>> they don't want recession, but they need things to slow down for inflation to continue to go lower. >> we think inflation will still be running at 4%. >> i think the fed works too fast and too much. >> >> i >> think the big issue we have in the market is that the fed is not about the pivot. we have a 50-50 chance of tipping over into a recession. jonathon: live from new york

city for our audience wide, good morning. this is bloomberg "surveillance." futures positive again, 0.1%. tom: we come up from the lows and i'm absolutely overwhelmed from hedge funds, the caution out there, the reticence to believe in a sector rally, to start strong this hour with howard ward is wonderful. going to governor bailey at 7:00 a.m. jonathon: looking forward to that rise in basis points and just about an hour so. tom, we are 19% higher on the lows of the nasdaq. a 15% on the s&p. tom: let's do it again on radio.

it is an august doubt. it is a doubt. we are very doubting. jonathon: the fed has done exactly what we anticipated they would do. tom: look at the inversion. jonathon: the equity market is not paying attention to that over the last couple of days. lisa: here's what i am wondering about. there is a doubt about the fundamentals that are driving that lower end and rate picture lower. it is believed that the fed is ultimately going to come to the rescue of this market and is still embedded in this market, but eventually there will be rate hikes. it is likely the expectation that quantitative typing will stop next year, in addition to rate cuts. that is still the belief embedded in markets. jonathon: priya missouri -- here we are. we are basically there. lisa: a row ahead.

he tweeted out that this accelerating decline has spread. how much does that indicate recession? it has most of the time. people are saying we are beyond that. that lack of doubt you are seeing in the price action really reflecting the backdrop of easier financial conditions told by the fed. tom: i went back and looked, did some fancy mathematics. it is no math thursday. i looked at how fast we have inverted and it is literally the equivalent. we have moved 170, 180 basis points, down through zero, into inversion. it really harkens back to what we saw near the crash of 87 and into 89. jonathon: we will build on that story for you a little later this hour. positive 0.2%, nasdaq up 0.1%.

crude, holding on the 90's. up 1%. lisa: i don't understand the crude picture. we will dig into that. the u.s. showing a decline in demand, a mixed picture we will look into further. what we are looking forward to today is the bank of england is expected to raise rates for the first time in more than 20 years. how much of this indicates the necessity of hiking rates into a we getting economy -- weakening economy? how much further does that have to go back a -- have to go? and only undermines the trajectory even further. this is a conundrum facing the fed.

at 8:30 a.m., we will get a report on u.s. job claims we have seen them take up from record lows. at one point, it will be the time that people are looking for , people taking their foot off the brakes. if it stays this flatline kind of level, strength getting the support, how much of that challenge? not only doubt, but the strength we are seeing despite the doubt. we get expedia, tripadvisor, all of these are interesting to watch for consumer discretionary spending. we are forecasting an ongoing weakening with consumers. jonathon: lisa, thank you. running us now is howard ward. i have got to ask you straight up.

how much do you think this riproaring rally is? >> we don't know, and that's the point. investors don't know exactly how the script is going to play out. if you don't believe in markets hiding, i would challenge you to give me a list of the greatest investors, because it would be a pretty short one. we don't know. what we do know is that a lot of stocks are down by 20% to 50%. we are going through a period where the economy appears to be wavering further. we may or may not be in a recession. that tends to be short-term phases in the history of time. there have always been opportunities for investors to upgrade their portfolios. i don't think that this is any different this time. the current concerns about interest rates, we have to go

back. interest rates are still historically low. the 1990's, which was one of the best decades for stock prices, the 10-year treasury outlook was higher by 6% at the end the year. stocks as well below. 3% earnings yield versus the 6% treasury yield, bond yields are now 3%. there is some margin for interest rates to go up and earnings to go down. i think we are still going to look historically attractive in terms of pricing. i think it is time for investors to realize that we don't know what's going to happen. stock prices are down and we have to manage them. tom: howard, it is a howard ward august. what i mean by that is all we are hearing is the word quality. everyone is discovering the word you have lived by for decades and decades. fine for our audience this

strange word "quality." >> that's a good question. in the world of investing, i think most people view the term quality to refer to a company's balance sheet and its ability to generate cash and the ability to withstand a recession, difficult times. that remains very much true today. in fact, if you went back on stockmarket components, you would see that balance sheet strength is absolutely a trait of outperforming equities during very difficult recessions for bear markets. sure, when we are possibly in a recession with a bear market, quality is important, giving you some protection to the downside, although certainly, you are not going to escape unscathed. jonathon: i wonder how you feel about european banks right now. this is from our team.

they are reducing thousands of roles globally as a european lender cuts space by an additional $1 billion. there is a credit sweep signal here. let's be clear about that. tom: i agree totally. we are going right into the season, which is perfect for the end of the summer, shaping up for labor day and into the autumn in europe. 51,000 jobs, i would say 2000 is normal. 4% or so is normal. the question in our reporting is how much more than that seems to be substantial to get that cost reduction. jonathon: we talked about how much, let's talk about when. expected to finalize these plans over the next couple months. lisa: how do they also keep talent at a time of cuts. we reported how much they have

to pay executives during trios. bonuses are going to come drown -- come down dramatically. jonathon: how long have we talked about the trouble that european banks are finding themselves in? it feels like more than a decade. what's your take on this? >> it has been more than a decade because they never recapitalized properly after 2008 or 2009. there is the global growth fund. we don't own any european banks or domestic banks either. in credit suisse in particular, it is one of the faster it has been. they tried to bring in new executives and nothing seems to work. i don't know the answer is there. hopefully, they can get them back together at some point. do your job. jonathon: it is difficult. thank you. howard ward there.

stocks up a little more than 2%. it has been a struggle. tom: i'm doing a compare and contrast with 71,000 jobs versus 51,000 at credit suisse. ubs is maybe better run. my tilt is that it is a lower number, it from 51,000. jonathon: i have the same question, what do they want to see when they grow up? take your pick. tom: i used to do securities research weeks ago. -- years ago. i would look at their font and wonder if they understand that their font and security research is unreadable. it is little stuff like that, and big stuff like errors. jonathon: i don't even think

that is the small thing. tom: doj, you could read the research. credit suisse, you cut them. [crosstalking] tom: the bank of england uses monotype. [crosstalking] lisa: there was a great documentary on that. jonathon: if anyone would like an advisor to your board, tom is available. the s&p up 0.2%. from new york, this is bloomberg. . >> keeping you up to date with news from around the world. china has started military drills after house speaker nancy pelosi visited taiwan. taiwan is downplaying the effects of the drills on shipping and airplane routes. the bank of england today's expected to raise england rates

for the first time in many years. this is despite risks of a recession. we will get details on how it plans to reverse. -- to reverse some of the $1 trillion it pumped into the economy in more than a decade. the u.s. senate has voted overwhelmingly to add a country to nato. turkey is still threatening to block the two countries from joining. there will be another attempt to save the landmark iran nuclear deal. the u.s. and europe will be getting together after months, after donald trump went there four years ago and puts actions -- put sanctions on iran. the world's top coal shipper will return an additional $4.5 billion to shareholders in

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>> the president wants to see

feel prices down, prices at the pump down. that is what we are seeing. i think what is very remarkable is that we are seeing it happen while one of the largest oil producers in the world is in the middle of a war in europe. and they are under sanctions. this is not an easy time to manage energy markets. jonathon: that was the senior advisor for energy. from new york city this morning, good morning. here is the price action, adding to yesterday's solid game on the equity market. around about 0.25% on the s&p. the nasdaq 100 up zero point -- 0.4%. wishful thinking this morning. i appreciate this. at the end, he said, where could we be wrong? he goes on to say that inflation hits the downside or growth stabilizes more quickly than we thought, things could continue. tom: you put in your risk

factors, but it is a piercing note. he does not mince words. he said you need to be in u.s. dollar cash. rarely do you see that. jonathon: for the rally to continue, there needs to be another sharp drop in real yields. he goes on to say that it is now very much out of line with our cyclical growth indicators. i have got a long list of banks now. they are pushing back again. tom: bloomberg news features someone else this morning on this. let's get to washington right now. heat of the summer is extraordinary and it is wrapped around the always beautiful, dry heat of arizona. jack fitzpatrick joins us now. we moved away from the news this thursday morning. we go to richard rubin in the "

wall street journal" and his wonderful, legendary tax work in the world of corporate taxes, filtering down to mere moral people. is that the intention of the senator from arizona, who is so important in this debate? >> that has gotten some attention and republicans think it will raise cost for consumers, not just companies. that is becoming a more significant talking point. one thing for the senator, she never signed off on the carried interest measure. if that had to come out, it would not necessarily break down revenue per she has raised concerns about who exactly the 15% minimum tax rate would apply to. there are some changes that might be able to be made.

this will be on deducting investments for depreciating assets. i don't know necessarily that the joint committee on taxation's scores are raising costs for everybody else is the primary focus for her, but i do know that it is something republicans are playing up and you will hear about on the campaign trail, and it is making a lot of noise. number two, senator kyrsten sinema is person to watch about increasing taxes overall on corporations. it doesn't mean she is going to tank the bill, but she has become the big x factor. tom: in the movement of the morning, this was published moments ago, that it's too big -- too good to be true. we are distracted with bank of england, job state, and the rest of it. should we be focused on this legislation into the weekend, into the talk shows? tom: we don't -- >> we don't

know when they are going to move ahead in the process to get this through? it has hit a big hurdle, it could get pumped back. they want to do this before they leave. they're supposed to leave for their august recess at the end of this week. now, the conversation is, does it happen over the weekend? does it happen early next week echo if they can get this through, the senate is going to try to do this in a matter of days. the house plans to come back next week to actually clear it and send it to the president if possible. over the course of the next week or so, that is what we're looking at for this bill. lisa: in the meantime, there is a bipartisan effort to pass a bill to name taiwan a nonmajor ally. it has not been formalized in this manner. it put president biden in this awkward position this morning, pushing back and getting heat for it. why is it in his interest to push back, with heightening

concerns about china, and bipartisan agreement that the u.s. needs to take a pretty straight line on this echo -- this? >> the timeline may be an issue come up with policies trip to taiwan. you are right that this would formalize a relationship that already exists between the u.s. and taiwan. there's other stuff in there, but it doesn't seem to be a point of injection -- of objection. it is not unusual for the u.s. to send aid to taiwan. a kind of believe the issue of timing and the sensitivity of communication's on china with pelosi's trip is likely the main culprit. chris murphy, a key senator on this, he has concern that there may need to be a rewriting. for all intents and purposes, the white house has pump the brakes and bumped this back until after the august recess. there was supposed to be a committee vote yesterday. they did not hold that. it may be a matter of a delay at

the request of the white house because it is not just a fundamental debate, it is more a matter of how that plays publicly at this point in time, in the context of speaker pelosi's trip. jonathon: quickly, can you clarify for me why a democratic senator would be interested in closing the loophole. -- loophole? >> i think the biggest push against it, number one, it would not raise a bunch of money. number two, there are arguments relating to the assumption that those fund managers are profitable in any given year, and you hear how it will affect them. there is some argument about who it is unfair to, also in the context of a 700 billion dollar

bill. this is supposed to raise may be $14 billion. arguments aside, it may be one of the slightly less important measures in the bill. jonathon: thank you. jack fitzpatrick, thank you very much. it is not always about fairness for this party. on something like this, it should be pretty straightforward. tom: with british elections, i wonder how fares translate. when you hear the word fair, all of your radar goes up. jonathon: i know, but that has been used a lot. futures up one third of 1%. good morning to you all. bank of england decision, 35 minutes away. ♪

jonathon: equity theaters up 0.3%. we talked about that already. the data yesterday, the s&p global pmi, not so much. the equity market ripped yesterday.

in the bond market, we responded to more hawkish fed speak. skilled time again, up three basis points. yesterday, lower, new -- near -40 basis points. you go all the way back to the early to the early 2000's, when we had -56 basis points. we are not a million miles away. tom: that's a huge deal. to me, currencies are down quite a bit. we have an equity rally, including advancing this morning. i think howard ward pushed market higher. john, two's and tens are a hard debate right now. it is in august of doubt. jonathon: maybe j.p. morgan does not see this playing out. they're calling all of this

wishful thinking. tom: there is some optimism out there, but to be honest, it is being drowned out with the force of the doubt and gloom. jonathon: resilience are links, i say yesterday, robust. so many nuances we are trying to work through. things are confusing for so many people. these are difficult moments to work out where we are going. tom: with the shock of double-digit inflation, right now, bank of england will be back in 29 minutes. jennifer mckeown will help us, and particularly help me. i will start with what won't happen. the silence of governor bailey, what does he want to avoid

talking about this morning? >> i'm not sure he will want to avoid talking about anything specific. the bank of come under some criticism for not acting faster and sooner. he will want to stress that a lot of the inflation has been on the supply side, and to avoid criticism on that front. i think the key is what is being signaled going forward, what the forecasts show us about just how far the pace of tightening will be in the future. tom: does he make the decision or is there a different structure there that the u.s. central bank? a visitor from america, i believe, is very hawkish, and there are others very dovish. do they matter in the debate, or is this all about governor bailey? >> while governor bailey will

put forward a proposal for what the change should be today, it will be down to the committee at the end of the day. those folks will certainly be playing a role and we think there is likely to be a pretty big shift. jonathon: important thing to recognize with the bank of england federal reserve is the disproportionate importance in the bankrate and bank of england , over the federal reserve. capital markets in the u.s. is so important, compared to the u.k. our member when the governor took over. he talked about the importance of bank rates for consumer loans and corporate rooms -- corporate loans. that's different here in america. having pushed through and rates a little bit more, compared to capital markets. >> everything is essentially pace off bank rates.

the economy, mortgages in particular are often more variable rates than in the u.s.. it is pretty significant. it is very much a issue about what is going to happen with the policy rate for watching. in the u.k., the bankrate is well-known. people generally know what that rate is, and it will be very interesting to see whether there is a 50 basis point hike the first time since the bank of england's independence. lisa: given the importance of that right, why are they thinking about outright selling guilt? they could announce that as soon as today. >> they could. i think that is much less important than what is going to happen to bankrate. we already knew the balance sheet was going to be reducing in size over time because it is

allowing assets to mature. the question now is whether they are actively going to the selling guilt. i think there is an assumption they will do later this year, going into next year. i think it is just setting up that assumption that is already in the market. i would expect a major reaction to that. lisa: taking a step back, the bank of england is uniquely positioned in a moment of pain, or central banks are having to raise rates at the fastest pace in decades, and a state of canonic weakness. the bank of england faces more than the federal reserve and is potentially at the epicenter. how do they message what they are going for, at a time when the economy is already weakening so substantially that you are seeing this translate into real-time data? >> that is absolutely right. it is an extremely difficult decision. i think it will have to convey

that dilemma between the fact that inflation has been rising very quickly, very, very high. this is even compared to other advanced economies, where inflation is also high. there is pretty strong wage great -- wage growth in the u.k. there is concern that could lead to significant persistence in inflation. the same time, real weakness in the economy, real signs with the higher energy prices, the effects of that coming to weigh on spending. that is really dragging on the economy. there is a great risk we are falling into recession. we are predicting a technical recession later this year. we believe the bank will continue raising rates to a peak of free percent. it is likely to come under some criticism for that. this is the best it can do with these lisa: inflationary pressures. lisa:from your seat, when you

are at the bank of england as an economist, can you give us a sense of how important it is to the members on that central bank when they take a look at the pound and how much it has deteriorated both euro, as well as the dollar? this is an inflationary course. how did they deal with us, factor this into their decisions? >> it is a factor. it is seen through the inflation forecast. the inflationary consequences of movements will be playing a role. the bank has been very clear, always. it is not an exquisite factor. what will be playing a role is the influence on the inflation outlook and any additional upward pressure. i think the labor market is the absolute key and what is happening to wage growth. and what businesses, including within the bank of england's own

survey of decision-makers, things they are going to do with bank rates in the future. at the moment, the worry is that they intend to raise wage growth further. jonathon: great to catch up with someone with expense in the banking line. jennifer mckeown there. i mention the difference between the bank of england and their sons. if you have a federal bankrate mortgage and that rate goes up the next month, you will see it. tom: that is very british. let's be clear, there are a lot of variable-rate mortgages in the united kingdom. jonathon: there are many. if you had a variable-rate mortgage right then, it dropped down close to zero. tom: i have 6000 square feet and notting hill, so that worked out as well. the difference between the two year and 10 year, it is really harkening back -37 basis points. the flatline in the united

kingdom of one basis point, they make a real distinction here about deep inversion versus flatline. jonathon: some serious version developing here. lisa, that is something you really have to think about a little bit more. lisa: what you could say is that this is faith they have in the federal reserve. in some ways, this is basically saying that the fed is as credible as ever before. they are going to get rates back down to the 2% level or below, they're going to get inflation back there, and that is what you're seeing in the long end, even as they ratchet up what the fed has to do to get there. to me, that is what the indication here is. they are expecting more work on the front end, which does not speak well to the economic outlook. jonathon: explain this remark it move, the nasdaq up 0.6%. bloomberg subscriber reached out to me. a smart individual, and they have a lot to say about nominal growth and the importance of nominal growth, and what that means for earnings. tom: you know i am there.

let me explain that into the timeline of the third quarter and the fourth quarter. if you say a resilient nominal growth at the same time you are saying extended, more persistent inflation, that is sort of the translation of that. jonathon: price action up around 0.4% on the s&p. your bond markets are all over. thanks for that. tom: i don't keep track of the stuff. jonathon: it was 20 years ago, that's for sure. the crude market looks like this, up about 1%. 91.61. the demand for gasoline in america, the driving season is not developing in the way it typically does. tom: people are not driving. tom:it's a historic summer. we know that kids are bouncing off the walls post-pandemic, all the rules are being broken. why should we have a repetition of normal times this summer?

jonathon: that destruction is in the data. lisa: that lack of driving, how much of that is behind the gas prices? not relief, nothing from anywhere else. his destruction you are seeing in real time. jonathon: from new york city, this is bloomberg. ♪ >> keeping up-to-date with news from around the world. bloomberg has learned that the biden administration is lobbing democratic senators against a bill that would alter u.s. policy toward taiwan, amongst other things. it would designate taiwan as a major non-nato ally. tensions between the u.s. and china were upgraded this week by nancy pelosi's visit to taiwan. in response, china began military drills around the island today. ukraine's president wants to talk with china's president. he says that they haven't replied to ukraine's request

since the russian invasion in february. they think china could quote -- could "put the russian invasion -- [indiscernible] the arizona democrat will be a pivotal vote. kyrsten sinema wants to drop a provision from the bill that would scale back a tax break called "carried interest." credit suisse is considering thousands of job cuts worldwide in an attempt to cut costs by an additional $1 million. the bank is weighing an aggressive plan to reduce accounts. more than 51,000 employees trying to move back to profitability. [indiscernible] that's according to the "financial times." they say the prepaid forward

contracts on alibaba allows the japanese company to raise cash immediately while keeping open the possibility of holding onto the shares. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪

>> it is hard to overstate how disappointing this opec-plus decision is for the biden administration. it is frankly the geopolitical equivalent of a slap in the face. the biden administration made a huge miscalculation. jonathon: that was that bti chief director of research. alex xp push back against the characterization of that decision yesterday. it is more than just oil in saudi arabia.

-- on the nasdaq, 0.5%. go to the bank of england, the decision is 12 minutes time. data out of the u.s. later this morning. a: 30 eastern, jobless claims. how much crude is actually out there for opec-plus to be pumping in? tom: it's not just opec-plus, but worldwide. it is a different world. the bets made by strategist, some saying 120, 150, may a few higher. others saying to wait a minute, demand is disappearing. $90 per barrel, even down to a whispered $80. paul sankey seeing all this before. he writes a strange and twisted note, which is almost the zeitgeist of what he has seen in earnings. paul, i want to go to your wheelhouse, which is gaming the

capital expenditure culture in the belief of big oil companies giving inflation. >> i think they know where the oil is in texas. what they top doing is spending the money on trying to find the next big thing. they have found one next big thing, but that is all that has been significantly discovered in the past decade. as you say, the expects and uncertainty of finding new oil is really constraining global capacity badly. opec is out of capacity. i don't see this as a slap in the face to the biden administration, i see it as more of a shrug or, we are powerless to move.

it is saudi arabia that has spare capacity left. they don't have any spare capacity and they are worried about it. there is a real worry about it out there. if it weren't for the $1 million -- one million barrel per day, we would be higher. jonathon: walk me through the next three years. if we don't get a recession and china comes back online, what does the market actually look like? >> i was thinking about that. 2023 and beyond looks very, very strong. one thing that is notable is we are seeing week u.s. demand. people are blaming that on government conspiracies and nonsense. if you look at vehicle travel, they are high. it has not necessarily changed. it is a change in the kind of vehicles they drive, more electric vehicles. it is more efficient cars than

traffic jams or anything else. people are less wasteful with gasoline. lisa: are you saying that happens more dramatically? with the amount of driving over the summer, it is shown that it has been less going back even to 2020, during the peak of the pandemic. >> you got me with that one. there also looks like marginal behavior change. i think underlying, there is a significant increase in new-car efficiency. there is a demand for gasoline in the u.s. people are taking one last trip. everyone behaves the same way. that is the other effect we are seeing. lisa: are you surprised the market is it respond more to opec-plus saying themselves that they are bumping up against the limits of how much they can produce, that previously would

have produced a big response and markets? it is basically just another thing in the day they got forgotten very quickly. >> i think it is that yield curve. what they are seeing in the back end of the curve, the oil is holding up. i still think it is low, but it is holding up with the front coming down. they are being attacked by the spr and a very big way. i think that big question that has been highlighted is that when we get china back and the spr has to turn off, i think close to midterms, that really will suffer a very powerful 2023. this is vying for a short-term move. as a result, they see the oil price falling for the turnaround requirements. those will be more effect over the coming months. i'm kind of bearish right now, if you ask me. tom: what is your oil price out

one year? are you able to estimate when you're out? >> we have said we thought you'd see $110 to $150 over the summer. we tried to hold those levels, but it has essentially failed. i think it is easy to argue for a $100 oil on a basis for 2023. i don't think you will be much more over 150 dollars over time simply because of the demand elasticity, the effects of the strong dollar. i'm not a buyer for the $200 or $250 craziness. jonathon: just to be clear, you slipped in the word bearish. what's the downside? >> over the next few months, it is going to keep coming at about one million barrels per day. yet to think that the whole of opec just added 100,000. we are pumping up one million per day.

it is too much for capacity. they are running at full capacity, but the oil is being exported. that is a terrible energy security policy, there is no question about that. it is good market policy, because they are hammering oil prices. we'll at $90 with one million barrels. that is an all-time high. it is going to happen for months more. jonathon: the downside? what's the number echo -- number? >> people are looking at april. lisa: that was great. jonathon: thank you. hitting a rally over the next year. everything paul was saying just then is the reason the energy isn't going away anytime soon. tom: it's not just the construction of a barrel, but the keyword in their was

elasticity. from fancy bowtie talk, it is responsiveness. what is the responsiveness of the demand to the move in price echo you pour cold water on that $150 plus. jonathon: in just a few minutes, we will bring you the bank of england rate decision. this market, the economists are looking at something close to 50 basis points. we will find out if that's what we get in a few minutes time. going into it, futures up 0.3%. the nasdaq of 0.5%. with tom keene and lisa at brevets, i'm jonathan ferro. ♪

>> they don't want a recession, but they do need things to slow down for inflation to continue to go lower. >> there is a lot of work yet today. we think inflation will be running at 4% plus. >> what i worry about on the other side is that the fed works too fast and too much. >> i think a big issue we have in the market is that the fed is not about the pivot. >> we have right