Transcripts For BLOOMBERG Bloomberg Go 20160708 : vimarsana.

Alex markets are relatively calm. Jonathan and have been throughout the season. The ftse 100 down but about. 1 . The dbacks in frankfurt, germany, performing pretty solidly on the continent. Across the continent, the futures firmer by about five points. I went through the other boards for you. Dollar yen, 149. Close to breaking 100 as we did on june 24. Fourday losing streak. A much stronger japanese currency. Ahead of this jobs report, unchanged. 1. 39 is your yield. Alex no one really taking any big nothings the next hour and a half. Lets check in with our team of our top stories. Julie hyman is in washington counting down to the jobs report. Guy johnson in london with the pound heading for its third weekly decline. And javier with oil taking a big plunge. David a little less than 90 minutes, well have the jobs numbers. Julie is joining us from our washington bureau. What are we expecting . Whats the consensus on what the number might be . So the consensus right now of the economists we surveyed is for an additional 180,000 jobs last month. The big question was was may an aberration. Does this signal a broader trend . We are seeing something of a slowdown in the three month average. If you dont include that may jobs report, you get an average 181,000. So well see what today does to that average but comes in line the average would remain a relatively in line as well. Private payroll additions, 170,000 is thest mat here. 8 , the average estimate for unemployment. 2 . Ourly wages, a gain of all of these numbers going to be important for the fefment as we learn from the Federal Reserve minutes from the last meeting this week, Federal Reserve officials were concerned about that may jobs report. It really gave them pause. And that was before the u. K. Vote and some of the other Global Concerns that have come back to the fore. So this number will be important for the market and the fefment all of these jobs report seem to be the most important jobs report of anyone. This one will be key for the arkets and for the feds. The key number there is 37,000. Thats how many workers that verizon strike took away from that nonfarm pay rolls number. You can subtract that 37,000. In other words, if youre keeping it all even month over month. Thats the effect of that in particular. The other sort of factors that were looking for, i mean, the verizon strike was the big one. If youre looking for any potential effect from the u. K. Vote, for example, thats not something where we will see. And as part of the management survey, they asked employers how important is the u. K. Vote . They said it would be negligible. In the coming months, well see if that proves to be the case. David thanks, julie. Thats julie hyman reporting for us from washington today. Jonathan in london, guy johnson joins me. The story of the year has been the softer dollar with the exception of one currency pair standing out to capture this moose this year. Its been a big year for argentina. The british pound is underperforming the peso. Jonathan remarkable. A lot of people are talking about it going even lower from here. The market is not there yet. There are signs of instability. And the t. A. Guys giving a little excited that maybe were in the early stages. And i emphasize early stages. Maybe thats a move back up. I think the big story will be when we get a big pop back up. Sterling hasnt hung around these levels back yet but people are positioning for that. Not now, maybe not tomorrow or next week but it will come over some point. The currency pay as the cable rate but in the equity market, its been italian banks. And the story continues today. Have we made any progress this week as far as the position of the italians are concerned versus the position of the e. U. With germany at the core . This is how to europe makes policy. They communicate. They argue their points in public and in private. You cant necessarily draw lines. Talking about state intervention. Now sticking to the rules are sticking to the rules can mean very Different Things to different people. The rules do allow for that to happen. So you can stick by the rules into the italian banks. You have to listen carefully to new york of what is being said here. As ever, europe will find a fudge. Thats how to european policy is made. Jonathan that is very true. Big moves in this market. The cable rate and your favorite crude. What a week. Alex oils oils worst week since february. Joining is javier from london. Were seeing oil up but what led the massive decline this week . It is a lot to do not with oil but with the gasoline market. We were expecting strong consumption in the United States the summer and the consumption that first half of the year has been very good. But two things are happening the demand growth has zphrode refinery has been able to make a lot of gasoline. We are entering the driving season for the Summer Holidays with too much gasoline. Refiners have to start cutting back on production rate. And that means they are consuming less croyle crude oil and thats why the whole complex on oil has come down. And we have seen the we have seen now in the wholesale market in new york for gasoline. We have not seen gasoline prices this time of the year peak driving season demand that low in 10 years. Alex great perspective. Wow, 10 years. Feel like the markets also hering bullish news. The biggest decline since 2013. You still have problems in nigeria and libya despite any kind of peace talks. What does it say that ignores the bullish factors . They have been very bullish factors. Nigeria with lots of production problems. The middle east is not peaceful at all. If you look at that kind of development, the main problem is iran is a very bearish factor. Theres a lot of oil from iran. Nigeria remarks we have seen recovery production. The u. S. Production is coming down but we have too much inventory and this is the time of the year where those bullish factors are really drawing down inventories. We have seen stocks draw. We are not seeing anything extraordinary and the market really needs to see extraordinary stock draws to really rally above these levels. And beginning to be a bit of a consensus in the market. Maybe the rally is over and we are going to end 2016 around current levels between 45 and 50 a barrel. Alex thank you so much, javier, joining us in london. For the latest on the developing situation out of dallas, texas, and other world and national news, here is emma. Thank you, alex. Snipers have killed five Police Officers and wound six others in dallas, texas. The attacks took place during a demonstration against recent Police Shootings of black men. The shooters coordinated their attacks. Dallas chief called this an ambush. The suspects were positioning themselves to triangulate from the Police Officers from two different purchase in garages in the downtown area. And planned to injure and kill as many Law Enforcement officers as they could. Three suspects have been arrested. A fourth was hold up in a parking garage in Downtown Dallas exchanging gunfire with police. President obama spoke about the attack in warsaw. We still dont know all the facts. What we do know is that there has been a vicious, calculated and despicable attack on Law Enforcement. Police are searching the downtown area for explosives. Meanwhile, David Cameron will make a show at the nato meeting. He will make the argument that britain is still relevant on its allies even though it is leave the european union. He will pledge more than 3,500 roops. And south korea and the u. S. Have agreed to deploy a missile system. It is in response to a growing missile threat to north korea. China is urging the two countries to reconsider. Global news. 24 hours a days, powered by more than 2,600 journalists and analysts in more than 127 countries. This is bloomberg. Alex we have some breaking news in the business world. Polly come is end their pact and will be joining up with Sirius Capital group, a private equity firm. About 2 billion in total. And fumbled it through equity. Olly come stopped popping. Coming up, it is the countdown to the june jobs report. 180,000 jobs expected in june in the u. S. Fresh reaction from bill gross. Ahead on go. This is bloomberg. Jonathan futures in the u. S. Ahead of the payrolls support a little bit firmer. The london, ftse 100 is unchanged. Guy johnson saying sterling now the worst performing currency so far this year, beating the argentine peso. Dollar yen close to the 100 market. 144. A fourth straight day of declines for that currency pair. And yields unchanged in a week where we saw an alltime yield on the u. S. 10year. David . David thanks very much, john thafpblet as everyone knows, you certainly should by now if youre watching the program, today is u. S. Jobs day. Here to preview the numbers is david roseberg, the chief from est economist toronto. What are you expecting . I dont think the a. D. P. Is going to miss two months in a row. The consistence somewhere around 170, 180. I think that is a reasonable estimate. As far as june is concerned, but the real kicker here and the real surprise could be an upward revision in may. Keep your eyes on that because we didnt get much of the revision to the a. D. P. Today. And my sense is that were going to see that gap close. So no matter what june does, keep your eyes on may because the chances we see an upper revision of size is very high. David we have to take 37,000 and 38,000 out of the 170 because of the verizon strike. But if your analysis, you pointed some other factors that you think are reasonably positive. For example, a shift in attitude on an analyst part about corporate profits in the United States earnings. Tell us what else you think are pointing in a positive direction. Earnings estimates were starting to go up ahead of the brexit. And either you believe that you have a break in the series or you dont and time will tell. But we started to see some of the effects of the improvement in the commodity complex having a big influence on materials, Energy Prices going up, having a ripple impact not just through the oil and gas industry but the financials. Its broadly paced. And the based. And the u. S. Dollar acting as a strangle homeland on the industrial sector the question is whether or not the analysts given the fact that were in a much more macro environment than we were previously. Janet yellen uttered the word uncertainty no fewer than 39 times. The earning estimates have started to go up. The big question is brexit, whether or not the analysts start to taken a eraser out for some of the recent increases. Back to the employment situation, i wouldnt say im bullish. This is one monthly number. I call it noise. The two things that i would actually Pay Attention to today in the june number, not the may revision, thats fine. Even if you count the may revision and you get a consensus number in june, its nothing to hide the fact than the trend basis. Employment is slowing. Thats a fact. Goods producing employment, yesterday in the a. D. P. Number is 30,000. We are going to repeat in payroll. Thats five months in a roll of negative and that leads overall employment. And keep an eye on transportation services. In april, that was down negative year on year. It went negative year on year in may at transports were leading indicators. Those are the segments in the report that people have to Pay Attention to. Alix if you tie in corporate profits and jobs, that leads us to wages. Its the atlanta wage tracker. Wages were supposed to come in 2. 7 youre on year but atlanta showing higher at 3. 5 . Is that kind of rise sustainable . Well it is showing that over time with the lags, the tighter labor market is finally belately led to a moderate increase in wages. No matter what measure you look at, or even if you look at average early earnings, the increase is less pronounced but its moving up gingerly. And we saw the evidence that they were seeing some poddest increase in wages. And when you take a look at nominal income in the United States, its slowing down. Nominal income in the u. S. Is barely more than 3 . And theres two next incomes. When i take a look and i see last 15 years over year is running 4. 3 effect. Today its running barely 3 . Those are the numbers went to look at. And the wages are hooking up. Its coming to be the spence of expense of profit margin which in the past was the nominal Income Growth that was squint the economy. No matter what number we get to april or june, the economy is fundamentally weak. And theres nothing in the tea leaves that will reaccelerate. David higher wages do cut into corporate profits and it can also put more money in the pockets of consumers and the u. S. Consumer is such a large portion of the u. S. Economy. Might that be a positive sign for the future if terms of growth . Well, you know, its a fair point. The u. S. Consumer is certainly pulling its weight. If you take a look at the various components of g. D. P. And if you look at what has been the real shortfall this cycle, nobody talks about well, this is the weakest expansion of all time. Its not really the consumer. And its not housing and believe it or not, its not even exports, notwithstanding how soft the Global Economy is. The big gap this cycle is Business Capital spending. And so thats been really the big gap. Youre quite right about the consumer. I wouldnt say its robust. And what goes into g. D. P. Is spending. Not income spending. The question is how much of that income is in the economy . So its happening at the same time that youre getting this personal Income Growth from wages is a savings rate is on the rising trend for a variety of reasons. And thats one of the reasons why consumer itself is not doing great. But were here talking about, you know, employment for the month of june. The question is, really, its a lagging indicator what is the outlook for the second half of the year . And whats really caught my eye is core capital goods order. Its down four of the past six months. Core durable goods orders are down at a 9. 5 annual rate. So companies are cut back on Capital Spending. Thats been the case all cycle long. They felt more comfortable buying back stock and boosting the dividend payouts but this has been an anemic, the worst Capital Spending cycle of all time. And if theyre cutting back, how far are they going to go in terms of adding their payroll over the past several months or quarters . David david, thank you for being here. I keep looking for some good news but its always mixed. Its always a little confusing. Jonathan coming up, well continue our jobs coverage with fresh Immediate Reaction to the jobs numbers from bill gross. And later, rick reeder, black rocks c. I. O. Of global fixed income. This is bloomberg. Jonathan one hour five minutes away from the payroll reports in the United States. Lets get some premarket movers. Heres something that you dont say every day. We have the italian banks trading sharply higher. U includes unicredit and the company is not reporting though on the euro wide test duty in july 29. And these banks are saddled with a lot of underperforming debts and investors are weighing on in a pretty negative way. Ugly charts. Lets see what happens on july 29. Sticking with europe, the european car makers were seeing a rally here after the chinese auto Sales Numbers for the month of june came up strong. Up 19 on s. U. V. Strength. V. Re looking at daimler, and v. W. All higher. The european stocks overall sharply. We have the index for the automobile offers the last year that heads down sharply showing that underperformance. Another wait and see. Lastly here in the u. S. , a. M. G. Getting hit in the market. Analysts went underperform but he has missed the big a. M. D. Rally this year. Lets take this call with a grain of salt, alix. Alix coming up, we have the latest on the breaking news out of dallas where five Police Officers were killed. And then back to markets. Our job day coverage. How will wage growth be impacted . This is bloomberg. You guys be good. Ill see you later [ bark ] [ bark ] bye. See ya pal. Ever wonder what your pets do when you leave home . [ laughing ] aw you cutie pie. Aw. Aw. Aw. Aw. [ barking ] [ washing machine running ] partys on know what your pets are up to with xfinity home. Xfinity. The future of awesome. See the secret life of pets, in theaters july 8th. Jonathan from a beautiful city of london thinks bloomberg. Im Jonathan Ferro. And it is official thermometer pound is the worst performing currency this year, worst than the argentine peso. We trade on 1. 2971. Heres the scoreboard. Futures in the u. S. Firm. Up. 2 . Dow futures up. 2 . In london, were up around 10, 11 points. The dbacks and equity mark. Switch up the board quickly through the others a sit classes. Euro dollar, up. Dollar yen, very close to that 100 mark. A fourth straight day of decline. A stronger japanese yen. Yields unchanged out of 10 year off fulltime loads. We tried at 1. 38 in the u. S. 10year yield. Thats the situation in the markets. Lets get to the latest situation in dallas, texas. Here are some of the headlines. Thank you, john. It was a peaceful demonstration in dallas but it turned deadly for police. Snipers killed five Police Officers and wounded six others. The attack took place as demonstrators demonstrated recent Police Shooting in black men. David brown called it an ambush. These suspects were positioning themselves to triangulate on these officers from two different purchase in garages in the downtown area. And planned to injure and kill as many Law Enforcement officers as they could. Three suspects have been arrested. A fourth was hold up in a parking garage in Downtown Dallas exchanging gunfire with police. The suspect shot himself but that couldnt be confirmed. President obama discussed the attack while attending a nato conference in warsaw. Theres no possible justification for these kinds of attacks or any violence against Law Enforcement. The f. B. I. Is already in touch with the Dallas Police and anyone involved in these senseless murders will be held fully accountable. Justice will be done. Dallas police say no explosives have been found after an extensive sweep of downtown. Still theyre urging people to avoid the area today. In taiwan, a typhoon has killed at least two people and forced thousands to be evacuated. The typhoon made landfall on the islands eastern coast. Winds were as high as 100 miles an hour. At least 15,000 people fled their homes. North korea is calling new u. S. Sanctions on its leader a declaration of war. For the first time, the u. S. Has imposed financial sanctions on kim jongun himself and other top officials for wide spread human rights the sanctions make it harder for banks to make it harder to hold his assets. Global news 24 hours a day in more than 120 countries. This is bloomberg. David . David thanks. This mornings mustread is a must watch. Tom keene joins us from Bloomberg Radio. Were waiting for jobs to come out an hour from now because of what it might tell the fed and what it might do. Take a look at what mark had to say about the fed. We think the fed will be on hold for several more months. We do think they want to get off zero the probability of them hiking as higher than what the markets priced in. Right now, the market is price in at 10 . Chance theyll raise rate this career and doesnt have the fed moving until 2018. We think thats a little bit too pessimistic that the economy is doing better than that. David so tom, i think thats probably consensus in the look at wirf the terminal, it doesnt anticipate much of a rise and the fed coming up any time soon. Tom its total chaos here right now. And he nails it. Theyre the idea of where the market is, where the experts are, where the fed is is one big jumble. David if you go over the last few months when the fed has disagreed with the markets, the fed has come to the market. Hes now saying nonetheless, that the market may be wrong. Tom but the key thing is a time function out to 2017 and 2018. Most pros and this has happen oferede the last 10 years, david, people used to make grand 18months projections. Thats ancient history in the game. The game is whats going to happen in the next meeting or maybe whats going to happen the september meeting and then you go on year end. Most pros are not looking out no an analysis of 2018. David its too far to look. But you had someone on surveillance. You had the mark gilbert piece which was fascinating saying maybe a rise in the rates would help growth. Tom seth masters said it to this important conversation which is brilliant. I really emphasize to people to read Mark Gilberts piece out today. Ill put it out on social. And the idea is if everybody raises rates together, what would be the outcome . Is is the ring fisher who considered the giants. And the believe in it is a belief based on very little experiment and very little data. And as professor boweder said, theres a real question of whether it would be effective if we all raised rates because of Capital Investment was stopped. David although it had to do with demographics and the extenttowhich the grades tom you put me in there. David they would have more money to spend if you raised rates. Tom yes. The favors do better and it works both ways but theres this word, ambiguous. Theres a lot of ambiguous questions about the microeconomics of these kinds of theories. Heres the theory. The numbers come at 8 30 and the markets will react. Its a live jobs report. David well know soon enough. Thanks very much, tom keene for joining us from surveillance radio. Youll want to tune in every morning for bloomberg surveillance radio with tom keene and mike mckee. Alix we are an hour away from that all important jobs number. How about 175,000 jobs to be created in june . Thats the number that standish is expecting. Vincent reinhart joins us. Eres 175k put the rate hike back in play . Vincent probably. So remember two things about the job number. Theres going to be a little bit of a sticker shock because 35,000 workers are going to be coming back from the verizon strike. We knew it was subtracting from the may total but people still got impressed at how low that number was. The second thing is the reaction probably going to be asymmetric. Its hard to imagine a Strong Enough number that puts the fed back immediately into play. 175,000 in that vicinity will get people to price out policy easing this year and Start Talking about the september meeting. But only be talk. Alix but the problem seems to be that would put the fed hike not on the table was a bad may jobs number. O we get a good june job number. How does the fed not being behind the curve . Vincent three things. The first, they were worried about the u. K. Referendum. Thats passed. So it wasnt just jobs that kept them off the table. And the worst case eventuated. So they might say there is a lot of uncertainity. Second, remember what janet yellen said and that is dont overcount one number. People will say this is a backward looking reading on where we were in june. Lots of things have happened since. Now, theyre going to need a couple more readings to establish that theres a momentum in the economy. Third, go back to what janet yellen was talking about all the way back into her philadelphia speech and her press conference. She likes to see job creation on the order of what we saw earlier this year and in 2015. That was 200,000 net jobs created per month. Thats a pretty high hurdle. Its going to take a bit to be convinced that the economy has momentum. Jonathan i want to go all the way back to the previous tightening cycle where we saw the 50,000 and yet the feds went ahead and hiked rates. Why the overwhelming bias to view these small job numbers as bad at a time when we should be reaching full employment and jobs growth should be shifting . Why is this the best thing . Vincent so i dont get it either, but you dont really care about my opinion and what they should do. Its what i think theyll do. And more than anything its the con junk cher being this close o the lower bound. And keep the expansion going than overtighten too soon because you dont really have policy instruments youre confident in if you tighten too quickly. Jonathan i caught up with the president in london and hes worried about fresh credibility. A market thats priced out any fed action for the next two years. They tell us that we still debate which data it is and we do that month after month after month. Do you think there is a big credibility problem down in d. C. At the fed . Vincent there is a problem. It goes back to the deep waters that tom keene and company were talking about. Im not sure its chaos yet but its concerning. And that is were seeing the end of policy guidance as an effective tool, i. E. , conveying the whole path of future policy over the next couple of years and using that as an instrument. Why . Because the worlds too uncertain to make credible commitments. Six months in advance, let alone a year and a half in advance. So they are going meeting by meeting in their policy decisions. Problem is theyre still publicing a summary of Economic Projections that tells you the whole future path for Interest Rate, conditional as it is. And the bottom line is we dont really know what the terminal federal funds rate is, however this tightening cycle will end. Nd those sorts of things are damaging to the credibility, the fed. Thats why they keep on emphasizing data. Problem is the dot chart, the summary of economic projection is haunting them. It was a good idea at the time. Its less good now. David mr. Bullard put out there that we should stop making projections too far up because they couldnt know it. Has anyone picked up on that . I was surprised theres not more of a reaction. Vincent if you go back to the transcripts, one thing youll see every time the f1c talked about a Communications Policy and it was involved in a number of those subcommittees and secretary economists, and they always say if we do something to enhance communication, we can never go back. And so theyre going to feel that theyve raise third bar on what they released and taking Something Back seems undemocratic. It seems, you know, to change the direction of progress and transparency. So theyre not going to be able to take that away unless they figure out some other way to do. Alix seems to be like you want to kill the dot. Vincent reinhart, great to see you. Standish chief economist. Lots of job day coverage coming up. Jonathan absolutely. Well continue that coverage right here on bloomberg. Ahead, rick reed err breaking own the rid rieder breaking down thea and bill gross will join bloomberg tv and Bloomberg Radio from london and new york. This is bloomberg. David this is bloomberg go. m david westin. Council economic advisors jason furman joining us from the white house live. London and new york, this is bloomberg. About one hour 45 minutes away from the cash opening in new york city. This is how futures are trading ahead of the jobs reports. Futures firm for the u. S. Equities rallying as well. With economists forecasting a strong bounceback from an ugly may jobs report. June set to come in at 180k. Joining me is ken. To set the scene, weve got a fed and a market that says no, no, no for the next two years. We live in this postbrexit world where yields are low. And you sit there witnessing the funds flow. And i want you to tell us what the money has been moving in the last three weeks. Money has been moving somewhat out of the european quities. But not a ton. U. S. Equities has been stable. Jonathan what do the bond funds flow look like . Are they trying to get some pickup . Ken theyre going more to the yield to get some credit spread in there. So theyre going into the corporate funds, Investment Grade funds. Its more of what were seeing than the government funds. Jonathan you look at european peripheral data. But with treasuries in mind on a job where we get the latest payroll report, do you find it hashed to reconcile yields with pay growth less and unemployment south of five . Ken a lot of whats causing yields is the yields in the rest of the world are so low. Theres constant move towards yields and the u. S. Is looking fairly attractive to a lot of Global Investors. Jonathan for Global Investors look into your funds, the passive story, a lot of people have painted a picture that its all about cost. Is it all about cost . Ken its a big part of the move towards passive is about cost but what were seeing, the flow has been strong and at vanguard, were seeing a pickup in active flows, especially in fixed income. And even on the active side t about cost. Its about the money is moving into the lower cost active funds, no the higher cost or moderately cost active funds. Jonathan the story over the last five, six years has been passive overactive. Do you see that changing fundamentally in any way as the years progressed . Ken i dont see that changing. I think the flow has continue to move towards the passive but the active flow tend to move towards the lower cost active. And thats the interesting story Going Forward is really investors looking at what is the average expense ratios on the active funds that those investors who believe in active and having a lower hurdle rate to overcome by actually looking at the lower cost active funds. Jonathan have they changed their convictions to where they see the world since the referendum in the u. K. . Ken theres still a lot of uncertainty Going Forward, how the e. U. Is going to work with the u. K. In terms of negotiating the exit. So theres still so much uncertainty Going Forward and what that does is it causes businesses to reduce their investment spending, causes consumers to pull back and be cautious, real estate prices have taken a little bit of a hit. And that creates that kind of uncertainty that is going to be hurtful to the u. K. Economy and the european economy. Jonathan someone in london told me dont bother watching because it doesnt matter now that weve had this postbrexit move. Would you agree with that . Ken i think the fed is probably priced out until the end of the year, december, or maybe the First Quarter of 2017. Investors do need to news these kinds of opportunities especially in europe and in the u. K. To rebalance their portfolio to the longer term mix. One of the things you dont want to do after the market has dropped considerably is to leave the market because the market has priced in a lot of that news. Its a great time like in the u. K. And in europe, equities have underperformed bonds. Its a great time to rebalance your mix back into equities and bonds to keep your longer term mix with the kind of risk that you want to take as an investor. Jonathan thank you, ken, great to have you on the program. David thanks very much. Thats a great conversation. Coming up on bloomberg go, u. K. Housing funds are under duress and there may seem to be nowhere to go but down. But is that right . We have some charts to tell us. This is bloomberg. Jonathan from london and new york, this is bloomberg. 38 minutes away from the pay rolls report. This is the scene in Global Markets. Futures firm for the u. S. Even though were heading for a week of losses in the United States and in europe. The ftse up. Dbacks and frankfurt up. Switch of the board very quickly. Heres the other Asset Classes for you. Dollar yen, close to 100 mark. Its the stronger japanese yen story. The cable rate stable around 12979. And yields alltime low yields earlier this week. We trade at 1. 39 . Unchanged today ahead of that payrolls report. Alix . Alix one of the big stories out of the u. K. This week had to be what happened with the u. K. Property funds seizing up and halting some redemption. Credit suisse says there is more downside for the openended funds. Closeend funds limit amount of shares. This is the difference between the two. Preredemption. This blue line are closeended funds. They had about 20 decline. This orange line are openended funds. Those are the guys that hatted the redemptions and they had about a 5 decline before the suspensions. Point bigs in order for the open ended to catch up with their peers, there has to be a lot more downsize. And the 15 more downside to get to that level. In addition, come of the closedend funds that we have been seeing are trading at severe discounts to their net asset value. We can pull this other chart. So this white line here is u. K. Commercial Property Trust fund. It is a closed end fund and this blue line is commercial Property Trust, also a closedend fund. This is zero. When they wind up closing above that level, it means theyre trading a premium, meaning a premium to the assets that they have in that fund. Now below zero, theyre looking at a discount where are they showing now . A pretty severe discount to the underlying asset. So john, credit suisses point is openended funds have a lot more potential downside if theyre going to match the downside weve seen in the closeended funds. A topic weve been talking about all week. Jonathan one of the big appearingle is the differing approaches from individual funds about how the handling the redemption story. Aberdeen for instance, telling investors there could be 24 hours im going let you decide whether you want to take the writeoff or realize the loss and pull your money out and thats fine. Other funds saying 28 days and then reconsider. So all these different funds with different strategies in terms of how they handle the redemptions. Alix imaccumulations for investers and for banks who might hold these underlying loans as well. David, we saw a lot of this in 2008 and 2009 when the mortgage crisis hit. The trickle down was selling gets selling. You sell celski what you can, not what you want to. David we have not seen is actual prices for real estate going down. The question is whether this trickles through the actual amount of money people are paying in a real estate in the u. K. Which we have not seen yet. Alix we have estimates from 20 decline in those underlying real estate assets. David for office rents. 20 down. Alix yeah. Definitely something were going to be keeping our eye on as the brexit fallout continues. David thanks. Thats really good. The latest on the breaking news out of dallas where five Police Officers were killed. Plus, we are awaiting the pay rolls number. We get reaction from the june jobs report from bill gross. And later, rick rieder, blackrock c. I. O. Will be with us in new york. This is bloomberg. E david countdown to payroll. David excited to bounce back from an ugly may. Anything set out the rest of 2015 . Troubled assets grow over instability in the italian government. State intervention cannot be ruled out. Vonnie five Police Officers are killed after snipers opened fire on Law Enforcement in the heart of dallas. David welcome to the second hour of bloomberg. We will look at the telestrating shortly. I have alix steel and Jonathan Ferro here with me. We are 30 minutes away from u. S. Jobs data, and that is the big focus. Jonathan right after those numbers are out, we will have numbers on on the program to break down what it means for the fed. Betty a company willf be here with us. Traders dont want to take up positions here. Firmer, uputures are 0. 2 in the u. S. The, london doing good. Almost 1. 5 on the dax. We had for a week of losses for europe and the u. S. Switching up very quickly, here are the other Asset Classes. The fx market, dollaryen, we broke the 100 mark. Willie do that again in about 30 minutes time, i will get that, 1. 45. It is a stronger japanese yen for a stronger day. For metals, and crude potentially the biggest drop in the year. Alix unbelievable. From the minutes away june jobs report, and we have team coverage. We have the chief u. S. Economist from Bloomberg Intelligence, radio surveillance michael mckee. First of all, the numbers, prediction . The forecast is 180,000. Wall street is leading a little stronger. If you look at this, this is if you look at the skew of the forecast. Towards a belief among economists we might be stronger. Just part of that not potential paybacks but verizon workers coming back from strike. You have to count just discounted 35,000 from that number. We should have added 35 numbers to get a cleaner reader, but it is still a lousy number for may. He said subtract 35,000 from the june result. I am concerned we could be on the softer side of things. ,he bls could be very seasonal and the more typical seasonal in may, we wouldve had weaker numbers. There is a penchant for weaker numbers to pervade the labor data, not only injured with david the next couple of months. David do numbers tend to be weak. There is a mild mop bias. It is our to adjust for the backtoschool season when people move in and out. Alix the other part is wages, expectations of 2. 7 . This looks tax withholding receipts. You pay more money to the thankt, thinking you for making this chart. If i can zoom in over the last few months, you see it increase. Is that sustainable . It is if we continue to see people get jobs. On the basis, the numbers are worried running weaker. The numbers are met matching up. Just not matching up. Are we really seen people get hired or not . It is not a perfect correlation, but it does tell you something. Alix if the wage increases and the tax withholding are the minimum wages, at some point, that juice is going to wear out. It is happening across the spectrum, as we are seeing labor scarcity in an array of fields, especially higher skilled openings. So i think that will beget more wage pressures. Wage pressures are critical to the interpretation of the jobs report. We always joke, this is important, but this one really is. I would think the most important data point in the last six months, because we have seen the pace of hiring dwindling not just in may but over a sustained time. This is real questions, is due to economic weakness or a more mature economy . If it is the economy, you need to see wage pressure accompanying it. David funny up the average number of hours worked or week, we talk about this every time in you note a. 1 variance the average number of hours worked would be the same as how many jobs . Over 300,000. Gainve to take the payroll into broader context of what it means for hours worked and aggregate income. It tells us about gdp growth for the quarter and household income. David michael, what are you looking at . The headline number for all the reasons we have been talking about. Janet yellen made it a big deal about minority unemployment and minority earnings. She let off her testimony last month with that. Employment doubled the white rate, and it has not come down as fast as it has for whites. To see whetherng or not that moves a significantly, because it may suggest her bias supports itself longer. David she expressed frustration about the inability to get the number down. It is a tool, but she can keep rates lower. Toid thank you very much the chief economist for Bloomberg Intelligence and mike mckee. Alongside tom keene, interviewing the Capital Fund Manager after the numbers come out. Alix what it means for stocks, we have the citigroup chief u. S. Equity strategist. Good to see you on this show on friday. The s p, a little bit higher today. We are near record highs. What do they happen so the market if we get a good job number . It is supportive of economic earnings phenomenon. We were talking about wages and workers earnings, but corporate earnings have been stubbornly high. They have not gone higher, or lower in the last 18, 21 months. You wonder why the stock market is near alltime highs, because earnings are near alltime highs. It there is a strong correlation between the two factors. If you start to believe there is a better economy, you ought understand better earnings and there is a positive trend. Market iseems the pricing an ok job number, and then a diminished fed. If we want a killer number, does that for the rate hike back on the table . But aate interrupting, single data point will not change the feds mind, and i dont think anyone should i gets the ultimate very nervous just focusing on a single number. It becomes very topical, on the given day, we had a very poor number reported for the may jobs. Deviationhe standard of revisions ultimately are about 100,000 in a given month. Thousandd 60 something , and in 160,000 will we look at them to years later, the street reacts to the news. Strategists said back and say, one data point is not going to change my view one day or another. Alix [indiscernible] [laughter] it does not extend to viewers of are supposed to be thoughtful about it. Upid my colleague points the fed repeatedly said the data is dependent. We do not know what they are depending on. It seems like there is confusion. Is that part of the feds fault in the clarity of their expression, or are they confusing data, playing the hand that dealt them . There is great umbrage when the fed is critiqued by many people who dont actually look at as much data as the 20 2000 phds who work in the fed. I cant sit there and say they are making costly mistakes. The fed structure, or you have these different president s in different cities who have the ability to speak their mind, and they are not speaking for the fed, but themselves, they create caution and communication. Different voices are heard in the foc meetings as well, the chairman and vice chair get a consensus message out. One thing is really confusing when the fed talks about data is this idea of market dependency, also. It is part of the data they watch because they have to worry about feedback loops. Let me give you one example. In january, one of the worst points, early february, 40 of the s p 500 names, 200 out of 500, more down were down 45 . Imagine your stock is down 35 to 45 , you think the world is ending, you cut back investment, dont hire as many people. You worry about the stock market. The fed says we understand feedback loops. We have to be conscious of markets, not just the labor data point. Alix citigroup u. S. Equity strategist, speaking with us. Well be breaking that down next. For the latest on breaking news out of dallas, texas, other headlines. Here is, chandra. Reporter downtown zealots is a war zone. Police chiefire on during protests of shooting black man. Seven officers were wounded and five were killed. It was an ambush. Wereese suspects participating in a way to triangulate on these officers from two different perches in garages in the downtown area, and planned to injure and kill as many Law Enforcement officers as they could. Reporter police have arrested three suspects. They exchanged gunfire with a fourth and Officials Say that suspect is dead. President obama called the shooting a vicious, calculated attack online enforcement. Resident obama there is no possible justification for these kinds of attacks or any violence against lawenforcement. Withbi is already in touch the Dallas Police and anyone involved in these senseless murders will be held fully accountable. Justice will be done. Reporter a large part of Downtown Dallas is designated as a crime scene. Police are telling people to avoid it. In taiwan, a typhoon has killed at least two people and forced thousands to be evacuated. It made landfall on the islands eastern coast. Winds of high as 100 miles per hour, 60,000 people fled their homes. And south korea and the u. S. Have agreed to deploy a new antiballistic missile system. South korea has fallen to it growing missile threat from north korea. China is opposed to the move and is urging the countries to reconsider. Global news 24 hours a day, powered by more than 2600 journalists and analysts and more than 120 countries. Chandra, this is bloomberg news. Jonathan we are awaiting the june job report. We will see the forecast 100,000 jobs . And bill gross ahead. From london and new york, this is bloomberg. Jonathan from london and new york, this is bloomberg. Attention to Global Markets and 15 minutes time shifts to that picture, d. C. , and the labor Market Report in the United States. The head of that report, 50 minutes away. U. K. ,s up 1. 10 in the the footsie up to put 0. 2 . The dax up 1. 35 . Indexes, the stoxx 600 and the s p 500 heading for a week of losses. Here are the other Asset Classes. We treated the fx market, 1. 29. Dollaryen, 149. All time lows on the u. S. 10 year earlier this week. Crude, 45. 53. Citigroup chief u. S. Strategist is still with us in new york. It is great to have you with us. I question to you is, i was trying to gauge how this market was primed. How is it primed . How does it react to a downside surprise in the labor Market Report . Numbersnk stronger job will generate more of a relief. Fears about slowing, any kind of recovery from that trend would be positive, i believe. If you have continued weakness, people will start to doubt the strength of the economy and the ability to generate earnings. Strong would probably also generate some, if you like, fed concerns, but people will try to price a higher probability of it late rate hike later this year. One product will not get you there. The federal want to see other things. We look at the brexit vote or the italian banks, the fed will take a harsher posture. One data point does not change that. Jonathan the labor president here last week said the brexit decision should have pretty much nothing to zero impact on the u. S. Economy. Why is there a concern for u. S. Equities. I understand foreign earnings are a big makeup of the s p 500, but when we woke up under 24 and saw the s p 500 and constituents down, was that overdone . Tobias i am not sure it has no impact with respect to the earlier comment. I think it has modest impact. Europe is probably a percent of the s h essen it p5 hundred sales. S p 500 sales. Tobacco am ae, they are still taking the drugs they have to take with respect to the brexit vote. So the last one present might be cyclically sensitive areas lets point 02 . S 20 , so it is not zero. A domino effect. And then, is there a vote in france, italy, spain . Everybody freezes. It would not say no impact, but it is a secondary effect. That was what my point was. David you were talking about the psychology of the ceo and whether it is brexit or what the fed might do or what the economy, or their stock prices. There is a lot of uncertainty facing the ceos we need to get past. The biggest determinant on determining whether they will hire people or invest . Side, on the investment we did a study looking at 700 companies in the u. S. , and energy, we all know energy is down. But ask energy, the aggregate Capital Spending plan for 2015 is up 25 . That is higher than we thought the study back in february, up 4 . The biggest drivers, technology, media, companies that have to invest in the media industry, responding to or cutting and things like that, or in technology, you are talking about Cyber Security, things like that. David it is often the pretty low base. In the last 20, 30 years tobias no. Capital spending has been growing. Growing ever single year we hit records in 2011, 2012, 2013, 2014. 2015, was a pullback because of energy. Ask energy was up. And it is just inaccurate. Head ofspending at the buybacks everything a year since 2009, and the record year was 2007. We are this drumbeat here this drumbeat of inaccurate data being spouted. David so i was wrong, and im glad to be corrected. Tobias everybody is wrong on this one. David why is a productivity coming out . Tobias i talked to the protesters professors in the u. S. , and they think it is being measured correctly for the most part. You take an uber car ride for instance. You get out of the car. Behind the scenes, you are getting billed, right . There is a billing process happening in the cloud, but you walk off the to your next meeting or whatever. That is productivity. There was a process of a bill payment being generated. It goes to your emails, this is what you spend, etc. Something is going on, but we dont measure it that way in terms of hours. Kind of academic groups that look at this believe there is a measurement issue. Alix so you have 3 Earnings Growth for 2016 for the s p. You are looking for some kind of organic growth. And in citigroup says the brexit heightened the risk. How do you even this . For phil,eat respect so if i say anything bad, it will come back to me. The context is the same, it uses the term a growth recession. It means we are going to have modest growth, the u. S. Being one of the better elements of that growth. There was a big disappointment over the last double years. It is not even europe or the u. S. , it is emerging markets. That had been the engine of growth globally and the slowdown for a variety of reasons. Montis and countries, for example. Lets go to the u. S. Sales are north american. We are more dominated by what is going on here. The growth is slower than we anticipated before. You put that together, you need something more devastating to her the earnings of the u. S. We had a couple of things hurting us, energy. That was 80 , but he percent was the trawler dollar 20 was the dollar. Isnif you look at the manufacturing new orders, they have been out five months in a row, which has been harbinger for industrial trends. It is down. If Industrial Production goes up, which indicators say it will, earnings will follow. You spread overhead costs a cost more units, generate more profits. Alix thank you very much. Citigroup chief u. S. Equity strategist is staying with us. Coming up on go, minutes away from the june jobs report, 180,000 jobs expected last month in the u. S. We react to the data. Futures up five points. This is up this is bloomberg. Jonathan four minutes and 35 seconds away from the gym pay more june jobs report. 0. 2 in london. Equities up on the continent as well, dax up 1. 35 . With look at the other indices. Abigail has the stocks to watch. Reporter big movers in the u. S. Starting with polycom, shares are soaring that the Video Company is going to be acquired for 2 billion by serious. Also and the merger pact agreement with a canadian mike dell. There are shareholder relief with stocks in the u. S. , plunging on the news three patients died in a cancer trial. This is going to put that whole trial for acute leukemia on hold. Efore todays downward move juno had been outperforming the biotech index, but we will join the bear market. In the Cyber Security stock is storing today soaring today. Earnings by 80 cut. A huge beach. Other Cyber Security stocks could be sought soaring. Lets look at what key things are looking up. Director ofnaging Foreign Exchange is looking at the impact of todays job report on the dollar. Great to have you. Because of this tugofwar between safe haven bid for the dollar on one side and rapidly declining expectations of activity on the fed on the other , which side wins . When we get the breakout . Big number in enough combined with average 0. 3 or 0. 4 month over month, that would be big and the dollar would rally significantly. He would havto reprice the fed. The summer 2016 comes back on the cards. December 2016 comes back on the cards. It would not do much on the dollar story. We remain in the same tugofwar we are in now. If we get a big miss, there is a asymmetric set up. If we get a big miss lower, that will be bad for markets. We might have to pass global recession. If the dollar gets hit initially , and then probably comes back on a safe haven bid. Dollaryen it will be the one that suffers the most in that regard. The tugofwar is in place. Looking for number outside of the consensus and the comfortable range. Jonathan talking about asymmetric risk, look about the dollar. If we could capture this, the dollar is underperformed everything bar the cable rate against sterling. Move either way, surely the potential for the upside is bigger, given we have a lot of Stock Movement and talking from the fed. That is correct. We have seen the dollar weakening against Commodity Currencies and the yen. It did rally against emerging markets and the pound, but not against the euro. There is potential for the dollar to rally. Any meaningful shift in u. S. Will give that into the dollar. Is not in the best interest of fed to have an excited extended dollar rally, and that will be key. Very much. Hank you 40 seconds away from the payroll report. Lets check in on the markets. The scorecard ahead of that, this is how we trade. Futures are firm in the United States. Equities are up in europe, the dax up 1. 35 , the ftse 0. 3 . This is all the fx market is positioned. Dollaryen, 149. 49. A stronger pound story in todays session. Yields have not changed on the 10 year. 1. 39 is how we trade on the u. S. 10 year. The june payroll report is right here with julie hyman. 287,000 jobs added in june, that is the best gain since october 2015. Better than 180,000 estimated by economists. 4. 9 versusomy 4. 7 as unemployed rose. 0. 1 , half ofng what was estimated. The other important number, may ofise is down from a gain 38,000. April revised higher to 144,000 123,000. That means the threemonth average gain is 147,000 versus the 12 month average gain of 129,000. So they came from gains in leisure, hospitality, social assistance, and financial activities. Private sector grows 25,000. In may, the gains that it happened, happened because of government hiring. This fell by 6000 in may. It was the first decline since february 2010. Effect onthe verizon the information category. The biggest drop in private sector and hurrying in the month of may hiring was in temporary agencies. 62. 7 . The average work week at 74. 4 . The headline, 287,000 jobs added in june, and may revise down to 11,000. Jonathan thank you very much. Markets trading on the upside. A big beat for the month of june. The twoyear yields going up five basis points, to 63. 10 year yields up for basis points, zero point 1. 43. A stronger dollar story. The cable rate is putting back down to 129. The dollar index up 0. 1 . The initial react in the market is up. With every deep that remains to be seen, but we are trading on the upside surprise. Two hundred 87,000 jobs added in june. Much more even if you back out 37,000 for the verizon workers. You are looking at a gain of 250,000 workers. David it seems like it was going to be half of that. How all overed by the place the numbers were. From 11,000 jobs down 38,000. And you are seeing the market sort of move higher on that. Lets go to tom keene and michael on Bloomberg Radio. Ony are speaking with janet the much better than expected jobs report. Tom we welcome Bloomberg Television with the radio audience. We have jp morgan here. Bill gross of janets capital. This is a point where you smooth things out. Im looking at a three month moving average of 147,000. That is stabilizing the shot that we saw last month. Yeah, i think so. The feds Statement Last month suggested unemployment, uncertainty. Straight as you things out, that does it. The Unemployment Rate went up to 0. 2. Ages increased things are not as hunkydory as 287,000 might suggest. But it is maybe a normal 150,000. It is nothing to get excited about. But doesnt get anybody interested in what janet yellen and company are going to do . Does that change the calculation of when they might move at all for you . Bill i dont think so. Into is the brexit to look the eyes of brexit, i guess. They have problems with italian. Anks does with the ecb and the eu do, problems with u. K. The property, mutual funds. There is a sense of liquidity in markets, and the fed is upset and concerned with markets. To the extent that there is discord around the world. I think the fed stays where it is. They want to raise Interest Rates. They did it once. If they want to have us believe they will raise several times and therefore have a pretty positive yield curve, which will help banks and Insurance Companies, for the most part, i dont think this change is much. Michael your calls for how many rate moves this year . For athe market calls half in the 12 months beyond that, another half. 12 basis points each. That is the market. That is, i think they raise once and try to get employment numbers like this, and if they get those wages up, then perhaps they will have their chance later in the year. They really do want to raise rates, some of them like bullard and evans have a sense they need higher Interest Rates in a to balance out their savings versus the investment element in the economy. Tom in the market come back, it is stronger yen and then weaker yen on the report. And then we have the yen coming back again. In our question lifetimes, this is the most prized to perfection bond market weve ever seen. Is your day to day life changed when you see yields . The yield goes from 139 to 131. These are shocking yields, shocking bond evaluations. What are you doing daytoday within this . Hit is priced to perfection, i will change that if you permit may. I dont think it is priced to perfection. Space. Ed negative yield in germany, the ecb cannot provide 40 of german bonds because they are yielding less than 40 basis points, almost everything including the 40 year jgb. So it is on third that it is absurd. So you dont buy those bonds. The german banks and Insurance Companies have to buy because they have got to put their money somewhere. So you substitute some kind of certainty. The trick in this business is to buy the highest return relative to risk. I would say every asset class is at risk. The question is, which is at less risk. Is, centralpremise banks will do what they do despite the fact i disagree with it. If that is the case, volatility itions, thebanks pos volatility of the policy rates around the world will stay relatively constant. So you want to take advantage of that by selling personality around it. That would include buying more, selling outright options. That would include basically staying in your in zone summing like 1. 4 on a 10 year like 5 or 6 . Gross shells mr. Options, those derivatives, those bring in the income stream. Bill gross, if i look into the into thend into july, second half, is bill gross looking at Janet Yellens American World and for that matter, a troubled europe as an equilibrium or disequilibrium so great that you need to be vigilant for the shocks . Bill one must be prepared. T is hard to say it does not approach a black swan, baby a grace want. Y swan. Ybe a grace we are not quite sure what is going on with china, but i observed the chinese stock markets basically stay level throughout the entire night, each and every night. One half is suspected, something is going on there. Problem a potential almost everywhere, and i, that is the key. A highly livered world, anything can set it off. Tom let me ask one more question before we go to my colleague. There was a brilliant article written overnight in the telegraph about china exporting their deflation over to us. Is janet yellen running a nonorthodox policy that she has got to accept the disinflation from china and the rest of a troubled economic world . Bill i think she does, and if she continues to talk about raising Interest Rates, that would make it even worse. China has been devalued the 6 or 7 over the last seven or eight months, 10 annual exporting deflation. Experts dont understand how that could be the case. We can buy chinese goods much cheaper. That erodes the manufacturing bases, it becomes is competitive. China exports deflation to the rest of the world. , not with as that stronger dollar or an Interest Rate hike. Behavior doeser to some extent. Tom we are so europe, europe, europe. Guess what . China and a little bit to do with it. Tom china will come back into the news. To ask you about the price action today. It is similar to what we have been seeing in recent weeks. Does the new curve tell us any much about this point . Moreeory, we should see signs of inflation and not go down as much as going up. I think we, the old standard, that is the possible problem with the oldtime 72 ors, not that i am but i think the old standard is when the 10to curve is on zero. It has come down from 250 two now i think it is a read on 78 or 80. 78 orhink it is around 80. The process of flattening, the momentum of flattening will make the difference, and one has to adjust to the highly levered world. It is a different world with the yelled flat yield curve is flat at zero. I think the fed basically has been tightening for the last two years. They have taken off things. Curveave watched the between two and 10, 30 flattening. Financial with profitability, regulation, all of that in combination. The flattening yield curve is not good. Even where it is, it suggests a potential for Slower Growth in the session down the road, especially alongside a very strong dollar. 20 can see an increase by to 25 in the rest of the world. A very provocative piece in the last 24 hours, got a lot of comment. The banks are keeping rates too low. If they were to rise, thanks for profitabilitynks will have demographic shifts. Ugly people, not you tom watch yourself or you will never come on again. Michael they are not making any money right now, because they can earn anything on their savings. You get more bang for the buck that way than trying to influence the spending behavior of millennials. , but thatink so too is not the problem. The Central Banks work off of 20, 30 year models. I think it is commonsensical. That is where common sense enters the equation. It would be negative in terms of mortgage rates. Certainly in terms of stock toces at discount relative the gordon dividend discount model. To basically lower its prices, Everything Else being equal. The real problem Going Forward is savings and the ability to earn savings. Executive companies, profitability and margins, citizen incomes, education and retirement. It was time to raise Interest Rates, 12 to 18 months ago. I still think it is, but i dont think is going to happen. Mentioned pension funds. What is happening now is going to be a disaster. What do you do if you are going to be a Pension Fund Manager . Bill it is a disaster. You try to change the rules a bit. They do that, they change the rate and make the relevant a little bit different in order to stretch out the inevitable. But you try to cut benefits. That does not work very well. We have seen that happen into troy and chicago. The begichs budgets get hung up as you try to reduce benefits. A long, dry doubt battle in terms of reducing the marginal profitability over the marginal survivability of a pension fund. Most of them are like 80 funded because of lower Interest Rates and their durations have not matched the durations of liability. It is a long problem Going Forward. One of the ways to do it is to raise Interest Rates. There are other ways. Michael will this unleashed a wave of buying as fundamental as capitulate . Is this a fight over 30 . Bill that is the buzz in the paper. I dont know whether that is true or not. It is hard to immunize your portfolio. A 10 year at 1. 4 . You will question your sanity because a few years ago, it was 3 . Before that, 5 . Annual immunize at 1. 4 . Immunize atill 1. 4 . So all he is in germany, their portfolio was negative space. Thereiance and germany, portfolio is negative space. Rusheal problem would be a to all you risk your assets to provide a semblance of return, relative to liabilities. Profitu mentioned companies in the editing them. They have got to stop reductions from the various funds because of the gain. I think what all of our viewers and listeners want to learn from bill gross, including the institutional lead like madame lagarde warning yesterday with the imf is when this alice in wonderland world underlines. Will it unwind along smooth, predictable, dampened reaction funds, or will it unwind with ugly jump conditions where there is real damage . Which way do you go . Bill policy makers are trying to make it through there. In the last five or six years, monetary stimulation, changing and rules at the last minute. Basicallyt germany in could be aail bail out for italian banks under special circumstances. Well get the u. K. Property mutual funds basically changing their unit value. The worth of the fund by 15 overnight to prevent money coming out, which is incredible. Say, whatn investor is my money worth . Tom there is a smalltime bond manager on the west coast. Remember him . His name is gun lock, and he focuses on Deutsche Bank as a proxy for the european banks. When you consider the position Deutsche Bank is in or if they have to structure cocoa hybrids for the italian banks to be the kind of jump condition that leads to real instability . Bill it could be. We have known Deutsche Bank is a weak link in the Banking System for a long time. With the stock prices, it sinks to 11, 10. There must be a hole somewhere. Deutsche bank is over hundreds of trillions of dollars of derivatives, some of which then closed out, but we dont know what is left. Was theeutsche bank bastion of german banking versus a long time, but it got caught in the rush to derivative mess. Now is the problem. Certain italian banks, Deutsche Bank, the lack of confidence for the policymakers as they change the rules in order to support them, all of these things, reduced confidence in markets is investors know the artificial prices are the theme of the day. Tom one thing you have been comfortable with in recent quarters has been mexico. If i see a brexit knock on effect with the contagion in europe going over to a mexican peso from 18 to a weaker 19, who knows where it is going, does even bill gross have to stop doing normal procedures because of the butterfly effect of brexit in europe over to an emerging market proxy like mexico . Bill i think that is a fair impression. Mexico is a proxy for emerging markets. Abreast of the art emerging markets. It has half the ddp of the United States, but mexico and the peso are taken on the chin when things go wrong. What does that mean in terms of policy . We saw last week the central bank raised Interest Rates to support the peso to some extent. So you can expect volatility. I will point out the mexican tenyear tip, the linker, the inflation in the bond, it yields 3 real as opposed to 35 basis points in the United States. It is huge spread. You can adjust for credit quality, but it is a value absent, a rush to safety. Michael we have seen a lot of people rushing into Corporate Bonds as anybody tries to get some sort of yield here. His that a smart move . Are people taking too much of a risk and using it as a proxy for sovereigns . Formula. Is a quick you figure out what the spread is, you pay high yield at 450 basis points to figure of the annualized defaults on the recovery. Of 50 . E recovery that takes two points off the 4. 5, so that leaves you 2. 5 . You have treasuries. That is not a bad deal, but it is not the deal investors think we are going to get. And we have problems like we are talking about, those spreads are going to widen out. It is obvious when Interest Rates are zero and negative but everything is tied together. The knee bone and the hip bone and junk bonds and negative are tiedbonds together. You must think the highyield bond area is artificially priced and underwritten his and circumstances. In certain circumstances. Across all categories of corporate, or just highyield . There are cd x, an index of highyield bonds. Ig cdx, investmentgrade bonds. They are easily traded. Are about 125. So when you buy protection versus selling, that you are that carry. But you are looking for a widening of spreads. That is what happens in both of those markets. Michael the cost of market money, effectively 37 basis points, or Corporate Bonds the channel for Monetary Policy now . Bill they certainly are beginning to be with the ecb. Stocks of the asset class of the day with the Swiss National bank, we found up. They have 500 billion worth of stocks around the world, including johnson johnson. It is staggering. We have known the japanese buy stocks, but i never knew the Swiss National bank bought stocks. It is like a sovereign wealth fund. Market iss entire distorted by cash flows that never have been. Tom i look at the swiss franc has a safe haven proxy for this United Kingdom stuff. All of the world would like to know the bloomberg surveillance world would like to know what you are thinking in the drama of the brexit vote. What were you thinking as you saw the United Kingdom shift to leave versus the presumed remain . Bill bill i was watching that overnight. What i was watching, i had some options in u. S. Treasuries, calls and puts. Initially, the u. S. Treasuries were declining in price, declining to much. Then all of a sudden, as the brexit was winning, treasuries went and we are going up too much. So you dont want to sell as much volatility as happened on that night. It was a long night for me. It turned out very well, but that is the problem with a sudden change. There are so many positions, so much leverage, currency wise as you point out every five minutes on your program. I think that is good. There are huge currency positions that have to be allowed and rebalanced. There are huge positions in terms of credit and treasuries. Huge positions across the u. S. Treasury. Lots of volatility. Lost taking on one side and trauma on the other. It is not the way capitalism should be run. It a casino opposed to a midwestern farm. Alix you have been listening to janice capital bill gross. So as to recap from these major jobs headlines we see, the jew number at 287,000 jobs june number. A few thousand workers gain. I really blockbuster report, but wages david a range of possibilities. Alix much more coming up. We continue job coverage. Alix alix payrolls jumped, hiring picking up in june after 287,000 jobs are added, to beating estimates of 180,000. Futures rising to four point percent as people into the workforce. Jonathan concerns over financial instability. Bake Intervention Bank intervention in italy cannot be ruled out. David Police Officers are killed after snipers opened fire on Law Enforcement in the heart of dallas. We are 30 minutes away from the opening bell. This is bloomberg. He with alix steel, and Jonathan Ferro, joining us from london. 287,000 jobs were added in june, and we have three guests to weigh in. Rick reader, black rock chief Investment Officer for fixed income will be joining us, and the council of economic advisers from the white house. John, markets are on the move. Jonathan what i see first of all is good news. Rallying off the back of this. S p futures up 0. 3 . Highs ono new session the dax, up four percentage point in fray for, germany. Back,yen bounces briefly, that settles it 100. 67. The cable rate goes back to where it was at 129. 69, a yield was higher. Immediately after. We have tripled losses, the yield to basis points up from 4 on the u. S. Tenure. Back to thet to go june Employment Data it numbers. Julie hyman is joining us from the Labor Department live in washington. Julie i want to bring you the details of the report once again. Theputted 87,000 with addition of jobs in dan. Jobs was the addition of jobs in june. That was higher than estimated. Increasedoyment rate from 4. 9 . 4. 7 to 4. 9 . Even though we are talking about this is a largely positive report, it was not across the board positive. We had an increase of average Hourly Earnings month over month 0. 1 , 0. 2 is what economists estimating. The increase in wages was not materializing. We are increasing the pace of wage growth, not materializing. And there is the conundrum of may and why it was so weak. Revisedprovides to 11,000. It had been 38,000, which was a disappointing number. It cannot be explained away by the verizon worker strike. Private payrolls contracted, fell by 6000 in may. That was the first since february 2010. If you threemonth average pace of 147,000, a slowdown of the prior 12 months, but not as poor as some folks had been fearing for june. Alix julie hyman joining us from washington. Acute wrap up. Everything down. , operator ofmoney Oppenheimer Funds. Is from Stanford University evelyn. Is this the green light to sell bonds . I hate looking at a single data point and making a choice like that. Investors will react that way today, believing the fears they had going back to last month. They are willing to trade. We would get more numbers and anybody will freak out on something else. David how long will it take markets to insert this . Absorb this. Things like knock on effect from the increased dollar. People are more focused on the earnings releases. The dollar will be a part of that. I think companies are going to be, they will be cautiously optimistic. Those words are cringe worthy, but the notion they dont want to stick to it if they dont know the effects of europes issues, they dont know china. They would rather overpromise and under deliver. Alix more from tobias on Bloomberg Radio. 5 to 10 ooking for a in u. S. Equities. Does not change the mediumterm outlook for the u. S. Economy or world economy. The drawdown expectation is driven by the fact look at economy was slowed down. This is not supported, but it is braque were looking data. Backward looking data. Seeill be a while before we the full data come through. To answer the question you asked tobias earlier, is this the right time to be selling bonds, mike answer would be, no. The driver of a bond is not really the u. S. Cyclical environment. It is really the global. Eflationary micra shocks brexit is with us and will be with us for quite some time. It is not going away anytime soon. I would say the markets would react somewhat to this, but it looks relatively modest and will fade relatively quickly as well. Back up andgoing yields. We saw a little bit. A couple of basis points. Those in three positions, are you tactical about that . Bonde battle you in the market is really government value in the bond market is really in government bonds. We were better doing highgrade bonds. At least you own some income. It is better than what you can get in government bonds, where half the world is negative. David i want to go to Stanford University. One thing we have not talked about is, we had the irony of both the jobs number going up, number of people employed, but also unemployment going up. What accounts for that . Those numbers are volatile for one thing. You get monthtomonth variations. The most important lesson we take from this particular report is these things bounce around a lot. You are not going to have jobs tong from 11,000 one month 287 thousand and having appealed real reflection and having that be a real reflection of a number. 147, theto think about three month moving average. That is a good number. It is just about consistent with where we want to be to keep up with politics it population growth. So just to stay even, it is about 129,000 a month. That would keep us constant in terms of adding enough jobs to keep up with the population growth. That is where we are. The slight uptake in employment is not significant. To me, those numbers still suggest that we are looking at an economy that is near peak employment. And so, if that were the case, if we turn to these numbers and we believe these numbers, we say, we are near the peak. We have basically recovered. Wage growth picked up a little bit, our estimate is 34. 4 . That is kind of high when your new the top of the business cycle. Everything looks right. One problem, unemployment is very low. That is a significant issue. Alix so how far away are we from full employment . Using the employment rate, we are down 4 million or 5 million jobs. A lot, obviously. How much of that is demographic, how much is reflecting things that are real in the economy . My calculations suggest that even if we correct for demographics, if you look at the current hiring rate, the on employment rate, rather than being 4. 8 , 4. 9 , which is five. Hide more like 5. 8 . That feels more consistent with the kind of economy we have right now with growth rates we have seen, wage growth, and employment. That is probably the correct on implement rate, but Unemployment Rate, but we have come a long way from 10 unemployment. No doubt we recovered on the ground we had lost. David picking up on what ed is talking about, that underemployment number, account for the fact we are not seeing robust wage growth . Even 0. 2 is not very robust. Absolutely, and that is why the fed is focused on wage growth far more than on implement number itself. Unemployment number is very contingent on Participation Rates and a lot of other factors. The proof of the pudding is going to be in wage growth. If it is not there, we are not as stressed the from and on appointment standpoint as we numbers you see in a daytoday basis. Alix Oppenheimer Funds staying with us and Stanford University. Yearuld point out the 10 yield going negative now. 1. 37 . That bond selloff not continuing for the 10 year. Now for a look at world and national news, lets go to emma chandra. A peaceful demonstration in dallas turns deadly for police. Snipers killed five Police Officers integrated seven others. And wounded seven others. They demonstrated against recent Police Shootings. Dallas police chief david brown call this an ambush. Were brown the suspects possessing themselves to translate on the officers on two different perches in garages in the downtown area, and planned to offer certain injure as many Law Enforcement officers as they could. Reporter three suspects have been arrested. A Fourth Exchange to with police. Officials now say he is dead. President obama talked about this. Obama there was no possible justification for these kinds of attacks or any violence against Law Enforcement. The fbi is already in touch with the Dallas Police and anyone involved in the senseless murders will be held fully accountable. Justice will be done. Reporter Dallas Police are urging people to avoid the downtown area today. There is a temporary halt in the president ial campaign. Hillary clinton has canceled an event scheduled in pennsylvania. She was going to appear with Vice President joe biden. She will still speak at a church in philadelphia. Donald trump but his plans on hold. He canceled a speech in miami. And in the u. K. , theresa may says it is time for her to make the case why she should make the next prime minister. She and another will face off in a battle led by David Cameron. Round amongsecond lawmakers and Party Members will make the final decision. News 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Jon thank you very much. Paper up, we continue the friday. The of the officer of fixed income and the council of economic advisers. Futures former ahead of the open in new york city. 13 minutes away. David we are now breaking news that the Capital Building in washington dc is under lockdown. Is blocking its down. The house was in session briefly but is not out of the building. There is a report from capitals police and are searching for an individual. T has happened before sometimes it is just a simple person who gets on the ground, they need to ever hand. We dont know details, so we will monitor this and report as developments happen. You very much. We will stay on top of this right here at bloomberg. We are 15 minutes away from the cash open in new york city. Posted how we trade jobs. Futures firmer, 12 points in the s p 500, dow 1. 5 as well. Gains 20 minutes ago, post job session highs, the dax up. Fascinating moves in a bond market on the payrolls number. Curve, nowcross the yield down on the 10 year, one basis point. Curve flattening again over the front and coming up and across the belly and into the longer end of the curve, coming down. We are developing trade at the moment. Cablellaryen 123, and rate pushing to 129. 85. With more on the job report is question of Oppenheimer Funds. Will get you very quickly. My first question is to michael mckay. He said to bill gross, what would it take to watch the next bad news conference, given the market is set to do anything for two years . Is enough to pay more attention . Economic,lly, the backward Economic Data has been steady. But that is not the driver. The driver a bond markets and what the fed is going to do is what happens on a global basis. , we arenews is clear still full of brexit related uncertainty, and that will be the driver of conditions in the u. S. David so professor from Stanford University, as we look at his jobs in a larger context of where the economy is now where it is heading, do you see growth . I always use the market as my best indicator of growth. The market is telling us that we are looking at the next four to 2. 5s of about 2 percent. If you believe market numbers, what is going on, that is kind of where we are. Will be consistent where we stand throughout the whole recovery. Picking up on christians point about the fed and their situation, they are in a bind right now. The reason is if you believe these numbers, the job numbers, growth numbers, everything going on in the economy, it looks like the recovery has kind of played itself out. A peak. T hopefully it is the plateau and we are not going back down. The fed raise rates . They do not raise the map a peak. They raise rates during the recovery. If that is essentially over, and the numbers look like the recovery is over and we are in an unsure phase, the fed is in a bind. This is not the right time to be raising rates. They should have done it two to three years ago, and now they are stuck and have to figure out how to remedy that situation. That is the problem that janet and other fed governors face right now. We will see how they handle it. Unfortunately, they are kind of behind the curve on this one. David so this was the fiscal stimulus, and we always want that. It never happens. Is it possible with tax reform . Is possible. The real question is, is it likely . It is probably less likely that people would like it to be. The fiscal policy is something we talk about a lot, but given the political environment, it is unlikely we have seen much of it. Alix what turns more, credit or equities . Credit. Growth slows down and valuations are rich. Credit can be carried. When rates are low, spread widening potential goes down because of this slower thing. Credit is the best choice. Alix we want to go to the new york stock exchange. They are taking a moment of silence for the police killed. [bell rings once] [bell rings once] alix that was a moment of thought exchange silence. Stock exchange silence. Five polices were killed by snipers, others wounded, including civilians. Ed lozier is still with us from stanford. When we do continue to get these stronger job numbers, does there come a point when the fed is behind in the curve, if they said it was may, they would take that rate hike off the table . At the history of the fed, that is the best indicator. What should they have been doing, when should they have been doing it . In retrospect, in hindsight, they should have been raising before. The question is, why didnt they do that . It comes back to what we were talking about at the beginning of the hour. While a number of the indicators look pretty good and seemed to the peak is peak, not where we should be. The implement the the Unemployment Rate is below where it should be. The labor market is 59. 6 . Rosemeans the labor people to the working age population is 59. 6 percent. It should be 61. 5 , and that is correcting for demographics. If you look at the previous session number, of couple Percentage Points even above that. Correcting for demographics, we should have another two Percentage Points. The fed knows that. They have known that all along. It has been that number more than any other that has kept them from raising rates. They look for this thing to move back to where it needs to be, and it has not gotten their. We arebe recovering, but still not back to where we need to be. That reason they have been reluctant to raise rates. As a result, now they are in a fix. Jon thank you very much for joining this program and giving us your insight on the job report and the Federal Reserve. And christian of Oppenheimer Funds still with us. Looking at the conversation of the last hour, this is how it is expressing itself over the treasury curve. It is flat. Just drop below 250 basis points. The buyers, they still by the long end, and the bias is a much fodder yield curve. Flatter yield curve. How much longer does this play out . Christian i think this will be with us for a long time. The driver of the story is effectively the fifth asset shortage we had on a global basis. Is not just coming from u. S. It is coming from japan, most of all, u. K. And other parts of the world. That is not going away anytime soon. That does not say nothing about the jobs number in the eu on any particular day. Jon how flat can it get . Christian it can get still a lot flatter. Historically, the curve is reasonably steep. It is a flat, or it seems flat because [indiscernible] but i think it can get a lot flatter. Jon christian, great to have you with us. David, with some breaking news. David to keep you updated on the story out of the Capital Building, we have report from a representative of congress, dennis ross, who is saying what happened was a staff member from the hill try to enter the premises with a gun and was apprehended presumably. They have it on lockdown. They were scheduled for a house vote at 9 15 eastern, 10 minutes ago, which has been postponed. We will continue to bring you uptodate from new developments from the capital as they cooker. Joining us now is jonas prizing of manus. He provides consulting around the globe. We have numbers coming out. You have a wonderful survey from employers. If you make of these numbers . Jonas we think the are consistent with a slow growth economy, a good labor market that still has some slack. Can see the bouncing around between may and june. We look at the threemonth average, a solid number, almost 150,000. There is Wage Inflation, we expect more Wage Inflation Going Forward. All of that is consistent with a good labor market. There is still is room to go because of the work force rate at a historical low. David ticky behind the scenes of this survey you did. 11,000 employers, tell us what you found when you talked to employers. We surveyed 11,000 employers, we asked a simple question. Nextng ahead to the quarter, what are your hiring functions . A light you going to increase or decrease or hold it stable . So with response the Third Quarter, employers are still optimistic. If you look at your after year outlook, it is slightly softer, but overall at a good level. Employers look ahead to the fourth quarter, they are looking asa stable situation as far their Business Outlook is concerned and they will buy higher. D david take us below the numbers. Break them out. Do you see variations region to region . Jonas we see this is notable. We see strength on the east coast. Then it moves over to the west coast. It headed into the middle of the country. This time it is well just should be did. You can see differences between various sectors. The Energy Outlook is different, mining, anything related to the consumer is much stronger. As well as health care and retail, those are sectors where the Employment Outlook is stronger. David you do this regularly. You have not really seen an upward trend in this. Is that correct . This is reasonably stable over time . This will improve going out . Jonas it is something we have done for more than 50 years, surveyed employers in this way in the u. S. And you are right, outlook for the Third Quarter is stable, so there is not an anticipated increase, but also not decrease. It is consistent what you would expect in a slow growth economy where a number of parts of the economy are still doing well, and the consumer is driving good Economic Growth as well as labor market stability and improvement. David you also do a survey similar to this worldwide. Compared the United States with what you have found overseas. Jonas we surveyed 60,000 employers worldwide in over 50 countries. What we are seeing is a chalky environment. If you look at europe, the outcome on the whole is slightly softer. And then you have regional differences. Germany is strong, ireland is strong, spain and greece are week. U. K. Stable, but at a lower rate. It is a mixed picture. Isia is very strong, Japan Holding steady with china slightly negative. It is a mixed picture. Overall, i would say the Employment Outlook in the Third Quarter is stable to finally softer. Breezing,t is jonas ceo of manus group. Jon thank you. 287 k is the job number. We approachscene as the cash open in new york city. Lets go to the board. Futures remain firm, s p 500 teachers up. 20 seconds away from the open. The ftse up 0. 5 . The european equities had a week of losses. You hear the bell, so switch up the board. Quickly. 1 100 point 49. We came back again, the cable rate pushing up to 129. 74, approaching 130. Dollaryen 100. 46. Or five basis points around the curve, now we are unchanged at 4. 9 . Wti, the biggest week of losses since february. Almost seven Percentage Points. Section across it since become a lesley at the market and get the movers he. Here is ramy inocencio. Ramy initial reaction after stellar job numbers came out at 8 30 a. M. 0. 8 , s p up 0. 7 . The nasdaq, up as well. Estimates the highest , 287,000. Interesting stuff. Lets take a look at what was happening with s p 500 futures as well. You can see 8 30 a. M. , when we get this leg up, numbers came up. We saw numbers with the esa as well. Lets see where we are in term of the s p 500 based on the post brexit vote back on june 24. Coming back from june 23, all the way until today, less than 0. 1 , the 2113 numbers while recouping all of the losses ever since then. Lets look at safe havens, particularly gold. As you might expect, we do see a thatown just at 8 30, but was a shortlived little event. Gold is no climbing just a hair above on the positive line, 1371 is where we pop up. Now 3063. 1363. The blackrock cio of fixed income joins us. He manages to . 3 trillion in fixed income assets. Use selling short end of the buying the long end of the curve . I think that is longer than the trade of the day. I think that curve will keep flattening. That dynamic when the demand for the long Interest Rates and growth where there is not enough yield is a sturdy very. That keeps pressure in the back and the front is too high. We were pricing in a cut. Markets are pricing in a cut if you go back a few days, that is crazy. The fed is not in any mood to cut rates. They have more room to go. We see flattening. Headline, get a red doubt reached 4. 8 . Looking at the curve, flat, flat. I wonder how flat. We are around 200 basis points, how flat really go . Will it go . In history, go back we are at a reasonably steep yield curve for an economy operating at a decent level. Can we get another 20, 25 basis points to flatten . It is incredible. One end of the curve is not cheap, but organically cheap for the inflation rates. The front end is too high, there could be back up in the other end, get 20, 25 out of it. Jon talk to me about Duration Risk and how things are getting a little bit overdone in some ways . Take away what is fair value of the 10 year, it is well back, 50 to 75 back of where these levels are. But we are not getting back to fair value anytime soon. The pressure in terms of the need for yield. Think about post brexit. You took one country, the other major economy that was in the eu, a tightening mode, has suggested easing. So now it is easy to get yields, so the 10 year stays in this range. Any negative news on the economy or political will push down a bit. The key of what we think about a lot is, how do you get income out of fixed income . The number was good for kerry assets, credit markets, emerging markets. This is what i would argue, close to a good number for emerging markets. Emerging markets to not react terribly to brexit. They held up all right. Given the fact there was no yield to be found in the rest of the world, it seems like, is that a point to make now for the emerging markets . The hard thing about emerging markets is a moniker. You feelverage yield, good about investing. You get into the individual names. There are some tough stories. You have an economy operating at a decent level, which the u. S. Is, and we are seeing growth in the emerging world stabilizing at levels, that is good. Not overheating growth. You go in and think about which parts of the emerging markets, asia, india we have liked quite a bit. Weve been adding to brazil a couple of months ago and argentina. Said,nerically, has you you can get yield and real rates. Some of these countries will have to ease and where they are. David mexico, what is going on with mexico . Rick a tricky dynamic. We talked about a month ago or so, it is a name we have liked. That being said, we reduced exposure over time, for no other reason than getting to a stable economy, growth and inflation ready good. Certainly some challenges around the currency, but technicals in the market are not terrific. It has been a tricky one. The outsets are reasonable. That is one of the cheaper places to go. There may be a lot of time before return is positive in terms of mexico Going Forward. David we want to go now to jason froemming, the Council Economic chairman. Welcome dr. Fuhrman. Good to be here. We were surprised by these jobs number. Were you surprised . I dont think you should be surprised. These number is bounce around a lot. We are not good at measuring the economy as we would like to be, so we should do pretend we can do that really well. We are adding jobs at the pace of 150,000 jobs a month. That is mild decline in the Unemployment Rate. It is a good place to be given where we are in the economy right now. David south is the Participation Rate and concerns concerned, people are it is two or three points below where it ought to be. Are you concerned . Jason the largest thing that is going on is the aging of the population. Above and beyond the aging, i think we need to be concerned that the Participation Rate has been falling for 60 years, adjusted for age for men, and 15 years adjusted for age for women. There is a longterm issue in terms of functioning of the labor market. You are that we have seen recently. ,e Participation Rate stabilize and that is because demography is dragging in one direction. The strength of the economy is pulling people back, and they are canceling out. In the short run, i feel good about it, but we need a bigger conversation about the longrun trends. About what something we were talking about today i want to ask you about something we were talking about today. The numbers have been low, which is indicative of a very good labor market. The dispersion between may and june was bigger than anything. Any thoughts on that . Jason it is hard to believe the economy was really terrible in may and really great in jim. Everythinggeos there was insistent with into gators. The other indicators. There is a range of Economic Data. Are housing around as less they did in the past. Around less than they did in the past. Alix i want to show you a chart on the bloomberg. Isyou look at bloomberg, it nonfirm payroll numbers, 287,000 for june. There is the underlying, the red line, 147,000. 200,000. Quarter was are you worried about the pace, the overall pace . Jason what i want to see is the Unemployment Rate staying low and people getting wage gains. 4. 9 Unemployment Rate over the last 10 year, wages up 2. 6 him a that is tied for the fastest pace of nominal wage growth in the recovery. We simply dont need to add as many jobs to get the Unemployment Rate where it is or from trending down. The reason we are adding is because the in employment rate was so high. It was a system of how much work we needed to do. Buttill have work to do, not as much. It is quite natural, expected, and i feel good. David this is a different subject, but on all of our minds. That is the tragic shooting of the Police Officers in dallas overnight. Would you give us your thoughts of the white house on this subject. The president said it was a vicious calculated and despicable attack. He is being updated on it while he is overseas, and that reflects the thoughts of all of us here at the white house. David thank you very much. That is jason furman, council of economic advisers chairman. Withw we will come back rick reader and black. This is bloomberg. David this is bloomberg. Alliancelians chief economic advisor, Mohamed Elerian. Jon mrs. Bloomberg. Coming up on Bloomberg Markets is vonnie quinn. What have you got coming up . Vonnie we are having Mohamed Elerian about the jobs report to see if this stabilizes markets. We have seen the doubt going down, but there was some things in the report that might make us more nervous. The Unemployment Rate ticked up. There was not much wage growth. He will address these. We will also be speaking later on the brookings institution. Jon looking forward. David one to bring into to the story of the capital locked down. Beenockdown order has lifted. A capitol hill staffer tried to get to work, and then there was a lot down because he brought a gun. A look at the movers with ramy inocencio. Ramy i want to tell you about the s p and the dow. We both refute their losses after the post brexit vote off of what is happening in terms of markets today. I want to get to some movers right now, and first analyst action in terms of microprocessing as well as computers. One pointevices down for percent because bernstein has decided to cut its reading on the company to underperform from market perform, saying the growth may not meet expectations. As for bernstein, as for intel, it is going up 1. 8 . That is because bernstein is raising its intel from underperform to over perform. It will not commit second order earnings because of recovery in the pc earnings market. Lets go to the closing space clothing space. Gap is up. This is the highest in the past two months. This is up surprise jump in comps sales, versus the estimate versus cap 3. 6 locals, old navy, they all be their best. Old navy up 5 , year on year versus june. Thank you. 16 minutes into the section jon 16 minutes into the session, looking at the nasdaq, abigail doolittle. That, letstting to start up with the big winners at the nasdaq. Poly co. Shares are up 13 . The company is going to be acquired by serous capital. Premium to yesterdays close, and polycom is about that. With mike still. There is shareholder relief that did not get through. And trading sharply higher, barracuda networks. They beat first order estimates earnings by 15 , 82 . They also raise the fullyear outlook. Security stocks did not rise as well. And another thing, wd40, the spray company is down after they missed fiscal thirdquarter estimates. Shares are sharply higher, so this could impact the stock pickers did light. Alix rick reader still with us from blackrock, cio of global fixed income. There talking about flattening of the yield curve, leading investors into places like highyield. Bullish onrica, technicals, bearish on fundamentals. They say they will have to close. What do you make . The bullishe with on technicals. The fundamentals are mixed. Bullish on technicals, the valuations have gotten full in some parts of the highyield market. Rich in some parts of it. It would still do its job. It will create the carry in your portfolio that you want to create. I disagree on the fundamentals side, people talk about leverage that goes on. What is happening is terms come out. The thing that deals companies in highyield is if liquidity is a problem. If you term your debt out, you dont have anything in front of you the next two to three years. Or your debt service, your cost of interest. In that comes down, people talk debt toat equity, revenue, that is growth. If your debt service is not high because of where your rate is, i would argue highyield is not a lot of industry time. We talked about the industry sector how commodities moved around. It is something to argue. Lets look at debt servicing costs. Bgp is looking at what is happening with italian debt. 1. 2 is the yield on the italian 10 year, but the story has been alltime record low yields and concern about italian thanks. You sit at blackrock. Does blackrock think you have to build in a risk premium to spread, if the italian state steps in to do something with the banks . Rick that is equipped tough question. We could talk about all the ramifications, but the talent you Banking System, you have the italian Banking System, there are banks that are well capitalized in italy. Have what is the dynamic situation, idiosyncratic situation. How that plays out. You have an election coming up in october. Italy will be volatile. You have an insured airily supportive ecb extraordinary supportive ecb. We think it is 120 going lower because of the incredible amount that mr. Draghi has combined. We think we will have support of dynamics around italy. We think there is a positive coming around the Banking System, capitalization with the Banking System, about that will continue to play out. There is value in some of those banks, in europe broadly. Or you take it with senior risk or equity, but there is value because of the syncretic nature. Alix so where . That gap is huge. Ior debt is pretty do see juicy. Where do you see it . Rick we spent time looking at the places we like is, i think there is an earnings dynamic that is difficult. The u. K. Dynamic has to play out, there is nearterm softening. Softern dynamic is a bit , but we have got to watch other things. [speaking simultaneously] so that being said, some of the sub debts, subordinated debt has become attractive. We look at some of that, i looked at individual names. They have gotten overdone, in particular subordinated debt. Equities is better, there is value. The banks are better regulated, better capitalized, no doubt, earnings are tougher, but i think there is value on the debt side of some of these banks. We have a report about home bias. Explain what that is and where there is opportunity and the risk to it. Rick people in the u. S. Like to invest in fixed income. That is what are they have known for 25 or 30 years. It is a consistent lower rate dynamic. You can discuss the federal number, the u. S. Is better than the rest of the world. U. S. Fixed income, the first part of the rolled that will raise rates very slowly will be the u. S. Some of the global funds are doing extremely well because of exposure to other parts of the world that are going to keep reducing rates. Japan will be easing, ecb will be easing. Emerging markets are going to be easier to get their economies require it. So people should think about Interest Rates in the u. S. Are low. If you think about the trajectory of where the rates are going to go, where they go higher first, it is the u. S. Look at what is worked for me, and the u. S. Alix what keeps you up at night . Rick everything. We need to follow data in the europe and u. K. , but i dont think that will create problems. China is one, the data coming up next week, you keeping up a ionic. Other things, valuations, got to be careful. We in our more conservative place. It is a combination of all those things. Cio, fixedrock income. More go is coming up. We are looking at the dow up 158 points, s p 18, nasdaq 48. It is a risk on the jobs report. David wrapping up a big jobs day here in new york. 287,000. R came in at it was more than the top of the range, which was to 43,000. It was quite a number. Post brexit the losses, im looking forward to next week to see what the post brexit response is in the bank of england. The bank of england decision, forget the weekend. Im looking ahead to next week already. Alix the story of the day seems to be the yield curve continuing to flatten. It is like you want to scholl sell the shortterm and by the long and. David we are looking forward to having jobs back in new york. Jon i looking for to it. It has been a historic few weeks in the city of london. That doesnt for bloomberg. This is bloomberg. Vonnie it is tender call came in new york and 3 00 p. M. In london. From new york, i vonnie quinn. Mark i am mark barton and this is Bloomberg Markets. Vonnie we are going to take you from london to rome to washington in the next hour. Heres what were watching. Have grown by the most in eight months with payrolls climbing engine. In june. Mohamed suggest that the weakness in the may jobs report was an outlier. He joins us next hour. Mark spurred by declines of the brexit vote, the worst performer among major currencies. Series that drive. S around the world rollsroyce takes to the streets of california. It