Welcome to Bloomberg Markets. Before we get to that we have the bank of canada. Guy a bit of a nonevent. 5 matching. Im curious to see what ted macklin has to say though. He cannot make the same mistake he made in january. He cannot say we will pause, i think they will avoid that this time around. It will be interesting to see if the ecb and the bank of england make the same decision. How they are hawkish but keep pausing at the same time. We are near the top of the cycle on Interest Rate. But the sentiment is strong. Alix yields are popping lets get to that with michael mckee. Mike it matches the Third Quarter gdp. Services come in at 54. 5. That is up from 52. 7. New orders rise 50 75 57. 5 from 55. Unemployment rises but it is too late to use that in terms of forecasting the august payrolls but it it was 54. 7. Supplies are easing under the weather a little bit at 48. 5 but 48. 1 was the previous. And prices paid 58. 9 compared to 56. 8. Questions asked about if we see the economy further reaccelerate does that lead to higher prices . That is something they are keeping an eye on. At this point, it looks like on the services side, things are pretty good. 54. 5 is a good headline number. Guy it is amazing this data is sensational considering where we are in the rate hikes we have already had. Sensational numbers. This economy is cracking on and really doing business. Thank, mike mckee. Analysis with ism services emi pmi chair. We are talking numbers. These numbers are strong. Give me your analysis on how we should be reading the data. Looking at the four subindexes that comprise the deposit ever up month over month. It came in at 54. 5. That was driven by employment. Employment remains a mixed bag for many. Some of the industries that comprise this sector specifically in combination and services had the largest gains and they have difficulty backfilling positions. Alix is this like the last gasp of summer . And we read any seasonality into this . Anthony i think this is actually better been what we have seen historically. We see usually a waning in the summer months when people are on vacation. Theres not as much hiring until september which is typically the pivotal month going into the last quarter. What we see now is this is even better what weve seen prepandemic levels at that threshold. Guy and i am looking at the prices paid index 58. 9. Has the fed got a grip on u. S. Inflation yet . Anthony it is a great question. One of our respondents commented on that and said they thought the fed was doing a great job of staving off inflation with the Interest Rate of looking at how prices have moderated from where we were near 80 ever months ago. Still, prices are increasing but not at the levels we had seen in the past several months. Alix so is the market too hot or just right . That is a question. Dollar up, yields up, we see higher odds in november rate hike coming into the story. This is a different story than pretty much anywhere in the world. Guy that is why the dollar is doing what it is doing right now. Alix right. Guy any other central banker right now you do not have this problem. This is a u. S. Problem and the rest of the world is looking on in awe as to what is happening. Is this to you and economy that is free accelerating, the rest of the world feels like it is going down, the u. S. Doesnt. Anthony all indications are that we are going to continue on this path. We had seen that from the respondents indicating this when we did our semiannual forecast back in may. There was no talk about a recession. Everyone was talking about the first half and all indications are we are on the track right now. Alix one said it looks like we found a trough in manufacturing. We do not know how long we will be there, but we found a trough. If that is true, do services need to roll over to meet manufacturing or can manufacturing about services . Manufacturing move up to meet services . Anthony i think it is manufacturing. They usually beat into and out of recessionary periods. We hope they will start to see them get north of the 50 basis line sooner rather than later. Manufacturing does give us that forecast as to what the economy will look like down the road. Guy cannot i just come back to the what is happening with the labor market . Clearly companies are still struggling in the Service Sector to get to labor day one but other data indicates that we see people come back into the labor market. The overall labor market is growing. We saw the jobs data last week indicating that maybe we are actually coming more into balance. Do you think, how consistent is your data related with the other data we see. How do you think these lineup with the moment . Are your numbers consistent with that or are your numbers telling us Something Different . Anthony they are fairly consistent with that. The respondents is a mixed bag. We have some company saying you are holding back and it is an expense and we will see how the economy and our business goes. It is the industry in the sector whereas other industries are not saying we cannot backfill back fast enough and we do not have a work enough workers in hospitality and food Retail Industries they cannot find workers as well as other industries can. Alix heres a list of worries when they look at the consumer, Student Loans ticking up, excess savings being run down, and there is an article on the terminal talking about daycare being an issue. 70,000 daycare closures could really impact the workforce. Does this ring true on your respondent . Today highlight any of this as risk factors . Anthony not at this juncture. I go by all the comments that we received, right now, i am not seeing that that could change next month. All indications are what they are mostly concerned about is inflation and the longterm outlook of the economy. Alix thanks a lot. We appreciate ism services pmi chair. Dollar higher, yields higher as well. The weakness we were waiting for is not coming. Guy the u. S. Economy continues to defy expectations. These are such strong numbers. The data are strong. Theres a great piece on the bloomberg talking about how the fed will have to upgrade its gdp forecast next time around. A look at the rest of the world, is it a completely different place right now. The fed will have to be higher for longer. You have to seriously ask the question of whether the ecb will come before the fed or the bank of england will come before the fed. These are Central Banks that come in late and now potentially come in earlier and we talk about the dollar in the moment the impact may be still has not been built yet. Alix and with a market moving on november hikes, we let price out cuts in 2024 . Is that we are facing now in the data . Guy how can the fed signal cuts at the same time raising its gdp forecast . At the same time all this data points to the fed raising its forecast. That has to tell you the cuts are further out, doesnt it . It logically indicates that. But i wonder whether the ecb has a real problem and i have to start fighting back against the cut narrative. The bank of england i think the same thing as well. Alix or is it just normalization . Or long and variable lags . He was just talking about the rate rises to come. Will be still be in that narrative for a while as well. It will be interesting. Guy yes all of his comes back to the dollar. You recognize the dollar just maybe it is just getting going. Alix i dont know anything about pop culture. But how do you deal with the dollar. Howdy we will address that with senior Portfolio Manager at Wealth Enhancement Group coming up next. This is bloomberg. the first law of thermodynamics states that energy cannot be created or destroyed. But it can be passed on to the next generation. when you look at the broad commodity market. Commodity prices are rising. Higher oil prices. Spike in oil and gasoline prices. They are both very strong it may be a spike in demand. And you start to see Inflation Numbers take up. Pressure on inflation. The last thing consumers need at this point in time. It looks like inflation bottomed at 3 in june and it will start drifting toward four. If we see Higher Commodity Prices that should eventually translate into higher yield. We see higher yields for a little longer. The reality is it is difficult to achieve a softer landing. Bad news may not be becoming bad news as we move forward from here. Alix those are Bloomberg Television guest weighing in on the challenges of our landing a soft landing. And it comes to the question of the day how do you deal with the dollar . We have avako yoshioka senior Portfolio Manager at Wealth Enhancement Group thank you for joining us. How do you deal with the dollar . Avako it is difficult with the expectations that the dollar could be weakening toward the end of the hiking cycle but the u. S. Dollar strength is a relaxed reflection of the yield differentials across the globe and the surprising economic strength we have seen today in the ism services number. Guy do you think this is it is a symptom in many ways of a u. S. Economy doing better than everybody else. It is also the sense of the economy that has the potential to generate inflation. Look at the prices paid with the ism data, do you think the fed is done . Anywhere near cutting . What you think the outlook is . Avako in terms of the fed, there will continue to be they will continue to be datadependent. Well they pause in the upcoming september meeting, probably. But i do not think they put take future hikes off the table just yet. I think they want some of the cuts priced into the market for next year to get the price out. And to not expect any cuts in 2024. That is still yet to come and needs to be reflected in overall market pricing. Alix i want to point out him remit bay kkr upgraded his growth forecast. He says the gdp growth will surprise to the upside. This is before we saw a superstrong services ism Goldman Sachs tracking number higher for the third and fourth quarter. How do you play that . Is the dollar a wrecking ball that will hurt multinationals . Do you play it on a u. S. Basis even though it is already priced in, what do you do with that . Ayako yes, you have to stay with the u. S. And lean into the economic strength we are seeing. It will hurt with the translation from a revenue standpoint, however with the multinationals that especially with the multinationals that have done well. However, we think the u. S. Has room to grow and with a lot of the companies that make up the Public Market and publix talks are rhymed or additional growth public stocks are primed for additional growth. Guy lets look at how everyone responds to this. Where is the surprise that could upset this narrative . Is the japanese getting rid of yield curve control and stepping into the market . Theyve been signaling that overnight. Is that the chinese coming out and delivering massives and meal is and that changes the case around the dollar as well . Where does this surprise or upset to the current narrative, we got used to narrative changing quickly, will we see another one . Ayako im not sure if we will see another one, but these are the concerns everybody is watching. Especially the one from japan. We are at levels in terms of the dollar cross currency levels that prompted japan to intervene in the past. We have not seen these levels in many years. This kind of additional potential relaxing of the yield curve control spooked markets at the end of july. We will see of all of the transmission mechanism in terms of Monetary Policy currencies and yields and we will see how it turns out in the next coming weeks. Alix it feels like if you front run it it does not pay off either. So i look at the sectors that have done well in the s p that have done well in the last three months it is purely cyclicals. What you still like and that group . Ayako within industrials we like the quality names. In general quality names with companies with strong Balance Sheet and free cash flow. Penny well comes to mind with the Industrial Complex as one of the strong diversified companies with good free cash flow. High quality exposure to some aerospace that continues to do well. We like honeywell and we like energy names like chevron and exxon they continue to perform. Gasoline with higher prices and refining margins will continue to go higher. We like cyclicals. On a longerterm basis, it is hard to judge right now given the potential slowdown that might occur in 2024. However, if you can ride through that, those are good names to continue to be on any sort of downturn in the economy. Guy Ayako Yoshioka at Wealth Enhancement Group thank you very much. What is happening with the u. S. Industrials is amazing. You look at honeywell and what is happening with deere the Big Industrial company they should be cyclicals and the economy should be slowing down but is not they are outperforming. The u. K. Has a flag that they will rejoin the eu Horizons Finance program. This is a huge deal for the u. K. And basically speaks to the idea that relations are starting incrementally, slowly, to normalize with the eu. This is a big step forward. Its fascinating to see that happening at this point. We will see what happens going forward. Clearly with the u. K. , the data, i know you like to rain on our raid, the u. K. Data is not as bad as it surprises upwards. The u. S. Data surprises down and the u. K. Data it revises up but nevertheless you look like you are on a different page right now. Alix we really do. Guy i hate to say it. Alix i know you do it is painful. But the stronger we are in qs redoes that set expectations too high for q4 . I can go back and say i made this argument for the past year and it did not pan out so there is that also. Guy the u. S. Looks like it is in a different place. The upside is that maybe you will come over to europe and a for the holiday in france once again. Alix not with the jet fuel prices but that is a different story. Guy that is definitely true. We talk about next we talk about san francisco, lost out in london, singapore, dubai, because of hostile u. S. Government policy this is according to the cofounder of the crypto pioneer chris larson. We will talk more on that next. This is bloomberg. [mo] if youre thinking about going back to school, this is for you. I ended up spending less money my entire time at snhu than i did in just one year at my other university. [juan] my time at snhu has given me more confidence. Now i can go for that promotion. If youre ready to go back to school. You can do it. Southern New Hampshire university has changed my life. And it can change yours too. [announcer] visit snhu. Edu. Alix it is 23 past 7 00 on the west coast. Silicon valley starts its morning. It joining us is ed ludlow. San francisco was supposed to be where the crypto world blossomed. You spoke with cofounder of ripple, chris larson. That is not how things panned out. Ed the conversation was supposed to be about how he fixed it but we changed to lamenting how the regulators killed the industry in the city and it lost his title as a Blockchain Capital of the world. He had sharp words for gary gensler the chair of the sec this is what he said. Chris genslers decision in gauging this by enforcement. Rather than giving clear laws, he likes the lack of claritys though he can go after anybody and make up the rules as he goes along true bullying. That is not the american way. Ed that is pretty sharp calling the chair of s. E. C. In the regulator a bully. But his point was they are trying to fix the industry through the court and not regulation. He gave me the stamp that if they had not killed the industry here that the postpandemic economy here would be better. He see rates for curve Marshall Real Estate would be about less than what they are and they are currently 32 . Guy lets transition to what is happening with apple. How big of a china problem does apple now have . You have a new iphone that people will look at comparison to an iphone. And they have a government working for us saying you cannot use those. Ed the Central Agency has given instruction to get rid of your foreign phone, not just apple but the nondomestic brand phone and make it a domestic brand phone. We remind the audience a year ago that bloomberg reported the Chinese Government issued a similar directive for personal computers. They gave a twoyear deadline for all Government Agencies and state backed corporations to transition domestic hardware to a personal computer. Next week we have the apple event on the 12th. We remind ourselves not just the proportion of revenue that comes from china, but so much of this is there. It is a worrying time for them and it will be interesting to see if they proactively address this next week. Guy thank you very much indeed. Bloombergs ed ludlow you can catch him and Caroline Hyde on Bloomberg Technology coming up in 90 minutes time. They will have more on that interview with ripple executive chris larsen. We get. The data that we got out o will join us from citizens he is the ceo. Up next tune in for a glimpse of an event in the business world. Now we take you to ges leadership summit taking place in new york city. These are three very different comparisons between gm and Auto Consumers to now what you are doing at e. G. Any. Pg e. When we transition to automotive and the approach that you took with consumers first with the compare and contrast, how did you go about that and how different was it . One of the biggest differences. I was hiring an executive that had come from automotive he and i had worked together. I brought him to the window in our Office Complex and we were looking out the community and i said, that is our shop floor. It is a totally different shopfloor. One of