It was uncorrelated. We will do that in the data check coming up. Francine longer data checks today. Lets get straight to the bloomberg first word news. Heres karina mitchell. treasury secretary Steven Mnuchin and House Speaker nancy pelosi are working to avoid a government before the election. They wont let the stalemate over virus relief legislation hold up a stopgap spending will. Allow the government to stay in operation through the new fiscal year. To , the president tried to get out of visiting graves of marines killed in world war i in france. He reportedly said, why should i go to that cemetery . Its filled with losers. He denies that account. Were trying to take michael right hold michael when theynto custody shot him. Report is outbs at 8 30 this morning. He economists project the Unemployment Rate to drop below 10 for the First Time Since march. Global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Im karina mitchell. This is bloomberg. Tom thanks so much. Equities, bonds, currencies, commodities. You look at the bloomberg launchpad, and it is a blur of numbers. You try to see the correlations that are out there. The number one message is lets nights is last nights debacle was not correlated. Dow futures up 150. The vix comes in from a 33 level into 32. 34. 24, andat 21, and then exploded out yesterday to the 33 level. The real yield barely moves, which speaks to the domino inflation. , thet juckes mentioned Foreign Exchange market was shockingly stable yesterday. Some equity strategists suggest equities delinked from the rest. Francine a couple of things im watching. Its the noncorrelation we need to look at. I looking at gold, higher a touch. The dollar pretty much steady. The stoxx 600 was actually fluctuating. We saw losses, and that initial ins was a because banks spain are gaining on a potential merger between the two biggest lenders. Just an added story we need to look at. Stocks,pened in equity athey,et to james aberdeen standard director. What is underlying the selloff we saw yesterday . James good morning, francine. I believe that is an astute observation. The dollar actually a tiny bit weaker. Other equities across the globe not really reacting with anywhere near the same force. That tells you theres not really a macro driver underneath all of this. It looks like it was a very technical event. What we have been noticing in the days leading up to this was some really funky things going on underneath the hood, not just in the brought indices, but civic in that group of tech name we all know about but specifically in that group of h names will know about names we all know about. That was spilling over from single name into the broader indices. You saw things like the broad index going up on the same day that the vix was going up. You saw things like implied volatility in the nasdaq rising faster than s p implied volatility. Is you what happens than just get this air pocket. I think thats what we saw yesterday. I certainly wouldnt ascribe any macro narrative to it. Francine this is basically a removal of froth, right . If there were a warning sign, where would you see it . James in terms of where we go from here, you mean . Were looking at yesterdays move . Francine if something were to turn ugly in the market as a whole, where would you see it first . Where would that warning sign be . James you would have to look first and foremost at tech because the divergence between big tech and indices has been a feature of this market for quite some time. I think in order to see a real shakeout, first and foremost would have to see some further really negative performance from big tech, knowing that has been a popular position, and a popular position really amongst a broad range of investors, but also because concentration in the brought indices has been getting so high. Even passive investors are buying broad indexes heavily exposed to tech. That might be our first indicator that we might see something a bit more longlasting and a bit more brutal. Tom i really like that ideal. We are not there yet. Smartest note i have seen in the 122 hours, the purpose hours, muggle 12 rves ofmichael pu tallbacken. He goes on to say, days like today might feel like the beginning of a massive bear asket, but we think of it simply a reflection of investing and trading in a highly ednancial eyes financializ market. Worldnancialized is your where derivatives have taken over the cash market . James it means Different Things to different people, but broadly speaking, it is not just about the instruments that are being used by investors and speculators and traders, such that derivatives dominate the cash market. The types of strategies which people are engaging in. It is also the behavior of the companies themselves and the extent to which that Business Model has become financialized. They are borrowing to invest in their own stock, not to invest in their own businesses. That has been a feature of the market for a number of years, and helped to propel what he markets ever higher, such that it reinforces that market psychology that equities can only go up, valuation no longer matters. And bill ackman i am sure are on the same page on this. The fundamental financial eyes leaves financialization no clue how you stabilize through the fixed income market over to some form of ratio valuation of equities. How blind are we going into the end of the year . James completely. I wouldnt say the bond market is more distorted than the equity market, but the bond market is the direct means that Central Banks have first and foremost, and then relative valuation sort of flows out from that distorted value, so i completely agree. Price discovery, the notion of Capital Markets as disciplinarians, all of these concepts have gone completely out of the window. The psychology of markets is broadly speaking a trader psychology come always and everywhere at the moment. Is reallyor community not engaging in attempts to derive fair value, and that obviously includes Treasury Bonds and sovereign bonds as well. It is more a question of stimulus. What are the actions of the Central Banks . What are they distorting . How much are they distorting . Where am i being incentivized to take risk regardless of the price . Francine will we ever go back to oldschool correlation . James i think we will. Humanity, cognitive bias, we have a tendency to believe what is true today will continue to be true. It is called the status quo bias. We have short memories. In reality, monetary policies have not always operated this way. We go through paradigms where operates aolicy certain way, and then we have to reassess. I think in the next few years, theres going to be a massive and fundamental reassessment of exactly what Monetary Policy is trying to achieve, and when that occurs, that absolutely will change some of these relationships. That being said, i do believe theres a limit to which markets can continue to pay up, ignore the premium they are paying for future cash flows purely because they believe there is a central bank there to support them. So i believe there is a confluence of the events in the coming years. I think it is likely that inflation is the most obvious trigger for that to occur because Central Banks are limitless in their actions unless and until we get inflation above the tolerance. At that point, you have to reconsider whether Central Banks can continue to provide stimulus, and that might not be good for assets. Tom james athey, thank you so much. A terrific brief at the top of the hour. Ey with aberdeen standard investments. To 8 30 this morning and the labor economy of america, without question, this is the greatest mystery, the single greatest months of deep mystery. Jonathan ferro will get perspective from mr. Kudlow of the trauma ministration in the 10 00 hour the Trump Administration and the tenant on our. Stay with Us Administration in the 10 00 hour. Stay with us. Tom good morning, everyone. Bloomberg surveillance. What you need to know in the american five unlock our americans 5 00 hour, 10 00 london. Is awaiting 8 30 this morning. Litz is at ts lum ts lombar lum bard ist. Heir chief u. S. Econom steven if you just do the simple math, you are adding about 8 million or so grossly new jobs. That is a mystery. But these things get solved over time. Lets compute it right now. Policy institute was brilliant yesterday, combining the published claims number with the pandemic adjusted claims from all of the different federal programs. Are you going to have to go through that exercise this morning of taking me normal ash of taking the normal report and adding in all of the other of taking the normal report and adding in all of the other data . Steven yeah, but theres really only one number i am keying in on, the number of people who say the jobs they lost were permanent job loss. That number has crept up. It is just under 4 million. It didnt move much last month. That is at a mild recessionary level. That number peeks at the end of a recession, not at the beginning. So youve had this, as we know, this temporary job loss, which is what the big surge was back in april. The temporary number has come down a lot as the economy has reopened. It is the nontemporary number that has crept up. That is the number that is going to indicate, when we get into the Fourth Quarter, what kind of economy, what kind of a growth we really have. We know the second and Third Quarter is going to be 20 , 25 , Something Like that. 4 , 6 , apeat a percent growth number . Adp shows we are stuck at 10 , below the highs of the beginning of the year. Every hard to see 6 growth in the Fourth Quarter in that environment. Francine what kind of shifts are you seeing . You talk about these distortions to make sense of what we see in the last couple of days, but what are we going to see come christmas if there is a second lockdown . Steven i dont think we are going to see a second lockdown. The distortion, it is the unwinding of the distortion i am looking for. Mainly that this has been a loss of employment that has been heavily borne by people who work in these industries that are locked down. Finance, the end of limit rate is 4 . For most the Unemployment Rate is 4 . Lockdownpeople, the and pandemic has been a lifestyle change. , if this for million number starts to creep up, you are going to see a broadening of unemployment across more Industry Sectors that look more like a typical recession, and as a result, the christmas season, lockdown or not, will not be particularly good. Francine should we measure things a bit differently because of the severity of the pandemic . Do we also need to think about the people that are just not making it . I dont know if you look at food banks, but it is the people that are really struggling and will struggle a lot more in the next year or two. Steven look, the human part of me does absolutely. The loss of the 600 a week for these people is a critical amount of money, and it is one of the reasons why trump stepped in, and whether it was successful or not, to stop evictions. Week, andt 600 a retail sales continue to roll along. Its exposing an unfortunate aspect of the u. S. Economy, ofely that the top 10 , 20 wage earners where this pandemic has not really impacted, because of the jobs they have, that is also about 80 of discretionary consumer spending. Their spending, because of the money they take in their confidence, ties much more closely to the s p 500. Tom i think this is so important. How do guys like you and fancy People Like Us that are looking at a fancy market, fancy finance, fancy investment, how do you fold in the tangible hardship we see out there . Isven well, it unfortunately happening to someone else. Extendedhave an expansion that we have, whenlly the higher end you get threatened in terms of your income and things go bad, and actually caused because of the pandemic, you buy less leisure. The spending that has gone down has been in a sense luxury spending. You are not going to a restaurant is often. But when you look at the growth employment that helps drive down minority unemployment as much as it did during this cycle , and has all been during these during these servicesns that are for higher income people. Losing that leisure spending is very difficult obviously in certain industries, but more ,roadly for the u. S. Economy you see how fast manufacturing has stepped back. You see how fast the economy has snapped back. It is unfortunate. Im not a politician. I dont want to get on a soapbox here. But it is the reality of the data that we look at. Tom thank you so much. Futures up 12, dow futures up 145. Coming up on this interesting day of economics and the market activity, the laureate from nyu paul romer will join us in the 10 00 hour. Stay with us. This is bloomberg. Karina this is bloomberg surveillance. The Justice Department reportedly plans to file antitrust charges against google in the next few weeks. Attorney general william barr overruled career prosecutors who said they need time to build a strong case. Some are said to be concerned the barr wants to announce case this month for political reasons. Malaysia has dropped criminal charges against Goldman Sachs and the one dbs gamble in the 1mdb scandal. Billion and 2 guaranteed the return of 4 billion seized from 1mdb around the world. That is the Bloomberg Business flash. Francine thank you so much. We wanted to talk about who is with abu dhabi with alibaba come but they are in talks to stilleys to sell a stake in the firm that has come under pressure. Some of to negotiate the abu dhabi firm. This is bloomberg. 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Liam the process is very confidential, so i wouldnt break any confidences on that, but i think the wto is a Great Institution with great technical capability, great people, but what it doesnt have his political weight. The problems that we have in the Global Trading system tend to be political. Weight, andive that i think an elected politician with a lot of International Experience is wellplaced for the job. We also need to reconnect ourselves to the concept of a multilateral rulesbased system. The lack of commitment i think politically is one of the problems weve had in recent years. Francine if you look at what the reelection of President Trump would do for the wto, if he does get reelected, is that a good thing or a bad thing . Liam if you look at the editorial that ambassador light has a road for the wall street journal a couple of weeks ago, setting out the fact that if the multilateral system and we get changes, america remains committed to the system, i think most people in the wto took that as an olive branch. I think that is how it was intended, certainly how it was received. Even those who dont like the wto and have contemplated like without it had found that the alternative is even less palatable to them. To the rising tide, your wonderful book from years ago, what is rising tide of today . What is the rising tide that can get us back to a multilateral world . Liam i think that we need to reemphasize the case for free trade, the case for comparative advantage in economics. The fact that if we have a genuinely open global economy, it is going to help spread prosperity, and therefore security. It is how we help people trade their way out of poverty. What has surprised me is that during this process, the number of people who have said to me it is great to have someone making a case for free trade, which has caused me to pause for thought. If the director general of the wto is not making the case for free trade, who is . I think there is a strong need for us to make that again because you are right. 2019, Fourth Quarter of global trade contracted in value, and that has become worse by a number of protectionist mechanisms. But that is the tip of the iceberg. If you look over the past 10 years, back at the end of the financial crisis in 2009, only 0. 7 of g20 imports were covered by restrictive measures. That ballooned to 10. 3 by the end of 2019. Tom i want to speak to the general practitioner from glasgow right now. Real simply here, in the United Kingdom, in the united states, how do we solve the reticence to go back to the office . Do we need to wait out a vaccine, or can we do it sooner . Liam i think that inevitably, was going torgency lead to acceleration in the change of a veer, where more people were already working from home, and i think a lot of businesses have actually found that they can cut their costs by not having a lot of staff in and only having the staff in that they actually need. I think in all pandemics, you get a change in social circumstances and social behavior, which tends to be an acceleration of an existing trend, and that may be what we are seeing now, and we may not go back to where we were before. Francine where do you see trade in the next five to 10 years . How is it going to change given protectionist stance, given a lot of countries wanting to look more inward to give their citizens