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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot com, the Radio plus Mobile Act and on your radio.

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Speaker 1: This is a Bloomberg Business Flash and I'm Karen Moscow.

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Speaker 1: This updates brought to you by National Realty Providers of

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Speaker 1: Satisfaction guaranteed New York City real Realty investments. See them

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Speaker 1: at n r i A dot net US dot US

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Speaker 1: stocks are higher for the first time since Britain voted

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Speaker 1: to leave the EU, as banks letter rebound amid optimism

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Speaker 1: that policymakers are committed to limit the fallout from the

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Speaker 1: UK's exit. We check the markets every fifteen minutes throughout

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Speaker 1: the trading day on Bloomberg and the SNP five hundred

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Speaker 1: is of one point one percent, up twenty two points

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Speaker 1: to three Dow Jones Industrial average of one point one

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Speaker 1: percent or one eighty nine points to seventeen thousand, three

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Speaker 1: hundred thirty. Then ashtacs of one and a half percent

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Speaker 1: or sixty nine points to forty six sixty four Can

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Speaker 1: your treasury down nine thirty seconds the yield one point

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Speaker 1: for six percent yield on the two year point six

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Speaker 1: two per cent nim X screwd oisle of three three

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Speaker 1: percent of a dollar forty one to forty seven seventy

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Speaker 1: five a barrel, comex school down four tenths per cent

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Speaker 1: or five dollar sixty cents to thirteen twenty. Announced the

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Speaker 1: Euro at allar ten sixty two, the En one out

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Speaker 1: two point five one and and right now the world's

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Speaker 1: largest economy expanding more than previously projected in the first quarter,

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Speaker 1: as improved performance in trade and business investment more than

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Speaker 1: made up for a weaker consumers spending. Gross domestic product,

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Speaker 1: the value of all goods and services produced, rose at

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Speaker 1: a one point one percent annualized rate, compared with the

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Speaker 1: previously estimated gain of eight tens per cent. Corporate profits

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Speaker 1: at the start of the year were also revised up,

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Speaker 1: giving a brighter picture to gross domestic income and home

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Speaker 1: prices in twenty US cities rising five point four percent

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Speaker 1: in April from a year earlier. Assigned demand for residential

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Speaker 1: real estate remains solid enough to support both buyers and sellers.

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Speaker 1: That's a Bloomberg business flash. Tom and Mike Karen Moscow,

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Speaker 1: thank you very much well. The economy they have grown

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Speaker 1: faster in the first quarter and initially reported, but that

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Speaker 1: doesn't bring the FED any closer to raising interest rates.

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Speaker 1: They're concerns about the overall growth rate, the unemployment rate,

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Speaker 1: the rate of labor market take up, and of course

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Speaker 1: Brexit have the FED on hold for longer according to

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Speaker 1: the markets and according to economic researchers like Michael Faroli,

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Speaker 1: the chief US kind of for JP Morgan, they have

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Speaker 1: pushed back their FED call from September to December, and uh,

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Speaker 1: Michael Farli is here now to explain to us why. Uh.

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Speaker 1: The question I have, Michael is is is do you

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Speaker 1: have enough confidence in that forecast that they won't do

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Speaker 1: anything until December to survive a very large upward revision

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Speaker 1: to the May payrolls report week from Friday and and

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Speaker 1: a rebound in in hiring should that happen. Yeah, Mike,

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Speaker 1: I think they're either they're they're two side of risks.

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Speaker 1: I believe to a December rate high call, we could

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Speaker 1: obviously see payrolls rebound in June or revised higher in May,

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Speaker 1: and you could be at the September meeting looking at,

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Speaker 1: you know, looking back at three very strong jobs reports,

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Speaker 1: in which case, uh, you know, handwringing about Brexit. Maybe

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Speaker 1: a tough sell to the rest of the committee. On

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Speaker 1: the other hand, there's the real risk that that the

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Speaker 1: type of global uncertainties we're seeing could make businesses more cautious,

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Speaker 1: and that that the May Jobs report is, you know,

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Speaker 1: a signal things to comme So I think I think

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Speaker 1: at this point you can't really exclude either possibility. We're

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Speaker 1: thinking that the most likely is that payrolls do firm

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Speaker 1: some but perhaps not enough to kind of ease Yelling's

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Speaker 1: proven sort of risk management when it comes to global

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Speaker 1: downside risk, and that they would want to wait a

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Speaker 1: little longer before the train. Do you ever get frustrated

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Speaker 1: down there at ap Morgan when when people say you

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Speaker 1: have got to put out a FED forecast? Do you

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Speaker 1: ever want to just say I'm data dependent? Well, uh,

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Speaker 1: you know, I think, uh, having a modal view makes

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Speaker 1: some sense to uh, for ease of ease of communication.

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Speaker 1: But yeah, that's true that you know these things are dependent.

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Speaker 1: But as you do, Michael, you go right to the

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Speaker 1: heart of the matter, which is a modal view, and

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Speaker 1: econ one on one or macro one on one is

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Speaker 1: a sort of a probability distribution around a single point,

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Speaker 1: which is a hope and a prayer. Are we done

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Speaker 1: with those days? I mean are we in a bimodal

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Speaker 1: or trimodal world where we're dealing with nation to nation

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Speaker 1: as Bruce Casiman and you do, Uh, we're dealing with

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Speaker 1: two America's to frances to Italy's. Plus the geopolitics is

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Speaker 1: John Norman says, Brexit, frexit, nexit and the rest of it.

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Speaker 1: M hm, Well, I mean, unfortunately our a discreete number

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Speaker 1: of FLMC meetings, so they should have positive probability on

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Speaker 1: on on each but uh, you know, the global situation

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Speaker 1: really has we know, over the past two years, been

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Speaker 1: a big determine at a set policy, in particular how

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Speaker 1: it's played out with the dollar. We're somewhat comforted to

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Speaker 1: see that over the past few days the dollar hasn't

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Speaker 1: broad trade wayed dollar, I should emphasize, hasn't moved all

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Speaker 1: that agree. Why is that? Um? Well, I guess you

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Speaker 1: know that seems to be um mostly viewed as a

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Speaker 1: UK situation. Yeah, so that's uh, as I said, that's encouraging,

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Speaker 1: and that's one of the reasons we still think a

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Speaker 1: hike in sixteen is Mike can I, Michael McKee and

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Speaker 1: Michael Faroli. Can I ask the two of you, is

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Speaker 1: w I r P addicted. They go home, folks and

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Speaker 1: look at the Bloomberg function. Probability of rate cut is

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Speaker 1: twenty two point seven. Whatever. When does the probability number matter?

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Speaker 1: How high does it have to get to where it

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Speaker 1: gets Michael McKee or Michael fer all these attention. Michael McKee.

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Speaker 1: One is the tip points? Um, I guess I would say,

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Speaker 1: depending on which measure you use, and I prefer the

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Speaker 1: Overnight Index swaps to the FED funds UH measure, But

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Speaker 1: it depends also on how close you are to FED meeting.

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Speaker 1: At this point, you know, it doesn't really matter to

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Speaker 1: me what it's saying because we haven't gotten to the

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Speaker 1: jobs report yet. We haven't gotten any data that we're

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Speaker 1: going to change anybody's mind. I don't know if you

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Speaker 1: agree mine. Yeah, I mean, I don't think the market

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Speaker 1: can force the Fed into a cut here, and I

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Speaker 1: think it's going to depend on on the data. This

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Speaker 1: is not a type of credit crisis that would get

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Speaker 1: the Fed acting proactively, and they're going to be responded

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Speaker 1: here if economic to that. I'm trying to get to hear,

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Speaker 1: Michael Feroli. The idea that the media loves to climb

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Speaker 1: on the Bloomberg function w I r P for noise

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Speaker 1: that's beneath the probabilistic outcome sixteen percent for oh I

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Speaker 1: asked for FED funds. That's like ground noise right now,

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Speaker 1: isn't it. Yeah? I mean I think I don't think

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Speaker 1: it's crazy for the market to price in some probability

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Speaker 1: here of of a cut in the future. Um, but

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Speaker 1: I wouldn't. I wouldn't you know, run away with that

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Speaker 1: and fret too much into it. What's your view of

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Speaker 1: this is a question we've been discussing all through the

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Speaker 1: day on the possibility of inflation getting away from the Fed,

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Speaker 1: possibility that Alan Greenspan raised with us on surveillance yesterday.

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Speaker 1: I could see that in seventeen or eighteen. I think

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Speaker 1: for this year, UM, I have a hard time seeing that,

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Speaker 1: in part because, uh, you know, developments as they relate

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Speaker 1: to wage inflation are pretty slow moving. Um. The dollar,

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Speaker 1: while it has stabilized, hasn't you know, moved a whole

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Speaker 1: lot lower in a way that would gets you imported

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Speaker 1: price inflation. So uh, I think if you look out

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Speaker 1: a couple of years, it's not hard to see that,

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Speaker 1: particularly if the unemployment rate continues to decline like it has,

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Speaker 1: but I wouldn't I wouldn't want to get too panicked

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Speaker 1: about that in terms of the next few months or quarters. Mica, Fairli.

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Speaker 1: How is consumption in America? It looks looks pretty good. Uh,

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Speaker 1: we did see it revised down in the first quarter,

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Speaker 1: but the second quarter we're tracking close to four percent

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Speaker 1: annualized real consumer spending growth, which is obviously very solid numbers.

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Speaker 1: So UM, that's not what we're worried about. Everything that

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Speaker 1: relates to the household sector looks pretty good, whether it's

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Speaker 1: um uh, labor income growth, it's starting to pick up, sentiment,

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Speaker 1: consumer spending, UM, the housing market, all those things look fine.

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Speaker 1: I think it's the business factor that right now we're

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Speaker 1: a little more concerned about. And is that maybe one

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Speaker 1: of the bigger dangers here from the whole Brexit issue

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Speaker 1: idea that uncertainty continues and it's easier for CEOs to

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Speaker 1: do nothing than to to make a decision. Yeah, yeah,

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Speaker 1: that that that is the concern I think on our

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Speaker 1: certainly on our part um. As you know, there has

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Speaker 1: been kind of this fluorescence of research in the last

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Speaker 1: few years on economic policy uncertainty and how it affects

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Speaker 1: um economic behavior, particularly particularly things like capital spending. I

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Speaker 1: think kind of the jury is still out on the effects,

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Speaker 1: jury is out on how to measure it properly, but

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Speaker 1: certainly um it's being floated around. I think things like

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Speaker 1: the fiscal you know, fiscal Cliff has kind of brought

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Speaker 1: to life at research and you know, I think this

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Speaker 1: next few months will be an interesting test for that. Mcafroli,

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Speaker 1: thank you so much. Congratulations, particularly on the Friday publication,

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Speaker 1: the Robert Melman Weekly Prospects piece from the team at

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Speaker 1: JP Morgan. Again, folks who protect the copyright of all

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Speaker 1: of our guests, we're not going to send you Kasmin

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Speaker 1: Faroli Melman, please contact JP Morgan. The dawop tune and

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Speaker 1: eight points Mike, the vis comes in as expected under

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Speaker 1: point seven two. And maybe that goes to the heart

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Speaker 1: of what Faroli was saying, which is that some of

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Speaker 1: the dynamics here appear very discreet to the United Kingdom.

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Speaker 1: You really don't see the strong dollar that you'd see

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Speaker 1: off sterling carnage. Yeah, it's uh, it's settled down for

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Speaker 1: a day, but we shall see. Well, what was the

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Speaker 1: Lehman thing you stated earlier? State that again, well, I

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Speaker 1: said you chart on that. You look at um what

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Speaker 1: happened with Lehman Brothers. Two days after the bankruptcy, stock

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Speaker 1: was back to its pre bankruptcy not just the not

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Speaker 1: their stock, but the the SMP was back to their

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Speaker 1: pre bankruptcy um higher than pre bankruptcy closed and then

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Speaker 1: it started to go down. So you don't know if

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Speaker 1: this is a dead cat bounce or not. We will

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Speaker 1: see tomorrow. That's the theme of our show tomorrow, Across

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Speaker 1: five hours dead It's a strut Michael McKee and Time

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Speaker 1: Keene saying thank you for listening. We are produced by

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Speaker 1: y U N. This is Bloomberg's surveillance