tv Bloomberg Surveillance Bloomberg August 9, 2021 7:00am-8:00am EDT
>> the economy, the empty cubicles have not stopped. >> the fed is being very clear to want to avoid the taper tantrum. >> we are expecting the marketable and lower rather than higher. >> this is "bloomberg surveillance." jonathan: all-time highs into monday. for our audience worldwide, good morning. this is "bloomberg surveillance." alongside tom keene and lisa abramowicz, i'm jonathan ferro. down 2/10 of 1% on the s&p. a series of upgrades over the past week the u.s. equity market. >> the view forward for the strategists is simple. it confirms a lot, 832,000.
when are we going to get off -- get up to 5000. >> the labor market is healing. supply starting to arrive, can we say the stain -- say the same about what's happening in china. downgrades last week. they are starting to pile up. tom: the benchmark is 6%. 3% growth. they are modeling out below a 6% growth and that demands a government response. jonathan: lisa you can talk about levels and direction of travel. levels in china, goldman looking for a handoff. that ain't bad. lisa: however it's also coming as they try to shift their economy in a way away from some of the fast growth leverage fuel that we had -- that we saw over
the last year or two, catering to the average mom-and-pop investor and consumer. that is going to necessarily slow growth. they need the underlying growth to be faster. jonathan: this equity rally has been sustainable. what's get into the price action. futures this morning just a little bit softer. we are negative nine on the s&p. into the bond market where we've been all over the place. as high as 130.50 this morning. >> to me the bond market is contained. >> you would've thought we had a better real yield or lesser negative number on the jobs report. jonathan: we had that friday. what did we have off of the back of that? gold is the opportunity cost as
real yields adjust. in response to what's happening in china, commodities suffering. copper down. lisa: which raises the question is there dissonance between what we are seeing in oil prices lower, fear of a slowdown because of the increasing delta cases. are these sending a negative message that equities are getting or is there something else at play here? i'm going to throw out a number, nine point two 7 million jobs. that's how many openings there may be at 10:00 a.m. in june. that would be a record. the idea is those frictions are persisting and getting worse in terms of employees not being able -- employers not being able to find employees they need. we will talk about potential further progress. the richmond fed president
speaking 10:00 a.m. and noon respectively. going to hear what they have to say about the report. just to talk about the progress in the pandemic, hong kong is planning to open its borders to some vaccinated foreigners. fully vaccinated united states residents will be allowed into canada for the first time. when is the u.s. going to open its borders to foreigners who have full vaccinated status? jonathan: reciprocity is a bit of an issue when you try to do these things. let's bring in invesco global market strategist. i will characterize your view for you. i understand you are looking for that return to trend growth through next year. you are looking for growth to take over in terms of leadership. any challenge to that from the data over the past week? >> may be over some weeks but
not over some years. when you think of where the 10-year was, i would not be surprised to see further improvements in this economy as we get more american adults vaccinated and so should rates be at 1.28, probably not. in that environment, cyclicals and value-oriented parts of the market. my point is to say we are on to mentally going to stabilize to a more modest growth rate. nothing structural change. this coronavirus driven recession, we recovered from it and we are navigating around getting back to a more stable level of growth. my view is you are looking beyond the next couple of quarters, it should continue to be a modest growth environment. tom: michael agrees with hewitt
and km partners. what does it mean for corporations. life goes on. state where the bloom crew has it wrong. brian: it's similar to what you saw from the middle of 2011 through the end of 2019 is growth is strong enough with corporate earnings. it's not stronger needs big access, is a gifted inflation. it creates a cycle that can go on for some time for it some corporations will be better positioned for us -- this than others. if you are the type of business that requires higher sustained economic activity, then you are unlikely to receive a fancy multiple. >> as an investor deal like this kind of chart the charles schwab put out showing buybacks in the united states of the s&p 500 are
running it near the fastest pace ever. is that a good thing from your perspective? brian: it tells us businesses are flush with cash. it is certainly a tailwind to markets. would i rather see more businesses use that money to put it to productive use? sure. but it's indicative of a corporate environment that's probably thinking similarly along the same lines i'm thinking is we are not going into robust growth environment and they are deploying cash in a way they think is appropriate. jonathan: tom: to what degree -- jonathan: i wanted to a degree those buybacks were delayed into this year. brian: absolutely. jonathan: that has to be an issue going forward. how can we take this year's data that we just had. lisa: after a year like last year. they borrowed all this money and
they are using some of that to do the share of buybacks. the fact we can just go right back to our old plans with a huge gap in the middle. jonathan: the deck piles of some of these companies have lowered rates, leverage ratios are moving in the right direction. lisa: right now we are seeing that in the investment rate. it's a little bit different. brian: for the most part these businesses are borrowing this money at very low interest rates. you are not looking at a wall of maturity, you are not looking at a very onerous interest burden. it's similar to households that refinance. you take advantage of these opportunities when they come to you. tom: it tells you a lot about use of cash.
i don't need to pick on amazon other than their cap expert 2019 was the last normal year, something on the order publish free cash flow growing out and then you skip 18 months because of the pandemic and the new working number is $45 billion. amazon is amazon but that permeates through the system. brian: it does. it's back to talking about these businesses that can generate cash flow in this environment. if you think about where we are, corporate steve eisman to borrow money's going on the earnings picture. we are coming through a very robust quarter.
we don't continue to see earnings grow at these levels, but back to my original point is a more stable growth environment can still be very supportive. jonathan: good to catch up with you. corporate america looks pretty resilient, pretty decent right now. i'm much more concerned about how things flow out of china. these two statute -- stats jumped out at me. china makes up more than 25% of em bonds trading above 7%. china makes up two thirds of the distressed e.m. universe. we need to watch out what happens there. can it stay isolated or does it start to flow back through not just the economy but through markets? tom: a massive change.
i would suggest some of those worries can impart a disinflationary tendency on the inflation worries in the united states. i'm not sure how that math works out. i do not share the gloom from the united states from what we see that's tangible. jonathan: hasn't that been the change for china was a source of disinflation and now it's a source potentially. that seems to be the change. lower prices and commodity. we catch up in the next hour. down 4%. the man from delmont a makes a comeback. i feel like this is something to do -- are you in support? tom: beige suits are worn in the summer.
you would style in beige. paul stewart or whatever fancy euro trash you buy. jonathan: are you done? tom: and with your british accent. jonathan: from new york we will leave it all there. this is bloomberg. ♪ ♪ >> new report from climate china -- scientist see no end to rising temperatures before 2050. the assessment comes from the un's intergovernmental panel on climate change for the planet will keep warming unless our drastic moves to limit greenhouse gas solutions. it comes three months before the un's international climate conference. >> it's very critical. they provide very basis for people to have an understanding.
>> today's report is a work of more than 200 scientists. the infrastructure bill has cleared/procedural hurdle. final passage could take place as soon as today. the bill is the cornerstone of president biden's economic agenda. if the senate approves it, the measure goes to the house. u.s. infectious diseases chief says booster shots should go soon to people with weakened immune systems. the delta variant keep shifting the strategy of fighting the pandemic. found she said he supports vaccine mandates at local levels. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'mritika -- this is bloomberg. ♪ ♪
in some sectors we will need to see higher wages for people who come back to work. all signs are incrementally going in good positive directions. >> the u.s. secretary of labor after the payrolls report friday. i think everyone agrees without tremendous that report was. alongside tom keene and lisa abramowicz i'm jonathan ferro. equity futures on the s&p were negative seven. down to tense of 1% on the s&p 500. a little bit defensive off the back of some downgrades. your 10 year, 1.2733. crude is down four percentage points. tom let's look at the report. the latest scientific assessment from the un's intergovernmental panel. this is scientists, the six
global science assessment from this group since 1990. it will be the lead quote in several publications around the world. here it is. it is unequivocal the human influence has warmed the atmosphere, ocean and land. that's the headline from that study. >> it is just miles from 2015 and the good feeling of paris. to me the two observations are the united states, what are we going to do, whatever anyone's politics is, there's no other issue. >> the past decade was most likely hotter than any period in the last 125,000 years. china, that's where the tension is going to be. tom: the council on foreign
relations is definitive on this. the answer is the river still runs black. you can talk all you want. the basic idea is we can do all of this mumbo-jumbo, you have to go after the blunt instrument of the big topic in the big topic is coal and china. jonathan: for the biden administration what does it mean politically? tom: that's a good question. i'm going to let experts talk about that. trying to sway both sides. >> this is a bridge to build with the new incoming administration. china was almost trying to do the same thing for a moment in time. i wonder if that has traction through the rest of this year. tom: they have a really interesting place in this. right now we discuss bridges
over troubled waters. emily wilkins does not know who simon and garfunkel is but she knows political waters. give me the summary of this week in the political swirl known as washington. emily: we are on track to have that infrastructure bill finally passed the senate. they took their final procedural vote last night. republicans joined with democrats giving them more than enough votes. what will happen with the crypto amendment? it will be passed either today or sometime tuesday morning. from there we go to the budget resolution because chuck schumer has said that needs to get done before the senate can finally depart. tom: what is the character of the first phone call from the senator from new york to the speaker from san francisco?
emily: probably to discuss if they will continue their strategy of holding both bills, holding that until the reconciliation bill comes down the line. speaker pelosi is under increased pressure from moderate democrats in her own party saying we cannot wait for the senate to move this reconciliation bill, we need to move now on this infrastructure bill and they do have some leverage. pat -- to pass that budget reconciliation they need the blueprint of a budget resolution. that means to pass the senate, come to the house and pass the house. we heard some rumblings among moderate democrats saying they will not approve that blueprint if they don't see movement on infrastructure. at this point it's unclear how much is posturing and how much is a credible threat. lisa: every year we have to deal with the debt ceiling farce. will we or won't we default on the american debt load.
this year there is a question of whether that respective affiliation bill -- reconciliation bill will be tossed in. what is the political weight on that issue. >> this is one question everyone's been asking to senator bernie sanders, are you going to include a raise the debt ceiling in the budget resolution. he has not given a straightforward answer. also hearing this morning from the treasury secretary who is saying this needs to be a bipartisan effort. republicans and democrats need to come together to raise that debt ceiling like they did during the trump administration. the senate minority leader has said that is a no go that republicans will not be voting with democrats to raise the debt ceiling, citing the amount of money that spent an additional concerns about inflation. jonathan: got to leave it there.
the u.n. panel on climate change, the report they released. the conclusion, it is unequivocal humans warmed the atmosphere, ocean and land. the document is "a code red for humanity." this is an important one for markets and certain sectors. here's the quote. >> this report -- "this report is the death knell for fossil fuels before they -- our planet. a sector has done tremendously well. tom: michael man out of penn state, a mark in the united kingdom who put on twitter today a very short read on climate change. people have to get basic knowledge on this before they
dive in with their personal politics. jonathan: it's not just about government's response to this, it's how corporate america response to this. lisa: we heard that in the earnings reports of how oil companies tried to indicate they were being forward-looking with respect to the new phase of energy. i think this is interesting in light of what emily has talked about, of infrastructure bill in washington, d.c.. how much goes into building a greener infrastructure and how much goes into the oil industry. jonathan: brent at 868 handle. lower on wti by about four percentage points. the equity market shaping up as follows. futures look like this negative six off the lows of the session. yields have been all over the place.
jonathan: live from new york city on tv and radio, here is the price action. negative six on the s&p. lisa has been counting for 190 days since a draw -- 5% drawdown on the s&p 500. nasdaq futures positive about a 10th of 1%. no drama here whatsoever. been a bit of drama over the last week. one point 30 -- 1.3050 the top. let's set the stage for the debate right now. crude is having a rough tough
ugly morning. we are softer on crude. down by a little more than four percentage points on wti. you can look to the u.s. and say glass half-full payrolls are fantastic. you can say downgrades are coming. all cutting their forecast. tons of demand in this economy at the moment. payrolls trying to build, good news prayed two ways of looking at things. either you believe supply will start to wane constraints will heal or you believe you might get another wave of this that runs through the system, more supply constraints of the back of a tapping. supply response fantastic. a second shock, a second wave out of china.
you knew where i was going. tom: you've got to move your podium closer together. lisa: join us. jonathan: i don't know -- tom: i don't know why we aren't all in the same room. jonathan: crude right now at 65.42. here is romain. >> i will pick up where you left off. a lot of the movers are in the commodity space. some of the concerns right now with crude oil and the demand out of china. you are looking at wti below that $66 level. devon energy also moving lower as are most of the stocks. you are also seeing some of that similar pessimism. you are looking at copper prices fickle.
the flipside of that has to do with the relative u.s. strength and the potential reaction function of the fed to last friday's jobs report. gold here on the day. we should point out treating below $1700. -- trading below $1700. outside the commodity space a few individual stores to keep an eye on, this is a big genetic sequencing company that is backed by arc investment funds. exact science is said to have made an offer for the company. the companies have not confirmed that but the shares are higher in the premarket. coinbase reporting tomorrow. higher on the day making a nice run. -- had a nice rally with record highs on wednesday, it did feel back.
tom: look for that this afternoon. right now this is important with a well-timed headline out moments ago. tysons food which is part of the barometer of this nation with a revenue upgrade. michael, buried in your notes is way too much revenue optimism, why does the gloom crew misjudge the revenue optimism that you see? michael: in q2 we had a series to underperform the expectations here. it gets a little bit into the notion that the u.s. economy because of the s&p revenue earning streaks. i think it's a testament for corporations when the storm hit.
they've also proven to be agile maneuvers of the tricky economic condition. would you call earnings growth to help smooth things out. at the end of the day i thing the corporate earnings are an interesting contrast. with the earnings and revenues with the second quarter with the economic data is really sort of underperformed. jonathan: big concern for a lot of people. can we continue to insulate those margins if these supply
constraints persist? michael: one of the things is here we are with more halfway through the year, supply chain issues, ford can sell cars because the chip shortage. if it's related to those facets, i think people will ultimately afford a car or truck in 2022. the market needs to look at a stronger 22. if the margin misses because of something really for more structural forces related to sustain costs increases, that's going to be different. that conversation is
extraordinarily company and sector specific. very high wages with company founding's, companies at walmart are going to be much more vulnerable there. we don't have data on whether the margin of progression, economically sensitive sectors are going to be that problematic. lisa: just to build on this point, there is an argument that consumers have been more willing to absorb higher costs because they -- because their savings are so bloated from the checks from the government and not going on vacations. that tolerance will fade over time as though savings get eaten
down do you buy that it will become harder for companies to pass along higher costs regardless going forward simply because the consumer will be more discerning as life returns to normal? michael: it's a good question. i think it gets a little bit name specific. it's also about timing. you can look at material names like the steel sector, they aren't giving all of their gains back. the steel futures curve is very robust through 2022. the steel companies have been able to pass off their higher prices on to their customers. tom: we have to leave it there
because of the monday schedule but thank you for your optimism, you saved the show. that means we have to get jonathan ferro to damien who joins us. i know john is all fired up about china. i want to go to indonesia and the covert impact. the 10 year u.s. dollar piece, a price up yields down to a yield of 2%. >> i believe that has something to do with the bank of indonesia suppressing yields artificially. what's going on with the delta spread, let me pivot to the philippines where we have a central bank meeting this week. they might hike rates there. we have peru, the philippines. if you want to talk yields you have to look at china. tom: you are agreeing with ferr
o. >> let's talk about factory gained inflation in china. the 10 -- the yield is following suit. jonathan: let's talk about those growth forecasts out of china. it's not just bpi, it's cut, cut, cut. can you run me through from the credit perspective. where it is right now in china, what it's doing to e.m. and the prospect potential this could lead. -- bleed. >> a chinese issuer, a issuer of debt, we might have that by the end of the month. people are looking for color there, expect another rating downgrade. if you look at local aa rated china credit yields versus -- aaa versus aa. it's actually -- that's not what
should be happening if you have this default risk underlined the surface. everyone is down grading. it's good for china government bonds. today they rose. jonathan: let's continue the updates through the week. tom: that would be good. jonathan: some revisions over a jp morgan the fed treasury forecast. they cut yields forecast by 20 basis points to 1 -- tens, 1.28. they are predicting a high yield but lower than they were if that makes sense. tom: that make sense given the research flow this weekend. jonathan: a conversation you do not want to miss.
this is bloomberg. ♪ >> the u.s. senate could pass that infrastructure package suit -- as soonest today. lawmakers moved to limit debate on the measure paid 18 republicans joined with all 50 senators who vote with democrats for bipartisan support on the bill. u.s. officials are reviewing their options on the reentry into the accords failed to reach an agreement. iran found ways to cope with u.s. sanctions. berkshire hathaway is reaping the benefits of the u.s. recovery.
manufacturers and retailers bounced back in the second quarter. the business brought its second highest quarterly profit. berkshires profit rose 21%. samsung billionaire vice chairman will be released from prison friday. the committee recommended he received parole. he was sent back to jail for a second time in january. convicted of using bribery to win support. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta, this is bloomberg. ♪ bloomberg. ♪
the balance sheet remains strong which means if they continue to person -- purchase assets as add-ons of the auction. they will have their tentacles in the bond market for a long time. >> one of the sharpest bond market strategist on the street. from new york city, good morning. we start this monday morning asking the question to what degree do we make progress the fed would like to see before they start tapering. that after a blowout jobs report in fright -- in america. negative six pointed down zero. jp morgan revising their forecast lower. we cut in those forecasts on tens and 30's.
tom: the crew over jp morgan, -- jonathan: we have learned the fomc tolerance is not as large or as durable as we previously understood. jp morgan on 10 year yields. you mentioned indonesia. they put together the pmi, look at who is south of 50 right now. sub 50 pmi, that's congestion for china just on the line. asia is starting to go a bit softer. tom: damien put me in the timeout chair saying all that matters is china. right now, david wilson with us on the record highs in the
record level of the record s&p. >> friday was the 150th trading day of 2021. we have 100 more to go. 44 records for the s&p 500 through friday. the most recent one was on friday. if you look at the current pace and extrapolate out to the end of the year. you are talking about 74 record highs for the index. that's about the most you've seen in any year since the s&p 500 was first calculated. tom: are we numbed by 10% corrections never happening? >> 10%? there hasn't been a 5% drop in the s&p 500 from a high since november. that certainly plays -- lisa: 90 days. >> that's what we are seeing the
succession of records as much as anything is stocks aren't going down that much when they fall. so when they bounce back it doesn't take a whole lot to get them the records again. lisa: the s&p 500 has not had a 5% drawdown over the past 190 days, but it's not the most notable thing. the s&p 500 has risen at an annualized place -- pace at 46%. you have a record in terms of the pace of gain. is this bearish in that it cannot continue and had to reverse some way. >> that's the fundamental question at this point. the answer looks -- lies with earnings as much as anything. last year, so many companies were hit by the pandemic. you're talking something like 94% profit growth for the s&p
500. the question with the third quarter and the fourth quarter. two companies deliver more growth or have they peaked already? that's the thing that may well dictate whether we see a continuation of momentum or any kind of reverse here? lisa: this might be a little bit bullish and i was reading the statistics, s&p earnings are projected to have grown 90% in the second quarter. that's a versus an estimate of a 53% are we underestimating how much dynamism there is or is this all baked in? >> you can argue analysts have been underestimating for the fast -- past five quarters. given the extent to which s&p 500 earnings have outpaced estimates, that's been a trend.
does that keep going? does that feed into what we are seeing in stocks? these are all as we see record after record for the s&p 500. tom: one thing we know for certain. a really sophisticated morning monday note challenging jonathan ferro. ira goes after the german yield conundrum, what you and i are observing on the infant -- interest rate differential across the atlantic. jonathan: 10 year yields in germany, the whole curve is negative. can you take an economic signal would you look at the ecb is a massive fire? -- massive buyer? tom: jeff bezos doesn't live there.
as lisa mentioned, the dynamism of the united states is just not there and that's the disparity. jonathan: it's a global bond market. with yields down here in germany , how far can treasury yields go? i mentioned jp morgan, where is your up in the mix? are you just looking for a much wider spread? lisa: it's a global market and a changed central banking philosophy. we are printing money and extending the balance sheet has not led to runaway data. are the central banks going to shrink their balance sheets? they will probably go bigger. probably they will stay negative and that is what a lot of people have been coming out with whether the united states or europe. i don't see the political goal on shrinking the balance sheets. jonathan: even when the
additional bond purchases finished at the central banks they will have massive balance sheets and continue to reinvest. that will only stop once they start to raise interest rates. can anybody give me a gas when you think the ecb will raise interest rates and that process of unwinding will begin? lisa: will they ever raise interest rates? this is becoming the question also in the united states because they think they will hike rates marginally. what do they have left to fight the next downturn? jonathan: it's been 10 years since the ecb hiked interest rates. it's been a decade. this is an ecb that supposed to be a different reaction function. tom: i had a quiet moment with timothy kite mayor in the beginning of the -- timothy geitner in the crisis.
>> the saddest the fed is concerned with the maximum employment. >> we will stabilize to a more modest growth rate. >> the earnings backdrop will still be quite good over the next year and we will still grow earnings comfortably. >> this is "bloomberg surveillance." tom: good morning everyone. simulcast