Transcripts For BLOOMBERG Bloomberg Surveillance 20160603

Caroline the war of words continuing, but i think getting the use out to vote, it has been so persistently about the economy. When will we see it and sent of is to exert their democratic right right . Poor, 0 ,ne looking no change, no growth for european retail sales in the month of april. The market is expecting at least. 0 0. 4 increase eurozone still not looking all that pretty when it comes to the data. Polarity of the consumer in europe versus a better consumer and the United States, Charles Evans coming up. Our first word news. Nejra the u. S. Labor departments monthly job deport do well later this month later today. Payrolls rising by 160,000 in may. That would equal aprils total but would mark a slowdown from average monthly growth of almost 230,000 jobs. British Prime Minister David Cameron denying accusations he is ratcheting up fears about the impact of a potential brexit. Last night he defended while outlining the potential economic headlines from a departure. We have to negotiate our exit and trading arrangements and 53 other trading arrangements. In my view this would take a decade. Do we want a decade of uncertainty . Nejra the u. K. Referendum on u. K. Number ship is on june 23. On eu membership is on june 23. Tom across the bloomberg this morning, and 10 minutes ago, headlines by Charles Evans of chicago. Every fed president and governor makes headlines. David weston spoke with governor to rouleau yesterday. Anna edwards to Charles Evans out of chicago, and he has been a most interesting and nuanced voice in the recent weeks. Anna thank you very much. Is with me right now, so lets get to that conversation. Great to have you on the program. Into minesat you are going into the june fomc meeting. Are you leaning one way or the other . Charles i tried to raise two possibilities. The expectation going into the meeting, i am expecting economic positions have improved. I expect that it will be appropriate to raise the funds rate twice in 2016 so by the end of the year we will be in the range of 75 to 100 basis points. Unfortunately, i think it is going to take three years or more to get inflation to our 2 objective so what i tried to lay whether we thought it was more important to get to a 2 inflation sooner to solidify further inflations. There might be some value to think about holding off until we get core inflation up to 2 . That is not what i expect policy to be that i think it is worth getting Inflation Expectations up. Anna can you see a situation where they u. S. Allows inflation to get higher before hiking rate . Charles my outlook for the to two is far about 2 and a half percent growth going forward. That is above trend at the moment so i would say i would not say it is hot but it is running pretty well. If we did not raise rates the two times im thinking, i would say there is a downsize risk. 75 to end of the year, 100 basis points is about right. Anna payrolls due out later today. How will you be adjusting those numbers when you are trying to work those into your junejuly process. The verizon strike, or you be adapting that data to give you a cleaner picture . Charles there are likely some effects like the verizon strike so that might knock it down a little bit. I think looking for good Payroll Employment growth. 200,000 overged the past year. We will look at the adjustments but i am expecting a good number. Anna how would you adjust for those kind of effects . People are asking if it is possible to get a clean number, and does that take june off the table . Charles we have seen good process in the labor market so i would not get too excited over one number. I do think that there is a lot of value to allowing enough time to monitor the situation, especially if you think that things might be changing a little bit. That might be one rationale for holding off. I do not think the timing for our rate hikes is important so much. If we were to move in june it could work, july could work, september could work. I think two hikes in 2016 could approach could be appropriate. Anna if you are going to do it in july you might have to call a press conference. Charles that is the case. Chair yellen has two press conferences a year, june and september. Have tested it on short notice. She can get people on the phone and explain our decision. Anna lets talk about how the markets are position for the summer because we are talking mid 20ske 20s expectations around a june hike and it gets to the 50 area for july. Can the fed move if we do not have a higher percentage expectation of a rate hike . Charles we have tried to be as clear as we possibly could be, we have an outlook. We think inflation is moving up and we have more confidence than we had before. From the 17ion participants is that it is likely there will be two moves this year. One could be in june. One could be in july. I think the markets have heard us and that chair yellens comments the other day were well heard. Market missed matched, would that be troubling . Charles we are not talking about such a substantial move that it should be a big surprise either way. Anna we are here in london. Lets talk about the upcoming Eu Referendum or brexit debate. Putting out a note saying they think the brexit decision could be more influential on the fed in june than the payrolls report we are waiting for. Is that a good measure of the magnitude . Charles this is adding a lot of uncertainty to the Global Environment and there is a lot of uncertainty with global slowing around the world. The u. S. Has a Strong Economy and the question is are the conditions right where we could take another step in terms of tightening . We would like to have a resolution of as much uncertainty as possible, so the brexit vote gets in the way of that. We are going to focus on the u. S. Economy financial conditions, whether the Global Economy has imparted to much global restrictiveness. Anna what is the concern around brexit, around a shortterm alatility in markets or longterm concern for the growth of the u. K. . Brexitbeen said that could lead the u. K. Into a recession. Charles it is just a big unknown. It is not my country or economy so i am listening to opinions on this. It suggests theres so much uncertainty it would be difficult to take a decision ahead of that vote. Afterwards, depending on the situation, the next two years could be a difficult time for making decisions so i can understand some of those comments you have alluded to. Anna Charles Evans, president of the federal bank Federal Reserve bank of chicago. Tom that really advances the conversation forward. What i gleaned from the bloomberg headlines, caroline once was Charles Evans again distancing himself from the socalled inflationistas. He made it clear that this is a fed they can wait on inflation and it is something Governor Carney has also alluded to. Caroline maybe they want the overall economy to look that much stronger, get more hotter in terms of 2 to two and a half percent growth this year. Significant issues about brexit i think. Tom the brexit news always important. Let me do two boards. Equities, bonds, currencies, commodities, or are some real nuances on this jobs day. Yen stronger, a 50 brent. Curve flattening this morning. This is a big deal under 91 basis points. 0. 11 ,man 10 year yield, grinding ever lower. London, from new york, bloomberg surveillance. Caroline welcome back, i am Caroline Hyde in london with tom keene in new york. Lets digest more of what came out of Charles Evans. Stretch is our guest host. Give me a sense of how you digested that comment from Charles Evans. He is in london but he does have the year of the fed. Think we have to assume that june is on the table because all fed meetings are live so there will be a live debate, but i think the reality is it seems increasingly unlikely that a june move is a proceed,that we can partly because of the concerns about brexit. It did not appear that mr. Evans knew a great deal about the mechanics of it, but from our risks associated with broader performance, so that precludes probably a scenario for june and we probably need to see more information on how the economy is doing. There is a lot of debate on how clean the numbers will be today so we need more information from the labor markets and more confirmation he inflation is moving higher before the federal Federal Reserve feels comfortable to move the rates. Perceptive caroline how much do you think this next move is going to be affected by the ramifications on the rest of the world . Jeremy if you go back to last september we had the fed statement that referenced global conditions. We are talking china. The fed has been looking externally and the impact of that on their own domestic considerations. In a sense you could argue that is abrogating Monetary Policy responsibility. I think because of the one off nature of this event that is upcoming after the june fomc, i think it would be prudent for the fed to signal that we are getting ready to move at the june meeting and see how events pan out in the subsequent weeks prior to the rate trigger in july or september. Tom jeremy, good morning. I want to bring up euroyen. It is a nuanced fx market. Omics, and we are rolling over with a vengeance. Getting yen, week euro to one standard deviation on the two week trend. The mexican peso unwinding as weakness thatrd getting there quickly. What is the framework off the cibc trading desk . I want a handle on where we are now in terms of different pairs being extended. Jeremy i think you have raised a number of interesting points. Clearly in places such as mexico, there are presumptions that that is a liquid currency for markets. When we see structural concerns that often is reflected in the performance of mexico. In the context of euroyen, you are right that we have seen a rolling over. Where the japanese Monetary Policy will go from here and whether they will be doubling down on rates in july, the question of this rolling over underlines inherit market uncertainty inherit market uncertainty. Think we will see a degree of moderation on the euro side of the equation over the next month or two as i think Monetary Policy differentials come back will keep and that eurodollar on the defensive. Perspective ween should be trading a little bit higher and we will be looking at front and spreads front and spreads. Tom this chart surprised me, this is dollar mexico. In the crisis, a lot of peso weakness and we get this leg up. I am sorry, nobody is covering this. We get this new leg up and some of these adjacent hydrocarbon currencies. Does that set us up for a brutal june . Jeremy i think june is set up for a period of uncertainty, or a summer of uncertainty because there are a lot of event risks we are focusing on particularly in europe. Decision the German Court Decision on the onc , so there are a lot of domestic considerations and a risk parameter scenario to factor in along with Broader Market uncertainty about the global backdrop. Those currencies in particular that have a commodity component or a significant commodity component, where there are signs of structural weakness or signs of investors looking to head for the exits, i think mexico is one and i think the rand is another. I think investors are preferring the safety of the currencies which are much more liquid. Tom i bring this up because i think it is going to be fascinating 12 days to the june fed mating. Charles evans not saying much about the emerging market. Not much on jobs. Our allstar lineup, alan krueger, james glassman, after the jobs report on bloomberg radio. Caroline this is surveillance. Caroline hyde in london with tom keene in new york. Time for my morning mustread. Greatbarrett writes a piece that despite receiving areificantly more, boys more likely to complain they were not receiving enough pocket money. This is about the pay gap at the tender age of 15 years old. Boys said theyof thought their parents should give them a rise compared to 39 of girls. Why are girls not knowing how to negotiate on pay at the age of girls are getting less. We need the girls to be able to negotiate hard on cass cash. Tom it is called the harrods affect. It is the second floor, that bag floor. They get over age 12 and they parachute into harrods and not , and the make up platform shoes, i need to have right now. Caroline you are a man with daughters. Are you teaching them how to negotiate hard . Tom it is so hopeless and painful. It is the heritage of fact harrods affect. Girls are way ahead 41 per diem. Caroline lets bring in jeremy. Something you worry about . Is this something you are teasing your children about . Jeremy i have one of each. My daughter is very keen on spending money and my son is very concerned about the value. Osey just have different eth on how they deal with it and how they propose to look forward. Caroline never too young. Jeremy first of all, you need to know the value of money. Caroline and the value of yourself. Tom we are waiting in london. Jamie dimon with the chancellor, mr. Dimon running a small shop. Jpmorgan in the United Kingdom for 150 years, dimon and osborne next. Tom good morning, i am in new york. Obs day Caroline Hyde in for francine lacqua. Amnesty international is urging the European Union to stop plans to return violent seekers to turkey. The deal with turkey is illegal and reckless. Turkey is hosting 3 million refugees, most of them syrian. In northern india, two dozen people are dead after police tried to evict thousands from a makeshift protest of government land. Many were arrested. 11 of the deaths occurred when gas cylinders used by protesters ignited a fire. Donald trump says Hillary Clinton should be sent to jail for her use of a private email server while secretary of state. He told a rally and Northern California yesterday that she is. She says he is unfit to be president. At least 20,000 people are without power in paris as the biggest flood in more than 30 years hits town. Loumove is closing the today,closing its doors and more downpours are forecast over the weekend. Really extraordinary. One report having paris the wettest since 1960, back half a century. Really extraordinary. Ok, de saint louis are but the senate is looking pretty ne is lookingei pretty ugly. It is a good time on friday before the job stay in the United States to catch up with rendon brown, one of the great figures with mitsubishi musc a and is still with us. On thes up to date Economic Contraction that we are seeing in europe, in asia. We had a pmi derby this week. What does it mean . What you are seeing in europe is a fairly stagnant picture by germany is relatively strong and there has been a little bit of cheer on the french side. In the Global Environment of slow economic activity, many risks which are more for the downside dan upside. Tom we mentioned earlier some of the currency. Do you believe that we will see brutal moves or is it a Financial System that is within stability . Brendan i think we are in a Financial System which is unstable. Thehe case of japan, backtracking on raising the sales tax and the stimulus raises the prospect that sometime we will get a flight and concerns about sovereignty of the japanese government. No one will give you a timing that that is an underlying instability. When we turn to the u. S. , these low, longterm Interest Rates in is actually telling you there is a lot of concern about underlying potential for the u. S. Economy to slow down in various public sectors to go in reverse. Caroline we have had a call to arms from the oecd for governments to start spending. Do you agree . The i think it is time to engage in public spending projects is when the economy is prosperous. In the present situation that is not what should be happening. The accent should be on stimulating entrepreneurship and the investment side of the economy. Caroline jeremy, are you in agreement . Jeremy i think there are inherent instabilities within the situation and the question is can we work through those . Whether the stimulus is a necessary juncture, i think in the context of the ecb they would clearly like to be pushing germany toward some kind of fiscal easing. I think that is the debating point, but there are still some it is a there question of making sure they would be using those opportunities rationally to provide growth stimulus to the other nations across the eurozone to provide a mores Table Economic a more sTable Economic environment. Thought Charles Evans with our in a evans earlier in the hour absolutely nailed something you have always talked about. I definition, Central Banks act after the fact. He talked about overshooting and heating up or refleeting and economy, and that really underscores there is no way any central bank and get out in front of the data and debate. Fedmy the history of the or any other central bank shows that finetuning is almost doomed to failure. That is the basis of our main argument for why Central Banks should get out of this finetuning business altogether. Instead of these fantastic debates about whether a 25 basis point rate rise should take place, the fed should slim down its Balance Sheet and the Monetary Base becomes the of the system. Tom you wrote about the global curse. Define for us the global curse the chair yellen faces. Is a curse of her own making and with many asset markets inflated, everyone knows it is going to fall at some point but nobody knows when and there is a tremendous amount of caution for doing anything. If they go out and pay big dividends and buyback equity, we are seeing low investment and productivity. That is the curse of the fed, in addition to which we know that all of this is very likely to unwind at some point and there will be another recession and financial outcomes. Caroline doom and gloom. Where do we trade . Jeremy i think in a sense this is a classic example of the emperor has no clothes. We continue to see moderate growth and asset markets holding up relatively well, if you can be the first mover to get out of that process when it reverses that is where the investors have some degree of opportunity. Arehe short term i think we in the scenario of saying the Global Economy continue to generate modest growth. The question is when are we going to hit when that crisis market starts to kick in . Brownsyou have brendan caution, do you buy definition get a strong dollar . The reserve currency has to take it up, right . Jeremy i think it probably does. In a sense the longerterm dollar is relatively fully valued that i think we will see the u. S. Dollar moving back a little bit higher, although i would not necessarily expect to see the dollar Index Trading substantially north of that 100 area. Yes it will strengthen a little bit further. That would obviously be a cause theoncern or caution for central bank in terms of the immediate Monetary Policy direction but the u. S. Is not necessarily reliant on export related demands to generate growth. Acceptable not quite to the currency strength in other markets. Tom a Great International briefing before we get to the jobs report this morning. Radio,up on Bloomberg Michael mckee and i are pleased to bring you adam alan krueger, tim glassman before the report and bill gross after the report on market reaction. Caroline this is bloomberg surveillance. Caroline hyde in london with tom keene in new york. Two former Deutsche Bank traders facing u. S. Charges tied to the rigging of benchmark Interest Rates. Conspiringcused of to manipulate the libel in a scheme running from 2005 to at least 2011. Connelly has pleaded not guilty. Ae indictment signaled Justice Department is reaching progressively higher within the german lender. They havesumed collected five banks for funding. They were each provide 12 and a half billion dollars in shortterm loans. If the deal happens it will create the worlds biggest supplier of farm chemicals. The sluggish pace of euro area growth while persist if the economy cools from a poor firstquarter performance. A gauge of new Business Growth fell to a 16 month low last month. The survey suggests the 19 month thatam 19 nation is the Bloomberg Business flash. Caroline we have been hinting at it, geopolitics affecting the market, the brexit debate. We have rob hutton joining us and still with us is jeremy stretch. We are going to be getting some interesting comments coming from none other than jamie dimon and jpmorgan, going to be hosting george osborne. Is this a call to arms that if we leave the eu the u. K. Will sustain serious job yes. They remain campaign are doubling down on economic risk. Dimon, a clear message if the u. K. Leaves the eu we may have no choice but to reorganize our business model. It could mean fewer jpmorgan jobs in the u. K. And more jobs in europe. He will be saying that standing alongside george osborne. There was some criticism last night that he was scaremongering. They are sticking with that strategy, your job is at risk if we are going to leave. Caroline if we want to go to the bloomberg terminal, you can get everything you need to know with where the polls are and the recent news. Chaos. Caroline a complete equalization. There has been this move toward the leave campaign gaining strength this week. That is why the pound is the worst performing this week and today. How much do we believe these polls . Rob what i have been saying is the online polls have it now can that but the phone polls have remained firmly ahead, and there is a reason why many pollsters think the phone call may be right. The scary thing that happened is a phone poll had leave ahead, and that worried a lot of people. There are Big Questions about whether any of the polls can be trusted. Last year as you know, they got the general election wrong and there is no particular evidence that the problems that led to that have been fixed. General inquiry into polling and they said it is really difficult. There is this big uncertainty basically as to what the situation actually is. Tom i will go with that. I think the coverage that you have had and as carolyn go, i was, brex thunderstruck on the polarity of the debate, as a foreigner. The skew of the public. Here is a headlines a headline you guys just put out sees a brexit vote having no major impact on demand. Im fascinated by the business beliefs supporting brexit. Are there any . Rob there are some. It is not most of the business argument, especially multinational business is definitely on the side of remain. Argument is that these other companies that can afford to spend money lobbying in brussels. Last night we got who is coming out for remain today and shortly after that, you get a press release from lave saying they will spend a Million Dollars a Million Pounds a year. They can afford it, other companies cannot. There is a regulatory argument that says we might the freer to do our own thing if we were outside the eu, so there are some business names. Tom Brendan Brown with jeremy stretch. When you look at this, how many people are going to go into the voting booth and vote for brexit . Brendan they may very well do that. I think what we have is the eu has failed like the Holy Roman Empire on three fonts three fronts. They have not produced any democracy and fundamentally have not produced proxy they are ready prosperity. When you ask people to continue the membership of this club, it is a Different Club from what they came into on hopes years ago. Tom caroline, very quickly i positivenight, i am that stillman would vote for brexit. I just want you to know in the world of jane austen, 100 they would vote for brexit. Caroline it is an interim generational thing inter generational thing. Tom i want a story of brexit, bremain, and folding it into stillmans movie. It is a fabulous movie. Rob hutton, i think i saw your ancestors in the movie. Let me do a data check. They said earlier, it is boring, it is june. Really interesting. Yields are in and the u. S. Yield curve flattens out over the last 18 hours. Caroline hyde in london, i am tom keene in new york. Caroline welcome back, bloomberg surveillance. 10 51 in london, i am Caroline Hyde. 5 51 in new york with tom keene. All eyes on the u. S. Where the latest payroll and unemployment data will be released. Also today, chancellor angela andwill discuss tomorrow starting 6 00 a. M. Eastern, hong kong holds the biggest commemoration of the scene and amend square massacre of the Tiananmen Square massacre. Tom it is remarkable, 1989. The dynamics this morning are the job economy. Michael mckee and i will speak with alan krueger, jim glassman, and bill gross. Michael we know the numbers will be distorted by the verizon strike so we brought some mad stats. Lets look at the first chart here. This comes courtesy of stockton. If you predicted 200,000 jobs per month, you are probably going to be right. Standard deviation is down to less than 1. 5. Tom loves this chart. Of course, past performance no guarantee. If you want to forecast it, forecast 200,000 jobs and you will probably be very close. We conflated down to a highly predictable job economy that everybody is so miserable about . Michael we do not really know. Tom that is the right answer. Knowel we do not really what is going to happen with jobs because of verizon. Lets look at a number that has changed, average hours worked. We have the equivalent of 200,000 jobs in earnings power and before the recession, we have ratcheted up in hours work. We are working more hours these days. We have an addition to that that you do not like, that we do not have enough jobs creation. Notice how the yellow line does not match up with the white line. We do not create enough jobs to match the hours worked. Tom Brendan Brown, you have written about this. Are we creating quality jobs in the United States, in the United Kingdom . Are these lowpaying Service Sector jobs . Brendan know, the evidence is there is a lot of lowpaid low productivity jobs that go with the low investment. It is like each economy having within it an emerging market that has been growing based on lowwage and low productivity. Caroline is there any sign of hope in terms of forwardlooking wage growth . It was up. 3 last month. Jeremy i believe it will remain at. 3 so we are a little bit more optimistic, and i think the wage numbers are going to be huge. I have taken the view that i think there is an a differentiation in the labor market which is causing concern about how the numbers are going to stack up because we have the lowcost, low skill jobs holding down the aggregate measure whilst those who have skilled jobs can bid up. The official data is struggling. Michael lets look at one last chart. That is exactly what jeremy is talking about, average Hourly Earnings and the inflation. Charlie evans was telling anna edwards this earlier, they want to see wages rise and pull up inflation. The yellow line is wages and it is finally starting to happen. We are starting to see inflation rise as wages go up. Tom Michael Mckee getting you ready for the job report. This has been a brilliant our. Jeremy stretch, Brendan Brown. Greatly appreciate your appearance this morning. Coming up in our next hour we will continue to look at the american job economy. Holz will join us, and howard ward will join us. Howard ward of gamco on your inner bluechip. It is a dark and gloomy new york awaiting the jobs report. We have the best of both worlds. Tom this is remarkable. Mr. Diamond of jpmorgan. He has 16,000 employees in the United Kingdom. Of london, a jpmorgan meeting, which i would suggest is tinged with the backdrop of june 23. Jamie dimon making comments this morning to his employees, of maybesupport this is a window of what is to come in the coming weeks. We say good morning to all of you worldwide. Lets listen frame on it. Well, there is the chancellor ending his comments. Lets see what jamie dimon does. This is very spur of the moment. Jamie i want to say i love the u. K. And britain. Even though i am an american patriot. Britain stood alone in the early 1940s, alone. The only people in the world standing up against the tyranny sm. Not see as him of nazi calledn really should be js morgan because jpmorgan is the son of a man called js morgan. He is american but spent most of his life in london. He sent his son in the early 1860s to america because europe, wastinental actually industrializing america. His son when there and started another Company Called jpmorgan. He was an internationalist. Jpmorgan himself traveled the world all the time. He loved international business. If you go to chile or italy, he bought homes there, he loved art, everything. Whenold enough to remember there was a fight for who was going to be the Financial Center of the world. And london won. Youominates not just the itey conduct business dominates not just the eu, but they conduct business all around the world. It has a great long heritage. I am proud of all the people here. For proud of what you do your clients, your communities, your companies around the world, the philanthropy we do. I am mostly proud of the fact that when times are tough, jpmorgan never left. We did not leave greece, ireland, argentina. To serve andfast support our clients, and we did not need Government Support anywhere. So we want to continue to conduct business here. In bournemouth, we all know the great job you do. These operations help companies from around the world come to europe. We are not just helping european and british companies, we are helping Companies Come and invest here. We educate people around the world about the u. K. , about britain, and it is a great partnership, having built j. P. Morgan chase in the u. K. I cannot and will not tell the british people how they should vote in this, but i want to give peopleopinions because should make this decision with their eyes open. Opinion, it is a terrible deal with the british economy and jobs. On june 24, we will wake up having a vote, and if that vote is to leave the eu, we will have teams of people talking about what that means. We will not know what it means. Becausest outcome you cannot Passport Services and leave the eu without paying for it they will change the laws about how we can service our clients around the eu. Today we can Service Companies freely with systems, technology, investment banking, sales and trading. After a brexit, we cannot do it all here. 1000not know if it means jobs, 2000 jobs. It could be as many as 4000. They would be jobs all around the u. K. The most important thing for me is we are going to take care of our people and our clients. I do not want you to worry about it, but when you vote you should be thinking about Something Like that. I thought it was a very important thing, whatever happens to jpmorgan, we will do our best to help the people of the u. K. And the eu, but think really carefully about this decision. And now we go to questions. Bournemouth,mon in south of london. Absolutely extraordinary. I am trying to imagine, given the polarity between washington and new york, secretary lew and jamie dimon talking to people. An extraordinary moment as we go to june 23. We say good morning to all of you worldwide. I am tom keene in london. Caroline, your thoughts on this most interesting financial moment . Caroline this is the argument coming from the remaining camp. Peoples jobs will be lost. This is what David Cameron said yesterday. And here you have a chief executive saying as much as 4000 jobs could go if we see britain exit the eu. This is what everyone is worried about in financial services. Will it become frankfurt, brussels . This is a key concern. The interesting thing is, will it put people off voting . That is the key question to be asking as well. Tom we will continue to give you the images of the chancellor. F exchequer we are thrilled to give you perspective on this. Ward of getting a, we are sort of ripping up the show with this historic moment. Let me talk with you as a resident of europe. This is really getting a new velocity, isnt it, across europe and with the United Kingdom . There is a new urgency as we enter june. I guess it came along with the latest polls, that the Brexit Campaign has gained some momentum. Dimon is moving over, and i agree that we see other Business Leaders to convey the same message to the people. The issue with referendums, it is good if you have the people look for what they want. But they all really need to be educated about what they are voting for and what is at stake. His jamie dimon opened comments harkening back to 1939 and 1940. There is a whole political tinge to this as well. Is there a market tinge . Can you take all of this uncertainty and the history we are seeing and bring it over to investing, or is it completely removed . Howard i recall a couple of weeks ago when the polls on brexit were clearly showing an attitude to remain. Remainas talk that the vote had broken out in the markets breathed a sigh of relief. Now the polls have tightened up quite a bit, and the markets are much more tentative. So i do think that clearly the remain vote toa be the winner here, and it will be much better for economic growth. Tom it speaks to multinational, something that harm has talked about. We are all multinational now, whether it is a big u. K. Company or a big u. S. Company. Howard yes, and we have three weeks to the vote, so now it is the fullcourt press. The fullcourt press of the Business Community in the u. K. Globally to try to encourage people to remain to try to encourage people to vote to remain. Tom caroline, jump in here. Caroline this is having an impact largely in the fx market. This shows you over the course of the week who is the worst performing, major currency, british pound. 1. 40 . Early harm, i want to come to you. Volatility we are seeing in the fx market is not being replicated in the equity market in the United Kingdom. These are multinational firms. Can you give us a sense of what the economic damage would be for companies within the u. K. If we saw a move to exit ceu . The eu . Harm it all depends. The biggest risk if there should be a brexit vote is huge Financial Market volatility. The risk is that then the equity market will be heavily impacted. The longterm implications depend on how the u. K. Will renegotiate contracts, trade agreements, with europe and the rest of the world. A is probably longterm bigger issue for london and the u. K. Than for the companies. The Companies May decide to relocate. Vote, thes a brexit picture that you just described, the resilience of the equity market, would most likely change. Caroline i have a great chart on the terminal at the moment. When you are showing the different volatility between what is going on in the fx market, this is the blue line, the british pound. Look at the blue line spiking. Big oil and gas copies might benefit from a weaker big oil and Gas Companies might benefit from a weaker pound. Policyout where monetary goes . If we did indeed see the u. K. Leave the eu, you are going to see a cutting of the Interest Rates in the u. K. What does that mean in terms of assets . Howard it is a good question. I think we have to frame it in the context of the feds next meeting here, which is before the brexit vote by about a week. If they want to do anything this summer, they should wait till july, not june. If we do get a vote to leave, you will see a much more dovish roster on the part of the Central Banks. Tom here is the german 10year right now. This is a chart we have not shown in a wild. It is a little deceptive. The swings down harm, we are getting a new one right now. Europe is greatly affected by the brexit debate. What did you see this week within the Economic Data of europe . Harm i think in europe we see the mirror image of what is going on in the u. S. In the u. S. There was a lackluster force quarter there was a lackluster First Quarter and we are getting a stronger Second Quarter. The latest pmi indicates a correction on the negative side. I think the picture overall is still all right. 1. 5 gdp growth is ok for europe. Tom we are getting back on track with howard ward and harm bandholz. A remarkable scene south of london today in bournemouth, jamie dimon with his assembled troops per listen to the chancellor of the exchequer. They are taking a question now from jpmorgan. Lets listen in quickly here. We are safer by being in the European Union. We are stronger in the world, better at protecting our National Security by working with other nations in the eu. But as the chancellor of the exchequer, i am looking at other complications. If you look at the services sector, with 25 Million People work in our country, it is clear that we would be worse off and we would see job losses if we quit the eu. You have 10 of the Largest Companies in the Service Sector today telling us that jobs would be at risk. You have analysis saying there would be potentially 400 jobs at risk, and you have got caroline it is jobs day in the usa. You are watching bloomberg surveillance. Lets get to the Bloomberg Business flash with nejra cehic. Deal lufthansa may make a. Ior management from bloomberg has been told that talks are complex. Lift aa is looking for partners to he stem the loss passenger traffic to middle eastern rivals. Sluggish pace of growth this is according to market economics. The gauge of new Business Growth at manufacturing and Services Group manufacturing and Services Firms fell. Twitter and yahoo met several weeks ago to discuss a possible merger, according to the new the newspaper says the company spent several hours in talks but twitter bowed out of the bidding process soon after. No comment from either company on the report. That is the Bloomberg Business flash. Caroline we have a keen eye on oil today. Crude, but upi 50. 11 if you are looking at brent. Digesting what has been felt out of opec , but it seems as though there is more unity being shown by the cartel. The big change is that the saudis came into the meeting, generally speaking the tone was more civil than in the last couple of meetings. The one in doha got ugly. , the saudisinute came in and said we are not going to do the deal. Now they are making efforts to be friends to people, to show some willingness and flexibility. Yes, we have a nondecision in the end, but at least that has not changed that tone. Put, are we clearing markets . Is the supply glut going away . Stuart it seems to be going in that direction. You have to because his. Supply numbers are being skewed by nigeria and libya and places like that. I would not take the numbers now as an indication of what is going to happen in the future, but the consensus seems to be that we will clear the glut in the second half of the year, going into 2017. Tom stewart wallace, thank you so much. Howard ward with us. You see the banner up there about exxon mobil. Would you just buy them, own them, monitor them, or just hold on . 30year track record, 12 for year. Is this the mother of opportunities for howard ward and big oil . Howard i would not go that far, only in the case of big oil exxon, chevron, and a few others they are having a difficult time replacing their production with new reserves. This has been a big gap that has developed in the last couple of years in their ability to do that. They can go out and acquire those reserves by buying other companies, but in terms of their ability to go out and replace the reserves they are burning up every year, that has become a challenge for them. The next 30 years may not be quite so good for exxon as the past 30 years. Does unicredit have a terminal value for oil . Have you guys figured out is it 50, 60, 70, or do you not even try . No. what is terminal . Tom where does it dampen out to in terms of price per barrel . I think anybody gaming this is really we go through these phases where it breaks because of the lack of discipline on supply, and things get really desperate and they try to bind together again and be more disciplined with production. That may happen again but it is not happening now. It is a free market for a commodity. So the market will determine the price. It is pretty hard to estimate that precisely. Tom most interesting, to say the least. We will come back to hear from howard ward. To hear what dying he thinks of another multinational, namely apple. Quickly, a data check. Some interesting nuance through the curve flattening as part of the story. The 10year yield, one point 1. 80 . The curve flattening in the last 24 hours. This jobs day, bloomberg surveillance. Tom good morning, everyone. Bloomberg surveillance. Caroline hyde in london, tom keene in new york. We have been distracted on this jobs day. I am going to bring this up without a banner. This is the number one thing you are focused on, the atlanta said the atlanta fed, the wage growth tracker. I believe this is moving in a higher direction. Harm it looks a bit different from the most closely followed labor cost measures. I think the reason is that the wage tracker is one of the few, the only one to the best of my knowledge, that is doing a good job in isolating the effect of demographic aging on wage growth. Tom watch yourself. Paid babybetter boomers are retiring and being replaced by not so wellpaid younger ones. Because we have the baby boomers, the effect is getting bigger right now than it has been in the past, and that is holding wage gains down. There was Good Research from the San Francisco fed a couple of months ago and the atlanta fed, which gave one of the better pictures for underlying wage growth. 3. 4 here, and we are almost back to where we were before the crash. We are not back to where we were on a nominal basis in 2000. Are you going to see any of this in the 8 30 numbers this morning, or is that oldstyle data . Harm as i mentioned, we have seen the average Hourly Earnings pointing north as well. I am worried that this is only affecting payrolls and that it is affecting hours worked, and there may be an impact on Hourly Earnings as well. I think average Hourly Earnings are starting to mirror this as well. Tom we are going to regroup here. Howard ward with a spirit we will speak about apple computer, Goldman Sachs with that important adjustment yesterday, the research on iphone 7 and all that. Still a lot of enthusiasm on apple at Goldman Sachs. Harm bandholz on jobs day. Do not forget kruger, glassman, and gross. Bloomberg surveillance. Data 88 30. Caroline welcome back to bloomberg surveillance. Fascinating things are occurring in the United Kingdom, tom. In bournemouth, the chief executive of the worlds biggest bank, jpmorgan, jamie dimon talking about how they might cut 4000 jobs if the u. K. Exits the European Union. He was standing up with chancellor of the exchequer. He declined to say where in europe the jobs might move to, not speculating whether it will be brussels or frankfurt. Jpmorgan would have to move their executive to. But he could result in longterm uncertainty. For the u. K. And indeed for the eu economy. British Prime Minister David Cameron denying accusations he is ratcheting up fears about the impact of a potential brexit. Last night he defended himself while outlining the potential economic headaches from an eu departure. David cameron we would have to negotiate our exit, our trading arrangements with the European Union. In my view, this would take a decade. Do we want a decade of uncertainty . Do our businesses want a decade of uncertainty . Nejra the u. K. Referendum on the European Union is on june 23. The monthly jobs report is due out later this morning. Economists surveyed by bloomberg running m payrolls at 160,000. Is Unemployment Rate expected to take slightly downward to 4. 9 . Amnesty international is urging the European Union to stop plans to return asylumseekers to turkey. The Rights Group Says in a 35page briefing that the eu deal with turkey to curb irregular migration is illegal and reckless. Turkey is hosting 3 million refugees, most of them syrians. Donald trump says Hillary Clinton should be sent to jail for her use of a private email server while secretary of state. Yesterday he told a rally in Northern California that she is guilty as hell. Earlier in the day, clinton delivered a blistering critique of donald trump on foreign policy, saying that he is unfit to be president. Global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus. One the world, it is not a big surprise, either. But apple is becoming a very low expectations stock, and we saw this a couple of years ago when the stock was at 60 and there was all the talk about apple innovating. Tim cook is no steve jobs, the margins have to decline and they have not declined since then. And china is going to be a problem and the stock went from 60 to 130. Tom ring up our single best chart. We do this with howard ward. This is a really cool chart. The red line is a good line. Apple is the white line, and the red line is a toothpaste company, colgatepalmolive. That is not west texas intermediate, it is colgatepalmolive. Colgate has a price as compared to its earnings ratio of a lofty 26. Howard ward, explain to mere mortals why this is. All, we ownt of some colgate. It has been a great investment over decades. Colgate, consumer staples, are trading at historically high valuations. Part of the reason is we have been in a slow growth economy for years and that has rewarded the more consistent flow of our companies through there has been this wall street attraction toward low volatility stocks in recent years. This has been the biggest product that wall street has sold in terms of etfs, mutual funds. What are lowball stoxx . Stocks . Are lowball they have become momentum stocks. Those valuations, 25 times earnings for companies that have 2 to 3 topline growth. Tom which is what apple has as well. Howard it aint going to last, folks. Tom caroline, a question for howard ward. Caroline i want to see where the u. S. Goes in terms of earnings in the second half of the year. We have seen strong dollar resurging third what does that mean for the multinationals in terms of the earnings season for the Second Quarter . The First Quarter of this year should mark the low point for earnings comparisons for the year, so we should get progressively better earnings compared to over the course of the year. The dollar has recently lifted a little bit, but it is lower than where it was back in february when it peaked. The strength of the dollar headwind should be largely behind us. The decline in oil and the impact that has had on Energy Industry profits should be mostly behind us. We are looking at a better profit picture. We do not have an economy that is robust and we have an economy that has accelerated like a turtle, and as someone who used to race turtles as a child in michigan, they have a strong acceleration tom you realize this is going out on twitter . Howard there could be a future there. We should think about that. They do not go very fast. They reach their top speed very quickly, and then they just sort of go slowly. That is where we are with this economy. We are looking at 3 , 4 operating earnings growth. Not bad, it could be worse. Caroline you had a wild childhood. Wheretalk to harm about he sees the earnings future going for the United States. There seems to be a discrepancy of where the dollar goes from here. With theally up diverting of bank policy, or is the dollar done . Tom it is a great question, harm your it you centered your economics report on the stock market. Harm our view has been when we entered the year, we were one of the outsiders. We were the outsider saying your dollar goes up. Tom i remember this. Harm it went up faster than we thought. One of the rationales that we had is that the fx market priced in much more Interest Rate divergence between europe and the u. S. Then the Interest Rate market. So the fx market went ahead of itself. You remember when the euro dollar went down, it was expected to stop at 1. 10 or Something Like that. The trend is still higher. We think we are going back to 1. 20 over the next several quarters, but my personal view is with the fed pulling the trigger over the summer, you may see a little bit of a downward move, but then the upward trend resuming. Your question of how this fits in, the fed has started to emphasize Global Development more than ever. So then you look at what has changed in terms of the International Linkage of the u. S. Economic with the rest of the world, and the real answer is it is a share of s p foreign earnings. Tom howard, you have something to say. Howard we need to point out there seems to be in general an assumption that when and if the fed raises rates, that is a prodollar move. That would be a mistake to assume that. See a lowere to dollar. That would be better for earnings and growth. And if there is an acceleration and global growth, we would like to see a lower dollar accompanying that. Tom we will try to figure out what to do. After the jobs report, after alan krueger, after jim glassman, after bill gross, aloomberg with conversation with the labor secretary of the United States of america. Thomas perez will put a constructive spin on whatever we see at 8 30. Washington, very political this june. Tom breaking news this morning. Not osborne and dimon. Caroline hyde in london, tom keene in new york. We have seen a lot of these smaller transactions through the week. All of that coming back to cheap money as well. Lets move on to our business flash with nejra cehic. Nejra they are has secured 63 billion for its pursuit of monsanto. Selected bank of america, credit suisse, Goldman Sachs, hsbc, and j. P. Morgan chase. They will each provide 12. 5 billion in shortterm loans. If the deal happens, it will create the worlds biggest supplier of pharm chemicals. Discussions are at an early stage. Pag bain and pag asia are said to join kkr in bids for takata. Size of increasing the a fiveyear loan from 1 billion to 2 billion, according to people familiar with the matter, who say that chinas biggest Search Engine has a commitment from 21 banks. It plans to borrow the money for general corporate purposes. Caroline . Caroline of course today we are still focused on brexit. We are watching the pound as it heads for its worst week since march, the worstperforming major currency this week after brexit polls begin to show favor to the leave campaign. The pound is the second worst performer, and still with us is howard ward and harm bandholz. Before i get to you, i want to show the volatility that is spiking, and the pound volatility we have seen. It is really the fx that is showing the pain at the moment when were looking at the brexit debate. This is one month volatility on the pound. The white line is a significant spike up versus the euro dollar, which as we saw in 2008 spike hugely. Which, as we saw in 2008, spiked hugely. You, live uso ask a sense of the volatility that you are trading with at the moment. How are you looking through this Geopolitical Uncertainty . Are you taking any bets . Howard the equity markets have been amazingly stable, given what is going on in the world. Every time we are sort of feeling like the market wants to come in and give us any kind of a correction, it does not last. Buyers come in, and i think this gets back to the fact that with 1 Interest Rates, there is really no Good Alternative for stocks to earn a real return, as long as the economies are moving forward. The volatility that you might have expected, we have not gotten it. It might come, but it has not yet. When you are focusing on the pound and the euro and the volatility, one of the assumptions is a vote to leave the euro would be negative for the pound, negative for the u. K. It would be negative for the euro. Harm, you mentioned earlier the outlier hall of the assumption of the weaker euro. Lets go back and look at the of credit. You look at the weaker euro, parity. You guys were, here is consensus. The world is coming to an end. You guys said maybe not. This goes to howards point. Just just a much it is as much about urodynamics, isnt it . Harm i am hoping we will figure theut, but we hope resilience of the euro would last with a brexit vote. Some smaller countries want to leave. I do not think it happens, but we saw Corporate Officers away from the media, the hysteria and all the articles, the multiple walls of worry. Corporate officers are just going to keep doing business, and that is where the opportunity is. Howard they are also going to be encouraging people to vote with their wallets. In other words, pride of nationalism, there might be some noneconomic reasons why the brits would like to leave the European Union, but if they are voting with their wallets tom do you change your framework with what Jeffrey Immelt is doing with ge right now . Where are you on ge . Is there an opportunity . Howard ge has done a great job, the ge, of jettisoning capital part of the business. Stocks get very low multiples, so ge becomes a very viable mobile infrastructure play with leading positions in grade areas such as aircraft in great areas such as aircraft engines. Caroline hyde with that smart comment there on the volatility of fx. Harm bandholz with us from unicredit. Howard ward is with us as well on this jobs day. Coming up on bloomberg radio, walmart is set to hold their annual shareholders meeting. Joseph feldman will provide wisdom. Good morning. Tom good morning, everyone. Bloomberg surveillance. London, i am in tom keene in new york. The story of the week was abes comments a few days ago. A domestic pullback on arrows within abenomics and the outcome. For your weekend consideration, dollarmexico has my attention. Mexico is weakened over the past number of days. ,hat really gets my attention getting out not near 19 but moving in that direction. Caroline . Fascinating, weakening as the trump to beat goes on. Bloomberg is coming up. Megan, what do you have lined up today . Megan it is all about jobs. We will have a full range of guests. We will have nigel travis, ceo of Dunkin Brands to talk about minimum wage and the trends we are seeing in the job market and calls coffee as well. I dissecting it with none other than bill gross. We will have it all here for you from 7 00 to 10 00. Tom howard ward is with us from emco from gamco. Our, what is the quality of 4. 9 Unemployment Rate . Does it make you feel good, or is it challenged, as we hear from our president ial candidates . Harm it is good. The shadow Unemployment Rate is certainly higher, but the same concept of unemployed came down from 10 a few years ago, so the dynamic is pointing in the right direction. It is not only the Unemployment Rate, as you mentioned in a previous section in a previous session with mike. You look at job openings, hirings, all back to precrisis levels, which shows that the labor market is largely healed. Tom bring up the Unemployment Rate chart. This is an extraordinary chart, as we migrate to 4 . Of ad ward, you and i certain vintage would look back at the 1960s blue back, the eisenhower years, we are almost there. Unemployment was still employment in the 1970s. We would have to be mindful on a jobs day like today that we have gone from 10 to 5 , the low job gainsuit for being behind us. The natural progression is to have a slowing in job gains. Harm, what will you look for at 8 30 . Harm it is a bit boring, but i am on 160,000 as well. We gained some momentum after april, but then with the verizon strike that left me with 160,000. If you look at april, we had the slowdown in payroll. But if you look at the details, only three sectors saw a slowdown. And theg, construction, government and whatever that was. Job gains inrated april, so there was no sign of underlying momentum loss whatsoever. Caroline how much should i be paying attention to wage growth, rather the on rather than the Unemployment Rate or additions in jobs . Is it all about the slowdown . The average Hourly Earnings is not the best measure to look at. But if we see the labor market somell employment and raising wage costs, it will be reflected in average Hourly Earnings as well. It is not the best measure, but overall it is trending higher. The eci is pointing a little bit higher. Not as much as we would like to see, but it is biased by demographics. Tom come on over, anthony, and grabbed this. This is a huge deal. 0. 1 ,. 099 . Below that is a huge statistic that speaks volumes about your. Thank you, Caroline Hyde. Thank you, harm bandholz. Howard ward will continue with us on bloomberg radio. There is a remarkable set of news flow this jobs day. Stay with us. And it is the final u. S. Jobs report before the next fed decision. Weighs in on the brexit debate. They may have to cut u. K. Jobs at the country decides to leave the European Union. Megan Goldman Sachs switches negative. A growing risk that capital flight may be an issue. Jonathon to our viewers, worldwide. Alongsidehan ferro with david westin and megan murphy. We have another big show. David payrolls and friday together. Today, the focus shifts to u. S. Payroll. In about 90 minutes, we will head to the Labor Department for those numbers. Megan weve another great cast us all. S to guide he will reveal the fallout from todays crucial jobs report. Jonaon