>> the question of when will it become appropriate to begin dialing back is clearly a discussed topic. >> the fed showed its cards here. they are excited about the fact inflation has come down. >> that's basically as good as it can get. >> this is a green light for investors. >> the market is taking this to the brink and i would be inclined to go the other way. >> this is bloomberg

surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: good morning, good morning for our audience worldwide this is bloomberg surveillance on tv and radio. your equity market positive again. the bond market is still rallying. we closed north of 4700. that's the year end price targeted goldman sachs for next year, not this year. tom: on dow, 37,000. do we get 38,000. yesterday the arsenal placard behind greg peter's desk has to stop. it was too emotional. what i'm really interested in is how we what do money market funds due over the coming days and weeks. where does the cash go. the other was the massive

obvious margin calls. how many people got run over yesterday. the story for end of the year. jonathan: absolutely steamrolled. here are the changes. we now forecast of three consecutive 25 basis point cuts continuing in may until june. there were big questions about chairman powell and whether he would move the punch bowl. he spiked it and turned up the music. lisa: if anyone was expecting pushback what they got was a declaration of victory because what he said was nothing in terms of pushback to the question about financial conditions easing. he did not seem to address it at all. he did not seem worried about inflation anymore and the result is the chances of a march rate

hike went from less than 40% to about 85% like that. jonathan: what changed in less than two weeks. here's the line december 1, it would be premature to speculate on when policy might ease. two weeks later, the question of when it will be appropriate to dial back the amount of policy restraint could lead to a discussion and a discussion for us at our meeting today. lisa: i will let other people do conspiracy theories. what i think happened was the data came in and if you look at the six-month trailing level inflation comes below the fed's target and at the time he doesn't have the heart to try and hurt this economy in an effort for some sort of decline in inflation we are already getting. tom: talking to a bloomberg washington federal reporter prayed they have three meetings maybe they thought there would be two meetings.

you mentioned the party spiking the punch bowl. chairman powell is a massive debt head -- deadhead and was singing touch of gray. i'm not saying i agree with that, but i am saying what he did yesterday for vice chair biden was a gift. jonathan: and you start to consider the political calendar. tom: we will let anne-marie do that. jonathan: instead he's going to stick around to try and answer it. futures on the s&p just about positive. yields are lower by seven basis points. your 10 year is now 3.95. the two-year is down 10 basis points again today. the two-year at its peak october 19. we have dropped almost 100 basis

points. lisa: can we sit on this for a half second. the fact that we saw more than a will one percentage point decline in less than a month, should that raise concerns about the structure of the market that is supposed to be the deepest benchmark rate for all other asset classes? jonathan: what does chairman powell that we don't -- what does chairman powell know that we don't? do we have an about turn like the one we saw, people are going to ask what was that about. what was that about. lisa: christine lagarde is up next and will have to follow that up. followed by that press conference with christine lagarde. does she echo what we heard from fed chair powell. it's become apparent with the economic data the disinflation is fully underway. let's watch this and i'm curious

about the euro and its response. november retail sales will be important. to your question about what the fed knows that we don't. fed chair powell did not really engage in much potential pushback to anything he was putting out there. if we start to see a real deterioration in retail sales does that point to something different. would you like to continue? tom: a nominal statistic, david rosenberg in the last hour tweeted out about the focus on nominal gdp. did he know those numbers yesterday? i do not know. lisa: i think the earnings of a lot of companies are interesting. we talk about magnificent seven but costco shares her up. lennar up as well. jonathan: joining us is the

international cio within the global fixed income currency committee group at j.p. morgan asset management. what changed for the fed chair in two weeks? what changed for you? >> i think jerome powell is fixated on delivering the soft landing and what's changed is the inflation data is coming down. we are seeing good evidence that job is done and they are worried they are in restrictive territory. what he was probably doing was making sure that the rest of the committee would be on board with what he was going to do yesterday which is obviously do the pivot and get the markets excited about that. we have definitely shifted from where we were early in the year where people were concerned about growth slowing and inflation being too high. central banks can now be

proactive and tried to deliver this soft landing. jonathan: thinking about rate cuts, when do you think we cut first. iain: i still think it will be dependent on the data and they will be looking to keep rates higher until they are fully committed to having inflation coming down but if the data continues to weaken and we see those going down there's no reason to be cutting. if you think about historical cycles from final hike to first cut, it is not typically -- the final hike was in july than actually march doesn't seem unreasonable. tom: the weekly prospects we will get friday are widely anticipated. 4.32% and 11 basis points. i got the real yield down to a

1.76 on the 10 year real yield. what happens in your world when the money market fund comes down. i've got a quote from black rock. 5.42%. what happens in a 4.50 money market fund. where is that allocated across the jp morgan world? iain: the bond market. what we had yesterday was probably the green light. i've been speaking to investors over the last few weeks and they have acknowledged bonds look attractive, a growth has slowed but what they wanted to see was the pivot from the fed. a lot of people have been frustrated for the first part of this year and they were still concerned they had a tightening bias. that is gone and the next move is cuts. >> does it keep going from here? or from what we heard from greg

peters yesterday, making it real clear he does not by this he is looking for a pullback. to step in. that's the conundrum this weekend for fixed income. lisa: which is the reason it's interesting you seem to have more the conviction it will go into bonds. are you saying the long end is dutch given the pivot from the fed. >> firstly the pullback would be great. everyone was looking for that this week. we were apparently going to have a fed that would pushback on the easing of financial conditions. are we can get that pullback or do you just need to look at the bond market today and say that's not too bad. most people would have bought that at the beginning of this year and the data is slowing. where on the curve, the supply that's coming. more intermediate bonds from a

risk reward standpoint. we are in an environment we should be pretty good for the bond market. >> everybody was set up with the ecb making the first rate cut and the fed following because the u.s. economy was in a better position. we are seeing that in currency markets with the euro. i'm wondering if this is the most out of consensus trade you can lean into. that the dollar will weaken and the euro will strengthen with the fed being much more aggressive on this or perhaps just powell and the fed chair. i'm just crushing it. iain: it's going to be fascinating how lagarde follows this. if you just looked at both of those markets and you look at the euro zone where growth is zero. we have had this disinflation environment in europe which is becoming quite concerning.

it's the ecb that should be doing this sort of pivot, not the fed. i will be fascinated to see what lagarde has to say. jonathan: your turn, you are next. >> the ecb typically takes more time to move to maintain that consensus but it could also be there for the ecb so i'll be interested to see if they follow powell. and if they do the market will be off to the races. tom: the money you mentioned earlier going to fixed income, does it also go to equity and is the market getting out front of the wall of money in may, june or july. >> if the market can get convinced they will deliver the soft landing. >> with ample gdp. do you see in the gdp forecast yesterday. >> you are seeing trend like gdp , it is coming down but it's not

disastrous and if they generate the soft landing and we start to move back up again, that will support all asset classes. >> just how data dependent is this rate cut. i wonder how data dependent it is based on communication we saw yesterday. what would need to happen to make this go through? iain: continued evidence that inflation is slowing. they would like to see more of the same and i do think you want to see a little bit in the job market but we also heard of those insurance companies -- insurance cuts it might be inflation dependent. they do believe they are in very restrictive territory at the moment. jonathan: down another seven basis points. the fed behind us, the ecb still had for the european central bank is the door wide open for

lagarde to do exactly what chairman powell did yesterday. >> i think she has a whole different set of people around the table. i can't believe anybody could do that. yesterday he could do it because he has a vibrant dynamic technology driven economy and the united kingdom, europe and japan don't have that. lisa: they have more reason to go first. >> they are not going to cut rates today. jonathan: the ecb later, the bank of england as well. talking to a man who has nailed it over the last few months. ♪ but you can invest in them. at t. rowe price our strategic investing approach can help you build the future you imagine. t. rowe price, invest with confidence.

what do you see on the horizon?

can help you build uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today. >> a huge about turn from chairman powell yesterday

sparking a big continuation in this rally. futures positive by .3% on the s&p 500. the rally continues in the bond market. we've dropped and broken 4%. >> terrific analysis, thank you for the comments yesterday. we sleep here, we don't go to a hotel or anything. just great comments through the evening as we made a campfire. jonathan: carry on. lisa: it's an american thing. jonathan: i don't understand the relevance of it. tom: here is the relevance right now from new york wall street. a number of analysts have done a great job on this. microsoft is a magnificent seven charges today. here's what happened yesterday

afternoon as a lot of people got run over by jerome powell on the trade. coming out with a big biocide call. here on television. through the day, powell spoke in the magnificent seven cratered. they cratered because when you are in stress and have margin calls you sell the best quality thing. it happens every time. would we saw yesterday with the rebound after the calls came in i think is profoundly important. fascinating to see what they do today. >> i think what's more curious over the last month is that brent has improved. what we saw was a continuation of the bond market rally. the regionals up by more than

five. that's where the enthusiasm is over the last few weeks. much more optimistic constructive about the prospects for growth. >> the russell 2000 up yesterday. looking at is this the way people are selling what they can to buy things that have upside potential. jonathan: -- tom: annmarie hordern with us this morning. i have a lot of political questions about the fed. a bloomberg poll this morning. what is new about the polls in january. annmarie: the first time trump has a lead ahead of biden in chicago -- in michigan. he now has the seven swing states that we have been polling prayed in october biden still

had michigan and now that goes to trump trade it's still within the margin of error but biden is losing support from these groups he has to win. talking about black americans, young americans and women voters. what you will see is potentially the fact biden could build on this. it's about bringing back in the people who voted for him in 2020. it looks good for the former president. on the economy, people trust trump when it comes to everything, and not just kitchen table issues that interest rates. they trust the former president. there was one piece of data i think is very good for the biden campaign and that is the fact that while most swing state voters don't think the economy has moved in the right direction , they have better more optimistic progress about how their own economic conditions are. what's happening in their town or county and that is something the biden campaign could build

on. >> a series of bad polls for this president. this white house claims they don't really listen to the polls or follow them. what i'm capturing is a shift from this administration. the secretary of treasury doing the same thing earlier this week , a shift when it comes to views on israel and the division that's happening privately. they might claim these polls don't matter but are these changing policy? annmarie: politico saying the vice president is urging the administration even having a conversation with president biden about the messaging and conversation that needs to be happening with the prime minister about day two. what happens next after the israeli invasion of gaza. they are concerned about the humanitarian so we have seen a shift when it comes to how this administration is talking about

israel but also talking about the economy, biden's coat on friday was this, solid steady job growth. a sweet spot needed for stable growth and low inflation. not encouraging the fed to raise interest rates. this was a very rare for the president to do this. we were talking about how in 1992 when george bush lost reelection he squarely blamed alan greenspan for that. he said people weren't feeling the recovery because he was too late. he said i appointed him and he disappointed me. lisa: does anyone believe the fed chair would somehow manipulate her convinced to shift his approach because of the administration? >> i'm not going to speak for what people think about what i will say is a trifecta of everyone singing from the same tune starting on friday with the president talking about how we are in a sweet spot.

this administration loves to tell the unemployment rate has been under 4% for some 22 months. the secretary saying she thinks the fed is on the right path and it felt like from jay powell yesterday a completely different tone he took than two weeks prior. that is for cuts next year. so the timeline for the biden camp at this moment when it comes to the economy is very strong. that remains the issue he is dragging in the polls but they have 11 months. lisa: there also has been some new data that's been particularly disinflationary. i'm curious about president biden's support on the left not only when it comes to the israel hamas war but also with ukraine given the fact there seems to be a greater willingness to give into certain republican demands for border control policy.

this is angering a lot of people. how much do you think you will go through with that even if it alienates members of the party? >> there will have to be a border deal if they want aid for ukraine. even the most critical defense hawks like lindsey graham saying in order to get ukraine that money there has to be a border deal. i'm not sure biden doesn't want to border deal. he has to make sure he's listening to the progressives but at the same time immigration concerns of the border also rank high in their polling of what swing state voters care about. >> you mentioned the politico story on the vice president urging the white house to be more sympathetic to palestinians. where is that coming from? who -- in whose interest is that story to come out? annmarie: partly in kamala harris's interest. she's potentially waving the flag within the administration

also last night some members of the staff, whether this is the executive office building, but staffers to this administration were outside the white house protesting president biden's policy when it comes to israel. people from the administration, progressives on the left think they have gone too far when you see the palestinian death toll north of 17,000 people. >> we have a sense there was division privately. now starting to see that publicly in a more material way. tom: the political reality of the fed babble of yesterday, the shock of it in the latest showing. what this means for the elites and people with assets which is a smaller part of america. the answer is on the others if it to get elected is the agony of inflation.

the new inflation to come. that's what people care about. it is a dozen eggs popping back to five dollars. >> thank you you. throughout the morning on bloomberg tv and on radio. renaissance macro and why he's been so right all year. neil will join us in about five minutes time. come tell us why you've been so right. he will tell us in about five minutes time. good morning. equity futures positive again. the rally continues. this is bloomberg. ♪

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jonathan: pouring fuel on the fire. following that fed decision at the chair powell news conference. equity futures of the s&p 500 positive by .25%. higher on the s&p 500. year-to-date the gains more than 20% on the s&p. year-to-date the gains of 40% on the nasdaq. >> how much more fuel is there to burn to push these to new heights. already before next year happens.

they say we have already hit those targets we see no reason for them to go down. this was a massive shift that is screaming across markets and changes some of the equation going forward. >> let's go through the bond market together. to year and 10 year. the two year on october 19 was 5.25" 71. on the 10 year for october 23, we are down to 3.9469 and down another seven basis points. >> yesterday was the biggest rally of the bond market since people were concerned about a banking system collapsed. there is a question of whether they have gone too far or not far enough and what you're seeing in fed funds futures is 150 basis points of rate cuts priced into the market for next year. that's six rate cuts.

they say three and the market says we will see that an aa. jay powell did nothing but to underscore that was a probability and saying here we are we did that. >> let's push this through the fx market. the euro begets the dollar. the ecb coming up later. the top story, the federal reserve getting ready to reverse the steepest rate hikes in a generation for a series of cuts next year. >> the question of when will this become appropriate to begin dialing back the policy restraint in place. that begins to come into view and is clearly a topic of discussion. also for us at our meeting today. >> premature to have this conversation. two weeks later there was a topic of discussion. >> they have seen the data and i will say it again a first look

at retail sales this morning and it comes in a little bit light that gets in the cover he needs to do in december what possibly he was going to do in march. jonathan: tk with some conspiracy theories. >> i grew up in a house where this was front and center. spent all day worried about conspiracy theories. it's out there, people are talking about it. we don't have to believe that. some people think there is vice biden. >> a difference between ideological federal reserve chair and one that is much more practical and a pragmatist who doesn't have as much of an academic background and there is a feeling he hasn't had a driving theory. so the question is what is that he is following. let me guess, you agree. >> i do not. he had a purple tie on. wearing a purple tie yesterday. he is in the middle. >> waving in the wind.

if that helps. >> does governor bailey play to the tories and labor. >> tries not to. they are meant to be independent. let's get to the top story down in washington dc. house republicans voting to authorize an impeachment inquiry into president biden. it does not set a deadline or layout any specific impeachable offenses. it set up a high profile clash between congress and the white house as the 2024 election approaches. lisa: there are a lot of questions over how much cohesiveness and conviction by republicans against president biden to actually impeach him because you have republicans from swing state saying we don't want to push back against you but it looks bad for us to get behind something that doesn't seem to be much evidence. how much of a stunt is this and

how much can you get some coalescing behind this. >> little reed call impeachment. it's a tour de force, doesn't matter republican or democrat, the pasteurization of this process is a travesty. jonathan: don't hold back this morning. tom: it doesn't matter if republican or democrat, clears the air. jonathan: ubs stepping up efforts to claw back hundreds of cash bonuses from credit suisse dealmakers before the banks collapse. the was lender contacting hundreds of lenders trying to recoup a chunk of the cash rewards according to people familiar with the matter. can you imagine right before christmas they ask for the bonus pack. what on earth. >> i don't know what else to

say. it's just too me the oddest thing. authorities in switzerland saying you are right, go get it. lisa: there are clawback provisions for people who leave, it's just never been executed on a mass scale particularly with at a time when ubs shares are up since the acquisition. poised for the biggest gain in ubs annual stock return history back to 1997. just to give you a sense of where they are at. they will eat out every last dollar. >> a great guest coming up but we talk about mergers, acquisitions and culture clashes , the culture clash here is poison. some of the stories coming out. >> much more with a lot of reporting from manus cranny as well. i think there's a major culture clash and a domestic fear maybe

we don't see in our press. yesterday humility for everyone. lisa: except. >> today a recalibration of where we go in our optimism of the american experiment. head of economics at renaissance macro over the last 18 months and absolute tour de force that america economic might will prevail. david rosenberg writes of a tepid nominal gdp. at the same time dan ives and joel fishbein at the truest go back to and three years on technical excellence. can our technology lead continue the optimism on the american economy? >> that's a tough question. i hope so. productivity is notoriously difficult to process. it raises the capacity for the

economy to grow without stoking inflation which takes a lot of pressure off the fed. >> the last few months you have been locked in. some other people are lacking. what's the framework you are used to seeing things a bit more clearly over the last few months. >> you mentioned earlier powell sounded different a couple weeks ago. to me the die has been cast for this for a little bit of time now. that's because inflation is slowing more rapidly than expected. i think the fed is following a rules-based framework where they are taking changes in inflation and translating that to expectations around the federal funds rate. that's basically what's happening and what they did yesterday. so core inflation in november is likely to come in barely 1/10 of 1% month over month and that

means the momentum going into 2024 is quite weak. so if they are revising down inflation in december which they did and then a few months later they will be revising down inflation in march. i -- what do you expect them to do. what i would push back is the notion that this is -- you see this already. the 10-year is below 4%. that's not what this is about. this is about inflation coming in better and the fed adjusting as a result and that's ultimately a good thing. i think it's going to give the economy a chance to continue growing and i think that's likely. >> policymakers like to use the word if just to hedge themselves. you don't think -- you think this is already -- the rate cuts are coming. >> to me, six feels like if

there's a recession six wouldn't be enough but if the economy is going six feels like too many. i don't think it's much of an f about inflation. powell talked earlier about a disinflationary process and i think that was premature to talk about. now it does feel like a meaningful disinflationary process is underway and we have continued moderation and housing rental inflation. the terminal has an article today going down year-over-year. they will continue to deflate over the next several months and that popped in november. between that and core goods excluding there's continue downside there as well so -- and the labor markets are basically normalized. they are back up to balance. you go down the line and to me it suggests we will see

continued disinflation over the next several quarters. >> jay powell did not want to dig into the question around financial conditions and the easing of which we have seen over the past couple of weeks, but i would love for you to weigh in. you have concerns the easing and financial conditions will push inflation the other direction. >> that's a reason to expect on how much they can end up doing. i don't think they will end up on the easing of financial conditions in and of themselves. labor markets, inflation and then financial conditions. if labor markets are in balance and inflation is slowing the markets are then reassessing the feds interest rate path so why would they be upset about that? >> you have been good about tracking homebuilders. if you suddenly start to see a re-acceleration in the home space, you see people re-engaging with selling homes and being able to price up some of these homes because mortgage

rates are lower, these are some of the questions people have. of still robust growth. >> talking about the seesaw thing. where we go from one story back to soft landing. i just feel like we need to get through this disinflation first before we talk about what happens next. could i make a case for things may be re-accelerating and ignite inflation in the fed will have to come back and undo the cuts. that's a possible scenario. that could reignite inflation because there won't be enough housing supply. the fed has to deal with issues in front of them and right now the overwhelming issue is inflation is rapidly slowing. they are going to be more cognizant to the risk they over

tightened. it's not about what my reaction function is. tom: the optimism, on the equity call, the spx 6000. he talks about the warring 2020's. there was a roaring 20's 100 some years ago and it did not end well. how is your optimism different than the effervescent exuberance of the unstable roaring 20's? neil: if we have a roaring period of economic activity it does help we had a financial crisis in 2008. we already had the big one and -- tom: we have guardrails up. neil: and the benefit of hindsight. going through on the first time.

so i think that's helpful. >> congratulations on a great call. thank you sir. happy christmas. >> merry christmas, happy holidays. tom: the only equivalent i know is the 2018 call on the bull market. >> just locked in on the directional travel. equity futures positive by a quarter of 1%. shares constructive on this equity market on risk assets. peter tchir up next. ♪

what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today. jonathan: live from new york city this morning, good morning. equity futures looking something

like this on the s&p positive by 0.2%. yields lower by seven basis points. what a turnaround in the last couple of months. >> the inflation-adjusted yield. above 2% and down we go. the first print today is 1.75, make it 1.76 is that yield. slamming march, june into the third week of december. lisa: everyone scrambling to figure out what the new outlook is. having to revise the outlook for next year. they are now scrambling to overhaul them because this is a different fed than they thought. now we are looking at a fed and

we will cut rates. tom: eight to 10 people, the team at morgan stanley. i think it was a little window. it's going to be -- jonathan: the consensus yesterday it felt like a victory lap at morgan stanley. lisa: just in case you were wondering. tom: john you talked yesterday, he has to completely reframe his view. it all happened in one day. >> goldman sachs put out there outlook a month ago. a week or so before christmas now saying ok. we will go again. tom: we will get 4800 futures here. >> year-end price targets for next year.

we have 10% outside for next year. double-digit percentage points gains. >> peter, thank you for coming by this morning. what i see on the sell side is people looking at one years, two years, three years. all of a sudden it seems post-covid, pre-pandemic. was that the celebration we saw yesterday. this is where we've moved on from the pandemic? peter: i thought it was clear we could get down to 420 on the 10 year and yesterday took me by surprise of how comfortable powell was with cutting rates. i was getting nervous about risk assets because i thought the only way we get to 4% is for

economic conditions to turn much worse. they did not turn much worse and we are at 4% because of the fed. we have room for us to rally. we have been a big fan of the laggards, the russell 2000 was up. i rarely look at their futures but they were up. the russell is up more than the nasdaq 100. tom: what are the ramifications if yields come down, what to $6 trillion do? peter: it rallies. i thought we would have this great run but as i look at what the fed did you have to look at these positions. in the laggards you look at disruptive tech. year-over-year they were roughly performing in line with the nasdaq. it should be high debate compared to that.

you get excited about the ipo market coming back. a better place for risk on. having said that you want to be cautious on things that most people will look elsewhere. small caps, the banks, a commercial real estate breathing new life into that. jonathan: one is to like about them right now other than the bond markets rallying. peter: people got far too depressed far too quickly. they undersold them. like a lot of things, it takes a lot of time even if there are commercial real estate volumes for this to work its way through the system. you've got six or seven years. what was complete doom and gloom in april, we will restructure, you were getting those returns. all people wanted to talk about was how big treasury issuance would be.

that hasn't changed much with a few rate cuts but that story was overplayed. having to issue trillions it's going over years. that's something that will start to weigh in on markets as we digest looking at the fed's offer back we still have this deficit to worry about. yields at 4% are about as low as they go. risk assets do ok but it will be this transfer into the laggards. >> relative to what's already expected. peter: one thing i was still looking for this year, something out of china where we give china a pathway, we do something nice with china, we have not seen that yet and i expect we will see that into january. another reason for this to continue. i was getting very nervous about

these positions. powell really surprised me. it's like ok, three cuts but it's not that bad. only back to where we were in june. the fact he just let it go on during the press conference and did not push back on the work, that tells me they are serious they will let this go and it is an election year so the willingness to create a recession in 2023 was much higher than the willingness into an election year. >> which we can develop in a bit. do you believe this is politically influenced? peter: they want to be careful to be a political. it would probably be very bad for the economy. if you go book to george bush senior, went into a recession and did not get reelected. they are well aware creating a recession in election year is not good for people in charge.

i think they are also not purposely wanted to influence this. >> what's the difference between being bullish on risk and going further into risky assets and being all in on gamestop? what's the difference between being constructive and being in a bubble? peter: the things that aren't in trading at 50 multiples. people kind of throwing in the towel saying recession. you look at what's going on in credit. the index at a derivative index it back below 60. i think there's room for that to continue to tighten as people realize u.s. companies did a good job managing their exposure. they bought long at low yields and if we are going to avoid a recession which i think they are still at risk for right now if we could price that out we have yields lower, spreads lower. that will function very well. high yield bond fund market is

when ford got upgraded you took that out of the market. that's been this huge opportunity for a lot of double b and single b issuers. you will see a lot of refinancing. one of the problem areas you will see rate cuts, i think this feeds nicely into strength. that's not where i thought i would be. jonathan: i want to go back to the politics. doesn't the political calendar make it likely they go earlier than later? >> i think they do not want to be cutting in the months right into the election so i could see this easily. they leave it alone for a while to see how the economy does. >> deutsche bank has an interesting call. i don't know if that's changed in the last 24 hours. i find that difficult to get my head around given what you've just said. >> i can see 25 and 50. >> what's the cut off today for

you? what is the cut off tate with the federal reserve is not accused of being playing politics. >> maybe you can get a cut till the end of the summer. i think they want to avoid that. you've watch what's going on in d.c.. i think the fed is trying to avoid listening to them. we were transitory until the president and some members of congress were all over inflation. then all of a sudden it wasn't transitory and you've seen a different tone in the last six months out of d.c. as they want to prepare for a strong economy. >> sounds like transitory -- tom: just the return of transitory later. jonathan: got to go, good to see you. 2024 on this riproaring rally. coming up very shortly we have another central-bank decision.

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the idea that we have saved five million people's lives, it's overwhelming. it's everything. >> the question of when it will be approved had to be in back the amount of policy restraint is a topic of discussion. >> they are very excited by the fact that inflation has come down. >> inflation has come down a lot. >> the bullish sentiment could go on for a while.

>> i would be inclined to go the other way. jonathan: more than 20% on the nasdaq. the rally continues. good morning. per our audience worldwide, i am alongside tom keene and lisa abramowicz. market is higher again after a pivot from powell. tom: i think it was unanimous. there was no dissent. i love the bank of england with the dissent. jonathan: that's get to the decision now. good morning, lizzie. >> they say there is still some way to go. this is what we were expecting the bank of england to do, not

following jay powell into the pivot party but holding firm in saying the inflation fight in the u.k. is not over and it is a little bit unique. tom: it is even more interesting what we will see from the ecb this morning. absolutely extraordinary. jonathan: how much weaker is the british economy? >> softer than expected growth data. you would think that would help to make dovish argument, but others would argue it is a blip in the data. the fine line between stagnation and recession is not a great one. anyways a bleak picture for the u.k. economy. lisa: what we heard yesterday

was perhaps paving the way for rate cuts in the u.s., but a different feeling in london. you can see yields rising. how much does this create a more stagflation or backdrop, understanding that it is a little more entrenched in the u.k. than in the u.s. or the rest of the region? >> you had the varieties and rate cuts already, so now they are pricing in five quarter-point cuts. it happened without andrew bailey saying anything or any extra data coming out of the u.k. it happened off of the back of the fed decision. it shows you how little they had been listening. tom: lisa, what you mentioned is

important. i have never seen this. the separation of divide between the shock that we saw yesterday versus now. what does lagarde do today? i have never seen the divide between these two banks, ever. lisa: just how much is a loan right now when they are looking at their economy and back drop versus the european central bank and the federal reserve? >> it is not consistent with hitting that 2% target. we had this autumn statement with putting one billion pounds

of fiscal stimulus, personal and business taxes, so it makes the disinflation journey even harder in the u.k. and that is the argument that andrew bailey is making through this decision, through the guidance. we do not have a forecast today either. there is a note on the growth point that they are still flat on the gdp. it is actually worse. perhaps they have been influenced then softer than expected inflation report, but it is a bleak picture in the u.k. jonathan: i think if they had a plot, there would be some officials showing that they wanted more rate hikes. cable at the moment is positive.

the rally in the u.k. government bond market is fading just a touch. down by six basis points. you reflect on what happened yesterday. chairman powell with a huge pivot. you do not get it, which explains to some extent the little turnaround. lisa: if people were listening to andrew bailey, they would have gotten it right because he was guiding in this way. this raises the question of, is it a matter of the bank of england losing it earlier or is it such a different kind of economic backdrop that it requires a different prescription? tom: the ecb is up next, but jonathan, you have direct experience with this. what is the character of dissent to raise rates in england? that is a polarity that i have

never seen. jonathan: there is clearly a willingness to dissent that does not exist at the federal reserve right now. there is this idea of doing the same thing. tom: these are absolutely -- the divide between the central banks, i believe i have never seen a. do you perceive that? how loan is jay powell versus governor bailey or what we will see from christine lagarde? >> what this really highlights is the differences in the economies that each of the central bankers is facing. there was a bit of a pivot. that has spilled into rates market across the regions.

the bank of england faces a different challenge. inflation is less of an outlier. they still have some challenges, if you look at the core inflation and service and ration. that is still a problem for the bank of england, trying to manage weaker gdp growth and a sticky inflation picture compared to other regions. there is no change in guidance or statement, and we still have a vote split. that is a key communication point right there, the fact that we have that split. lisa: let's create our own. if they put out whether they thought the economic growth would be better or worse, what direction do you think it would go? >> what we have seen in the

recent data, it was a disappointment there. if we look at the moving averages and put it through that contraction that we saw month on month, that was across the board by if we smoothed that out, we are looking at a flat three-month, but there is the possibility of a recession. it is a difficult balancing act, but we think they are more likely to hold on with this and stay there for a few more months yet. timing is quite fluid and will depend on how fast it decelerates, but it might be one of the later banks to cut.

lisa: how much does that benefit been? this could actually be disinflation area, if they diverge from the other central banks. >> i think it helps on the impact, but really, it comes down to this wage inflation that is really going to be key. real wages are a little stronger because inflation has come down a little bit. that should help to some extent, but the imbalances in the k labor market are still there. they have improved, but they are still there. tom: we have a nominal gdp of 4%. what is ua estimate of nominal gdp for the bank of england and the ecb?

what are those different numbers this morning? >> we are going to see a slowdown in terms of gdp growth, particularly for the euro area, the challenge is that we are seeing a much weaker inflation outlook than they have actually projected, and what we are projecting versus what is happening, i think that challenge is what we are really going to see later on today from the ecb, whether -- how they address the fact that actual data has been weaker, inflation and growth -- growth outlook is weakening. that could be quite important in terms of what they say of the shift in timing. the markets have pulled forward the timing of the first cuts from the ecb. now we are looking for march and april, more likely april.

i think this is the kind of signaling that we need to be focusing on, and terms of what messages are coming out of the ecb later today. going forward for the u.k. as well, it will be that relative shift in data that the u.k. will be focusing on in the coming meetings. jonathan: the latest on the bank of england. if you were hoping from a synchronized pivot, you did not get it from the bank of england. lisa: does the ecb go with the pivot or do they side with what we saw from the bank of england and go their own way and reemphasize that there could be more to do? tom: the bank of england without the visible dissent. we have a 20 basis point move and a four to five basis point

move. i have never seen this come ever. jonathan: positive here by 0.3%. yields are a little bit lower, down six basis points, down. following that bank of england decision. lisa: people are wondering what is their level of conviction? is the level of inflation different in the u.s. versus the u.k., versus the euro area? is there something separate that makes some of them longer-lasting than the others? jonathan: let's compare. i think that is just the reality in the markets. if you believe the ecb was going to go first -- that was consensus for you yesterday. what are you looking for? what are the expectations a

little bit later on? lisa: a lot of people, including some of our guests have said that they think they should probably just cut today because they are looking at a possible recession. tom: i would suggest one is the real economy. the other is the fiscal debt buildup in the u.s. and they really do not have that payoff that powell had just yesterday. jonathan: we will catch up with them in the next hour. rip roaring rally over the last month and it continues from new york city. morning. ♪ (sfx: stone wheel crafting) ♪

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speculate on when policy might be easing. quest it begins to come into view and it is a topic of discussion. jonathan: those quotes not even two weeks apart. lighting the fuse under this market. equity is on the s&p 500 like this. futures are positive. gains of more than 1%. likewise on the nasdaq. absolutely flying and the banks are loving this move in the bond market. lisa: more than 5% in one day. this is the question. can that widening out continue? you're getting the sense that the rates are lower. jonathan: does it complicate the

timing? tom: i do not think we have really been as conspiracy theories. i love what you did yesterday with them weighing in. the unusualness of this in the market. let's be honest. you just wonder within the divide of the nation, the number of our guests yesterday. i thought jeff was absolutely brilliant about the divide in america and how it folds over. jonathan: it is really important for what might happen in the election. the morning console poll showing that former president trump is pulling ahead in must win michigan. cannot change between now and

then? tom: that number of inflation. a dozen eggs this morning, maybe that will help the pain at the grocery store. he knows the polls and rick davis is joining us. he is a partner. politics for the late senator. i want to go down. this is off of the washington post article sunday or saturday that only 18% of america will decide who the president will be. it is not narrow with the swing states and all of that. what did they say about those roughly 18% of americans? >> this is the third pole in a series. bloomberg has been testing seven battleground states since early

october and what it is telling us is that donald trump continues to show strength across those states, that joe biden shows weakness across the states and has gotten a little bit weaker, especially in the critical state of michigan. michigan is a classic study of a swing state that means everything to joe biden. he does not win without michigan, yet michigan was tied in the previous tvo polls and is now behind trump for the first time in this series in michigan. look at michigan. we had uaw strikes, a lot of focus as it relates to israel conflict and joe biden is

slipping away. tom: can you gauge turnout now? if not, when can you gauge what the turnout will be? >> it is hard to gauge turnout. you are really talking about the intensity. neither trump nor biden excite voters right now. they wish they had a different option, so if it comes down to it, these are the candidates available a from now. it will be hard to imagine that you are going to have record turnout that you did in 2020. that being said, the stakes of the election have not been well defined. joe biden really has not campaigned that much. i think this is a poorly formed

campaign. we will see if they can lighted up later on. lisa: a lot of people discount these polls as early without really thinking about the opponent. do you buy into any of those arguments? >> there is a lot going on in the democratic party right now. this is a consistent pole with what we have seen nationally. they have this base weakness with joe biden since october. biden's problem is not swaying voters, it is with his base. one in five say they support the impeachment inquiry. can you imagine democrats supporting an impeachment of their own president? it is outrageous. the democrats say, this is their excuse. the base is always going to come back. when the choice is joe biden or

electing donald trump, they are always going to support joe biden. are they going to be excited about turning out or staying home? lisa: former president trump has been pretty quiet, not necessarily when it comes to rhetoric, but he has not been showing up to the debates. how much do you expect the groundswell of support for trump to materialize in the heading into this election versus not so much as some of the other candidates start to gain some critical mass? >> he is not moving around very much. think about what you said about trump's lack of campaigning. he is sitting in his basement, not going on the campaign trail. now he is doing four to five

events a month. he spends more time in a courtroom that he does in iowa, trying to win the caucuses. if he has any kind of pickup, if nikki haley challenges him or beats him in new hampshire, it could redefine the entire election and all of a sudden, he does not look as strong as voters think that he is. jonathan: it is just a lack of union support. the president and michigan joining the picket line and cannot get a pick up and support. what is going wrong? >> this president since the day he was elected has been a union man. he has done more for unions in america than any other president, and they have all decided that they are going to take a look at this race and determine if it is in their self interests to support someone else. biden's weakness is that he just

does not seem able to manage the economy. the headlines this morning should help him long-term. as the economy continues to improve, does that have an impact with union households and other people who are still undecided? jonathan: is the president doing the same thing? >> the question is, is he ahead of time or a laggard? there is an argument to be made that bad nymex is going to ultimately succeed and that people will start realizing that the economy is actually healthier than they have felt it being over the last two years, that the mists on inflation is in the rearview mirror at that point and then they start giving biden credit for managing the economy. headlines are important to voters.

we will see that movement. there are indications in the survey that people have a very positive attitude towards their local economy. that is an indication to the biden people that they might be able to convince people that their local economy is doing better and the national economy is on the mend as well. jonathan: thank you. shocking to see that union support. it is not there. tom: he had no money and he won and delaware. he is living and another time and place. jonathan: coming up -- this is bloomberg. ♪

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jonathan: the rally continues. we hardly talked about it, but retail sales coming out from that data point. equity looks like this, elevated by 3%. let's not gloss over it. up another 1.4% this morning. lisa: they have been consistently eating the other index is. is this beginning of a broadening out or has it been a head fake? here we are. jonathan: lives are like 100

basis points. two year right now. 10-year, 394. 394.69. a little bit -- 3.9469. it is interesting framing. the bringing forward of rate cuts is an indication of fine-tuning policy, not an indication that it has been achieved as markets are pricing. tom: it speaks to the data dependency and makes it more interesting. if you slam forward into what we witnessed yesterday, everybody recalibrated. peter mentioned this earlier. we are blathering on about the bank of england, point 3% of a

percentage point and it is extraordinary. up on the small caps of america. jonathan: let's turn to foreign exchange. we saw this play out with the federal reserve. we have yet to get that pitted. what you don't get, it is stronger with positive by .8%. basically, the bank of england has people voting for rate hikes still. compromising the ability to do what chairman powell did yesterday. lisa: there is a lot more work to do on the inflation front. this type of divergence has an interesting question for the ecb. do they like that they are seeing a stronger euro especially when you have the likes of jeffrey talking about

the possibility of parity. they could achieve disinflation. jonathan: a tough act to follow after jay powell signaled that a pivot is coming. six rate cuts. they are looking for any pushback after the fed sparked a surge across the globe yesterday. this is the question that we were asking going into yesterday's position. we did not get any pushback, whatsoever. tom: how does christine lagarde deal? bailey has to deal with catherine and they want higher rates but how does she deal with the bank here? i have no understanding of that process. jonathan: a lot of people picked up on it. maybe getting some support from that direction, but it is a very

diverse council with a range of opinions. there will still be people scarred by their experience and unwilling to engage in the idea that rate cut i just around the corner. lisa: in terms of whether or not they will be late to debate cutting cycle, will the ecb take the same tone? jonathan: retail sales are coming in. data indicating a slower start to holiday sales. expecting consumers to pull back after splurging in the summer. some cash back making people think twice about that, making you think twice. easy to forget hasbro cutting off half of the staff a week away from christmas. tom: it is a crazy season and i

do not know what will happen. heart of the matter looking at this retail sales report are the guesstimates from mike mckee and others about nominal gdp. if it is soggy, that changes the debate. jonathan: good news. rent in manhattan making their first year-over-year decline in 27 months. median prices sitting at $1000 for november. down nearly 5% from the previous month. president of the retail firm saying it beyond seasonal. you can say that again. this is what is amazing. we set here and we say, news, the rent is not going up. the first year-over-year decline. and then you read the price. that is the reality. month over month, year-over-year

, everyone has to live this. they are looking at rent at $4000. tom: i am doing the math here. 48,000 and if you spend one third of your income, you have to have an income of $45,000 to buy the median rent. that is a challenge. people are not spending a third of their income. is it unique to new york? i think you have better contacts than i do. for a large body of americans, there is no other topic. lisa: there are specific things for the units going back on the market to be rented out, but it is clear to me that we are talking about a much higher price point, which is the reason why people are wondering if there is going to be a cracking in the consumer confidence.

tom: the math i just did does not work. he is from canada and he has had a thrill in the tumult. of black rock and princeton economics. we could have a three hour conversation now to gather some of the bank of england act to the fed. let's talk about what we do about it in the market. what is the prescription this morning, given the shock that we saw yesterday? >> it was a shocker. yesterday, timmy what is shocking is the fact that we think this is an uncertain environment and we have never been -- we are normalizing from it. we do not quite know where we

are starting from. a wide range of uncertainty, but we have a said that is narrowing the outcome in a very aggressive way. to me, it is not so much but they are planning to do next year. it is the narrative around it. it is all in to that story and i think that is the shocker here because i think the reality that we are facing a much wider range. our job is to take they had come calls and position for that. i feel like the roles are a little bit reversed here. the market is now running. jonathan: you have been talking about a new regime, a change. you question that after what you heard yesterday? >> i think we are in a new

regime. i do not think central banks have a better handle of what is to come next. we are all trying to learn from this. it is about learning from the data. there is a scenario where we might get some disinflation and it depends, but it is not the only scenario. all these scenarios are to the downside, so we still believe in the outlook and the team that we have. if you do not have conviction, maybe once you neutralize that but central banks are making big beds and it does not reduce the uncertainty but you should consider the environment. lisa: does it make you more optimistic on risk assets? >> i think we have a green light

for now. given the position now, it is the case that it will take some deployments to change the narrative. i think we have a constructive backdrop in the near term. i think the question is when does that narrative face a challenge? the key thing to watch would be the development. it is a story about goods inflation, not about services. i think we need to wait for them to come in, but for now, this is a green light for risk asset. lisa: do you believe in the broadening out story coming before and finally seeing money? >> i think that will be the market reaction, to see this

macro backdrop. the fed is basically giving a signal that macro should be your friend for now and i think it needs to be tested but for now, this is the story. if you believe in that story -- i think we see some momentum. that is very near term trading. i'm not sure this is lasting. tom: i went to a blackrock money fund. working with 5.11% for a blended money market yield. what does all of that money do when the yield comes down? >> i think that has been sitting -- setting a high bar for risk assets. we have been competing and once you try to deploy risk and put

money to work beyond cash and short-term rates and money market, it is difficult to make the case. if those rates are falling faster, i think you need to think about putting people to work faster. we still thought 2024 is where you need to start doing that. if rates were to come down, that would accelerate that, to some extent. i think we need to be careful. we are still pretty cautious. i think the fed has more direction. that is gap. jonathan: thank you. lisa picked up on it as well. we asked how much that would be and the answer is tons, but it has gone in a different

direction. lisa: there is just as much daylight. they got the greenlight saying that that bias is to cut rates above all else. tom: it is amazing. it goods us to 30 to 32 minutes. what does this mean for people who are not into the central bank game? it falls into what i am witnessing, which is a persistent bid on equities. not once, but every second. jonathan: if you are just joining us, here are the scores. positive by .3%. the conversation will continue with stephanie roth. retail sales are still to come, just around the corner, 8:30 eastern time. tom: going into the weekend,

going into the year. jonathan: shut it down, lock it in, walk away. tom: there are some people out there that got this wrong. i got it wrong. jonathan: they cannot shut it down and walk away. money market funds. tom: i am watching. it has never been like it is. it is the stimulus and the pandemic. it is new behavior that will keep us occupied into the new year. jonathan: we will talk about one of the worst-performing stocks on the market, next. ♪ (sfx: stone wheel crafting) ♪

the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

>> i think the fed is following a rules-based framework.

they had translating that into expectations around the federal funds rate. that is basically what is happening, what they did yesterday. inflation is coming in better. i think it is going to give the economy the chance to continue growing. jonathan: the head of economics macro. he got it right in a big way the last couple of. the bond markets are still rallying by seven basis points. the fx market, 1.0 930. that ecb is that even its claim. -- is 13 minutes away.

tom: the first question, how does she respond? jonathan: we need some humility here. a little bit more space and room for christine lagarde to do the same thing after what chair powell did yesterday. tom: we will continue with an important discussion. it ballooned out well over $400 per share. the covid peak has come down to $78 a share. the beginning, -- they gave us great leadership. we know that out of the incredible program. i want to go to one of the great people that we lost this year, a

singer-songwriter, jimmy buffett. he died of skin cancer. what are you going to do about skin cancer? every listener, every viewer, it is an unspoken fear. >> good morning and thank you for having me today. today is a huge day of hope for cancer patients in general. skin cancer is a scary thing. what we are doing at moderna is we are developing individualized treatment. we make a different chemical drug and it gets customized. they are striking. the data that was shared from 34%.

the best drug available today. we see a lot of ideas manufacturing wise. phase 3 is working very quickly. at the same time, the data is so strong. we are also winning to see the path for accelerating approval. it is very similar. there is a very interesting risk reward opportunity here. we wanted a chance to make it.

tom: i think of bristol-myers and their commitment to cancer therapies over decades. can you do this by going alone or do you need to merge in joint venture with a bigger platform? >> we are partnered with merck. what we are sharing today is, we compared to to be a populations. one gets the merck drug and the other gets the merck drug for a product that is individualized for them. that is where you see the big difference. commercially, clinically, some studies -- i think we have learned the study.

we believe that technology will have a big impact. we are very excited. we are going after more cancers in 2024. moderna got a huge boost. it rose tremendously. it struggled last year with shares lower by almost 30%. how important is it to you to get the cancer vaccine off of the ground to offset the lack of sales and some of the vaccines that we have seen with the latest out of pfizer? what happened with covid, we had $18 billion sales, which is a lot compared to other pharmaceutical companies. if you look at it, as we said in

24, we are getting a market share. if you look at it, 36% market share. 52 to 30%. if you look, it is a big opportunity. it is around -- we believe we are getting the best product on the market. we have basically going into service growth. it is very exciting. it is a platform. i think a lot of people are getting their head around what it looks like. we have covered walking.

positive. they use that gene. we are using information technology. i think it will be good. jonathan: you chief officer is leaving. what are you planning to do differently? >> we have evolved and we have -- the goldberger need the 24 and 2025 is sales. the sales team is sweating what we are doing. we want to grow the market and gain more market share. i believe we have the best product. the big news today on the market -- it is very cumbersome for

pharmacies to prepare. we would be the only product on the market. we have strikes because it is so hard for those the pharmacy. we are working on all of those things to make sure that we drive sales growth. jonathan: you've run quite a polarizing company, celebrating tremendous elevation, but there will always be a degree of resentment towards countries that benefited from the policy that pushed people to take your products. is that something that you need to repair? >> we worked tirelessly, seven days a week to get the vaccine out. it has been shown by several public health analysts that we saved lives around the world. but the policy official decided to do around the world was not

the company's decision but government. i think we have a tremendous impact on lives. it helped all of us to go back into the real world with kids going back to school, not worrying about parents are friends who had diseases. we are working on cancer. jonathan: we appreciate your update and looking forward to more to come in the coming year. we are leaving the pandemic behind us in the world continues to normalize. moderna, before today, third worst performer on the s&p 500. tom: pfizer was the same thing as well. it is fascinating, the struggle of her cancer. mrna was a hope and dream 20 years ago. and it worked. and we will do the same thing with cancer. jonathan: counting down to that ecb decision. the ecb decision is up next.

♪ (sfx: stone wheel crafting) ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

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the question of when it will become appropriate to dial back the policy

this is clearly a topic of discussion. we have had decent growth, unemployment is stable and that is basically as good as it can get. this is a green light for investors until we get a new round of economic data. i would be inclined to go the other way. this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: the day after the said meeting minutes after a bank of england meeting and onto the ecb. history is being made the russell 2000 printing 2000, up 1.25%, up 18% since halloween. jonathan: every timeline is

amazing. we are talking about easing in the timing of easing. a good question going in to today, there is a huge rally in the bond market and the rally continues. equity futures are down, yields are lower at 430. we have broken 4% on the 10 year. at 4.93. tom: the shock yesterday it gave me pause to see a 6-3 vote in england at a different tone from bank of england. what is this tell lagarde? should they raise the rates today? jonathan: yesterday you get home and look at the moves in think we are about to get a central

banking pivot, the fed, ecb and then the boe still putting up their hand saying they want to raise their rates again. and they are getting pushback from christine lagarde. what will she do? we saw from chairman powell yesterday. has she been given the room to do it? tom: what does the price and yield telus for the fixed income market? the inflation adjusted 10 year yield reached a new year low. lisa: and it is screaming victory which is the key question, how long can it last? i was looking at

investment-grade bond yields dropping the most yesterday since november 2022. you are looking at a yield just above 5% going back to a level that was comparable to where we were not long ago. this raises the question, does this make a soft landing easier? tom: 12 minutes away from this decision the ceos of the magnificent seven, will they issue more paper. jonathan: i am pleased that you brought up the magnificent seven, microsoft not participating in this rally in yesterday's session. this was not about the dominance of big tech. we have started to see banks participate and people get more hopeful for the outlook for

growth next year. is it anything more the bonds helping the big banks take their knocks? tom: the vix is it 12.04. i think it's a bull market? jonathan: governor bailey saying it's too early to speculate on rates. there's a difference between the u.s. and the bank of england. 1.09 on the euro, yields are lower by seven basis points at 3.9432. we are up .39 on the s&p. tom: this is something i thought about yesterday, if you believe in the litmus paper of the foreign exchange market, the cross rates, the different currency pairs out there.

he is the head of research at standard chartered. you have a different currency pairs, which currency pairs should our viewers and listeners follow to try and make sense of the stocks? steven: is a very broad mood they can get a good sense of what's happening but what i'm also seeing as there is a lot of interest again as the rate gap narrows and capital flows may be shifting they are looking at it differently than they were even a few months ago. tom: i look at the dollar-yen, i won't go into the details. it's an exceptionally elegant chart. as the market telling the institutions of japan what to do or will the institution still

the market what to do? steven: the boj has done a good job of writing its monetary policy containing exactly what it wants to do and what it wants the market to do. the fed is clearly helping the yen. it is going the yen's way. the japanese economy looks a little better in your seeing interest in the capital flows into japan this well. when everything is going your way, things may go your way in a big way. jonathan: you wrote the chairman powell is giving christine lagarde some room today. he has open the door, did she walk through it? steven: that's an interesting question. i think the ecb forecast in the way they prevent themselves -- present themselves as stage.

there is a risk and we will see in a few minutes, if the ecb does not alter its forcast. we won't do much until 2025. i would suspect they would prefer for the euro to relax from these levels. the u.s. economic data have been flirting with recession but never walked into the door. the european data are in a recession except for the labor market which is black but lagging. european inflation numbers have come down sharply but only in the last couple of months and

that may not be enough. if they are reticent at all, i think the markets will see that as an indication as they emphasize the down side and leave open the door for rate moves sooner than the indicated earlier. there is no reason for the euro to underperform, certainly other g10 currencies. lisa: how reticent are they to the idea of following jay powell? steven: they have their own circumstances and the inflation wage dynamic is different in europe than it is in the u.s.. even within the ecb i suspect the discussion would have been do we wait another six months before this inflation has

consolidated to the downside? see more science that the labor market is softening? they may be tempted to move it up a little bit. the last couple of months have been very promising, lower than the u.s.. they can walk through the door if they want to. lisa: if the ecb does not follow the fed, people get really worried about an even deeper recession and it will be negative for the euro? steven: it is possible but that is going to be lagarde's job in the press conference to make sure no one gets the wrong impression.

given all the information that they have right now. i would say the last inflation numbers look very high given what has happened. the first thing i would look at is how they are marked down. tom: is not an easy call. china is the wildcard. what does the englander call for china in the next year? steven: there's a lot of -- to policymakers, they pushed things too far in the past and have regretted it so they may want to go slower. as far as cnh, we have seen it

relatively stable. it is not going to be a leader against the dollar but they will welcome other currencies are appreciating against the dollar. jonathan: ecb, federal reserve, first cut? yesterday it was ecb, what's the answer now? steven: i think it makes more sense that the ecb cuts first because their economics or wors e. we will have to see whether they choose that way. the fed has always been more aggressive in his reactions to the ecb. jonathan: steve, thank you buddy. it was good to check up. steve englander, thank you. the fed is going to hold on and

start cutting in june. just like that. lisa: what's a calendar for the ecb to get ahead of the fed? when would they have to cut? this is one of the questions we were hearing from the people. the timeline. tom: they don't have the luxury of getting ahead. forget about the war, finland, all the other politics. they don't have the vibrancy in the economy, they are in some sort of recession there. i don't think the analog comparison is there. jonathan: let's get a preview and checkup with maria tadeo. what are you expecting today? maria: those like ice has changed here in the past two

weeks, especially yesterday with the fed and that's a problem for the ecb when they have a monetary policy decision they know that a lot of the comfort -- and conversation will change. they talked about this higher for longer narrative and that has changed into cutting rates which is a question she will be asked and it's interesting to see if she can see that there is a pivot that they're trying to live with. this idea of a march cut if the economy deteriorates is not even a possibility. can she be in a position where that is even credible? lisa: are there whispers from the bank about how much pushback there would bank about because?

maria: the decision will be made and now it's about fine-tuning the press conference. there are members of the governing council beyond germany but including germany that would be cautious and worried about the idea of early because they could undo the work that they've done over the past year. they want to get inflation back to 2% which is why the forecast will matter but if you ask the german central bank if you're in a position to cut they would say absolutely not. jonathan: did the german banks seem angry as he was walking away? in the equity market, equity futures are still positive stateside. for the euro we are positive.

we will get a ton of headlines but rates are unchanged at 4.5. the deposit rate is at 4%. unchanged with a ton of headlines to get to. lisa: inflation has dropped in the ecb is emphasizing that gives you a sense of where the narrative is. they say the rate should be maintained for a long time which is pushing back against what we heard from the fed. this is going to stand out, inflation is likely to pick up near term which is the question if you see that happening, do they have the same luxury of pulling a powell and having a pivot towards rate cuts? jonathan: the governing council decided to keep the three key interest rates unchanged while inflation has dropped is likely to pick up again temporarily in the near term.

according to the latest expectations, inflation is expected to decline averaging 5.4 in 2023, 2 .7 and 24, and for 2020 61 .9 compared to the stop projections this is a downward provision for 2023 and 2024. the interest rate increases have been transmitted forcefully to the economy, dampening demand helping to push down inflation. they expect economic growth subdued in the near future but will recover because of rising real incomes. they seek growth picking up. here is the call for gdp, one

point 5% for 25 and 26. here is the commitment from the governing council to ensure that inflation returns to its 2% median in a timely manner. the governing council considers the key interest rates maintained at these levels will make a substantial contribution to this goal. future decisions will ensure the policy rates will be set at restrictive levels for as long as necessary. as i continue to read this statement, i don't hear chairman powell in the language of the ecb this morning. maria: if anyone was expecting in the ecb that would anchor onto the words of the fed yesterday. that's not the case. they want to bridge their target by 2025.

that's nearly two years from now. sufficiently restrictive but the question will be what's restrictive? if you believe that this would be an ecb that would provide a platform to pivot you don't see that in the statement. the question now is the press conference and she will be asked many times, what about cuts? but there is nothing that would suggest that this is an ecb that wants to follow the fed. they have always said they're not fed dependable will look at the data. tom: this is a clear statement of nominal gdp, dare i say they frame it out with some probability, nominal gdp. with all of your wonderful reporting from brussels, has europe escaped double-digit unemployment or a percent unemployment? is it a better employed europe given the lousy nominal gdp?

or are they going back to what they knew years ago? maria: you see an economy that has gone through so many challenges but when you look at the unemployment data you see that it continues to do well. we've talked about this many times. but going back to the question of gdp, the ecb has been criticized for being too optimistic about the resilience of the european economy and looking in inflation in a way where they don't believe it slow and fast enough. when it comes to gdp and growth the ecb is too optimistic. it will be interesting to see if they see that manifesting in the next few years but the criticism, the logic for early cut is that the economy is doing worse than what the ecb believes

it's doing. jonathan: we will catch up with you following the press conference. that news conference in 25 minutes with ecb president, christine lagarde. guilds are still lower on the session by 12 basis points, the euro is still stronger against the dollar at 4.5. when you read through the governor's language what i hear is hold. i don't hear the conversation about cutting that we heard from chairman powell. there is an opportunity so let's not prejudge the news conference but based on what we have read. it's not a repeat of the federal reserve. lisa: higher for longer was not the language the fed was using. to me, will the press conference have a different tone as they raced to adapt to a market that

has changed? tom: let's summarize this together. there was a book years ago, flying on one engine. it was a global investment strategist and she gave us a wonderful image summing up the fed, ecb, bank of england and 14 other central banks about investment strategy into 2024. somebody has to land the plane. after we saw the turbulence at 2:00, or this morning. how can we land the plane given the instability of the last 24 hours? elyse: it's no surprise to us that the b.o.b and ecb is on hold and we think the ecb is the

obvious candidate to deliver the first cut in light of the economic weakness you're seeing. lisa: this is an interesting point. i would expect the euro to strengthen dramatic on the heels of this in response to a more hawkish ecb than people expected. are you saying you don't believe them? elyse: i think the ecb has to continue to hold a hawkish posture given that wage growth has not rolled over in a convincing way. given the economic slowdown and nascent signs of economic life coming back i think the ecb will be the first to cut in the spring. jonathan: yesterday before chairman powell, why does the ecb not feel as credible knowing what is happening in the economy?

elyse: we are having conversations about this on the floor yesterday. what we learn from the fed is we have to start entertaining are both case a little more. we came into the decision on the front foot and encouraging investors to add back risk exposure and this underwrites our call. jonathan: what is the bull case? lisa: the s&p ends up before 5000. elyse: but we expect that at the second half of the year. jonathan: is there a risk we could be there in january based on what were saying? elyse: i think january feels aggressive. we have to see earnings come through and we are making the call that the earnings recession

is over and we will see rolling earnings recoveries but let's get through the fourth quarter reporting season. jonathan: is equal weighted and not market cap weighted? elyse: we want to make sure you have exposure to all 493 in the index but we are constructed on the magnificent seven. they are expected to grow more than 20% in 2024 and that's an exposure were encouraging investors to invest in. tom: we've never been here before, 6 trillion in cash, what happens? elyse: bonds are back on the table. there is still a trade to step into some duration and not plow into the equity market. some folks will remain reticent given where valuations are today. but given the cash flow relative

to 10 years ago where comfortable with today's valuations but we don't think that will drive the upside in the next months. jonathan: thank you for coming in. following the central banks reports. coming up, we will hear from alessia delongis. the rally continues, s&p positive, jobless claims, resale sales, those are up next. ♪ ♪ it's an amazing thing

when you show generosity

of spirit to someone. and you want people to be saved and to have a better life, then you don't stop. the idea that we have saved five million people's lives, it's overwhelming. it's everything. tom: bloomberg surveillance, how to synthesize all we have seen this tuesday, wednesday? it is happening in real time, but in 10 seconds here. which is more important claims or retail sales? lisa: retail sales, heading into the holiday where consumers are starting to push back. tom: here is the question with the chairman pause.

and we will pause as he tells us about the american economy. michael: it seems to be a little stronger than anticipated as retail sales rise .3% after a revised 2% down in october. take out autos and it's up to tents. you take out autos and gas and were up 6/10. gas always the driver, dropping away from the lower prices we've seen. retail control comes in stronger-than-expected, of 4/10. the expectation was for her to tents rise. -- .2 percent rise. jobless claims, 202,000, with no

jobless claims last week. that is down from the month before. overall, continuing claims number and finally we have import prices down 4/10. we have another gdp number and it was a 1.2% and that will have applications for the markets in terms of pricing. but they think the fed is going to do.

tom: thank you so much, after what we've seen in the past 18 hours a modest giveback and i thought equities would go down a little bit. they show the persistency of a nicely employed america. lisa: we were expecting a bigger move, one that we believed in the data dependent federal reserve. evidently, people don't think this fed is as data dependent because we saw stronger-than-expected retail sales and after this tremendous volume, it tells you the

narrative has shifted so hard with the idea that the fed's goal is to cut rates sooner rather than later has permeated everything. tom: 2.37 from a 5%, the changes that they have wrought. the 10 year yield up to the brammo level. two hours we went off air, there is a little ebb in the bond market. i will leave it with currency

it with currency weakness. stephanie roth had a very busy weekend. lisa: they are really leaning into the soft landing narrative. do you have a more optimistic view they can achieve a soft landing after yesterday? then the day before? >> i just have more conviction in a soft landing. our base case was q3 of next year and heading into yesterday we posted into q2 and that makes the runway even wider for a

soft landing. lisa: for you ok with how chairman powell responded to his questions yesterday? stephanie: he did not talk about market conditions, financial conditions because they fees. tom: i have really failed at the core theme that was alluded to by the chairman we will go to michael mckee before we get to christine lagarde in frankfurt. you're quite good at this which is interpreting a free ratio productivity dynamic of capital and labor and the pixie dust of american efficiency. how would you determine better productivity? do they have confidence in productivity? stephanie: i think there is

real scope for that. the economy has learned to operate with you were workers than what the pre-covid trend would suggest. tom: are you guesstimating we grossly underestimate the labor dynamic? with the comment about more unemployment in the middle age bracket but are we completely underestimating labor? stephanie: the biggest question is the labor supply. it was a combination of immigration and reentry. tom: it's the women coming back into the labor market, is jaw-dropping. lisa: p these numbers. initial jobless claims came in

below expectation. that's a good downward surprise. retail sales, month over month, the control group came in 0.4% with the expectation is 0.2 percent. when you strip out autos and gas, do you get a sense that the consumer is not cracking at all? they still have money in real wages going up will continue to fuel the spending spree underpinning the recovery? stephanie: the consumer is doing just fine. we did get some downward revision to the prior months. the consumer seems fine. you see some delinquencies in vulnerable spots but with rates coming down and conditions easing, maybe that's the end of that? lisa: what would you see took question the soft landing thesis? where with the weakness come from? stephanie: there are two things

to watch for. as long as consumers are employed they will keep spending but the cracks forming within the consumer, that keeps me looking closely. some delinquencies on the lower and our younger borrowers it feels very late cycle to me. but overall, the consumer feels fine. tom: all of us got the third quarter wrong. we got the shock of an optimistic number. with the 3% gdp, 2.8 those are good numbers. stephanie: i think we will track at 2%. tom: can we get above 3%? lisa: i don't think so. tom: on trade, the wildcard next year's china. the great question is, do we

underestimate china once again? the export import dynamic as to gdp? stephanie: china can be a bit of a boost i don't think it will be dramatic. will we end up with cross port, import tariffs that's a real issue depending on the political cycle. everyone is talking about restoring but there aren't signs of it yet. were still importing disinflation. were not manufacturing all these goods here. lisa: who was more right the fed projecting three rate cuts or the market pricing six rate cuts? stephanie: the fed, and thus we get a recession. lisa: that seems the most likely being less than what the market is expecting? stephanie: the market is not pricing the fed getting down to

2.5, 3%. that's where the rest of the market could price two. tom: stephanie roth -- with a perfect summary. we are so fortunate with the head spinning blur of the fed, bank of england, ecb to have with us michael mckee. he joins us now as we go to christine lagarde. i made fun of it yesterday i had used of silver what was going on in your press conference. it's almost historic times. why are we seeing this with powell, bailey and lagarde? mike: i think what is happening is we're seeing inflation fall faster in the united states than in other places.

the central banks are acknowledging that inflation is coming down in their monetary policies of worked and there doesn't seem to be a reason to raise rates further. tom: if we see the mortgage rate commend the dynamics of the inflation surge we saw, will there be a roaring 20 20's? mike: we may see inflation rise at the beginning of the year because of base effects from low inflation but the way people are spending, we are seeing solid but small gains. not the outsized gains we saw earlier this year. part of that was inflation driven in part of that was a hangover from the pandemic. but we are beginning to see people get into the normal 2019

spending patterns. retail sales, everything was pretty much as you would expect with gasoline prices pushing everything down. clothing stores were buying up clothes and toys. tom: imagine those refrigerators? lisa: ha ha. i bought a refrigerator and he will never let me live it down. how much is this trend and not transitory? mike: it is, transitory was correct it was just long transitory. the things the fed thought would happen right after the pandemic are finally happening now where labor and good supplies are

coming back into balance and that is bringing down inflation. thus what really pushed it up when you look back with a much clearer picture of what's happening. lisa: we still have stephanie roth with us and i'm wondering will people the packet transitory is the right call bit too early? stephanie: i think so, the economy is back to normal and were back to the old economy where inflation is running at 2%. tom: one more question as we go to christine lagarde. i look at the r-star debate, does europe have an r-star that's a lower than america? mike: they do in the new york fed calculates side as well. but their potential growth rate is lower in productivity is

lower. r-star will be lower there and they have a demographic that skews older than the united states. the problem for the u.s. and the ecb is where do you think that r-star is? where is that neutral rate? it seems to be higher but will it come down as the economy grows at a slower rate? tom: we are waiting for the ecb and they do it differently. they do have follow-up questions . it's going to be as original as the shock we saw yesterday. lisa: the ecb came out and said they would be completely keeping rates high in the market says yeah right. we think he will cut before the federal reserve and that's notable at a time when you have a real different tone and don't

hear christine lagarde going along with jay powell. tom: the russell 2000 up almost 2%. that shocks me, futures are up 22 on the s&p and 10 year adjusted really old, it went up after retail sales. the higher real yield in his come down to 1.75. they do this differently in europe. they line up with photographers and three podiums. christine lagarde, she is the president of the ecb and there will be a statement in the q&a. lisa: which will be really interesting this time around. will she hold the line, restrictive until we get inflation under control or will

she say inflation is coming down and we can cut rates soon? tom: inflation is 5% while it still, two, three maybe four in america. we bring you worldwide on bloomberg television and radio the president of the ecb, christine lagarde. >> good afternoon and welcome to our press conference. on stage we have president christine lagarde and vice president. my name is wolfgang fritzler and i welcome the participants online, and with that i would like to handed over to president lagarde. pres lagarde: i want to

preface a statement by asking for your indulgence. i would not have wanted to miss this lasts press conference nor the council meeting of yesterday and today but if i start coughing my lungs out, at that point my vice president will agree that he will take over. it's as simple aside. i am not contagious, rest assured it's just bronchitis. so, good afternoon. the vice president and i welcome all of you to our press conference. the governing council today decided to keep the three key interest rates unchanged. while inflation has dropped in recent months, it is likely to pick up again temporarily in the near term. according to the latest style

projections for the euro area, inflation is expected to decline gradually over the course of next year before approaching our 2% target in 2025. overall, staff expects headline inflation of 5.4% in 2023, 2 .7% in 2024, 2.1% in 2025 and 1.9% in 2026. compared with the september stop projections, this amounts to a downward provision for 2023 and 2024. underlying inflation has eased further but domestic price pressures remain elevated primarily owing to strong growth

in labor costs. we expect inflation to average 5% and 23, 2 .7 and 24, 2.3 and 25 and 2.1 and 26. our past interest rate increases continue to be transmitted into the economy. tighter financing conditions are dampening demand and this is helping to push down inflation.

the euro system staff

i set out in a press release available on our website. i will now outline in more details how we see the economy and inflation developing, and will then explain our assessment of financial and monetary conditions. so turning to the economic activity. the euro area economy contracted slightly in the third quarter, mostly owing to a decline in inventories, tighter financial conditions are subdued and subdued. foreign demand are likely to continue weighing on economic activity in the near tum. prospects are especially weak

for construction and manufacturing. the two sectors most affected by higher interest rates. service activity is also set to soften in the coming months. this is due to spillovers from weaker industrial activity and fading effects from the reopening of the economy and the broadening impact of tighter financing conditions. the labor market continues to support the economy. the unemployment rate stood at 6.5% in october, and employment grew by zero 2% over the third quarter. at the same time, the weaker economy is dampening the demand for workers, with firms advertising fewer vacancies in recent months. moreover, even though more

people are in work, the total number of hours worked edged down by 0.1% in the third quarter as the energy crisis fades. governments should continue to roll back the related support measures. this is essential to avoid driving up medium firm inflationary pressures, which would otherwise call for even tighter monetary policy. fiscal policies should be designed to make our economy more productive and to gradually bring down high public debt. structural reforms and investments to enhance the euro area's supply capacity, which would be supported by the full implementation of the next generation eu program, can help reduce price pressures in the medium tum. while supporting the green and

digital transitions to that end, it is important to swiftly agree on the reform of the eu's economic governance framework. moreover, it is imperative that progress towards capital markets union and the completion of the banking union be accelerated. so let's look at inflation. inflation dropped over the past two months, falling to an annual rate of 2.4% in november, according to eurostat. flash release. this decline was broad based energy price inflation fell further and food price inflation also came down. despite remaining relatively high overall. this month, december inflation

is likely to pick up on account of an upward base effect for the cost of energy. in 2024. we expect inflation to decline more slowly, more slowly, because of further upward base effects and the phasing out of past fiscal measures aimed at limiting the repercussions of the energy price shock. inflation, excluding energy and food, dropped by almost a full percentage point over the past two months, falling to 3.6% in november. this reflects improving supply conditions, the fading effects of the past energy shock and the impact of tighter monetary policy on demand and on the pricing power of firms. the inflation rates for goods

and services fell, respectively. to 2.9% and 4%. all measures of underlying inflation declined in october. but domestic price pressures remained elevated, chiefly because of strong wage growth, together with falling productivity. measures of longer tum inflation expectations mostly stand around 2%, with some market based indicators of inflation compensation declining from elevated levels. so what's our risk assessment? the risks to economic growth remain tilted to the downside. growth could be lower if the effects of monetary policy turn out stronger than expected. a weaker world economy or a

further slowdown in global trade would also weigh on euro area growth. russia's unjustified war against ukraine and the tragic conflict in the middle east are key sources of geopolitical risk. this may result in firms and households becoming less confident about the future. growth could be higher if rising real incomes raise spending by more than anticipated, or the world economy grows more strongly than expected. upside risks to inflation include the heightened geopolitical tensions, which could raise energy prices in the near tum, and extreme weather events, which could drive up food prices.

inflation could also turn out higher than anticipated if inflation expectations were to move above our target, or if wages or profit margins increased by more than expected. by contrast, inflation may surprise on the downside side, if monetary policy dampens demand by more than expected of the economic environment in the rest of the world, and in the rest of the world, worsened unexpectedly, potentially owing in part to the recent rise in geopolitical risks. so let's now turn to the financial and monetary conditions. >>