Tom keene in new york. There was a big surprise from the boe yesterday. Tom i have to tell you, and we will show charts, yields speak to the tensions out there into this mornings jobs report. Francine they certainly do. Then we will go to the boj. Lets go to the bloomberg first word news. More on todays jobs report. The government will issue another solid report later this morning. 180,000 increased by july with the Unemployment Rate falling to 4. 8 from 4. 9 in june. Fornumber of people higher permanent positions in the u. K. Slumped the most in seven years in july, according to a report improvementd the federation. They are calling it a dramatic freefall. The bank of england said the outlook good weekend markedly. In south africa, the chief whip of the Ruling African NationalCongress Said the party conceded defeat in Nelson Mandela bay. That includes the city of port elizabeth. 98 of the vote counted, nearly 47 of the vote, to 41 for the anc. They are poised to lose control of Johannes Berg and the capital city. The Opening Ceremony of the rio olympics games taking place today after terrorism threats, zikacarrying mosquitoes, athletes kidnapping, dont think candles, and infrastructure scandals, the acting president will launch the event. It will feature highlights including somber mbaber sa dancers and gisele pugin. We have some bloomberg charts for you this morning. Futures advance. The yield. Steven major will join us from hsbc in a moment. Oil is churning after the visit to 39 a barrel on american oil earlier in the week. The vix shows the lethargy. Where the dow is. Higher. Should be 12. 13 shows the complacency, the gentleness of this august market. The two year yield is flatout stunning. There is no other way to put it. From. 67 2. 65. Look at the year in revisiting. That is maybe the lead item at this moment. Francine i really like that. As i was going onair air and hour ago awould say that markets are little circle. It is the return of the bullish sentiment, the return of the boe. This means that european stocks are heading with her biggest twoday rally in 3. That. O knew i do not know if it explains, fully explains, the Market Sentiment today. European stocks are higher and banks 0. 8 . Tom why is francine so nice and you are so miserable is the i get. One mail the number two is inflation in the mailbox. Look at the chart that i invented. It tells the story about our audiences on radio and television live. These are wages and benefits growth taking out Service Sector inflation. Or core cpi, taking out core Service Sector inflation. What you need to know is that in the previous decade there was a real bout of real wage and benefit growth. It ended because of 2 moving parts. Tested wages, and particularly low inflation. Wages, and particularly low inflation. That gives you a wage and benefit decline when you only look at Service Sector inflation. Francine i like that chart. I think the u. K. Economy when it comes off of the wage growth mirrors the u. S. On this occasion it is a little different. I will get stephen majors to do some of my charts. What i did this morning had to do with treasuries, and how much Foreign Central Bank, treasury central treasury Foreign Central Bank balance. Securities held in custody of European Central banks. 2015,e lower than early almost at the level in 2014. What does this decline show . Central banks are burning reserves or that they switched to a more reverse instead of treasuries. It gives us a sense of how children banks are looking at treasuries and what they want to do with them. The u. S. Jobs data, treasuries, the outlook for inflation in general. Lets bring the head of hsbc head of fixed income research, steven major. It is always an honor to have you on on jobs day. A lot of volatility in treasuries. Traders are betting more that the fed will not raise Interest Rates. Steven the way that the market is no change for months from here. The first move is september 2017. The concern that i have is that we need to somehow separate more considered response to recent events from the kneejerk reactions. I say kneejerk reactions, because you are having a lot of that. You have had the brexit, the rejection over the bank of japan, the bank of england rate cuts we have to think calmly through this. The bond yields have been low for a long time. They are already low. They are telling you something. Whether or not we need to be pricing in lower and lower yields from here, i dont know. We may have gotten to the white where yields are low enough. We are at the point where i thought we would be a year ago. Francine you were the only one that got this right. Steven im taking my time thinking through this. I do not think just because you have had a rate move from the u. K. , the measures from the u. K. Bank of england, there is likely to be some more i will not slash the u. S. Forecast. Francine was that a kneejerk reaction . Steven the kneejerk reaction on brexit to treasuries to 130 and we are toward 150. That tells you what im trying to say. It seems to me that the market is rejecting these very low yield levels. It will be a struggle to pull them lower. , good morningjor and congratulations on your call. We are to have you on the american jobs day. I like your phrase, they are telling us something. Chart it at the dots is extraordinary the distance between the governors, president s, vice chair, chair, and markets. Steve majors on the red line with james bullard. Dots. 2 lower which of these 2 lions gives way over the next six months . Steven clearly, the upper half is coming down to something more realistic. I think that there is a certain amount of hubris in the longerterm dot forecast. They have always relied on a reversion to the mean. Since when was that ever a good analysis . Later. Will talk yields you say that you are hesitant to lower your forecast. 150, a 140 or a 145 . Will be athink we 150 at year end. It is quite possible that we could go 10 to 20 basis points on either side of that. I think 150 is the right number for the end of this year. Tom steven darting strong on jobs day. He is with hsbc. Abby, we will be joined by joseph cohen on Bloomberg Radio and a conversation with William Gross of janus capital. Bill gross after this mornings jobs report. This is bloomberg, stay with us. Francine i am Francine Lacqua in london. Tom keene is in new york. Rbs shares trading lower after a bigger loss than estimated. It is owned by the government, the majority owned by the government, it comes after the boe cut Interest Rates. Governor carney said they had no excuse not to pass the rate cut on to customers. Stephenson about the tough conditions to lend. Every think is different. For us, it is more of a demand problem. It is not a supply problem. For some of the other banks, the lending facility. Will pass through the quarter percent cut . All ofill look across our asset and liability products and do what we think is fair and reasonable. The governor made a clear message, you have no excuse. You will pass it on. I will not commit that we will pass it on, but we will look at it. The one thing that came out yesterday was that we are heading to a zero Interest Rate, potentially, in the u. K. How are you going to deal with that . How are you modeling, preparing, to deal with 0 . Are you getting ready to charge the customers . There is a change in conditions. We are at least putting ourselves in a position that if we needed to, and we hope we wont need to, to be able to look at how we get to a fairer balance between customers and asset customers. Dropped 80 billion pounds noninterest bearing on demand. That is a tough place to be in a zero Interest Rate environment. I think that we are headed into an environment that is structurally lower in terms of profitability for the large u. K. Banks. It is going to make it harder for subscale challenger banks. Francine that was the cfo of rbs. Wrote a fictional letter where he imagined that the banks might say to mark carney at the end. It is one of the funniest things ive read this week and goes to the point of how u. K. Banks deal be doing,eed to because of the lower rates. He writes, the problem is our customers. This is the bank writing to. After brexit come they werent interested. I lending growth is going nowhere, and we thought you should know. Congratulations on the piece. It is a light read that goes to the heart of the matter. The banks have our interest likely heard from the cfos. They are happy to land, but theres not enough demand. Steven it is also a question of cycle. You k bank lending was healthy going into the brexit vote. House prices were at a record high. You have to wonder what it demand, impacts, have we seen from the referendum, and what are we trying to support . I sympathize with a say if demand and confidence is the issue, im not sure the rate cut is the answer. Tom if it is not the answer, and i thought the debate was extraordinary, it seems to be the mystery of whether inflation. Is that how you read it that if byhave demand dynamics that the end of next year is that we dont have a clue or u. K. Inflation is going . Absolutely. We do not even know what the impact of the referendum has really been. If we imagine that there has been a hit to confidence and demand, we are unleashing the kind of measures we have seen in the eurozone, which has a completely different dynamic, and that is from lending growth and record high housing prices. Means. Sure what this is it ahead of the curve coming behind the curve . I think that banks are worried that whatever we do we are still going to be headed toward zero rates id and of the year. Tom what is the hsbc call on inflation . Atch was on yesterday with stunning 3. 1 inflation for next year, beyond where Governor Carney is. Steven our economists have a number of 4 for the end of next year. Y. T is quite go cable down at 120. On that basis, if you thought inflation could get as close as 4 , you should be buying inflationary problems. At oneyear forward is 3. 1 for the u. K. The market is not pricing and at inflation rates anywhere near 4 next year. It is very difficult. Clearly, the bank of england does not have any control over inflation. It would be hubristic to suggest any central bank has control over inflation. We are a small open economy and we cannot control the oil price, for example. Francine an open economy for now. Steven open at the moment. Open for business, apparently. We have a small economy driven by global trade. We do not have any control over the inflation rates in many ways. Francine they are it is letter to the customer saying, watch out. This would be a nightmare for u. K. Thanks. Lionel to be honest, we are not there yet. We are seeing banks very anxious about. 25. We are not there at negative rates. We have seen pain from the euro banks. If you sell other kinds of products, you can raise prices, but we are not there yet in the u. K. Francine in the fictitious etter, you finish by saying ps have you spoken to the treasuries . Is this the right way . Steven everywhere, theyre talking about loose fiscal policy. The fiscal impulse for 2016 is still for tightening across the globe. For 2017, if enough countries are moving toward loosening, we will get a different outlook. The numbers, so far, have not been impressive. I will give you an example. The japanese government announced a 6 fiscal loosening. 6 of gdp. If you strip out what had already been announced it was 1 . That is not impressive. One thing i noticed was the speed with which mr. Hammond, the chancellor, made comments at the end of the announcement. It was six minutes. Francine also on twitter. It was 4 minutes. Steven some is logical because the government has to authorize the asset purchases. England and the government are working closely. I wonder whether the u. K. Could be perseid here in the steps that we see in the coming months. The is regarded with government and central working together, fiscal loosening. Question of the q a yesterday were clearly on things like negative rates. Money. Licopter you can see where the debate is going. Tom quickly, let me bring up this chart. The idea of getting from here to there. Deutsche bank at the bottom. Jp morgan at the top. Lionel, it is friday, august. We are all relaxing. Cryan going to get this thing going . Lionel i remember in february when they were talking about Deutsche Bank, saying it was a lowest price in decades and it was a massive crisis, it is six still at and we are very depressed levels. If you are a ceo, all you can do costs and pray for some act of god. Some economic upturn. Some improvement in the outlook. This could keep rolling. Francine thank you. We will be back with steven major in a couple of minutes. We are also talking about boj. It is not only the countdown to u. S. Jobs data, in rio it is the countdown to the start of the olympics. Will it alleviate arson joint problems facing south americas biggest economy . This is bloomberg. Tom jobs day, bloomberg surveillance, bill gross later. Abby joseph cohen white will join us on Bloomberg Radio. We digress. We aree we digress, but talking economics. We picked out something on bloomberg that relates to the olympics. It kicks off the season. The contributing writer for bloomberg writes, their punishment has already been dished out. But the article is based on, they look at the olympics and they say the proponents of the olympics will not be there. The godfather of the olympic bid would be the it coordination of brazils rise to greatness. Will behe nor rouseff in the stands. It goes back to a serious point. If we look at the challenges of building stadiums, the olympics, the challenges to this economy we have been covering it for the last year and a half has been incredible. Unemployment and inflation have almost doubled. Tom you talk about the past for brazil and the leaders, i wonder if the olympic concept has passed. It is nothing like the buzz that i remember 15 to 30 years ago. It used to be a huge deal. A hugee i hope it is deal again. It is one of the greatest sporting events where countries come together. A moment where a lot of countries are moving away from globalization, it is an important reminder of the world we live in. We will be back with steven major. This is equities in europe. This is bloomberg. Jobs day, bloomberg surveillance, Francine Lacqua in london, i am in new york. All that i care about is the pole vault. It is eight days from now and will be on for 4 minutes. I have never done it. Have you ever done it . Francine i will have to look it up. Tom lets look at another set of polls with taylor riggs. Democratic president ial nominee Hillary Clinton extended her lead over republican rival donald trump. A new poll shows mrs. Clinton with a nine point lead, 47 to 38 . In july, the same poll had her leading by five points. The latest full has a margin of error of 3. 5 . It looks increasingly likely that the Obama Administration will hit its a goal of admitting 10,000 Syrian Refugees before the end of september. 2300 and i last month, more than the previous seven months combined. Bracing for the possibility of economic retaliation from china. Korea International Trade association, an influential business lobby group, identify 26 measures in place by china that hurt members. Any could be damaging. Have fallen exports 19 months in a row. Australian state governments will change laws to keep higher risk people convicted under terrorism in prison after they served sentences. It could apply to 13 prisoners serving long sentences for federal terrorism offenses after several plots were supported in sydney and melbourne. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im taylor raikes. This is bloomberg. Francine . Francine it is jobs day, the monthly report out in three hours. Our next guest says it should be fairly symmetrical to an upside or downside. Adam cole joins us from his office. Stephen major is also with us. Also with us. Is the dollar is calm at the moment. Is this because we had such a correction in rate expectations on friday . Adam yes. I think the market is reasonably priced. 50 or so probability of the move this year. I think the risk in payrolls is quite symmetrical around that. For choice, if i had in the payrolls i would reach to the downside for the dollar but not by a large margin. Francine how many Interest Rate hikes, if any, are you expecting from the fed this year . The first move, given the Global Environment, the first move. Be until the middle of next year. Particularly when you combine the Global Environment with an uncertain political environment in the u. S. , which could have a similar effect as the referendum in the u. K. The fed has plenty of excuses to do nothing for the remainder of the year. Tom tell me about sterling as a oneway bet. Everyone is on the weaker sterling bet. Is it a big bet, little bit, normal that . Looking at the positioning that we have, the market looks like it is limit short sterling. I think that is being reinforced decision yesterday. Going forward, i can see the acting as a restraint on sterling keeping it in a tight range for the midterm. I think the market will be right and we will get more easing. The risk is that we have another leg lower in the next six months or so. Tom this is the bloomberg volatility. It shows the massive one way bet on sterling. It is simple. Is everybody looking for a weaker pound sterling. Francine i love those graphics. It shows you kind of the angst or comments that we are seeing in the market. Looking at the pound, and we were talking about the only, was it we were talking about boe, was it going to go lower despite the brexit . Can you call it bottom . Steven the bank and treasury want a weaker pound is part of the inflation strategy. They would rather have it not all up front in one go. There is a multitude of easing measures that have been introduced. It was quite clear that that was not the end of the rate c