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Speaker 1: Good morning.

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Speaker 2: I'm Nathan Hager and I'm Karen Moscow. Here are the

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Speaker 2: stories we're following today.

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Speaker 3: First, the latest developments in the Middle East. Israel continues

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Speaker 3: to push its military operations further into the southern Gaza strip,

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Speaker 3: with more strikes reported overnight. We get the latest from

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Speaker 3: Bloomberg's Oliver Krook.

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Speaker 4: Today marks the sixtieth day of war between Israel and Hamas,

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Speaker 4: and after a temporary ceasefire last week of seven days,

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Speaker 4: fighting is once again raging on the enclave. After intense

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Speaker 4: operations in northern Gaza for these last sixty days, the

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Speaker 4: Israeli military campaign is really increasing its focus on the

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Speaker 4: southern part of Gaza, and much of that around Gaza's

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Speaker 4: second biggest city, con Unis. That's a city that held

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Speaker 4: more than four hundred thousand people before the war. We

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Speaker 4: have satellite photos over the last few days that show

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Speaker 4: tanks and troops massing outside the city and under international pressure,

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Speaker 4: notably increasingly from the United States. Israel says it is

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Speaker 4: beginning to be more precise about it's so called safe

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Speaker 4: zones and where it is striking its operations.

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Speaker 3: And Bloomberg's Oliver Krook reports one hundred and thirty seven

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Speaker 3: hostage still remain in Gaza.

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Speaker 2: Well back here in the U, asked Nathan. The presidents

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Speaker 2: of Harvard, MIT, and the University of Pennsylvania are set

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Speaker 2: to testify before Congress today about combating anti Semitism on

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Speaker 2: college campuses. Bloomberg's Amy Morris reports from Washington.

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Speaker 5: The three college presidents will testify before a House committee

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Speaker 5: about stopping anti Semitism on campuses. The hearing was called

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Speaker 5: in response to protests that have sprung up on college

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Speaker 5: campuses across the country since the Hamas attack on Israel

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Speaker 5: in October. Committee chair Virginia Fox says she'll hold university

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Speaker 5: leaders accountable for anti semitism after the Hamas attack and

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Speaker 5: during the Israel Hamas War. There's no mention of any

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Speaker 5: plans to investigate Islamophobia or any other forms of hate.

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Speaker 5: The hearing begins at ten fifteen in Washington. Amy Morris Bloomberg.

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Speaker 6: Radio, Okay, Amy, thank you, saying in Washington.

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Speaker 3: Ukrainian President Vladimir Zelenski has been invited to address Senators

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Speaker 3: today as aid has gotten en snarled in a debate

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Speaker 3: over the southern US border.

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Speaker 6: Bloomberg's at Baxter has that story.

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Speaker 7: The invitation comes from Senate Majority Leader Chuck Schumer to

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Speaker 7: speak to senators at a classified briefing on security. Schumer

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Speaker 7: says senators need to hear a direct message to untangle

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Speaker 7: the circle of debate.

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Speaker 8: The hold up on the security supplemental has not been

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Speaker 8: over Ukraine or Israel or the Indo Pacific, but over

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Speaker 8: Republican decision to inject hard right immigration measures into the debate.

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Speaker 7: Zelenski will be on video now. Schumer also says he

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Speaker 7: set up a test vote on advancing a national security

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Speaker 7: supplemental package including funding for Ukraine for tomorrow ed Baxter

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Speaker 7: Bloomberg Radio, All right, ed.

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Speaker 2: Thanks, We'll be turned to the markets now. And Moody's

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Speaker 2: has cut its outlook for Chinese as sovereign bonds to negative.

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Speaker 2: That's underscoring deepening global concerns about the level of debt

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Speaker 2: in the world's second largest economy. Moody says China's usage

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Speaker 2: of fiscal stimulus to support local governments and its spiraling

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Speaker 2: property downturn opposing risks to the nation's economy.

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Speaker 3: In European markets, Karen the London Stock Exchange Group is investigating,

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Speaker 3: assists that's an issue that earlier affected trading in large

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Speaker 3: numbers of smaller stocks. This is the third outage to

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Speaker 3: strike London in a few months.

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Speaker 2: Well back here in the US, Nathan concerned mounting that

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Speaker 2: the November to Remember for stocks and bonds may have

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Speaker 2: gone too far. We get the latest from Bloomberg's John Tucker, John.

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Speaker 9: And Karen Markets. Maybe in technically overbought conditions and extreme

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Speaker 9: bullish positioning, maybe leaving traders exposed to corrections. The counseters

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Speaker 9: CIO Christopher Allman sees it this way.

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Speaker 4: I don't know if the Fed is going to ease

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Speaker 4: very quickly in twenty four.

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Speaker 10: We have to readjust to that November people got ahead

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Speaker 10: of themselves.

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Speaker 9: The S and P five hundred pound Monday from the

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Speaker 9: highest since March twenty twenty two, while the Nasdaq one

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Speaker 9: hud have dropped one percent amid of decline. At megacaps,

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Speaker 9: two year yields jump ten basis points, and traders today

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Speaker 9: we'll focus on the labor market, looking for any signs

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Speaker 9: of weakness in the job openings or jolts data. We

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Speaker 9: get that at ten am Wall Street time. I'm John Tucker,

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Speaker 9: Bloomberg Radio.

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Speaker 3: Okay, John, thanks for watching shares of Noke This morning,

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Speaker 3: they're down about seven and a half percent overseas. That's

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Speaker 3: because AT and T has chosen rival Ericsson to modernize

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Speaker 3: its US wireless network. This project could amount to almost

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Speaker 3: fourteen billion dollars over five years, and this is another

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Speaker 3: blow to Nokia. In October, the company anounced job cuts

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Speaker 3: alongside broader struggles in its five G infrastructure business.

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Speaker 2: Well, Nathan, some of the world's biggest tech companies are

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Speaker 2: collaborating on an artificial intelligence project to meta platforms and

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Speaker 2: IBM are joining more than forty companies and organizations to

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Speaker 2: create an industry group that's dedicated to open source artificial

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Speaker 2: intelligence work. The coalition called the AI Alliance. We'll focus

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Speaker 2: on the responsible development of AI technology, including safety and

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Speaker 2: security tools.

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Speaker 3: Well, well, Karen, let's get to the latest from the

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Speaker 3: COP twenty eighth summit in Dubai. Bloomberg has been speaking

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Speaker 3: to some big names at the UN Climate event, including

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Speaker 3: White House Special Climate ENVOYT John Kerry. He's calling out

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Speaker 3: big oil companies like Chevron for skipping on a commitment

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Speaker 3: to slash methane emissions.

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Speaker 10: You can't be outside of this initiative. The evidence is overwhelming.

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Speaker 10: There is no doubt about science, and that is why

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Speaker 10: I say it is inexcusable. There's no reason to be

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Speaker 10: permitting unabated efforts at this point.

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Speaker 3: Now, along with former Secretary of State Kerry, we've also

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Speaker 3: heard from Bridgewater Associates founder Ray Dalyo. He says it

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Speaker 3: is not likely the world will meet the Paris Agreements

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Speaker 3: one and a half degree celsius warming target, and addressing

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Speaker 3: climate change, he says, is going to be expensive.

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Speaker 10: It's estimated that between five and ten trillion dollars a

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Speaker 10: year is one way or another.

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Speaker 11: No matter.

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Speaker 7: If you neglect it, you'll pay the price. If you

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Speaker 7: don't neglect it, you'll have the cost either way.

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Speaker 3: And both Ray Dalyo and John Kerrey spoke at the

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Speaker 3: Bloomberg Green Forum on the sidelines of COP twenty eight

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Speaker 3: in Dubai.

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Speaker 2: And it's time now for a look at some of

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Speaker 2: the other stories making news around the world, and for

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Speaker 2: that we're joined by Bloomberg's Amy Moore is saving Good morning.

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Speaker 6: Good morning, Karen.

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Speaker 5: New York Senator Kirsten Gillibrands says a stronger anti gun

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Speaker 5: trafficking law has led to an uptick in seizures of

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Speaker 5: illegal guns. Jillibrand is releasing a report and the progress

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Speaker 5: law enforcement is made. After the bipartisan Safer Communities Act

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Speaker 5: was implemented last year, inspired by a New York City

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Speaker 5: teenager who was shot by a stray bullet back in

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Speaker 5: two thousand and nine, this gun.

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Speaker 12: Trafficking statute has been used to prosecute more than two

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Speaker 12: hundred defendants across at least twenty states. In total, law

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Speaker 12: enforcement has seized over thirteen hundred guns across the.

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Speaker 6: Country under the measure.

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Speaker 5: The federal government put seven hundred and fifty million dollars

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Speaker 5: toward mental health services to help hire more than fourteen

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Speaker 5: thousand mental health professionals across the country, including nearly four

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Speaker 5: hundred in New York alone. And we should note that

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Speaker 5: Michael Bloomberg, the founder and majority owner of Bloomberg LP,

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Speaker 5: the parent of Bloomberg Radio, is a donor to groups

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Speaker 5: that support gun control, including every Town for Gun Safety.

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Speaker 5: The race to replace expelled Congressman George sand is already underway.

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Speaker 5: Chairman of the Nassau County Republican Committee Joseph Cairo says

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Speaker 5: they're trying to avoid another Santos fiasco by closely examining

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Speaker 5: potential candidates credentials.

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Speaker 7: We'll have a much more thorough vetting process. Now we

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Speaker 7: will retain an outside firm to do a complete background check.

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Speaker 5: Both parties need to present a candidate for a special election,

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Speaker 5: with Democrats expected to announce their selection this week. Governor

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Speaker 5: Hokel could announce a special election this week and when

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Speaker 5: it happens, that election has to take place between seventy

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Speaker 5: to eighty days. A Congressional oversight hearing is set for today.

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Speaker 5: Over national park flights, now, National Park Service rules are

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Speaker 5: in effect that limit airplanes and helicopters flying over national

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Speaker 5: monuments and parks. Visitors complain about the noise from those flyovers,

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Speaker 5: but Baileywood is with the Helicopter Association International.

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Speaker 13: We believe that air tours are the least damaging to

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Speaker 13: the parks when compared to cars and foot traffic.

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Speaker 5: Some of the strictest new flight restrictions are at Mount

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Speaker 5: Rushmore and Badly National Park in South Dakota. Global News

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Speaker 5: twenty four hours a day and whenever you want it

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Speaker 5: with Bloomberg News Now.

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Speaker 6: I Amy Morrison, this is Bloomberg Karen great Amy.

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Speaker 2: Thank you what we do bring you news throughout the

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Speaker 2: day right here on Bloomberg Radio. As you heard Amy say,

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Speaker 2: but now you can get the latest news on demand

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Speaker 2: whenever you wanted to. Subscribe to Bloomberg News Now, and

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Speaker 2: you can get the latest headlines right at the click

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Speaker 2: of a button. Get informed on your schedule. You can

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Speaker 2: listen and subscribe to Bloomberg News Now on the Bloomberg

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Speaker 2: Business app, Bloomberg dot com plus Apples, Spotify, and anywhere

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Speaker 2: else you get your podcasts. Time now for the Bloomberg

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Speaker 2: Sports Update with John Stashaur, John.

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Speaker 13: Karen Mother Life Football was in Jacksonville. The Jaguars in

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Speaker 13: first place in AFC South of Bengals under five hundred

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Speaker 13: and last place in the AFC North, but Cincinnati, who

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Speaker 13: was playing without the injured Joe Burrows, still one in

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Speaker 13: overtime thirty four to thirty one. Burroughs replaced Jake Browning

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Speaker 13: thirty two of thirty seven three hundred and fifty four yards,

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Speaker 13: including the seventy six yard touchdown pass to Jamar Chase.

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Speaker 13: The Bengals won on a field goal with one forty

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Speaker 13: five to go in ot The Jacksonville quarterback Trevor Lawrence

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Speaker 13: left the game late fourth quarter with a springed ankle

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Speaker 13: and a couple of other injured quarterbacks. Pittsburgh's Kenny Pickett

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Speaker 13: needing ankle surgery. He's going to miss two to four weeks,

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Speaker 13: so the Steelers will turn to Mitchell Trubisky beginning with

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Speaker 13: their game Thursday at home against New England. In New Orleans,

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Speaker 13: Derek Carr in concussion protocol for the second time in

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Speaker 13: a month. Tennessee running back Derek Henry was feared to

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Speaker 13: have suffered a concussion last Sunday.

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Speaker 14: That turned out to be not the case.

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Speaker 13: Linebacker Shack Leonard, a three time Pro Bowler who was

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Speaker 13: surprisingly released by Indianapolis, signing with Philadelphia. He chose the

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Speaker 13: Eagles over the Cowboys. Those two teams play a big

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Speaker 13: Sunday night football game this week.

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Speaker 7: That's for first place.

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Speaker 13: They played in the quarterfinals the NBA's in season tournament.

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Speaker 13: Pacers beat the Celtics one twenty two to one twelve

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Speaker 13: tybees Halibert in twenty six points his first career triple double,

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Speaker 13: and the Pelicans won in Sacramento one twenty seven to

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Speaker 13: one seventeen.

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Speaker 6: So Indiana and.

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Speaker 13: New Orleans heading to Las Vegas for the semifinals Thursday,

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Speaker 13: two more games tonight, the Nicks in Milwaukee Phoenix playing

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Speaker 13: the Lakers.

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Speaker 6: Johns Dashawer Bloomberg Sports.

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Speaker 11: From coast to coast, from New York to San Francisco,

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Speaker 11: Boston to Washington, DC, nationwide on Syria's Exam, the Bloomberg

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Speaker 11: Business app in Bloomberg dot Com.

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Speaker 6: This is Bloomberg Daybreak. Good morning, I'm Nathan Hager.

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Speaker 3: After a November to remember for stocks and just about

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Speaker 3: every investment asset rally, December has gotten off to a

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Speaker 3: bit of a rough start for long traders, dialing back

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Speaker 3: some of their bets that the Federal Reserve will cut

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Speaker 3: rates as aggressively as they might have thought just a

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Speaker 3: few weeks ago. Really, I've seen some weakness in the

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Speaker 3: latest economic data, but Fedchairman Jerome Powell is keeping up

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Speaker 3: his message that the Central Bank needs to move carefully

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Speaker 3: on policy into next year. So let's talk more about

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Speaker 3: this economy and the policy path from here on out.

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Speaker 3: We are very pleased to be joined this morning by

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Speaker 3: Mohammad al Arian, the chief economic advisor at Alliance, the

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Speaker 3: president of Queen's College, Cambridge, and of course columnist for

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Speaker 3: Bloomberg Opinion. Muhammad, thank you so much for taking the

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Speaker 3: time this morning. I want to start by asking what

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Speaker 3: you made of the exuberance we saw over rate cuts

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Speaker 3: last month.

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Speaker 6: Was it overdone?

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Speaker 14: First? Good morning, Nathan, Thanks for having me. Yes, I

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Speaker 14: believe it was overdone. I do believe that the Fed

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Speaker 14: is done raising weights, but I don't think they will

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Speaker 14: validate what's currently christ in by the markets in terms

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Speaker 14: of weightcuts next year.

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Speaker 3: Now we have this debate going about how long the

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Speaker 3: Fed will keep rates elevated, whether it's higher for longer,

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Speaker 3: high for longer. I mean the market is pricing in

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Speaker 3: one hundred and twenty five basis points of rate cuts

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Speaker 3: next year. Does the Fed have room for that kind

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Speaker 3: of easing?

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Speaker 11: Yet?

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Speaker 14: There's a few things that we have to keep in mind.

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Speaker 14: One is inflation dynamic. While we've had goods deflation, services

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Speaker 14: remain rather hot in terms of the inflation rate, they're

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Speaker 14: not disinflating fast enough, and at some point the goods

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Speaker 14: deflation will stop. So getting to two percent inflation is

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Speaker 14: the inflation target is far from automatic. Second, and we'll

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Speaker 14: get more evidence this week, the labor market is still

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Speaker 14: doing really well, and I suspect that the FED would

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Speaker 14: like to see some weakening in the labor market. Thirdly,

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Speaker 14: the markets have already loosened financial conditions significantly, you know, Nathan,

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Speaker 14: November going to the Goman SAX index of financial conditions

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Speaker 14: was the biggest loosening of conditions in any month since records,

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Speaker 14: So there's been a tremendous loosening of financial conditions. I

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Speaker 14: think if you look at these three things, they suggest

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Speaker 14: the Fed will be more careful in cutting weights than

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Speaker 14: what the markets expect right now.

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Speaker 3: Well, let's take those three things in turn. Then, starting

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Speaker 3: with the stickiness of services inflation, why do you see

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Speaker 3: it sticking around as much as it has? Can policy

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Speaker 3: make an impact on the elevated services price pressures that

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Speaker 3: we're seeing in this economy.

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Speaker 14: Nathan, That's a key question, and a very good one.

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Speaker 14: The problem with falling behind on inflation, which is what

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Speaker 14: has what happened to the FED, is that you allow

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Speaker 14: the inflation process to go from a few items in

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Speaker 14: this case it was energy and food to the good

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Speaker 14: sector as a whole, and then next thing you know,

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Speaker 14: it starts getting embedded in the service sector. Now, why

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Speaker 14: is that a problem. Because the service sector is less

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Speaker 14: sensitive to interest rate hikes, So the minute it gets

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Speaker 14: embedded in the service sector, it's harder for the central

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Speaker 14: bank to get to that inflation, and that's why the

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Speaker 14: stickiness of the service component of inflation is something to

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Speaker 14: keep on the weight O skein. Hopefully it's not going

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Speaker 14: to last for a very long time, but don't forget

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Speaker 14: the outright deflation and good is going to stop. So

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Speaker 14: we do need the service sector to disinflate further.

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Speaker 3: And that gets to the question about whether cracks in

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Speaker 3: the labor market are what it's going to take to

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Speaker 3: get inflation down to the target that the Fed has

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Speaker 3: set out two percent because services are so tied to

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Speaker 3: the labor market. What is your expectation about the data

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Speaker 3: that we're going to see on the jobs market this week,

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Speaker 3: particularly the JOLTS data today and the all important Friday

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Speaker 3: jobs report.

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Speaker 14: So it's interesting that for the JOLTS data today, Blommerk

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Speaker 14: Economics expects only a marginal decline and Roomerk Economics expects

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Speaker 14: that the ratio of the unemployed to job vacancies will

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Speaker 14: stay above the historical averages. So to put it into context,

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Speaker 14: Rulemak Economics expects that way should to go from one

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Speaker 14: point five to one point four to four, and that's

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Speaker 14: still above the average. Nathan, your question really comes down

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Speaker 14: to something that the FED doesn't want to talk about,

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Speaker 14: but increasingly others are talking about, which is two percent

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Speaker 14: the right inflation target. If our labor market is slightly

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Speaker 14: less flexible than what it used to be before, if

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Speaker 14: the supply side as a whole is less flexible around

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Speaker 14: the world, which it is, should we continue to insist

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Speaker 14: on a two percent infation target or should the FED

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Speaker 14: be willing to tolerate somewhere above that. Why would the

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Speaker 14: FED want to tolerate somewhere above that? Not because it

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Speaker 14: wants to create inflation expectations that won't happen, but instead

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Speaker 14: because it doesn't want to unduly sacrifice the job market,

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Speaker 14: unduly sacrifice growth, and unduly sacrifice aspects of our key

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Speaker 14: to the equality of income and wealth. So that's going

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Speaker 14: to ultimately be the big question is does the FED

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Speaker 14: insist on staying at two percent and therefore with really

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Speaker 14: weakening the labor market, or is it willing to tolerate

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Speaker 14: slightly higher inflation because that's the reality of today's supply

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Speaker 14: constrain global economy.

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Speaker 3: We're speaking with Muhammad al Aarian Bloomberg opinion columnist and

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Speaker 3: the chief economic advisor at Alliance. That is a big question, Muhammad,

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Speaker 3: because this FED has really hammered home the target of

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Speaker 3: two percent. They've really been laser focused on that. Do

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Speaker 3: you see room from some of the commentary that we're

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Speaker 3: hearing from this Federal Reserve that it could be open

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Speaker 3: to a higher inflation target?

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Speaker 6: And what would that mean for the US economy?

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Speaker 14: So I don't think we'll ever hear this FED say

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Speaker 14: we are revising our inflation target from two to say

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Speaker 14: three percent. That's not going to happen. They're not going

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Speaker 14: to explicitly revise up the inflation target because they've missed

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Speaker 14: it for so long and by so much that they

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Speaker 14: will feel that that will undermine the credibility. What they

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Speaker 14: may do is continue to promise us two percent in

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Speaker 14: the future, but tolerate I don't get to two percent

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Speaker 14: very quickly. Now, what does that mean for the economy?

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Speaker 14: I think ultimately the choice facing the FEED is the

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Speaker 14: following Nason. Either they stick to two percent and with

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Speaker 14: tipping the economy into recession, or they tolerate slightly high inflation.

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Speaker 14: They don't push the economy into recession and they find

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Speaker 14: out that that is stable, that it doesn't un anchor

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Speaker 14: inflation or expectations. My hope is that they will opt

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Speaker 14: for the second option, but we will have to wait

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Speaker 14: and see.

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Speaker 3: Well what could that mean though for market volatility? I mean,

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Speaker 3: we've seen a lot of questioning in this market about

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Speaker 3: whether the FED is serious about the message that it's

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Speaker 3: putting out there. If we do see the sort of

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Speaker 3: rhetorical focus on a two percent target but maybe not

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Speaker 3: a realistic two percent target, what could that mean for

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Speaker 3: market volatility?

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Speaker 14: So, first, the sources of volatility we've seen in the

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Speaker 14: fixed income market was unthinkable not so long ago. Everyday

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Speaker 14: seven to ten basis points move is often on very little,

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Speaker 14: So that's something else going on in the fix income market.

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Speaker 14: What is more worrisome is the issue you raised, which

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Speaker 14: is that the FED says things and the market totally

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Speaker 14: ignored it. Last Friday was a perfect example of that.

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Speaker 14: Chappout was very clear. He said it would be premature

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Speaker 14: to talk about any interest rate cuts and he left

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Speaker 14: the door open for interest rate hikes, and yet a

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Speaker 14: market that had already rallied by four basis points in

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Speaker 14: the front end on the second year. The second year,

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Speaker 14: the two year, yield had come down by forty basis points,

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Speaker 14: rallied another ten basis points, and that, you know, started

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Speaker 14: a whole conversation yesterday about whether Pole was steamrolled by

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Speaker 14: the market, whether FED pal was stiff armed by the market.

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Speaker 14: The fact is that FED communication is not as impactful

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Speaker 14: as it used to.

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Speaker 3: Be, which gets to a question I've been wanting to

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Speaker 3: ask you all morning long. Yeah, I mean, you've been

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Speaker 3: very critical of FED messaging FED policy in the past.

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Speaker 3: You've said that the FED waited too long to tackle inflation.

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Speaker 3: How would you grade the Fed's performance now?

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Speaker 14: So, I think they've played major ketchup, which they needed

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Speaker 14: to do. So if you look at analysis and action

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Speaker 14: where they had failed earlier, they have corrected that. They've

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Speaker 14: also paid much more attention to the supervisory role, so

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Speaker 14: that is good. Communications remains poor, and again we have

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Speaker 14: examples of that over the last few weeks. So they

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Speaker 14: still have a significant communication problem, and they still have

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Speaker 14: a credibility problem. You know, the whole point of forward

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Speaker 14: guidance is for the markets to listen to you and

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Speaker 14: for the markets to do the heavy lifting for you.

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Speaker 14: What we're seeing now is forward guidance. As we saw

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Speaker 14: last Friday is being completely ignored by the market, And

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Speaker 14: it is really interesting to me, Nathan, that the market

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Speaker 14: is taking on the Fed on variable that the FED

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Speaker 14: controls completely. I mean, think about that Fed. The market

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Speaker 14: is basically telling the Fed, I don't care what you

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Speaker 14: think about an indust rate that you set. I think

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Speaker 14: you're going to do something completely different. And that's quite

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Speaker 14: a statement from the market to the FED.

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Speaker 3: So in our last minute, Muhammad, what would it take

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Speaker 3: for the market and for you to get that credibility

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Speaker 3: back from the Federal Reserve?

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Speaker 6: What does the FED need to do to regain its

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Speaker 6: credibility in your view?

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Speaker 14: So first time, it just say that in terms of

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Speaker 14: the outlook for twenty twenty four, I think the market

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Speaker 14: should be listening more to the FED. That's why I

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Speaker 14: don't think the Fed is going to end up validating

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Speaker 14: what the market is pricing in for cuts. In terms

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Speaker 14: of what it takes, takes a couple of things. One

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Speaker 14: is something that different recent G thirty report on central

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Speaker 14: bank stresses is for central banks to be more humble,

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Speaker 14: to recognize that we live in a different world and

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Speaker 14: they've got to have a much border mindset and much

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Speaker 14: greater cognitive diversity, and the second thing will take is

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Speaker 14: better accountability. The FED is not as accountable as it

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Speaker 14: should be, and therefore, even when it makes mistakes, repeated mistakes,

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Speaker 14: and they've made five different mistakes in the last few years,

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Speaker 14: even when it makes repeated mistakes, it doesn't own those mistakes,

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Speaker 14: and therefore it raises doubt among lots of people as

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Speaker 14: to what it's learning from those mistakes. So the two

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Speaker 14: things that really would take is being more open minded,

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Speaker 14: having greater concenter diversity, and secondly, better accountability.

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