariffs were not in there. we actually could see wrist do pretty well and we could see some of that dollar strength come off the ball as well. i think we will get tariffs announced in some sort of way on day one or in the first week. launching the investigations. the investigations can last 30 to 60 days for the section 232, 301, or whichever part of the acts they want to work with.

if he goes for it, that is when it can take a steep dive. lisa: you were talking about the differences between the liz truss moment of 2022, which she would like to recharacterize. there is a question about whether rachel reeves, keir starmer or some of the leadership in the u.k. will survive this disgruntlement in markets. what is your sense of how it would be received if there was some change in leadership in the currency markets, in the bond markets? jordan: i kept the list short. there are loads of differences. another difference on the politics side as you have not had rachel reeves arrive at the treasury, tell the opr i don't want you to the forecast and then let go one of the chief secretaries to the treasury. that was what liz truss did in that led to huge uncertainty. it therefore required the

markets and the politicians themselves to call for the end of that leadership. this time around is not exactly self-inflicted. there is global factors driving the latest breach in fiscal rules. it is difficult for replacement of leader schmidt -- leadership in the labour party. the tories can get rid of their leaders by a vote of no-confidence. labour does not have the same function. it is not self-inflicted. it is not their fault that u.s. is selling off. i think they hang on and by march they are hoping for the best. hoping u.s. labor data slows down, that global rates rally and the natural gas story gets better. it is a big hope and hope is not a strategy. jonathan: it is worth debating. are you saying if the chancellor had not come into this job and

had not got around to saying there's a massive black hole and did not give away billions of sterling to public-sector workers to give them a pay increase and a bring back the old mood music of tax-and-spend and tax-and-spend in the u.k., if they had done something different are you think it would not have made a difference? jordan: it would have made a difference to the mood music. the drop in business confidence would not have been as severe, is specially the employment intentions we were seeing after the national tax hike. europe is selling off as well. it is a global rate story. not just a u.k. the u.k. has issues coming due. it always looks like the ugly duckling. jonathan: i wanted to squeeze in japan. you believe the boj meeting is a live meeting. could we get an interest rate hike? jordan: i think we could. it is a really close call.

japan is doing their best to be as vague as possible. the 40 guidance always surprises people. i think -- the forward guidance always surprises people. you have the growth surveys picking up, inflation is stronger services, ppi looking good. wage data at an all-time high since the 1990's. the last time wages were the strong the stronger rates were at 3%. if it wasn't for trump's tariffs on january 20, the boj would be happily hiking at this meeting. it comes four days after his inauguration. we will have a lot to make of what he does on january 20. if he soft on japan, maybe that is the moment they go for it. jonathan: jordan, we appreciate your time. some of the moves, the external factors shaking up markets abroad. lisa: the bank of japan has the luxury of waiting to make the decision. the bank of japan is thinking about upgrading their inflation forecast on salaries and the

price of rice and other inputs. it goes to show how they waited to not necessarily hike rates in december and how now might be the time to go after the policies. jonathan: it's amazing how much of the world is waiting on a number that drops 8:30. the spillover you will seek to foreign markets is remarkable. lisa: is remarkable how much the markets are susceptible to one that is not their own and they are feeling that and responding to that. at 8:30, expect a real potential move globally. jonathan: payrolls just around the corner. 165,000 is the estimate. let's cross over to dani burger. dani: chinese hackers breached sify's, the u.s. government office that reviews foreign investments. cnn reporting the breach happened in december, part of a larger incursion into the treasury department's unclassified system. officials are trying to

determine the national security risk from that hack. apollo management is considering a major stake in 7-eleven parent coming seven and i to take the company private. people familiar say the private equity giant could commit as much as $9.5 billion for an equity stake in the plan. under the proposal, apollo would join the company's founding edo family that operates stores in japan is key investors. they are raising to finalize the deal ahead of arrival offer from cu start -- cushtard. byd began taking orders on the model y. it starts hundred 36,000 u.s. dollars and has a single charge range of over 370 miles. the model y is one of china's best selling dvds signaling tesla's effort to inject excitement to the line and china and increased domestic competition. that is your bloomberg green. jonathan: what a tough market it is in china.

up next, signs of softness. >> people are not feeling is countable that they can find a new job if they leave their job. those are the kinds of signs of softness we are seeing in the data that we think will continue to feed through. jonathan: looking for 120. the low end of major banks. the range is wide. 120 all the way to the 200. the median estimate is 165 on this payables friday. good morning -- payrolls friday. good morning to you all. ♪

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stop waiting. start investing. e*trade ® from morgan stanley. jonathan: it is payables friday and equity -- equity futures down a little bit. on the nasdaq down by .1%. the russell down by .15%. signs of softness. >> layoffs are low

.that is good news for the job market. the hiring rate is quite low. that surprised us to the downside. people are not feeling has come to will that they can find a new job. those are the signs of softness we are seeing in the data that we think will continue to feed through and lead to higher on a planet rates -- unemployment rates. jonathan: the payrolls report is due in two hours time. economist expecting 165,000 jobs added. sarah house writing, "we expect softer demand for new workers and slower growth in the labor supply to lead to a moderation in the pace of monthly hiring to around 125,000." welcome to the program. to build a what you have written, where does that leave pay and wages in the months and quarters to come? sarah: i think we will see a further moderation in wage

growth. when we look at the unemployment cost index is just under 4%. it will probably slow to about 3.5%. that will be enough to keep real compensation growth positive and continue to support the consumer. looking at a slightly more tepid jobs market will continue to push downward pressure on those labor costs for the near term. lisa: you don't inspect the unemployment rate to rise materially. why not? sarah: it has to do with the supply backdrop. we are continuing to see demand we can -- weaken at a slower pace than what we saw for 2024 and 2023. we have begun to see the labor force growth slow substantially. for 2024, less than half of what we saw in 2020 through an 2020 three. -- 2022 and 2023. as we have begun to see

immigration slow substantially, that will help keep the labor market relatively balanced here. lisa: michael reed pointed out the main drivers of the job growth we saw in the past year for health care, leisure and hospitality and government, if we get a significant slew of government cuts, how does that affect job growth in the u.s.? sarah: most government hiring, about 90% is at the state and local level. even though there's focus in terms of federal employment, that's not really going to move the needle. i'm worried about a slowdown in the government portion of hiring given state and local revenues have really slowed. a lot of the funds helping prop up those revenues allowing state and local governments to hire has to do with the covid relief. that is starting to run out. we have already seen. a lot of free staffing efforts that is one area where you will get less support in terms of the overall hiring picture. it will contribute to that moderation and overall job

growth. jonathan: the number drops this morning. appreciate your time. sarah house on the jobs report we are expecting at 8:30. federal hiring and what it will look like in the years to come. lisa: the reason i'm pointing out the government is because it's been a major support for some of the numbers we have gotten recently. if that is a target to reduce that area of hiring, what does that due to the overall market how fragile does that leave a labor market that's being supported by a couple of pillars but has seen softness elsewhere? it's important to understand and digest these numbers. jonathan: in the next hour of "bloomberg surveillance," we catch up with mohamed el-erian. he will be with us for two hours in the studio counting you down the payrolls alongside meera pandit, alex dasilva --matthew palazola and alex dasilva of morgan stanley. the next hour of "bloomberg surveillance" is up next. ♪ ♪ community is the way we find

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>> the u.s. economy has been the beacon of opportunity in the last several years. >> there's a lot of health and the u.s. labor market because the economy is very healthy. >> workers has lost leverage from the heyday of the great resignation when they were clearly in the driver's seat. there is no one in the driver's seat now. >> people are not feeling comfortable they can find a new job if they leave their job. those are the signs of softness. >> we think the surprise given

where markets are is a could come into the soft side. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and and record turn. jonathan: the payrolls report 90 minutes away. equity futures down on the s&p. on the nasdaq, down by basically .2%. on the bond market some stability. we have not had a single day of declining yields. that changed today. up to 4.2689. a range from the banks on wall street anywhere between 120000 and 175,000. lisa: the question that will be the most important is the market response to this number. if it is in line, we can all go home and say let's wait for cpi next week and retail sales and maybe even earnings. if it is not, what is more punishing to the stock market?

an upside surprise or downside surprise? i'm curious to see the response. jonathan: it depends who you ask and what asset class and what country you are looking at. good afternoon, london. good, tokyo. you know this -- good evening, tokyo. you know those countries are watching. lisa: i will say right now the united kingdom is probably watching more than the bank of japan because of vulnerability with the dual deficits in the united kingdom and how much that bond market has sold off. yields hitting the highest on the 30-year going back to 1998 and continuing to creep higher. jonathan: many markets are at the mercy of what happens outside of their own borders. the world is looking to the united states, not just today but again on the 15th when we get cpi and again on the 20th when we have inauguration for president-elect donald trump. lisa: is no longer that the

federal reserve is the central bank to the world. donald trump is the arbiter of tariffs around the world and how do countries respond when their fiscally challenged dealing with some doubts about their ability to borrow and spend to the degree they have planned. jonathan: coming up, we catch up with mohamed el-erian on the global bond market selloff, meera pandit of jp morgan on policy efforts in washington, and matthew palazola on the cost to rebuild los angeles. we begin with stocks lower and u.s. treasuries finding stability. mohamed el-erian staying focused on the bond market. "some label 2024 as ushering in the return of bond vigilantes. this greater focus on political stability is likely to continue into 2025, as will the dispersion between the united states, the euro zone and japan." welcome a good friend of all of us, mohamed el-erian. muhamed: good morning. jonathan: it is january 10.

welcome to bloomberg surveillance. are the pond vigilantes back westmark -- question -- back? mohamed: consistently stronger than inspected u.s. economic data. two is the understanding inflation will be sticky. three, renewed focus on debt and deficits. put them together, the u.s. leads a global bond selloff. what that selloff does is find weaknesses in the system. it would not have been good afternoon, britain. just afternoon. they are facing the combination of higher yields and lower currency, bad news for them right now. jonathan: how much of that is in their own control? mohamed: some of it. it is a golden opportunity for the government to redouble or restart its economic approach, which has lost its way a little

bit in the last few months. they will be looking at the u.s. jobs report and critically the cpi coming up. it was not so long ago we used to say forget about cpi. inflation is under control. all that matters is the jobs report. now we realized both over and play, inflation and employment. lisa: when we say afternoon in great britain, what is better for them? an upside surprise to the labor markets or downside surprise at a time when potentially that could spur risk off moves at a time when even in the u.s. people are questioning the sustainability of what is going on? mohamed: in the u.s., you want an upside surprise. you would take an upside surprise. in britain, it downside surprise. yields have got to stabilize otherwise you risk triggering these dynamics that can hurt.

they would hope for a downside surprise that brings yields down and puts down pressured -- outward pressure on yields -- downward pressure on yields. lisa: how long before they find the united states vulnerable? this goes to the question torsten slok raised. it's unusual to see the long and yield rise by 100 basis points after a series of one hundred basis points of rate cuts from the federal reserve. do you have a since the u.s. is one of those vulnerable spots? mohamed: in relative terms no. you've heard me say the good, the bad and the ugly. the good is the u.s. the baddest china and the ugly is a europe, including the u.k. the u.s., china, europe including the u.k. will focus on the ugly first, then creep up. the u.s. has a good spot. higher yields here associated with stronger growth. that is not the case in europe. jonathan: why do you think the

federal reserve is so confused? they sound confused based on the news conference in december. mohamed: how much time do we have? lisa: two hours. mohamed: they are confused in analysis, communication and approach. when you are data-dependent and looking at the futures for the lens of the past, you will get more and more confused. we have not even talked about policy uncertainty, which adds to this. we could solve different levels of unemployment and inflation. whatever probabilities you had, each is associated with different levels of inflation. that is new. the fed -- you heard me say this for a long time -- has to get more strategic in its approach and has got to stop being excessively data dependent. jonathan: they say the phrase you use, policy uncertainty.

i just think donald trump. what they mean to say is donald trump. i think we heard that in the news conference with chairman powell. i would love your opinion on this. why are some officials willing to preempt policy changes and factor that into their observations in their forecasts but unwilling to do so when it was biden in the white house and he was pushing through massive fiscal stimulus into a supply constraint economy? what's the difference within the hague are in response and approach to two different president? mohamed: you have to ask them. we thought we understood with the fed -- how the fed approached this when chair powell said that we don't speculate, don't predict and don't assume anything about policies. everyone assumed let's wait and see. what we are hearing from the fed does not incorporate forecasts about policy changes. then the whole thing got muddled. some do, some don't.

this is part of a bigger issue. fed communication has gotten really confused. bill dudley had a good piece about this. it does matter. the fed is supposed to reduce volatility, not contribute to volatility. for the last two years the fed has contributed to volatility. lisa: how do they not contribute when they are facing off with policies that offer up profoundly different contours of inflation and growth? mohamed: they have to either take the approach of this is what we think the baseline is, we will check it everyday against more signs out of d.c., or we are not incorporating new policies. sometimes you need a top down -- the chair needs to say this is the approach we will take. the muddled middle causes all sorts of spillover effects that are not helpful to them. lisa: let's talk about the spillover effects. we talked about how they are at risk of maybe allowing inflation

to creep higher and then hike rates later. the idea of not recognizing inflation enough. there's the other side of things, if they hold rates too high for too long that can cause a deterioration. which is the bigger risk? mohamed: the only reason we talk about the inflation risk is because we compare it to an arbitrary target that i'm willing to bet if we were to set today, we would not set at 2%. 2.5% to 3%. every occasion suggests expectations are stable. we are structurally -- what is structurally happening means you have to run the economy for now at a higher equilibrium inflation rate than before. the reason why we are getting in this whole thing is because we are judging ourselves against a target that itself is not only arbitrary but not the target we would have chosen today. hi don't worry honestly about

inflation until i have evidence inflation expectations are the anchored. -- de-anchored. if the fed believes it has achieved 2% and wants to do it, it has to hike rates this year. if it hikes rates, it will pull the rug from under u.s. growth. from under u.s. investment. this is how important it is. my expectation is they will say we continue to pursue to present but down the road they will stick with 2.5% target forecast for now on their way to 2%. we will basically be living with a higher inflation target. jonathan: we are lucky to have you. lots of time fortunately. you will stick with us to payrolls. equity futures negative by .3%. dani: firefighters are making progress in controlling the wildfires in los angeles. the kenneth fire is 35% contained.

the palisades blaze is showing signs of control. the wildfires have claimed the lives of at least 10 people, damaged or destroyed 10,000 structures enforced 180,000 residents to flee. i check on delta shares in the premarket higher by more than 6.5%. they come any reported profits that beat estimates thanks to gains in the international and corporate travel. delta's revenue is effected to increase as much as 9% from year ago. the ceo saying the supply-demand balance is as good as i have ever can recall it being as we look into 2025. president-elect donald trump says he's planning to meet with russian president vladimir putin after he takes office. in a meeting with republican governors, trump told reporters the russian leader wants to meet and they are setting it up. hey crimmins spokesman said there were no specific yet about organizing a meeting. that is your brief. jonathan: more from dani in about 30 minutes. donald trump prepared to hit the ground running. >> president trump knows this

job already. he knows he has four years. you will not waste one moment. he will be tremendous on executive orders but he needs a legislative body to catch up to him. jonathan: up next, annmarie at the nation's capital and meera pandit. good morning. ♪

jonathan: equity futures on the s&p negative by one third of 1% on this payrolls friday. 10-year looks like this. just about unchanged. under surveillance, donald trump prepared to hit the ground running. >> president trump knows this job already. he has four years. he will not waste one moment. he needs the legislative body to

catch up to him. our greatest that is our debt. we have to do a lot of thing going forward. the debt ceiling is not a part of that. he should take that out of the way, let the president govern, do the job that has to be done. jonathan: donald trump planning to issue executive orders on immigration, energy, federal workers and regulatory reform immediately after his inauguration. annmarie joins us from the nation's capital. amh, how busy is day one going to be? annmarie: the first 48 hours are going to be executive order after executive order. this is not new for any incoming president, especially when they're handing out power to the other party. to give you a sense of what we expect, nancy cook, they colleague in washington has a long list of what the team is starting to prepare on the energy front. new drilling on federal lands as part of his initial push. he will freeze regulations put forth by the biden administration that have not yet

been finalized when it comes to federal workers. they are trying to shrink the federal workforce by putting a hiring freeze on the government. mandating they returned to office. on immigration, this is going to be the most important. the one the president feels like he has a mandate from the country on. they want to tighten restrictions on border crossings, mandate the government finish the unfinished parts of the border wall, carry out mass deportations and deprive any sanctuary cities of federal resources until they stop serving as a safe place for migrants. it will be a busy first few days of the donald trump administration. jonathan: we talked about this this morning. tariffs were not part of that report, which was surprising. i thought you would start to see some policy on that front. lisa: on january 20, expect a rally in currencies and a decline in the dollar. on january 22, you can reverse all of that.

jonathan: amh, appreciate your time. meera pandit can try to make sense of it all. happy new year. meera: happy new year. jonathan: let's talk about your underlying assumptions for policy changes. the way you think about emphasis through the next year. meera: there are three key areas when we think about taxes, tariffs and immigration. you hear headlines on what is coming first. we will see a lot of that in the first 100 days. the sequencing is important in terms of what gets enacted when. you can see tariffs come to the floor right away. the location from an economic perspective is on inflation. you could potentially see a one time pass through. it remains to be seen exactly how that might play out. if you think about immigration, a similar impact. tighter labor supply and inflationary there as well. taxes are the key question. if you see big tax reform there

are two big questions. if it is mostly an extension of the tax cuts and jobs act, that's not necessarily going to have a huge impact to growth coming forward. two, if you don't see that until 2026, you have a timing issue we see more inflationary policies come first and more progrowth policies come second, which was not the case in the first administration when you saw that nice impact to earnings from tax cuts at the same time as you saw that drip feed of tariffs. lisa: do you think there will be the same or a similar amount of policy driven volatility this year as we saw in 2018? meera: very likely to see many packets of volatility brought on by this drip feed of tariff news as we are likely to get. if we use 2018 as a guide, you did see that drip feed in terms of policy and the tear frowned. -- route -- tariff realm. it did boost earnings by about 20% that year.

we expect politics will be unproductive both. we don't expect the fed is going to be unpredictable. their job is to be protectable. the challenge we saw was that despite the hiccups throughout the year in terms of tariffs and what will and won't happen and what did happen, the biggest pullback from 2018 were really fed driven when people were worried about an aggressive fed. lisa: the market can continue to broaden out unless monetary policy becomes the unwelcome dark horse. as long as monetary policy is on a steady path, you think that risk assets -- the risk markets can look through some of the fiscal policy and volatility? meera: in the absence of a tax cut this year, even if that takes place in 2026, we expect strong earnings growth. a strong fundamental backdrop in terms of growth already in the above trend level.

we have a buffer for things to moderate a bit. profit growth expected to be 15%. if we get two thirds of that, it's a double digit from the earnings side of the house. i do think policy will continue to cause volatility. we don't want a big surprise from the fed. powell could be on the government's side. the fed could. be a source of correction there's a lot of uncertainty about what the fed might have to do next year. the fed has an under enviable challenge -- on enviable challenge -- unenviable challenge. mohamed: we spend a lot of time on the what of the policy side. do you think someone in washington is bringing together these elements and seeing what the effects of all these measures would be? meera: the challenge is if you do have a centralized strategic

initiative towards all of this when it comes down to legislating and you think about congress there are so many competing interest because of everyone's different constituencies. that is how you end up with things that seem like a bit of a frankenstein, and this is true for any administration with any legislation because you are trying to please a certain number of parties. we are dealing with slim majorities that are going to make some of that negotiation quite fraught. mohamed: i completely agree. we hear quite strong predictions as opposed to embrace volatility. that will be the theme. we all say it's a one-time price pass through. some companies don't learn. companies were shocked in 2022. the whole cost inflation surge, etc. there have been changes in how

they think about adjusting prices. are you confident this is a one pass price swing and that is it? meera: all this is taken with a grain of salt. it is highly speculative as to exactly what will happen here. when we think about companies versus consumers, consumers have very little appetite to take a higher cost. s we saw that in the -- higher costs. we saw that in the exit polls of the election. we will have to look to companies to absorbency, this. if -- absorb some of this. if you have record margins or near there, you are looking for companies to shoulder some of the burden. jonathan: what has to go right for international markets to start working? meera: i think about europe where growth is incredibly weak.

there is the possibility you could see some fiscal stimulus in europe. there's the possibility when you think about financial conditions, very tight in europe, not so much in the u.s. some loosening of that could help markets overseas. the ecb will lower rates. interest rate sensitivity from the perspective of more bank lending that we see in the u.s., mortgages that are variable or fixed for a shorter period, you can see a nice tailwind. it is harder to see it sometimes in the u.s. given interest rate sensitivity. you could have a scenario where the administration does want to be tough on china but is willing to make deals with europe, canada, mexico. if you have any area of trade policy that is tough on chinese autos, that would be a huge tailwind for europe. add one more perspective. we have spent an enormous

meta-consumer savings in the u.s. that has been great for our economy. europe hasn't. there is room for that if you can drum up enough confidence. jonathan: confidence rock-bottom at the moment. lisa: that is the hope that maybe we aren't rock-bottom. maybe there will be a washout. suddenly yet for patients are so low any positive surprise, what a great thing. jonathan: meera pandit of j.p. morgan asset management. in europe, i'm reluctant -- i'm surprised how reluctant the ecb is to be dovish. lisa: how much space to they have to do that? they saw upside surprises in inflation readings in germany and natural gas prices. this is one of the sticky aspects that's when a conundrum. mohamed: at a single mandate single mandate -- single mandate central bank. lisa: i actually wonder if they are glad they are not when there isn't political leadership and they would have to be charged

with all sorts of political interference. maybe they can say we will stick to the inflation. i'm just saying, i think they have a real quagmire right now trying to figure out policy that could change the trajectory dramatically. jonathan: a lot of the is their own creation of the federal reserve. the communication of powell from one meeting to the next. to say to mohamed's point we don't speculate and then say some do. lisa: it is the fed's own creation that that took such power going back to 2008, even though they are not politically elected. it raises an extra question. jonathan: that conversation will continue. up next, matthew palazola of bloomberg intelligence on the cost of rebuilding los angeles. that conversation is our next. ♪ -- up next. ♪

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jonathan: the open, two hours away. jobs report, 60 minutes away. coming into all of that, equity futures are down. pulling back just a touch. we are two hours until the cash open. let's get you some morning movers from manus cranny. manas: the world is trying to grapple with what's happening in los angeles. the horrors are there to see, but this is about financial repercussions and that is where we are beginning to see some numbers. j.p. morgan doubled their estimate in terms of the actual

costs of the wildfires to $20 billion overnight. the consequence to that is a number of stocks are impacted. allstate, chubb, travelers. primary insurance will bear the majority of the burden. they are the most exposed. this is a more severe impact than the 2018. in some way this is a financial translation of the horrors of the situation. nike, a vote of confidence in the new ceo, the stock upgraded to overweight. elliott hill with intensified urgency on an earlier call with healthy profitable growth that might not just be now, but four quarters away. upgrade yourself like the millennials do, this is delta. overseas business, travel, both of them combined with a nice rebound in the numbers guiding higher. this quarter they will make up to a buck. the market had estimated around

$.76. free cash flow, $4 billion, up 18%. as i say, 85% of the season this company will put into these premium seats on the planes. millennials, i never afforded business contrast -- business class when i was a millennial. jonathan: of course not. i used to fly with manus. i took a left and he took a right every single time. lisa: pause. u.s. a young lad? jonathan: ryanair didn't allocate seating. you ran across the tarmac. lisa: you sprung for the high end when you were like 23? jonathan: absolutely not. lisa: 100%. jonathan: no, ryanair. london into the bowery. no seats. use to run across the tarmac and he would block the seats for the family. >> how did you block the seats? jonathan: like this.

someone would say where are they. it was some violent stuff with ryanair. they would try to take her back off you, say it was too big. force you to put it into a metal thing to see if it was too big or not. i'm sure they still do that. michael lewis made the experience more pleasant over the last decade. lisa: full on lounge man. jonathan: yes, i charge it to work as i should. under surveillance, delta airlines beating profit estimates in the fourth quarter with gains in travel. experiencing elevated demand as a push into premium product services. phenomenal performance from that company over the last few years. a market leader in many ways. lisa: how much does this point to the industrywide standard that they can all charge more because there are fewer deliveries of airplanes with lower capacity, doing the ryanair experience going into

fisticuffs with other people over saving seats, which maybe isn't a terrible thing, but it speaks to this idea of also international travel and how it has continued to be strong. i wonder how much that has to do with the dollar. jonathan: delta, america, united, we all have our own airlines. mohammed, can we stand with united? >> i'm happy for lisa to stand with united. jonathan: what's so special about united? what's kirby done that makes you so loyal? mohamed el-erian: it's more about me. i like predict ability. i know the food, the surface -- service we are going to get. jonathan: the stroop waffle? >> they killed that. jonathan: why did they do that? your favorite snack. 10 to 30 year yields jumping

more than 20 basis points. the important stuff over the last five sessions. lisa: evidently. jonathan: the 30 year yield hitting its highest level since 1998 and investors are concerned about labor policy and debt burden. we talked about this already a few times this morning but what's the biggest difference between now and, say, 2020 two and a liz truss moment? mohamed: a functioning of markets. 2022 was a breakdown in that function and it spread disorder all over the place. here the markets are functioning well, but the economy is going to have to deal with higher yields at a time when there are very -- when there is very little positive flexibility. this basically eliminates all of that. [no audio] [applause]

lisa: melted caramel all over. [no audio] mohamed: no, it stays in the stroop waffle. jonathan: it stays in there. you learn something new every time.

[no audio] jonathan: 30,000 acres have been scorched so far. alex from accuweather joins us. welcome back, are things getting any better? >> things continue to get worse and we have the numbers here. 92 wildfires breaking out across southern california with the main two or 3, 4 fires, other ones sparked by the embers of the parent fires, sparking new fires. we have five confirmed fatalities and i would see new -- but i have seen new data showing that number closer to 10. like you mentioned, 30,000 acres have been burned.

unfortunately, each and every one of those fires is 10% or less contained right now. the wind continues to grow pretty strong in southern california and it will continue to do so throughout the day. it might relax tonight, but it looks like this weekend it will pick up yet again, unfortunately. this is all fueled by high pressure moving down across portions of nevada, that is what has caused the event. in terms of the wind, low pressure to the south with a gradient between them causing the wind out of the east. that is why we have seen the strong wind across the area. new damage estimates from accuweather, we are calling it 135 to $150 billion in economic loss across southern california. that's about 4% of their annual gdp in california. this is not just physical damage. this is insurance loss as well. tourism loss. we are looking at the nfl game

that's been moved to arizona, factored into the economic loss as well. health care premiums might come up a little bit with all of the smoke and people having allergy problems. it's not just about the physical damage. an event like this, it really goes much more beyond, unfortunately, the physical damage. how does the event rank amongst other natural disasters we have seen in recent times? you can see that the my calfire is up here. it's very considerable. shocking stuff -- jonathan: shocking stuff. alex, appreciate it. bloomberg intelligence looking at the insured losses for the wildfire could be between $10 billion in $20 billion under some scenarios, saying it will likely be a large event for public insurers. matt, good to see you, coming to us from bloomberg intelligence. difficult conditions in los angeles. do we have any details on what

started this fire? >> as of yet, no. calfire is saying it's under investigation. they are so focused on fighting it at this point. that usually comes out, could be even months after. lisa: do we have a sense of what proportion of homes destroyed were actually insured as opposed to uninsured or insurance of last resort? >> in the main affected zip code, 15% of those homes are in the plan. i don't have data uninsured homes. anecdotally, sometimes here these very high-end homes go without insurance because it's so expensive, but generally they are insured. mostly insured with about 15% on the fair plan. lisa: can you give us a sense how many insurers pulled out of california in the years leading up to this because of the mandates coming from local legislation?

>> the biggest ones did. state farm pulled back, all stapled back. a number of smaller ones have pulled back. what they said publicly was wildfires, climate change, but like you said, the regulatory climate is difficult for them to operate within. i would think that's the primary reason a lot of them pulled back. for example, that fair plan, the state doesn't run it but gives it powers and has power over it. they made the fair plan increase the limits that they take, right? so that they ensure a higher amount. the fair plan said they would need more rate in the state didn't give us what they needed. mohamed: take us from what has happened to what is likely to happen. high demand for insurance, lower willingness to supply it. >> i think that will happen here . it's a blue skies scenario that regulators come to this table to

work with insurance a bit more. that's probably an unlikely scenario. i think that what happens is you will see an opportunity for the residual market insurance companies that don't operate within the more regulated space to write more free-form policies. but i don't think this helps the cause of the state at all. in fact, i think the fair plan, the solvency of it could be at risk. mohamed: when we try to think about how quickly rebuilding goes on, how quickly we get back to a new sense of normal, do you think the insurance element is a big issue to think about or just a marginal issue at this point? >> i would say i think the rebuilding happens quickly. the maui fires being an example. we get to this work quickly.

we talked about hurricanes and flooding. there's more of a chance that perhaps insurance doesn't pay for some of those things. with these wildfires they understand that it is risky and there will be carveouts. i'm not saying everyone gets coverage, but there's probably less of a question in a case like this. lisa: if the fair plan is insolvent, which you raised the specter of, this is the california premium of last resort, some of these homes are far beyond that. do we have a sense of what the necessity will be of california for federal financing to cover any kind of additional funding at a time when i think it is $700 million that it has currently in financing? >> those financials are not exactly public. we don't know the ultimate claim ability. the first step is that they can access a line of credit. i don't know who gives them that line of credit. and then they assess insurance

companies. they can keep assessing insurance companies, but once they get over a certain amount, insurance companies can pass that on to policyholders. there are a couple of things in the waterfall before federal funding and fema money comes in. but they have some kind of stopgap before that happens. jonathan: matt, thanks for your time. just devastating stuff coming out of los angeles and beyond. update on stories elsewhere this morning, with your bloomberg brief, here's dani burger. dani: walmart shares with stronger-than-expected quarterly results. strategic options included sales. revenue came in at $39 billion for the quarter. higher prices for prescription volume at walgreens pharmacy positions. elon musk has waded into the german election, hosting a

conversation on his social media platforms with discussions ranging from hitler's and stalin to aliens and human settlements on mars. it lasted just over an hour. the spaces event comes ahead of the federal election for the company -- country next month. the supreme court hears arguments today on tiktok and a last ditch effort to keep the social media app running in the u.s. with a federal appeals court upholding the law that would ban the app unless it is sold. donald trump is asking the court to hold off, the band would shut down tiktok on january 19. that is your bloomberg brief. jonathan: i've been thinking about this for the last week or so. is mark zuckerberg doing enough to change the mind of the incoming president all over again? lisa: we shall see. is it the role of mark zuckerberg or is that the number of followers that the campaign assembled on tiktok?

jonathan: we have had a few arguments. he doesn't want to help meta. probably wants it to stay that way. lisa: does he want to anger the kids? jonathan: he's not running again, is he? [laughter] pretending trump is running again? lisa: stop. [laughter] jonathan: freaking out about dictatorships. wrong channel. >> this is a moderate market. it's going into softening and that's not where you can look at the individual outlier number and really change the whole forecast. jonathan: that conversation, up next. live from new york, let's hope i'm still here after the break, this is bloomberg. ♪

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jonathan: equity futures on the s&p 500 on this payroll friday, that number dropping in about 40 minutes. equities are down by .2%. 400-6875. under surveillance this morning, the payroll report. >> this is a moderating labor market that is cooling, softening, going into softening and it's not one where you can look at the individual outlier number and change your forecast. i think there is more room for it to cool. we do see the unemployment rate gradually rising up to 4.4% in 2025 and we do think that there is real reason that post-q1 there will be a lot more discussion on whether the labor market is weakening. jonathan: less than one hour away from the december payroll report, they are calling for 165,000 jobs added with unemployment holding steady. morgan stanley sang the labor

market is gradually calling, making sticky inflation the wait and see approach. good morning. happy new year, thank you for being with us. >> happy new year. jonathan: coming out over the summer, we were worried about employment, not so much inflation. what has changed in the last few months? >> inflation has been sticky, gradually slowing, that's fine and normal and what you want, but inflation has been more sticky in the fed has cut rates by 100 basis points. growth is strong. financial conditions are loose. although we can talk about the backup and yields. there is this sort of wait and see, which i believe in december, big words as used in the statement, indicated a hard pause. the thing is, you have got this big, looming event. what is that? the inauguration and the flurry of executive orders that can

come out of that and until you start to see the shape of it, a lot of the uncertainty creates policy paralysis where it makes sense to hold. lisa: is there anything that we could get today that could shake the paralysis you are expecting at the federal reserve? >> the rule of thumb is that one data point does not make a trend. what you have seen is that if data is disappointing, with bets that the hikes could at some point come off the table, you continue to take that away in terms of market expectations around what the fed might do. certainly, the expectations of when they could start cutting again would be pulled forward if we had a terrible number, but i don't think it will change the january decision. lisa: do you have confidence, and i'm thinking about what andrew hallman thorpe has been

saying, confidence that it's strong enough to keep going without participation from other companies and real growth stemming from some additional places? >> as long as layoffs don't pick up. when hiring a slow, it doesn't take a tremendous rise in layoffs to push those numbers down to very low or negative jobs presence. we have got to focus more on layoffs, because hiring isn't going anywhere. there's not a lot of churn in the labor market. it's a fine balance when it just matters if companies are laying off. we are not seeing that broad-based yet. mohamed: not so long ago the view was that we don't have to worry about the cpi report, it's all about employment. the risk is to the downside. now that has changed. speak a little bit about how you

see inflation dynamics going forward. >> you saw governor waller expressing confidence that it would gradually move towards the goal and i think that if the economy slows enough, and maybe this yield backup helps the economy slow further, may be trump policies help the economy slow further, you can get more downward pressure on inflation. i'm talking about be on tariffs, right? tariffs will be a one-off shift. as a policymaker, you should look through that. the hit to aggregate demand will pull inflation later. i think that confidence that it will continue to move gradually towards 2% is fine, but not in the near term. that doesn't support a fed pause . you've also had a lot of change at the january meeting, right? the housekeeping meeting where we shuffle the deck in terms of voters. the divide on the committee

becomes even greater. so, unless the data is very clear, there will be no reason for them to move. mohamed: probability of a hike? >> i was say very low. mohamed: hello? >> i don't put zero on it. i learned that early in my career when i said zero and was wrong. i would say 15%. jonathan: that's pretty low. how helpful or unhelpful are the forecasts at the moment? >> economists love to say that it's tremendously uncertain. it's hugely uncertain. you can't do a dang thing about your forecast until you know what is coming out of the administration. jonathan: some people are, though. >> we have to. if you are forecasting the economy, you have to have a baseline, but you can see the baseline of presumptions, how many folks will get deported, how far will tariffs go, are

they economic contributors to the economy or are they incarcerated in a federal prison system? it matters who we are deporting. who knows. take your pick. if you tend to lean bearish anyway, choose a baseline that assumes tariffs are more onerous and immigration is greater than we think. if you tend to be more bullish on the economy, decide that trump is not going to do much of his policies promised on the campaign trail at all. it's something for everyone. jonathan: going to be a big year, coming up. appreciate your time as always. the next big debate is 34 minutes away. lisa: with a sense on how much momentum is left in the market in the market response to potential downside surprises. jonathan: in our third hour, the lineup looks like this. nadia from ubs, 70 at wolf research, and jeff rosenberg from blackrock.

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>> you at least want to keep an eye on the labor market. that is the only point of

concern. >> actually it is the unemployment rate is the biggest data point we are going to get. >> i don't think things are as calm in the labor market as the fed seems to view it. >> it is cooling, it is softening. >> defendant's cuts come down to the table, or if it is a week number equities are going to say , the economy is not as strong as we thought it was. announcer: this is "bloomberg surveillance." with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the payrolls report, 30 minutes away. let's start with equities, move to bonds, and then i will get you the guesstimates. equities on the s&p 500 -5.1%. on the nasdaq we are down by .2%. on the bond market, i want to think about september 18. we were trading at 364. that afternoon the federal reserve cut 50 basis points and went on to cut another 50 over

the next two meetings. since then they have cut a hundred, this market moved 100 on the other direction on tends. -- 10's. it is payrolls today, and cpi next week. the estimate for payrolls this morning, we are looking at 165,000. of the four banks we track, citi is at the low end. vanke of america at 175,000. lisa: equity markets have remained resilient in the face of this 100 basis points rise we have seen in long-term benchmark yields. if there is a downside surprise, will we rally into the bond market at a time where people are also worried about the deficits? and will it be enough to support equity markets that are hinged on growth, not just the right store? jonathan: how much can change in one data point? we came into 2025 wondering if this fed could cut at all.

for the break mohammed was asking whether we need to hike interest rates later this year. i'm wondering how quickly this could change again and whether with a weak print in 28 minutes time we will be discussing rate cuts all over again? >> we could well. normally there are three anchors to use. when his policy. that is all over the place. policy right now is not an anchor. policy is a contributor on both sides. the other anchor is technical. that is not much of an ankle -- anchor because everyone has become independent. the reason why we obsess about these numbers is because we are testing the hypothesis over and over again. jonathan: we will see how strong it is. looking at the u.k., because the u.k. will be looking at us in about 27 minutes, hoping we get

a downside surprise on the jobs report. coming up on this program we will catch up with nadia lovell of ubs. mike collins of pgim as the market selloff stalls. and jeff rosenberg reacting to december payrolls. we begin with stocks lower as investors await the last payrolls print craft when a 24 and the first big data point of 2025. nadia lovell is remaining bullish and writing, we expect the s&p 500 bull market to continue, supported by robust earnings growth. wever, 25 could be a bumpier year due to government and monetary policies. nadia joins us for more. good to see. what are you expecting on the government side? what you expecting from january 20 onwards? nadia: it is clear, we have already heard news president trump is preparing several executive orders the first week as he takes the helmet. we expect to see some tightening on the board. we expect to see tariffs.

we do not expect to see universal tariffs, but selective tariffs continuing against china. do not expect to see any sort of changes to the corporate tax. we don't think it will be in the budget. but we do think the policies will cause volatility. at least the rhetoric around the policy will cause volatility to markets. jonathan: let's go with immigration first. labor supply has been a huge feature of every conversation we have had about the labor market for the last several years. if you begin to constrain that where does that leave price pressures and wage growth? nadia: no, absolutely. when you look at the last year we know an increase in labor supply has helped the job market. the job market has loosened a little bit. if you do tighten the borders it will affect some areas of the economy. particularly the low-wage workers. when you think about consumer discretionary, restaurants, and those things can come under pressure and you could see upward increase again in terms

of wage pressures. that has implications for inflation. it is partly why you heard some of the fed participants in december say they could factor in the potential for increased inflation due to uncertainty around government policies. lisa: there has been some fear that today good news will be bad news for equity markets. if there is higher than expected hiring and wage growth you could see a 10-year yield that climbs higher, that torpedoes the optimism for fed rate cuts. do you think that is the biggest potential risk? is a bigger risk the downside surprise? the questions, that pillar that mohammed was talking about about the momentum in growth underpinning this economy? nadia: equities want to see a strong number. again, to speak to the continued growth in the economy, we have an economy that has been growing above trend. have seen equity perform despite

the fact that you have seen a pickup in long in yields because the growth picture has been strong. in terms of the more interest rate-sensitive areas of the markets, yes, they have been under pressure due to rates backing up, because it does price out some additional fed cuts. the fed right now is quite focused on inflation. i do think that wage part is important, and the inflation number next week will be important for the fed decision. lisa: what is the most interest rate-sensitive part of this market? nadia: look at real estate. a massive pullback in december. have seen pullback there. parts of consumer staples. and then housing. housing has been under pressure quite a bit. you have seen the backup in mortgage rates again and you have even seen inventories start to build within the housing market, despite the fact that we know demand remains strong. but affordability remains an issue. mohamed: when jon read the

opening quote from you it said government policy and monetary policy. we have talked about government policy. can you speak to monetary policy? what do you think will happen this year and what do you think should happen this year? nadia: we think you will get two great cuts this year. a lot of this will be data-dependent, and that pendulum between this balancing act the fed has an the recalibration process, that pendulum between downside risk to the labor market and a potential upside risk to inflation is going to continue to swing back and forth to various degrees. right now inflation is a concern. we have seen tremendous progress in terms of, on the labor market remaining solid, progress on inflation. the fed, i think you want to see inflation come back under 2.5%. core pce is at 2.8 percent. if we can see progress on the way to the 2% goal that would be -- that would give the fed comfort in terms of continuing to cut rates. we expect applause in january and we know there is a

changeover in the fed and the fed is skewed more hawkish, when you think about schmidt in terms of voters, and terms of skewing a bit more hawkish. think also the fed is watching camino, policy coming out of washington to determine policy. mohamed: and you are confident that two cuts is consistent with a confident 2% inflation? nadia: we are. you can never be 100% confident right now because the data keeps changing, but we feel comfortable that two cuts this year will get us there. we expect core pce to come back toward 2.5% by the time we get toward midyear. we have seen a pickup in inflation. again, some of this has to do with shelter, but we expect that to come down by the time we get to spring and 2.5 percent. that will give the fed leeway to cut. jonathan: let's finish with sector preferences. what you like to be now? nadia: tacky.

news coming out of ces this past week has been quite encouraging. we took up our numbers for tech for this year. you're taking it up to 25%. growth, expecting $280 billion. think those numbers has room to grow even. hyperscalers are spending quite a bit, but then the baton will get passed to enterprise, as well as sovereigns, which we are watching closely, given the talk around export restrictions. jonathan: the numbers on semi, good overnight. nadia: i think 58% year-over-year growth. for december that bodes well. jonathan: do you think investors will retain that patients in some of the likes of nvidia's biggest clients? it has been a big focus on this program. the spend has been imputed -- has been huge. you think that patients will be maintained through 2025? nadia: investors want to see

more in terms of monetization and you are seeing signs of fat already in terms of whether it be on the advertising side and so forth. we do think that investors will be patient, but not too patient. one to see that gap between capex and monetization heir apparent we think that would narrow this year. but the reality is a lot of this takes time to translate and it could take another couple of years to see that full pickup in adoption. lisa: does that challenge the idea of a broadening out? if big tech continues to be the winners in a sphere that is challenged by perennially high rates? nadia: not necessarily. you can see areas -- look at financials. has been giving back some since the election but i think the economy remains strong. if you are seeing a pickup in things like capital markets activity, those areas of the markets do well. also when you look at, yes, the manufacturing side has continued to be in contraction territory.

new owners are starting to pick up. if that happens you could get some more relief on the cyclical areas of the economy, whether it be industrials or areas like that. don't think that limits the broadening out. don't expect the same sort of exceptionalism from tech you had seen last year. we expect it to outperform. we think other sectors can also perform well. jonathan: appreciate your time. nadia lovell of ubs. looking ahead to next week, once we get through payrolls january 15 is a big one. cpi that morning at 8:30 eastern time and numbers from j.p. morgan too. lisa: which is going to be more important? with earnings coming out i think delta is fascinating. is this a demand-supply story or the fact people keep traveling because they have the money to do so and a consumer-driven economy story? we are going to continue to debate that. jonathan: the stock is up big time in the premarket. we will be running through more estimates around payrolls and

what is going on around fixed income. let's get you an update with dani burger. dani: nearly to hunt thousand los angeles residents have been forced to evacuate, with five wildfires continuing to burn throughout the city. firefighters have made progress in containing some of the blazes. accuweather estimates some of the damage and economic losses could be as much as 150 billion dollars. that would make it one of the most expensive natural disasters in modern american history. nvidia is criticizing president biden on the new chip export restrictions his administration is expected to soon announce. nvidia says the white house is trying to undercut the incoming trump administration by imposing last-minute rules. the ai darling says the new rules will harm the u.s. economy and do nothing to promote national security. elon musk, expressing doubts his government efficiency task force can achieve $2 trillion in cuts to the federal budget. muska says he now thinks $1 trillion is more realistic of a

goal, but even that would be challenging. the $2 trillion target would require cuts to popular programs like social security and medicare, which is unlikely to happen. that is your brief. jonathan: appreciate it. up next, we will get you morning calls, plus mike collins of pgim fixed income as we count down to december payrolls. ike's thoughts about whether we are in the buy zone in this market. that is next. this is bloomberg. ♪

jonathan: payrolls. 15 minutes away. equity futures into that negative by .2%. the estimate, the median, 165. it's get you some morning calls. piper sandberg upgrading nike to

overweig expecting a return to profitable growth within the next year. that stock is up 5.7%. a second call from needham upgrading lululemon to buy, citing potential you -- potential re-acceleration following the holiday season. finally, moffat nathanson downgrading roku to sell. noting a competitive pricing environment and lack of m&a. that stock is down by a little more than 3%. stocks and bonds retreating ahead of the december payrolls report, coming in a few minutes time. joining us now is mike collins of pgim fixed income. happy new year to you and welcome to the program. i want to start in your bond market. have had the equity strategists say the bond market is in the danger zone for risk assets. we want to know if it is in the by zone for you. mike: i think we are unequivocally in the buy zone. rates have backed up a lot. as you mentioned, 100 basis points since the fed started cutting rates.

that is historically a gigantic move. right now there is basically just about one fed rate cut priced in over the next 10 years. all right? could the fed stop at 4% on the funds rate and keep it there for 10 years? i guess, but with the incipient nature of the weakening in the labor market the preponderance of the data really seems to point to camino, a bias toward a chance you are going to have much weaker than expected job market data or inflation data at some point over the next few months. lisa: can you elaborate on that? what a lot of people think has changed is the opposite. that weakness in the labor market was viewed as temporary. we saw a resurgence. corporate profitability held up better than expected. that is an ongoing story with eltel. gives you confidence that the trend is weakening and not the opposite? some sort of surge in inflation? mike: there is not a high level

of confidence in these calls right now. in our portfolios we are inching into a longer duration position as we skip -- as we reach these new yield highs. but we have gone through this huge increase in jobs, almost a historic level of increase lately. you are seeing at the fringes, right, weakening leading indicators in the jobs market. and it just seems like the markets have fully priced in the continuation of this resilience you are talking about. the continuation of strong economic growth. of higher than expected inflation. strong jobs data. when that gets fully priced in we just think the chance of a downside surprise is heightened here. mohamed: when people look at the attractiveness of fixed income they tend to look at u.s. yields, dominated by treasuries, as you know.

suppose i took you away from that and said, comment on would you buy here? would you bet on corporate spreads? tickets away from how we sort of go in the summary statement and other elements of fixed income. what would you bet on when it comes to the other elements of fixed income? mike: that is a great point. the value right now, the long-term value in the fixed income markets, i think is in the government bond component, right? the incremental yield you get or excess spread you get in investment grade corporate's in -- and high-yield corporate's and other risk assets, even though the multiples in the equity market are in the same category. are at risk. in your situation if you get upside surprise in the data and rates jump again that could continue to put pressure on fundamentals in corporate america, fundamentals in earnings.

if you get a downside surprise in growth or inflation, that starts to question the resilience of these profits and growth. i really think risk assets, kind of like the treasury market, are on a knife's edge here, could move in one direction or the other pretty quickly. but it seems like, again, the probabilities are starting to skew more toward rates falling and credit spreads, presumably, widening here. mohamed: how bad can the widening be? some people say yes, you are being compensated, so take that risk anyway. where are you on this? mike: the fundamental backdrop is a solid. we are seeing default rates -- lease our expectations are coming down. you have actually seen in the latest quarterly earnings the fundamentals in the high-yield market continued to actually improve or remain really resilient. companies are issuing a ton of debt, but it is almost all being used to refinance existing debt,

took term out debt. credit fundamentals, earnings fundamentals, you know, are actually really solid in the credit markets. look at the structured product markets. they are a really solid backdrop for those markets. i think any spread widening as a buying opportunity and we are really light on credit risk in our portfolios, looking for opportunities to buy. i think the whole market is set up that way, but i think that is the trade in credit. you play defense here, you wait for opportunities to buy. member, the technicals are great. as rates backed up, even though it does put pressure on companies because their interest expense will continue to go up, man, the technicals are great because companies will issue less debt as rates go up and we are seeing record demand from international buyers in the last few days into our credit mng th.

relative to almost any place in the world. chinese yields are fallen, right? european yields. our yields are twice the yields in europe. four times the yields in japan. our market is really attractive from an international perspective. lisa: we are less than eight minutes away from this job is a report and you are setting up with such drama that i love it. are you saying that this could be a really significant move in the bond market across the board if we get some sort of downside surprise? can you give us a sense of -- i want -- i don't want to save violent, but how significant the move could be if we get some significant downside surprise? mike: you could get a big move either way. the bond market is on a nice edge here. the bond vigilantes, as we have seen in the u.k., are at the ready to kind of hit the markets here if growth or inflation continue to go up or the fiscal situation continues to look really tenuous. as we have seen in the u.k..

it could go either way, but with only one fed rate cut, a sickly priced in for the rest of our lives here, if you get weakness in jobs, at some point in the next few months and weakness in inflation at some point in the next few months that one fed rate cut could turn into four really quickly, right? that is the kind of value that is in the bond market today. you could have a 50 basis point retracement in yields really quickly at some point in the next few months. i think that is where the skew is positioned right now. jonathan: violent is exactly what lisa wanted to say, like. mike collins of pgim. it is what you wanted to say. it is your word. lisa: it was significant. violent has a negative connotation, but it could be really positive. jonathan: i think a lot of guests believe that risk is skewed toward lower yields. because of what positioning

looks like right now, right? lisa: that is basically what he was saying. one rate cut priced in for the remaining lifetime. his point on the nice edge is important. you could see a significant move in either direction is one that highlights the vulnerability and volatility into this. jonathan: i have wondered about this over the last several months. we are hypersensitive to incoming information. whatever this number looks like in five minutes we will build a narrative and extrapolated out 12 month. you will see the market do the same almost immediately. mohamed: and then we will remind ourselves that we should not get carried away. jonathan: and then the federal reserve will respond to it at the end of this month and do what? lisa: i don't know. good luck. this is part of the difficulty, right? we don't have a sense of their reaction function to incoming data. is it just noisy? is it something that indicates a real shift in narrative like what we saw from september to december? jonathan: and what is more important, today's report or

january 20? the steps that we get from the incoming president? lisa: i think for equity markets it is incredibly important that we see a strong number. that, i think is going to be one of the more interesting surprises. do we have an undermining of the american exceptionalism story if we get week this in this number that might be really wonderful for the mike collins as of the world but less so for the others? jonathan: bank of america said a goldilocks report is needed to hold the 30 year yield below 5%. we will see. mohamed: 125,000 to 200,000. jonathan: that is quite a range. mohamed throwing rain -- throwing shade at the south side. that will continue. and 65,000 is the median estimate the number drops, next. from new york, this is bloomberg. ♪ safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment...

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♪ jonathan: it all comes down to this. you know how this works. the most important jobs number since the last one, until the next on. the previous number 227. equity futures -0.2%. in the bond market, your 10 year just about stable, yields unchanged and the world in foreign exchange watching what this number will be. what the number, let's cross over to mike mckee. good morning, mike. mike: it looks like at this point you can turn your

attention to cpi because the numbers come in pretty good for the fed staying on hold. change on nonfarm payrolls, 256,000. that does not suggest weakness in the economy nor does the unemployment rate number, 3.9%. that is average hourly rate, excuse me. the unemployment rate number down to 4.1% from 4.2%. 3.9 would have been pretty amazing but it's 3.9 year-over-year. average hourly earnings as little bit less than last month. looks like we see a little bit less wage pressure, strong growth and an unemployment rate that is stable to falling a little bit and that's going to keep the fed already much on the sidelines -- the fed pretty much on the sidelines for the coming month i believe, unless we get some surprise next wednesday. jonathan: big move in the market. equity futures gapping lower, down on the s&p 500.

put you through the bond market, up by about nine basis points on the front end of the curve on a two-year. on the 10 year, up by eight. i told you what was happening about. we get a look at foreign-exchange worldwide, everything weaker in comparison to the dollar. the euro back to 1.0250. i am sure the u.k. treasury is sitting with their head in their hands. the 10 year in the u.k. up another seven basis points. it's a big surprise on payrolls, upside surprise on payrolls in america. lisa: which is not certain what the u.k. wanted to see or some of the officials in germany and elsewhere. for equity markets cap and lower, would i find interesting -- gapping lower, what i find interesting is this is actually a statement of strength when you look at private payrolls. this is being driven by the private sector.

it is not necessarily being accompanied by major downward revisions. this is strength and really goes to the question of exxon the written inflation and growth -- accelerating inflation and growth. jonathan: the jobs number comes in at 256. the median estimate was 165. the unemployment rate has come back down to 4.1%. the obvious reaction in markets, bond yields higher, the dollar stronger, equities lower. you have had a few minutes to go through this. what do you think about this one? >> i think this one is good for the economy. i don't know how the markets are reacting. but fundamentally. ,. it. is good for the economy it confirms the economy remains a solid and the u.s. continues to meaningfully outperform other advanced economies. that theme of dispersion is going to become really important as we go forward. jonathan: how does this complicate the lives of people in the u.k., and by people, i

mean authorities? authorities in europe, and japan who are seeing repeatedly really strong members out of the united states -- in japan, who are seeing repeatedly really strong numbers out of the united states? >> that get amplified in a meaningful way it feels continue to go up due to the u.s. what they cannot do is simply blame the u.s. and stop. they have to get their act together. i know the u.s. is leading the higher yields around the world but when you expose people's weaknesses around the world -- lisa: the idea of the draghi report, and i am just looking at the euro, it is dropping like a stone. do they get some sort of reform or energizing push into their tech sector, etc.? i keep going back to this. you're exactly right with the idea that this is unabashedly positive when it is being driven by the private sector.

this is not government spending. those discussions really have to change, which should be positive maybe for the u.s., that the rest of the world. >> the worst thing is to lose the only locomotive of global growth. if we lose this only locomotive of global growth, action things get worse in the western world, so the u.s. has to continue to be strong but the rest of the world has to get its policy act together. jonathan: i believe mike mckee is still with us. big upset surprise. what is driving it -- upside surprise. what is driving it? >> looks like we are getting numbers for things like retailers, manufacturing lost jobs, 13,000. construction was only up by eight. unissued there but the retail trade gains 43.4, so 43,400 jobs there. of course, additional jobs in leisure and hospitality, of course, as always. health care up 69,500.

that is kind of what we normally see. leisure and hospitality up 43,000. in terms of that. food services up by 30,000. it continues the pattern we have seen but stronger for all of these things. in terms of the unemployment rate, a big rise during the month in the establishment hiring. remember there were people who were rude about that last month? they thought the establishment numbers were bad. and therefore, we were going to have a problem. but they go up by 240, the labor force goes up by 243,000 on the number of employed people in the household survey up by 470 8000 where the unemployed number fell. more people joining the labor force for more of them getting jobs. all in all, mohamed is absolutely right, this is good news overall for the u.s. economy. and it will be very interesting to see, here's my one political comment for the day, how

president, he will be president trump, talks about the u.s. economy in his inaugural speech. remember last time, it was american carnage. this is a long way from that. jonathan: i am sure he can turn around and say some of these numbers are on the back of improve confidence from businesses going into what many believe will be a progrowth administration. lisa: i want to think less about the political spin and look more the actual numbers. does this call into question the fragility and frozen this of a market that, as my just described, included more household survey hiring, lower actual people that are coming out of the labor market? and if you take a look at the partition. -- participation rate staying steady. the unemployment rate coming down, pretty unabashedly positive. jonathan: 5% wash on a 30 year. the two-year right now up 10, 11 basis points. with us around a table,

stephanie. good morning. that is quite a number. what do you make of it? >> first of all, it is quite a number of the average hourly earnings were .28. this is kind of a goldilocks print. markets are treating it as a hawkish print. the reality is wages are growing out below 4%, even with job gains running the strong. jonathan: so we don't have to start talking about interest rate hikes anytime soon at the federal reserve? >> we have to think about when is the fed going to be pausing? i think that's the real question. lisa: now, i think that's what people are saying. i think the question is when are they going to revive. want to go back to the point you are making about inflation. how accurate have the average hourly earnings actually been when it comes to inflationary pressures? because ultimately, if people have jobs, they have been showing the willingness, particularly of millennials, of paying premiums, premium seats,

airplanes there still is the impetus to spend if you have a job. >> if the labor market remains healthy, people are going to spend. wage growth is still running that 4%, which given where productivity is, the fed can kind of. accept something like the fed has said they don't believe the labor market is really causing significant inflationary pressures. can the fed stay on pause from here or can they cut one or two more times? >> wednesday's adp numbers on earnings shaaban increase of 4% for those in the same job, 7% for those changing jobs. the question becomes if we continue to create so many jobs, if they can -- if vacancies are at a six-month high, at what point do earnings become the leading indicator? at what point do earnings respond to what is happening in terms of the quantity of jobs? >> that's the trend that we saw

in 2022 and 2023 and the labor market started to heat up. there was that differentiation between job switchers and stayers. that's something to keep a close eye on. but as of now, the wage data have been fairly contained. if we did not see a wage price spiral in 2022, 2023, it is very unlikely we will see at this time around. it did not involve into something that was out of control wage inflation. to get to your question about how accurate the wage data is from month-to-month, not great. this probably has some calendar effects that push down some of the data. in a year-over-year basis, it is in line close to what the eci is saying, which is the gold standard anyway. maybe it was artificially depressed by some of the calendar effects but the reality is that wage growth is running at some close to 4%. >> how confident can we be that we don't get the second round affect? economists will tell you it is not surprising we did not get it

in 2022, 2023 because people do not have any memory of inflation so they did not think they needed to adjust. people have a fresh memory of inflation now. can we be as confident that it is just one off, we don't get the anticipatory wage demands, the anticipatory price increases? >> that's going to be the challenge for the fed, which is probably why they are going to have to wait this out for a little while. with tariffs, that makes it a little bit more challenging. but i think at the end of the day, we will see that inflation is probably going to stay somewhere between 2%. and 2.5%. i think this challenges the narrative that inflation is going to easily get back down towards 2%, but something that we saw the last time has to be driven by supply chain issues. jonathan: if you are just joining us, welcome to the program. a big upside surprise on the payrolls report, coming in at 256, the estimate 165.

unemployment dropping as well to 4.1% from 4.2. the two-year up by double digits off the back of that, as you might expect. some dollar strength. euro-dollar get in closer and closer to breaking 1.02. equity futures down across the board. s&p 500 index down. the russell small-cap negative by 1.7%. we are on 5.7% watch on a 30 year yield. lisa: we are pushing back the potential for our first rate cut of 2025 from the federal reserve to at one point october, now we are back to september, but really pushing it back. this is where we start to wonder, particularly the small-cap area, how much this becomes restrictive for a small subset of companies. i think about housing. i think about mortgage rates and how much that can remain dissident from the rest of the strength -- dissonant from the rest of the strength elsewhere before because into question some of these dynamics. jonathan: joining us is jeff rose from blackrock. welcome to the program.

your reaction to that number from 12 minutes ago? >> clearly it is a strong number, and that's the market reaction. that's the first point. second thing is the retail component is worth kind of thinking about what's going on here. it is having kind of an effect in two parts of the report. the retail numbers underlying are stronger because of the shift between november being negative because of the lateness of thanksgiving and black friday. you are seeing a little bit of a flattering on the headline number. the other thing is that average hourly earnings, which our last guest was talking about, which is kind of like it's maybe not so strong we don't have to worry about inflation because it is a weaker average hourly earnings print, you got to be careful. the question was, how reliable is it? on these monthly payroll reports, the problem is the mixed shift can really mess with that number and the boost to retail this month may be factoring in, those tend to be

lower paying jobs, so it may be understating the average hourly earnings. which if you didn't have that mixed shift may actually be an even stronger picture. this is just financial conditions tightening because it is less need for the fed to cut. we priced out most of that. most of that shift happened in the fomc december meeting. but this is even further pushing it along the way. you asked, when do we start talking about the fed having to hike rates? this is pricing out any need for the fed to be cutting and pushing on my long-standing, you know, refrain every time i come on the show. it's just financial conditions are really undermining the fed's view that their policy is really that tight. and so, they don't need to be worried about how tight their policy is, so this is pricing out some of those future cuts for 2025, not that we had that many priced into begin with. lisa: you have asked and answered most of the questions we had. what do you do with this?

does this make you more bearish on equities? or does it actually make you more bullish? because ultimately, you are not going to find the value in fixed-income it is going to come from the strength we justice are reflected. >> you touched on it as well. it's a good report. mohammed's first point this is good news, this is american exceptionalism this is a strong economy, this should be good for stocks and risk assets. i think that ultimately is the case. the markets have to get over the idea that you're facing some higher interest rates. i think from the fixed-income lens, the higher interest rates are actually bringing relative value back to fixed-income. we have really shifted the pricing of how much should do we need the fed to support? we talked in an earlier segment about the asymmetry. i very much agree with that, that the asymmetry is more in favor of fixed-income in terms of how much more rates can go higher versus the potential for them to go lower.

we have priced out a lot of that expectation of support from the fed and i think that's helpful to the pricing of the bond market. and kind of the selloff that we see here on the front end leading, i think that has reinforced the attractiveness of yield in the front end of the yield curve. >> it seems like we are very comfortable with the notion that this pushes back whatever rate hikes, rate cuts we are going to get, and we are going to get fewer, etc. but the minute someone mentions a rate hike, everybody gets really, really uncomfortable, no, no, no, we are not there yet. what does it take to get there? >> i think it takes a lot to get there. that's a very big swing. obviously, what it takes to get there, and you know this, it is inflation. not just of the somewhat on the ease of sticky inflation but a complete change in the narrative that for all the forecasting of the underlying components and the imputed data and our

understanding of inflation, that we have just gotten that so wrong and there is a re-acceleration and inflation. i think you have to have -- reacceleration in inflation. i think you have to have a reacceleration to shift the fed and the market's expectation that this is tightening. i think that's a very high bar to get there and with really few expected cuts. jonathan: how high is the bar to cut again given what we have just seen over the past few months? >> i don't think the bar to cut again and change the expectations on cutting is that high either. look at what we went through last year in terms of the swings in market expectations on what the fed would do, and the fed' sown forecasting on what it would do and extreme data dependence. the bar toward more cutting is we have seen that stabilization in inflation. there is not the risk on

inflation. and for whatever reason, obviously not the story today, you are seeing that slow down the fed has feared in the labor markets. and a couple of data points on labor markets, again, not what we are seeing today, sub 100 pictures, increases in on employment rates. you get two reports in a row of that you, can quickly shifted the narrative back to the fed has got to cut two, three, because of this extreme data dependence. lisa: i see stephanie roth nodding along. briefly, the 30 year yield did hop above 5% before coming back down. there is, 5%. you are shaking your head. do you agree? >> i agree. the fed has been data dependent but very much on every data point. to the extent we have another couple prints that are a bit softer in the next couple of months, the narrative could shift to some extent. we have seen every three months the market has been swinging

from soft landing to hard landing to know landing, and realistically, you're probably somewhere between. base case, the narrative is going to continue for a while, then you are going to have the q1 inflation seasonality problems again. it's probably toward the middle of the year where we start talking about potential cuts again. >> stephanie said the fed is data dependent, not only overall but, every single data point which powell would push back on and say no. and that makes us all data dependent. it makes us all add volatility to a market because we get swung around. doesn't that bother you? doesn't it bother you that everybody has become so data dependent? >> it does. nobody should be caring about the unemployment rate to three decibels. it makes us uncomfortable. we are all in this environment even though they are trying to steer us away from that. in theory. the fed continues to get swung around by every data point so we

have to do the same thing. the retail thing is a good point in a sense it was -29 last time and not a jumped back up 43. realistically, that drove some of the strength. we are in an environment where it's going to be tough. next print, we are going to be impacted by all of the fires and that's going to be a messy data point. >> can you think of any fed that has been swung around as much as this one has been swung around? i think back to so many bigger episodes. jonathan: post-pandemic, this federal reserve allowed the administration at the time to come out with huge fiscal plans, the supply constraint economy, and just said we will look. . they were not dated appointed then. they waited just data dependent then -- they were not data dependent then. they waited. a lot of economists were more to defend the institution than provide critical analysis of it.

that's really problematic for me for economists on wall street who are hell-bent on making sure their friends at the fomc still give them access to have conversations than actually just calling things out for the way they see it. this federal reserve has behaved very different hunter biden and has changed -- different under biden and has changed when donald trump has come into power. they opened the door to those accusations themselves in december. do you agree? >> i agree now we have a fed never getting the monetary policy landscape and political landscape. it is not navigating one thing anymore. it is navigating two things and we just have to keep that in mind. jonathan: why wasn't it navigating the political landscape two, three years ago? >> i think 2, 3 years ago they were asleep. and the rush to call inflation transitory, ignoring all the policy side, ignoring all the uncertainty was a big mistake. because of that, they became

extremely data-dependent and they don't even want to look forward and more. it's ironic because we are dealing with markets that are supposed to be looking forward. we are supposed to be discovering the future, and yet we have all become completely data dependent on what's happened. that is what happens when the institution with the printing press in the basement decides that it will become excessively data dependent. it turns us all into extreme data dependent. jonathan: we will get two data points before that, cpi is one, the inauguration is another. what is that meeting going to look like at the end of this month? >> let's first talk about maybe cpi, because with that we are looking for something that should be a little bit more soft, something like .24% on c ore, which should be ok i don't think it's going to change anybody's view. where going to have to see from the trump administration, what's going to happen in terms of immigration? that's got to be one of the biggest thing that's going to happen probably right off the bat.

how aggressive are they going to go? it's probably going to be a lot of, i will -- all bark at the beginning, and realistically were not going to see that much deportations because that will require funding they do not have and will probably be people rolling off the humanitarian parole and tpc. what's going to happen from a tariff perspective? we have not really heard much specifics, you know, reminding back to the announcement on canada, mexico. are we going to get more of that? probably not. those are the things we are looking at most from him, tariffs and what we are hearing from immigration. lisa: as an investor who has to take a longer term view, how do you remain independent from this excessive data dependence that we were just talking about? how do you have any conviction with calls at a time when people are talking about how much the parameters could change based on whether it is cpi or whether it is january 20 and the inauguration? >> yeah, it is really

recognizing, you know, the things that you think you can forecast and recognizing the things that are just not forecastable. we have a little sink if you can't forecast, and i would put all of the policy uncertainties that were just described in that category, then you have to observe. you just kind of know what you can kind of control and know what you cannot control, what you can and cannot forecast. try not to overreact to every data point. on the fiscal policy, that is basically the story for the 2025 outlook, is uncertainty and unforecastability. we are going to sit back, be patient, observe. and as the information becomes more clear, that's when you can take action in your portfolios. to try to do it at of time, i think you just have to recognize that's a very difficult

exercise, but forecasting the policy and equally forecasting what is going to be the market reaction to that. getting both of those right is very unlikely, so you are going to have to sit back and wait for the data to reveal itself. jonathan: appreciate your time. jeff rosenberg of blackrock. we will take a step back and a big deep breath and look ahead to cpi next wednesday, as well as some big earnings. a final thought around the table. we came into 2025 thinking about u.s. exceptionalism and global divergence, and lease and i have been talking about this for a number of weeks, the extent to which we can keep stretching that rubber band how far can we take that? how much oxygen is left in the story before we get these negative feedback loops and things start to move in the other direction? >> that's a great question and i am not sure i can answer. but i can tell you that the theme of dispersion is really important. because there's a limit to how long you can run a system with significant dispersion. and we have two main dispersion issue, u.s. vis-à-vis the rest

of the world. the hope is the rest of the world comes up to the u.s. the fear is the rest of the world drags the u.s. down. within our economy, low income versus the rest. low-income that is struggling right now, we must not forget that. and these numbers cannot make us not also consider what's happening at that end. because at some point, that can migrate up -- that weakness can migrate up. forget about averages, look at sectors. in the market place, we have gone from a market focus to a theme focus and now it's going to all be about individual names. lisa: honestly, i am looking at the euro touching the weakest since 2022. strong dollar, how much does it impede earnings for u.s. companies? jonathan: stephanie, good to see. mohammed, special thank you to keep her thank you very much as we count you down to the opening bell. we are already looking forward to monday. the lineup looks like this.

nida richardson of adp, chris harvey, michelle meyer of mastercard and veronica clark of citi. thank you for choosing bloombergtv. ♪ where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

matt: 30 minutes until the start of trading. i matt miller. sonali: i'm sonali basak. katie: and katie greifeld. bloomberg open interest starts right now. sonali: an upside surprise for the labor market. great cuts are back on the burner. we get the first kate -- take from julie su and