What lessons global economies can learn from japan. Lets kick it off with our market minutes today. I want to highlight something i was super excited to realize with my imac, and that is that we are now looking at 11 different Industry Groups today for the first time, this will go official for standard on september 16. It is already official. They have broken out real estate from a financial. Financials have done very well this year, but mostly because of the reads. They have done much better on a oneday basis. Financials are down half a percent. Telecoms are leading the way. Joe on the Government Bond fund, very quiet on equities. All eyes on the jobs report tomorrow. Here is a look at yields, the mining a little bit on that twoyear and 10 year. Not that dramatic. I want to look at the u. K. , reticular leotard of 10 year yields. You can see it taking up, way lower than it was prior to the brexit vote. We have more good data out of the u. K. , solid manufacturing data. And you do see yields starting to creep up as some of the worst postbrexitist referendum are not realizing for now. And we are seeing quite dramatic news because of this. 132 point sterling, 67, we have seen this action jump, the pound to jump, to its highest action in weeks. Against the dollar, and the euro. You can see euro and sterling up there, as well. Unexpectedly expanded in august, reached a 10 month high and jumped to a record. A course with sterling it is two way trade. Foras contracted in august the first time in six months, it makes sense with the stronger pound and weaker dollar. I was just looking at the euro, i want to point out, it is up. 4 . But every currency is stronger fact, thee dollar, in dollar snapping a fourday gain. Oil had a pretty ugly day, it was down over 3 at one point. We continue to see very high inventories, inventory this time of year stockpiled at its highest level in 20 years. You can see oil is once again on a losing streak, down 9 over the last four days. We have had bull and bear year, andr oil this we are starting to put together a downstream. Matt those are the market minutes we have for you today. Dive on theo a deep bloomberg. You can find the following charts with the function we show you on the bottom of the screen. Earlier whenme con, on theut bie e lefthand side of the screen is an area with a tab for country risk. At politicala look risks in each country. There are one or two countries that have risk reversal here. Let me go ahead and click on this currency first. And then i will show you more clearly. Toronto dominion and others have randout and said, sell the in south africa, because Political Risk and south africa is getting bad. You can see that as the blue line, and Political Risk in russia is getting better, here is the white line. Come outbers quarterly, and i wager they will switch positions after this quarters numbers come out. I go back in here and put the back in ruble trade there, and you can see it has come down. Rubles tots 4. 5 purchase a rand. Earlier in the month, it was five rubles to buy a rand. Speaking of russia, tomorrow on Bloomberg Television and radio, do not miss a rare and exclusive interview with the Vladimir Putin, speaking to our editor in chief, that is all they tomorrow. You can catch exclusive pieces of that number station and on radio as well. On monday coverage continues with a onehour report from that exclusive interview with russian president Vladimir Putin, monday at noon, new york time. Joe that will be a must see. I am looking at what are my favorite data points that came out earlier this morning, gaming revenue. I show this chart earlier this week when the white line was showing a nice uptick with a change in gdp. Today we had the first year growth in gaming revenue in macau since early 2014. You can see the blue bar ticking up a little bit, the First Time Since may 2014. I like to look at this as an index, because there are animal spirits in china, and gambling, and i love gambling. So maybe that is a good sign. And in a similar part of the ld but looking at the u. N. What this is showing, and i have to give credit to our strategist traitor g, he is a trader that writes for bloomberg. Want yuan is breaking out and appreciating. He says the timing is right for this to be sustainable, and has bullish implications, particularly south korea and malaysia. You may have been watching the wrong indicator,. Ixated on the arbitrary level i thought this is pretty interesting. Joe very interesting and important to watch. I want to break some earnings right now, a company that makes your pants and shorts for men, . 33 a share, revenue over 5 billion. Key, the company sees revenue that is basically in line with what the street has. 5. 35 to 5. 45. Than the is lower to . 44. On, . 42 you can see the stock is down 8 in the after hours. Dive,ets take a deeper matt maley joins us from massachusetts. Youll been talking about one of the big themes, the rotation out bondlike these stocks like utilities, and move away from the yield plays, into the more value and growth areas. Are these safety plays that have been so popular for much of the year . I think they do, in the Utilities Sector it is such a great move. And for a group like that to have moved most 30 in just six months is quite a stretch. Even if we dont see a big and are notrow, firmly on the table for a rate hike, seems to be more hawkish than a couple of months ago. See thathat we will come down a bit. Yield, nots good like we saw with the Biotech Center in the summer when they crashed 40 in six months. But they have some good underlying fundamental support. But they will see more Downside Movement as people move into other areas. What about retailers . Were at a key juncture for retailers. When i say key juncture, you see , the next few days might tell everything. I do not think that is the case. It has had a great run since the brexit vote of 17 . The xrt hase come down 5 . A lot of the news this week has been positive, whether it be Consumer Confidence or consumer consumption. A bitwere a delight light. It is too early to call, but it is something we will be watching for. For the next couple weeks, if this falls further, it will be a big warning flag for the consumer and the retail group. But if they can bounce back and rally, it will take off and get a lot of momentum and be positive for the market and the consumer. Joe i am not sure it is a lululemon products, but what about the fundamentals here . Are you only concerned with the technical . Is that how you made such a successful call in utilities and defensive sectors, as well . It is funny, it was a combination of both. December we saw how much people were reaching for yields, we saw how much the bond markets were overbought, and we thought they would go for that group. I must admit, the group rallied more than we thought it would. Fundamentals that we it is not june that utility fundamentals rolled , but reached a level where people needed to take some profits. Now it is much more of a technical thing. Momentum players are getting out of it. It is a combination of both. But i guess my point is, were watching it closely for shortterm moves. These defensive groups still have good fundamentals, but , a little more vulnerable than they have been in a while. Lets talk about the dollar, such a hotly debated question, whether it will go higher, whether a tighter fed will beat the other currencies. Thate this upward channel is not moved decisively in a while. What do you forecast here . It will be really important when it happens. Forward,ortant going one of the key areas we have been watching his earnings. What happened with the Energy Sector and multinationals. Those are the key problems when we had quarters with down earnings. Will lead us out. Itthe dollar continues bounced in may, as it continues to rally come of could be a problem for commodities and Energy Earnings and Multinational Companies earnings. A lot of people looking for that big bounce back in earnings, they might be a little disappointed if this rally continues to take off. We bumped up against the 200 day moving average, and we will watch for a breakup of that. If we move much higher on this higher low and lower high trend, it will be negative for the market for those reasons. Those are key sectors of the stock market. Keep ant maley, we will i on these charts, thank you very much. Matt coming up, he numbers out tomorrow. We will have three charts you need to see before the report. And then a quick check on those shares of lululemon. They are falling hard in late trading. Forecast for future earnings coming in on the bottom end of the range of estimates, and you can see the shares up 7. 2 after hours. This is bloomberg. Joe whatd you miss . One thing you will not miss is tomorrows job data. We have charts you must see, matt basel or is here to break it all down for us. I am always excited. I used to tell joe, i do not miss anything. It every time you bring a chart, i say, i did miss that. What you have . The first thing i will look report, is, what happened to construction jobs . We have these really good reports the last few months, but one thing that has not been so great is the construction sector employment. That has been slowing, and that is an engine of domestic job growth that we want to see going at a steady pace. If that reacts hillarys erates, that is a piece we need to see at this point. Is lookingond chart at americans working in the private sector, and you say longerterm is something to think about because it could have hit a record high in august. What does that mean . That goes right along with this. It is interesting because if this picks up again in august, it has been going the last few months, we will have a Record Number of americans employed in the Service Sector, and that has big invocations for the fed and Monetary Policy and all sorts of things. Looking at this chart reminds me of a few other charts in which you have big, secular trends, the shift from manufacturing to services, that accelerate during recessions and dont revert back at all. There are two good things to consider, one, that when you have a greater share of your economy and services, it is harder for Monetary Policy to stimulate and tighten things because it is a slower moving sector. You do not have inventory cycles that are important and spurring growth coming out of recessions and that sort of thing. Stability,give you but explains why they are so much slower now and harder to get going. Does the fact that the Service Sector was exportbased and capitalintensive also explain why Monetary Policy is most effective . Absolutely. That is the other side of the coin. We are talking about the fed in productivity and why is that so low. We have a lot of people working in lower paying, lower productivity sectors like health care, the big one that has risen in this cycle as we get older and demand more healthcare services. Thisll will present an ongoing challenge for policy makers for decades to come. I feel like when i was a little kid, i did not hear as much about monetary stimulus as i did fiscal stimulus. It was more about cutting checks. That seems to have turned around 180. It is crazy, we just got the Construction Spending numbers today. Private construction was up 4. 5 in the yearoveryear basis. Public instruction down 6. 5 . I saw that. You pair that with payroll numbers, private payrolls growing at a 1. 9 him a and public payrolls growing at less than half of that, so we are not getting any help from government spending. As some people pointed out, it is more of a drag many stimulus. We are not quite there yet. Hopefully we see that, but it is not clear. , and it ishis chart rudimentary, a bit crude. Help him out with this chart here. You can see the blue is Construction Spending, and that is a strange drop. It is a big drop, isnt it . Publicsector Construction Spending. Writes, it is not clear if this is a new trend or just a big, one off number. Lets look at your final chart about mixing rings with the labor market. We have the labor market components of the monthly Small Business report this afternoon, they put this out before the job report so we can get a preview, and we see mixed signals here. We are seeing a smaller percentage of Small Businesses saying they are planning to hire, but at the same time, we see a larger percent saying there having trouble filling job openings. It is not clear what is going on here. One thing you can add to this analysis, if you look at what they are doing with wage growth and are they increasing wages, that is another thing that plateaus. You have Small Businesses having trouble filling job openings, but they are not willing to raise wages right now. That is another puzzle that we have to solve. Basel or, we will see the job report tomorrow. Coming up, donald trump double n on immigration after he he is back where he was before. We will decoded the signals next. Joe whatd you miss . Trumps big immigration speech in arizona. It was a shift in tone from his visit to mexico earlier in the day. Mr. Trump under my administration, anyone who illegally crosses the border will be detained until they are andved out of our country, back to the country from which they came. For more on trump, lets bring in Toluse Olorunnipa from washington. In addition to him sounding very different than he did in mexico, he sounded different than he has over the last week and a half when it sounds like he may be softening or pivoting. However politics people like to describe it. Is he going back on the original plan to double down on hardline immigration . Toluse that is what it sounds like. It sounded like he would soften his position, and campaign. Fficials put out mixed signals when he got on stage in phoenix, we heard the classic donald trump, the donald trump that came out and called mexican immigrants criminals a year ago, and he took that hardline tone. It seems we answer the question about whether he would soften his question. He seems strong about saying we will deport people who came in illegally and there will not be amnesty or softening in any major way for the rest of this campaign. What does it all mean from his campaign . We can look at the initial reaction from some of the hispanic supporters who either resigned or said they could no longer support him. We have seen this in the last 24 hours, major supporters who said they were waiting for this speech as an indication to find out whether or not they could if you wouldsaying be softer on immigration. But after hearing his speech and allowed rhetoric he brought on stage, they said they no longer could support them, and that will be difficult if he cannot do better than mitt romney, he will not be able to win the presidency. Said, people are saying he has had a good 24 to 48 hours between not embarrassing himself in mexico, and polling data showing the race is closing. Is this a race again . Toluse definitely. We saw two different donald trump. Insaw the loud, firebrand phoenix. But earlier in the day we saw him a president ial, in a foreign leader and not embarrassing himself and being able to carry off the president ial look. The polls are showing that the race is tightening, Hillary Clinton is having a number of problems with her emails. So we do have a race again. Thank you so much. Still ahead, questions about the bojs strategy with an 80 million gap on its balance sheet. Mark i am mark crumpton, lets get the first word news. New zealand issued a tsunami warning for the north coast islands after a severe earthquake. A high wave was generated at auckland, ther most populated city. It has been followed by several aftershocks. Said some coastal areas were evacuated as a precaution. Residents along floridas gulf coast are bracing for hermine , which has been elevated to a hurricane. Residents in lowlying communities have been asked to the lastd those hurricane to strike florida was in 2005. It was a category three, leaving five people dead and causing billions in damages. Florida officials said they virusthe zika advisor in mosquitoes, the first time in the continental u. S. They say the development is disappointing but not surprising. An additional 91 trapped mosquitoes have been tested negative since those three in miami beach were found. Are urgingials turkey to amend its tough antiterrorism laws so they can restrictions, to stop migrants from crossing the aegean. They say it is not an option and that will harm security. It comes in the aftermath of the failed military coup in july which resulted in thousands of arrest. News 24 hours a day, powered by more than 2600 journalists and analysts in over 120 countries. I am mark crumpton, this is bloomberg. Joe, back to you. Joe lets get a recap of todays market action. Very quiet across the major indices. S p, most were lower, ending a decent levels. A similar story, a bit of a decline in yields after eight after not so great data. I just want to talk about lululemon, the earnings after hours, and basically, we have seen stocks fall as much as 9. 2 in late trading, down 8. 4 , as you can see. That is because the forecast missed some estimates. Beulemon said earnings will . 42 to . 44 a share in the fourth quarter. Really what this is doing is a sparking concern about slowing demand on competition in the market for Athletic Apparel because you have nike and other rivals pushing deeper into the category athleisure. Butell in after hours, lululemon gained 46 . Matt has more on auto sales. The auto industrys six year run of growth may be coming to the end of the road. Lets look at that in todays, the numbers do not lie. Every major automaker, every single one, missed analysts estimates for august. Gms all the decline of more than 5 , ford, and nearly 9 drop. And toyota fell 5 , as well. Chrysler is the only Major Company that reported any kind of gain at all, and that trailed estimates. Consumers are not responding to the discounts and other incentives if they are being given them, and that is the problem. They show a seasonally adjusted sales of about 17. 2 million. That was the Bloomberg Survey number for this month. The orange line you see here is that number. The pace of auto sales is the white line. Month, the last sales were a little bit better. We will see if that changes. Automakers have underperformed in the s p 500. Trading,down in u. S. While fords shares have fallen nearly 10 , even with the f150. Gned that has been indicative of the truck over car trend. For years, regular gas prices are very low, which helps create the divide. With trucks, you can see the orange line here, way outselling cars, the white line here. August saw an amazing and surprising turn in this trend as sales were down for the f series trucks. And chrysler ram pickups. Suvs sawall trucks and a drop in august, very rare. Financing has helped fuel the gains. That hasnt some concerned that the market is overheated because financing and leasing have become such a huge part of the industry. Even jpmorgan has mentioned it. Chart, the credit intensity of sales, the highest point in the current economic expansion. So how much consumers are using financing, if you will pay for an increasing proportion of these autos that they purchase with borrowed money, almost everyone does now. Autos have been a big driver of consumer spending, this leaves economists concerned about gdp at large. Joe whatd you miss . The governor of the bank of japan assures bankers there is room to ease policy and boost monetary stimulus. Joining us now for more on japans economy is columbia professor Takatoshi Ito. Thank you very much for coming in to talk about this. Room . He boj have more can they stimulate the economy and revive inflation and growth, since right now, people generally have the view that at best, they are doing an ok job . There is room to however it is admitted that the costs of those actions increasing, so at some point, the cost and benefits will cross. Thending on who you ask, benefits still outweigh, and i take that view. That there are benefits of the easing. Will be presented with a comprehensive review of policy, as well. Bearing that in mind, does this number one, increase the likelihood of an increase in stimulus, and number two, what do you think are the best options . That decision and assessment will be based on the experiences in the last six months, which is not good. Inflation,asure of it has been declining. Counter to the target. , expect some sort of easing but this comprehensive more than just actions. There will become brands of reframing of what they are targeting. What do you think are the best options for easing . Takatoshi my recommendation , keeping the interest rate. Therevernor has said that is a room from current boj two may be 1 . In europe, the major complaint is that it has affected banks profitability in a bad way. Maybe that is not the worst outcome for an economy. How have the worst a fax of negative Interest Rates been felt in japan . Takatoshi the banks are very vocal, opposing the Interest Rates. What they can lend, the lending rate is coming down. So the prophet spread has declined. The profit spread has declined. I think the boj is aware of that, and they have had to , and it istactic flattened more than they intended. I would be willing to pay negative Interest Rates if they wanted to charge me a negative interest rate, no problem. To the yield curves, you say that it should be noted that the limit is. 5 . But there is still cash used. That will generate expectations that rates should go up in the future. Policy, whatetary else should be done, deregulating, or market reform, where it be the most bang for the buck in further helping the economy outside of the boj . Takatoshi the rate is not going up as we expected, wages are not coming up. Households are still focused on spending. , thatges are not going up is not Monetary Policy, that is productivity. We need jobs with high productivity so that companies can pay higher wages. Policy, butmonetary the deregulation structure of reform. That is presenting a problem and mary in many countries. Many say that is just a function of getting down to not enough workers, and needing to boost productivity, and that is us a function of companies having to do that, and Monetary Policy can affect that. Takatoshi we need labor reform aroundanies can shift ,heir workers or fire workers to be hired by different companies. Diet, andrm is in the that is necessary for the japanese. I see we never see little fiscal stimulus packages every quarter, but never really big fiscal stimulus coming out. I think it does not have the capacity to spend, we just discussed the high debt to gdp ratio, is that influencing it . Takatoshi it is not this year or next year, but down the road, this ratio will be a problem. It has not been a problem so far. A 3 unemployment rate. We will take a quick break. Is japan a leading indicator for the u. S. Or the rest of the world . And an important programming reminder, on Bloomberg Television and radio, do not miss a rare and exclusive interview with russian president Vladimir Putin speaking with our very own editor in chief. Tune in friday to watch that exclusive conversation. Monday, the coverage continues with a special hourlong report from that exclusive interview with Vladimir Putin on monday at 12 00 p. M. Eastern. Joe i am joe weisenthal, whatd you miss . Our japans banking choices indicative of what is to come for the rest of the world . I was reading a paper about what is this the fate of everyone . This is an index that shows the inflation, nominal rates, your peculation your calculation. It is not just a japanese phenomenon. I want to start with, what is the root of all this . What is the Common Thread causing this seeming decline all around the world . Takatoshi it could be the other financial crisis, countries in a deep recession. But it may have started much earlier, like 1990. It is not just the crisis, but more of a longterm trend of the lack of innovation and the other things. How much is demographic . About japan, they talk about declining birth rates, declining workforce, virtually nonexistent levels of immigration. Some of those things are elsewhere. They say that is why japan cannot get anything going, they do not have new people. How much do you attribute to that . Takatoshi maybe half of the decline can be explained by that we arecase of japan, and losing the working age population, baby boomers have be aged and they will in five to six years. So we have a change of the aging, it is a problem for japan. Companies investing in japan are seeing shrinking markets. Is it he you change that, with immigration policies, or Something Else . It is both inducing women to work more, the elderly to work more, and foreign to work in japan. Combining all those, we can maintain working age workers in japan. And yet, these demographic issues are not in japan. We have the same demographic issues. It seems like we are all having them at one time. I think the u. S. Is lucky that many people want to move to the u. S. The u. S. Is the exception to this trend. I think the big thing is that in asia, we have had very high growth, but now looking to the will have aa similar aging issue, and korea, and then singapore. I think asia has to deal with and demographic transition, avoid it. Professor Takatoshi Ito of columbia university, i want to point out he was a former member of the prime Ministers Council on economic and fiscal policy, with a senior position in the Japanese Ministry of finance. Stay with us for more talk on japan and find out more. Joe i am joe weisenthal, whatd you miss . Our japans economic choices indicative of what is to come for the rest of the world . My question is, what is the policy people talk about the last decades of japan, and the policy errors the country has made. One of the key lessons we have learned from japanese policymakers that central bankers and fiscal leaders in the u. S. And u. K. And so forth should take to heart . Takatoshi the first thing is that deflation is really bad. They will make the expectation that the market is shrinking. Managing the Inflation Expectation is very important, and that is what they are still fighting. Joe can never be too vigilant on that. Which part of the world, risks he coming the most like japan . Takatoshi some of the eurozone countries and parts of asia, i would say. What parts . Takatoshi china. Difficult for the eurozone because they have a policy level policy lever, but fiscal policy is all over the place . Takatoshi yes, that is a huge constraint. That is a problem for some southern european countries. A problem that can be fixed . Takatoshi that cannot be said. Heres a question i ask every time we talk about japan and the economy, what really needs to be fixed . Ismployment is low, japan one of the wealthiest countries in the world by any measure. What is it so bad that is in urgent need of fixing . Takatoshi productivity. We have not seen decent , and thatty increases is constraining the real wage to workingnd the overall population to shrink. Reform,labor market including foreign workers. But the people are happy. If you live in japan and have a job, which you probably do if you live in japan, everything is ok. Takatoshi we have a huge budget deficit. I know you are saying fiscal policy is really important now. But we are still talking about what the boj will do next with Monetary Policy. What you think of helicopter money . Takatoshi i think as the theynor would point out, have been doing de facto , but i do not think that would be effective in japan. The premise is, no redemption, a burden on the minister of finance is less. And people feel happy to spend more. Takatoshi ito of columbia university, it has been such a pleasure, thank you so much. Thank you. What you need to know for tomorrows trading day. Do not miss this. Spanish unemployment, which joe has been paying close attention to, is out at 3 00 a. M. Eastern time. Pbi ppi atne 5 00 a. M. That is all for whatd you miss . Gone back and forth between softening and not softening. What they perceive of trumps softening. Softening. Softening of his immigration stance, and now he is being blamed for not softening of. There was no softening. There was no pivot, no softening. John