pam francine lacqua. tom -- i am francine lacqua. tom keene in new york. markets with the dollar tailing. tom: we got the markets today and the jobs report. i tell you, this nation shaken. memories oflearest 1963 and 1964. i don't mean to compare anything we have seen in the last 48 hours to that, but i tell you, this is a changed america this morning. the president is in europe. world.e: it is a changed it affects us all. let's get the first word news with nejra cehic. nejra. nejra: a peaceful demonstration in dallas, texas, turned into an ambush pierce clippers opened fire killing five officers and wounding others. arrested.le have been there are media reports that a fourth suspect who had exchange gunfire had killed himself. british prime minister david cameron heads to his first major summit since the country voted to leave the european union. in warsaw, he would make argument that britain is still relevant to its allies. he will pledge more than 3500 troops. some will be deployed in eastern europe. may says it issa time for her to make the case to the nation why she should be the next prime minister. she and andrea leadsom will face off in a battle to succeed cameron. ballot the second round nationwide. global news, 24 hours a day, powered by 2600 journalists in more than 120 countries. i am nejra cehic this is bloomberg. tom: very good nejra. commodities, two days in a row, a great fragility on what is clearly a better day. a lot of this waiting for the mystery of the jobs report. michael is adamant over the importance of this report. i spoke to him yesterday. they are front and center on the uniqueness of this report. on the next screen quickly. some of the nuance out there. 2/10 spread is flattening. that is the idea this morning. that is the 10 year coming in relative to the two-year. let's call that a safe haven move. francine, you note -- you know sterling was ugly. francine: this is as we wait to find out who the next prime minister is. this is one of the things i am looking at it i want to show you euro-dollar. peers, it is all about the u.s. jobs report. all trading below $46 a barrel. it is ok today. it feels better than yesterday. we still worry about italian banks. tom: let's go over to bloomberg. yesterday, i brought up one america which is a job filling america, jobless claims are plus plus less, outstanding. this is the of america. this is my chart from two years ago. chart of the year. this is median inflation. this is the aspiration of america, up to 2000 and something happens. this is that flatlining and decline of real median household income. it is flat out to america's. this is the uglier side of it. francine: i picked up something also to do with the u.s. jobs report. i attempted to look at average hourly earnings, but what i picked out was the inflation. this is the two-year break. you can see it was at a high in march and that inflation expectation going down. all important when you go into u.s. jobs data. joining us, james bevan. he is barclays head of economic research. when you look at u.s. jobs, christian, it is different to what it felt like. as the unemployment rate goes down, all we expecting a lot more volatility when it comes to jobs numbers? christian: you were spot on when you said earlier that this number today is very crucial. it was a disappointing drop growth numbers in the recent report. even the market is to know whether if this is a soft patch or is this a beginning of a trend? the labor market has turned. since the 1950's, every recession in the u.s. was preceded by a slowdown in jobs growth. there was a time in the 1980's and 1990's where there was a soft patch. the market has to decide there could be nine soft patch or this is the beginning of a recession. in the next 18 months or so we would have to deal with the high probability of a u.s. recession. friend of the problem is if you consider janet yellen the central banker to the world. no matter how much of a great number the u.s. jobs can provide today, she will not hike for some time. james: i would completely sure that view. she will be cautious. i would anticipate there are a number -- indicators coming out to say she is -- which is been quite soggy. the rest of the numbers should be outright week. there are challenges. i would say look at some of the domestic sources of inflation in the state, she is going to recognize that tightening rates is not going to help at all. -- discourage people from spending money. a tendency to weaker economy. tom: the barclays view i find cautious. maybe only bnp paribas is in that bank. sterling, he told us yesterday to watch out below. what is the outcome of your cautious view on the global economy? do we stay in the markets? or do we go to cash? christian: we play defense. our interpretation is the uncertainty the brexit has caused. the other political event that is playing out -- we have a situation, voters are willing to step away from the status quo, in particular the brexit quote -- the brexit -- we have revised our growth output for europe. markets so far is retreating it -- markets so far are treating it as a u.k. event. ok.y assets should be doing we believe that this will not play out over the coming months. we are underweight, equity. it is a different environment to do asset allocation. picky when we believe european equities are going to be under pressure. tom: james bevan this seems to be the theme of the morning. the idea here is a brexit. can you export brexit? that is a record number of axis. anticipate that with the british public is done is to vote against political elite who has become disconnected from the trials of the everyday man. it is being played out over in -- mr.tes where the -- peoplemr. sanders are not happy. where i would disagree in terms of -- there are some good companies with very high internal yields. i think relatively well placed and can sustain margins. play -- wille will pay higher prices and don't to be dissipate rather than low. tom: part of the friday debate. francine loquat in london and tom keene in new york. worldwide, we'll gross and generous capital -- william gross, we will talk to him about the fed. this is bloomberg. ♪ tom: bloomberg surveillance worldwide. in war so, -- in warsaw, nato meetings. this will be a meeting of the president of united states. jean-claude uecker will be there. francine, as we look at this and we await this press conference. the president expect to speak on the horrific evening in dallas. i must say that the difference between the presidents view and mr. yunker is remarkable. and my right to say he is the arch federalist of europe? francine: he is. i would call him the emotional european. we have heard him talk about the u.k. saying they deserted the rest of the eu. he goes way back. he was wondering the original people who signed -- i don't know if he was there but this is the idea that he wants a collusive year. -- europe. let's look at the post-brexit wreckage. we talk about pound. we are back with james bevan. and christian keller, head of economics research. .hank you for sticking around james, when you look at brexit, i want to get your thoughts on the market liquidity. have we figured out whether this is specific to real estate in the u.k.? or whether this is a deeper issue with liquidity in the markets? james: it is a cross market issue of liquidity. the at the underlying level is holy. -- trading and equity where everyone understands currently just six. clear that the capital that is available to keep markets open at all times is not strictly limited. one must accept that's one was have to wonder about areas -- we may well see a widening. francine: how much value are we going to lose in the markets if people realize -- james: i would distinguish between movements and prices trying to ensure there are no .ostile -- and the shift i was suspect in the wake of -- i would suspect in the wake of brexit, -- downgrade the value by the -- by 5%. that does not accommodate any change to the underlying fundamentals of rental value or future demand. anything more than that, i think is fundamentally understand what is going on. you have been phenomenal, the idea of the differential between price change in unit change. christian keller of barclays, when i look at the idea of rice change, that gets my attention on disinflation and outright deflation. piece on the new deflation in china in their export of that deflation. is that what we see in the rest of this year and into 2017 which is a further this inflationary pressure bringing down bivens price dynamic? christian: if you look at the price in china, pti which is quite an important factor when it comes to import prices in the u.s., ppi have been starting to rise. it is still negative. so moving up to -3% or so. end at awe probably quarter on 50% brent. china would export less disinflation. it depends on what they do and how much more depreciation we get. maybe they decide to lower prices. where we are now, it would seem that a leave in the second half of the year, some of it is inflation that should fade and headline creeps up a bit. tom: the idea that janet yellen, the central bank of the world pretty james bevan, what i find fascinating -- i am doing it today, mark gilbert is my morning mantra. he was on with francine in the previous hour. james bevan, what would happen if everybody raised interest rates? james: what we would have is a coming home to roost. the real challenges of excess investment in the global economy. we have this interesting challenge of excess debt across the world. together with the ongoing inflation, i think we get to the deflation issue is really interesting. what are the structural challenges of globalization? -- below the reasonable profit at cost. we have seen the same in europe where germany is able to export by virtue of having a cheap currency. germany becomes an economic black hole into which proceeds sales drop but are than not recycled. that in itself is a deflationary impetus. tom: we are going to come back with tom -- with james bevan and christian keller good where waiting in warsaw of a -- keller. we are waiting in warsaw for a press conference. i believe that is michael froman, our trade representative as well. from london and new york, bloomberg surveillance. good morning. ♪ >> the united states, specifically the situation in dallas texas. i've been updated throughout the morning and evening in dallas. i spoke this morning with mayor rawlings of dallas to convey the deepest condolences of the american people. i told him that the federal government will provide whatever assistance dallas may need as it deals with this tremendous tragedy. we still do not know all of the facts. what we do know is that there has been a vicious, calculated and the despicable attack on law enforcement. police and dallas were on duty doing their jobs, keeping people safe during a peaceful protest. these law enforcement officers were targeted and nearly a dozen officers were shot. five were killed. other officers and one civilian were wounded. some are in serious condition and we are praying for their recovery. rawlings, iyor believe i speak for every single american when i say that we are horrified over these events. we stand united with the people and the police department in dallas. according to police that are multiple suspects. we will learn more undoubtedly .bout their twisted motivations let's be clear, there is no possible justification for these kind of attacks or any violence against law enforcement. the fbi is already in touch with the dallas police and anyone involved in these senseless murders will be held only accountable. justice will be done. i will have more to say about this as the facts become more clear. even as let me just say yesterday i spoke about our need to be concerned as all americans about racial disparities in our criminal justice system, i also said yesterday that our police had an externally ethical job -- an extraordinarily difficult job. i also indicated the degree in which we needed to be supportive of those officers who do their job each and every day, protecting us and our communities. today is a wrenching reminder of the sacrifices that they make for us. we also know that when people are armed with powerful weapons, unfortunately, it makes attacks like these were deadly and more tragic. in the days ahead, we are going to have to consider those realities as well. in the meantime, today, our focus is on the victims and their families. they are heartbroken, the entire city of dallas is a grieving. police across america, this is a tightknit family, feels this loss to their core. we are grieving with them. i would ask all americans to say a prayer for these officers and their families. and them in your thoughts as a nation, let's remember to express our profound gratitude to our men and women in blue, not just today, but every day. thank thei want to president yunker for our work. i worked with him in his previous capacity as prime minister in poland. our meeting comes at a critical moment for the european union. the vote in the united kingdom to leave the eu has created uncertainty and that the future thisropean immigration -- is the entire edifice of the european security prosperity is crumbling. those who have been questioning what this -- what does this mean for the transatlantic relationship. case inay is often the a moment of change, this hyperbole is misplaced. i wanted to get opportunity to reaffirm some points that bear repeating. first, based on my recent discussions with prime minister cameron, chancellor merkel and now here today, i am absolutely confident that u.k. and european union will work together in a pragmatic and cooperative --hion to ensure the u.k. is the uk's transition is orderly. no one has an interest in a protected adversarial negotiations. interest ins a minimizing any disruptions as the u.k. and eu forge a new relationship. faced, even as we difficulties in this moment, we cannot lose sight of the extraordinarily -- extra ordinary achievements that integration continues to be. more than 500 million people speaking 24 official different languages and more than two dozen countries, 19 with eight, currency. every member of the eu is a democracy. no eu country has ever raised arms against another. an integrated europe is one of the greatest clinical and economic achievements of modern times. this is an achievement that has to be preserved. all of the reasons i just mentioned, the united states has a strong and enduring interest in a united democratic europe. we are bound together by ties of history, family and our common values. our commitment to democracy, human dignity. our economies are deeply woven together with the largest trade relationship in the world. the security of america and .urope are indivisible that is why for nearly 70 years, the united states has been a champion of european integration and we will remain so. fourth, given our shared interest, europe will remain a cornerstone of america's engagement of the world. european countries are and will remain among our closest allies and friends, and europe is an indispensable partner around the globe. we managed the us -- and the applications of brexit, i worked today shows we will continue to be focused on pressing global challenges. we agree that the united states and eu can do more together our shared security and we will keep working to provide each other information to stem the flow of foreign terrorist fighters and prevent terrorist attacks. we will do so they continues to protect privacy and civil liberties, as a global coalition pushes bicycle back on the back, thepushes isil eu has pledged financial assistance. as nato nations of firm -- i want to commend the eu for taking the lead in globalizing international assistance for development and afghanistan -- development in afghanistan. in europe, will continue to support ukraine as it takes necessary forms. united -- until they fully implement its obligations under the agreement. yunker said to us receivedwe have not cooperation between nato and the eu. we agree that on both sides of the atlantic, we have to adjust economic frustrations and anxieties of many of our people. feelings that contributed to the brexit vote. thats that are related they are being left behind by globalization. be remotements cannot institutions that we have to be responsible and move more quickly toward minimal bureaucracy to deliver real economic progress. , we discussed the importance of global investments like if the structure, education , security to stimulate growth and job training to help reduce inequality and unemployment, especially for young people here in europe. that has been the right thing to do for years, both for long-term and short-term. at a time when heightened uncertainty in the global economy is potentially amplified by headwinds that we all face, these policies may -- make even more since today. we're going to keep working to help europe -- with more diverse -- including from the united states. while we are mindful of the challenges we are going to continue to pursue a transatlantic trade and investment partnership to help sustain jobs and all of our countries and to help reinforce the transatlantic relationship. finally, we are stepping up to operate on global challenges. i want to take this opportunity to commend the eu for the generosity and compassion that so many eu countries have shown desperate migrants. men, women and children who have fled to europe. we believe that nato can do more to support the eu naval seized -- in the gene the a gnc's. we aim to secure conservations to adjust the global refugee crisis. with respect to the threat of climate change, we look forward to all eu countries ratifying the paris agreement. we continue to see eu as one of our strongest partners in reducing emissions and investing in clean energy. again, i want to thank jean-claude for our work together. despite the challenge of this moment, i'm pleased to see the united states and the eu continue to deepen our partnership. the world needs a strong prosperous democratic and united europe. strong andhave a steady partner in the united states. thank you very much. >> before -- i want to say sorry about what has happened in dallas. and theith you in this families and friends of the victims. so sorry again. this is my first and last meeting in warsaw with barack , the president of the united states of america and i believe we will see each other again here in poland. -- barack, you know you .ill always be welcome [indiscernible] together toed strengthen the relation between europe and the united states. today, we need [indiscernible] even more visible. 27 years ago, it was in my hometown. members of [indiscernible] welcomed george bush senior outside of the famous gate of the shipyard. we were chanting -- we just heard from president obama talking about police shootings over the last couple of days. he was very sorry, this was a very sad president. tom, we monitor this news conference at any breaking news, if they talk about brexit. a our talk -- they are there to talk about nato and i have rarely seen such a somber president. he is saying we still don't have the facts. they are investigating. all of our hearts goes out to the families affected by what happened over the last 72 hours. tom: it is a point would dallas just with dallas where there is almost and exhaustion about what institutions can do it we have the european council, european commission, obviously the president of the united states and they are at a nato meeting. a time where you really wonder what institutions will do as a move into -- that was one of the great things of henry kissinger's book, world order, if user go -- a few years ago. francine: let's get to our guest, james bevan. christian keller, head of economic research. it is difficult the transition. is in a like the world social cohesion is more difficult. we don't want to draw parallels to much. overall, because of brexit, because of what is happening in the u.s. and elsewhere, who is the person to unify? are we going to have a more peaceful and unify the times? james: i suggest we will have more fragmentation because domestic audiences will favor domestic agendas. we will have the rise of globalization from the end of the 1970's. we had the bring down of the berlin wall at the end of the cold war which was arguably the greatest trade barrier of all time. that led to a huge hike up in living standards. people now appreciate companies who have done particularly well. this is a pendulum that is always one back-and-forth. we are seeing the pendulum swing away from the workforce and back -- francine: we just heard from president obama. donald tusk of the eu said that brexit -- this is all of the mode -- all the more credible when you see that the brexit vote is a vote against globalization. christian: to some extent, it is. europe, the issue is we have several sessions coming up in europe. we have presidential elections in france in may. german elections in the fall next year. elections in the netherlands. the referendum about the constitution which in principle has nothing to do with your, but people now take every election as a vote against establishment, against the status quo. we have a very binary risk in places like italy. it will follow very closely each of these events. portugal is not doing very well. the commissioner is good to ask them to tighten the budget. wages are not coming up. we have inflation development. i said earlier that inflation picks up in the second half but the truth is, there is a global theor that is keeping sector down. we have a lot of countries in the u.k. where sufficient numbers have been coming down. larry flint -- where inflation number seven come down. there seems to be very low -- ition. tom: we have mr. tusk talking about no sequel in the united kingdom and we have lagarde talking yesterday in her support from the chair of the imf. what is the risk of contagion in europe from brexit? measure that, please. christian: we do think it is high. have reduced down our growth forecast as a result. each problem now, you approach in europe, we still have a 900 billion euro nonperforming loans issue. most of it is in italy but in other countries. it needs to be overcome. it is a principle durable we can think about buying asset that, but each time you need to find a compromise and this divergence of people in the north can have a tendency not to want to socialize. each time this will become a political contagious issue. we think that will have a negative effect on european growth. tom: francine, with all of the interviews we have done before the referendum, this idea of contagion is making the ultimate issue. i go right. you can see it because -- francine: right, you can see it because of the brexit vote. you don't know what the domino effect of all of this is. as we are hearing now from jonathan: juncker -- jean-claude younger, he's talking about the world is getting more uncertainty. one of things we have been talking about his leadership. we have two contestants in the u.k. race to become the next prime minister. when you look at both leaders, they are very different. are trading in the u.k. press is very similar leaders. one has a lot more experience than the other. james: mrs. may is a much more seasoned campaigner. we have to put this in the camp -- in the context that the budget but was not anticipated by either missed a cameron or mr. johnson. neither had a clue what to do when the vote came in. when one talks about where is the world? what is this risk of contagion? i would say the reality that we gdp -- speaksl volumes for the challenge that the global economy faces. the reality that quantitative easing and physical containment and repression have actually supported the risk -- the rich to the relatively poor. francine: we are getting the news conference from warsaw where world leaders are meeting to discuss nato and the inclusion of certain eastern european countries. we heard a very somber president obama talking about the shootings overnight in dallas. we are hearing from mr. yunker seeing the eu and u.k. share interests. we will monitor any headlines coming in from that news conference and we will bring you that live. this is bloomberg. >> that we want to conserve the negotiations tom: from london and new york we have been looking at warsaw. the president, mr. juncker, mr. tusk speaking. what do we learn? -- what did we learn? francine: the president says we need to figure out what happened in dallas. he was heartbroken and we heard from mr. juncker and mr. tusk saying we need to keep the u.k. at -- as close as we can to the eu because they do share interests. this is about security and nato, however there was something -- a feeling of nostalgia. a feeling that all three people were looking to more stunts -- more uncertain times ahead. tom: michael mckee joins us and we were speaking about what is beneath the headline data on the jobs report. we talked about this before, this horrific tragedy in dallas. we talk about two americas, some of that comes across, a racial divide of asians, hispanics and blacks. it is not one america, is it? michael: it is appropriate to be talking about it today. the numbers -- janet yellen has been pushing to look beneath -- tom: i agree. suggesting that we need to look at unemployment, particularly for minorities and afghan americans. black unemployment -- and african-americans. black unemployment has lagged. you see this on the chart, 4.1% for whites, but for whites, desperate for blacks, more than double that. -- for blacks, more than double that. the policymakers note that median household income has dropped. it is even worse when you look at minorities, because the median household income for americans in the 25 to --year-old range for whites $40,000 for blacks. the recovery since the 90% -- blacks only 80%. tom: in the struggle, every political persuasion which is better education, what is the short-term tactical solution for the next president? michael: there is no real quick, short term fixes. .ducation and poverty programs janet yellen when she was on capitol hill suggested congress can work desk at work on doing that. there is not much -- at work on doing that. there's not much that -- there's not much that the fed can do. francine: what to do we need to say today -- see today in the jobs report? michael: it is probably going to take a lot for them to price a rate hike. to get them leaning in that direction, you need something will work 200,000. -- well worth 200,000. 180,000 is the consensus forecast, but the majority of forecasts are bill -- are built -- are above that. several bond traders, wall street is positioned for a better than 180,000 number. francine: is it going to be much more volatile. isn't there a risk as the unemployment rest -- rate goes down -- michael: that was the history of employment. we have had a consistent run of 200,000 jobs it as unemployment harder to findis workers. the jobs on a month-to-month basis, it's a lot more bottled. the fed was to get more evidence. tom: i think what can we do to bring you folks in? speak to jim blasts and bill gross. the air went out of that room at 8:30 last month. the question about it. we went into that report expecting 170,000 jobs. the fed would be raising rates. 30 seconds later -- tom: i usually do not do this, what is the why of the air going out of the room? michael: it was an unexpectedly low number. we knew that the verizon strike would take jobs away. that was not the expedition and nobody knew what exactly happened. francine: it will take a lot of time to push the fed to hike, because of the italian banks, brexit and because we fear the globalization -- the end of globalization is nearer than we think. participation is a big issue as well. earlier, a lot of u.s. americans working are not only demographic. millions of americans that have decided not to join the labor market. yes, you're right. the fed will be drawn between looking at the domestic issues between the labor market and they will have in mind globally and internationally. bloom higher now. i would not underestimate that there is some urge to normalize things because of the limits of monetary easing. it is not that we stay loose or for longer. it does a lot of damage to financial institutions, etc., as you have a very low and flat yield curve. -- monetaryhere is policy is clearly at its limits. this is weighing on central banks. tom: this economy babble is all great. james bevan, can i make money in u.s. stocks? plain and simple, do you find u.s. multinationals of interest? james: absolutely. i see i'm not super nouriel figure. -- i see an entrepreneurial figure. i see a focus on shareholders to u.s. is the most natural market. york,ichael mckee in new 8:30 today, the headline numbers. it is chaos when we do it. pages of analysis. a conversation after the report and after dr. glass analysis with william gross. that will go worldwide on television. let's look at the data. it is a fragile bed to european markets. -- fragile bed to european markets. this is bloomberg surveillance from london and new york. this is bloomberg. ♪ top bloomberg surveillance this morning. i am tom -- tom: bloomberg surveillance this morning. i am tom keene in new york. let's do our single best chart. we will do this in the next hour as well. right now with james bevan and christian keller, global gdp on the imf and that yellow line is the classic 3% growth in the basic rule of thumb is if it is below 3% growth, not so good. i was surprised francine about rarely in the last 15 years have growth.above 3% francine: this goes back to what we have seen here in europe. the concerns about brexit and the impact it will have on gdp. it goes back to the inflationary pressures. if you sum up the week, there is clear risk aversion on the week. as we still try to measure the fallout from brexit. there is a clear path into havens such as yen and the swissie. james and christian are here. james, he will probably be upgraded to anchor. -- why is yen a fundamental asset? christian: i will try to make a very short. one looks at the gdp dynamics, over 200% debt to gdp. it is a country that over a decade has run conservative did they have a massive desk conservative. -- conservative. what to do japanese do when things go wrong? they bring money back. if there's an earthquake, they bring money back. a very unique situation. it is not necessary that foreigners invest in japan. francine: is it too early that abenomics has not worked? >> it is becoming more critical. the bank of japan is moving into negative territory has backfired . they'll have to make a decision in july whether they want to do more. it will be more helpful -- a package of 1% or so. after this week they have the election of the upper house. that is probably a more direct affect and that would help a bit. on inflation, it doesn't look good. a chart. is respite.r again, a asked him again getting down to 100. james bevan, i've got a philosophical ride a question. how close are we -- philosophical friday question. how close are we? i'm getting a lot of e-mails saying are we at that tipping point? let me ask you the question. james: we are not at a tipping point in terms of capacity for economies like japan to resolve their problems. is a really important point that japan owes itself the money . you can print money and pay the bills. albeit on a currency that is being devalued in tactical terms. the challenge is when you borrow someone else's currency. you've got a real squeeze. to the great crises in latin america which is borne out of the challenge that we have similar crises in asia in the 1990's. tom: james bevan, thank you so much. christian keller with us as well. hour, we will drive forward the conversation on this jobs today. us.em buiter will join this is bloomberg surveillance. ♪ tom: this morning, a critical and the american economy desk and the locomotive keep pulling forward the train wreck known as europe. in this hour, the lumbar of citigroup -- villa about her of citigroup. you terms continue to flatten, and in dallas, death as 11 police officers shot. five are dead. this is "bloomberg surveillance, live from new york on friday, july 8. i am tom keene in new york. francie lacrosse and london. as we heard, the president from warsaw in the last hour -- francine locke while -- lacqua. francine: we will be talking about the events in dallas and the president's response to that. we also need to talk about about on a day when it is security and countries together. and we do to ask ourselves whether globalization is maybe something from the past. tom: let's get to first word news with nejra cehic. nejra: a peaceful demonstration in dallas turned into an ambush. officers,ll police wounding six others. they coordinated their attacks at the end of the protest against police shootings. a fourth person is holed up in a parking garage in downtown dallas. he exchanged gunfire with police. president obama spoke about the killings while attending a nato conference in warsaw. we still do not know all the facts. what we do know is that a vicious, calculated, and despicable attack -- nejra: dallas police say they are searching downtown for explosives. british by minister david cameron heads to his first nato summit since the country voted to leave the european union. in warsaw, cameron will make the argument that britain is still relevant to its allies on the continent. he will pledge more than 3500 troops. some will be deployed in eastern europe. others will be used as a quick reaction port. may saysetary theresa it is time for her to make the case to the nation why she should be the next prime minister. will facedrea leadsom off in a battle to replace david cameron. may won the second-round ballot among conservative party lawmakers, and party limit -- party members nationwide will make the decision. global news 24 hours a day, powered by more than 2600 journalists and analysts in more /star 100countries, global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, now police are being killed. we are not sure who is behind the shooting there. it is a situation that has engulfed the entire country, and we will hear from all the presidential candidates soon on this. tom: thank you so much. let me get through a data check right now. it is a jobs day data check. quiet, but i want to underscore the fragility of the bid in fixing markets, the 10-year yield, 1.93%. oil has been soggy. on to the second board, if you would. spread, the curve flattening, down 76 basis points is money. with a bit of a bid, a fragile bid. francine? francine: i wanted to show you some of the -- the stocks overall in europe are maybe recouping some of the losses we saw, but it is all about valuation, and it is also all about what the u.k. consumer sentiment will be like. let's look at pound, 1.2958. i am not used to seeing it under 1.30. i guess i will have to get used to it. the u.k. consumer confidence plunging the most in 21 years after the brexit vote. has joining us now, as he often done on jobs day, is of economics,f willem buiter. wonderful to have you with us. the citigroup have a handle on your economic models now? are you flying as blind as i feel i am flying? willem: it is certainly more complicated and unprecedented. there are policy instruments and shocks, yes. a suddenever had breakup of the eu before. we have never been in a world where most of the -- this really is crazy land, yes. tom: within the crazy land, your team did a fabulous italian banks report. banks, or this or that, are those the exogenous shocks that can upset the viewers' applecart? willem: not just the italian -- poorly italian financial, generally i think euro area banks were never properly recapitalize. .ut there is a material risk there is a referendum coming up in october or november that they might see the referendum on italexit, and that is the last thing we need. francine: how systemic will that be? when you talk about crazy land and shock, our italian banks such that they make you worry more over what we saw with the real estate funds? funds is al estate completely necessary resolution, in response to u.k.-specific shock. as you would expect when a tradingleaves arrangements and enters a point of mass uncertainty. in italy, we have the reemergence of an unresolved underlying -- underlying banking problem. too many small banks, too little capital, too much political unwillingness to take the steps necessary to recapitalize according to the rules laid down by the commission, and by the european central bank. and that is the politics in ,taly that is threatening today as the u.k. politics six months or a year ago, existential uncertainty. i would be more worried about the politics than the banks, per se. the banks are after all solvable if there is the political will to recapitalize in a proper way. francine: they are solvable, but how can state support fit with the current rules with italian banks? willem: there is nothing wrong with the rules. there is the clash between the a large of bailing in ander of unsecured credit depositors effectively, and the election coming up, the referendum coming up. we clearly need in europe and the rest of the world a system where banks are capitalized. europe, they are trying to get the thought going across the continent where this was least ingrained. we will get there. they will probably declare retail investors in terms of products to be treated like depositors, and then everybody else comes up. i think that would be by european standards a reasonable fudge. tom: let's come back to the banks in a bit. this has been jobs day. her, and -- about what is willem buiter and what should chair yellen do? willem: if the jobs report comes out unbelievably strongly -- we had 155 k, below consensus here. there is no way they are going to raise rates for the foreseeable future because the uncertainty i just described, not just the brexit, but the risk of banking crisis, will cause them to sit on their hands. tom: do you agree with james bullard? is the dot a failure and james bullard has been onto something? willem: there is nothing wrong with the federal reserve board members giving us their best guesses as to what the future rates will be. i would like some more information, and i would like the dots to be labeled. tom: you would like the dots to be labeled. that is classic willem buiter. willem: there is really only one dot that matters. yellen, stanley fischer, and dudley. tom: you are brutal. crushingiter with us, governors and presidents this morning. i like the idea of labeling the dots. that sounds like classic willem buiter. absolutely. we are going to come back. we have a great set of guests for you to drive forward the conversation this morning. it is always five minutes after the jobs report from janus capital, william gross, on radio and television. stay with us. worldwide, it is bloomberg. ♪ tom: good morning, everyone. "bloomberg surveillance." it is jobs day. right now, to carry forward the leave debate, it is getting a little old, but so are the ramifications and the shape of the world. seth masters is with us, and willem buiter of citigroup as well. we have way too bad much academics on this. -- we have way too much academics on the spirit i was on the streets of london on the evening after that vote three what was it like worldwide for a b bernstein? seth: we positioned portfolios to take advantage of market upside, but with some protection on the downside. it was possible to do that because volatility had been priced cheaply in the market for that. yourself withse call options and high-yield bonds. we think in this market it is so uncertain. you want to have some ability on the upside still, but you need downside protection. tom: it is worth paying for the hedge to be there to be safe. francineseth: absolutely. tom: bring up the chart right now. currency adjustment and a weaker sterling -- bill about her, help seth masters and myself and everyone else, can currency be the adjustment of first order in crisis? willem: for the u.k. crisis, in the first instance, yes, obviously. there has been a significant reduction in demand because of the increased uncertainty. there is weaker consumption demand, and so the natural response is weaker currency. tom: but then the heart of the matter is export power. there seems to be great out with her cheek -- great doubt whether cheap sterling helps rolls-royce and others. willem: it certainly does not hurt rolls-royce. the volumes to exchange rates is limited, but even with improvement in margins that will not hurt. the movement of sterling was definitely the correct response, given the nasty shock the economy got. exactly does the u.k. have to do in terms of gaining from exports? we were having this conversation saying that the weaker pound will help exports, except it is a lot a foreign-owned companies that will do the exporting, so we will see a shift for the next five years over who will manufacture more. willem: the country is plea close that is pretty close to full capacity. there is a history of low investment, and the only way to take advantage of the external competitiveness is increasing export capacity through, through training, and to increase capacity for competing sectors as well. all that will take time. seth: i think you are completely correct, francine. it will take a long time for that to unfold because people have to be confident enough to invest in the u.k., which means they have to understand the rules of the road and what they will be, and that it takes time to turn that investment to output. this is a problem that will continue to unfold for a while. it will not resolve any time soon. francine: in the medium-term, should people be looking for bargains, be it on valuation, pounds? seth: that is a great point, too. -- some things have gotten next room she ate only expensive as people have been trying to seek perceived safety. they bid up the prices of things they think are safe havens, like sovereign debt, and also like stocks, which behave a lot like bonds. utility stocks have gotten extraordinarily overpriced, in our view, because they are not as safe as people think, and now they are expensive. some companies are more solid than people understand that have been punished unduly in the past few days. francine: will volatile markets -- go ahead. willem: in the u.k., for industries, their exports areas outside the eu, and are a major suppliers. the indirect exporters outside the eu would be an obvious source of even short-term robust behavior. francine: also going back, the volatile markets, others will be encouraged because valuations are cheap. how important is it to understand the political system in the u.k., which is undergoing a major transition in what it will look like three years from now? seth: i think we will see deals because it is very cheap to borrow money, among other things, and some companies have become cheap. i think that kind of deals we will see are ones where people perceive that the political risk is small, so probably there will be industries which will be off-limits for a while as a result. we are going to come back with seth masters and willem buiter. we have an important headline from goldman sachs. goldman expects the bank of england to implement credit easing in august. do you agree, willem buiter? willem: yes. it has to make sure that what is a nasty shock, a self-inflicted wound, does not become a financial crisis. thether, the lines between ecb and the fed have to make sure that liquidity in all necessary currencies -- willem: i hope the helicopter money does not hit the big ferris wheel in parliament as well. willem buiter of citigroup and seth masters from bernstein. as we look at the jobs report, the former chairman of the president's council on economic advisers, alan krueger. this is "bloomberg surveillance." from new york and london, this is bloomberg. ♪ tom: "bloomberg surveillance." francine in london, i am tom keene in new york. we are going to rip up the script in a big way. "rk gilbert wrote a brilliant bloomberg view" column today. here is mark gilbert. thank you for mentioning me. i guess that would help the gray vote. tom: willem buiter with us with citigroup. this is not stanley fischer, this is irving fisher. james tobin of el and milton friedman in chicago all loved the guy. economics?-fisherian actuallyhe argument is classical economics. it simply means the effects for savers of higher interest rates, to a is positive, leads domino substitution effect that can happen at any level of rates, positive or negative. it is an interesting question. tom: but it comes into i grew -- into microeconomics. there was this strange word, ambiguity. you have a confidence that if we raise rates that would boost economies? i am pretty sure that if we raised rates without there being an accompanying increase in non-monetary policy driven aggregate demand, that whatever we do to consumption depresses capital expenditure. tom: that is the other side of the coin. thatmasters is here in awe we mentioned james tobin, milton friedman, john hicks. this is like a clinic. this is great! willem buiter and seth masters with us. good morning. ♪ francine: this is "bloomberg surveillance." i am francine lacqua and london. tom keene is in new york. let's great -- let's get to bloomberg first word news with nejra cehic. nejra: in dallas texas, snipers have killed 5 police officers and wounded 6 others. they tax to place during a demonstration against recent police shootings. dallas police chief david brown called it an ambush. >> they were positioning themselves in a way to triangulate on these officers from two different perches in garages in the downtown area and and kill asnjure many law enforcement officers as they could. three suspects have been arrested. a fourth was holed up in a parking garage in downtown dallas, exchanging gunfire with police. president obama spoke about the attack while attending a nato conference in warsaw. pres. obama: we still do not know all the facts. it was ao know is that vicious, calculated, and despicable attack on law enforcement. dallas police say they are searching downtown for explosives. north korea is calling new u.s. sections on its leader a declaration of war. with the first time, the u.s. has imposed financial sanctions on kim jong-un and other officials for widespread human rights abuses. the sanctions make it harder for banks to move or hold his assets. prime minister not comfortable of australia is confident his international coalition will win the election. he says it is important for the vote count to be finished before he declares victory. 78 of the vote has been counted. australian tv says turnbull is short of what he needs to form a global government. -- to form a government. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am nejra cehic. this is bloomberg. tom: it is jobs day, and folded into this is an extraordinary discussion about the economic and financial times we live in. we have been talking about the idea of raising rates with willem buiter of citigroup and seth masters of bernstein. you have an important option -- you had in a port and observation during the break that we have been here so many times, our statistical count of what to do has been remarkably small. seth: it has never happened before that a significant proportion of all the sovereign bonds in the world are at negative yields. now it is a most $10 trillion worth. and that actually goes out to 20 years on the yield curve in major countries. tom: you mentioned 37 and japan. even back then it had not happened. the evidence, while there is not much of it, suggests the opposite because in 1937, when normalized,s were it hurt. and in japan it also hurt in the late 1990's with the same thing. the reason it would hurt more now is because we know income distribution has become even more polarized. for most people in the u.s. who do not have a lot of savings, the interest rate hike would certainly be a negative. it is only theoretically for the people who have savings that -- tom: that goes to the bimodal economy. this speaks to the creative destruction that -- mencine: sometimes you tell i overthink things, but i want to pick up on something seth said. what we seem to understand -- and it is terrible to link it, but it is brexit, what you see in the u.s. at the moment, and what seth masters just said so eloquently, it is income division. because of the income division, which means we are putting more extreme politicians, be it to the right or the left, in play, the suppliedt have a -- the sobriety any longer? seth: much of this is actually reducing income inequality because countries like china have grown very quickly, so globally income inequality is actually diminishing because of globalization. but the problem is, within countries -- and it is true both within the u.s. and in china -- the people who are benefiting from globalization are benefiting dramatically, and the distribution problem, because in some cases all this change is taking work and opportunities away from the people who are not. the challenge is, how do you train people and how do you make investments that are intelligently focused so that you can lift up the people who are currently feeling like they are losers? also, are there policies that you can use to have some income redistribution to keep the game afloat, as some people are trying to take advantage of the dissatisfaction of the so-called losers? a single they bring up best chart. and extort in a recall last year on probability of -- an extraordinary call last year on the probability of distribution. it was said that america and china would be strong enough as rose engines to drive forward. can you now say that we are in a global recession? willem: no, global growth is below -- the global output gap is negative. global disinflation and pressures are intensifying. downward pressure on risk-free real interest rate is increasing, not diminishing. tom: do you agree with seth masters when you bring a bimodal over,y and many nations it makes it even harder for policy makers to provide solutions? willem: certainly monetary policy will be more problematic, but this is the time to use the scope policy, because you can both have a demand effects, a boost to equilibrium, really, and of course you could use it in a distributive way. --kling growing in economy growing inequality, you need both working before tax and transfer distribution of income to capex to education training and all that, and we need to think of more intelligent ways of disturbing tax and transfers. it is coming down the pike. francine: does it mean that central bankers have to stop doing what they are doing to make sure that banks put enough pressure on government to do what you are talking about? willem: it is not their job to play games with the government. they have to take fiscal policy as given. that is the only legitimate position they can do. this notion that they should control, push the fiscal authorities into being more aggressive or encourage structural reform is a complete perversion of normal democratic legitimacy. francine: i respect that. so what is the prescription? we have been, in all fairness, playing games with the eu, or eu countries have been playing games with the electorate for as long as i can remember. willem: ticky arguing that the fiscal stimulus is needed, and that it can be monetized without desirable inflationary consequences, and then to implement supply-side reforms that make potential output higher than it was before, you have to keep on fighting the good fight, saying the sensible thing. if government will not listen, that is a problem with the political system, and we ought to address the electorate rather than the government. seth: there is a big opportunity here. there is a huge amount of excess savings looking for homes. it is finding those homes in especially government debt that therefore is incredibly cheap. that is providing the capacity to finance a lot of needed investment in many countries, including the u.s. why not take advantage of that? tom: seth masters with us, and phil about well, this jobs day. we are thrilled to have them with us. a wide set of guests coming up, including alan krueger. later today, after the jobs report, headline data and we will look at the broader picture on television and on radio with william gross of janus capital. from london and from new york, this is bloomberg. ♪ francine: this is "bloomberg surveillance." let's get straight to the bloomberg business flash with nejra cehic. anra: china may come with aid package for 10 of its struggling state-owned businesses. according to people familiar with the matter, this is one of the comedy that may receive help. many of the chinese businesses are having to cope with capacity -- overcapacity and slumping demand. a 1.2as closed a deal for billion dollar high-yield leveraged loan, according to a person familiar with the matter. the ride hailing at has raised $15 billion in equity and debt. creditors will receive a 5% the yield on the the loan. pressure is being put on boeing planes to iran's national guard. it would be the biggest transaction between the u.s. and iran since the 1979 revolution. that is the bloomberg business flash. the brian kelly has changed travel business. he is a points guy. we like to make jokes about this, that, and the other thing about traveling for five dollars around the world. today, a more direct tone. i have noticed in the last two weeks all sorts of bargains. is all of a sudden, like some say in american real estate, is all of a sudden american aircraft begging for seats? >> it is interesting. air travel is up, but fares are down. with oil prices down, global uncertainty going on, even though it is a great time to go to europe, exchange rates, a lot of people are staying home. norwegian air is flying to europe cheaply. it is a great time if you are wanting to travel as an american. tom: where will the game be, given a slower economy or the bargains unseen? will we end up with airlines in the same behavior they have done over the years, which is cut back on transatlantic, etc.? brian: most likely. billionshave invested to create these new beautiful business classes, and now with business travel slowing down a little bit, we have seen round-trip. had -- they have to fill planes. is zero toward the bottom line or negative. it is an interesting time. especially with more and more uncertainty with brexit, i would expect the low fares would continue. francine: how should i travel as a brick? -- as a brit? currency is, your devalued, so coming to the u.s. is a lot more expensive. there are many beautiful places in the united kingdom, that there is a lot of uncertainty there with the airlines. easyjet and ryanair are scrabbling to see what they will do. there is no immediate panic or fear in terms of travel, so -- tom: do you see a new discipline? is there a new executive discipline among the airlines? brian: discipline as in -- tom: budget discipline, cash flow discipline? are they going to be adults this time around, unlike before? brian: they are. airlines are producing a huge profit and spending wisely. a hugejust announced investment, finally, in their business-class products. i think airlines are seeing that there is a slowdown, and instead of getting caught and getting killed profit wise, i think adding more premium economy so that they are not left standing holding the falling knife, of falling business class fares. they are going to meet more in the middle. francine: is it fair why i ask if the u.s. carriers are so behind when it comes to transatlantic travel? tom: that would be true, francine. they have a shortsighted approach. it costs a lot of money to invest in your product. it is a hard investment, especially when the economy is down, to redo your product. they are now seeing -- it is clear that asia and the middle east carriers are whipping them,. the business-class seating that united currently has does not cut it anymore. much lessu.s. was a concentrated airline market with a lot more internal competition. then we had a lot of consolidation in the u.s., so the big players were involved and focused on integrating acquisitions. now they are playing catch-up. tom: i look at this, and there is one last quick question. what are we going to do about heathrow? putem buiter wants them to in a personal runway so he can get in and out of citigroup. fda has a nonstop flight to london city. tom: there we go. brian kelly, the points guy with us on changing airline business. let me do a data check. it is a jobs day data check. it is quiet, but i want to underscore the fragility of this over the last 48 hours. you see that over the spread right now, a stunning 77 basis points. the 10-year yield, 1.39%. this is "bloomberg surveillance." good morning. ♪ tom: all morning i have talked about a fragile bid. there it is. sterling with a little strength in the last hour, 1.2985. --e is the backstory, yuan that is really interesting, overnight and into the chinese monday, which of course we will see sunday evening. they have a history of putting things out on saturday. francine: coming up shortly, it is bloomberg go, with alix steel, david westin, and jonathan ferro. i know it is all about u.s. jobs, the port indicator -- the important indicator for the fed. david: happy jobs day. we will have an array of reports coming out. we'll join tom keene and michael mckee for an interview with bill gross. we'll also have rick rieder on the set from black rock. finally, we'll go right to the white house, to jason furman, the president's chief economic advisor, and had his take on what the numbers mean. tom: thank you so much per let's try to get back to the jobs report today. below about her with us from citigroup, seth masters with a b bernstein. what will you discern or glean at 8:30? seth: it is always a very uncertain number, and this time especially so because the people out on the verizon strike from the previous month are coming back. that swing by itself is about 80,000 jobs, roughly. on top of that, we think there are demographic factors causing the labor force to grow slowly anyway. as the population grows, more people are retiring then entering the workforce. that is a key point. this is the terminal value bringing us down to a new nonfarm payroll norm of -- it is not 200,000 anymore, is it? seth: it is maybe 100,000. tom: really, 100,000? rightseth: that is probably the ballpark. effectively retired or it willted workers, eventually hit the full implement area, but not quite yet. there is some slack in the labor market. francine: willem buiter, what are you expecting in terms of hourly wages? how much will that impact inflation? willem: earnings growth, somewhere between 2.5 and three, will have a minimal impact on inflation because there are lags , and there are many other factors governing the short term in terms of headline inflation. if you look at the data, there is something going on, so labor costs are likely in the underlying sense to be more modest than the earnings growth. seth: there is a very interesting thing you can look at right now that shows the problem here. normally the growth of income is the same as the growth of output in the economy. it is literally -- it literally has to be. but if you look at the measures the government puts out, income is growing significantly faster than output and has been for about 2.5 years. issonally, i think which correct is not that hard to figure out because income is a function of what people are willing to pay tax on, and i am people being happy about how much tax they pay. biasedoutput numbers are downward for some reason, and i am not sure we know why. francine: it is clear that janet yellen would never take a chance of hiking rates without the markets pricing it in, right? seth: yes, and it would be a huge surprise now for anybody to start seriously talking about a rate hike in july. i think the question is -- the market now is discounting no rate hikes out into 2018. that may be overly complacent. probably will happen is somewhere in between. tom: phil about her, this is critical. buiter, this is critical. are we measuring this quick directly -- are we measuring this correctly? willem: a lot of the use of iphones and i.t. is nonmarket production. by definition, it is not miss , it's in the does not included. there are adjustment problems even within gdp. i do not think the underestimated quality improvements estimate cause, there are other reasons. tom: i look at this stunning report we are going to see today. in the last three days, we have barely talked about wage growth, which goes back to your discussion on income. neil dutta of renaissance macro is an arch optimist on america and says income growth is remarkably good. is it, or is our political system saying no, neil dutta, you're wrong? seth: i do not think it is remarkably good, i think it is better than people realize. the median household income has been shrinking for a long time. that is a little bit muddled by the fact that the median household size has also been shrinking at an even faster rate. so income per capita is still going up in real terms. i think it is not going up at a remarkably good rate. it is going up at a modest rate. the problem is, we are in this very modest growth environment that is not terribly satisfactory to anyone, and it is not enough that you can afford to stimulate a huge amount, but it is also not enough to make people really happy. very quickly, is this the beginning of a dollar rally? willem: well, since everything else in the advanced economies currencies to weakening in europe, possibly in japan as well, i think there has to be somebody doing depreciation. the fed, even despite the fed will not raise because they are a prisoner of external financial conditions. tom: this has been spectacular. thank you to seth masters. professor william bauder -- professor willem buiter will bloombergith us on radio. across all our platforms this morning, william gross after the jobs report. bill gross on the american economy. good morning. ♪ ?c+sv [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] jonathan: june jobs error is expected to bounce back from an ugly may. david: trouble assets as concerns grow over financial stability in italy, this italian governors say state intervention cannot be ruled out. >> and tragedy in texas. five police officers are killed after snipers opened fire on law enforcement in the heart of allas. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] jonathan: from the city of london and new york, a warm welcome to "bloomberg go." i'm jonathan ferro alongside david westin and alex steele. another big show ahead of us. equity set for their biggest weekly drop from february. the attention shifts to the u.s. for that jobs report. david: and after those numbers come out, we'll have janice capital's bill gross on the program and telling us what he thinks the data means for