>> green on the screen with the stock market but there will be another bout of repricing. i'm kriti gupta and bloomberg markets starts right now. the stock market is rallying in defense of tech leading the way. the nasdaq outperforming with 2% gains in the nasdaq and one point 5% by the s&p 500. all the action was really in the bond market. after yesterday's massive move, the second-largest since the

covid-19 pandemic really began. volatility and the volatility -- the nominal yield is not the way to look at it. 36 basis points, and the recession calls for 50 basis point inversions. we are inching closer and closer. it is opec day and we had the meeting of the brent crude prices. then we had inventory data that came right back down to a 97 handle. some of the action we are seeing is traders pricing and economic data better than expected. kathy wade on the pace of economic growth. >> it is not anywhere near the economic crisis or the covid -- covid recession. it would be a moderate recession in our opinion but i think if we do fall into a recession it

could be white shallow. we are not in the camp that thinks unemployment needs to go sharply higher to bring inflation down. we are already seeing inflation trending lower. kriti: for more on the hawkish comments, bloomberg international economics and policy correspondent michael mckee. this is kind of a wild story. it you have a market that is trying to reprice what they kind of saw on the dovish pivot. how much of what the federal governors have really said, how much is really new? >> not a lot is really new. they made the case before. they saw what is happening in the markets. they are hoping for a recession so that the fed will cut rates. but the fed is determined to keep rates rising as long as inflation keeps rising. we did get good news today.

the services index comes in much stronger than expected and the prices paid number drop significantly. it is still very high but it is down. the manufacturing number also felt. -- fell. a be some price pressures are coming off, but -- maybe some price pressures are coming off, but as you mentioned, the s&p pmi although they were still negative, being up. it looks like it is kind of in conflict the idea that we will get a recession. all the data are coming in better. it's hard to know at this point which one will turn out to be right. you're correct that the fed is pushing back hard. kriti: it's the services data that stood out to me and came in a whole lot stronger than expected. payroll is friday and that is the big one. how high can on a plummet or should unemployment go to ease -- how high can unemployment or

should unemployment go to ease the pressures? michael: jay powell thought between 4.1% and 4.5% would be a lot. jim bullard thinking it's in that range. the fed is below neutral right now in opposition to what powell said. he thinks it needs to go as high as 4%, the fed funds rate to push unemployment up even more. larry summers is arguing 5.5% or more. now there is an argument between him and chris wallace that we don't need to go that high. we've never been in this situation before and it will take a while to figure it out. kriti: always reassuring, bloomberg's michael mckee. let's push now to market reaction. the libor rate rose for the fourth straight session, now the highest since november of 2008 following the hawkish comments from the fed reserve officials. alex, thank you for joining us. you have a long history of

reporting on these markets. walk us through the market reaction. how justified is this? will we see more of that bond volatility? alex: the interesting thing is that libor i don't think is a leading indicator anymore. the way the methodology has been restructured in the post manipulation years, it's using a trait to underlie. one day fed bets are going higher, those will feed back into the life or fixing so libor will then move higher. i think it's more of a trailing indicator. the interesting thing is that we watch very closely. what that is telling me is that as traders bet on treasury, betting on the fed be in more hawkish. you will see a demand for overnight borrowing.

that is actually going to push repo rates lower. and that we also need to keep watching as well. june 30, 2023. we watch them both in tandem. we are watching to see where we wind up. kriti: it's not just the bond volatility on these comments, it is a question of liquidity when you look at the bond market. talk to us about the liquidity picture in the bond market right now. alex: oh, man. liquidity, you talk to everybody on the street about this and it is not great. one of the things we're hoping to get out of the federal reserve meeting last week is the press conference. how are they thinking about

treasury market? what are they looking for that things will mediate in the treasury market. will it be enough? and the pace of the quantitative tightening program picks up. these are things that we will get a bit more guidance on. the treasury in their funding announcement today, it was discussed in the buyback where you replace them with something else as a way to help treasury market functioning. it is such a ways away from any concrete decision on any of this. the treasury bill market is very liquid and part of the treasury pole. it could be as wide as 10 business points. that is huge for a liquid market.

everybody is very concerned right now. you know, it is a lot. and i think everyone is just frustrated that we are not getting the same sort of concern coming out of the official sector that a lot of people can see. kriti: cameron on the ny team brought up the point. and what the dot plot suggests can create a stage for that bond volatility. thank you as always for that context. a let's get more on the fed repricing. joining us now is the chief economist. that the fed dot plot a so why that bond volatility is almost inevitable.

>> i think you hit on an interesting note that i think is true. in the market is anticipating that rates will stay high until they go low or until they are reversed. there is a big difference between those two and it anchors into 2023. this is the reason it could hold on for longer and it creates some of the volatility that we have in the marketplace because it is a big that being placed out there. kriti: another major call being made will be 5% to 6%. do you agree with that? >> a terminal rate will be the same people that gave secular stagnation. and that did not turn out so well. at this particular juncture, making those calls without seeing the way it unfolds is very tall order and i think it pushes beyond some levels that

we feel are consistent with the long economy. i think any analysis that tries to go back is running into substantial amounts of disconnect to the reality. and you throw it all on quantitative tightening which is adding to the dislocations and the look at the in the marketplace. kriti: i'm that you mentioned the liquidity picture. it creates this magnified move in the bond market. let's push this ahead, payroll numbers and getting data nonstop. mike mckee pointed out that it is extremely strong.

>> we had two negative quarters of gdp and recessions are considered to be a broad-based contraction in the economy. that is where the argument comes in. employment numbers and retail sales numbers are two of the big six components which are not signaling the recession. and therefore, the contraction could occur without a recession. once you look at the data we are experiencing and you see how it gets revised over time, you may discover things aren't as rosy as they currently would seem. the debate shifts to the payroll numbers and the cpi. i think the payroll numbers, the jobless rate numbers will all keep this debate and even though the economy has already contracted for two consecutive quarters. kriti: how high does the

unemployment number have to get for the federal reserve. >> i think it needs to get to 4.5 percent. that is the estimate of the natural rate of unemployment. and they have to get back to that level. that is why you have bullard, powell, and that is their internal assumption. and therefore you have two see the labor market has come down to some semblance of normality where you can assume declining headline inflation will manifest itself in declining core inflation over time. kriti: that is the amount we need on unemployment to get a little bit of normal. time now for bloomberg's first word news with mark crumpton. mark: romania's prime minister is warning nato allies they will have to maintain an expanded true presence on the eastern flank.

they said it was wishful thinking to expect relations. the white house's senior advisor for global energy and security. they say the message will remain the same. >> to be able to make sure the global economy has what it needs to continue to grow. both the sovereign in the private company.

jones is a conspiracy theorist who has repeatedly pointed to false claims that the shooting rampage was a hoax. parents say the actions put them through a living hell of death threats, harassment, and trauma. global news 24 hours a day on air and on quicktake powered by more than 27 hundred journalists and analysts in more than 120 countries. i'm mark crumpton. this is bloomberg. ♪

kriti: this is bloomberg markets. u.s. house speaker nancy pelosi is wrapping up her asian trip with stops in south korea and japan but her main focus was the taiwan stop where she met lawmakers and taiwan's president. john authers wrote a fascinating column today almost connecting the dots between what was going on in taiwan and geopolitics

with the volatility we see in the bond market as well. let's start with geopolitics. a lot of concerns about the taiwan strait. 88% of the largest ships cross here. now you have military drills in the region. it feels like deja vu from the trade war. john: it is potentially that much scarier because there is a suggestion that a hot war could happen. and in the case of taiwan, we do need their semiconductors. they've got a lot of them. china would like to compete with them anyway but they are far more important even than ukraine. so yes, the risks are a trade war combined with ukraine. kriti: you are also seeing the opposite trade relative to the trade war. and what we saw back then, i was sitting right next to you. and what we see is the massive end of the bond markets, and

what comes to the chip sector in light of these headlines. yields skyrocketing higher alongside commentary. and into the chip sector that has to do with inflation trade. john: there is a complicated story where there is a belief that there will be scarce to help those countries extremely. it is tasteful. it makes some kind of sense in the margin. the real yields go back negative for 10 year, which is extraordinary given how hard the fed is trying to make conditions tighter. it is obvious that people have not really factored it in.

the u.s. congress is playing, trying to land in taiwan. basically as soon as he had arrived unscathed in taiwan, he made a big relief rally. and one that bothers me, -- kriti: let's talk about the bond market because he did see the bond market react to nancy pelosi as well. and you saw the fed speak as well. you pointed out that the move you saw yesterday was the second largest move we have seen since the covid unplugged pandemic. the market was repricing for 75 basis points. is the market repricing for 75 in september. john: frankly, it should not have written in the belief that

we are in the presence of a major fed moment never made sense to me. we are seeing the return of something like sense or sensibility. if you take a comparison, i think it is the 2013 take which has been very similar to the way that angst have happened so far this year. the fed wants the real yield to go up, not down. and we see that, it might be very surprised if real yield doesn't somehow find a way to move up again. kriti: and that was set the stage for a bond case if there is one. bloomberg's john authers. still ahead, china hopes to reopen their gambling hub in macau. we get the latest on covid in the region from the john hopkins center for health securities. this is bloomberg. ♪ how will your business adapt to change? you could hire an office full of peyton mannings.

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kriti: this is bloomberg markets. i'm kriti grouped up. it china will resume quarantine free travel from macau as the city recovers from its worst ever covid-19 outbreak. joining us is senior scholar at the johns hopkins center for health security at the bloomberg school of public health. thank you for joining us. this is a pretty big moment when it comes to china's policy and when it comes to covid as well. i'm curious on the timeframe it will take coming in and out of these covid lockdowns. will this policy go away anytime soon? gigi: we have to wait and see but it is certainly encouraging news that the strategy is being offered. it is something workable but will not last into the future. kriti: what does that mean when it comes to the science of it? when you look at europe and travel restrictions in the u.s.

or lack thereof, whereas the quarantine restrictions going into china and taiwan, they are completely different. is there any sign that that is the right approach to take? gigi: we are at a different spot from the beginning of the pandemic or they are going to facing the virus with. people are vaccinated. different kinds of vaccines. people have gotten covid sometimes multiple times. some appear to be better protected against future variants because of a higher vaccination rate or because they have previously dealt with in omicron surge. it will get more complex from here on out. kriti: talk a bit about the severity of the virus as it talks about another uptick in urban areas. does that mean that perhaps so

many more people have gotten it, the symptoms and the severity will be less? gigi: for people who are vaccinated or who have gotten covid before, especially if they have had the trifecta that they have been boosted and and exposure, symptoms are likely to be much more mild. people complained. but there is no indication that it will be less severe if they don't have that protection. being more mild is a function of being protected by your vaccination. thankfully, the new versions do not seem to be any more severe. but they do not appear to be less severe either. kriti: it was supported by the

founder of bloomberg lp and bloomberg philanthropies. coming up, oil is falling after fresh inventory data and opec-plus is out with a new production decision. a look at some of these markets. brent crude below -- 91 handle on nymex crude down about 3%. we will discuss at all. stick with us. this is bloomberg. ♪

welcome. i am mark crumpton with first word news. diplomats are set to return to vienna for another attempt to save their nuclear deal. the u.s. special envoy said they will discuss a european union proposal to rescue the agreement. it collapsed after washington withdrew and we impose sanctions on the iranian economy, prompting tehran to ramp up its enrichment of uranium.

others are making a last-minute lobbying effort. the provision is the semi 500 dietetics credit for electric vehicle values and an extension is included in the measure. the bill also includes new limits. in texas, intensifying heat is going to test the power grid on thursday with demand expected to break records. the grid operator is hoping that robust when turbines will bolster electricity supplies, reducing the threat of outages. temperatures will soar for another day across much of texas. the high-end dallas will reach 100 three degrees. austin could see 104.

temperatures soaring to 36 degrees celsius or 97 degrees fahrenheit. for many regions, they have been placed on orange alert due to a second heat wave the summer. 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. i'm crumpton and this is bloomberg. >> welcome to bloomberg markets. >> we have a rally on our hands. 1.6 percent higher on the s&p 500.

we are at session highs. a lot of the actions in the bond market, it continues. even on the nominal basis, 18 to be basis point move higher. you are seeing a third inversion. we are getting closer and closer to that level and solidifying that risk off mood. move. you did have an opec increase on the table. inventory data is pulling it down lower and lower. >> he talked about that nasdaq performance. three of the big movers on the day include a name like moderna. some of the shareholder goodies were well received on wall street. the elliott management impact also getting investors enthusiastic.

well received results from starbucks. on the other side, another reminder of some of the economic uncertainty of their with the chip giant down 1.5% right now. there are some questions going forward. >> let's send it back to the oil story. one hundred thousand barrels a day in september. the u.s. department senior advisor the -- advisor spoke about the decision that might have fallen short. >> and u.s., most of the production is onshore in the u.s. and those are short cycle productions that need not -- that do not need 10 and 20 years to be able to make profits. they can invest as dollars today and get the profit that they need and get the relief for the

american economy and the american people. we are in the middle of a transition. we want to see declining demand for oil and that is what we are trying to do. we had trying to accelerate electric vehicles, but we both know that that will take time. we need to make investments today, in order to have enough of the energy resources that they need, while we accelerate electric vehicles and renewable energy. >> julia covers the oil sector and we cannot ignore what you are writing about midmorning, that the latest inventory data is a reminder of demand weakening as we started the day with this type demand story.

>> demand on a seasonal level is lower for the month of july and it was we were under lockdown. they did spike a little bit higher. we saw stock inventories going up. we had crude going up and we had stockpiles rising. that was very bearish for the oil markets. opec delegate said one of the reasons they had this very tiny increase was because of demand concerns. they were afraid of but also the impacts of covid-19 lockdowns in china and what that would do to him -- do to a demand. >> spare capacity or the lack thereof is not just an issue in

the uae but here as well. >> absolutely. as they tap into that and go all the way out, there is no way to buffer that. there is no way to buffer the higher prices so not having that would be a huge issue for them as well. >> think you as always. boosting production by 100,000 barrels a day. it is the smallest hike in history. let's get a little bit more context. our star washington correspondent in the middle east. what does the president make of this? >> we have heard from his most senior advisor. what the administration is pointing to is that yes, this was small. it was an increase of 100,000

barrels. we saw opec really ramping up and accelerating some of that production. where the saudi's are pumping right now, it is some of the highest we have seen out of the kingdom and decades. they will point to that as a policy working, but at the end of the day, the only thing that matters to officials is the fact that oil prices are going down and gasoline prices are going down. the white house account as well with the press secretary tweeting the fact that gasoline in america is coming down. for many, it is actually below the aaa average. the president is very happy about that. >> against that backdrop on a

day where some people look at that whale mode -- will move and describe it as a snub to the u.s. -- you were covering the president's trip to saudi arabia . we saw the big u.s. weapon fail as well. is there an argument that the trip, which in theory was about more than just oil -- that the relationship is changing? >> the trip was definitely more than just oil. energy was part of the discussion but it was not the lion's share. there is also the fact that we have young men. there are a number of things, but this was a pivotal moment to make the trip. they started looking around the world and looking to shore up some of their closest allies

that had spare capacity. the u.s. recognizes what opec put in their statement, which is that they do not have a ton of spare capacity, so they need to make sure they are using it at the right moment, and they are worried about we session fears. also the fact that china will go through intermittent lockdowns. about a million people are locked down. the number of factors at play, the republicans are saying, he went to saudi arabia and you not even getting the bulk of that oil, but how much does the kingdom have to give? you take 100,000 barrels a day on top of july and august. do you think the u.s. considers that a success?

>> thank you very much. let's stay on this story. we will get some perspective. head of supply and production analysis. a lot to digest, but we have gone through a lot of the conversation that has played out today. was it a surprise to see this modest increase? >> it was not entirely a surprise. we knew that it would be difficult. i think it was an important gesture for opec-plus to come up with an increase, even -- opec did not have to do that. they have been steadily adding to their quota since july. the last few months added money to their production.

they were going to stick at these levels through the remainder of the year. any additional increase that was agreed upon was a really important gesture. what is really important to take away from the event today is number one, we are all seeing it is equating to 35,000 barrels a day of production on the market which comes from saudi arabia and the uae, so almost a nonevent. what it does tell you what highlight is that we are in a world of tight capacity because even when we are trying to add 100,000 barrels a day, you can

only add a fraction of that the oil market. in a time where there are concerns and stocks are going to rise, even in this backdrop of fundamental weakness, there is an underlying tightness of supply. it is going to put some pressure on prices. >> the markets tend to break out , worried about the supply crunch. the meeting noted that availability necessitates using it with great caution. why is the market not panicking? >> because as we are heading into the fourth quarter, we have

passed the peak demand. they have seen oil prices retreat. gasoline prices -- they are all retreating from high levels that we saw. we do see that and supply catches up to demand that was particularly strong, we will see it move. there is uncertainty about what will happen to supply. there is also on top of that other risks. there was a click on that just moments ago. there is weakness in the fundamentals, on top of high risk and high uncertainty.

it is a little >> the head of supply and production analysis. thank you, as always for joining the show. best second-quarter earnings. more on the 2022 travel rebound. that conversation, next. this is bloomberg. ♪

>> as we continue to see the earnings rollout, the travel rebound is in focus. for more on that, let's bring in ed ludlow. want to get to the booking story in a minute.

one of the biggest movers on the day, airbnb was over 2%, over 4% in the session. what gives? >> expectations were very high. they think bookings growth will be around 25%, which is fantastic. but it was similar to what we got this and let -- second quarter. it is interesting because there are two schools of thought. many think that 2022 was an interesting year because airbnb set records and surpassed what we saw. but at the same time, you have rising case counts with covid in various parts of the world and there is also the macro headwinds that we are looking for. there is a question about demand and as it relates, it is not

just a slowdown from consumers feeling inflation but about the growth narrative. will they grow at this dramatic rate when the world normalizes to pre-pandemic levels? >> i'm so glad you brought that up because as we checked in with you during earnings season and during the story of paypal, there are juggernauts that have struggled but so many of them are still suited to grow. it was cofounder and ceo on one hand keeping the growth narrative alive while on the other hand, the cfo was trying to remind people that they are going to be cautious with their spending as well. >> i like the classic. airbnb got a profit in that quarter. airbnb profitable despite getting this consumer back. we are offsetting to be of

factors. pent up travel demand. everybody is talking about it, but that is seasonal. there will be a finite amount of people booking their summer vacation. inflation is what it is. that is where the concern is, not just the current period and the disappointing forecast but the growth narrative for next fiscal year. >> like we talked about in the intro, bookings and holdings. it looks like they have to balance the same thing. how are they going to fair? >> this is an interesting story because if you look at the stock performance, it is faring better. booking is basically the sum of

its parts. it is invested heavily in different financing tools, different options for hotels. yes, there is pricing power, so we are looking for similar stories. the current period and further, but what is the macro commentary? there is a note that says we need that longer-term discussion to really understand how these companies will faring with that balance. booking is very interesting as well because it is not just north america. we take a global lens on this because they are feeling different levels of pressure. >> they are a huge advertiser with google, so it informs the whole ecosystem. thank you very much, and the other with a preview of the booking story. coming up, oil under pressure

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delivered right to your door. epson rapidreceipt, visit buyrapidreceipt.com or call. piece of cake baby! >> bloomberg markets. time for what it is worth. today we have a percentage for you. i decline that we have seen in oil since that spike that we saw when russia first invaded ukraine and we started this half-hour talking about this worry of oil today. joe was with us on bloomberg and he talked about weakening prices as a possible sign of disinflation. it is something that the fed has to be careful with as it focuses on rising interest rates. >> what i worry about on the

other side, that the fed works too fast at too much. it takes about 18 months for the effects of monetary policy to be felt. in that span, if the war in russia comes to an end, the energy prices will come down and it will be a strong disinflationary force. it would be -- >> it is interesting how we do not talk about transitory anymore. it was felt like those commodity prices do come down at some point. >> on the one hand you have a decline. food prices as well. things like wages are on the up and up. they factor into the bottom line.

you are not seeing that dollars story help any other countries. as we had to break, the s&p 500 is up. you do see a .5% increase. with us. wi at fidelity, your dedicated advisor will work with you on a comprehensive wealth plan across your full financial picture. a plan with tax-smart investing strategies designed to help you keep more of what you earn. this is the planning effect. how will your business adapt to change? designed to help you keep more of what you earn. 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. omaha. the finance, hr and planning system used by over half of the fortune 500. for a be-agile-like-an-mvp world.

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mark: president biden still testing positive for covid-19. that is not to say he -- he continues to feel well. he will continue to say at the white house. opec-plus members have a lead on an increase in oil production for september. 100,000 barrels a day. this after president biden took a political gamble and asked for