Good morning.
I'm Nathan Hager and I'm Karen Moscow. Here are the stories we're following today.
First, the latest developments in the Middle East. Israel continues to push its military operations further into the southern Gaza strip, with more strikes reported overnight. We get the latest from Bloomberg's Oliver Krook.
Today marks the sixtieth day of war between Israel and Hamas, and after a temporary ceasefire last week of seven days, fighting is once again raging on the enclave. After intense operations in northern Gaza for these last sixty days, the Israeli military campaign is really increasing its focus on the southern part of Gaza, and much of that around Gaza's second biggest city, con Unis. That's a city that held
more than four hundred thousand people before the war. We have satellite photos over the last few days that show tanks and troops massing outside the city and under international pressure, notably increasingly from the United States. Israel says it is beginning to be more precise about it's so called safe zones and where it is striking its operations.
And Bloomberg's Oliver Krook reports one hundred and thirty seven hostage still remain in Gaza.
Well back here in the U, asked Nathan. The presidents of Harvard, MIT, and the University of Pennsylvania are set to testify before Congress today about combating anti Semitism on college campuses. Bloomberg's Amy Morris reports from Washington.
The three college presidents will testify before a House committee about stopping anti Semitism on campuses. The hearing was called in response to protests that have sprung up on college campuses across the country since the Hamas attack on Israel in October. Committee chair Virginia Fox says she'll hold university leaders accountable for anti semitism after the Hamas attack and during the Israel Hamas War. There's no mention of any plans to investigate Islamophobia or any other forms of hate.
The hearing begins at ten fifteen in Washington. Amy Morris Bloomberg.
Radio, Okay, Amy, thank you, saying in Washington.
Ukrainian President Vladimir Zelenski has been invited to address Senators today as aid has gotten en snarled in a debate over the southern US border.
Bloomberg's at Baxter has that story.
The invitation comes from Senate Majority Leader Chuck Schumer to speak to senators at a classified briefing on security. Schumer says senators need to hear a direct message to untangle the circle of debate.
The hold up on the security supplemental has not been over Ukraine or Israel or the Indo Pacific, but over Republican decision to inject hard right immigration measures into the debate.
Zelenski will be on video now. Schumer also says he set up a test vote on advancing a national security supplemental package including funding for Ukraine for tomorrow ed Baxter Bloomberg Radio, All right, ed.
Thanks, We'll be turned to the markets now. And Moody's has cut its outlook for Chinese as sovereign bonds to negative. That's underscoring deepening global concerns about the level of debt in the world's second largest economy. Moody says China's usage of fiscal stimulus to support local governments and its spiraling property downturn opposing risks to the nation's economy.
In European markets, Karen the London Stock Exchange Group is investigating, assists that's an issue that earlier affected trading in large numbers of smaller stocks. This is the third outage to strike London in a few months.
Well back here in the US, Nathan concerned mounting that the November to Remember for stocks and bonds may have gone too far. We get the latest from Bloomberg's John Tucker, John.
And Karen Markets. Maybe in technically overbought conditions and extreme bullish positioning, maybe leaving traders exposed to corrections. The counseters CIO Christopher Allman sees it this way.
I don't know if the Fed is going to ease very quickly in twenty four.
We have to readjust to that November people got ahead of themselves.
The S and P five hundred pound Monday from the highest since March twenty twenty two, while the Nasdaq one hud have dropped one percent amid of decline. At megacaps, two year yields jump ten basis points, and traders today we'll focus on the labor market, looking for any signs of weakness in the job openings or jolts data. We get that at ten am Wall Street time. I'm John Tucker, Bloomberg Radio.
Okay, John, thanks for watching shares of Noke This morning, they're down about seven and a half percent overseas. That's because AT and T has chosen rival Ericsson to modernize its US wireless network. This project could amount to almost fourteen billion dollars over five years, and this is another blow to Nokia. In October, the company anounced job cuts alongside broader struggles in its five G infrastructure business.
Well, Nathan, some of the world's biggest tech companies are collaborating on an artificial intelligence project to meta platforms and IBM are joining more than forty companies and organizations to create an industry group that's dedicated to open source artificial intelligence work. The coalition called the AI Alliance. We'll focus on the responsible development of AI technology, including safety and security tools.
Well, well, Karen, let's get to the latest from the COP twenty eighth summit in Dubai. Bloomberg has been speaking to some big names at the UN Climate event, including White House Special Climate ENVOYT John Kerry. He's calling out big oil companies like Chevron for skipping on a commitment to slash methane emissions.
You can't be outside of this initiative. The evidence is overwhelming. There is no doubt about science, and that is why I say it is inexcusable. There's no reason to be permitting unabated efforts at this point.
Now, along with former Secretary of State Kerry, we've also heard from Bridgewater Associates founder Ray Dalyo. He says it is not likely the world will meet the Paris Agreements one and a half degree celsius warming target, and addressing climate change, he says, is going to be expensive.
It's estimated that between five and ten trillion dollars a year is one way or another.
No matter.
If you neglect it, you'll pay the price. If you don't neglect it, you'll have the cost either way.
And both Ray Dalyo and John Kerrey spoke at the Bloomberg Green Forum on the sidelines of COP twenty eight in Dubai.
And it's time now for a look at some of the other stories making news around the world, and for that we're joined by Bloomberg's Amy Moore is saving Good morning.
Good morning, Karen.
New York Senator Kirsten Gillibrands says a stronger anti gun trafficking law has led to an uptick in seizures of illegal guns. Jillibrand is releasing a report and the progress law enforcement is made. After the bipartisan Safer Communities Act was implemented last year, inspired by a New York City teenager who was shot by a stray bullet back in two thousand and nine, this gun.
Trafficking statute has been used to prosecute more than two hundred defendants across at least twenty states. In total, law enforcement has seized over thirteen hundred guns across the.
Country under the measure.
The federal government put seven hundred and fifty million dollars toward mental health services to help hire more than fourteen thousand mental health professionals across the country, including nearly four hundred in New York alone. And we should note that Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent of Bloomberg Radio, is a donor to groups that support gun control, including every Town for Gun Safety.
The race to replace expelled Congressman George sand is already underway. Chairman of the Nassau County Republican Committee Joseph Cairo says they're trying to avoid another Santos fiasco by closely examining potential candidates credentials.
We'll have a much more thorough vetting process. Now we will retain an outside firm to do a complete background check.
Both parties need to present a candidate for a special election, with Democrats expected to announce their selection this week. Governor Hokel could announce a special election this week and when it happens, that election has to take place between seventy to eighty days. A Congressional oversight hearing is set for today. Over national park flights, now, National Park Service rules are in effect that limit airplanes and helicopters flying over national
monuments and parks. Visitors complain about the noise from those flyovers, but Baileywood is with the Helicopter Association International.
We believe that air tours are the least damaging to the parks when compared to cars and foot traffic.
Some of the strictest new flight restrictions are at Mount Rushmore and Badly National Park in South Dakota. Global News twenty four hours a day and whenever you want it with Bloomberg News Now.
I Amy Morrison, this is Bloomberg Karen great Amy.
Thank you what we do bring you news throughout the day right here on Bloomberg Radio. As you heard Amy say, but now you can get the latest news on demand whenever you wanted to. Subscribe to Bloomberg News Now, and you can get the latest headlines right at the click of a button. Get informed on your schedule. You can listen and subscribe to Bloomberg News Now on the Bloomberg Business app, Bloomberg dot com plus Apples, Spotify, and anywhere
else you get your podcasts. Time now for the Bloomberg Sports Update with John Stashaur, John.
Karen Mother Life Football was in Jacksonville. The Jaguars in first place in AFC South of Bengals under five hundred and last place in the AFC North, but Cincinnati, who was playing without the injured Joe Burrows, still one in overtime thirty four to thirty one. Burroughs replaced Jake Browning thirty two of thirty seven three hundred and fifty four yards, including the seventy six yard touchdown pass to Jamar Chase.
The Bengals won on a field goal with one forty five to go in ot The Jacksonville quarterback Trevor Lawrence left the game late fourth quarter with a springed ankle and a couple of other injured quarterbacks. Pittsburgh's Kenny Pickett needing ankle surgery. He's going to miss two to four weeks, so the Steelers will turn to Mitchell Trubisky beginning with their game Thursday at home against New England. In New Orleans, Derek Carr in concussion protocol for the second time in
a month. Tennessee running back Derek Henry was feared to have suffered a concussion last Sunday.
That turned out to be not the case.
Linebacker Shack Leonard, a three time Pro Bowler who was surprisingly released by Indianapolis, signing with Philadelphia. He chose the Eagles over the Cowboys. Those two teams play a big Sunday night football game this week.
That's for first place.
They played in the quarterfinals the NBA's in season tournament. Pacers beat the Celtics one twenty two to one twelve tybees Halibert in twenty six points his first career triple double, and the Pelicans won in Sacramento one twenty seven to one seventeen.
So Indiana and.
New Orleans heading to Las Vegas for the semifinals Thursday, two more games tonight, the Nicks in Milwaukee Phoenix playing the Lakers.
Johns Dashawer Bloomberg Sports.
From coast to coast, from New York to San Francisco, Boston to Washington, DC, nationwide on Syria's Exam, the Bloomberg Business app in Bloomberg dot Com.
This is Bloomberg Daybreak. Good morning, I'm Nathan Hager.
After a November to remember for stocks and just about every investment asset rally, December has gotten off to a bit of a rough start for long traders, dialing back some of their bets that the Federal Reserve will cut rates as aggressively as they might have thought just a few weeks ago. Really, I've seen some weakness in the latest economic data, but Fedchairman Jerome Powell is keeping up his message that the Central Bank needs to move carefully
on policy into next year. So let's talk more about this economy and the policy path from here on out. We are very pleased to be joined this morning by Mohammad al Arian, the chief economic advisor at Alliance, the president of Queen's College, Cambridge, and of course columnist for Bloomberg Opinion. Muhammad, thank you so much for taking the time this morning. I want to start by asking what you made of the exuberance we saw over rate cuts last month.
Was it overdone?
First? Good morning, Nathan, Thanks for having me. Yes, I believe it was overdone. I do believe that the Fed is done raising weights, but I don't think they will validate what's currently christ in by the markets in terms of weightcuts next year.
Now we have this debate going about how long the Fed will keep rates elevated, whether it's higher for longer, high for longer. I mean the market is pricing in one hundred and twenty five basis points of rate cuts next year. Does the Fed have room for that kind of easing?
Yet?
There's a few things that we have to keep in mind. One is inflation dynamic. While we've had goods deflation, services remain rather hot in terms of the inflation rate, they're not disinflating fast enough, and at some point the goods deflation will stop. So getting to two percent inflation is the inflation target is far from automatic. Second, and we'll get more evidence this week, the labor market is still doing really well, and I suspect that the FED would
like to see some weakening in the labor market. Thirdly, the markets have already loosened financial conditions significantly, you know, Nathan, November going to the Goman SAX index of financial conditions was the biggest loosening of conditions in any month since records, So there's been a tremendous loosening of financial conditions. I think if you look at these three things, they suggest the Fed will be more careful in cutting weights than what the markets expect right now.
Well, let's take those three things in turn. Then, starting with the stickiness of services inflation, why do you see it sticking around as much as it has? Can policy make an impact on the elevated services price pressures that we're seeing in this economy.
Nathan, That's a key question, and a very good one. The problem with falling behind on inflation, which is what has what happened to the FED, is that you allow the inflation process to go from a few items in this case it was energy and food to the good sector as a whole, and then next thing you know, it starts getting embedded in the service sector. Now, why
is that a problem. Because the service sector is less sensitive to interest rate hikes, So the minute it gets embedded in the service sector, it's harder for the central bank to get to that inflation, and that's why the stickiness of the service component of inflation is something to keep on the weight O skein. Hopefully it's not going to last for a very long time, but don't forget the outright deflation and good is going to stop. So we do need the service sector to disinflate further.
And that gets to the question about whether cracks in the labor market are what it's going to take to get inflation down to the target that the Fed has set out two percent because services are so tied to the labor market. What is your expectation about the data that we're going to see on the jobs market this week, particularly the JOLTS data today and the all important Friday jobs report.
So it's interesting that for the JOLTS data today, Blommerk Economics expects only a marginal decline and Roomerk Economics expects that the ratio of the unemployed to job vacancies will stay above the historical averages. So to put it into context, Rulemak Economics expects that way should to go from one point five to one point four to four, and that's
still above the average. Nathan, your question really comes down to something that the FED doesn't want to talk about, but increasingly others are talking about, which is two percent the right inflation target. If our labor market is slightly less flexible than what it used to be before, if the supply side as a whole is less flexible around the world, which it is, should we continue to insist on a two percent infation target or should the FED
be willing to tolerate somewhere above that. Why would the FED want to tolerate somewhere above that? Not because it wants to create inflation expectations that won't happen, but instead because it doesn't want to unduly sacrifice the job market, unduly sacrifice growth, and unduly sacrifice aspects of our key
to the equality of income and wealth. So that's going to ultimately be the big question is does the FED insist on staying at two percent and therefore with really weakening the labor market, or is it willing to tolerate slightly higher inflation because that's the reality of today's supply constrain global economy.
We're speaking with Muhammad al Aarian Bloomberg opinion columnist and the chief economic advisor at Alliance. That is a big question, Muhammad, because this FED has really hammered home the target of two percent. They've really been laser focused on that. Do you see room from some of the commentary that we're hearing from this Federal Reserve that it could be open to a higher inflation target?
And what would that mean for the US economy?
So I don't think we'll ever hear this FED say we are revising our inflation target from two to say three percent. That's not going to happen. They're not going to explicitly revise up the inflation target because they've missed it for so long and by so much that they will feel that that will undermine the credibility. What they may do is continue to promise us two percent in the future, but tolerate I don't get to two percent very quickly. Now, what does that mean for the economy?
I think ultimately the choice facing the FEED is the following Nason. Either they stick to two percent and with tipping the economy into recession, or they tolerate slightly high inflation. They don't push the economy into recession and they find out that that is stable, that it doesn't un anchor inflation or expectations. My hope is that they will opt for the second option, but we will have to wait and see.
Well what could that mean though for market volatility? I mean, we've seen a lot of questioning in this market about whether the FED is serious about the message that it's putting out there. If we do see the sort of rhetorical focus on a two percent target but maybe not a realistic two percent target, what could that mean for market volatility?
So, first, the sources of volatility we've seen in the fixed income market was unthinkable not so long ago. Everyday seven to ten basis points move is often on very little, So that's something else going on in the fix income market. What is more worrisome is the issue you raised, which is that the FED says things and the market totally ignored it. Last Friday was a perfect example of that.
Chappout was very clear. He said it would be premature to talk about any interest rate cuts and he left the door open for interest rate hikes, and yet a market that had already rallied by four basis points in
the front end on the second year. The second year, the two year, yield had come down by forty basis points, rallied another ten basis points, and that, you know, started a whole conversation yesterday about whether Pole was steamrolled by the market, whether FED pal was stiff armed by the market. The fact is that FED communication is not as impactful as it used to.
Be, which gets to a question I've been wanting to ask you all morning long. Yeah, I mean, you've been very critical of FED messaging FED policy in the past. You've said that the FED waited too long to tackle inflation. How would you grade the Fed's performance now?
So, I think they've played major ketchup, which they needed to do. So if you look at analysis and action where they had failed earlier, they have corrected that. They've also paid much more attention to the supervisory role, so that is good. Communications remains poor, and again we have examples of that over the last few weeks. So they still have a significant communication problem, and they still have
a credibility problem. You know, the whole point of forward guidance is for the markets to listen to you and for the markets to do the heavy lifting for you. What we're seeing now is forward guidance. As we saw last Friday is being completely ignored by the market, And it is really interesting to me, Nathan, that the market is taking on the Fed on variable that the FED controls completely. I mean, think about that Fed. The market is basically telling the Fed, I don't care what you
think about an indust rate that you set. I think you're going to do something completely different. And that's quite a statement from the market to the FED.
So in our last minute, Muhammad, what would it take for the market and for you to get that credibility back from the Federal Reserve?
What does the FED need to do to regain its credibility in your view?
So first time, it just say that in terms of the outlook for twenty twenty four, I think the market should be listening more to the FED. That's why I don't think the Fed is going to end up validating what the market is pricing in for cuts. In terms
of what it takes, takes a couple of things. One is something that different recent G thirty report on central bank stresses is for central banks to be more humble, to recognize that we live in a different world and they've got to have a much border mindset and much greater cognitive diversity, and the second thing will take is
better accountability. The FED is not as accountable as it should be, and therefore, even when it makes mistakes, repeated mistakes, and they've made five different mistakes in the last few years, even when it makes repeated mistakes, it doesn't own those mistakes, and therefore it raises doubt among lots of people as
to what it's learning from those mistakes. So the two things that really would take is being more open minded, having greater concenter diversity, and secondly, better accountability.
This is Bloomberg day Break Today, your morning brief on the stories making news from Wall Street to Washington and beyond.
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I'm Nathan Hager and I'm Karen Moscow.
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