Appetite. Alix as you were pointing out, youre not going to see a lot of Movement Ahead of what is going to have any jackson hole. S p futures down by about two tents of 1 . You have utilities making a record high yesterday, so a little bit of risk on the side. You do have dollar u. N. An with its biggest drop yesterday. Time now for global exchange, where we bring you todays market moving news from around the world. Joining us from london is bloombergs emma chandra. From wyoming, Michael Mckee. From sao paulo, julia leite. First, i want to start in europe. Euro area pmis coming in slightly strongerthanexpected. Bloombergs,go to chandra bloombergs emma chandra. Emma we saw the pickup and composite pmi across the area. We also saw in france a return to growth for french menu factoring. The real headlines out of germany were in manufacturing remained in contraction mode is the engine of the european economy is not looking good, fueling those fears of a eightion, shrinking straight months when it came to manufacturing. Orders falling for the third time in some four months, and. Ore companies now picture at the global for manufacturing as well, you see that everything is in this red zone, in contraction. The yellow line is the u. S. , but it is getting pretty close to it, too. Alix thank you so much. Eurodollar not really moving any higher on that note. U. K. Prime minister Boris Johnson is in france today to meet with french president Emmanuel Macron. Bloombergs go to paris bureau chief. Reporter i wish i could be a fly on the wall because it is definitely going to be tense. Is absolutelyn opposed to an extension of any potential brexit talks, and france now thinks that a hard brexit, meeting the exit of the United Kingdom from the European Union with no deal, is the most likely scenario now. Boris johnson thinks rather the contrary. He was given a little bit of hope yesterday after he spoke with the german chancellor angela merkel, who said that if he comes with a new proposal within the next 30 days, sure, why not . Alix thank you so much. Now we move to jackson hole, wyoming, where the Federal Reserve of kansas city is having its annual meeting. Michael mckee is on the ground with what to expect. Michael weve already seen a moose, soweto copley star main goal this week. Moose,all members a so weve accomplished our main goal this week. Almost all members of the fed will be here, so the challenge is how do you manage an economy and use the tools to get through a downturn if Interest Rates are so low that they cant really cut them . How much will chairman jay powell and the rest of the fed cut Interest Rates next month here in the u. S. . Everybody is looking to the chairmans keynote speech tomorrow morning. We will be getting a preview of that, as you mentioned, from Kansas City FedBank PresidentEsther George, coming up in half an hour. Luke you mentioned all the fed officials are gathered there. Thats pretty much the only sign of unity that appears to be on the committee now. Yesterday, if you look at the per disciplines section if you look at the participants section, many not really there at all. How hard is it for jay powell to give a speech when theres not a lot of consensus for what comes next . Michael its going to be a fine line he has to walk because he cant promise something Going Forward when he doesnt know if he has the entire committee behind him. He did a great job, if you valued unity, getting most of the fed to vote with him at the last meeting, but apparently there are some holdouts looking at the economy. Esther george was one of them. We will find out whether she is still interested in voting no on an Interest Rate cut. Alix bloombergs Michael Mckee, thank you very much. We go now to brazil, where fires are raging through the amazon rainforest. The effects can be seen as far away as sao paulo. For more, we go to Sao Paulo Bureau chief julia leite. Tell us more about these fires. Julia weve seen a massive increase in fires in the amazon. You can see it in nasa imagery. It is up 84 compared to last year. Theres been over 74,000 fires reported this year. You really see it mostly in the cities close to the north, where visibility is nonexistent. Suddenay, there was darkness in sao paulo, which is a city of 20 million people. It was a little bit of an apocalyptic view. Theres a lot of debate on whether there is fire whether it was fire from the amazon. A lot of meteorologists are saying it was more of a cold front with possibly some smoke, but it was striking. Alix striking indeed. The pictures are incredible. Thank you very much. We also have our eye on asia this morning, specifically hong kong. Messageeos getting the that china sent when it clamped down on cathay pacific. Firms like kpmg telling staff not to speak on behalf of the company in public and expressing support of chinas governing policy. Hsbc, which gets more than half of its pretax profit from hong kong, is trying to stay neutral, but did call for a peaceful resolution to the crisis and condemning violence of any kind it makes it one of the first global banks to publicly address the crisis. Now it is starting to actually feed materially into earnings, etc. Luke what weve got is analysts calling for a 19 slump in profits for Hong Kong Companies this year. That would be the worst since the financial crisis. A lot of this does have to do with them citing some of the effects of the protests. For instance, you are not going to go to eat, people are not hotels. Come stay in you are seeing that filtered through, and some strategists are saying we dont just need a trade war resolution. We need this political stability to reassert itself. Alix and some Airlines Just not working at all and hong kong. We are going to do that over the next few months, take the capacity out, and the anticipation that this will continue for a few months. Alix i feel at this is the First Company to say we are going to have to cut capacity there for sure. Luke definitely. A lote seen in the past of companies that are moving out of both china and hong kong on trade war and political instability. Hong kong being such a potential bastion of globalization, this really is a lodestone for what we are seeing on trade and all the tensions around the world. Alix and japan and south korea. Lets not forget about that. Coming up, recession signs for germany. Business sentiment taking a dive. More on that next in todays first take. This is bloomberg. Alix its time now to give you all the news of the morning and get you all the trades to set you up for the day. We are going to kick it off with euros and pmis, giving signs of recession for germany. In the u. S. , the fed disagreeing on rate cuts as we await jay powells speech from jackson hole. Steveith us, chiavarone of federated global investment. The problem with germany looking forward to is i am concerned how the white house is going to react to this. The president is not a type of person who i think is going to pass up on this opportunity. Germany has got their backs against the wall, and now is the time to deal with it. Theyre worried about their exports and just throwing more fuel on the fire and making the situation a lot worse. Luke this is kind of as expected. When does the same old story warranty different response . When does it warrant a response that is just more that is more than just tweaking monetary and getting the fiscal going . Steve yesterday. There needs to be a coordinated effort here. This feeds directly into jackson hole. , on theot a recession verge if not already in a recession. Same with the u. K. Youve got the stimulus bazooka coming from the ecb as soon as september. That is going to put pressure on the dollar and make it hard for the fed not to cut more. If that is the case, they might as well come to that conclusion now, come out with a plan, and just get on with it. So i think there are crosscurrents back in the u. S. , not just for trade, but for Monetary Policy. Vincent i would agree the fed should cut more, but not necessarily for the same reason. I dont know that the ecb has got a bazooka, to be honest. Transfer of wealth mechanism, which isnt going to happen. They need to go into deficit spending during a recession for some time, at least until they can turn their economies around. You cant ask the fed to play central banker to the world. While that may be detrimental to the u. S. Economy in favor of global economies, it may play well to the white house, but it will not play well across the states. Is this kind of difference in willingness to use countercyclical policy or outright stimulus, is this something that, as a portfolio manager, does tilt you more towards the u. S. . Steve i think you have to be tilted towards the u. S. Here. Just look longterm. There are two themes going on. The first is we have population growth. People forget our population growth has slowed, but you have it. You have decline in almost all of the rest of the developed world, including china. Longerterm come of elation growth is a key ingredient in growth longerterm, population growth is a key ingredient in growth. Socks look over the euro the euro stoxx, it is banks. Do i want to own amazon or Deutsche Bank . I think theres legs to that. Alix Deutsche Bank is its own story. [laughter] steve that was cheating, im sorry. Are to pick up on what you saying in terms of the dollar and how strong its been, luke, you were talking about it yesterday, about how the dollar in a nominal value versus inflationadjusted, they are tailing a bit of it they are telling a bit of a different story. Luke when the president was tweeting earlier this week about the dollar at record levels, what he was talking about was the nominal dollar much more so. What that does is it really overstates the loss of u. S. Competitiveness relative your emergingmarket currencies. That white line, the dollar, the real dollar, suggesting maybe the dollar isnt as big of a headwind for both global activity and Financial Markets as that nominal area might suggest. That reads into something ive been thinking about recently. How have Global Markets been able to shrug off Dollar Strength . Ci,ss youve seen the ms its been completely uncorrelated with global stocks for the past month. Vincent they havent shrugged off Dollar Strength, but the real effect of the dollar is the tradeweighted dollar index. I will go back to stan fischers ideas because hes a lot smarter than i am. You need Something Like a 10 move in the dollar weighted index to transmit to a cut or hike from the fed. Manufacturers on a shortterm level, on a bigger picture, you need a much bigger move in the dollar. For emerging markets, it does impact because they are funded in dollars, as well as china. A lot of local companies in china are funded by dollar debt. Impact the to domestic economy of china as well. While on one hand, they shrugged it off because it has not impacted from a trade standpoint, per se, it is going to impact the funding level. I think that is where we see the pressure, if at all. Steve i think the same dynamic is impacting sentiment at home now. You see japan passing china once again as the biggest holder of u. S. Treasuries. When you think about the yield curve in the signal that is playing off of, i think it is an important signal. Thats one of our six key indicators. But you have to be cognitive of the fact that we are trading 6 billion at negative yield come of the long end of the curve is being pulled down by demand for u. S. Treasury. How much of see that is a reflect in of the global search for yield. I think it is the same dynamic is the dollar. It is a safe even a safe haven. Luke we might as well mention auctions here because it ties into the hunt for yield, how theres this big bullish options hedge. Whatever the case is, it is essentially a bet that the 10 year treasury yield might go to 1. 45 at the end of the week. What im wondering, is this the kind of response you get on a dovish powell with rates sinking, or a more hawkish powell, where you get the twist we saw october 31 . Vincent i dont think it is talked about enough, when you have the 10 year yield at 1. 6 and the people talk about inversion and worry about a recession, its clearly because the shortterm are too high. Not because the longterm rates are too low. If you look at the natural rate of fed funds, it is Something Like 40 basis point above where fed funds is now. So there is a pretty clear argument that fed funds rate should be 50 to 75 basis points lower. Were you to have that, you essentially have the 10 year yield at the natural rate. So the lower end needs to come down and maybe take that pressure off the curve. I think thats where the play needs to come in the next six months or so, and the short end of the curve. The lower end, you might get 10 or 15 basis points. Alix so the reason the fed gave the minutes for the cut gave in the minutes for the cut, may be some deterioration in the Global Economic picture, is that wrong based on that chart . Vincent its not wrong, but its not taking into account inflation rate in the United States and the global inflation rate has done absolutely nothing in the last 10 years. What the fed is trying not to tell you is what the ecb is trying not to tell you, that on a terry policy has essentially run its course. This is essentially a fiscal policy issue. You have rates in a large part of the world, 16 trillion in negative rates. The fed will do nothing but essentially blow up a bubble even bigger and create a real mess down the road. Luke what are you looking for tomorrow from jackson hole . If there was one dovish bit from the minutes, it was that its not over yet. Steve i think at the last meeting, the fed was trying to communicate they are there to support the markets in a recovery, but the world has changed since the last meeting. You got some perverse incentives in the yield curve right now. Here think what youve got ironically is the upside risk people are mispricing. Everyone believes we are trying to pick up pennies in front of a tractortrailer, but theres a scenario where the fed brings in those short rates significantly. 2. 5 downcash go from to 1. 5 or 1. 25. Lets just say that International Equities arent the most attractive. You push people back into u. S. Equities. Its a scenario we have been talking about all year. I think you have to be cognizant of that risk, even in an area with softer growth. Alix great conversation. Bloombergs vince cignarella, always good to have you. Steve chiavarone of federated Global Investors will be staying with us. A full star lineup tomorrow. Remember, find all the charts we just used and more running gtv on your terminal. Browse the features, check it out. Coming up on this program, theres something for the data dependent fed. 3. 99 sandwiches the signal of the health of the u. S. Economy, dietary requirements. This is bloomberg. Viviana this is bloomberg daybreak. Amazon is launching a 15 to helpCharm Offensive thirdparty merchants boost sales. Amazon has been criticized for wielding too much power over sellers. Some of the money will be spent on a dashboard to help sellers decide what new products to carry. Little effect today from a strike by british pilots against ryanair. U. K. Flights operated by europes largest budget carrier are taking off largely as scheduled. Y walkouts twoda began before the countrys biggest travel weekend of the year. Hsbc calling for a peaceful resolution to political differences and hong kong, among the first global banks to publicly address the crisis. It derives more than half of its pretax profits from hong kong. That is your Bloomberg Business flash. Alix thanks so much. One thing luke and i are both watching this morning is popeyes chicken. First, the sandwich, over the last when he for hours, was a crazy thing to want to eat. Did you eat it . Luke i did not, and some of our colleagues are trying to get their hands on it, and couldnt. You can see that eights and 23rd location, they are out waiting until tomorrow. Connor had the most read bloomberg piece yesterday, unpacking why we should think about this. The reasoning here is really this has to be at the mother of invention. Its one of those stories when you think about it that way. Weve got the chart showing that the big mac and the whopper both came at times of low employment rates. Fast food is always budget conscious, but one way to raise the margin without raising the price on existing items, just make a new one. Alix it is sort of like the walmart indicator, like when walmart is doing well. Luke i think its a good push back against that, that this is a healthy labor market story, a healthy economy story, that doesnt necessarily clash with the walmart and target strength. Said, like,k it sandwich out of order. How can that be out of order . Very strange. Up, the annual gathering at a tiny wyoming resort that investors watch every august. It is day one of kansas saids symposium kansas feds symposium in jackson up, the ang hole. We will hear from Esther George next. This is bloomberg. Alix this is bloomberg. Ybreak everyone waiting for what is going to happen over the next 24 hours at jackson hole. The dax pretty much flat, but trying to be in positive territory despite the fact that manufacturing pmis get work and get worse and worse. The cable rate hitting the highs of the session as Emmanuel Macron meets with Boris Johnson in paris. Something we can find in 30 days. Wow, ok. Spread is at two. Does not need lower Interest Rates, according to Kansas City Fed president Esther George. Esther as i look at where the economy is, it is not yet time. Not ready to begin to provide more accommodation to the economy without seeing an outlook that suggests the economy is getting weaker. Michael hiring has slowed. Strugglinges to find workers, or limiting hiring because of uncertainty about where the economy is going . Esther the reports we get so far are that businesses are still having a hard time finding people. They are still wrestling with wages and thinking about how to compensate a workforce that they need to be protective. I think that still is one of their largest concerns, keeping have andorce they figuring out how to compensate them in a way that will keep them. Michael you know my next question is going to be where is that wage pressure that we should be seeing that youve been looking for . Esther i think we are seeing higher wages. For a number of years, even as the Unemployment Rate came down, we were not seeing a pickup in wages. Over the last couple of years, you have seen that pickup. As productivity has gotten stronger, so the recent releases around that suggest inflation is not just going to pop up in a way that will undermine the workers ability to realize gains around that wage growth. Michael let me ask you about how you look at Monetary Policy. You were an advocate of raising rates to get ahead of inflation. If you are not ready to cut rates, are you happy with where rates are given that inflation is lower than anticipated, and would you be happy to leave them at this level for quite some time . Esther i think that is going to be a process of judging how the economy unfolds. Where rates are right now relative to the Unemployment Rate and inflation suggest we are at a sort of equilibrium right now. I would be happy to leave rates here,r seeing absent seeing some weakness or make meisk that would think rates should be somewhere else. Michael where would you put the neutral rate right now, relative to where you are . Are you tight, loose, accommodative . Make me think rates should be somewhere how do you see it . Esther i would judge policy to be at neutral or even accommodative with this last rate cut. If you think about where real Interest Rates are eligible to the rate of inflation and where the fed funds rate is, we are operating close to zero with real rates. I cant believe that that is tight in any sense for the economy right now. Michael would you pushback against the argument that the december rate increase was a mistake on the feds part . Esther in my public speeches, my view was we were beginning to see mounting Downside Risk at that time, and those were influence my outlook in terms of flattening a path of policy at that point. But i think as we judged over the last two quarters, the economy has continued to grow. I think the economy has absorbed that. Alix that was bloombergs Michael Mckee speaking to Esther George, the Kansas City Fed president. Mike joins us now from jackson hole. Still onset is Steve Chiavarone of federated Global Investors. Think might be on that list, not enthusiastic about cutting rates . Michael there are a number of possible candidates. Rob kaplan of dallas was somewhat neutral on whether rates should go down before that last meeting. You have to wonder how much opposition there will be in september if the data continues to come in strong. Fortunately, we get a look at a lot of the numbers over the next two days. Tomorrow we will speak with jim bullard of st. Louis, who is favor of a never cut, but not 50 basis of another cut, but not 50 basis points. We will talk with loretta mester, patrick harker, and rob kaplan. Luke thats a lot of fed speak. You mentioned a lot of it comes from the reserve president s rather than the board itself. It made the rounds last week that jay powell basically put a gag order on Federal Reserve speakers. Do you know anything about that . Is there any truth to Something Like that . Michael the theory behind that was that the fed was attracting so Much Negative attention from donald trump that it would be better if they werent out in public speaking, and just kept a low profile. Ive checked into that story and i can tell you it is categorically not true. Luke steve, from a Portfolio Managers view, looking at the fed, i believe you are so pretty bullish for the outlook, yet youve been lightening up on stock exposure since the end of may. Can you talk about whats driven you to do that . Does the fed play in at all . Steve sure, that plays in. What we should have been doing this time of year is looking at 2020 earnings, trying to identify an appropriate multiple, and have that lifting us to the upside. Consensus earnings is somewhere and 185 next year. I just dont have that much confidence. Art of it is the fed rate cuts. Hong kong as well. In that environment, at a 3100 ,pside, we were sitting at 3025 thats very little upside with the potential for even a slide. Variety the economy does continue to grow. I think the question is when youve got the federal funds rate above the rest of the yield curve, does that create perverse incentives that hinder hiring and investment, and all of those activities that would allow growth to continue . I think thats the question the fed needs to wrestle with. Luke the fed hawks seem to be making the argument that the u. S. Consumer can be an island. Think the u. S. Consumer is the single best bet in the world right now, with low unemployment, wages rising. I think comments on productivity were key. Productivity is a cavalry coming in here, it allows you to have easier policy and not cause inflation. I think it is the single best bet, but you dont want to test it too much. Lets not throw everything we can at the consumer if you dont need to. Alix theres no surprise to me that in the ft, theres an oped that is dovish, but they are talking about longerterm expeditions. To zero,ed cuts rates that can be perceived as a sign of weakness rather than strength. It is like driving a car into a ditch and then declare youre staying there by choice. The reality is you cant get out. It is better to avoid it in the first place. We need to say we are committed to getting inflation to this. Vel, and make it very clear whats the conversation there . Michael what the fed and other central bankers will be discussing, challenges for Monetary Policy. What do you do when rates are so low you cant get a lot of bang for your but out of cutting them when you are in recession . One of the tools they used during the financial crisis was Forward Guidance. We will keep rates in place until x. Hes proposing a variation on that, which would suggest to markets that rates are not going to go up until you get to their target. The problem with that is thats what the japanese are doing, and it hasnt worked for them. Would it work for the Federal Reserve any better than its worked for the bank of japan . Thats an open question that will be part of the debate here. Luke right now, the cross asset landscape that people seem to be position for is very preemptive fed cuts. Any sign of u. S. Weakness help explain why credit and equity are so strong. One note from the minutes yesterday that kind of surprise me was the fed talking about how the cost of qe didnt materialize. This seems like a central bank talking up the amount of policy amount of policy space it has. Michael one of the problems you have is that the problem they were talking about in terms of negative effects was hyperinflation. There was a feeling among a lot of economists that if the fed were going to go into qe and really push rates down, you are going to get an explosion in price level, and that never happened. Thats what they are talking about when they say they have room for Monetary Policy. The problem is, normally after any recession, you cut rates and average of 500 to 600 basis points. The u. S. Is the leader at 200 basis points. The rest of the world has almost nothing. And in japan you have negative rates. They have to lean on the idea maybe they arent going to touch on a lot of inflation, but is part of the problem they dont have enough right now . Alix yes it is. Steve, this relates to what mike is saying and what we are seeing with the yield curve because we havent seen any of those bubbles materialize, which leads us to that 1998, 2019 yield curve scenario. Walk us through the logic you have for portfolio diversification. Steve i think we need to interject some optimism. We are not japan, we are not europe. We have a growing population. Where are the worlds hotbed of innovation. We have productivity picking up in the way it hasnt in a decade. That is all good, and low inflation, when it is coming from higher productivity, is a good thing. The thing i think is important is you dont want to have Monetary Policy too type in that environment that it doesnt allow you to appreciate some of those benefits. In terms of 1998, you had a yield curve inversion, emerging markets under pressure, a fed that went from hiking to pausing to cutting. I think the set up is similar in that youve got a pickup in productivity, which is positive. You have an economy that everyone thinks it has run its course, but could have more upside. So everyone just needs to take a breath. The yield curve is an important signal, but no other recession indicators turned on right now. Lets just right side the yield curve in terms of the short end and allow the thing to run. I think it will. Alix Steve Chiavarone of federated investors and bloombergs michael, thank you very much. Coming up, more from jackson hole. We will have live interviews tomorrow. During the last 10 minutes, we got the latest ecb accounts. This is their form of the minutes from their last meeting. Something that came out is that some ecb members saw some risks of unintended consequent is of what theyotentially are going to use for banks to lower the deposit rate even more from 40 basis points, but also make some exempt from that deposit rate to help their profitability. No surprise, they see the slowdown is likely more protracted than expected. Shocker. Luke same old news, and look at japanese banks. Tiering doesnt always help. Alix lets get an update right now of headlines outside the business world. Viviana hurtado is here with first word news. Viviana in august, german manufacturing shrinking for the eighth month in a row. Overall Business Confidence to climbed confidence declined, too. Jobs growth in the german held, butctor unemployment fell at the fastest pace in seven year. Isitaly, president matamela president mattarella is speaking with government leaders to try and form a new government coalition. Tomay give a few more days enter into formal discussions. The amazon rain forest in brazil burning at a record rate. Thats according to data from the countrys National Institute research. Between 2018 and 2019, there was an 84 increase in fires there. Brazils president tsai your president j your bolsonaro president Jair Bolsonaro says environmentalists to be setting the fires oppose him, without evidence. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Of. To be on art out this is blue im Viviana Hurtado. This is bloomberg. Alix unbelievable pictures. We do have some more retail earnings coming out, to the upside again. Dicks Sporting Goods delivering better earnings at 1. 26 a share, but increasing their full years earnings you on the highend, raising it by about 0. 05. Coming up, the savings stamp of approval. Deutsche bank now requires ceo christian sewing to say yes before filling any vacancies. More on that next in todays wall street beat. This is bloomberg. Viviana this is bloomberg daybreak. Bloomberg ter on Bloomberg Opinion mohamed elerian. The Trump Administration is getting close to unveiling its plans for freddie mac and fannie mae that would free from government control. Thats where theyve been since the Global Financial crisis. Stocks in Hong Kong Police for their worst quarter since 2015 hong kong poised for their worst quarter since 2015. This year, operating income is expected to fall 19 . 11 straight weeks of antigovernment protests have pressured hong kongs slowing economy. Qantas once to know if passengers can put up with a 20 hour nonstop flight. Starting in october, the australian carrier will run some test flights from new york and london to sydney. The boeing 787 will only carry about 40 people, most of them employees. Im Viviana Hurtado. Thats your Bloomberg Business flash. Alix thanks so much. Would you do a 20 hour flight . Luke i would do a 20 hour greyhound with some rest stops. That would be good to me. You would . Alix i would totally do a 20 hour flight. Anyone with kids would also want to do that. You can sleep, you can eat, you can drink, you can work, and no one talks to you. Awesome. Luke someones kid will be on that flight. Alix but not mine. We turn now to wall street beat. First up, mounting hedge fund pains. Billions thised year as they struggle to win back investors. And newcomers to Deutsche Bank now need the green light from and deputyceo, cfo, cfo to fill open positions. And jp morgan is dropping its chase pay app. Joining us now is our Bloomberg Finance reporter. Lets kick it off with hedge funds. Outflows of almost 56 billion so far. Reporter we saw another month of outflows in july, so its just kind of deepening the problem. Thats 50 more than they saw all of last year. The interesting part of that story was that its not the same story for everyone. Youve got some more event driven funds seeing inflows for the year. It will be interesting to see how the shakeout affects who is the winners and whose the losers. Weve got some clarity on and hedge fund0, allocation for their clients. Is there any since this can move the needle meaningfully for the industry . Jennifer for so long we saw them saying we want volcker 2. 0. We saw at this week and there wasnt a lot of excitement. They are more marginal than transformational, so i dont know that we will see flocking to invest in hedge funds and private investment. The lets go to secondstory, and that is Deutsche Bank. Apparently you have to get approval from all of the upper echelons here. Jennifer thats exec a right. Deutsche bank thats exec the right. Deutsches thats exactly right. Deutsche bank is in the middle of cost cutting, so any new hire has to go directly through the ceo. Really only bring the most important folks. Luke this has got to be great if you are a new hire, being told you are critical right off the bat. Stamp of your boss approval. Is there any prerequisite or time this has happened before with this degree of micromanaging at a bank . Does it underline the depths of their reworking . Jennifer ive never seen anything like this, but we will see. They said they will revisit the policy at the end of the year, so after a few months, maybe christian will be sick of grooming all these new hires. Alix i can see how the holdups might be significant. Can you approve, can you approve . Luke im trying to run a bank. Alix exactly. So jp morgan drops its chase pay app because americans actually like their credit cards. Jennifer we are really slow here in america on all things payment, it seems. Were just coming around to the top to pay credit cards. Mobile payments have been slow to take off here. People really dont find it that difficult to pay with their credit card, so it is just a Consumer Behavior thing. They are still going to be focused on trying to get their ecommerce and mobile commerce, but saying that instore was too hard a battle, and we are moving our efforts elsewhere. Alix thank you very much. Good to see you. Heres something off the beaten street. Sean spicer had a brief starter and as president trumps first press secretary. Now he hopes to waltz and tangoe his way into your hearts. He will be one of the celebrity contestants on dancing with the stars. His critics arent happy, saying he shouldnt be rewarded for his time and the white house that had many questions on credibility. Although we might be able to see Melissa Mccarthy come back to snl. How would you not watch that . Luke i dont know. Kind of ended with will ferrell. Alix wow, dating yourself. ,f you are jumping in your car stay with us on Bloomberg Radio, heard on sirius xm jenna 119 and the Bloomberg Business app. This is bloomberg. Alix heres what luke is watching. This is basically joe weisenthals economic indicator. Luke we smooths this out a little bit, but heres the big chart you see and what weve got here are claims of the fourweek moving average in yellow. You have your Investment Grade spread, and you have your 210 inversion. A lot of people are latching onto the fact that spreads are so low, claims are still low. We dont have to be worrying about recession right now. Look at any other time prerecession where the yield curve is inverting. Theres a long lag before those start to pick up. Even though im very much in the camp that is like, ok, how many recessions . What is the sample size . You cant yet discount the possibility just because of a low level. Alix we also have that revision to the bls data that would have decreased to the amount of job hiring. Luke interestingly, while that kind of takes out the payroll print, we also have that over this time. The offset to that is premuch an open question. Alix you do initial jobless claims as your Desert Island educator. Luke i would do that, or warren buffett. Also add in truck tonnage. Alix the Cash Indicator might be mine. Luke luke come up alix the Cash Indicator might be mine. Luke, really appreciate you spending the hour with me. All eyes wait for jackson hole over the next 24 hours. Germany still finds weakness in the manufacturing sector, but potential breakthrough for brexit. Macron season some possibility of good talks over the next 30 days. This is bloomberg. From the 5am wakers, to the 6am sleepers. Everyone uses their phone differently and in different places. Thats why Xfinity Mobile created a Wireless Network that auto connects you to millions of secure wifi hot spots. And the best lte everywhere else. Xfinity mobile is a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Click, call or visit a store today. Alix investors wait for the main event in jackson hole as the fed chair treads the line between credit ability and a supporting the markets. Plus, recession signs for germany. Manufacturing falls and recession clouds build. And your dietary habits could hurt the climate and the environment. We speak to an expert on the subject from Johns Hopkins university. Welcome to bloomberg daybreak on this thursday, august why second. Im alix steel august 22. Im alix steel. Butd westin is in italy, eig pcuoglu of j. Lo of j. O. Hambro Capital Management is not. Shes with me for this hour. Of 1 . Ures up 2 10 eurodollar flat, despite german manufacturing continuing to sink. You are seeing some selling on the long end, with yields of about three basis points. Year at one point its 1 . , what do you care about over the next few days . Lale i think everybody watches stens, but im focusing on the funding market and how to make that work. Alix you had the budget deficit blowing out earlier than we up in 2020. Lale thats the thing to watch for me. When we are buying a cows when youre buying a house, youve got to check the plumbing. If the plumbing doesnt work alix dont buy the house. [laughter] alix thats what we are watching the market now. Fed officials viewed last months Interest Rate cut as insurance, so will the central bank ease more . We spoke to Kansas City Fed president Esther George, who is not ready to wind up cutting rates. Also, moving over to the Trump Administration, it is closer to unveiling his plan for the future of mortgage giants freddie mac and fannie mae. It would free both from government control, where theyve been since the financial crisis. The feud between south korea and japan is getting worse. Withdraws it will from an intelligence sharing agreement with japan over historical grievances. Amazon is launching a 15 billion Charm Offensive this year to help thirdparty merchants boost sales. Musicp star eminems publisher says hes being ripped , streaming his songs billions of times his songs millions of times without a license. U. S. Market pmis comingu. S. Mat 9 45 a. M. At 1 00 p. M. , the u. S. Treasury sells 30 year. After the bell, we get earnings from hp and salesforce. And the kansas city economic symposium kicks off tonight in jackson hole as everyone awaits fed chair jay powells speech tomorrow. Investors wait and the market moves. We talked to some guests about what this means in terms of structural shifts within fed policy. What i think were going to get out of jackson hole is a shift towards the fed getting more flexibility optionality. Jay powell will come out friday and clarify some of what he meant by a midcycle adjustment, and that they are hedging the Downside Risk of these incoming storms from abroad. He hasnt had to thread the needle on fundamentals in the u. S. Economy, as well as express his concern about global growth. Probably will be a bit more of a dovish tinge coming through. I would suggest we are in a new realm of cuts, reflation cuts geared toward a structural shift in inflation expectation. To thisthey are open being a little more of a prolonged rate cutting cycle. This is a paradigm shift happening in realtime. Isx joining lale and i David Lebovitz, jp morgan Asset ManagementGlobal Market strategist. What are you looking at . Going im not sure we are to learn anything more about longterm policy. I think we will learn how the fed is looking at inflation target, as being more symmetric, so nothing really telling in terms of the next six months. Lale i agree. Alix you cant agree. Thats not fun. Come on, man. [laughter] lale all right. Alix no, you can agree. Lale i think the whole rate concept is really funny. Going back six months ago, everyone thought the tenure was going to be at 4 . Now we think it might be a zero. I guess you can try to read the tea leaves, but im beginning to think they are just equally as human as we are, and we are all kinda figuring out this new thing on the go. Mistakes are bound to happen. So we will see. I dont expect much. Be apect hes going to kind of hawkish, midcycle statement, and the market is not going to like it. Alix heres what Esther George said about what the market is thinking and the underlying fundamentals. Seeer i understand why you fear and uncertainty right now. That isnt the metric, though, that i feel we have to focus on. We have a clear mandate, and i take a longterm view that we have to stay focused on it. Alix i wonder how alone she is . Lale between her and rosenberg, i think it is the right thing. The best thing i think they can hope is that inflation picks up in the curve steepens, and things take care of themselves. Because right now i think we are in apical. David and it is about the in a pickle. David and it is about the inflation piece. We saw some stabilization in the that thes morning downward trend may not be completely overcome a but it feels like manufacturing is gradually finding its footing. That could also lead to long and to steepen, alleviating some of these concerns and bringing a risk on mentality back to the market. Alix but should they care about global events in the same way . I get that it is going to impact the overall sentiment, but that is not a mandate. David i think it is the unfortunate reality of where the fed is. They were the first to shoot their shot coming out of the financial crisis, and that helps keep the u. S. Economy from experiencing a more dire recession. Theyve also been the only developed Major Central Bank to get rates anywhere off the bottom. When we look at what is going on in the world, the fed, to an extent, is the world central bank. When financial conditions tightened globally, youve got the ecb with rates in negative territory, the boj with the yield curve pinned at zero after 10 years. Somebody had to cut rates. The problem was the fed was the only one in a position to do something about the broader environment. Lale im going to agree. Look, i think this is what happens in the Global Markets. We are in a world where the money can flow very freely, and when you have the positive rates , despite the negative effect swap, 10 basis points is better than zero. Alix this goes to your funding issue, when we talk about the cbo increasing the budget deficit. If you have more issuance, youre going to have the take town and negative convexity the takedown and negative convexity that the fed cannot control. Lale the fed controls the front end. They dont really control the long end of the curve. Thats why the best thing that can happen is inflation picks up , the economy picks up, and that naturally takes care of it. But as we stand today, we really are in a pickle. Ive been spending the entire week trying to refresh my memory on how the funding market work. Workat plumbing doesnt and there are points of stress, the fed minutes talking about the repos, we will have issues. David i think whats interesting is if you think about that issue of inflation expectations, usually the fed hikes until something breaks. When you look at employment and spot inflation, they dont necessarily look broken. But if you look at forward inflation, inflation expectations, whether that is fiveyearfiveyear, that is trending lower since september of last year. I think that is giving the fed pause. Lale and what are the cpis, 2 . Wheres the 10 year, one point percent . Its read it 1. 5 . Its ridiculous. Alix an opinion piece said at the Central Banks cut to zero, it announces that it keeps rates low, that could be perceived as a sign of weakness, which you could argue is what we are seeing in the market. It is like driving your car into a ditch and announce that you are staying there by choice. It is better to avoid it in the first place. The solution is to make clear longterm inflation targeting. We will do x until we get inflation at 2 , and that will help in the long end. David i think that is a fair point. At the beginning of this expansion, we were excited that the fed was using Forward Guidance to help us understand where things were headed. I would go so far as to argue today that Forward Guidance may be getting in the way. If we think about where we were last fall, we were walking through a dark room trying not to stub our to, a long way from neutral. I think the fed might want to back off and be a little bit more concrete in what is driving policy from this point forward. Lale i think its absolutely possible. I get the argument. I have some of the for it. I think the challenge i have sympathy for it. , and maybe challenge i just woke up on the wrong side of the bed today, but i just think perhaps the markets have grown so rapidly, whether it is the credit market, the repo market, the treasury bill, i think we are stretching the band , and i worry that Central Banks are caught in the middle, and we are now in this new regime where the Balance Sheet paper cannot really happen, and they are there permanently as a last resort. That really worries me. Alix which leads us to fiscal, which leads us to our next topic. Lale topcuoglu and David Lebovitz will both be staying with me. Coming up, orders of factories and Service Companies dropping at the fastest pace in six years in germany. What it means for the euro zone. Well it all rely at the end of the day on fiscal stimulus . This is bloomberg. Viviana this is bloomberg daybreak. Apple is getting ready to unveil a basketful of new hardware. Among the new devices, three new iphones, upgrades to the ipad, and its largest laptop. On the new iphone will be a new camera system that can capture ultra ride angle photo ultra wideangle photos and video. Day walkoutts two began two days before the largest travel weekend for the area for the year. Qantas will run test flights from london and new york to sydney. The boeing 787 will only carry about 40 people, most of them employees. They will undergo a series of medical checks and assessments. That is your Bloomberg Business flash. Alix thanks so much. Lets be clear, if it is businessclass, im doing it. So low, no kid. Im super pumped. 20 hours by yourself in business. Lale but im still in a small closed space. [laughter] alix but your kids arent there. Lale but there are other people around you. And it depends on the seating. Single seating is great, but few have someone right next to you, its other awkward. People dont have their elbowroom, even in businessclass. Alix im on my own. Im into the 20 hour flight. Recession signals are blaring in europes largest economy. German manufacturing pmi dropping again to its slowest pace in six years. Still with me, Lale Topcuoglu of johcm and David Lebovitz of jp morgan Asset Management. Get it backs to together. What are they going to do . David the first thing i would point out is that while manufacturing in germany remains quite weak, the Services Numbers are looking better. The broad narrative in the market right now is that manufacturing is breaking, services are bending. As long as that remains the case, overall expansion probably still has legs. What is most interesting as with think about europe, they are talking about the ecb doing something later this year, cutting rates further into negative territory, further qe. I would argue that hasnt solved the underlying issues are more structural in the european economy. One of the bright spots about lagarde taking over his shes been very vocal about fiscal stimulus in the past and balancing the monetary side of things. To me, a little bit of fiscal stimulus would go a long way across the euro zone. Lale with negative rates, you just kill your Banking Sector. The Banking Sector in europe is still on the path to recovery, and then you try to tier it, it just doesnt really work. At one point, you passed on the cost to your depositors, and at one point the depositors say i am going to just shove it under my mattress. Alix weve already seen it. In denmark, for example, if you are a wealthy client at a bank, youre getting charged. Does any of it matter if the banks are in trouble . If it is a structural or cyclical issue, if the banks cant actually grow, does any of it matter . Like infrastructure stimulus. Is that going to do it . David it could provide a shot in the arm to revive the making sector, but i think you made a very good point earlier. If the plumbing is broken, the water is not going to flow throughout the house. Lale thats kind. I was talking about some thing else. [laughter] david europe is overbanked. Theres consolidation that needs to happen. Theres still a lot of nonperforming loans. I think it will take a rightsizing of the economy that allows growth to be robust enough for banking to get its feedback underneath it. Im not sure, longterm, anything can happen. Lale i think globally, Central Banks have just become large asset managers. I dont think theres any way to bignd this without a crisis. I think we are just stuck. Alix i go back to the blackrock paper issued earlier, and Stanley Fischer was one of the authors. In the next crisis, youre going to have to have monetary and fiscal coordination for a certain amount of time. Youre basically promoting helicopter money with some strict conditions. Is that a slippery slope . Does that work . Lale i think banks are already under an immense amount of regulatory requirements. Again, im going to go back to the plumbing. Year enduarter end, around the april timeframe. You feel the funding pressure. The reason for that is the banks are now required to meet certain average ratios, highquality assets. They are very strict, and you have to literally turn in your test results. There is so much capacity in the Balance Sheet. If one goes up, Something Else has to come down. Investment markets have grown exponentially, but the clearing system, the plumbing is still the same. So you build an apartment complex, you havent upgraded your plumbing. And im not sure you can. As a result, Central Banks are going to have to know to the last resort. I cant find any other way out of it. David your point about the accommodation of monetary and fiscal next time around being almost a requirement is pretty correct. I think thats one of the things that gives us the most pause about whats been going on in the United States. We basically fired the fiscal kanaan very late in the cycle. Next time around fiscal non very late in the cycle. T time around, we will be next time around, will we be too late . David from a market perspective, does that mean you buy to go by bonds, go bonds, buy the dollar . Lale for an average person, exclude wealthy people, think of it like your average saver. You tell them, by the way, we got you a deal. We can get you a cd for five bips. They are like, what . Thats tied into the whole income inequality, and that adds political and social consequences. This is a very slippery slope. I am so antinegative rates. It just doesnt work. David i think part of the reason the rates keep on sliding if you have institutions looking at what is going on in the world and saying, if we are headed to zero, maybe i should lock in 1. 5 . That is a very scary mentality in a world where inflation is at 2 and you have these perpetuities that will be managing money forever, saying we would rather own safe debt at a level below inflation then take a risk. Lale what is the curve steepens . What happens to all of this funds . Rapped in the bond when that money starts coming out, how does that flow through to plumbing . David we are going to get alix we are going to get to that and more plumbing analogies. Lale topcuoglu of johcm and David Lebovitz of jp morgan Asset Management are staying with me. This is bloomberg. Alix lets get some top calls here with Lale Topcuoglu of johcm and David Lebovitz of jp morgan. David as painful as its been over the last couple of weeks, we continue to like the financial sector. Theres a pretty robust yield story when you look at a combination of dividends and buybacks. You look at the fundamentals around these companies, and the banks are so wellcapitalized that to me, they are screaming cheap. I think it is something people should be taking advantage of. Lale ive been a huge fan of banks. They are tax efficient. [laughter] lale not even adjusting for the tax benefit of it, you get anywhere from 4 to 5 . I think thats pretty good in this environment, as opposed to buying a bb credit that pays you for percent and change. Alix the equity versus the credit market is a different story. You get dispersion in the credit market, where equities is a one tide, all boats kind of thing. Lale i think part of it is because everybody is so afraid of the economy and where the world is going, everyone is hiding out in the bbs. But if you look at the cccs, your usual suspects. Energy,telecoms telecoms, theres a lot of stress. Thats whats driving the high yield spread up. This is one of the things ive been debating lately. No knock on the equity guys, but they always look at it from the top and sadie credit market seems just fine. If you actually look at it where it is really widening, it is the specific areas where there is immense pressure, and they should be widening. But if you look at the bbs, its flat as a pancake. David its interesting because one of the equity sectors we do like is energy. While it is not compelling from evaluation story, it is compelling from a yield standpoint. Years,e past couple of as fracking becomes a more substantial part of the equation , arguably you may see more stability in oil prices Going Forward. The sector is also primed for some m a. M a activity has been hard to find. Alix david and lale, you guys are staying with me. This is bloomberg. Alix jobless claims come out and about 25 seconds time. We did have some movement after the ecb account. The real move will be in the bond market. The german 10 year yield is up by five basis points. If you switch up the board, you can see it. Ecb officials are now worried investors are losing faith in their ability to revive inflation. Weve been talking about that all morning and that means more Central Banks in the market for longer. You have yields backing up as a result. Jobless claims coming in at 209,000 jobless claims filed last week. A little better than estimated. Still relatively stable jobs market. It becomes a question of how long that last. Lale topcuoglu and David Lebovitz are still with me. Good enough . When is good enough not good enough . David what investors are looking for from the Employment Statistics is stability. The pace of Payroll Employment has slowed over the past couple of months. We have returned to trend growth. I do not think any of us are expecting to plumb new lows on claims. What they are looking for is a continued signal the consumer remains healthy and labor markets are fairly robust. That is what will keep the ship afloat. Manufacturing activity has essentially ground to a halt. It is all on the consumer with respect to u. S. Growth. Whate current juncture, youve seen from retail sales and the broader Employment Data is very much continuing. Lale u. S. Gdp is consumer driven, so alix when you wind up having manufacturing and energy jobs falling and rolling off, at some point that will have a trickle effect, right . Is it different this time . David i do not think it is different. Manufacturing pmi does leave the Service Sector pmi. The Service Sector and employment is the thing we are leaning on. The key thing to watch in addition to the labor market data is what happens with corporate profits. Thinking about the q2 earnings season you at half of the four percentage in coming from buybacks. Companies have shut down investment spending and. If the property picture continues to deteriorate, whether because of Slower Growth or a deterioration with china, that could push Profit Growth flat and companies will be left saying we need to figure out how to make money. We have already cut everything on the investment side. Now we need to freeze hiring or begin laying people off. Enough. Ir when i talk to some of the companies, and some of the jobs in the food sector, the low skill jobs, they are terrified of cutting jobs because they cannot find the labor. Obviously the cycle is skyrocketing, but one of the things that came out of the conversation is i can add another shift on a saturday but i can guarantee you that guy will not show up on monday. If i do it three times in a row, he will quit and go somewhere else. He says that i will have a gap. I have seen it in some other packaging companies. They are seeing their margins get pressure because of what is happening globally. They are so afraid of cutting the labor peace. I think of the labor piece gets cut, they have just given up. An avalanche is coming. It is interesting. We will see. I do not have a good answer. Plumbing, thatot is the house blows up and explodes. [laughter] lebovitz, thank you so much for joining us. Today we look at three Companies Worth watching this morning. Ponczek, and sarah Brooke Sutherland joining me now. First we look at apple. Sarah bloomberg reporting apple will be announcing a new slate of products in the coming weeks and months. This will include new pro iphones, also upgrades to an ipad and the largest laptop yet, supposedly. Apple will announce three new iphones as soon as next month. Those will also go on sale as soon as next month. That means they will be contributing to fourthquarter sales. We know apple is probably hoping to avoid what happened at the end of last year, but on top of the products mentioned we should be looking for new apple watches, new air pots, among others. Will i trade in my iphone 5c . Is looking at dicks Sporting Goods. Emma they turned positive for the first time in a number of theters, gaining 3. 2 in Second Quarter after being flat in the third quarter. This is the strongest quarter since 2016. Ticketsriven by higher and higher transaction, more frequent and more expensive purchases. They did well in all three of their main categories, hardline, apparel and retail. The second measure is the forecast. They boosted those in shares and earnings per share. The company saying the key strategy and investment are working and all major headwinds are behind them. Lix thanks to emma chandra and Brooke Sutherland is taking a look at elle brands. Not what we expected . Gershon novel we expect brooke not what we expected not great either. Bath and body works coming in with 8 comparable sales growth. That reflects strong sales we saw estee lowder in the Second Quarter. The consumer is spending. All you have to do is look at results from target and walmart. They are being picky about where they are spending their dollars and they will not put that anywhere. Alix what does that mean for the guys who are doing well . Is because Consumers Want their products or are they managing and better . Gershon Nordstrom Brooke nordstrom is an interesting case. They positively surprised because they cut cost and better manage their inventory. There profits were better than expected even as their sales were down. Even if you do not get it quite right, even if sales are not coming in as strong as you might think, can you maintain your bottom line if you do have that type of situation . The for me, there is inventory issue, you have the tariffs on september 1 and september 15 and december 15, how do you manage that inventory . Brooke nordstrom managed its inventory well, but part of that is the anniversary sale. You see consumers going all in on the top items but they sold out quickly. That is why you saw the inventory dynamic where they did not necessarily have a surplus. Then you have issues like macys where they have these fashion misses. The dynamicyou have and retail which is difficult as it is, but once you throw tariffs in the mix, how do you make sure you have the products you want . Lale the tariffs will be a lagging indicator because a apparel category three and four is just now coming. Markets, we have the nordstroms and macys and jcpenney which have their own struggles, but the more interesting ones are the low ticket item ones like michaels or party city, those dollar items. What is interesting is if you look at their inventory. They turn them overdosed go times a year they turn them over two times a year and the tariffs have not impacted it. If the tariffs come through, you are talking notable shift in impact on their profit margins. That is next years issue. Next year, who knows what will happen with an election, with the fed, of trump getting , imed, maybe he doesnt not sure there is any benefit in preordering. Brands does say the tariffs are already incorporated in their guidance. Now they say tariffs predominantly affect women. Women are seeing the bigger affect because they tend to buy more apparel. They tend to buy more Household Goods that would be subject to the tariffs. Alix really . Lots of thoughts on that. Brooke sutherland, thank you so much. Lale topcuoglu will be sticking with me. Now lets get a headline of what is making headlines outside the business world. Europesanother signal largest economy is slowing dow. German manufacturings drinking the eightmonth a row. For the third time in four months, orders fell. Factory employment fell at the fastest pace in seven years. The field of democratic president ial candidates just got smaller. Washington state governor jay inslee dropping out. He told msnbc he determined he cannot win the nomination rate jay inslee ran as a moderate. In polling and fundraising, he was far behind. The amazon rainforest in brazil burning at a record rate according to the countrys National Institute of space research. Flames are unbelievable. So is this statistic. Waseen 2014 and 2019, there an 80 increase in fire. Saysls president nongovernmental organizations could be setting the fires to discredit him, but he offered no evidence. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Hurtado. Ana this is bloomberg. Alix thanks so much. Coming up, something for meat lovers. We will take a look at how carnivorous diets are affecting the climate. Lead, wes follow the continue our what you eat series. Interact with us on gtv. You can see all of our charts. Viviana this is bloomberg daybreak. Im Viviana Hurtado in the hewlettpackard enterprise greenroom. Elerian, mohamed Bloomberg Opinion columnist. Daybreak. Oomberg here is your Bloomberg Business flash. Investors got ms. Mixed news from victorias secret parent l brands. Second quarter profits beat expectations but the outlook was worse than expected. Samestore sands falling 6 . Been under fire for his ties to jeffrey epstein. A selloff arising more than 600 million from the citys equities. Analyst are still flashing profit forecast for this year. Operating income is expected to fall 19 . 11 straight weeks of antigovernment protests have pressured hong kong slowing economy. A dismal 2019 hedge funds. They have already bled more money this year than all of 2018. Outlook for the year are 56 billion. Investors frustrations with high fees and poor performance our mountain. Event driven funds are apparently the best, long short equity funds hurting. That is your Bloomberg Business flash. Alix thank you so much. Time for follow the lead, a deep dive into stories making headlines and moving markets with insight from industry veterans and insiders. Today we will take a look at how the food we eat affects climate and how the food on our table winds up affecting the environment. Fanzo, us is jessica Johns Hopkins bloomberg fed bloomberg professor on food ethics. Still what this is Lale Topcuoglu. Jessica, you have a chart that walks us through the agricultural sector. If i want to eat more protein in soybeans, what does that do to the environment . That that is jessica is a great question. We know the food system from agriculture is producing about 20 of Greenhouse Gases in the world and a lot of that is feeding consumer demand. The demand for animal source foods, the demand for cereal grains, feeding the animals we then eat. That is not a sustainable approach. There is science showing from recent reports, the panel for Climate Change showing that. Increased demand for animal source foods and the feed, the grains to feed those animals is taxing the environment and contributing to Greenhouse Gas emissions. That the way diets are going is an unhealthy trend. What we do to save ourselves and save the planet . Alix i do not know. What do we do . [laughter] alix tell me. How do i eat . How do we deal with that . Jessica it is a complex issue. It is not something to be taken lightly. It is the grand challenge of our time. If people eat different diets and some for some consume a much lower environmental footprint than others. We in the United States consume a lot of animal source food, we have a big environmental footprint. We have to look at who is eating what around the world and what kind of changes can we make. Alix youve done some work on this. What have you found . Lale it is not my work that i happened to sit on a panel so i will cheat and look at my notes. Eat, but thehow we other part of the coin is how much foodways there is. The food waste can help the other issues. Jessica absolutely. Lale we currently waste 1. 3 billion tons of food, about one third of all food produced for human consumption. Think about that. If you take all of the food that of theed and think Carbon Emissions it takes to consume it, it would be the third polluter behind china and the u. S. Alix really . That is stag right. Jessica that is staggering. Jessica, walk me through what that means. Jessica we have significant amounts of food loss and waste. There is waste at the consumer and retail level where people are throwing away food that has been cooked or sitting in the refrigerator, but there is also food loss at farms during the supply chain. Theres a lot of transport loss, processing and packaging loss. That is a huge issue and one that is tangible at the producer level and the consumer level. We also can shape diets. There is more and more emphasis on people moving away from consuming so much beef toward a more plantbased diet. We have a lot of new technology out there around alternative protein. A third way is reducing or orminating beef production making beef production more sustainable through different types of feed, adding seaweed to feed, which decreases method emissions, genetic breeding selections to select breeds of cattle that produce less methane. There are Production Practices that can be had. Alix to jump in, we had a chart up earlier that show the growth emissions in crop use from 2010 to 2050 to show how dire this is, how the growth will grow in terms of what we are eating and how we need to fix that. This next decade will be the most decisive decade for Climate Change. World, two degrees by 2050. If we do not do something in the next decade, in which the agricultural systems play huge role, as well as what consumers are eating, the sustainability of those diets, it will be important to make these grant transformations. We need governments to take a look at their food systems and see what their environmental footprint is. We are at a crossroads now and we need to take action and we need governments to step up. Alix Jessica Fanzo of Johns Hopkins university. Lale topcuoglu is dipping with me. We cannot talk about food and climate without the story about burping towels burping cows. Scientists want to bring a seaweed on a largescale basis. Adding the seaweed to the towels reduce the cows diet can lale i get. If we go back to the food waste, there are easy things you can tackle. The easiest thing you can think of the most wasted food is fresh fruit and vegetables because of transportation. It has to be kept in a cold air storage. The Grocery Store can deal with that. The precision farming, as that develops, and we provide subsidies to farmers, maybe that will be my advertising for john deere, that can help on that regard. The other part is packaging. This notion of the u. S. Customer, by wanting get three free does not work, it just adds on to the waste. Think of europe. You can buy one apple. You cannot buy one apple and many of the groceryfree does nos unless you pay 10 times the price. There are easy fixes that can be done. If that means the government gets a little bit involved for the longterm benefit, frankly it is better than doing q. Week. Doing qe. Alix we will leave it at that. Stay with me for bloomberg commodities edge at 1 00 eastern time. Coming up, we will have a look at hong kong and final thoughts from Lale Topcuoglu. If youre heading into your car, check out Bloomberg Radio channel 119 and on the Bloomberg Business app. This is bloomberg. Alix time for word on the street. Us. Topcuoglu is still with youre watching hong kong. Is that what traders are focusing on . The thing that immediately got off the radar is the 70th anniversary of the peoples communist party on october 1. A lot of people are trying to figure out how to hedge for this and thinking that volatility from october 1 through the next couple of weeks will get excitable. People think china must come in and do something to quash the demonstrations, at least during the celebratory time. The sources i talked to say if they move it would be two weeks prior. From a training standpoint, if you would option this type of would see the two weeks prior are cheaper than the october 1 date. There is an opportunity to hedge any possibility that china would theto come in and dampen demonstrations. It would be cheaper to do goes for weeks before that go october 1. Alix president has tweeted about the fed, talking about the german 30 year bond that has negative yields for the first time. He was saying that the fed cannot do whatever it wants. Vitor home. If that is not a mandate fight or go home. If that is not a mandate for jackson hole, i do not know what is. Lale i would love to be a fly on the wall for that dinnertable conversation. Part of the problem is the u. S. Treasury is jamming paper on the front end. I will go back to the plumbing. I hope my house plumbing is fine. [laughter] alix if the plumbing breaks, youre basically lale i think the Biggest Issue is the funding. Three months versus the 10 year. Alix which has been inverted for a while. Thanks so much. Thanks to Lale Topcuoglu. This is bloomberg. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort, while premium foams relieve pressure. 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Futures up six or seven points on the s p 500, firmer. 2 . Eurodollar treading waller treading water. A little bit of a lift in core Government Bond yields. Yields up on treasuries to 1. 61 . Lets begin with the big issue. The difference between the mark the dispute between the market and the fit. They labeled the rate cut as a midcycle adjustment. A midcy