Europe, United States, China discussed on Bloomberg Surveillance


Alongside some cane, at least grab some Jonathan Farrow 60 minutes away from the opening about just around a corner equity futures ticking higher going into that cash open futures in their session highs on the S and P off 7/10 of 1%, now another lift to this market. 23 points on the morning in front exchange talked about this through much of this morning here. O'Donnell 1 18 slightly weak. You're a stronger dollar against the euro against the Chinese currency overnight as well as economic data coming up, you will get CPR in America tomorrow pp on Wednesday claims on Thursday retail cells The back end of a week of huge focus on the loss of momentum, not just in the U. S economy, but across Europe much more so take a listen to what Mohammad Al Arian valiant. Throughout the advanced countries. The pace of economic recovery is slowing, and I can't think of any exception to that general statement. Tom. I would have to say that is much more prominent in Europe right now, and I'd pick on the UK in particular. Before these new restrictions come into force, a recovery that's really started to still, Yeah, stall with dis inflationary tendencies and, of course, across the Atlantic, a little bit of inflationary tendencies. And maybe some of that devolves into the equity market again. Bonds. We don't see full faith and credit. That paper in the United States. Today it is Columbus Day right now, Paul Donovan to get to it very quickly here with jobs and their global chief economist in the zeitgeist this weekend, Paul There's no question about it. Can you believe China's recovery? Can you Yes, I think China has had a genuine recovery. China's recovery was very different from what we saw in Europe and in the states because in Europe and in the states, people are quiet savings during locked down. And then as soon as they're released from locked down, you know you just spent three bumps sat at home watching Hope makeover shows on Netflix. What are you gonna do? You're gonna go rush out, spend the money. That's exactly what happened on once you've spent the savings that obviously the momentum slows, slowing fourth quarter momentum. It's hardly a surprise. Every economist was expecting this to happen. China didn't have that model. Because China's locked down, people weren't able to accumulate savings they were having to live off their savings because there's a far less efficient social Security Net so what's happened in China is that there was a pause. Before the domestic consumption started to kick in on that coincided with the recovery and demand that we've been seeing in Europe and in the states. Can you bring that recovery and demand over to GDP in the U. S and in Europe and by that I mean equity markets today down 5 28,081. That's PX. Almost up to 3500 almost out near record highs were a bit away from that I don't want to over so that But Paul, can you look at the expectation of the equity markets and hard for all, Do you get that real GDP that goes with that? Well, we gotta remember, of course, that there is a really important distinction, but that the equity markets or just a sub Set of GDP listed companies are actually nearly as important as people think that they are. So what we're looking at here is a TDP environment where a lot of the negatives on GDP are actually in sectors a million miles away from listed equities. So it's it's the small restaurants that are suffering. It's the full service sector businesses that are suffering. These are not listed companies. He's a moment pops stores. They're not. They're not in a position. Toby quoted on equity markets, the listed architects to be more biased towards the manufacturing sector. Manufacturing's doing better than services. It's got better access to capital. It's got better control of its costs. The listed sector is going toe outperformed GDP in this environment, and that, of course, is exactly what we're saying. Fall in love feeds, compare and contrast. What's happening in United States in Europe, not just the US and Europe versus China trade. It's become really popular in the bond market over the last several weeks. I'm sure you're familiar short Treasuries get long Europe just the idea that this US recovery Continues. And it stalls in Europe. What you're seeing right now? Just the trajectory of the respective recoveries. Does it speak to that? Well, not really, I would say so. What we're seeing now is a shift. So, as I said, we've had this surge of consumer spending fueled by the savings accumulated in lock down that's pretty much universal in the developed world. Unnatural third quarter story record third quarters. As we go forth quarter into next year fiscal policy is going to start playing a larger role. On their we're goingto have. I think some issues are depending on the election result. We might get a large fiscal stimulus in the states in January. But of course, if the negotiations in Washington of the Highlands rival breaks it for the delays and the chaos and the internal tedium of what's going on, so Failure to Dick fiscal stimulus now is actually doing real damage to the U. S economy first, because if you're unfortunate enough to be unemployed, you are clearly on a follower income than you were. And second and economically. This is very important if you are afraid that you might become unemployed. That fear off a lots of incoming unemployment is likely to delay spending and so what we getting here is is two hits to the consumer through fiscal policy. Now that's not in evidence in Europe. In Europe. We are seeing the number of people on furlough fall, but that's because they're being rehired, not because they're being made unemployed, and so I think that the fiscal policies on the two sides are creating Slightly different stories. At the moment, the US will grow faster than Europe simply because of demographics. Surprise about that. We know that but I think actually, Europe's fiscal policy at the moment is Is clearly supportive for us. We've got this crowd of uncertainty over the fiscal support. So this is slightly contrary important. I stress this is relative to expectations and anecdotally just the conversations we would have in a program like this, but you seem less constructive on the U. S recovery. Most Well, I'm still constructive recovery carries on in the fourth quarter. I think, though, that we are seeing some damage to the recovery come through from the indecisiveness over fiscal policy in the United States. I mean, there are plenty of people who are relatively secure in their jobs. They'll continue to spend they'll spend down there saving, that's all great. If you look at the employment participation in the states, it's very interesting. The High school people, people who've got college degrees. They got pretty much normal employment participation, low skilled people. People who failed to graduate high school have also got all those noble employment participation. The area where employment have bean weakest people graduated high school but did not go to college on. That, of course, is an area where you're likely to see quite a lot of service sector jobs. These are the jobs which you are risking the fourth industrial revolution, but that's the areas of weakness. And I would argue the fiscal policy today is not doing much to help that particular cohort in a way that perhaps it is helping in Europe on both sides of the Atlantic. However, in the US and the UK and the rest of Europe you're seeing Is bifurcation that you talked of earlier. You touched on of big companies doing better or having a better chance of surviving, while smaller businesses go out of business at the fastest pace in some cases on record, and there was a statistic in the Wall Street Journal over the weekend, showing that smaller businesses account for an incredibly shrinking portion of overall employment in the U. S and around the world. How much does that hamper global growth going forward? Now this, I think is a really interesting because you're quite right. Of course, we're seeing lots and lots of four businesses closed, but we're also think a normal pace of small business creation..

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