Tendency to overreact. We will hear why, later this hour. Scarlet we finished relatively flat on the day, but the dow did climb 119 points at one point. Little change after it came back down. However, when you look at how things have fared for the week, we are on pace for the first weekly decline in a month. Joe a disappointing week across the board, especially for equity investors. In the ongoing backup in rates that we are seeing preventing the stocks from going higher. Matt and a mixed trade as far as the indexes. We do not see that as far as the groups go. Health care and financials putting up little gains, but materials and industrials, energy, all down. Take a look right here. I promise you there we go. Sellingy like they are defenses, selling everything. Gas up 15 . Remember yesterday we reported those numbers, the chain doing better than what they were looking for. And monthly storage cells sales better than what they are looking for. Concern about a class action suit. And ppg biggest drop in six years. Joe looking at government bonds. Looking at the 10 year yields, a lot of noise right around 8 30 a. M. They went down my because people said no pressure to hike. And then they jumped, with lower numbers, then back. You can see all that activity around 8 30 a. M. Here is a longer look, the 10 year yields, looking at the highest level in several months. Levels we have not seen since early in the summer. Scarlet currencies. And there was a flash crash of the british pound, the set of plunge at about 7 00 p. M. 12 00n, 8 00 in tokyo and a. M. For london. Not a lot of liquidity at that time. 11841. To it dropped 4. 1 , the lowest since right after the brexit though. Ack to 31 years joe every time it falls, we say a 31 year low. It has not gone there yet, because after the trade, bring in the pound down to 1. 05. Joe it is also interesting how much of the flash crash did not get back up. Matt when u. K. Traders woke up, they traded it down again. Scarlet fundamental concerns for that. Stalleddollar rally has. It took a breather after in a day rally against the japanese yen. The second decline in 12 days. Looking at the project ray, that has not changed projected rate, that has not changed. Matt and it is the longest gain for the dollar in two years. You cannot just keep going up. Joe commodities, we have a onemonth chart of gold. It had an ugly week and is ending it closer to 1250 or 1257. Down nearly 7 in the last month. This is the flip side of a rising rate story that everybody was focused on. Taking a look at oil and natural gas. Oil not doing that much, falling below 50. Natural gas had a big rally today. Expectations of warmer weather thatigher demand, pushing higher. And joining us for a look at the jobs report is matt basel are boseler. Thank you for joining us. He picked out the most interesting charts from this. Matt this was a decent report and a lot of the things where positive, so i will start with a more negative aspects. Scarlet always a contrarian. Matt right. It has kicked up. Is the rising because of persistent to patient participation rising, or other reasons . And this chart scarlet the unemployment bathtub chart . You , this one shows scarlet the blue line is those not in labor force. Matt basically what you have is to sources of unemployment, you can lose your job or the outside the labor force and come back in and be looking for work and be unemployed. It is the latter that is driving the rate and that is a good thing and that is what the fed wants to see. But part of the problem is that the less people, the amount of people every month that are losing jobs is stabilizing, and that has been going down. Now that is stabilize, the rate is falling further. That is not a good thing, because it points to less net hiring. Joe another thing you are looking at is Service Industry job growth, looking at high wage service providing, how much they change, it versus the lowwage charts. What do we see . Guest this redline, we always talk about the lowpaying service jobs saying those are the little ones created. The job growth in those sectors has been strong. But the red line shows that job growth and high service sectors, the lawyers and accountants, that has been strong. Inis almost the fastest pace the recovery. So we are not looking at deterioration there. Joe and a criticism that people. Ave is, oh this is low end but we are really looking at momentum at the higher end. Guest; exactly. Obviously, we are losing some jobs and they are in the mining sectors and manufacturing sectors. But not really any drop off in the high service jobs. That is a good sign. Matt one thing i look for is to see how many hours worked, that were put up. The headline number missed a little bit, but these hours worked were up. And if you added another 120,000 jobs really to payroll, that is a good sign. You put together a chart that has average hours worked, going back to a few years back. You have the Unemployment Rate in verdict, why . Inverted, why . Isst the underemployment flat income is basically the same thing we see flattening, basically the same thing we see here. This is the story of losing labor market momentum, because you can see it is in line with growth in hours worked, which is basically the output number. Matt just to show them tracking each other . Guest exactly. There is concern over lots of momentum. We talk about the fed and we still have two more jobs report before the december meeting, so we should get a lot more clarity on this trend. If it continues to decline, maybe we wont be talking about a rate hike. Myrlet if you go inside bloomberg, the homepage for the federal reserve, you can track the events on any given day related to the fact. If you the fed. If you look at today, many people speaking about this after the jobs report. What kind of clarity did we get from that . Guest going back to why the employment rate is rising, many people taking the view that it is rising for good reason. Stan fisher said it is fine, because participation is picking up and that means more people coming back to the workforce. It is more complicated than that fed it is partly true a man that. It is partly true. He describes this as a goldilocks report. Usually when we use that to describe the report, it is like that because it is not force the fed to move, but it is also not signaling something big. Joe kind of like a traitor term. Trader. Term. It is not so good it will force the feds hand, so lets buy stocks. It is unusual coming from a central bank official, because they do not really want to see goldilocks. Guest exactly. Matt but if you look at it from the traitor trader perspective, the market does not have to freak out because of a hike coming soon. And they are happy because they are not forced to raise this before an election. They do not want to appear political cut some political, so now they dont have to. And the economy is still growing. Scarlet right. And the jobs report is consistent with what was already told. And they do not need to change their tactics. Guest either way, it is interesting to hear him say that. And it takes pressure off of november. And today, the probability of a november rate hike had been increasing, so if we had a much bigger number, it could have gone higher, but it actually went down. So now matt it took november off of the table. Joe thank you very much for breaking down the report. Coming up, Monetary Policy stretched to its limit and fiscal policy must take a bigger role in normalization. That is the perspective we will hear. And how the u. K. Is navigating the brexit, next. This is bloomberg. Mark lets get the first word news. The u. S. Is saying publicly that the russian government hacked political groups and delete stolen material leaked stolen material. They acknowledge that the Intelligence Community is not in a position to confirm that moscow infiltrated the systems, saying it would be extremely difficult for a cyber attack to alter the ballot counts or election results. Hurricane matthew is pounding florida with heavy wind and rain, now going north. 200 people were told to evacuate in the hurricane path. I want to have a size to everybody emphasize to everybody that this is still a very dangerous hurricane. That the potential for storm surge, flooding, loss of life and severe Property Damage continues to exist. And people continue to need to follow the instructions of their local officials over the course of the next 24, 48, 72 hours. Mark the death toll in haiti from Hurricane Matthew is approaching 300. Officials say the number is likely to rise. On sunday night, donald trump and Hillary Clinton meet for a town hall debate at washington university. The second debate presents challenges for both candidates. Clinton has been absent from the campaign trail, preparing. And donald trump held a town hall on thursday, but denied it was practice. Special coverage before and after the second president ial debate in st. Louis. It will begin at 8 30 p. M. On Bloomberg Television on bloomberg and bloomberg. Com. Global news, 24 hours a day, powered by more than 2600 journalists in over 120 countries. Im mark crumpton. This is bloomberg. Matt the imf meeting wrapped up and among the notable guests we spoke with was philipp hildebrand, the former head of the Swiss National bank. We asked him for his assessments of the value of negative Interest Rates. The policy has made an effort to get us where we are today. In many ways it has worked. We have better conditions today in europe, much better in the u. S. , japan is still an open question. The issue is, where do we go Going Forward . The negative Interest Rate tool is one of those that was deployed. If you look at the total reserves in the eurozone, it is about one trillion euros. 40 basis points with negative Interest Rate, that is the total charge for the entire euro zone and all the banks, about 4 billion euros. One should not over dramatize. It is there and it is the charge for the entire zone. European banks are complaining . They are saying it is hurting them, or is this just an excuse . Do they need to change their Business Models . Philipp as i said, in the context of things it is relatively small. We should look at the whole story. The issue is the possibility of the something i have heard from behind closed doors, the ceos of big european banks should they say, i appoint an independent panel to go through what negative rates mean for the market and these banks . Philipp it is pretty clear what it does. We do not need that. The overall toolkit has had positive effects. We have credit flowing and weve had a lot of easing around financial conditions because of Monetary Policy. You have negative effects and positive fx impacting effects impacting the banks. I think we understand it. The question is, what happens Going Forward . Monetary policy has reached boundaries and it needs support from other policies. In the time we have, it is important to talk about a broader public and financial repression. We spoke with bill gross this. Orning about these the 1. 35 and the lower rates through 2021. Give us an update and how this . Tone senses philipp i dont think it is useful to talk about financial repression. We have uncertainty. It is likely felt everywhere. And we have excess savings. And high debt level. What we have creates an environment where investment is not happening the way it should. You live this. The idea of savings that flows into switzerland, still out of control. Are you worried about capital flows in the coming years destabilizing europe and the g7 system . Philipp the normalization process will be difficult. That is a highclass problem. We want to see stabilization. I think the most important thing is how do we get confidence back into the system, where you have Political Uncertainty and adding to it every day, and where you have high debt levels . That is not a conducive environment for investing. I do not think it is help other talk about financial repression. Vice that was mark , the that was philipp hildebrand. Scarlet coming up, what is bigger, the flash crash of the pound or the actual crash . This is bloomberg. Scarlet im scarlet fu. Taking a dive into the bloomberg with some charts. You can find the following charts using the function at the bottom of the screen credit i had to focus screen. I had to focus on the flash crash of the pound. Night into puts last context. Regardless of how big it was, this shows there very bad week. And the green line shows the residual impact from the flash crash. The other line shows the actual crash from the week. The crash from the weak is about 4. 2 , larger than the slump we saw when the pound plunged automatically. Analysts say this is indicative of where it is going next month because even though it went next, because even though it fast, far too investors. Joe markets tend to go back to that. The levels that seem arbitrary or mistakes of the algorithms end up being magnets, we saw that in 2010. Even though it seems like Something Weird happened, pay attention. Scarlet people call this a market tantrum, because all week these traders have been concern. Was right before this, it said by francois launch the president of france, that he would have some words. And that has some people worried. Joe i want to talk about the british pound. We are looking at the function of looking at volume trading. Thebets are piling up that dollar and pound will reach parity. Looking at this column. This is a look at it. These are all ones that have been purchased with a one dollar strike price, expiring next year. These are for big trades that went through in the last few days. According to analysts and the volatility of the pound, the odds of the pound hitting parity by the of the year are small. 3 , now at 7 , still very unlikely. But people are putting up the feelers to see if it will pay off. Scarlet that would be even lower than where the pound traded at year, ike a 60 or 100 will look it up. These are big bets. 220,000, 170,000 in pounds, worth something. Lets take a look at a jobs chart. I always like to look at levers, it makes me feel good that somebody can say, take this job and shove it. And has confidence they can get a job summer else. People do not have that in the beginning of the year. We fell to the lowest level at the beginning of 2016 and i believe at the end of february, but we have risen back up to a threeyear high. They call this job leavers, quitters is a better term. 893,000 people willing to ditch their jobs in september, because they thought it would be easier to get another job summer else. Scarlet that is a sharp recovery and a small amount of time. Matt a lot of confidence back in the job market. A tight jobis market. Matt taking a break. Coming up, speaking with a guy that manages money for ubss richest climates, simon smiles. You have to wonder what he has ofng on after todays kind disappointing not disappointing, everybody seems optimistic about the report. We will discuss it next. This is bloomberg. When youre on hold, your business is on hold. Thats why comcast business doesnt leave you there. When you call, a Small Business expert will answer you in about 30 seconds. No annoying hold music. Just a real person, real fast. Whenever you need them. Great, thats what i said. So your business can get back to business. Sounds like my rides ready. Dont get stuck on hold. Reach an expert fast. Comcast business. Built for business. Mark lets get thto first word news. Hurricane matthew has been moving northward and 35 east of Saint Augustin 35 miles east of Saint Augustin. Still, matthew has sustained winds of 115 Miles Per Hour and has brought torrential rain. More than one million florida homes and businesses are without power. Officials say Volusia County is the hardest hit by power failures. The mandatory Evacuation Order for the 3000 people who live on the tiny island of georgia. Hundreds of people have decided to ride out the storm. Most of them left on wednesday, some of them hit the road at the last minute this morning. Rail service at the hoboken, new Jersey Transit station will resume next week. A portion of the terminal will reopen in time for monday morning. Investigators say the train last week that crashed was traveling at twice the speed limit, killing one woman and injuring more than 100 others. President obama has issued an executive order, officially lifting u. S. Economic sanctions on myamnar. The white house says it has shown considerable progress establishing democracy. The move is expected to benefit myanmars economy by stimulating growth to Small Business. Global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. Im mark crumpton. Back to you. Scarlet thank you. Lets get a recap of todays market action. U. S. Stocks flipping today and rounded off a weekly drop in four. The jobs report did not do much in terms of impacting the market. The dollar offering little change as well. Yields were down a little bit. Thought they wereoin going to be lower and then they shot up. Yields declining as well. A lot of red on the screen. Joe except for gold. Converging calls. Goldman says they might want to some up and bank of america says it is a good time to shore it. Scarlet that was before the u. S. Markets. Maybe that stopped all the action. Joe i cannot stop thinking about the pound. Even the jobs report was a little less exciting. I was fortunate listening to brian curtis on Bloomberg Radio last night at 7 00 and when they set a drop to 1. 18. I cannot believe it. Mberg radio for an hour and a half. I was over it this morning. Scarlet the u. S. Economy produced another month of weaker than expected labor growth. Rate climbed to 5 while Labor Participation rate had a sixmonth high. Smiles. Us is simon investors kind of shrugged off the jobs report. It feels like deja vu of this summer lull. Is this the calm before the storm . Simon i dont think so. It was slightly below consensus. Is close to four decade low it is close to a four decade low. We had improvement and manufacturing. In manufacturing. The fed is on track for a rate hike in december. It explains the relatively mutual reaction to the jobs numbers today. Joe ultra high worth investors have different needs than other people. Andcurious if this election deterioration of the u. S. Any of yourstem has clients thinking about diversifying their money outside of the u. S. As he walked in here with very wealthy people in other countries with unstable to politics . Simon that is something we have preached to all of our clients and international needs. With respect to u. S. Assets, we have a number of clients talking about potentially reducing allocation the u. S. Equities on the back of uncertainty of the u. S. Election. When you push them on that, it is not as much about Political Uncertainty as it is about stretch valuation. I dont think politics in the u. S. Would be coming out. Where we have more concern over politics being stressed in europe the event around Deutsche Bank has focused some of the attention about the issues facing the eurozone, the stability of the eurozone. The stability uncertain the Political Uncertainty and the upcoming german election at the end of next year and a potential nok for chancellor merkel longer running germany in 2018. Matt there is a reason for a little of overvaluation in u. S. Stock. When i speak to individuals here, they say stocks are fully valued, bonds are fully and valued and they are looking at alternative assets. Im guessing your european investors are looking over here for a bit of safe haven. Simon there is an element. They are fully price, as you say. Globalverweight in our allocation. We think we will see 3 growth. 6 , 7 next year. In an environmental return, we think it is ok. At your second point with your second point, looking increasingly at markets. Be that private market opportunities, private investing opportunities, hedge funds in a diversified portfolio context. And Impact Investing with our clients. Scarlet i need to bring up the pound and the wild ride it had earlier today. The 2. 1 tumble. We had spoken to kevin mcfarlane, the head of research at greenwich associates. He sees liquidity problems in the fx market. Kevin it is hard to disagree with the idea of the liquidity profile. The fx market has changed over the past 10 years. A decade ago, we had primarily banks driving all the markets. Today, the ecosystem is more diverse. We have nonbank liquidity providers. Scarlet it is unsettling because fx was supposed to be the cheapest and most liquid Financial Market in the world. How does a flash crash of a major currency like the pound affect the psychology of riskaverse high worth investors . Are seeing this in fx markets, rate markets over the relatively recent past. I think the clients i am talking to are less impacted by this than perhaps the higher frequency trading institutional client base who see a lack of liquidity as a means for concern. The clients i am talking to her taking a longerterm viewpoint are taking a longerterm viewpoint. Our british alliance, many of them have Significant Holding assets outside of the u. K. 20 were almost postbrexit. Businesses in the u. K. Are seeing reduction for consumer demand. There is more availability of highquality assets but they are being snatched up by investors in the u k and globally. Despite the tribulations we see in the pound today, quite perversely, the u. K. Funds im talking to our feeling happy, especially when they are looking atit. It. Scarlet they are still bullish on the longterm and looking way out. Does that mean they are holding off on doing anything for now because they can get lower . U. K. , from outside the part of the reason real estate assets have not gone under more pressure because Foreign Investors are taking the opportunity of the weaker pound to buy real estate and buy assets in the u. K. The reason, at least with the clients im talking to, a profound uncertainty or disappointment for the outlook of the u. K. , that is an opportunity to invest more. Matt one of the big bullish themes is what we have seen in emerging markets, especially debt. The whole concept of the surge areasld has extended into in what people have not been comfortable with. Are you seeing continuing interest to get some yield in return . Simon im not sure i would classify it as a 2016 story. It has been a story for the past three or four years. Where i do think there has been a change is the attitude towards the emerging markets equities. Underperformance. This year, a sharp turnaround in the emerging markets and it is something clients are actively trying into pl with respect to the play with the respect to the momentum. The valuations is a rationale. It is also a theme we share. We are overweight and emergingmarket equities in emergingmarket equities. Chieft simon smiles, Investment Officer for ubs. Thank you for joining us. Joe it is round two for donald trump and Hillary Clinton this sunday evening. What can we expect from the second president ial debate in a town hall style . This is bloomberg. Obtainedhington post and posted a video of donald trump recorded having said something extremely lewd with billy bush, the host of access hollywood about women back in 2005. Alex joins us now to talk about the incident and the apology and is it a big deal . Is this a big deal for donald trump . Binders full of women from 2012 and what damage that caused mitt romney . I think this is binders full of women on steroids. There is really disgusting stuff he said to billy bush in this audiotape. Joe he talks about the benefits of being a celebrity. You can do whatever you want, including grabbing women in on certain anatomy. This seems really bad. Where do we go from here . Alex he was already struggling with suburban women voters like in suburban philadelphia. I dont see this helping. His already low chances will probably get worse when this recording and this news article gets better known, which will probably happen by sunday. Scarlet he did apologize which is kind of rare for him to apologize. In his statement, he said this was a private conversation that took place many years ago. Billy has said far worse to me on the golf course. I apologize. Matt bill clinton is someone that would probably get elected today by suburban women in america and he has not only set but done far worse things that we know about and i dont want to bring up here. Does that matter because donald trump is running against donald trump Hillary Clinton is running against donald trump . Alex bill clinton has said worst things to donald trump get it to take. Talking about the things that happened in the oval office. Alex with bill clinton . Matt yes. Alex if donald trump wants to litigate that, he can try. Matt ken starr did. He was impeached. Alex i dont think donald trump would fare very well given his own history. Matt lets look forward to the debate on sunday. It seems clear that donald trump lost the first debate. Is there any expectation he is going to try a different approach . Iex this town hall format, think it is probably pretty alien to most outsider candidates. It really benefits seasoned politicians, but donald trump has been doing these big Campaign Rallies where he speaks offthecuff to large crowds of people. Formight be better prepared this than the average tycoon running in a race. Scarlet what about Hillary Clinton . She is a seasoned politician. We know speaking offthecuff is not necessarily her strength as opposed to more prepared formats, or formal formats. What do we know about her level of preparation . Alex well, she does mock debates. She has been practicing for this all week. I dont expect her to do badly at the debate. I would be surprised if turmrump wins. I dont think debates in general are a great format for him. I think he would do a little better but not win. Matt given the drubbing he took in the first debate, the you think many do you think many people will tune in for this one . Alex projections are the ratings will be pretty strong. I dont know how long people will tuene in. If you are donald trump, you need a pretty good showing in the first half hour otherwise people will make their decision right then and there. Joe i want to go back to this tape real quickly because people people all the what are all the people down ballot in the rnc going to say about this . It has not really been a problem. It seems like senate candidates, house candidates have not been penalized for the association with trump. Do you see any reason for this to be different . Alex no, i dont think so. Paul ryan is expected to appear on the same stage with him tomorrow at a Campaign Event in. Wisconsin wisconsin. Paul ryan has not canceled that event. I dont think people will run from him or duck trump mentions. At the same time, republicans all year have been putting distance between them and trump. Even his Vice President ial running mate did it the other night. He did not bother to defend trumps policies and statements. I think they have gotten pretty good at keeping trump from being hung around their neck. Matt will this be the worst thing the worst thing we have heard donald trump say so far, right . Alex i dont know. He is having a bad day. He made two pretty outrageous statements the other day. Accusing the Obama Administration letting immigrants to pour over the border to vote. Two, these five minority teenagers, the central park five, that were wrongly charged with a rape in 1989. He says they are guilty even though the evidence says they had nothing to do with it. These are almost equal outrageous statements. Joe thank you very much, alex, for bloomberg politics. Scarlet we have breaking news from mylan. It is interesting they choose to release this news on a friday. They have agreed to a settlement for its classification of the epipen. For the medicaid drug rebate program, mylan has agreed to a settlement of 465 million with the doj. It does not admit to any wrongdoing. That was fast. In terms of the movement of the stocks after trading not necessarily a lot of liquidity here, a lot of volume it is moving. Matt mylan is still down 35 year to date. Scarlet mylan has reduced its fouryear epf forecast. 4. 85 foricipating the full year. This is bloomberg. Joe this morning, i spoke to oeystein olsen. I asked him after seeing couple of events involving flash crashes recently, are they self correcting or damaging . Oeystein it is reflected in increased volatility and emerging markets in emerging markets. A tendency for markets to overreact. Of course, if i go back to e u. K. , i think given the challenges the u. K. Economy will face, may face, there may be also a weaker p ound as a result of that on a trends basis. For the world economy, if i go ack to years two years, as consequence of the market decline, the oil prices in weakened market base. If the prices remain low, that could be an equilibrium level with the crude level. Joe you are talking about the underlying conditions. We are getting close to 10 years since some might say was the beginning of the financial crisis. We still have very menial growth conditions. Are central bankers out of ideas . May be the ecb will have to come up with a new framework or the bank of japan needs to rethink its approach . Do you buy this idea that the policy measures and the general trajectory of monetary easing and central banking needs to rethink . Oeystein this is the major topic. My short answer is no. Notral bankers, banks are out of ammunition. I think central banks, especially in the major economies, they have proved they are innovative when they face new challenges. At the same time, of course, when Interest Rates have approached 04 at zero or even below zero, the maneuver in Monetary Policy is not the same as it was if it goes back five years. That is obvious. Today, there is need for other policy areas to join in the attempt to foster more growth. Im speaking about fiscal policy. Possibly where in some countries joe that was oeystein olsen. Scarlet Hurricane Matthew has now we can to a category two storm. Maximum sustained winds of 110 Miles Per Hour. With the storm 40 miles southeast of jacksonville, florida, this is good news for residents of florida and south and north carolina. Coming up, what you need to get ready for next week. This is bloomberg. Scarlet the big jobs report came out and it was a little weaker than expected. Markets kind of went eh. Joe especially in the wake of the pound crash, it seemed a bit of an afterthought. Scarlet lets look ahead at what is coming up this weekend. We have the big second debate, the town hall style between donald trump and Hillary Clinton on sunday night. Matt do not miss that. Earnings start all over again next week. Coa ont for alc on tuesday. Joe we will have a slew of fed officials, including janet yellen, on friday. Matt donny im donny. John with all due respect, if friends, megan can be why cant you . John Hurricane Matthew watch continues. The storm has stayed are not offshore of Central Florida but it is not over yet. The city of jacksonville and georgia and South Carolina are on high alert. We will track that throughout the show. Meanwhile,
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