Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20240713

World, from vienna to london, frankfurt to washington come our bloomberg roses are on the ground with all the top stories. In vienna, opec is said to reduce its target as a rock promises to comply. Joining me for more is bloombergs annmarie hordern. But do we know so far . Annmarie good morning. What we know is theyve agreed at the opec allies meeting today to cut by the hundred thousand barrels a day, but the devil is in the details. Brent and wti are both lower. This cut is basically cosmetic. We are still waiting for more details because it just brings the figures on paper to what theyve been producing throughout the year. Some members, including saudi arabia, have been cutting well below their target. That was the message from ben salman thisfrom bin morning, and his first meeting is energy minister. He said further compliance is needed. Everyone in the room knew he was talking about, even though he didnt name and shame. The message was simple. Stop cheating. Alix indeed. Thank you very much. Saudi aramco is delivering the worlds biggest ipo ever. Pricing 8. 25 a share, valuing the company at 1. 7 trillion. Joining me from london is stuart wallace. We got that out of the way now. The hard part really begins. Stuart it does. They got it at the top end of the range, so on paper, it looks like theyve got the worlds biggest ipo, but we all have to remove the context to remember the context. This valuation is significantly lower than they were hoping for. They were originally setting it to 2 trillion or more. Secondly, they are basically selling to the saudi population. Finally, there will be no International Listing yet. It will list in riyadh stocks next wednesday. We do think that the share price has a good chance of pricing of rising, largely because this will be included in so many indexes, and that will force funds to go into a market where there is a tiny free flow. Investors are basically tied up while they wait for a bonus for tying into the ipo. All of that will combine into the Worlds Largest ipo, but it doesnt get saudi arabia the funds it is looking for to transform its economy. So that problem remains. Alix great reporting. Thank you so much. Now we go to germany, where Industrial Production fell 5. 3 in october, the worst output drop in a decade. Go to me from frank for is bloombergs daniel schaefer. Does this but the story that we had stabilization in manufacturing out the window . Doesl yes, anyway, it renew fears that we are going to see an even deeper manufacturing slump in germany. In the third quarter, germany narrowly avoided a recession, and now this surprising drop in factory output is going to revive fears that the Fourth Quarter is going to be a pretty bad one. It is also going to revive the demands for fiscal stimulus coming out of germany. So far, the German Government has resisted these claims, and said there is no crisis in the sector, but obviously there will be renewed calls, and as we seen , one of the parties and the Ruling Coalition has new leadership today. Convention has demanded more investments from the government, and threatened to otherwise pull out of the government if theres not a bigger spending plan coming out of germany. Alix thank you so much. Now in the u. S. , investors focusing on the latest jobs report. Analysts are expecting a rise of nonfarm payrolls of 183 thousand jobs. Michael mckee joins us. Give us a look ahead on what to watch out for. Michael this was supposed to be a boring payrolls report. The fed is on hold, markets say, and not much would change that. Then came the adp report earlier this year earlier this week. Now investors have something to watch for. , as you is still high saw. 183,000, although its come down a little bit. The reason is we are going to see a gain of 46,000 jobs premuch already baked in because the auto workers who were on strike against gm last month has gone back onto the payrolls. You can see the impact they had there. Even though they are still declining, they did not payrolls down. Workers, analysts are thinking we will get a big bump. However, should adp come through and be correct, that could have a major impact on markets. We saw it in may, when there was a big drop in payrolls unexpectedly, and that sent both stocks and bonds tumbling. If you can see the effect. Watch out if the number is low this morning. Alix thanks so much. Stay with bloomberg tv. We are going to speak with larry kudlow, u. S. As no Economic Council director, coming up at 9 30 a. M. Eastern time in new york. Mage ability stepped up the timetable for impeaching President Trump, putting the house and motioned towards a historic vote. Rep. Pelosi the president leaves us no choice but to act because he is trying to corrupt, once again, the elections for his own benefit. The president has engaged in abuse of power, undermining our National Security and jeopardizing the integrity of our elections. Alix go to me from the white house is kevin cirilli, bloombergs chief washington correspondent. What happens now . Kevin what happens next, in the next couple of weeks, we are anticipating that the committee that Speaker Pelosi instructed to begin drafting those articles of impeachment will finally put them forward. That will likely lead to an Impeachment Vote by the end of the year. Now focus turns to the republicancontrolled senate, where behind the scenes Senate Officials in the republican are essentially saying, bring it on. They view this as an opportunity to tell the other side of this story and be able to call the witnesses that democrats in the house were not able to call. Senate Majority Leader Mitch Mcconnell has signaled that the senate trial would likely last about six to eight weeks. Both sides are completely dug in , and a new poll this morning suggests that the impeachment isue is actually what driving the basis of not just republicans, but also democrats. Whether it is changing the minds of independent voters right now remains unseen. Alix thank you so much. Something else i am keeping my eye on is the year of protests that have really led to change from all around the globe. Demonstrators took to the streets and demanded change, and many of them actually got it. Theres a great map that shows the countries marked and dark orange are the ones where protests actually lead to a leader being ousted. Particularly you see that in latin america, as well as africa. Light orange marks as africa. Light rns marks light rns marks a policy change. And that light blue is a surprise, russia. Russia marks the biggest demonstrations in years. This is bloomberg. Alix time for bloomberg first take. We are going to give you the news. And analysisrade of the markets. Joining us is vincent cignarella, damian sassower, and with us, lara rhame, Fs Investments chief u. S. Economist. It is jobs day. Whats the trade into the number . Vincent the trader whisper number is 180,000. A lot of opportunities for asymmetric surprises. If you are an adp follower and you like the way it goes, youre going to see a Downside Risk to this. If you want to blow the adp off, which a lot of people do because it doesnt always really track the regular jobs data, you stick 83 and keep your fingers crossed. Lara dont you think we will see a recalibration in expectations down around payrolls . Alix havent we been looking for that all year . [laughter] lara but this is going to be the year. Instead of clocking 200,000 jobs every single month, we are actually going to have to start getting used to and hundred 20,000, 100,000, and i think it is going to be a little painful for markets. 3. 5 unemployment is a good jobs market out there. Damian its that labor scarcity betweenhe decoupling the figures. It is a big disconnect. But for me, if we see the bi number that Carl Riccadonna is calling for, we should see unlimited come back down to a 50 year low. See unemployment come back down to a 50 year low. It is interesting to see where the price action is right now heading into the number. Vincent at the end of the day, it is one number. This is not going to move the needle for the fed. Lgos in aet the a tizzy, but everyone else is taking jobs in stride. Inflation is really where they are looking. Jobs are really in a nice trend. Its not what moves the needle. Inflation is what moves the needle. Lara lara if you look at this week of data, we havent had great data this week. We had the downside surprise on both the pmis. I think the market would have liked to get a number more in line with expectations. I think if we get a bigger downside surprise given the context of the data weve had this week, there could be some concern. Damian and yesterdays trade data, that did not give any confidence as we are putting out here. Any confidence that we are bottoming out here. Ofhave trade data coming out china sunday. Trade is going to be an interesting topic into next week. Alix i wonder if that is where the jobs intersect because there is rhetoric that the only way you get President Trump to move on trade is if the data starts to fall out from underneath the u. S. Economy, and a bad number could fuel that narrative. Vincent the bad number i am looking at his south korean exports. You can look at china exports all you want. South korea is the gauge for asia. We look at china data and take it tongueincheek. , ait edged up a little bit little bit around the back end of it . But south korean data is pointing to a continuation of slower Global Growth. Alix is it japan, too . Capent yeah, but it salutes the sentiment of what asia is doing. Overall it encapsulates the sentiment of what asia is doing. Overall numbers in the United States, we will talk about that more later. Capex continue to decline. Confidence in the economy from industry is still not there. Lara i think that is where it and globally. A lot of the big moves weve had where it wraps in globally. A lot of the big moves weve had, weve actually seen a lot of data around this leak. It is very unclear whether weve actually been able to hit any sort of bottoming in manufacturing. It looks like it is still enduring some pain. Romaine and theres barely 1 damian and theres barely one cut price did next year. If congress and President Trump can get some fiscal stimulus going, but i am not holding their breath. Lara me either. Alix i feel like the conversation is the handoff from qe to stimulus. Japan leading the way on that. Sdp lining up their demand on infrastructure. Anyone buying that on the market . Vincent no, not on the street. It doesnt play well for germany at all. German gdp and Industrial Production correlation is amazing. You see these idp numbers out of germany and you have to start to believe that fourthquarter German Growth could turn negative. Does that get fiscal stimulus in gear for germany . Potentially, but you have to look at what the United States will potentially impose. Spending between france, italy, and germany. U. S. Now turned toward oil tariffs and germany . If using about it, hes kind of got them where he wants them. If the situation in the economy deteriorates there, he can hold them over a barrel saying if you dont comply, we put the tariffs on unannounced to sever another drop in Industrial Production. Lara when i look at the equity markets, i see it basically is a referendum on trade right now. Weve seen the fundamentals deteriorate, the earnings deteriorate. What is holding it up is this miniof a many deal of a deal. We need to thing about how equity markets are really now, a is basede positivity on the hope we will get some resolution. I agree that i think youre dealing with a situation where the economics speak to higher volatility given the desire to have more trade in there. Damian when i was a kid, i used to read more comic books, and to me, this is a joke. The equity markets think we are going to see this phase i deal and it is going to lift all boats. Alix a perfect example is today, when you get those waivers from companies to buy more u. S. Soybeans and pork, but we had that for months. We literally got net every month and eight hasnt delivered a phase i trade deal. Vincent we are nowhere close to where the u. S. Wants china to be. Michael mckee pointed out a few months ago, china had imported more slowly two years ago than two are now more soy years ago than they are now. So we are asking them to do something that they probably cant do. Alix which also begs the question overall in talking to 2020 outlooks, what is priced in . It feels like everyone agrees we are in a 1. 5 , 2 growth world. Is the good news priced in, or is the bad news preston . No one seems to agree on that. Lara i dont think the uncertainty is priced in. To me, you look at the uncertainty coming from trade, i think even if we get a select resolution, you wrote that right over to the 2020 elections, where policy uncertainty keeps coming at you left, right and center. Im on the side of the fence that says not enough is priced in. Damian i was going to say the upside would come from emerging markets. Philippines might even move as well. Theres more of that to come, but it is all artificial stimulus. The policy transmission mechanism suits to be somewhat broken. Vincent if you look at the markets, the way it is traded, thats the answer to the question. Markets dip, but come back very slightly. Markets are pricing in better news, good news. And mored news hits uncertainty comes off come the markets are not priced in for that. Alix so do you fade the rallies, then . We talked about emergingmarket affects. It was really bad, and now it is so much better. This week they had a nice rally. That cant be real if a trade deal is not real. Damian theres key levels. Real, we broken below that. For me, right now it is about eurou. S. Right now. Its not necessarily a good thing for em assets. Vincent i wouldnt recommend that trade tomorrow. [laughter] vincent i think when you look at em going forward, seeing the dollar and spoken about this for weeks, singing its peaked and had its nice run for 23 years, heres the trade deal with china. If that works, you see emerging markets rally. Chinadoesnt, you see going into the supply chain they did get in the United States, brazil and argentina. The u. S. And europe are just in really bad shape. Lara and i think you continue to get this dichotomy between fairly lofty equities and they bond market still sending off a lot of signals of caution. I think about the next years forecast for the yield curve to stay very flat. Fed decide that they may want to cut again, i think that is going to coincide with a 10 year following. You had this trend now for so long, and i think you cant ignore the fact that valuations in the equity markets remain high. Is not seeingt everything is fine. The which also goes to 2020 outlook in terms of what kind of returns can you and whatally expect, we have the same 6040 performance we had this year . Has the market adjusted to that new world . It feels like the answer is no. Lara i just called it the zombie 6040. Alix there you go. Lara it is dead. It just doesnt know it yet. Arching into 2020, we have another outstanding performance based on the fed cutting rates, based on these valuations that are very high, but looking forward at the earnings picture, the fact that you are probably not going to get another 20 basis point decline in yields. I just dont see where it comes from. Vincent i agree. The fed is on hold. They make in late 20, but they are going to cut for they may cut in 2020, but they are going to cut for bad reasons. It will be because the economy is underperforming. Whether regrow from there is a different story, but it is a real zombie trade. It doesnt exist. Alix thank you very much. Lara rhame of Fs Investments will be sticking with me. Find all the charts we are using throughout the next two hours on gtv on the terminal. Check them out. This is bloomberg. Viviana youre watching bloomberg daybreak. Investors in glencore will sue the Worlds Largest commodity trader over a bribery investigation. The law firm saying the suit is expected to demand billions from share price declines. It is being investigated by the u. K. Serious fraud office. Glencore falling 9 on the back of other probes in the u. S. And canada. U. S. Regulators taking a small etep towards returning th grounded 737 max to service. Is finalizing changes to. Flight control assembly and some final advice as he shuts down his daily newsletter. Artman says Donald Trumps multiple trade wars and others mean it is time to raise cash. Last week, his gartman letter ended publication. Alix thanks so much. Here is Something Else everyone is talking about, and that is uber come out with their longawaited safety review. It is the first time the right hail co. Has done Something Like this, and some of the steps were pretty interesting. Last year there were more than 3000 allegations of Sexual Assault involving drivers or passengers. There were also 50 eight rd deaths and 1. 3 billion trips. Of assaultse number was 16 decrease. That, some people will be surprised at how where the incidents are. Some people will think there are still to come in. Coming up, gary roskam, black Gold Investors ceo, will be joining. This is bloomberg. When it comes to using data, everyone is different. Which is why Xfinity Mobile is a different kind of Wireless Network that lets you design your own data. Choose unlimited, shared data, or mix lines of each and switch any line, anytime. Giving you more choice and control compared to other top wireless carriers. And now get 250 off when you buy a new Samsung Phone during Xfinity Mobile beyond black friday. Plus, you can save up to 400 a year. Click, call or visit a store today. Alix this is bloomberg daybreak. Awaiting jobs about one hour from now. Equities trying to eke out a bit of gains here. The dax really going nowhere after industrial output shrank to the worst decline in 10 years. In other asset classes, waiting to see that jobs data. When he so flowing a little bit into the bond market. Crude down 0. 6 , paring some losses after opec agreed to cut by 500,000 target barrels of oil a day. To be enough to balance the market . The market says no. With us is gary ross, black Gold Investors ceo. Take us behind closed doors. Opec meeting yesterday. Iesco whats happening . Gary they want to make as big a cut as they can through using smoke and mirrors. At the end of the day, what is going to happen to the production, that is going to be the key to what happens to the price. I dont think very much is going to happen to production because saudi arabia has been under producing their quota by about 500,000. To theyve been doing everything they can to prop up the price. Theyve been fairly successful. The question is, can they really take it to a higher level . Given the industrial output number in germany, that is part of the problem. The problem is the industrial activity is very weak. Its hard to get very excited about whether i could come. Lara are we sick supposed to be excited are we supposed to be excited about oil though . [laughter] do towhat more can they garner enthusiasm going into this big launch. The last thing they want is a failed ipo. It is pretty much assured, given this selection event bass others. Theres no question about it. A lot of International Investors staying away from it, it looks like. Alix the rhetoric is that saudi arabia is going to put their foot down and be like, we are not going to shoulder all the cuts this time around. Is that actually going to happen . Does saudi arabia have the poll to tell russia what to do, to really get compliant from iraq and nigeria, for example . Gary i dont think so. At the end of the day, it is critically important one saudi arabia does. Saudi arabia knows these guys are not going to fully comply. In october, based on internal opec data, nigeria did indeed comply, and iraq was very close. But this this mean they will be complying in the first half of 2020 when theres no government in iraq . I doubt it. It doesnt matter the market. What matters the markets production on the supply side, and saudi production has been relatively low and will stay low because they want to support the price. Alix lets go into what opec expects. They see a surplus in the first half a deficit in the back half. What kind of cut will be need to see to materially change that first half surplus . Gary you had a surplus in 2019 which was what substantial, Something Like 800,000 barrels a day. Them achingd to see the cuts necessary, but that is very typical. When wes have a surplus built stock, and when we draw stock. We will draw stocks very substantially in the second half. I can imagine a situation where we are giving all the central bankers easing that we have seen around the world. We rolled around to april, may, pmis could be up to 3 50, for a clock. A much different environment when the pmis are rolling around 50. That would be quite positive for oil prices. Lara the one question i have is looking at Equity Investment in the u. S. You look at Energy Investment here, and it has been so beaten down. Theres so much pessimism there. Look across a landscape or equities are generally, many consider them to be rich, but equities is the one place where theres value to be had. The news just isnt as bad as they say it is going to be. Gary i agree with you. It is the same thing as the price. In november, the average print price was about seven dollars below where it should be based on fundamentals. So it was discounted by seven dollars wide because it had eligible strong dollar, because the economy has been so weak, and in november we had no geopolitical risk to supply that we had to worry about. But you can imagine a situation several months from now where the pmi is lifting come the dollars we getting because growth is improving outside the u. S. Or than inside the u. S. , so the dollar should be weakened, and it looks like the dxy may have broken to the downside. So the dollar is weaker come of the economy is picking up. Who knows what happens on the geopolitical risk . , we should lift the , noamental value of oil problem otherwise. Right now we are stuck at 60 to . 65. As we get closer to that second half of the year we are in and, we left towards everything lifts in anticipation of that. Alix we dont talk about that as an upside risk to 2020. We talk about stagnating growth. But what if we get all that central bank easing and you start to get pmis solidly over 50 and growing. Do we see inflation come back . Do we see better growth . Lara im not as worried about inflation in the u. S. Next year. I think we can land around 2 , may a little bit above. For me,thats come up whether or not in the u. S. , internal policy causes growth to remain sluggish. The nonchinas, asia, india, brazil, there is room there for that continued improvement. They are huge consumers of oil. Alix are we going to be at a risk of having a supply shock . That all obviously hinges on what happens with u. S. Shale production next year as well. Gary i dont think so. Shale production is going to go up, and my estimate, Something Like it hundred thousand barrels a day. Rigs,ve 580 horizontal but that is the key to watch. I think the rigs will bottom and then start moving up again. You will have to start hedging at these kind of prices. I think shale production will be there, but it is this first halfsecondhalf thing. Positive,f should be in that is what will keep us the 60 brent range. Alix thanks a lot. Really appreciate it. Gary ross of black Gold Investors and lara rhame of Fs Investments, thank you. We want to get headlines outside the business world. Viviana hurtado is here with first word news. Ritika the u. S. Jobs report viviana the u. S. Jobs report is out in less than an hour and is likely to give donald trump in the u. S. Federal reserve the rare chance to be patient. November employers probably. Dded 185,000 jobs for the fed, it validates the view that Interest Rates can stay on hold. China will weigh some tariffs it applied during the trade war. This includes soybeans and pork. Theyve asked to be invested from rich handler tory from retaliatory tariffs imposed by beijing. Survey Economist Says European Central bank is done cutting Interest Rates. That is despite persistent Downside Risk to growth. Most of us responding to the next two years of Monetary Policy will be on autopilot. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. This is bloomberg. Alix thanks so much. Coming up, we look at people from tech to fashion who defined 2019 in our Bloomberg Businessweek feature. If you have a bloomberg terminal, check out tv. What us online, click on our charts and graphics, check out the terminal, and go to anything you may have missed. This is bloomberg. Viviana this is bloomberg daybreak. Tmobile is preparing for a crucial battle over its sprint deal. Monday, the fight begins any u. S. Federal court in manhattan. A judge will weigh arguments from a group of states that say they should block tmobiles proposed 26. 5 billion dollar acquisition. The states say it will weigh prices by limiting the couple attrition in the wireless business, but in the competition in the wireless business, but tmobile says it could raise speed and reduce prices. Experts say the increase of tensions could end up boosting s youtubeeloton channel. And for tesla, it is made in chinas sedan, followed by ivy receive im viviana hurtado. That is your Bloomberg Business flash. Alix thank you so much. We turn now to our weekly Bloomberg Businessweek feature. First up, the bloomberg 50. Finance, fashion. Some of the big people who defined 2019. And then Beauty Industrys next goldmine. The cosmetics industry is turning to an aging population. Andy kremlin dismisses Climate Change. The enthusiasm for Global Markets this year may not have riches netted may not have resonated. So you had tons of people on this list. Can you bring up some of the highlights . Reporter it is the bloomberg 50, so it is the 50 most influential people in business, finance, sports entertainment, politics. We got plenty of ceos and prime ministers, and even a chicken sandwich. Alix check flight chickfila . Reporter popeyes, actually. [laughter] reporter we also have some knows you might know, but might not think of as business people. Of the ms. Rihanna, one of the worlds most to miss recording artists, but also this year the first woman to head a fashion label at lvmh, Louis Vuittons luxury conglomerate. She started a couple of years ago with her scent he with and nowy beauty line, the first black woman to ever head a luxury label. Alix on the same lines, kylie jenner crushing it in the beauty labels as well. Heard ofou might have her from keeping up with the kardashians, but this year she became the worlds youngest selfmade billionaire. Is 1. 2e cosmetics line billion, and she owns 90 of the company, but is also its primary advertising face. She has 150 one million followers on instagram. She is posting things about the makeup. Everyone buys it. Alix to that point, it leads us to our second story in the magazine right now, the Beauty Industry is now looking towards older women. I jumped on commercial break, yeah, obviously. Why is this just a thing right now . Thise on the one hand, has been an overlooked community for a long time now. Older women use makeup. Nothing has really catered to them. But it is going to become an increasing market and issue because weve got about, and the decade, or people on the planet thanoing to be over 65 under the age of five. Japan is interesting to graphically. Half of the population is already over 50, and it will be over 60 . A number of Japanese Companies have started these lines and brands for older women. As you know, powder highlights your wrinkles, so everything is creambased. Everything is thinner and goes on better. Theyve also done things like change the way you open makeup tubes. It is a pump instead of twist off because if you have arthritis, it would be harder to open. I think it is interesting. Alix fascinating. Very cool. Those little changes make a huge difference. Our last story has to do with Climate Change. Weve seen some a climate protests throughout the world, and for some reason, moscow didnt seem to matter. Claire we have this article in the magazine this week that is really sort of a warning of what might happen in russia in the next 5, 10 years. Half of all of the russian governments money comes from taxes related to carbon fuels. Yet, at the same time, their biggest purchaser, the european union, has pledged to go Carbon Neutral by 2050. So analysts are expecting demand to go down by about 1 3. Russias response to this is basically to say Climate Change is not caused by human action. We cant really do anything , so we are going to sell as much as we can while we still can. So far they dont really have a plan for the future, which might not work out. Alix you have to wonder how that is going to shake out. Really appreciate it. You can read all of these stories and more in the latest issue of Bloomberg Businessweek, on digital and on newsstands now. Sticking with Climate Change and what bunnies and countries are earlier this week to a ceo whose company has Carbon Capture focus. We are focusing on the decarbonization of our production process. We have been reducing emissions in the upstream and downstream. Now we are much more focused on downstream. Captureocused on carbon [indiscernible] we have been making significant progress. Believether hand, we using energy, solar or wind energy, is a different type of business than producing oil. We are very good at producing oil and natural gas. Are expanding the production of natural gas come out that is much cleaner than oil. At the same time, we are are using we research and develop men to learn about the renewables business. Once we feel we have acquired the competence needed to try this kind of business, we can move ahead. Now it is very premature. Alix you guys do have some offshore wind farms and platforms. What do you need to see to want to get back into Something Like that . Roberto we have very small reserves in the past we dont have one penny allocated to such plants. Alix at what point would you allocate . Roberto we are allocating money to research and development, and to decarbonization, and to increasing Carbon Capture. Alix do you feel like investors think that is enough when you are selling your plan to investors right now . Roberto this is a process. Losing money does not help anybody. Losing money for the sake of saying that we are dealing with Climate Change is pure marketing. From my honest response conversation with roberto branco, petrobras ceo. More signs of easing in 2020 . That is coming up. If you are heading to your car, tune into Bloomberg Radio on sirius xm channel 119 and the bloomberg is the sap Bloomberg Business app. This is bloomberg. Alix time now for traders take. Joining me as vincent cignarella, voice of the bloomberg audio squawk. Listen to vincent all day by going to squa on the terminal. A looking at what are we looking at . Vincent capital goods and real yields are very much tied together. They portend recessions. They also leading to general slower growth. Not suggesting it is going to recession, but as you can see, the trend from 2017 to now, this is more than likely the trade situation and what is weighing on capex. Even if we get a phase i deal, i dont think it is going to be substantial enough to change Capital Expenditure decisions on a major basis for u. S. Corporations because the deal is just going to be a really simple one, nothing substantial. If this continues to trend lower, i think we see the fed in a situation where growth was slow, potentially a fed cut next year. It plays into what we were speaking about earlier. Be the end of the dollar story, may be a place where emerging markets take off. Alix cheap, easy money hasnt been a problem for the companies. Even if the fed does do that, it doesnt mean you have a collapse in the dollar or a huge rush in investment because yields are three bips lower. Vincent no, we will just see a fade in the dollar. That is not going to be the story of 2020. For the u. S. Economy, it is just not going to be chugging at the current levels we see now. How this plays going forward, do we see middleclass tax cuts to try to lift it because we are coming to an election . That is another story that could potentially change this situation, but i dont think it storys the story the the capex story. Alix visits, thank you. Coming up, Constance Hunter of kpmg and Subadra Rajappa of societe generale. This is bloomberg. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. You can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. All with millions of secure wifi hotspots and the best lte everywhere else. Its a different kind of Wireless Network, designed to save you money. Switch and save up to 400 a year. And now get 250 off google pixel 4 during Xfinity Mobile beyond black friday. Thats simple. Easy. Awesome. Click, call or visit a store today. Alix welcome to bloomberg daybreak on this friday, december 6. Im alix steel. Heres everything you need to know at this hour. Lets take it from the top. Aramco now has shareholders other than the saudi government for the First Time Since 1980. It is a very big stuck for the saudi arabians. I think other emerging markets might look as it is listed. Alix now they still try to capture foreign direct investment. Pres. Trump we are having they ony major discussions december 15, but we are not discussing that yet. Ofx china is in the process waiving retaliatory tariffs on imports of u. S. Pork and soy by domestic companies. Pres. Trump those discussions are going very well, and we will see what happens. Alix alix it is a step some say could signal a phase one trade deal with the u. S. Drawing closer. [indiscernible] alix opec is said to be agree to reduce its output target 500,000 barrels of oil a day after talks. Annmarie but the devil is in the details. Brent and wti are both lower. This cut is basically cosmetic. We are still waiting for more details. Alix the first meeting for the new saudi arabia and oil minister. Rep. Pelosi the president yves us no choice but to act. Alix the house will draft articles of impeachment against President Trump as they outline a rapid timetable. To thenow to eyes turn republicancontrolled sentiment controlled senate. In the markets, we await that jobs number coming out in just about a halfhour. We are seeing money move into the equity market, a little bit into the bond market. S p futures up by about 0. 1 . In german industrial output, we did have a 10 year low, and the euro is premuch flat. Yields down by about two basis points. The u. S. November jobs report is doing just about a halfhour. Consensus is looking for about 183,000 payroll editions. Joining me now, Constance Hunter, kpmg chief economist, sue punter bridge opera, socgen head of u. S. Rates strategy Subadra Rajappa, socgen head of u. S. Rate strategy, and bloombergs Carl Riccadonna. Carl the economy has been slumming over the course of this year. Q4 is likely to be the weakest quarter of the year. In fact, the second weakest in the last four years. The underlying trend has gone from about 234,000 at the start of this year, a six month average, down to about 156,000 most recently. The trend is about 150,000. The consensus is that we layer in those returning strikers from gm, which is about 50,000. Toe that trend and you get 200,000, and that is where we are. Constance i would agree with that. I think the important thing is to look at monthly averages. Want to look at a threemonth average and see where we are compared to the previous three average. As carl said, the pace of hiring is slowing. We are still above replacement rates, so we are still hiring at a pace that is faster than the growth rate of the labor force. What i expect in the next years we will get down to a level closer to labor force were place meant. Alix is the market going labor force replacement. Alix is the market going to like that . Is the market actually prepped for that . What happens when we get there . Carl it is what the market likes and what the fed likes, and how the fed is going to respond to that. We are going to see the Unemployment Rate continue to move lower. Think today goes back to 3. 5 , the lowest since september, or 1969, and i think it is going to go lower still over the course of next year as we decelerate, but still remain slightly above that replacement rate. Theres a little bit of downward momentum in the Unemployment Rate. I think the markets are fine with that because falling unemployment makes the economy more resilient, but it is not so much momentum that it is causing a boil over in labor cost pressures, which would be something that would concern both the fed and market disciplines market participants. Constance the longer we have this expansion, the more steady consumption is. While theres no fireworks going off, and away, thats a good thing. It is just kind of steady as she goes, and the slower pace of growth makes us more vulnerable to shocks, but domestically, i think if you look at the labor market and the consumer, that is still carrying the torch for the expansion. Alix all right, ive got the economist over here. Subadra markets are relying a lot on the jobs number, which is always been the shining star of the economy. My concern is that we see a weak number like we saw midyear. That is really going to shift the sentiment. Theres a lot riding on the consumer. Theres a lot riding on the jobs market. If we get a slightly above consensus number, the market is probably going to be dismissive. If we get a weak number, you have the potential for an offset rally and bonds. Alix is good news priced in, or is bad news priced in . I feel like that is where we make markets right now. Subadra i think we are actually between. Thus far, the data has been good. The fed is on pause, which is positive for the economy because things are going well. Markets are responding very well to the fed rate cuts. The question is, where do we go from here . Do we continue to see the bottoming out, a lift, and a potential for increasing growth next year, or does this lead to a slowdown . We just dont know yet. We have to wait for the data to confirm directionality one way or the other. Alix i want to highlight something that johnny dunham, associates managing partner, had in a really interesting call on yields. I believe the administration is going to do everything it can to crank out money into the economy until the election just to keep it going. The employment cost index has been rising rapidly since the recession, and we are seeing the dollar up a lot. There will be decent inflation coming up. So he sees yields getting back up next year. Carl is like, no. Constance constance carl constance first. Constance the cost of our imports then go down. As far as the administration pumping out money, we dont we just had a 150 billion stimulus in fiscal year 2018 and fiscal year 2019. Now we are having a drop off in fiscal spending, and we are not having that 150 billion repeated. So i dont know where that is coming from, where that view is coming from. Carl i agree the administration will try to crank out some economic oomph, but that will come more from jawboning the Federal Reserve and try to push them into cutting rates further, which i dont think they are willing to do, but nonetheless, the pressure from the white house will be there. Cut rates ahead of the economy. But i also dont see inflation coming if we are seeing this slow down and job creation and this kind of soft landing for the Unemployment Rate. Youre not getting a lot of wage cost pressure, so that is the main driver for inflation. But look no further than the cpi data over the last five years or what is coming up next wednesday. Strong dollar crushing goods prices and import prices. Me, what is in the comment is the expectation for english to go up. It is not coming from for inflation to go up. It is not coming from rate cuts. Breakevens have done nothing. They kind of wallowed around in the u. S. In europe it is at 120 basis points. Theres really no response in the markets to write cuts. Carl because the rate cuts havent moved the dollar at all. They are just keeping pace with everyone across the globe cutting rates, so you did not see any weakening of the dollar as the fed was trying rates. Constance andy trade action would support a stronger dollar because that is the response in the currency markets to increase tariffs, the currency that is enacting the tariffs season increase. But also, china is still exporting deflation. If you look at their ppi, it is extremely weak. This aspect of china exporting deflation to the rest of the world is a phenomenon that is still ongoing, and that is impacting overall inflation as well. Alix so you see 1. 2 on the 10 year. One of the most bullish on bonds, bearish on yields on the street. Walk us through that. Subadra i think the expedition in the market is this is similar to what we saw into any 122013, when the economy bottomed out and we saw a rise. The fed provided accommodation, and you saw a resumption in growth. We are 10 years into the cycle. We are just not in that camp that we seek these three rate cuts will be sufficient to stop the economy from slowing down meaningfully. So we have a bit of an out of consensus call on yields. We think 10year gilts get to 1. 20 , but it is not out of the realm of reason. Yields are struggling to rise on any good news. I think the risks are asymmetrically leaning towards lower yields if the data disappoints. I just dont see much happening on the fiscal side to prop up the economy. There are no progrowth policies in place right now. Carl i do think the rate cuts, even though we are in a low rate environment, the rate cuts will help the economy to some degree, but the fed is calling it quits on a much weaker footing to tip to those prior midcycle corrections of 1998, when they did the third rate cut in those cut. Nces rate in those instances, the economy was looking much stronger than it is now. Payroll growth is celebrating, inflation growth is relatively low. It may be too early for the fed to declare mission a couple it. Alix thank you very much. Constance hunter of kpmg and Subadra Rajappa of socgen will be sticking with me. Paychexp, martin mucci, president and ceo. This is bloomberg. Alix 15 minutes until the jobs report. The last jobs report of the year. We want to take a closer look at wages and how Small Businesses have been performing. Joining me from rochester, new paychexrtin mucci, president and ceo, the second largest Payroll Processing company in the u. S. You just came out with a survey. What is your finding right now . Martin what we are seeing is that job growth is above flat to last year for Small Businesses. We are down about 1 in the growth rate. The interesting thing is that wages are at the highest level we have seen in many years, topping 3 , about 3. 1 overall. The are also seeing hourly hours worked up. So demand is there for the services, and wages are up across all levels. And, moya used to be driving the wage increase overall. Wages used to be driving the wage increase overall. Now even the highest earnings are seeing a wage increase. Alix that is interesting. I want to show a chart that shows the percentage of Small Business owners that see wage hikes ahead. It is the highest we have seen since 1989, about 26 . Do you get the feeling this is going to be sustainable . Martin i do because the toughest thing for Small Businesses, and most businesses, right now is finding well hide workers and retaining qualified workers for the demand they are seeing. We are finally seeing that wage increase that we thought would be coming for some time, and i think it will be sustainable. Youve got to hire, and youve got to retain the people to be able to handle that demand coming in. Alix walk us through the sectors. What sectors are being the are seeing the biggest wage increases . Services, leisure and hospitality are seeing the biggest wage increases. From a region standpoint, the west has the biggest increases in wages. The south still kind of on the lower end of the side, and they are having the best job growth. They continue to have the strongest job growth, and construction and so forth. Youre seeing new home sales up, and i think that is driving construction, particularly in the south. But the wage increases, highest in the west, particularly in california. Highest job growth in the south. Alix when you talk about wages across all areas, is that different than what you saw six months ago, for example . Martin martin it is. Basically, minimum wage increases on the lowerlevel jobs in the services, discretionary services, they were driving the wage increase, and it was Still Holding under 3 . Now what we see is that all levels of wages, including the highest earners, are seeing wage increases. This is the first time in a few years we have seen that. I think that is saying how difficult it is to retain and hire people in this tight labor market. Alix do you get a read from businesses when it becomes too much for them . Difficult. L, it gets do you raise wages or not handle in . Demand coming i think the time has come where they have to raise wages to attract the right people. Small businesses have a little bit, under 50 employees, have a little bit harder time hiring and retaining in a tight Business Market then larger businesses. , theyight labor market are holding as long as they can, but definitely they need to raise the wages now. Alix do you get a sense when you talk to them about how trade them . Acting i feel like the rhetoric for some Smallcap Companies has been they are going to have higher input costs, demand might not be there, so they are the ones that are going to be hit. Small caps maybe havent been able to break out in the ways large caps have. Do you get a read on what they are thinking . Martin we have probably 25 to 1 3 that feel like they are going to be impacted by trade and tariff issues. Small businesses under 50 employees are more regional, and not as impacted, depending on the sector they are in. If they are in manufacturing, obviously that could hurt some businesses. That hurts them a little more sometimes than large businesses. Those that are heard by trade and tariffs cant necessarily have the clout, the change from china as a supplier. They are a little more difficult, but about 70 from our surveys will not be impacted that much because they are more regional, and they either dont compete with china or use them as a supplier. Alix do you feel like and they are still getting pressure to raise wages as well . Are they getting squeezed on that end, the ones most sensitive to trade . Martin all of them are, pretty much, because the difficulty is hiring the people. They are feeling demand. It got increased wages. They are probably in the toughest spot, you might say, because not only those are impacted by the tariffs, theyve got additional wages to hire the people to handle demand. So they are probably in the toughest spot right now because they just dont have the leverage to be able to make the changes, and they cant always get it back in the price. Small businesses cant necessarily increase prices and be able to pay for those things. But overall, i think it is a good sign that the economy is pretty robust. We are seeing demand. They are raising wages to get workers to fill that demand. We are seeing Business Investment in equipment, up for the first time last month in probably three years, so we are seeing businesses start to invest more, too, so i think it is a prepositive sign. Alix marty, great to catch up with you. Martin mucci, paychex ceo. Still with me, Constance Hunter of kpmg and Subadra Rajappa of socgen. Talking to marty, maybe we might see a reflationary environment. Constance we were talking in the break about how there are these noncompetes for workers, and it is across all sectors of the economy, and places where you wouldnt expect. So fast food workers. I was just talking to a friend of mine who owns a hair salon, and he was saying he cant hire people because they have a 30 mile radius noncompete. So the people hes hiring, if you want to keep them, he has to go to court. This suppresses wages. It suppresses movement of people through the economy. So it would be great if we have demand for inflation, enough demand to bring up wages materially. It would be great, but i just dont see it in the other data. Alix go ahead. Subadra businesses are getting squeezed from both directions in some respects. There are increases in wages that are eating up on margins, and on the other side, you have the tariffs and trade, which is also eating up on the business side. It is interesting to hear from him that theres a pickup in Business Investment because we are not seeing that on a broadbased way throughout the economy. Theres a retrenchment in Business Investment and capex spending. Ultimately, i think martys to corroborates our views that corporate margins are coming under pressure. If that continues into next year, that is going to lead to a meaningful slowdown in the economy. Alix thats a great point. Thank the lot. Youre going to be sticking with me. We are about 10 minutes away from the jobs report. This is bloomberg. Viviana youre watching bloomberg daybreak. Investors in glencore will sue the Worlds Largest commodities trader over bribery investigations. To results expected in billions in chair price declines. Glencore fell 9 . That comes on the back of overlapping probes in the u. S. And canada. Opec and its allies agreeing to adjust their output target. The cartel decided to redistribute production cuts between its members. This after pressure from saudi arabia. For a long time, saudi has carried an outside share of the burden. Opec will reduce the output target by an extra 500,000 barrels a day. Alix thanks so much. To add to that, we are now reporting that saudi arabias quota is going to be reduced by wonder 50,000 barrels of oil a day, meaning their new quota is going to be about 10. 1 5 million barrels. It remains to be seen how those cuts will be distributed throughout the other members. Saudi arabia has been really pressuring its members to meet it in its cut output. Constance hunter of kpmg, Subadra Rajappa of socgen. Is oil a real indicator of inflation and breakevens, or is that not really part of the story anymore . A spike orif you saw fall in oil prices, that is going to impact headline inflation, but that is one of the reasons we dont always look at that. Economists look at core inflation, the fed looks at core inflation. Nothing cures high prices like high prices. If you see high prices, you see a fall in demand, and eventually those prices come back into line. Subadra generally speaking, there shouldnt be a correlation. If you look at 10 year breakevens in oil, you do see a correlation between oil prices and breakevens. That shouldnt exist, and that is why we look at fiveyear forwards, five year breakevens. But generally speaking, there is some impact from Higher Oil Prices on breakevens. Its beenis more volatile in the range. They havent broken out any meaningful way. If you do see a breakout, there is a spike in oil prices, you definitely see breakevens higher. Alix i want to get your take on do you want to buy inflation production now because no one sees inflation. Is this the right time to do that . Constance no, im with the consensus subadra no, im with the consensus. I think the u. S. Inflation story is strong. We are getting cpi next week around 2 . It is the global inflation story that is more troubling to me. If you look at the projections from europe for inflation, it is low. So i think the global disinflationary ighssures are going to we on the sensation. Alix you will stick with me because we are minutes from the jobs numbers. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone wifi up there . Uhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your local xfinity store today. Alix this is bloomberg daybreak. I am alix steel. We are just about 30 seconds away from the jobs report for november. We are looking at upside in the market. S p futures up. 2 . The dac still in the green despite industrial output in germany terrible. In other assets, steady as she goes. The curve at 20 basis points and the currency market not going anywhere. Crude rolling over a bit. Now i want to get over to the Labor Department in washington with michael mckee. Strong reporty expect incoming tweets. 260 6000 jobs created in november. The unemployment 260 6000 jobs created in november. Jobsnemployed 266,000 created in november. The total number of jobs inflated by the returning gm strikers. They added 41,000 jobs to the total. A total of 44,000 jobs added in manufacturing which shows reports of manufacturings demise are premature. Not only was november strong, but september and october were revised up, a total of 41,000 additional jobs in those months. The biggest gain came in healthcare services, up 60,000. Restaurants and bars added 25,000. Finance and real estate another 12,000. No surprise, Department Stores and warehouse adding 22,000. Losers, clothing stores, down 13,000 on the month. 7000 in construction added just 1000 workers. At 34. 4. Ked unchanged Labor Force Participation rate down to 63. 2. Household survey employment rose by 83,000 that breaks a string of triple digit gains. The labor force grew by 40,000. These numbers do answer one key question. Are we running out of workers . Apparently not. It raises another question. If we can find this many workers without raising wages significantly, how low can the Unemployment Rate go . Alix gangbusters numbers. The Market Reaction expected. The move into equities, a selloff in the bond market. The 10 year, 1. 85. Hunter hot constance and Subadra Rajappa with me. Constance, your take . Constance it is a strong report. I am looking at the website to dig in deeper. This is exactly what the fed is looking for. It confirms the pause. It will probably put upper pressure on rates. From an inflationary point of view, we are not seeing that demand pull on wages. Until we see that, it is reasonable to expect the fed to be on hold and monitor the situation. Subadra absolutely. This endorses the fed pause. What youre seeing in the market is interesting because the curve is selling off the front of the curve for selling off more than the back end. You are seeing a bear flat near. The market is saying the fed pause is warranted. This is the market endorsing the feds view. Divya alix what you do . What is the trade. All of the macro headwinds cannot resolve themselves on one jobs report. If we keep having all of this job Growth Without real wage inflation, is there a barbell trade you want to be in . Subadra if you look at the trajectory of the pace of job creation, you cannot get too excited with one number, you have to look at the longer term trend. The trend is for a slowdown in the pace of job creation. That is why youre not seeing too much exuberance in the bond market, you are seeing a measured rising yields across the curve as opposed to something that is more outside. The market will put this in context with the trajectory of the pace of job creation we have seen throughout 2019. ,s far as traits are concerned i think they could rise tactically. We will get cpi and retail sales, which might also be strong going into the christmas season. Year yields go to 2 , but i do not see a catalyst for a selloff in 10 year yields beyond 2 . Constance i am looking into the details. We saw a big increase in health care and services, that is 30,000. In terms of manufacturing it went from 43 in october deposited 54. 54. Ctober to positive the big rebound in manufacturing speaks to gm. The upside surprise comes from health care and social assistance, which has been this amazing engine of growth in terms of Health Care Workers and driven by demographics. There is one month in the last 20 years with a negative print for this sector, and that was during katrina. It ended up being revised up. Give us insight into the Labor Force Participation rate and if we are seeing these numbers be consistently strong . Michael consistently stronger over the year. The labor force did not expand that much of the month, which makes it more remarkable we added that many different workers. Labor force Participation Rate may not change significantly going forward, but it does suggest we have certainly bottomed out. For years we have been losing workers dropping out of the labor force. They are coming back. The number of discouraged workers falling by 128,000 over the last year. We are seeing people drawn in the labor force who were not there before. That trend may have slowed. It did in november. Subadra with the Unemployment Rate at 3. 5 , does the fed have to rethink where the natural rate of unemployment is . Michael you cannot based on everything on one month, but they have already been doing that rethink. The question i posed earlier is relevant how low can the Unemployment Rate go before we see some sort of inflation . You have 266 thousand workers but wages only up 10 . You would expect a 3. 5 percent unemployment, we would see wages north of 3 or 4 , but only 3. 1 . There are a lot of people willing to go to work but not demand higher wages to do it. Alix on that point, we spoke to martin mucci before the numbers came out and he said Small Businesses were seeing gains in low income workers as well as higher income wage grains wage gains. Can you get a read on the scepter breakdown of where we are seeing the strongest wage gains . Michael you see stronger wage gains in manufacturing, but overall the trend has been described that the lower end workers have been seeing wage gains much more quickly than the upper end workers. There was a report from the Conference Board this week that said it is getting more expensive for bluecollar companies, they are seeing their payrolls rise much faster than those classified as whitecollar companies. It does seem that jay powells desire to see the expansion spread to the corners of the labor market that do not usually see benefit in an expansion is coming true. Alix what do you notice . Constance i was looking at the confusion index, which tells you the percent of firms hiring, and we have a big jump from 52. 7 to 61. 6. That tells you this is broadbased across the economy and could have legs. Alix based on that, how does the fed come into next week and still sound positive but not too positive . This is not necessarily goldilocks for them. Constance as long as you do not see huge wage pressure it is goldilocks. What they want more than is they want symmetric inflation. What they have been gunning for and hoping for his they would have inflation above the 2 target for a time. Most people in the market say that is not going to happen. This report suggests that could happen and i think you will see them underscore symmetry. Cooperatehey will their pause mantra and the data cooperates them to be on pause. There is little bit of stealth easing going on in the background with the fed asset purchases. It is only in the front end, but there is stealth easing going on in the background, which is having some impact on financial conditions. There is no rush for them to guide the market either way. Alix typically when we have the conversation around repo, economists jump in and say it is matter ift does that the markets interpret it as such . Constance it is not qe but that does not mean it is not stealth easing. It was meant to ease financial conditions. It was meant to ease liquidity conditions. Liquidity conditions got too tight. We saw the fed funds above the target. It was meant to put financial conditions at the place where the fed had wanted them. That does not mean just because it is an easing of financial conditions, that does not mean it is qe. Subadra broadly speaking, there are only a few more months without crowding out the market. What happens then . That is what i would be looking for at wednesdays meeting. What their views are on repo and their views on how to grow their Balance Sheet without it being qe. Alix at some point in the market, i am taking a look at yields, still seeing a selloff, but in terms of the 30 year only up one to two basis points, which goes to your point we can hit 2 on a shortterm selloff but there is always going to be a cap on how high we can go. Subadra my recommendation is for investors if we get the 2 to go along. To go long. It is not just a u. S. Story but there are a lot of reasons i think it will be a struggle for 10 year yields to get above 2 in a meaningful fashion. Youre looking at a Global Growth environment that is lackluster. Now there is a lot more chatter about stimulus out of europe, but in general both global close both Global Growth and inflation is lackluster. Will be a struggle for 10 year yields to rise. The fed is also continuing to purchase assets. Even though that is not qe, that is going to keep the demand for treasuries. Alix mike, i want to get your take. We were talking about the shift from a handoff from qe and Monetary Policy to fiscal stimulus. When you get numbers like this doesnt make it harder for Central Banks to say it is on you, it is on physical . It is on fiscal . A littleit doesnt bit, for the United States, anyway. The rest of the world not growing at all at the pace we are. It does raise a conundrum for the fed going forward. I predict in the next couple of hours the president will tweet something about the fed, why are you cutting rates further . The fed will say we cannot go that much further are we risk having no ammunition when we get to a downturn. We rely on fiscal except there is no fiscal space. As long as this is a goldilocks economy, the fed does not have to worry about where it is or where we can do fiscal. Alix can the u. S. Continue to outpace the growth of other developed nations . I feel like we have talking about that. Part of what we have seen is growth will move elsewhere. Youve seen a value trait picked up in emerging markets. Is that legit . Constance if you look at germanys Industrial Production data, you saw continuation of that downtrend. German yields were down 30 basis on the 10 year. I would say the Global Economy is still facing challenges. We saw china overnight, they had an economic workgroup and the we are going to prevent a financial crisis. Ok. Who mentioned financial crisis . You are saying you are not going to allow one to occur. That would imply you are worried one might occur. If we look at the global situation, it is much more tenuous. If you look at the entire expansion, the u. S. Has been able to sustain stronger growth than other developed other developing economies. Developed economies. Sorry. Not speaking well. The u. S. Has been able to maintain that. We have a more vibrant labor market. A better functioning capital market. We were able to do fiscal stimulus. We can actually grow at a faster pace than other developed economies. Subadra i think the slow down was not was a lot more synchronized across all of the countries. The rebound will be all over the place. You will see pockets of strength and pockets of weakness. There is no engine of growth that will lift all economies. That is why i feel like it will be trouble for yields to rise meaningfully. There is not that trajectory for a synchronized growth, a synchronized rise in Global Growth. Alix what it does raise the question is the rhetoric we will see trade start to bite and impact. When you have these kind of numbers, doesnt that take that rhetoric off the table . Michael not really. The u. S. Is a kind of closed economy. We do not have that much trade with the rest of the world. It is not as big a part of our economy as it is on others. We do not have the exact breakdown where jobs were added and lost. Lost jobs and we have been losing jobs and the Steel Industry and things like that. We are seeing a bite. What people are waiting for is for prices to start to rise. That has not happened yet and maybe we will see that. The remarkable thing about all of this is we have 266,000 jobs created during the month of november and a quarter where the atlanta fed gdp tracker is 1. 3 . If we see any faster growth after a cessation of hostilities in the trade wars, what else is possible . Constance that is a very good point. The thing that is Holding Back Growth with regard to trade is capex portion of the economy. That is a concern not only for current growth levels, which is part of the gdp, but a concern for future productivity growth. To me, that is the vulnerability the u. S. Economy faces from continued trade uncertainty. Alix we have to wonder can we handle a capex growth . Thanks so much. Michael, thank you for joining us. Subadra rajappa, thanks to you as well. Constance hunter is staying with me. We will talk to larry kudlow at 9 30 in new york. We want to make the link between what is going on with the climate and the economy. We have been having climate series all weeks and today we will look at the economics of Climate Change. According to Oxford Economics, Global Warming may arrive sooner than expected. Joining me is james nixon. Walk me through some of your findings as to what Global Warming will do to gdp. James good morning. The first thing we say is coming up with an economic estimate for Global Warming is quite challenging. In the past, estimates have suggested the impacts of Global Warming will be look relatively modest and in any case not felt until after 2050. What we have seen when we have a look at the most recent studies newhere of been a range of large numbercrunching assets to have a look at the Economic Impact of Global Warming. What they are suggesting is that impact is likely to be in order of magnitude bigger than we previously anticipated. Alix in what way does it wind up subtracting from growth . There is an argument that weather events could be stimulative in shortterm growth. James absolutely. The latest estimates suggesting that if you look at an economy like the United States, and terms of the climate related development, that cost the United States 1. 5 of gdp at the moment. In so is because of flooding or hurricanes or wildfires, a lot of that requires the infrastructure and the housing to be rebuilt. It may well be boosting activity in the short term. The point is that is in investments replacing u already had. It is not contributing to longrun economic growth. Addresse i want to what we are calling in economics the broken window theory. That is if you break a window and you pay money to replace it, gdp,is not an additive to because that is money you wouldve spent elsewhere and done more productive use with. I do not think the rebuilding, while it may seem like a stimulative effect, unless you have everything fully insured, that is the cost. I want to ask, is the detrimental effect on gdp from things like weather events and rising sea levels, certainly in a city like miami you are seeing rising sea levels. Look at what is happening in venice. Is it due to that sort of thing or is it due to the fact that we are going to have to divert resources we would use otherwise do things like carbon sequester and things like that . I am wondering where the decline is coming from and over what time frame . James that is a huge question. One of the challenges at the moment, we are talking about the impact of changes that are likely to be outside of our previous experience. In terms of what we see at the moment, staying with United States, far and away the biggest impact of Climate Change are coming through things like tropical storms and hurricanes and the amount of damage they do to the infrastructure. The impact of Climate Change will largely vary country by country, it varies by geographical structure, it varies with industry and it varies by latitude. What we will see is a range of effects depending on where you are and what country youre in, whether you are dealing with extreme heat, which could become a problem in india, or rising sea levels which will be a huge problem for some of the big cities in southeast asia. Alix in your work, have you been able to find anything about how Climate Change impacts wages and individual incomes . Ofes there are lots interesting avenues we have not had the chance to explore. The interesting thing to a certain extent is what will be the other side of the coin. We have looked into what were negative impacts be of Climate Change. On the others out of the coin, clearly at some points there is going to be a policy response and that policy response will involve large amounts of investment and potentially the complete replacement of existing capital. That level of investment has the potential to be quite stimulative. At the moment we are not seeing yet. Alix constance, talking about fiscal stimulus over the last 45 minutes, is this the opportunity for stimulus . We know germany cannot do fiscal stimulus, but that if they captured is something climate, can that be a gdp accelerator . Constance sure. This is something many governments are looking at how the couch this, and depending on how it is done, it can be stimulative for the economy. More important, one has to look at what damage does it prevent. You not only have the shortterm stimulative effect, but you have admitted getting larger downturns down the road and that could be a way to do this in an off budgetary way. I am not an expert on german constitutional law, but certainly i think you have seen in Germany Movement to get a standscloser to that where there could be acting fiscal stimulus. Alix part two is jobs retraining. If you will have to move your economy to tactile to tackle Climate Change, that opens up different jobs. How does that come in your conversation when you look at the jobs market . Constance i take a more big picture look. If you look at the work of Something Like morehouse who has won a nobel prize on the subject, all of the studies suggest it hurts gdp before it adds to gdp. You are basically taking scarce resources, that is capital, and diverting it to an area of the economy where you were not before. It is considered those mitigating effects, while they stimulate certain sectors, it is not considered stimulative. It is still worth it because if you do not do anything, the negative effects down the road and the damaged the economy down the road is so significant it is worth it to do this in the short run. Alix to wrap this up, who is more at risk . Is it going to be developed economies, emerging markets, where is the biggest vulnerability . James no question the biggest vulnerability is in emerging markets, if for no other reason than they do not have the resources to put together the scale of adaptation or mitigation challenges. In terms of the question of jobs, the issue is about timing. Compared to what we have in the pipeline at the moment, the government commitment, what we need to see is a completely different order of magnitude of policy stepping up to the plate. If we can do that, then we can deliver the transitions we need to avoid those impacts coming through. Alix thank you guys. I appreciate it. James nixon of Oxford Economics and Constance Hunter. Thank you. It is a move into the equity market all on the very strong jobs number. Joining me now is bloombergs across asset reporter luke kawa. Also on the phone is mark from bank of America Merrill lynch. What do you do now . Do you buy the selloff in bonds or do go into it and sell . Have a lot of investors been trying to lean long duration. There is the potential for further upside surprise into year end. We do not know how the u. S. China trade negotiations will evolve. We do not know what the balance of data over the next week will show. What we do know is the underlying Employment Trends have been quite resilient over recent months and this morning certainly suggests the u. S. Economy has the potential to operate with a slightly stronger stance than previously believed. Right now you wait to see where rates settle in. You wait to see how some of the other nearterm risks evolve, and you probably want to take the opportunity to start leaning long because 2020 is fraught with uncertainty and it seems unlikely that the u. S. Economy will accelerate into a higher gear, at least in the near term. I feel like ive heard that. Is it the same deal in equities . Bonds, ifollow up on was able to listen to mark speaking on his year ahead outlook. One of the most interesting spots of his report is how if we are in a situation where the short end is anchored because we believe the fed will not switch to hiking any soon, the long end is relatively heightened i the world being the world. The part that would be the most vulnerable is probably in that area. It is interesting to see that come to fruition on good u. S. Data. Applied to stops, it has been a good news is good news story for so long, that remains in place. Alix we will see how long the jobs narrative can outweigh the tray narrative. Luke kawa and mark cabana, thanks. That does it for me. Coming up, Larry Kudlow Joan is Jonathan Ferro larry kudlow joining Jonathan Ferro on the jobs numbers. This is bloomberg. [ electrical buzzing ] [ dramatic music ] ahhhh ahhhh elliott. You came back jonathan from new york city for our audience worldwide. Im Jonathan Ferro. The countdown to the open starts right now. Jonathan coming up, equities climbing, bonds dropping. U. S. Payrolls report coming in hot. China in the process of waiving retaliatory tariffs on u. S. Pork and soy. Germanys worst industrial slump in a decade, a little reminder we are not out of the woods yet. A big friday lineup. An allstar panel right here in new york. Alongside me, Anastasia Amoroso of jp morgan, rick rieder of blackrock, and Michael Collins of pgim fixed income. Later, reaction from the white house with larry kudlow. We will bring that to you at 9 45 eastern time. With less than 30 minutes to go until the opening bell, lets bring you up to speed on the price action. Equities advanced. 6 on the s p 500. , and in foreign exchange, the dollar stronger in the euro weaker