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tv   Bloomberg Surveillance  Bloomberg  July 8, 2022 7:00am-8:00am EDT

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>> inflation, it's been clear that is their target. >> they are likely going to far. >> that is really going to cost the economy. >> the fed right not be in recession. >> we are not looking at the volcker recession.
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>> this is bloomberg surveillance with tom keene, jonathan ferro, lisa abramowicz. jonathan: good morning, good morning. this is bloomberg on this payrolls friday. along sign tom keene it, we are together with kailey leinz. the market is down 0.2% on the s&p. we have to begin with the shocking news out of japan. tom: that is not what this is about, this is domestic sadness of japan. this is a hugely domestic story of mr. shen say abe -- shinzo abe. he was shot. this was sudden animated. he died very rapidly. jonathan: the suspect used what appeared to be homemade weapon. it goes without saying that these killings are incredibly rare in japan.
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this kind of gun violence is truly shocking. the team is breaking down the data. in japan it, then all of japan, 10 gun related incidents. 10. that's the number for last year. tom: that is the society. i'm going to say the assassination of public figures in former prime minister's is common. out of world war i, i should say out of the japanese war, it has been all too common. i don't think people are shocked here by this violence of a political figure. what is shocking within the polarization is how he won for so long. he was the longest-serving prime minister. jonathan: tributes have been
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pouring in. the one that jumped out was a tribute to came from the governor. kailey: individuals who worked so closely together on economic policy, in 2012, he wanted to get out of the stagnation, wanted to get out of deflation. he used policy mechanisms to do that. that legacy is lasting. policy and japan is easy. growth is stimulating. they are buying bonds when global markets are doing the opposite. jonathan: anything it, we will bring it to you right here on tv and radio. we want to start with price action. this is how we trade going in. we are down 0.2% on the s&p. friday, a really nice rally, four days of gains on the s&p. on the nasdaq, we just ripped. here we go on the euro-dollar,
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my eyes will be on that chart. kailey: we've got a break of 101 earlier. how is christine lagarde going to address that when she speaks at the economic form later today? that is less than an hour than we get those remarks. how are they trying to exit negative rates at a time in which the european economy slowing down? they are planning to hike into weakness. the big event is the payrolls report which you were just discussing. 260,000 is the estimate. does that mean anything to the federal reserve who is so focused on inflation. we will get real-time reactions from one member of the fed. john williams will be speaking. to what extent does he echo
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christopher waller yesterday? they are playing down the risk of recession as they talk about going another 75 basis points this month. jonathan: looking ahead, another one next week on july 13, payrolls are just around the corner. tom: what are you looking at? i will let you tell me. i don't go beneath the headline data, i stay with the headline data because that's where jerome powell is going to be. jonathan: the head of global rates, is this labor market data going to keep the light green for the fed to go 75 at the end of the month? >> we think so. the labor market is slowing. we are looking for 350,000. the fed wants the economy to slow. all the recession talk is premature right now. inflation is still a problem.
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they are emphasizing inflation right now. i would say the green light for 75 is done. the next meeting, we expect 50 basis point hikes. i don't think the fed will change their view. they want it to slow. tom: we are the only two on the planet, we looked at fixed income theory. what is the attribute that helps you determine your terminal rate gas? is it a finance attribute? is it an economic attribute? >> i'm glad you bring that up. where the fed ends up is an economic attribute. it's not just the economic view.
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when you talk about finance, that curve has been flattening. i think it's going to continue to flatten. this is all about the dominant rate as you highlight. the long end is about future rate, what is the economy doing? i'm a lot more constructive on the long and. the front and until inflation gets closer to 9%, i think that front end is going to struggle to price in lower rates. the fed is on a mission to get inflation to do the same. kailey: how much more deeply inverted could the yield curve get? >> we are looking at -50, perhaps even more. the problem is growth is going
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to slow down and we will be watching the fed it, whether they blinked. i do think inflation will allow them to blink. this is right after. it's a little bit optimistic on the market front. inflation is not going to collapse in a month. the fed gets closer to neutral by early next year. there is going to be awaiting time when we wait for them to ease policy. they are going to say we have to be patient, we have to see inflation come down. that's when the curve inverts even more and we pencil in less growth. kailey: there is a lot of that the bond market has to consider. the volatility in the bond market continues to astound me. we caught up earlier this week and the 10 year was trading near that 3% level. you said it was a toddler having
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tantrums. how do you make sense of the rates? >> i'm glad you brought it up. it is giving me high blood pressure. the market is moving around because of uncertainty. we've got uncertainty on growth. there is also market structure issues. there has been a lot of regulatory pressures. on the previous issues and policy, they were just much lighter. we have high-frequency trading another investors that tend to slow down when volatility is high. i think that is why we see smaller flows having outside -- outsized reactions. you have to think about resizing trade and having white stock.
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we have noticed this move. we are at the highest level. the only other year was 2008. we know what happened in 2008. that's not going to go away. we will have pretty large moves until we see clear signs from the data. jonathan: it's awesome to catch up. the clinic from you as always. it's difficult to predict with the fed is going to do later this year. it speaks to the volatility. even if you believe they blink, they have to respond to weaker data, they can't say that out
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loud. if they do, financial conditions will ease and equity markets will rally. that will go against their goal of bringing down inflation. this is a difficult one from the communication side. tom: it is next to impossible. like our conversation at yesterday, they are pigeonholed into scripts. they don't work in the original territory we are in. it is original territory. i know it's a cliche. whether it's jerome powell or whoever next speaker is, they are making up as they go around that ballet. what's going on? we need to hear that from the fed. >> if they were transparent,
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imagine what volatility would look like then. tom: we need to thank bill dudley as an example of somebody who is talking straight. jonathan: we are counting you down to payrolls friday, one hour and 20 minutes away. the yields are to 97 on the 10 year. from new york, this is bloomberg. ♪ >> keeping you up-to-date with news around the world, the former japanese prime minister has died after being shot at a campaign event. it is stunning news in a country where political violence and guns are rare. a suspect has been arrested. he was 67 and was best known for his shock therapy to revive the economy. boris johnson is still in number 10 downing street after announcing he plans to resign.
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the ruling conservative party wants to speed up the contest to choose his successor by the end of the summer. he floated a three-month timetable yesterday. this month, governor christopher waller and the st. louis fed president said they need to curb inflation as the economy is headed toward recession. another report on whether elon musk's acquisition of twitter will go through. the deal may fall apart over his doubts about they are reporting the number of spambots on the service. twitter continues to share information. the wife of john paulson has accused him of creating a series of trusts to hide aliens of dollars from her in their divorce. she sued him in new york, asking for $1 billion in damages. paulson has a net worth of 4.6
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>> there's no question that if you look at what the chinese
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economy and the nonmarket practices that chinese leadership are undertaking it, there are sectors of the economy with a are engaged in unacceptable activities. we have other tools to make sure we are protecting key sectors of the american economy. jonathan: catching up with this at bloomberg headquarters, that was yesterday. i'm jonathan ferro. we are together with kailey leinz. futures are down 0.1%. the nasdaq is down 0.5%. euro-dollar is 101 .40. just to pick up on the words on china, removing some of these tariffs, the latest reporting from the team, the president will meet with his advisers today on possible reductions in tariffs on chinese goods.
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that meeting is taking place later. tom: the size of those reductions, we are really looking at -- we're looking at small nudges. jonathan: focus on the size and where. that's going to be interesting. what do they remove? what is the reduction? do they double down to make this more palatable at home? this administration is accusing the chinese of conducting genocide, that's a very big accusation. to remove tariffs on that government is going to be a big deal. tom: i want to thank the white house for attendance yesterday. welcome on a most unusual jobs day. jeff rosenberg is one of our guests scheduled to be with us. an assassination in japan.
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tobias harris will join us in a bit, he is an expert on the reach of shinzo abe and his domestic politics. on the international politics in the legacy, emily joins us with bloomberg government. the most stunning image from the g7, i can't remember which, it was biden with south korea and japan. that started with shinzo abe. he said japan it needs to reach out. emily: this is news that you've already heard it. the secretary of state responded. he has deep sadness about this. he is praising what shinzo abe was ready -- able to do. donald trump also praised him for his relationship.
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this is a shock. the president is going to talk about abortion access, i would expect him to mention shinzo abe and his legacy. tom: it is not touched by world war ii in the aftermath of that, across the dynasty of the shinzo abe family, he was trying to drag japan into more assertive military. explain to us with the white house desires in the pacific from japan. emily: they've been focused on working with allies in that region. a counterweight to china and their influence in the area, when president biden was making his first trips overseas, he visited south korea and japan. he sees them as key allies in that area of the world. he says -- sees that as
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incredibly critical. they are trying to figure a path forward on trade and these tariffs. kailey: you talk about the desire to counter china and the tensions that exist. the white house is accused china of genocide. they are looking at e-zine it tariffs. is this just for optics? how does that play if you're going easier on china in some sense? emily: it's a good question. the thing driving the biden administration are the high inflation prices, the fear of a recession and trying to provide relief. you noted that this was an incremental thing. any reduction in tariffs would only be a drop in the bucket. you are hearing concerns from democrats on the campaign trail,
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tim ryan is running for senate in ohio. he urged the administration to not relieve these tariffs. they could harm american workers. it's fascinating to see this split screen. you've got these discussions going on at the white house. you've got democrats and republicans in congress working on legislation that would bolster u.s. competitiveness against china. it's an interesting dance right now, trying to figure out whether to roll off -- back these tariffs. this is something that a lot of officials in washington are keeping a close eye on. kailey: the clock is ticking. you are in michigan to cover the primaries, how much time does this administration have left to do something to change the minds of voters? emily: not much time at all.
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keep in mind that a number of these voters -- there is a lot of early voting. the window the democrats have to change the narrative here is slipping away. i've talked with both who have said they are concerned about gas prices and the prices go up at the grocery store. there are other issues in the mix. so have -- those have remained at the top of the list. jonathan: thank you on the latest in washington. the story is unlikely to change next week according to forecasts. we get the cpi trend on wednesday. the estimates so far, the median is 8.8. morgan stanley, 8.8. those are the numbers from big names. they are looking at 9%.
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tom: people are worried about core inflation. the answer is were not living core inflation, we are living top line inflation. it's double-digit. let's be clear, you take 40 pieces like david rosen does, how many are above 8%. jonathan: i will remember that basis point from bank of america, for the lower income cohort, gas prices rose to 9.8 percent of total monthly spend. they are living inflation in a big way. payrolls are an hour away. ♪
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jonathan: one hour away from payrolls, the market looks like this. equity is down 0.1%. the nasdaq is down 0.40%. just four days, that's how bad
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it's been this year so far. the nasdaq is up 5% on the week this week. bank of america has a note this morning same the new summer consensus, the latest narrative for second half recession, for him turning tech lemons into lemonade. how credible is this? tom: we are following this tick by tick. are we exhausted by how the narrative changes on a two day basis? jonathan: i'm exhausted. chairman powell is responsible for some of this. the difference between a 50 basis point hike and a 75 point, it's problematic area tom: i take your point. we are going to recalibrate, we are going to recalibrate at 8:30 a.m. jonathan: if we get to 290, they
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think recession talks take a backseat. we did keep hiking interest rates. this is what it looks like, priya is looking for 50 basis points of inversion. that is a while. the fed needs to keep hiking as long as inflation is elevated going into next week. we are looking at eight .8% in our survey for -- 8.8% in our survey for cpi. we are looking at parity in the euro-dollar. tom: i think twitter broke down as well. in the blur of news today, twitter is like euro parity. stock has gone through parity. jonathan: the washington post story suggests the acquisition was breaking down. am i here to fill in the gaps?
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tom: cut me some slack. jonathan: let's take a be. someone is join us right now thankfully. that someone is here. >> let's stick with the putter story. the deal is in serious jeopardy. elon musk will make remarks at a sun valley conference saturday. some of the heavyweights will push among what the deal looks like and the timeline. the stock is down 4%. tesla is not moving. it's moving positive in reverse. we know there is that inverse relationship. does he split attention? those shares are about flat. in terms of deal news, this is up almost 2% this morning. warren buffett buying those shares when it drops below $50.
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he is hopping into that market. it looks like he has hopped into that. that is pushing the stock up. we have some specific news with the fundamentals. gamestop, you've had a complete turnaround in the story. gamestop was higher by a lot because of a stock split in the last 24 hours. they fired the cfo. they announced widespread layoffs. shares are down 5.5%. levi strauss, denham never goes out of style. kailey: skinny jeans do. >> i wonder if tom has those 70's bellbottoms. jonathan: you can stay for a while if you want. >> levi strauss is up 4%. levi's is coming out on top.
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tom: i will have to take a road trip to brooklyn and unloaded 501(c). -- 501's. thank you for reminding me of retail travails. matthew joins us, he's been brilliant at deutsche banc, way out in front of the beijing recesses. at 830 1 a.m., will i know if the american labor economy is finally broken in a different direction? matthew: thanks so much for having me. we are expecting 225,000 jobs. we expect the rate to fall to 3.5%. the market is focused on getting recessionary signals. we've gotten evidence that the
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economy is not slowing as fast as anticipated. we do get evidence of that. taking a step back, you have an economy that showing a clear slowing. the labor market is showing mixed signals. we have the ism survey looking at negative. the pmi is looking positive. jobless claims are near record lows. we are looking for better signals about the near-term trajectory. we think today will be a solid report. tom: how do you link it to the inflation report? how do you stagger from this labor report to the cpi report? matthew: thinking about the fed trajectory, what the fed needs in order to back down from the hawkish nest, they need clear evidence that the labor market is turning. i don't think you get that today.
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they will need evidence that inflation is slowing. we expect month-to-month for core cpi. those two data points together when the fed releases their new expectations index later this month, those things keep them on track. jonathan: when this data pours out slowly, i've been waiting for something that hasn't developed rid we get this strong headline print. wages don't accelerate, what do you make of that? that's been the story. matthew: we've been them surprised -- been surprised by the unemployment rate. we see more weakness on the household survey front. you've seen labor force participation, that brings some
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uplift on the unemployment rate and prevents it from declining. that's been an important element. you still have the labor market that looks tight on all metrics. job openings are really high. the vacancy yield, this is near a record low level. the labor market still looks very tight despite what you mention from an unemployment rate perspective. kailey: what is your assessment of how participation may pick up in light of the inflationary pressures the consumer is facing as they draw savings down. that will draw more people back into the labor market. shouldn't that have an impact on the rate ultimately? matthew: it should. when you look at the margins from where we can get participation back, 25-44 has
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recovered most if not all of the pre-covid levels we've seen. that area remains depressed. we can see people come back. the bigger picture has been the workforce. when you look at the prime age workers, we are 2 million below the 2019 trend. that is a source of tightness in the labor market. it doesn't seem like it's going away anytime soon. jonathan: go through the recent calls. we were the first to navigate a recession in america. how much have you pulled that in? what does that mean for your best case for the fed? matthew: he pulled that into the middle of next year. we are calling for technical recession in the first half of this year. we had a negative q1 gdp growth.
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we are expecting the economy to oz back in the second half of the year, avoid a more conventional recession and fall into it next year. if that is the story, the fed is moving more hawkish late, raising rates more. very clearly, they are skewed toward the a tommy -- economy deteriorating. if that happens, it puts the fed in a bind. you have inflation above 4% and the labor market weakening. that could stop before we get to the 4% terminal rate. jonathan: matt, just wonderful. a beautiful view at deutsche bank hq. from the situation matt described it, let's be clear about that.
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if you have economic growth rolling over and you have inflation still around 4% and the fed is working out what to do and unemployment is rising, where do we go in that world? tom: with slower decline in inflation, you get a more robust gdp. i do take your point. the idea of all boats rising, i don't think so. jonathan: a technical recession this year, looking for that more complete procession here with unemployment climbing, the more conventional view. in between, you could have a fed pushing rates to 4%. nothing sounds good for equities. that's what equities have been struggling with. kailey: it sounds like their worst nightmare. his the fed owing to blink at some point? there has been an assumption
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that maybe they will and that his given a boost. what we've been hearing's they are focused on inflation and they are going to keep going. jonathan: pushing forward to payrolls friday, that is 50 minutes away, less than that. we are looking for to 68. that is from our bloomberg -- 268. that is from our bloomberg survey. this is bloomberg. >> keeping up-to-date with news, in japan the former prime minister has been shot and killed while speaking at a campaign rally. the attack shocked the country where guns and political violence are rare. the mental police he intended to kill him because he was frustrated with him. shinzo abe was the longest-serving prime minister in japan history. the conservative party wants to speed up boris johnson's exit
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from number 10 downing street area he could be a caretaker leader for three months while the conservatives pick a new leader. they are drawing up plans to choose a successor by the end of the summer. president biden will meet with advisors about rolling back tariffs on chinese goods. it is a potential weapon against inflation. donald trump had tariffs on chinese imports. greg abbott has ordered the national guard to apprehend migrants who are illegally entering from mexico. abbott is a republican. he made the decision because president biden refuses to enforce immigration laws. this doesn't give us confidence. gamestop is falling after they fired the cfo and plans to cut jobs. game stock growth has slowed as
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gamers are going to digital downloads. 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. this is bloomberg. ♪
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>> you have the longest postwar serving prime minister, he brought more attention to japan globally. he formed good relationships with international partners. that element of his policy and legacy is something people in japan universally are proud of. jonathan: waking up to the shocking news of the former japanese prime minister has died. he was shot while campaigning. much more to come on that story.
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lisa will be back with us next week. payrolls is 42 minutes way. equities look like this. we are negative on the s&p. yields are coming in a couple of basis in's -- points. we remain on parity watch on euro-dollar. a lot of people are publishing payrolls. deutsche bank is one of them. strong datable underscore thoughts of the 3% 10 year yield. insufficient for a recession and bring unemployment back down. tom: it's important that bloomberg surveillance speaks to those steeped in experience. i think of robert feldman at morgan stanley or david pilling. also on that list is tobias
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harris. he is the senior fellow at the center for american progress. we are thrilled that he could join us this morning. this is something who took what he did, drag rural japan into a modern urban history. a modern immediacy. shinzo abe said we have to go further, we have to go beyond the legacy of world war ii. was he successful? told bias: in a broad sense, there is no going back to what japan was like before shinzo abe returned. he was very much a success. he was fond of misses thatcher's line that there is no alternative. that is what japan has now.
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you have an economic policy, he laid a blueprint for his successors. tom: you wrote the arch moment of japan, which is malaise. their voter turnout is low compared to recent history. how does anybody in japan bring a new spirit to political japan? tobias: there will be a lot of questions about japanese democracy after today's events. it is shocking. everyone is trying to think through what it means. the assassination is a reflection of one of the best things about japanese democracy, how accessible officials are to the public. campaigns use the internet more than they used to, but they are still based largely on
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politicians interacting with voters directly. there is concern, does this mean the end of that? are you going to have that accessibility? i hope not. it was a strength that folkers -- voters had access to the representatives. tom: he was an arch conservatives and there was great liberal social policy. he tried to drag his group to the center. is there a political center in japan it? tobias: i don't know if it so much the center. fundamentally, he wanted his country to be strong. he would do what it would take to do that. if that meant globalizing japan it, opening japan to the world, welcoming tourism and opening japan to trade, he was going to do that, even if you look at
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traditional conservatives and rural japan it, even if a meant -- it meant taking those on, he was willing to do that. he wasn't a reformer, he did recognize that japan had to open to foreign influences more than it had in the past. tom: explain to us how the response will be from the emperor and his family? it is such a unique relationship. how will the emperor respond to the assassination? tobias: of course, there were plenty of moments with the current emperor, between shinzo abe and the former emperor. what it comes down to, in moments like this that are shocking and tragic for the
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nation, the imperial household steps up and serves as voice to those feelings of the nation. i would expect as much from the emperor. i don't think there will be a moment of political tension. the emperor speaks on behalf of the public. kailey: you were talking about how he looked globally. he was a unique figure in japanese politics and that he did have that global recognition. people knew who he was. where does japan stand in terms of global politics in his absence? tobias: he was probably the most powerful figure in japanese politics up to the moment he died, more powerful then the prime minister. he was pushing for more defense spending. it's hard to see who will fill his shoes in terms of making
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that case. there is some uncertainty what we will get. there will be pressure to continue the agenda and fulfill shinzo abe's vision. he is going to have to step up in the moment and continue to live up to the blueprint shinzo abe outlined. jonathan: thank you for being with us this morning. just horrific, deeply deeply shocking waking up to this news. tom: moving away from the assassination to our relationship from a distance, there is a continued underestimation of the size, the depth, the economic reach of japan within the pacific rim and asia. this is fairly recent. there is a belief japan is flat on their back without shinzo abe. that is simply not true. jonathan: he said his legacy was
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very much still alive. the modern-day architect of modern-day japan. we've seen this play out beyond japan. tom: the indo pacific reach of the united states, that has to be reaffirmed. i wonder if we will hear from president biden. does he travel to japan again? jonathan: pushing forward to payrolls friday, we are looking at 260,000. the equity market is down 0.1% going into that data. good morning. this is bloomberg surveillance. ♪ welcome back to another wimbledon update. the two ladies finalist will
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both be making history at the all england club this weekend. on stripper became the first -- she became the first east african woman to reach a championship match after she ended the dream run in london. the number three seed needed to reset to get past the german. she has one 22 of her last 24 matches. she will head in the favorite. standing in her weight will be the first player from kazakhstan to reach a maitre -- major final. the big hitting 20 thrilled lasted her way to within a win. she fired 70 winners in the victory.
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>> the labor market is still strong. it does paint


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