tv Bloomberg Surveillance Bloomberg August 8, 2022 6:00am-9:00am EDT
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>> we are expecting an eventual slow down but it is not here yet. we are not seeing the economy go over a cliff. this is the time the fed needs to be moving quickly. >> we can see areas of the economy where there are very successful and areas where they need to continue. i think we need to be careful about the level of rates we get to. >> there is talk of a soft landing. i do not know why people think it is such an elusive thing. >> this is "bloomberg surveillance" with tom keene,
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jonathan ferro, and lisa abramowicz. tom: good morning. it is a monday. it is two days before cpi wednesday. kailey leinz in for jonathan ferro. he is offer one day. what an extraordinary weekend. legislation in washington. lisa: it was a game changer for a lot of people, both with respect to the proposals and what it does heading into the midterms, especially as i was driving down the highway and saw gas prices in some places under four dollars a gallon. you pair that with the legislative win and suddenly people are gaming about a different output. tom: a bang up jobs report, it is about the analysis of topline inflation, gas coming down, or core inflation. the bloomberg survey lifts core inflation. lisa: you have on one hand the
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headline cpi that will rollover and the gas prices are coming down. on the other hand, what does it mean for how far the fed has to go? lisa: people are not coming in a volkerized federal reserve. tom: a lot of the publishing over the weekend, it is good to start with david sarpy with his optimism on participation in stocks. kailey, where is the focus, bonds or stocks? kailey: that is a good question. primarily a lot of the action has been in the bond market. you have the equity rally continuing in a fashion it did not on friday, but the bond market has been confounding. 31 basis points on the two can spread. obviously a repricing in the short end on an expectation the
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fed will move 75 basis points in september. we have a lot of data and then cpi on wednesday. tom: well said. i agree. we are miles away from belief on september and into the november meeting. i will do the data check. i will go to priya misra's number. it is extraordinary. -42 basis points. the call of the summer from the strategist at td securities and that rapid inversion. someone said warp speed inversion. what do you see in the data? kailey: the yield curve most inverted since the year 2000 is remarkable. you are seeing resilience in the equity market. futures positive by 9.5 points. how much can that stick if we are talking about a federal reserve that will be more hawkish in the pivot the equity
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market has been expecting is not going to come soon. you are seeing yields moving lower. tom: peter tchir with us later. the fed governor you do not know, michelle bowman, the community bank governor may be less visible than the others but nevertheless important, she is in search of unambiguous evidence inflation is going down. we start with an unambiguous monday brief. lisa: i will give you an unambiguous morning tidbit. i came in this morning and i looked at what to expect and i said i will do a tom keene. it will be the beginning of the week on wednesday so let's start there. wednesday we get u.s. cpi. this will be the issue. bouncing around, up, and then we are a lot higher than we have been historically and terms of the consumer price index. if you start to see that court
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to cap, you have to fight the roving inflation that is tippy and goes well beyond some of the transitory issues of gas and food. thursday we get the u.s. july ppi, and the reason why this is compelling as these are the prices factories and manufacturers pay. how much does that climb at an exceeding pace then cpi? this goes into the issue of morgan stanley's mike wilson saying you will see profit margins cramp. you are seeing these prices increase at a faster pace and this cannot continue without a continuation of cpi. on friday sentiment should improve. especially gas prices have gone down. the university of michigan survey tends to reflect that data. to get a sense of where we are, we have been at the lowest consumer confidence in history in data going back to the
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1970's. how much can we revive and how much does this tell us about where the sentiment is going. tom: for those of you on radar -- on radio, it is an oscillating chart going back 40 years and we plunge in consumer sentiment. it speaks to the two americas after the bang up jobs report. lisa: this has been the issues. you have two america's rio people at the upper end continuing to spend and then you have people paycheck-to-paycheck with a real paycheck that is shrinking a rapid pace. how they deal with the outlook of this roving inflation moving from zone to zone? tom: futures up 12. let me go to the draw up we are seeing right now. david sowerby lowered the boat in the bottom with a draw up of 13% spx, the dow up 10% and the
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nasdaq saw a research, up 19%. he is a great optimist in the midwest. david sowerby joins us. you have always been in the market. you believe you have to participate in american equities to prosper. are you fully invested or halfway invested? david: more than halfway. i did not load up the boat in be june but i thought evaluations were more attractive, sentiment was bearish. you talk to companies anecdotally, whether at a conference or on an earnings call, i thought the tone of the message was better than what wall street was pricing. companies thought the same thing , that there valuation was attractive. it was a good time to be a net buyer but i did not load the boat. tom: the theme and research is if inflation comes down, that
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assumes nominal gdp comes down, and the inflation portion of corporate revenues becomes little less. is that something to study and be afraid of? david: the main point you should study his it seems like the magic line is 4% for inflation. if inflation is less than 4%, stocks are your best hedge. when inflation is above 4%, it is problematic, the fed needs to do more, this inflation is and always will be a monetary event. all of the stimulus the fed and the fiscal authorities put in, the fed needs to do more work. i think the stock market will embrace it and we will get double digit returns over the next two years. lisa: you talked about how to treat the legislation passed over the weekend by senate democrats. how much does that change the landscape when it comes to companies buying back their shares and issues that go beyond
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monetary aspects? david: in policy terms is little -- it is a letter grade d or f. i am buying these companies because i think they are good allocators of capital with the cash flow they generate. take two names to criticize the share repurchase tax. marriott and wyndham are growing their rooms, that means they are hiring people to build those rooms, they are growing the dividend, and they are buying back shares. they are deciding how to allocate that capital best in the interest of the shareholder and to begin to tax share repurchases is misguided because you are hurting the investors like policeman, fireman, laborers that i manage money for. it is bad policy. kailey: could the inflation reduction act reduce inflation or you do not buy that? david: i don't.
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i think it has to be the federal reserve continuing to do what they are doing. inflation is still our biggest problem. it is a tax on consumer purchasing power. i do not know how this bill gets inflation under control other than if it ultimately dips us into a recession may be that reduces inflation but it has to start and end with the federal reserve. tom: you just crushed at this morning. is it a bill that can be harmless it is just political legislation before the midterm elections? david: i don't think harmless. i think on the margin it hurts our ability to grow and to compete. we have already stimulated the economy nearly 40% since march 2020. why spend more, why tax even more? u.s. tax rates are now less competitive to our foreign competition.
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i do not think that is the solution. if we want to think about good profit growth or job growth is showing up in good returns for investors in the equity market. tom: thank you so much for the brief. we did not even get to mid-caps and small caps. we will do that another time. i look at the markets and the silence of the middle of august in the heat of new york is how many people missed the big june lift in equities. silence is pregnant. lisa: 13% gain for the s&p since the low we saw in june. it has been incredible rally that has been relatively silent because no one believed that. how many people will believe after it continues to be sustained and people need to reduce their earnings profits and profit margins. that has been the tone from wall street. tom: we did not even mention oil
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, nicely under $124. american oil down $.75. interesting to see that tilt towards $80. gold under $1800. in the 7:00 hour, peter tchir. stay with us on radio and television. this is bloomberg. ritika: keeping up with news from around the world. the senate has passed a landmark bill giving president biden a victory on his domestic agenda. the measure is a shadow of the $10 trillion plan progressive's had hoped for more than a year ago. the bill now goes to the house, where the democratic majority is expected to pass it on friday. a surprise change of the top of private equity giant carlyle group. the ceo lee has stepped down.
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his employment contract was due to expire at the end of the year. bloomberg has learned lee and carlyle group's board have crashed -- have clashed. hong kong has reduce the amount of time travelers in the city must spend in hotels quarantine from seven days to three. that is greater than the expected easing. hong kong is still an outlier in a world that has mostly reported to pre-pandemic. the trade that in china hit another record in july. exports rose 18% from a year ago, that is good news for the world's second-largest economy. still economists warned the export surge has slowed down. -- the selloff in global tech stocks continues to hammer its vision fund portfolio of investment such as uber. softbank has begun talks to sell its asset manager.
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act, the senate democratic majority has achieved what countless others have come to washington promising to do but failed to deliver and i am confident the inflation reduction act will endure as one of the defining feats of the 21st century. tom: the senator from brooklyn, chuck schumer, taking a victory lap after a marathon night. our steve dennis falling asleep on capitol hill during the all-nighter. someone who knows the all-nighter well would be jack fitzpatrick. let's get right to it. jack fitzpatrick knows all nighters from tomorrow union at arizona state university. let's start with the basic idea. is this any way to run a country? why are we doing something so childish as all nighters to pass important legislation? jack: if you ask senators, even
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the ones that take advantage of that process, the vote-a-rama process is not something anybody came up with as a good idea, it is something they hate, but now that it is part of the process they use at. this goes through the budget reconciliation arcane procedure that there are certain things they can pass with a simple majority, it is based on a 1974 law not made for that purpose but it has been repurposed. when you see them do dozens of amendment votes to torture each other, it really is assigned of the way senate rules have been twisted over the years and it is not something anyone endorses. it is just how it is. lisa: let's talk about what is in the bill. a corporate minimum tax and a 1% tax on share buybacks. there is also the ability for
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medicare to negotiate for drug prices. a host of different things the democrats are saying are the biggest efforts to tackle global warming to date. what about what is not in? any more color as to why kyrsten sinema removed the carried interest tax? jack: i did not know if i would call that a big sticking point but that is one place she jammed her colleagues and that is where the last-minute negotiations were and they just agreed to take it out. at a certain point those conversations got to the point where she was pushing back and that did not raise a lot of revenue. there was not a lot of open debate about the merits of that measure on its own. it was a measure, it is a bill that raises more than 700 billion dollars in revenue over the next decade. it was not something that was a make or break issue for
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something like senator manchin that wanted deficit reduction and and we -- anyone could have vetoed this bill. senator cinema, that is the one thing she wanted out, ultimately people agree. lisa: if you are listening earlier to david sowerby, a money manager railing against certain components of this bill, in particular some of the excess taxes charged to companies. what is the rebuttal by democrats as to why this will not reduce momentum heading into a recession? jack: for one, the democrats face a tough challenge of facing the worries of recession but also inflation. senator manchin push them as hard as he could toward something that would reduce the deficit in the name of inflation reduction. is it going to have that much of an impact on inflation either way? no.
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there is not really any reason to believe that. they had the deficit conversation and if you hear what president biden says, he says if you are on wall street, you are doing fairly well under this administration. democrats have been talking about increasing taxes on corporations and the highest earners for a long time. you should not be shocked that it democratic administration, democratic senate did manage something to increase corporate taxes to some extent. kailey: it may not be a democratic senate for much longer, at least that is the thinking heading into the midterms. does this bill change anything about that calculus? jack: i am skeptical this will change much. the economic effects of a bill like this are not something that hits immediately. the priority the democrats are going for in climate spending is a much longer-term issue.
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you are seeing the polls show voters are concerned about the state of the economy right now, how inflation has affected them. this does not do that much in the short term. it could be a long-term accomplishment the biden administration ends up being involved in -- this is not the kind of thing that will have a massive effect. tom: go further than where kailey was on the first tuesday of november. if the republicans take the house and eke out a majority of the senate, can they reverse parts or all of this legislation? jack: it would be very difficult to reverse this. talking about a tax bill, the republicans want the trifecta, they want to win the tax -- the house, senate, and the white house and use the same procedure to get their own legislation across the floor.
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if they win in the midterms, a lot of the effect will be they will have the committees, they can investigate, the oversight stuff you see from congress. they would have a difficult time reversing this without the presidency. tom: get the surveillance app. jack fitzpatrick working through the weekend on this important legislation. i think it folds into the bond market. wall street shrubs aside these kinds of legislation. lisa: and fairness, you look at this bill versus the build back better bill, it is about 1/10 of the size. a lot of people are looking underneath the hood and sing it has provisions that will move the needle, but overall it is not significant. terry haynes came out with something saying that. this will not shape the world. things getting done in washington is remarkable at a
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time when this was not on the radar for a lot of people. tom: part of the radar is the job formation. politics is always about job and we are still in shop over what we observed friday, a half a million jobs created. kailey: a blowout report, not just about the strength of the labor market. on the norm bomb -- on the nonfarm payrolls figure wage growth coming in above expectation. are we going to start looking at wage gains? tom: 50% odds kailey and i do not show up. lisa has announced the week does not start until wednesday. we will get a briefing on the way to wednesday. we do that with george chang -- joyce chang, chair of jp morgan research. this is bloomberg. ♪
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lisa, what you see in the bond space? lisa: the quiescence is amazing. 3.2%. you see a bid in across the board as people reassess how far the fed is willing to go. also dollar weakness is fascinating. how much of this is a global pipit to an aversion to recession or the u.s. avoiding the worst case scenario. tom: i have to talk about the long-term and i can do that with joyce chang, chair of global research at jp morgan, who put out a seven page special with the rest of jp morgan on the fiscal state of the country. i have to read every word of this report and it is a pastor 2052.
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no one is talking about this except you? how ugly is it for the nation and our fiscal policy out 30 years? joyce: it is pretty ugly. we are looking at debt levels close to 100%, 188%. if you take a look at our view that treasury yields are at 5.5% by the end of the decade, this will raise real questions about fiscal sustainability and the debt trajectory. interest rates continue to rise. on a 10 year it is 3.8% for treasury yields. we have 3.35% by the end of the year. tom: you have a great set on this call. let's start with the tan and rested for early. can we have the productivity and
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spirit of this economy, the growth rate of joe stiglitz to grow ourselves out of this conundrum? joyce: you have to look at productivity for the first half of the year, and it was atrocious. we are looking at pretty poor productivity ahead. any metric, larry summers. on our team, it looks unsustainable. this is a conversation that will start right now. the real conversation is where are we at with the pricing. lisa: if we could put this moment into the trajectory of 30 years, what will it look like? would it be a pivot point to add more debt or a pivot point to
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hire inflationary regime because of the geopolitical backdrop and the re-shoring you are seeing by a lot of companies? joyce: the re-shoring, the deglobalization, but they're also the poor demographics. that is the trend we are seeing in europe and china. that really is a key read why we think the potential growth is going to be lower going forward. on top of that, we do see a rise in treasury yields on the rise. you take a look at where we are with the primary deficit and you are going to levels that do point to debt sustainability when we look. with the health care spending, that will go up because of the demographics. lisa: this is one reason a lot
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of people have the confidence we are getting a lot of limit of wall street. >> the bear market rallies like in march, where are we right now? a lot more work to do. the forecast at 8.7%, that is going to keep us up on high alert and we have 75 basis points from what the fed has to do and for 25 basis points.
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the number is at a rate which we were talking before we really see inflation concerns come down. it is not the physical inflation, it is the structural inflation. but also, rent inflation. that is what we are focused on in the coming days. >> immaculate inflation scenario, i think it will be very difficult to see that play out. kailey: and obviously we will be watching the inflation data on wednesday, we will be viewing it through the lens of the job report escalating wage pressures in the economy. that strong jobs report runs in contrast to some data we had seen in other parts and i'm just wondering if you can glean a consistent message from the economic data we are seeing now. >> we have come into this part
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of the cycle with excess savings, and then is made for real pushes across the dollar market and also in emerging markets. on the third quarter of the year, we have just 1% growth in the u.s. that is what we are looking at. you work through some of that by the end of the year. we also have a look at what is happening outside of the united states. china disappointed on stimulus and on top of that, we are heading into some of the worst liquidity months where liquidity is really amplified positively and negatively. we are at a point in the cycle right now where i just think
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that the liquidity also amplifies. kailey: you mentioned china and we consider the geopolitical risks taking place as well in and around taiwan. how do you view this tension between the u.s. and china, the potential decoupling further of the world's two largest economies and what that ultimately is going to mean for the trajectory of the global economy moving forward? >> you really have to separate the global manufacturing hub from some of the issues that are much more that national security and critical infrastructure, but that is pretty tricky. you have so much of the supply chain that does move through the taiwan strait. and when we revisit with the precedents are, we had financial
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markets and now, the economies are much more integrated. i'm not so sure you're going to see these military exercises come to a halt as soon as people are hoping for. matt: -- tom: joyce, a simple question, is the united states becoming like france? >> what we are doing is really going to affect future generations. we are looking at debt servicing costs that are going to double here.
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the physical outlook is unsustainable. you could compare to japan on the debt ratios, but i think that it was really the moment where you have to look at what needs to be done to see treasury yields continue to drive. you really can see how this can change by the course of a decade. tom: thank you so much. i haven't done the work on a full faith and credit and pick a duration, but you wonder where they yield breaks really great higher and higher. kailey: so many people are talking about a fed funds rate, talking about consistently high inflation, and people are getting more and more conviction to go into long-term treasury
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exactly because of what you just said. lisa: if this nation is facing such massive debts, it cannot sustain treasury yield at 4%, 5%, 6%. this really is underpinning some of that conviction. tom: one of the great supply at -- surprises of the last 18 months is burgeoning tax revenues that surprised all. kailey: that's true. there will the changes coming if the bill passed in the senate does get passed in the house, but it is a much more muted change than was originally in vision by the biden administration. that 1% tax on share buybacks. tom: we will get a lot of different opinions on that across on bloomberg here on the show.
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reporting on apple, this got a soiree in september. kailey: are you trying to get a road trip to cupertino? tom: we need that. this is bloomberg, good morning. >> keeping you up-to-date with news from around the world, president biden and his colleagues finally got the win they have been waiting for, passing the landmark tax climate, a slimmed-down version that can give democrats a boost going into november's congressional election. a half percent into percentage
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crease isn't locked in. the strong jobs report walter support by the fed. military activity around taiwan is continuing in the wake of nancy's visit. the reason maneuver has been the most -- in decades. a real risk of a nuclear plot disaster in ukraine. russia blames ukraine for the incident. and warren buffett bought the dip. $3.8 billion in purchases.
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>> we are far from done yet, that's the promise of the american people. we are committed to bringing inflation down and we will work until i job is fully done. tom: this weekend, mary daly making a splash with the san francisco fed, one of the truly great stories in american economics and she has been very visible here as we shift from forward guidance to data dependency. i thought it was a very guidance-y like weekend. kailey: --
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lisa: that is what i was going to say. it looks like we were looking at data, and which data, exactly? tom: that is going to be interesting to see. i got notice that naples airport in italy, they've got selective delays, some maybe he will be a little longer, we will have to see. kailey leinz pulling the short straw and joining this morning. lisa is really talking this up as being a breaker. lisa, why don't you bring in the microeconomics of that? lisa: it has been 50-some odd days of gasoline prices going down. the u.s. report showed the gasoline demand was even lower this summer than going back to
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the 2020 doldrums of the pandemic era. i read a number of notes over the weekend saying this number doesn't make sense. does it make sense to you? >> know, we don't think the numbers are accurately representing the gasoline demand in the u.s. just a couple of things, we talked about this before, the liquidity, you're going to get very sharp movement in prices, so that is the backdrop against which we are operating. then we proved of people that we are already in a recession. if we look at these numbers carefully, the doe is saying that two weeks or three weeks is very poor, made it it of an improvement two weeks ago. but then a couple of things on
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that. the final data point actually shows 2019. if you grow the ethanol number out from the weekly numbers, you see gasoline demand. there is a whole host of factors i can talk you through, but two of those are the most compelling ones as to why these weekly numbers are not accurate. lisa: what is the application here? gas prices in the u.s. falling for 54 consecutive days, oil prices solidly below $90 per barrel, where should oil prices be? >> much more on the supply side. particularly in asia because
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china continues to be in and out. it is not a demand problem, it is a supply problem. in terms of where prices should be, we've got refinery maintenance coming up. i'm not expecting to see a sudden increase in prices, but come winter, particularly after november, the spr stops. you've got the china party congress, some easing in public restrictions. the market is going to tighten up very, very quickly. tom: we spend all our time on supply-side.
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we can't do that with demand. the second derivatives of oil and gas demand. >> yes, absolutely. which is precisely to your point, it is so much harder. that is one of the big reasons why the increase is just a nominal $100,000 per day. imagine if we are really going into a recession. they would have to claim that all back. >> what is a big amount of oil that opec-plus could actually produce? >> this is the other thing that they actually acknowledge. there isn't a lot of spare capacity. i also really want to highlight
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the difference between spare capacity and surge capacity. a lot of our conversations would say sure, we can increase per day. after that, we would actually have to take things down for maintenance. that is something we do on a very short-term basis but doesn't actually allow you to meet off-line. that is the big reason they have been very cautious about adding barrels back. tom: i look at this game over oil and it is just so profound how it has moved into the ration column wednesday. kailey: you are also seeing it
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with food prices coming down according to the u.n. index, the biggest july drop we have seen the years. in theory, those things are using. then it becomes about that sticky inflation and we expect that core metric is going to coming in hot. that is what the fed is going to have to take a look at. tom: we're going to stop right now for something that we love to do, which is drive forward the intellectual side. molecular biology, i believe through yale medicine. lisa, this is one of the companies working as hard as they can on something new and modern. only 110 years old. it is the understanding of sickle-cell anemia and i will set of generalized, it is sickle-cell disease.
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lisa, this is a huge deal for molecular biology. lisa: it is a big deal when it comes to microbiology because it is one of the solutions, particularly in the alcan history, that we continue to see. cvs also potentially pitting for signify, expanding into health care. a time in the deals market is pretty much shut. tom: futures of 21, dow futures up 129. this is bloomberg, stay with us.
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>> we are expecting the eventual slowdown, but it is not here yet. >> this is exactly the time that the fed needs to be moving quickly. >> we can see areas of the economy where they are very successful in areas where they need to continue. >> i just think we have to be careful about the level of rates that we get to. >> i don't see why.
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announcer: this is bloomberg surveillance with john keane, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. it is merger monday. ferro missing all the excitement, kailey leinz is in for him. he is stuck at an airport somewhere in italy. forget about inflation, it is merger monday. kailey: fascinating to see all of these deals be unleashed. we've also heard from pfizer, also hearing about a cvs deal. so many deals after the quiet of the previous month. they are opening up in force with what we have seen in stocks and the rebound we have seen in bonds. lisa: i've really gotta say, -- tom: the media is a waste
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disposal business. emerson is getting rid of this. i've got the quiet series. but the bottom line is this is again bolt on opportunity transaction, and here is the message: corporations are adjusting. whether it is pfizer or is whirlpool. you >> live in new york city and you have a go bridge -- garbage disposal? this is a whole other situation. whenever i go to an airbnb and they have a garbage disposal, i get very excited. this is coming at a time where you do have a real ambivalence, especially by ceos with the inflation, with the macro. considering the fact that they have all that uncertainty, that is a pretty powerful statement. tom: i should finish that thought. i have my insinkerato that i installed myself. rit leaks.
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part of the spirit on this merger monday is nominal gdp and good corporate earnings. >> part of the equity market also has to do with the notion that the fed is going to pivot eventually. we signed a change forming in that idea on friday when we got that 80% on of another basis point hike. the data we get on wednesday could be extremely informative and that decision. tom: come on, you were on this deal last night at 2:00 p.m. they provide sales tax management here on merger monday. >> buying that company for $93.50 per share in cash. >> rumors this morning, pretty typical for a merger monday.
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but this is an anomaly. tom: let's get back on the rails right now, dow futures are up, a 10 big figures. 21.5 six. a nice mood here. the percentage move on the nasdaq 100 gets my attention. almost 7/10 of 1%. the headline for me is continued aversion about this over the weekend. -43 basis points. reaffirming $120 right now. south of that by a modest $20. lisa: this morning has actually been fascinating with joyce coming out and talking about the overhang of data and how that is going to extend potentially lower over the long-term and necessitate a lower yields to
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be functional. the get a sense of that may have to do to curtail it. looking at the headline numbers, the expectations, and .7 down from 9.1%. the trajectory is good. still a pretty heavy number. core inflation, how much does that continue to rise? you do have the roving inflation moving to those areas. thursday, factories and manufacturers are paying, which has climbed to record heights and climbed far beyond where we are seeing the tightening. how much does this bleed into the mike wilson view of things? you see margins continually compressed and people are behind what they are expecting. tom: it is really important to see a bear cannot like mike
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wilson, really intelligently saying caution. moments ago, john stoltz it's who absolutely nailed this rally says further there to go in a great bull market. >> and both sides are digging in their heels, the bulls and of the bears and saying you guys are missing the boat how much is the faith getting people through that they will be able to have jobs? does that confirm the feeling that we're seeing certainly and other anecdotal data? tom: speaking of missing the boat, macro strategy at academy securities. academy is in annapolis and of course is a wall street shop with a huge military event. i would be remiss if i didn't speak to you on your public service and their thoughts on what we are seeing in taiwan.
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at that affected your call across the block market? >> yeah, it is something we are very focused on. about 50% of the company are veterans, so this is very near and dear to our hearts. looking at the escalation of a china is doing, it doesn't necessarily turn into something military, but it plays into the theme that we have been seeing china separate from the rest of the world, developing relationships with other nations of the expense of dealing with the west. >> how much do you buy into this rally that we have seen a 13% gain in the s&p since the mid-june low? how much do you view this as wishful thinking at a time of so much geopolitical and inflationary uncertain the? -- uncertainty? >> i like the idea of justifying calls. there is some good liquidity, either side can detraction.
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to me, the inventory overhang, that remains a big concern. i'm just a little suspicious about how good the jobs data was. >> suspicious in that it is not going to turn out to be that strong when we get the revision? >> in the last four months, you have is a disconnect which goes into the unemployment rate. about 1.8 million jobs different, which is a pretty big thing. that would mean that the unemployment rate is probably much, much lower, put pressure -- which puts pressure on the fed. >> does that mean you're more in line with the fed pivot narrative? peter: yes, i think the fed is going to have to pivot. i think we will see inflation rollover, i think we will see
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supply chains fix themselves. but the consumer looks like they're trying to buy things on discount. all of those are actually going to be relatively deflationary. by the end of this year, we are not talking about inflation anymore. tom: peter, i think i just heard you say you want a transaction because he may go along or we may go short. a six option trade, or something like that. can you be creating options now? >> as you mentioned, this is all the way back to 22. i think you can trade your way out of it. >> how much is a fed pivot going to be positive for equities versus negative? >> the realization that the fed
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is going to be paving because they pushed too far. i think we are seeing a consumer rollover, i think we are seeing inventory build. but when people realize we are going to pivot, the reality is going to hit. we have to be very careful. what are futures going to look like? you are seeing companies can't accept the valuations, but i think we are a long way from being done, and we got to sort things out. >> thank you so much, greatly appreciated. particularly the update on what is going on in the pacific rim. lisa, no surprise here, the president maybe wants to drive the victory lap forward. covid-free, i believe two negative tests. i remember when i had that in january. you get one and you are like ok, now what?
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and then you feel a lot better. >> he is going to be flying to kentucky to visit some of the flood victims. how much does he will be taught up the victory of the bill? how much does he also talked about gas prices? this is going to affect things more than anything else when it comes to the midterm election. it is really dramatic. >> it really is. lisa drove 50 miles for a quart of milk, but other than that, you are living this dream. i mean, we've got to get back under three dollars before we get a sigh of relief, right? >> well, things are looking better. three dollars might be a little ambitious. i will be filling up my tank
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more. transformation from manhattan to brooklyn. tom: she's got that bmw with the sloped seat where i can't sit up in it. >> list of cars tom keene has been to? tom: stay with us, this is bloomberg. tom: -- ritika: the senate landmark giving president biden a victory on his domestic agenda. still in the shadow of the $10 trillion plan more than a year ago. the bill now goes to the house with the democratic majority is expected to pass it on friday. private equity giants have stepped down, preaching a five-year employment contract by the end of the year.
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the co-founder will step in as interim ceo. time spent in quarantine from seven days to three. pfizer has agreed to buy -- valued at $5.4 billion. sickle cell disease affects 20 million people including many who are --. a loss in global tech stocks. meanwhile, talks to sell -- investment group. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries.
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over a practice that has been ongoing for decades. it is really up to beijing to decide if there rejuvenation, if china's rejuvenation will evolve with international respect or with international condemnation. tom: important words from a representative of taiwan this weekend, and of course, we are continuing to monitor that story. lisa, an important adjustment leading oil coverage from this one. lisa: what we are seeing is people reducing their short-term targets because of how much these declines really gained steam, despite the tight supply that we keep talking about.
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tom: we see that right now when you give me the numbers here. goldman sachs down, or for next year, they sustain and then energy aspects of the giving of the same message here moments ago. always in the same message, jack fitzpatrick. spent a good part of the weekend looking into some of the mathematics of the great surprise, and that is the latino vote which has shifted democrat to republican. i know the geography well, and that is east of colorado springs. it is thunderous how the republicans have taken the latino vote in selective geographies. how does that change washington in november? >> it definitely plays into the expectations. in november, it helps republicans in the midterms. also in the big picture, aside
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from taking some interesting reasons here and there, it makes republicans feel a lot better about the presidential -- their chances in the next presidential race. florida, especially. if you are talking about a major swing state that has not been very swingy lately, looking at florida, the cuban-americans were particularly conservative, the people who have been really open to republican arguments about democrats leaning socialist, as republicans would call it. it probably isn't even bi gger factor looking to 2024. tom: our expert on this is just been phenomenal. i thought axios this weekend
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really had an extended note on this. is it enough to decide the senate in november? >> it is very difficult to say. tom: i agree. >> there are so many factors playing into the senate. i think one overriding factor that we still don't know exactly how it is going to play out is actually the response to the supreme court jobs decision, and we don't know how much that is going to maybe outweigh other concerns. i'm not sure exactly how much the shifting expectations of how hispanic voters will play specifically in senate races, but it is something that republicans have to be happy about. these midterms, it is tough to pin down seeing the struggles of the president and his popularity, but meanwhile, growing enthusiasm among democrats when we still don't
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really know what the main story is going to be. obviously, republicans and democrats, they are conflicting narratives right now. >> i will give you another narrative that is conflicting, gas prices. we have been talking about it all year, but if we get the continuing decline in gasoline prices in the united states, is that enough? tom raised the question earlier. is that enough? for that to make people feel better enough to get biden a reprieve on inflation? >> i would be skeptical that that is good enough because people would be overall feeling really good about the economy. it is better for gas prices to be going down than up, obviously, and it is a nice thing, but they are not particularly low. still, if you just generally look at polling on how people
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feel about the state of the economy and how biden has handled the economy, it is fairly negative. there is reason to believe it gets better potentially from here until november, but that is not long enough to anticipate that it absolutely is going to turn around. overall, the economy, voters can lump all of these together. the economy is net-net for right now. >> so if it is not long enough to turn around the economic trajectory, is it long enough for any other kind of legislative victory for the biden administration and the democrats, or is what we saw over the weekend really going to be the extent of it? >> this one would be a big one that the biden administration would campaign on, the bill that just passed the senate. i don't know that it has an economic effect in the near term , from now until the midterms. in is not an easy path for
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democrats to get to the midterms, but this bill the president is supposed to sign into law tomorrow, the fact that they got those into the span of a week and a half is a big deal for democrats. more of a long-term issue than something that flips the switch immediately ahead of the midterms, but those really are going to be two of the main accomplishments, as well as the infrastructure that happened earlier. tom: thank you so much, particularly on latino voting. lisa, i've been waiting for this, it was published moments ago by mder, you know them as the recession-gaugers. moments ago, published and updated working paper on not
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unemployment in america, but under-employment. we get our analysis wrong particularly in the linkage of wage inflation. lisa: the labor market isn't as robust as people are saying. that is why he think that that is a mistake -- making a mistake by going too far, too fast. tom: his partition is part-time people that want to be full-time people. of course, that is part of a bag of job they saw a few days ago.
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airport, but we have kailey leinz in today, at least right now. i do want to mention something we have been remiss on the last 90 minutes, and that is dollar dynamics with acute resiliency to the dollar in the jobs report . the turkish lira holding at 18 per dollar, 17.96. i think that was enough of an aggregate. >> can i offer up a little bit of a backtrack? that is going to be stuck all the. we have the privilege of having kailey with us for the whole week unless she runs away.
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> i thought he was out for one day. lisa: american holiday. he is european. let's take a look at some of these stocks. it is merger monday, which is fascinating, because it hasn't been merger monday for quite a while. you can see signify shares popping more than 60% ahead of the open, a little change, down about a quarter of a percent. and really, the emerson story is that whirlpool is going to buy this company. the story is that tom keene has a garbage disposal unit in his apartment in new york city and i'm going to bring all of my cucumber appeals for your apartment -- peels. also in the news very much is that bill that was passed by the senate now heading to the house.
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benefiting from some of the potential electric vehicle credits, we are going to take a look at those shares, absolutely decimated. tom, we were talking about this earlier, it really is a fascinating deal, pfizer planning to buy this company that has some groundbreaking sickle-cell anemia treatment at a time when a lot of people are looking to do advancements in the pharmaceutical industry. tom:tom: right now on fixed income, we are going to drive to market vana. this is a timely update on where we are and where we are heading. in your research this weekend, what is the distinction of the bank of america view? >> the bank of america view has been very cautious on the outlook. expecting to see a slowdown in
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the labor markets and ultimately see that in consumer spending and business spending. however, what we got on friday was incredibly strong, much stronger than we were anticipating and much stronger than anybody was anticipating. it does question how quickly we are going to ultimately see that if the labor market is indeed this resilient. tom: mark, there is a wide gap between those looking for 4% and the 2.5%-3% outcome. all of our listeners and viewers actually play this massive diversion in outlook. >> just like the fed, unfortunately, i think the investors have to be very independent right now. what the data is showing us in the u.s. is that we are not seeing enough of a slowdown yet to: it's. but the fed has signaled they are going to keep raising
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interest rates. another 50 in november, 25 in december before they are finished. they are here, but the question is, how long can the fed sustain these elevated rates? we also question how sustainable the elevated levels of short-term interest rates will be, and that is one of the reasons why you are seeing the curve so inverted. the curse certainly agrees this notion that the fed may be able to raise rates today, but it is not going to be sustained. >> mark, i am glad you mentioned inversion. i have a yield curve in front of me right now and i'm looking at more than 42 bases. that is how much higher than two year yield is than the 10 year yield. where do you see this,
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basically, as a predictor of some sort of downturn? how long to be have? did the debts of the yield curve inversion signal some sort of magnitude? >> it certainly signals that the fed is not going to be able to sustain the level of short-term interest rate of the market is currently lying. that, we think is clear and unambiguous. there is a great phrase in the bond market, they have predicted 10 out of the last five recessions, or something to that effect. it tends to be a pretty good indicator that things slow down but what is clear is that the fed will not be able to sustain the very elevated level of short-term interest rates for all that long, and we certainly agree with that. recession or not, regardless, they yield curve is certainly indicating that the fed won't be able to sustain these levels for long. >> i'm trying to put together
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this idea that you think that the numbers were too high for the jobs were, that it got to come down, that you think the fed is going to pick up next year. what is going to make than pivot? it is still so far above that 2% level. >> we think the labor market right now is very strong. inflation is very high. but importantly, both of those are going to come down. we do believe that the fed will be successful at generating a slowdown in the labor market. we believe it is tightening the financial condition that always seem, employers rethinking hiring plans. we do think that is going to manifest itself over time. that is going to help bring down the elevated inflation that we see today and it is going to allow the labor market to ease. and if we are wrong, the overall
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level has to be higher in the economy. we don't think it is going to be all that far away. that is what is allowing the fed to pause and ultimately shift to later next year. >> until we get to that point were we have some clarity as to whether or not it has accomplished what it set out to do, how much volatility can we expect to keep seeing in the bond market? it has been dramatic, to say the least. >> it has been exhausting for everybody in financial markets and especially in the bond markets. but we do expect that as the fed sees some signs that the economy is slowing, you're going to see interest rate volatility start to moderate and ultimately decline. the fixed income market will be moved in that direction a bit faster in july, when powell indicated that it was slower,
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above the perceived level of nominal mutual. we still think that that is biased that. having a fed that ultimately slows down, that will help decrease overall volatility until there is more clarity on the overall economic outlook. it is not unusual to see elevated economic volatility, to see really mixed messages from the data when you are at this part of a cycle, where you are near the end of a broad expansion. the fed is going to be able to signal and ultimately, that will lower volatility in fixed income. >> overall movement will be subdued. what trajectory isn't going to be from here? you're talking about getting to 3.5% by year-end, where does that put the 10 year? >> we think they are going to
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end the year right around here. 2.75%. the curve is going to probably run the risk of becoming even more inverted, at least in the near term. the fed signals that they really want to move rates higher than they will ultimately get the outcome that they want. tens, we think are going to be somewhat stuck around these levels. they will be a slowdown coming. the fed will be successful. tom: let the ask you a historic question. i'm looking at the acceleration of inversion that harkens back to june of 1980. if we get the speed of inversion you are talking about, is howell like a volker -- powell? mark: powell wants to be like
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volker. he doesn't necessarily want to engineer as sharp of an economic downturn, but he is going to do what it takes. but the good thing is that the market and surveys of consumers generally suggest that the fed is still credible. we will get another update on friday. the most recent reading suggested inflation was also expected to be somewhat limited. because of that, because the fed is seeming so credible, that really does help them likely not have to go to the extremes, but i think powell would very much appreciate that he has those credentials. tom: thanks for the update, a real caution as well.
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a 21-level, that gets my attention as well. in the yield space, wow. 3.2 3%, the two year yield. this is bloomberg. ritika: keeping you up-to-date news from around the world, president biden finally got the win he has been waiting for. the senate passed the landmark tax climate and health care bill. it is a slimmed-down version of the $10 trillion plan proposed more than a year ago. now the question is whether it can give democrats a boost in the congressional elections. china announcing in the wake of nancy pelosi's visit the chinese military says they conducted
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anti-submarine and naval strike exercises today. it has been the most provocative in decades. and egypt is putting an end to three days of violence that left 44 people dead in the gaza strip. avoiding almost 1000 rockets fired into israel. the confrontation began last week. a $3 billion transaction, garbage disposal products and water filters. that would likely remain -- through this year. warren buffett bought the dip in the second quarter, $3.8 billion.
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>> the differences between taiwan and the mainland to be rebuilt peacefully. and what we see in china over the last few years is moving away from the peaceful resolution of differences to doing so coercively and potentially forcefully. tom: secretary of state antony blinken, he has been very, very forceful to a meeting with -- in the philippines.
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certainly a stork moment to see him take the leadership of the philippines after many, many years. right now on china, i was more focused on how they did with southhampton. lisa: anger garbage disposal. tom: -- and your garbage disposal. ferro texted me, so it is good to see that. why don't we read off on the disruption in china? lisa: we've been talking about what has been going on with the taiwan airstrikes, the warning shot as retaliation for nancy pelosi's visit to taiwan, and of course, our asian correspondent for all things economic, the more interesting aspect is the
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trade balance data which suggested a record trade surplus for china, even though imports from the u.s. are falling. what gives? why does this represent strength at a time when all other times .2 weakness in china? >> it was a figure for chinese exports. post-lockdown rebound still on the way. supply chain's have been improving, stocks coming back. there's also talk of demand and other parts of the region, but he didn't quite gel with indicators in the tmi. it is actually coming down to china's energy exports and saving the overall number. regardless, a lot of people are saying nonetheless that the merchandise store in china will
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cool off in the second half of the year and probably cool off globally, perfecting interest rates and inflation globally. some devil in the details, but i don't think anybody really expected to remain that strong as we head into the back end of the year. >> the data highlighting that china is exporting a lot of oil goods to europe and to japan and other asian nations, and they are an importer of russian oil allegedly and they could be taking the arbitrage. that aside, there is a question about whether they will move away from zero covid after november, in terms of increasing demand for oil and increasing uncertainty later in the year. how much is hong kong a template for that vs. an outlier as they moved to curb some of the quarantine requirements? >> we do have movement on the
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quarantine restrictions in hong kong today. three days in a hotel and then four days of self-monitoring. on a headline basis you think that is clearly a positive for hong kong on the ground here, but nonetheless, it is still quarantine for three days and the rest of the world or much of the rest of the world has moved on. there is a debate over how come this is happening, are they using hong kong a something of a petri dish? we do know that hong kong has some wiggle room on this, so perhaps the authority cr using that wiggle room. but there is the view that china is watching closely what happened as a model for their own. tom: a completely unfair question. does china have a dr. fauci?
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butch cassidy and the sundance kid. who are those guys? who is actually making a covid policy in china? >> well, they do have their own scientist, their own disease agency just like the u.s. some of these both present and former officials are quite high-profile on chinese social media. of course, the big debate with china is you got the science and health aspect. how much of it is being driven by the politics? the politics being that china has reached a big dividend. this year has been a testament. at the same time, they are at a point where if they do let it go, obviously they will face a pretty big risk to go with that. above it all, we all know the most important political event in decades is due to go ahead at
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some point later this year. here point, scientists are there, but i do think it seems to be more politic than anything else. >> and we know that the pandemic isn't the only political problem for xi xinping. how much more stimulus and supportive measures can we realistically expect, considering that that is a situation that looks like it is rapidly deteriorating every single day? >> it does seem somewhat tempered. other official commentary for smith and the point that you have to be willing to tolerate an economic pain. it isn't evidently clear that they have done that yet, but they are trying to put a slow on the consumer sentiment, keep things tipping over.
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obviously that is much slower than it has been, which is unusual, but nonetheless, we are not getting signals or narratives to put a lot of money into the economy, in the way it has done in the past. it doesn't feel like it is coming to a time. tom: thank you so much for the brief. lisa, and all the reading of the weekend, particularly with inflation report on wednesday, there can be one sentence that sticks out. this is on the bbc, and this is the head of jetblue saying i now need to over hire. to me, that is a fascinating
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sentence about the labor economy to come and wage dynamics. lisa: basically speaking to the great resignation, talking about attrition, how in order to have the qualified people that they need and to be able to keep their planes operating so you don't get stuck on the tarmac heading to atlanta instead of puerto rico, that you need to have an over-filled bench of potential people. how much are companies going to avoid firing in the downturn in order to get that? tom: absolutely fascinating. that just stopped me in my tracks. futures advance up 18, i guess it is a bull market. this is bloomberg, good morning.
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markets, they do not go straight down. >> the market seems to be more convinced inflation is close to a peak. >> core inflation represents the type of economy it is is still rising. >> i think it will slow organically. >> this is "bloomberg surveillance." lisa: it is merger monday ahead of cpi wednesday. from new york city, good morning. this is "bloomberg surveillance." jonathan ferro is out all week. kailey leinz, we are grateful to have her all week in the studio. and what i am struck by is the stubbornness of this rally. tom: listen to you. it is all gloom. look at the persistency of the rally, it is remarkable off of the june 15, spx at 14%.
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up 10% since july 1. even at a 1.2% in the first few days of august. futures up by 23. sorry, lisa. lisa: there is worry about beyond october, november, when we assess the pivot, if the labor market can sustain strength. tom: the ambiguity from jackson hole, a terminal rate of 2.75 or 3%, and in a long added 5.75%. the gamesmanship. is something we have never seen. lisa: especially when oil prices have been swinging so wildly. that has been one of the most under told stories of the past week with the rally. the oil went from well above $100 a barrel to below $90, heading even lower on the nymex.
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how much do you see that fueling this perception of rolling off inflation? kailey: absolutely, and same thing with food prices, which have come down as well. it becomes about the sticky price pressures the fed will have to contend with because with gas and groceries, that is something the fed is continually saying we are not done yet, we will continue to push to get inflation lower. it raises the question of if the market has it wrong or if the fed has a communication problem. off 543 basis points right now. lisa: when did you make of them saying by the end of the year we will end up with $120 a barrel, and you are going to get china back online because they will get rid of covid, or at least soften it, and suddenly the scene changes? tom: this is really important. jeff curry with a 120 call at goldman sachs. the arch call of those who look
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for higher oil prices is on the demand side. it's not the romance of what russia is doing, it is the demand of emerging markets. covid will end. china will do better in some way. and that will bring on oil demand. that's the core of their thesis. lisa: as we are looking now to see how that plays out at this persistent moment of gains. we were talking about it earlier, we are seeing it continue to mount heading into the open with the nasdaq up 7/10 of 1%, the s&p doing less good, but still up at nearly 6/10 of 1% on this merger monday, really deepening our understanding of tom keene's garbage disposal. and the purchase of whirlpool. 10 year continues to go down.
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2.79% at a time when the two year is well above 12%, the curve inversion. tom: single most important data point is 43 basis points. let me define that for those who are moving from global wall street. the difference in yield between the two year and 10 year, .43 percentage points, you move the decimal point over -- lisa did this years ago at chicago constitutional -- help me. lisa: [laughter] tom: it is 43 basis points. that's it? lisa: yeah, we are looking at less of half a percentage point. tom: did the walls shake when you walked into school years ago? lisa: i am not sure where to go with that. i do not recall.
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but we do have somebody who can give us insight into how negative or inverted it can go. matt, who covers everything fixed income, a senior portfolio manager at invesco. how u looking at the yield curve and getting in comfortable with its inversion given the optimism you are seeing in earnings, certainly the credit space, as well as a stocks? matt: it is an interesting time for rates. and traders do referred to today like today being like curve flattening, but is it more inverted? when you are negative, you are not flattening. when i look at the curve, it is tell me about over the near term the fed has more work to do, but over the longer term people believe the fed will get things done. you will see the 10 anchor around the high two's. the overall economy is doing pretty good. the numbers on friday were good.
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the question now is good good? i think absolutely. right now, for the credit market good is good. we do not want to see jobs falling off. and we got a really good number on friday. lisa: what gives people conviction we will get it down to 2% so quickly, which is what you see in the fed funds futures and in interest rate swaps -- how much do you have conviction they will do that without crashing the economy, the underpinning of why credit is holding and rallying to such a huge degree? matt: we are seeing interesting things from corporations that you would normally expect them to pull back right now, stop investing, but we are actually seeing them invest. capex is going up. there is spending on inventory management, on supply chain, and on renewables, batteries, things like that. there's different ways companies
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are spending money, which is good, because otherwise you would feel like inflation would be just a complete or difficult time for them to overcome, but they are spending money to get down costs. that will flow through and it will be good for the longer term for overall inflation. we feel the fed will be ahead of it. and the economy will slow, but not so much you will see demand fall off, you will see more supply get back more in balance with demand. kailey: what are your expectations for issuance as we move through the rest of the year? matt: corporate issuance has been really strong in investment grade over the last month. just last week on thursday we had that big meta deal, the first time they issued, it was over $30 billion in demand. so, highly rated names are doing well from a demand standpoint. the high-yield market is off by
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70%. we did see two deals at the end of last week. there is enough demand to see yields. on the investment grade side, has been the banks. they have been flooding the market, which is providing interesting value. it has been a value trap all year long, but overall i would say that at some point banks will run out of having to issue and you will see credit spreads firm up. kailey: as we talk about a fed that will remain aggressive, recession coming down the line, is that going to bring defaults this cycle or is the risk low given the position of strength we were coming from? matt: i think we are not going to be seen any downgrades until the early part of 2023. good is good.
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companies do not default because there is too much --. yes, it is not goldilocks. i would prefer wage inflation be a little less. but s corporations are investing, that will not lead to default. if energy would completely fall over, that would be a different story, but we are in a better spot now than we were in 2018. tom: matt, thank you. we appreciate you this morning. again, this is below the headlines, but it is really important for the apple community. government owns the high ground -- gurman owns the high ground and it was a tour de force in a message that has gone viral this morning. i will cut to the chase, children at lisa's house, the new i-watch is scheduled for september. that is the news we need to know. lisa: if they are watching it right now, they are saying they
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need it now. tom: gurman has all of his radar up on a thing called stage manager. this is a mystery. it's a huge ministry in the apple q3, q4. if this is a software compendium it could be problematic. that's the first i have heard of it. lisa: maybe it will be surveillance. tom: he does not mince words. he says they are struggling. lisa: this is the question, how much is some of the softening we have seen in sales apple has produced, how much is driven by what has not been popular versus a secular slowdown? they have held up well, they have beat expectations in china where they cut prices on certain products. it's noteworthy for that question. how much or products going to be able to do a homerun? tom: oil is at $88.27.
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bramo has gone long. futures are up 24. dow futures are up to 151. an up move by the nasdaq 100. this is bloomberg. stay with us. ♪ >> keeping you up-to-date with news from around the world with the first word. the senate has voted on a climate bill, giving the president a victory on his domestic agenda, even though it is a shadow on the bill that they had hoped for more than a year ago. it will go to the house for the democrat majority is expected to pass it on friday. a surprise change, a ceo has stepped down from a five-year employment contract that was going to expire at the end of the year. carlisle and lee have clashed.
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bill conway will be the interim ceo. and travelers must be in quarantine from seven days to three come greater than expected easing in hong kong but it is still an outlier in a world where most have gone back to pre-pandemic movement. and a deal valued at $5.4 billion to help with sickle cell disease. it affects 20 million people globally. whirlpool will buy and waste disposal business. the business known as incinerator makes garbage disposal products into hot water taps and filters. they said last month that demand has peaked. 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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unambiguously after this number accelerating after this number, after the eci, after the atlanta fed, we have by every reasonable measure a core inflation, inflation running somewhere plus or minus 5% -- plus or -5%. tom: larry summers there, former treasury secretary of the united states. a modest acquittance of economics. talking about the glide path and what do we do, pick your number, 5% or 6%, etc. jonathan ferro is off today. i guess until the end of the week. i thought it was a one-day thing. kailey leinz is with us. and now we will recalibrate into the wednesday inflation report with dana peterson, chief economist at the conference board with all the ability of
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the conference board to look at a different set of data out there. and i want to go, dana, i know lisette is focused on the job economy but i want to go to your call for restriction by the fed after jackson hole. are we going to calibrate for september 1 after jackson hole, do we just need to get to wyoming before we can look to the fed meeting? dana: wyoming is beautiful, but i think the fed is certainly data-dependent and we will get several more readings on inflation, another jobs report, an update on gdp, and i think the fed will be looking all of these to determine whether or not it needs to go another 75 basis points or 50 basis points. whatever is, they will continue to raise interest rates. tom: if it is 1.75 or 2.5,
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whether there are two, does it matter? dana: i think getting above 3% on the fed funds rate, that is restriction. we can argue about it but -- tom: we do not do that here. dana: raising rates this quickly, it will feel restrictive. we already see that in the gdp data. lisa: do you buy the data we got on friday? we heard peter shearer saying that data does not seem to cohere with the granular on the ground specifics and input. do you think it will get revised lower and give a less rosy picture of the labor market? dana: how much can you revised down? that was an as down the number, more than half a million jobs as of july. revisions will probably be minor.
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what the labor market is telling us as we still have a strong labor market, many people have seen wages rise, people have been hired in the in person services, and it really is astounding what we are seeing. i do not think the numbers are lying. lisa: tell about what we heard from peter, which i thought was fascinating, he said that people are over hiring. companies are scarred by what happened post-pandemic when they fired people and then to bring on staff that was not there. how much will that be a persistent theme throughout whatever happens in the next cycle? dana: we think labor shortages are here to stay. a lot is demographic. you have more people retiring than young people available. we have strict immigration policies as well, that make it difficult to find a labor from outside of the country. still, you have people that challenge the childcare issue. people do not want to work two or three jobs, hat'why they --
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that is why they are trying to find higher wage jobs. this will be in issue beyond what we think will be a brief recession. kailey: what does that mean for how persistent upward pressure on wages is likely to be? dana: certainly, if inflation continues to be elevated and the fed struggles to get back down to the 2% inflation target, we think that there is probably the potential for a wage christ spiral -- wage price spiral. they are both moving together and that is a challenge the fed is trying to prevent from happening with its actions. kailey: obviously, is actions do have a lag effect, it takes a while to see the impact. so, can the fed acted quickly enough that they are actually going to be able to get that under control or will we be looking at a situation where this ends up out of the federal
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reserve's hands? dana i: think the fed is acting as quickly as it can. other than raising rates every month, at every meeting since march of they have raised interest rates, and i think they are doing what they can. but monetary policy comes with a lag. first you will see the effects on things like mortgage rates, the housing market, then consumer spending, then inflation. it will take time but we feel that the fed can probably do his job and get things done in terms of bringing down inflation. tom: does any measurement of housing rent or ownership get in the way of their plan? can housing have such a crisis, be so expensive that it gets in the way of best outcomes? dana: housing is a huge driver of inflation right now for consumers in the u.s. as long as home prices, evaluations of new and existing homes continue to rise, that
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will show us things with a lag, so that present a challenge for the fed. tom: we have to leave it there. dana peterson, we greatly appreciate it. i featured this last week, it is the single biggest issue to me, not about the haves and have-nots, it's about where do you put your living room, bedroom, where are you going to live and it is a national crisis. lisa: we saw prices of homes decline, it is starting to cool off, but it has a lag affect. the more unaffordable house prices have gotten, the more people want to rent, which is the reason why they can continue to get pushed further and further before reaching that breaking point. we have seen that in new york city and all around the country. tom: i am looking at the bankrate, and i guess it has come in, but i am sorry, we were at 4% in february. up to 6%.
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then pulled back to 5.6% and at that does not get it done. kailey: still higher than six months ago. it comes back to affordability. as we had that conversation about people demanding higher wages, people are not earning enough to keep up, even with wage gains. and at what point, we see it in the housing data, but when will it show up in everything else, people not being tolerant of the higher prices they are facing? tom: the nasdaq is up 100 points. it sounds like the dow jones industrial average. lisa: how much is the dow up? tom: 141 points. i'm sorry, i am not in it, it is a bull market. this is bloomberg. ♪
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tom: that is a british accent. lisa: i would say that this is a persistent increase in terms of valuations despite all the gloom the goldman sachs analyst coming out and saying profit margins are going to get wheezed, so you are seeing the s&p up. climate so significantly passes yields. tom: west texas under 88, that gets your attention. lisa: absolutely does, especially when you see gas prices coming down in the united states for 50 days now. that helps the biden administration. the question is, how sustainable is it when we have people telling us earlier that oil is going to go back out because supply is still so constrained? that is the question. tom: it is always an important
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question but this morning after historic legislation, it is really critical as well. i want to cut to the chase. how do you put the profits the legislation of thousands of pages? >> that is a good question. fortunately, washington is quite expert at doing that. most bills tend to be hundreds if not thousands of pages. but i think that this could underscore how quickly this bill was able to come together to the vast -- of the past the senate. many of these ideas have been percolating in washington for years. in terms of allowing medicare to negotiate drug prices, that has been literally since i was on
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the hill. in some ways, many of these idea have already been in effect for be able to put into legislation immediately. the big question is just to get that unanimity. tom: the question i asked of jack fitzpatrick, and the republicans take it away if they win the house and the senate? lisa: it would be very difficult and i think what you have seen with the tax cuts is it is very difficult to take things away, to take benefits away. particularly on something like the drug pricing floor for medicare. that is something that is pulling incredibly well, more than 80% of americans support that. and on the climate piece, four hundred billion dollars of tax incentives for consumption on the clean energy tax fraud.
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all of that pretty difficult to take away as well. tom: i look at the medicare-medicaid combination for federal budget, and nixon, going from 1% of gdp approaching 6% of gdp for those programs. lisa: i did not know that, that is really fascinating. of course i look at the premises or recover the --pharmaceutical company shares, which raises the question about what the tangible effect of investment will be from this bill. you had david earlier decrying some of his concerns about buybacks as well as that minimum corporate tax post -- imposed. is there a readthrough that is knocking priced in, or is this not a significant move in terms of profits, as some would say?
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>> on your point about the pharma companies, they actually got a little bit of a lifeline over the weekend because one of the bigger provisions that was in the bill that would have required that pharmaceutical companies negotiate with private insurance actually got stripped out of the bill because of some parliamentary mumbo-jumbo. that is maybe why you are actually seeing a little bit this morning. overall, i don't think we should overstate the impact of this bill. there will be winners and losers like the pharmaceutical industry, so still persistent. technology, some of the companies that have been able to take advantage of the corporate tax rate would also be losers.
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and big winners, obviously renewable. sort of the macro impact or even the sector impact has likely been pretty much priced in here, but the political impact i don't think has been priced in. democrats really needed it. the price of gas, biden disapproval ratings, they all have been major headwinds for the democrats going into the midterms, and here they are. they are able to go been at the 11th hour and the campaign on the fact that they can govern and they can get a dp said their agenda that they campaigned on in 2020. tom: so what -- lisa: so what is the market readthrough if the democrats keep the senate, which seems to be the feeling that is increasingly getting speculated upon?
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>> the conventional wisdom the democrats will lose the house is probably right if you look at history. the party in power has lost is democrats face an uphill battle. but the margins do count. our view is that they can lose as few as 10 seat or as many as 50 seats depending on voter enthusiasm and what is actually happening through october and the buildup of november. and that margin does matter because in the long term, it means they lose fewer seats, then they are going to be able to more likely recapture the house in 2024. on the senate, it tends to not be as much of a national election. republicans have more difficult maps this cycle, and some of the candidates running on the republican ticket in
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battleground states like georgia and pennsylvania, maybe ohio are less experienced, and as a result, many have less of a chance to win even when the national mood is really much more supportive for republicans. the bottom line, the houses likely loss for democrats, at least at this point, but the margin does matter. lastly, in terms of the policy implications, as long as republicans take back just one chamber, that means that bidens legislative agenda for the next few years is likely dead or at least on ice for a bit. there is still some chance of bipartisan legislation around the weather area, so probably on ice. folks like me are focusing in little bit on the longer term for 2024 in particular. >> you mentioned voter enthusiasm a moment ago. i wonder if there is a lesson to be learned from kansas in the
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abortion vote, the turnout that we saw. is there an underestimation of the galvanizing effect that some of the social issues may actually have on voters approaching the midterm, beyond just the macro economic environment? >> another piece of good news that the democrats that had over the last several weeks. voter turnout in kansas, much higher than expected. that initiative lost by almost 20 points. there are some idiosyncrasies to extrapolate from kansas nationally, but for democrats, the big takeaway is that this is a galvanizing issue. one important thing of particular issue as opposed to the midterm elections. tom: we had this legislation, is this the window for president
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biden to say he is a one term president? >> i highly doubt he will do that. theoretically, sure. i think he will not do that especially before the midterms. but it is a good point in that he will likely have to decide whether he really is going to run for 2024 shortly thereafter. remember, in the debate in june of next year, we actually need to have a pretty good idea. tom: where is ferro? lisa: he is likely to come back if you use that british accent. tom: libby is suppressing me with debate. the debate started june. how many people will be on stage? >> if president biden does not win, we are going to see a rocky democratic primary side.
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last time, it was just on one side. it is a parliamentary system. >> i did not know that, greatly appreciate that. tom: let's go to the marmite. let's go to the market, i'm sorry. lisa, the biggest story today is the conversion. i mean, it is screening the way it is going toward debates. >> you seen that two year yield continued to climb at least at a relative basis.
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we will be talking about that coming up on the open. we also have a host of other guests including stored kaiser. tom: you are leaving me now to go to your other projects? lisa: yes. tom: kailey leinz and tom keene. brammo as well. stay with us. ritika: keeping you up-to-date with news from around the world, president biden gets the win he has been waiting for. the house expected to mask -- pass the measure on friday. the question is whether it can give democrats a boost in the congressional election. china same military activity around time one was continuing
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in the wake of nancy pelosi's visit. the chinese military says it conducted anti-submarine and naval strike test today. the reason maneuvers near taiwan have been the most provocative in a decade. and russia has said it is ready to international -- welcome -- and do a power plant that came under attack next week. ukraine believes around 500 soldiers. and the biggest u.s. meat company is getting it by inflation. prices flew to more than 40 earnings points. and they will do widespread cost-cutting after a record loss.
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-- marked on the holdings of doordash. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. at fidelity, your dedicated advisor will help you create a comprehensive wealth plan for your full financial picture. with the right balance of risk and reward. so you can enjoy more of...this. this is the planning effect.
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>> inflation will be falling primarily because energy prices coming down, but core inflation that really represents the domestic economy is still rising. i don't think we have reached the peak of that. tom: dovetailing the caution of mike wilson and the measurement of the american economy. not destroyed, but everyone would pause for jobs report. lisa, we have a question about that right now. i'm sorry, i am just frazzled
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here this morning. a one-day trip and i am just falling apart. 500,000 plus is a wild statistic. kailey: it was. you also had wage growth that came in higher-than-expected. that is a strong labor market they give the federal reserve clearance to be as aggressive as it says it is going to be to get inflation down. i don't even know why we are here today, tom. tom: a little merger monday fee and on looking at a set of smaller transactions. right now, a bigger transaction. we will stop right now, because the president here after covid, he and dr. biden are getting on
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and they will move for a somber trip to kentucky. maybe senator mcconnell after this important legislation. the president on marine one in delaware. the head of research and strategy and hsbc, i will not mince words. hsbc would absolutely ship on the strong dollar and resilient dollar in the last number of years. when does the dollar giving up? >> not yet. if you have tried to call peak inflation, peak economy, and they got it wrong. they might get it wrong again this wednesday. everything we are hearing from the fed is the patient. i think they are calling it out.
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tom: what i would really want to focus on is the effect of this resilient dollar on em. hsbc out of hong kong has a huge view of em. how does em survive a resilient or even stronger dollar? >> this is really tricky because you got that strong dollar, you got the fed tightening, and you've also got a global economic slowdown. in the past we would see the fed tightening into economic stance. this is a really problematic makes. that is a very tricky environment for them. tom: that is why this is so important right now, i really can't say enough about it. lisa: his work is definitely crucial coverage at this morning. when we talk about the dollar, is it so much dollar strength or
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weakness of everything else? >> well, it feels like it is all about the dollar. every conversation we have about currency, but we always come back to the fed, to u.s. cpi. i think the dollar is at the core. the second thing, and i think this is something people make a mistake about, that doesn't mean the u.s. economy itself is at the core because we have to think about what is happening to economic growth outside of the u.s. that global slowdown, that supports the dollar despite the fact that the u.s. economy is slowing as well. of course, one of those economies under pressure is really the euro zone and the u.k. well.
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realistically, any hikes from the central banks? can they be supportive of the currency if they are hiking into substantial weakness? >> the answer to the first question is yes, i think we will get more hikes. but does that translate in the traditional way? i would say no. as you point out, they are doing it to economic weakness. i think they have kind of come clean, saying that if we want to get inflation lower, likely side effect that the a prolonged recession. everyone else is saying we are going to navigate inflation lower. maybe that is the right thing to say, but everyone is forecasting they're going to land this narrow path. i think it sets up expectations more realistically. lisa: you've already obviously seen parity on euro-dollar.
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>> i don't think we will be quite that low. as much as i would love to, it is not going to work at that generously for me. the dollar is over-value, or at least it is richvs. a number of currencies. europe, we can go to the parity without that being particularly unpleasant. i don't think we would go greatly to some calamity. tom: the difference in this conversation is we are freely floating back to the crises of the 90's, or is it fixed within its band? >> it is a teenager. let me explain, you've got a
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teenage daughter. china wants to have a liberalized internationalized currency. if they are misbehaved, they are grounded. that is what happens. i would say for the most part, they have been kind of left to their own devices. kate has been important because there has been a somewhat helpful angle, at least. i think we expect a little bit more from the chinese economy. two months ago, a lot of talk about second-half acceleration. tom: very quickly, where do you and hsbc for china escape velocity, at least move the vector around? >> is less big scale than people
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might have anticipated. very targeted. we are not getting that big showpiece that it is a big stimulus. we are not getting that, but we are getting this continual expectation. tom: the mandarin in hong kong, this could work, right? >> that could be the dream team. tom: kailey, i think it works. kailey: road trip. tom: thank you so much.
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