>> right now, inflation's job number one. >> i do not think they are pivoting right here. >> investors should recognize that there have been a lot of ups and downs. >> the market already priced in a lot of damage. >> recession is the most likely outcome. jonathan: coming off the biggest

month of gains. live from new york city, good morning. this is bloomberg surveillance. futures down on the s&p. a big week ahead for economic data. tom: what is interesting to me is not the jobs report on friday but will be have a negative inflation adjustment yield? that would be the first shock of august. jonathan: does the fed have to put a little bit more weight back into the economy? tom: i do not think they can overthink that. do we want a fed trying to manipulate the equity markets?

jonathan: the wishful thinking is maybe a little counterproductive. lisa: it is their job. they are trying to decrease demand and lower valuations. but will it work? we have heard this from different fed officials. it is unclear if we will have the same impact on the market. there is a belief in the markets that the fed already -- it is going to adjust accordingly. it raises the question of whether it is counterproductive because we end up prolonging this whole process, this back

and forth. jonathan: it makes it less likely that you will get a rally. futures are down .2%. futures on the nasdaq i down. there is some dollar weakness out there. lisa: take a look at some of the manufacturing data out of europe. it has been bleak. showing a contraction in the factory output. this was a surprise for a lot of people. i do think it is important. it is a slower newsday but still, this is a linchpin on where we are in this cycle. it is not going to services. we are seeing weaker data.

is it holding up despite some of the weakness in demand? i am very much focused on the geopolitics. john mentioned cnn has it but nancy pelosi will stop in taiwan for a night. she is currently in singapore for this trip. how much does this ignite is some sort of altercation? what does it mean when their army comes out and says we will not sit idly by if nancy pelosi lands in taiwan? a slew of energy companies. how much do we see shale report record profits? what do they do with them as this becomes an increasingly political issue? do they just deliver them to shareholders?

jonathan: lisa, thank you. what a move we have had in july. after the lows of june, we have valued more than 16%. the head of equity research joins us right now. >> i do not think there are any victory laps in these markets. it did not take a lot. sentiment to the upside. any victory laps are short-lived these days. tom: looking at the move that we had, when you synthesize all the research, can you say that it is a bull market? >> i think we see some room for the market to move higher. i do not think i would call it a bull market.

tom: how do you know if it is able market? that is a great question. we look for the market. basically, people who have been selling winners. we probably see it as incrementally positive, but until the fed is comfortable and they are willing to back off a little bit, it is hard to call for a market like that. lisa: there was a story that caught my attention. they had to close out over the last few weeks and it was fueling the rally. how is that driving the market? >> if you look at the performance, they have rallied considerably in july.

i think it speaks to the bigger picture. certainly not as strong as we have seen, but the fed kind of stayed on script. it has -- i do not think it has drawn a lot of new investors, but as scared some out. lisa: there was this exhaustion from what we have been seeing and in -- and uncertainty. is it the economic data? or is it the line by line reports that we are getting from a lot of companies as they report earnings? >> expectations have been so negative. about a 5% upside has really helped.

their view has been that it was so far off and huge that they had to prioritize that. with a has sacrificed is that they have introduced a tail risk , so it will be that back and forth and how they are managing risks. the real challenge will be if we see weakness, how will the communication evolve? the tail risk is slower and in the future, so they will prioritize inflation. that will be the number one focus for us as we get through earnings. tom: for people who have missed the equity market completely, the few people who have actually completely missed the equity

market, how do you begin to get on board? do you have such an enthusiasm that you just dive in? >> we are not in the diving camp right now. i think you need to enter through higher-quality companies. they fall into that category, so you kind of want to be careful. the investor conversation is not if there is a recession it is weighing and how much. tom: she is always so good with

the reaction functions, but you have to believe we want to hear from mr. bullock to focus on inflation. lisa: the answer is no. they hate this response and i think that is an accurate assumption. how do they say that the economy is doing ok but you guys got it wrong. jonathan: isn't that the message? chairman powell was focused on the output data. we come up with somebody over the weekend but the majority of the questions were about this recession story. did not actually ask much about inflation, then he started to

lean on this concept of neutral. i think that is where you get some pushback in the coming weeks. it resonates with a lot of people. how can we be at neutral when inflation is at 9%? tom: i looked at the inflation chart back to 1914 and they had that on bloomberg from the u.s. government and we are in a unique position right now. it is much worse than what we saw. the depths of duration really screams for action. jonathan: 250,000. tom: i did not know that was the number. jonathan: 200 seems to be the ballpark figure that we are looking for. futures down with tom keene and

jonathan ferro. good morning. will the speaker of the house visit taiwan? we will catch up, up next. >> keeping you up-to-date with the news from around the world. china has been warning that the military would take action if nancy pelosi makes a landmark visit to taiwan. they said they will not sit idly by if she travels there. the architect of the bill getting on board. the measure does not raise taxes, but they do not divulge whether she will support the bill or not. the bank of england is expected to step up its fight against

inflation in the coming weeks. it will join other banks by raising rates by a half percentage point. it's earnings were better than expected. pushing back by its largest shareholder. being remembered as the greatest winner in the history of basketball. 11 nba titles and 13 seasons. two titles at the university of san francisco and an olympic old metal. -- gold-medal. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

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>> this is all about the wearable position that people are now because of the inflation cost, whether it be gasoline,

food pricing or energy pricing, it is driving inflation. this is aggressively producing more energy to get more supply to get the prices down. jonathan: that was over the weekend. good morning. futures are down just a touch. no drama here in the market. drama, potentially in taiwan. the latest from cnn. u.s. house speaker nancy pelosi is expected to visit taiwan as part of the tour of asia. tom: the secretary will be with us later on surveillance this

morning. we will digress. watching the pelosi story. with the attention that john just mentioned, i think we need to understand that a woman who was a young girl who lived and abandoned gas station picked herself up with three, four and five degrees. she holds court as the senator of arizona. who has to sell to the senator of arizona and what is she listening forefront her colleague from west virginia? >> he went out to make a point, talking about the fact that her agenda that she has been pushing for is reflected in this bill.

he talked about the fact that she did not want to raise taxes. he weighed into and leaned into the fact that this would give medicare the road to negotiate prices lower. lower prescription drugs. we have not yet heard from her office, except for the fact that she said that they will not talk about it until they read the text and that it needs to be scrubbed to make sure that there is no non-budgetary items in a. we may not know if kyrsten sinema is a yes or a no. the white house has gotten burned before and they need every single senator to sign up for this. tom: the ncaa is that it is more

democratic. what are the local politics that affect this big, national decision? >> arizona is key to bring up. this is a fight for the republican gop, especially there. president biden did win arizona saying that the election was stolen. kyrsten sinema has had a lot of blowback from progressives and arizona. you have seen it when build back better was in the price, forcing her to sign up for this, but she is very modern and a little bit more to the right when it comes to taxes. she has been against closing the loophole on carried interest. this will be potentially the key discussion to get her on the

finish line. lisa: i think this is a fascinating story. he has always been a waffling member. you do see him being the front runner, even pushing back against a study that came out. this inflation relief bill would increase marginally, inflation, before reducing it on the margins. how much of this is a surprise? >> these are people he has had discussions within in the past. he pointed to a lot of the investment that would go into that space. he says it will end up bringing down prices. for joe manchin come his team will say that this is not a reversal, that they have always been engaged.

the reason he kept it a small circle -- many people who are usually not shocked where quite literally shocked that this deal was able to come to fruition. 70 times, he let members of his party down because he could not go as far as the progressives wanted him to. he thinks that this is not about spending but about investment. for him, he says it was not a reversal. jonathan: all at the same time. when does that happen? >> closer to the midterms. tom: it will be fascinating to see.

john, as we speak of washington, can i note that the real yield will down from where it was on july 29 and we will possibly head for a negative statistic? jonathan: your disagreement earlier with lisa about what is driving the equity market -- we all have to agree that really yields -- that story and how it has faded has been a big factor in what has happened in this valley. a lot of it is the pendant on where they have shifted. tom: part of inflation coming down is demand structure. when prices come up, demand slips away. jonathan: from what?

tom: this goes to the important point. it is no news monday, i get that. but what about the cpi report? jonathan: we will see if we will keep this go, go, go with the fed. lisa: it could spread the markets in the opposite direction. honestly, john says that you do not disagree, but i say that you do. 100%.

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jonathan: from new york city this morning, good morning. after a massive month of the gains, we have pulled back just a little bit, down .1%. looking ahead to more economic data, the manufacturing coming out. then we get cpi's week.

august 10 before the payrolls this friday. building off of the lows. yields have come close to 264. another part of the bond market has backed away in a massive way. the italian 10 year yield has gone all the way back here to 294. can i just say that maybe that is ray of light, the fact that we do not have this risk bubbling away as the same time as the economy. tom: i agree that there is so much gloom about europe. i wonder what the effect is in some of those geographies.

it is an act salute boom economy. jonathan: they cut their target from 105 to $.99. the market still reflects how much pain that economy is about to go through. tom: we are watching the 10 year yield -- real yield as well. lisa: it is green. i am talking about stocks that are gaining. they came out and said they would reinstate their dividends, starting next year. they beat dividends. those shares up in the premarket. there are a number of

acquisitions this morning. it is interesting given what we have seen. global payments said they would expand in europe and expanded in south america. those shares up 2%. valvoline said it would have its petroleum unit for $2.6 billion. this is at the beginning of a slew of acquisition, especially with that free cash flow. it is interesting to see that prices are down. exxon and mobil reflecting that. those shares are up, even after a monster rally this year. the expectation is for record profit when they have reported for a decade or more, losses,

debtholders wondering whether they are going to get paid back. the videogame maker has already gained 20%. can they confirm that with a robust set of projections? tom: a really, really sharp note about what to watch as we move into august. it may take you to marge. claims exploded higher. it is a huge statistic and we have come down. the survey this thursday. good morning. you say it is the statistic that matters. you benchmark and at 280,000. how close are we are about a

quarter away from getting to a level that more clearly predicts a recession as defined by the body that is the arbiter. claims bottom around nine to 25 months ahead of a recession. at a historically low level, but they have been creeping up. there is a seasonal component to that. we are trying to differentiate between something that is more cyclical and more seasonal. tom: are they just waiting or do they act before? >> they are acting and i think this is the big question that we saw after wednesday. the markets are pricing in rate cut.

they are having to diverge significantly. the fed forward guidance piece to this. but i think that will be at the core of the fed speech this week. they are looking at market reaction and the higher inflation is a game changer. you cannot price in the same fed that we had in 2018. as a first sign of weakness, we are already seeing that the fed will not be able to come in with the same speed and flexibility. jonathan: what is driving growth here? >> i think recession debate is really taking the oxygen away from what we need to be focused on because the start date is

only good for years later, when we are comparing it to other recessions. the economy is weakening. job losses are the hallmark of the classic definition of recession. they are a hallmark component of that and looking forward, there is probably more weakness ahead. it is shaping up to be positive, a small positive, but i think there is another issue out there to drop, and it is the jobs. the fed has said that about 10 times that they are going to continue to address inflation until they see a problem with the jobs. jonathan: it raises the question of when you expect the that

weakness. >> it is too soon. we have seen this. it is something that i do not expect to materialize until the fourth quarter. lisa: mother inflation becomes less of the obvious goal if the market is struggling. do you think when we get there that inflation will come down significantly to a level where it will be a more comfortable discussion to have the echo >> no. so much has to go right to get inflation back down to anything close. either deep energy price inflation, rent to turn around and durable deflation. all those components will be required. right now it is hard to get it

below 7%. my forecast is around 6%. it is looking increasingly optimistic. you get these reports full of upside the prizes. it is a lot of economic uncertainty over the next year and this is something -- equity markets just have not wrapped their head around it. they are looking at a v-shaped recovery and i would argue that we have not in the bottom of that. lisa: lady summers came out and said it was indefensible. where do you see this idea of neutral evening out? >> they are based on the models. they really take for granted this deflation from china. in the face of deglobalization,

neutral is likely higher. there models have not caught up to that yet. it is going to answer be a higher terminal rate. it might be 3.5%, but even that would work wire a more hawkish approach. jonathan: the fact that we are debating, we have or have not a recession on our hands. i think this is a good way to wrap things up. affirming that long-term mutual rate around 2.5%. it anchors mortgage rates, which supports housing. they are not sure how to make markets do what they want. tom: how do you get the terminal rate up?

the way you do it on a very course basis is to look at the service inflation dynamic versus the global u.s. goods disinflation dynamic. if you get a little bit of a goods permanency above zero and a persistency, you do not get back to 2%. jonathan: at the moment, 8.8%, down from 9.1. the estimate is 6.2, up from 5.9. this market will be focused on the month over month core figure to get a feel for how broad this story is. lisa: the conversation becomes more tricky when it is not just the direction of travel.

this is a level of nuance that we do not understand how it will be received. jonathan: futures down .1%. this is bloomberg. >> keeping you up-to-date with news from around the world. president biden is isolating at the white house after testing positive again for covid. he has a rebound case that is seen in people that take the antiviral drug paxlovid. the dental from massive flooding has risen and one of these are expected. recovery efforts slowed the outlook for factories around the globe has gotten worse. activity plunged in july.

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>> it continues to be -- we are some quarters away from saying we are through the worst of it. we think we will see some furtherance on that portfolio, but we are managing it. in an overall percentage, we are looking very modest. jonathan: the cfl on the situation and china at the moment. future is unchanged on the nasdaq. you know the approach to the data over the last decade or so.

49 was the official managing index. that number is in contraction for the month of july. tom: 10:00 a.m.? we will look for that as well. dr. goodell is here on a ratio. >> that is what i am looking at. we are talking about the contraction. the sentiment has been worsening, which brings me to my chart of the day, despite the idea that this growth proxy is largely driven by chinese demand and relative to gold. we are looking at a three year. you see this massive

acceleration until 2021 and then it stagnates until june 2022. you see this steep decline. a lot of it is coming from china. remember that the growth did hold up the global economy and now we are seeing recession in the u.s. as well it is china driving this particular ratio. tom: a lot of different ideas here. expected to attend. we have turned to that now. i have to go to the reality. to the romance of hong kong, in olden days, the west would show the flag in the harbor of hong kong, a beautiful scene from the

movies and it is gone. what is the linkage of him to the navy? >> those courtesy calls are certainly long gone. this heightened tension just to see how the visit plays out. you mentioned cnn. we had some hawkish comments today. the daily briefing saying they would not stand idly by. they are all standing pretty hawkish. morning about a powder keg. it is all stacking up now. quite a lot of power from the political aspect as well. there will be -- it will have an

impact on investors. there could be an impact. i think a lot of eyes are on whether or not figure pelosi does go ahead with the agreement and the extent of china's response to them. lisa: also how much is playing into the hardline on taiwan. how can you connect the two, given this incredibly weak data? >> last december, it seemed -- they had some stability. we saw it again in the numbers. very surprisingly back in negative territory. it was quite broad-based.

reduction, new orders -- not just a story about supply chain. experts were a big story for the economic recovery over the last few years. on the others, the top 100 developers continue to fall almost 40% comes they would have to say it is certainly not going the way that the government wanted. when you look at it, it is not good. things are not yet stable. they are saying that it is in the existing government's rhetoric.

lisa: give us a sense of how much support there is in including it in the mainland. it's >> all of the rhetoric -- it all gets whipped up. any slight against china is a site against the 1.4 billion people of china. the warnings have been very sharp. we will have to see how they do. jonathan: endocrine there on the latest. timing the markets was hired. looking nice. a debt offering, according to our reporting. i'm looking for a little bit

more detail on this. you know that they are very good at coming just the right time. tom: this is around huge titanic free. 5% debt. it is actually a pretty big number. they built it out over the years, but with the size, you have 95 billion in long-term debts. 3.9% and 25 billion in short-term debts. almost the same as you and me combined. jonathan: there was a chart for companies like capital and it put out the issues. guess what. every single time, almost ink on the money. lisa: they did a great job.

it raises the question of was the rally and credit -- it was a monumental rally. what you saw was not only interest rates fell, but so did the potential perceived credit risk at a time when people were worried about recession. is that true? jonathan: more, still to come after a monster rally. kicking off august with futures slightly negative. this is bloomberg. how will your business adapt to change? you could hire an office full of peyton mannings. what's up, peyton? good morning, peyton. hold for peyton. they'd huddle.... welcome to the peytonverse. such a visionary. game plan... you go. no, you go! and call audibles... double our investment in omaha! omaha! omaha! omaha! or you could use workday.

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>> we heard a lot of talk of recession but we have not seen any indication in the results. >> we should not obsess over whether there is a recession, we should