>> this is a necessary print for the fed, but we need to see more. >> we are entering a new phase of the inflation debate. >> we are still optimistic given the outlook and the economy. >> coble secondary inflation is in focus. >> the idea of peak inflation is a math problem to us. >> misses bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning, jonathan ferro, lizzo from lloyd's and tom keene after a bang up job support and cpi, a stunning

market yesterday. every strategist has to recalibrate. lisa: every strategist has to see are we seeing the detailed read we were looking for? the first read in 18 that had the downside weakening trend and the markets rallied it substantially, despite pushback saying it is too soon. tom: green on the screen and the vic's on 20. michael readjusts to an abrupt no. he said there are challenges out there but it is markets in front of economics and he's easily forgotten the basic code. lisa: and not just that, the dollar weakened. if you go back to 2020, it was a substantial risk on move. usually with dollar weakness you

seated across the board with the nasdaq, getting it the most with july, all of these things easing together for a full risk on feel that is hard to push again. tom: kailey leinz in for jonathan ferro. we've been trying to get back. let me give you a bramo question. as lisa says, it is both equity and bonds, the dollar moving weaker or he says it is a double barrel short squeeze of a bonds price up, equities price up. kailey: we definitely saw that yesterday with the nasdaq -- that's not take away from mid june. i would argue the rally was more substantial than bonds. by the end of the day, the 10

year it was unchanged and the two-year was -- tom: we've got to train her to do this better. we just averted yesterday a little bit, but get with the scripts. [laughter] lisa: can i say one of the thing for we get so positive, everything going great. the aspect of the cpi report that were most concerning got thrown out with the bathwater, this old feeling that was out there. food inflation came in at the fastest pace going back to 1979. the fact that rents are exhilarating and medical costs are exhilarating. i wonder if we are seeing that bifurcation, it is a lower income squeeze group. we said it would be higher income groups, they can still afford it. tom: michael mccabe would help with that, the rest of the trim

inflation reports. futures up 12, dow futures advance a continued 122 points. the dow 33,000 381, 10.3% from a record high. the first time i have said that in months. with a vix that 19.2 on the vic's. -- vix. oil has its own story. brent crude making another -- for 198 on brent crude. dollar weakness we will get the two that in a moment. it's -- get to that in a moment. lisa: but the report switching from gas to oil, adding to the demand they had not seen six months ago.

that is part of the story. u.s. initial jobless claims and ppi, these are the price increases that manufacturers are seeing. how much do we see this outpace what we see cpi? this goes to mike wilson's question, which is do we see the profit margins compress and continue to compress as prices continue to out stretch cpi, prices consumers are willing to pay? misses bond option day for you, tom. yesterday after the cpi print you had a 10 year option the did well and you have seen this. people flooding back to bonds. to kaylee's point, you are seeing the rally. how low can it go and what does that say, does it send a contradictory message to what we are seeing in stocks? you normally have an inverse

relationship between these asset classes. and mary daly is speaking -- inflation is sticky, way too high at a .5%. they did seem open to slowing the pace but this has been interesting to me. one fed official after another has come out and said guys, we are not going to pull back. why are we praising in rate cuts? the market continues to say we don't buy it. i find this an interesting conundrum were fed officials are trying to drop on the market and it is interesting. tom: someone say the bond market is on there as well. futures up 11. a timely way to look at the equity market, a fixed income. head of global fixed income at morgan stanley investment

management is the right guy to talk at the right time. i'm looking at the bloomberg total return index. as you know, it has been ugly since the summer of last year, down 13%, maybe 70% on bonds. we have had a bounce, very nice bounce, price up, you'll down. is it all clear for bonds? is it all clear for stocks? >> the markets didn't win this out. we had to move from over 600 and how yields down to 400. i don't know that it is all clear. we might be at the lower end of the yield range for now but it is amazing that the bond market sniffed out that cpi has peaked and there is a smoother sailing ahead. the fed has more work to do but they have done a lot. the shelter component is the most confusing, the most

concerning to me. that is why they have more work to do. the mann market -- bond market i think it sifts out. lisa: how much is this evidence that the strategic reserve and the demand for oil is underpinning this in march and that is underpinning the entire move? >> that is a great question. it's around how quickly they move. 50 versus 75, after a year they had not moved over 25 basis points in so long. part of this is because commodities have come off and the man has shifted down. i think this is the beginning of the battle and having been more credible, but having more work to do. kailey: do you think the fed is happy with what it is seen in the market reaction? you have them talking about how on -- how inflation is still

high. they want to be a 4.4% next year but financial conditions are getting easier. brian: i think they worry, that easy money is back in the future and thinking he is again if the two. i don't think they see that. cpi is two best too sticky, they need to push back hard on the market. they manage to show the market they are serious about fighting inflation. they can afford to lose. lisa: the rally has been broad, nauseous and equities but in credit. you're seeing people piling to the debt and you are seeing it en masse. do you see that continuing ahead of what the fed is trying to achieve, which is a significant slowdown? brian: it is probably more ahead fake than these levels. they got to a level of too much fear. we are ahead of it and now you're probably at the point where you want to prepare the risk a little as opposed to

chasing it. tom: you sound like mike wilson. i guess you are reading from the same hymnal. if you said the s&p is to fight back, till they only have the interest rate tool? -- don't they only have the interest rate tool? brian: i used to think they had two, i thought they would use the balance sheet more. but yes, the tool they have at the front end of the yield curve, i think they will continue to push. to the need to go 75 every meeting? no. they've done a lot. tom: what is the two tens spread you see? do you see a -80? brian: -100 is reasonable to me. tom: wow. brian weinstein.

kailey: i wish somebody caught my face on camera because i just think my eyes popped out of my head. tom: we do not have that camera. we have a lisa camera. lisa: -- will check and see what that peak was. how far are we from having to do a kind of move and if that happens, what kind of pain is there? what have we seen in markets? have we seen the fed take effect in terms of taking the gloom off inflation? or is it different? a confluence of luck and some moves on the policy front to try to have that near-term in gasoline. tom: in the fourth season of game of thrones someone goes

into a cave and says give me wisdom. we do that with peter who gives is market wisdom every day on bloomberg. he says watch the spx area do you break out. that is what the pros are watching. this is bloomberg. ritika: giving you up-to-date with news rather world with the first word, i'm ritika gupta. not changing the minds of the federal reserve officials, two signaling the federal bank -- the central bank will stay on the path. the minneapolis fed president says he wants the benchmark rate at 4.4% by the end of 202023 -- 2023. a coordinated strike on a russian occupied airbase. this would be the largest single

day in the war. nancy pelosi says the u.s. has to encourage a new normal with taiwan. they have regular military patrols around the island. she says china had been trying to push this on taiwan before she met a congressional delegation there last week. north korea's kim jong-un was recently year -- recently ill with covid, that is according to a representative who claims dirty things spread across the border. regular gas is dropped to $3.99, the lowest since early march. fuel perception is lower than it was two years ago in the midst of the pandemic. 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. i'm ritika gupta.

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>> we are seeing a stronger labor market where jobs are moving and americans are working. and we are seeing some signs inflation maybe beginning to

moderate. that is what happens when you build economies from the bottom up and middle out. tom: august is unusual for the politics and policy of the american nation. it has been an extraordinary we can policy -- politics centered around former president trump. we will talk with chuck fitzpatrick about what is going on. my house stopped as a child for. mason. everything was all did 30 minutes. it was incredible how he always solved the case. they didn't respect to -- there was a prosecutor. it was a -- how are they doing

when the president of the united states pleads the fifth? >> it is hard to do because when he pleads the fifth it is in the context of this potential civil suit from the new york attorney general. we still have to see if they are going to bring a case. it is not a great sign for trump. in civil cases, a jury can be instructed or allowed to consider that as a potential negative -- they can infer negative things about the decision to plead the fifth as opposed to a criminal case where they instruct you not to. we don't know if they are going to file that suit but it does seem to show the former presidents feeling some pressure, especially everyone he implicated in guilt.

tom: not to turn this into perry mason, i don't have the good looks. but you explained the criminal versus civil. politics in america does not care. how will republicans respond to this quote unquote pleading the fifth? jack: we know how republican allies of trump will respond, so aside from pleading the fifth in the civil suit come out fbi rating mar-a-lago, there has been defense from public and politicians and congress on the republican side, demanding a next to nation from doj. there is a lot of loyalty still to former president trump under republican lawmakers. how does it play with voters? the hypocrisy of campaigning and

fashion 2016 saying only the mod -- mob pleats the fifth and then pleading the fifth for roughly six hours does not help. but on capitol hill with allies, we have not seen that many >> in the foundation -- cracks in the foundation. tom: washington pointed out that but trump pleaded the faith in 1990 in a divorce proceeding. lisa: i'm not going to go there. did you binge watch. mason last night? we can use this preparation for the show to color the inside we provide today. let's talk a little about cpi and what we got yesterday. and what this admin decision can and cannot claim credit to. they have thrown as much oil as they possibly can at the market, the strategic petroleum reserve.

passed a bill that may or may not have impact on inflation. they're trying to do with a can and it's going to take a long time. there -- they are hoping and waiting and talking about around outs and other constraints on energy. jack: in the near-term they don't have any massive other options they have not already tried and you can tell they are tapping all the resources they can where they are putting out that kind of reserve and when the conversation has turned too much longer term legislation that may or may not reflect inflation, the so-called inflation reduction act is supposed to do that partly based on reducing the deficit. it is a small reduction over the course of the decade. when you talk about the chips

bill, there are things that could be disinflationary in these pieces of legislation's impact. but this is not something where they can flip a switch. the spr, maybe there could be conversations about permitting reforms. that is a long-term issue. in the short-term, things they could do by election day or a little ways off, the administration does not have that many options they have not already gone to. kailey: of course in theory the democrats are going to be like, gas prices are going down, inflation is cooling off. but how is republican messaging going to switch considering the inflation? chuck: yes prices are going down, but will he talk about below four dollars a gallon, republicans feel good about their message that this

administration has not had a lot of success on the economy. the year-over-year rate was 8.5%. republicans are talking about inflation, gas prices and if you are thinking in terms of midterms a few months away, they are going to hammer the bite in administration and the economy. i'm not sure that's going to change to a significant degree. tom: chuck fitzpatrick. the dollar down 10728104 handle, the 106 is a stronger but even sterling with a bit. 1.2205. lisa: this feels like a reprieve to the currencies that are paired with it. i keep looking at the function on the bloomberg come out you

are praising and rate cuts. as the market is pricing in rate cuts of may have next year, fed official after that official -- tom: i don't understand how we can do that. lisa: and fed officials are saying this can't happen, we are not even close and how much is this underpinning the weakness of the dollar? tom: i understand the use of this and the use of the bloomberg terminal as a trading game. from an economic value, i don't get how you can get the crystal ball out to raise rates as people are talking about it and somehow come out with a rate reduction. i probably talked myself out of a job. futures up 10. stay with us. this is bloomberg.

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tom: bloomberg surveillance, we say good morning to you on an eventful thursday off of a bang up job support, a stunning inflation report. markets on the move and i will call it a recalibration. kailey leinz it for jon ferro, lisa abramowicz, every strategist has to recalibrate on these reports. lisa: have they reached key

inflation, does it matter, is it because of oil, does it matter food grows at a fast pace since 1979, all of the recalibration's that your perry mason analysts have to face. tom: our next guest had a brilliant reporting, joining us, the chief economist joining us this morning. i want to go what i see as every conversation in the household and get away from the idiocy of new york or a leg, cities. miami up 49% -- 39%, orlando 24%, las vegas bring you down, even boston up 14%. does anything matter except as an? >> -- housing?

>> it does. it gives me pause or makes it questionable that we are on a sustainable downward trend when it turned -- with the cubs a cost -- when it comes to costs. food prices up over one percent. these are large components of the monthly expenditure consumers spend on. there's continue to rise. the reprieve at the pump was absolutely a welcome step in the right direction but it does not mitigate the relentless cost. tom: i know you have studied this, the franchise at the university of michigan and the franchise, we join them at jackson holyoke and said how do

we measure inflation, my favorite is the cleveland cpi folks, which is not like core inflation, but i'm seeing an upward trajectory in what is called the now casting cpi. the fact is some of these indices have not turned around. lindsey: that's correct. the market is betting on the fact that inflation will come down meaningfully into the end of the year, alleviating pressure on the fed to continue to backup rates. we look at other cost measures and measures of inflation, we have word from a number of committee members that they are nowhere near done raising rates because they need to see several consecutive months of a meaningful retreat in costs before we have reached peak inflation and we are on a

sustainable trajectory. lisa: does this make you think there -- a soft landing is more achievable? lindsey: no. i don't think we are on a pathway of the rate to 2%. i think they will continue to raise rates, making it a potentially more prolonged downturn in the u.s. economy. so the soft landing i think could have been achievable had the fed initiated rate increases earlier on. but now we are in a position where they will have to tighten and a faster pace, a higher pace than they would have otherwise done if they removed the transitory language earlier. lisa: that has been the case for a wild. we are seeing a number of softening aspects and components. the areas you pointed to, food, shelter, the rent component is a

big one, how much is the conviction that could drive cpi higher than we saw a couple of months ago? lindsey: when we talk about food prices, a lot of that has to do with the supply side of inflation which the fed has little control over. the fed can raise the cost of capital which can tamp down demand and investments, we have started to see that impact. but on the supply side, traditional -- cannot do much and that will keep those are specs more elevated than the fed would like to see. kailey: let's talk about services. how worried are you about services and wage pressure? lindsey: with the productivity report, it is 10%. growth was low and the second

quarter but we also hired several. so productivity is minimal as they hire more workers to produce less goods. that will put upward pressure on wages without the improvement in productivity. kailey: yeah, gina martin adams saying the equity rally only works if you see more productivity with it to that point. we talk about where inflation is going to get to and how high the fed has to be to get there, what rate of unemployment to that dictate? lindsey: it will be a meaningful increase in the jobs rate. we are checking boxes for most sectors of the economy, housing, consumers, risk spending. the labor market remains solid. to see that meaningful slowdown in the economy to bring down inflation, i think the unemployment rate gets nearer

that five percent level, a significant increase from where we are now. lisa: i will ask you a question with all of your academic experience and research, which will make tom brown. -- tom groan. it is the historical analog. people will say it is akin to the 1940's, others point further back in history. where do you look for guidance as to how this is going to transpire and what tools will be necessary to get us back to where it is more comfortable? lindsey: i think there is comparable aspect of the 70's, particularly when we talk about supply-side shock to inflation. we are in an unprecedented market with the aftermath of a global pandemic, ongoing geopolitical conflict. there is no realistic comparison to what is in the past. i think economists, fed officials and marketed participants are struggling to

understand all of these factors, this confluence of factors driving the market to act irrational at this point. we have seen market participants are ping-ponging on one data point. using the 10 year shift and rally back to 3% based on one -- there is no historical precedent compares and we can look to do understand what's happening in the marketplace. tom: let's channel island meltzer of the carnegie mellon. can you do this or are we so fractured, heterogenous analysis where you looking -- you are looking across america? lindsey: clearly. those at the higher end of the income earning range are better

able to observe best absorbed inflation versus those in the middle or at the bottom. inflation does hit those with less ability to absorb cost increases and that is having an impact on the average small business of the displays and cost pressures. kailey: to that point, we are going to get ppi later. do we expect to see the same moderation? lindsey: i think we will see some moderation as affect that energy costs did cool july. but we are likely to see other categories continue to rise given the market and increased confidence. i think economists and fed officials are going to be less convinced even after it reprieve in the ppi this morning. tom: thank you, lindsey piegza.

i'm glad kailey is here. she will keep us on the straight and narrow. it is thursday, we have claims. lisa: i just got a text that he may not come back now. be careful what you ask for. tom: why my surprise? lisa: yes, claims thursday,. kaylee brings up a key point, ppi will be key. in the alphabet is basically our businesses -- our businesses paying higher prices -- are businesses paying higher prices to pass this on to the consumer? tom: i would turn to gina martin adams or other equity strategists, given the turmoil laid out, we begin to see

transactions and -- for profit? i can't remember, we saw some of those transactions here. lisa: merger monday. but we are starting to see deals and how much is out of necessity or convenience? that is what we have to see in terms of whether it is trying to strip out costs, to streamline to maintain the better margin. tom: did you say there's another auction today? lisa: i'm so glad you were listening. yeah, 30 year bonds. tom: what's the difference between 30 year option and seven-year? lisa: one come out one of them is seven years. tom: don't do that. [laughter] lisa: that seven-year option is less liquid. they have not been around as long and it is not a benchmark

move so tense be messier. tom: the acute knowledge we want to see. we will be back. futures up, this is bloomberg. ♪ ritika: keeping you up-to-date with news from around the world with the first word, i'm ritika gupta. the ukrainian president says russia wants nine fighter pay leads -- had nine fighter planes that attacked an area in crimea. russia denies it and says ukraine attacked the airfield. about 20% from the start of next year, due to a european union import, declines will start as soon as this month when russia cuts back findings. they will hold most crude purchases. and protecting the economy against the inflation, to avoid

massive stimulus and money printing. at the same time, they promise to provide stronger and higher quality support to the economy. and a plan to generate more revenue for money is online businesses, extremely giant wants to build -- profit and growth. raising earnings guidance for a full year after forecasting that customer growth in the u.s. will speed up. there also was expected revenue growth in the european market to take full control of the mobile u.s. business. it has become the primary growth driver. according to chick-fil-a, -- aaa, the average price of gas has dropped to $3.89 since march. it is lower than it was two

years ago in the midst of the pandemic. 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. i'm ritika gupta. this is bloomberg. ♪

>> energy markets have been the key focus for is and will continue to be. we would expect where the market is today, we want to encourage this transition where price pressures moderate across the economy. but also do things that will make things more affordable for people right now. at the end of the day, the typical family looks at their monthly budget all in. tom: brian deese yesterday with a long white house -- what was that like? you're talking to him about it bang up inflation report and he has to say life is grand and energy.

lisa: he said there's more work to do, look at this bill we just passed and my issue is what more can they do? at a time when inventory and the strategic petroleum reserve is down. especially lower income households are struggling. tom: we were watching him and the bramo cam. kailey leinz in for jon ferro today. right now, gas under four dollars a gallon, there is no one in america who writes a more detailed report across hydrocarbons then stephen short. he is principal of the short group and his report is absolutely definitive. let me go to one sentence of your report. new york harbor has the lowest inventory of hydrocarbons in a

decade. why is that? >> it is the lack of refinery capacity. i'm in philadelphia, 13 miles down the road from office. we used to produce enough gasoline each day to provide more than -- that was a key supplier. why is new york harbor so important? we certainly have the ingredients. tom: that is a window, schork is a genius on the details of supply and flow. what you see in your madness about demand? stephen: right now it is to keep lower oil prices.

we're looking at demand destruction year-over-year, more than 400,000 barrels lower a-day, 5%. we look at demand relative to seasonal norms, we looking at demand destruction that is nearly 200,000 barrels a day, 2% below normal. clearly, high prices are the cure. they are driving less. lisa: this goes to the underpinning question of what we have seen in inflation prices. is this the sign of a deteriorating economy that is deteriorating, people have not expected this. stephen: thank you, over the past weekend i did some soul searching. i have been in the camp since march that we are in a economic downturn.

they will tell you we cannot be in a downturn because of the labor market. it is very strong because of inflation, earnings are at a three year low. we look back and look at the last 14 recessions, what we see is the labor market has fallen in the first two quarters on half of those. it means at this point in the recession, labor markets are increasing and this makes sense because labor is a lagging indicator. my concern going forward and what is keeping me in a hard landing is energy process of decreased in they will continue to decrease into the fall as we switch over to winter grade gasoline which is cheaper to manufacture. but of course we are at a seasonal lull demand. the other drops, we saw this in cpi, and that is food costs.

food costs are rising at the fastest pace since the 1970's and we look at the potential harvest this fall, not only off-road diesel price for farmers rising, farm equipment is rising, all of our propane prices are rising, low costs of the harvesting we look at continued food cost. there's the gasoline, not with food. lisa: we are looking at an economy where we are seeing volunteers because of food, rent, other input where's wealthier individuals can still spend at romance -- hermes or whatever. stephen: i was shocked earlier this year, the demand for income and perks blew my mind. i'm 55 years old and i'm just

aghast at what these college grads are expecting. and they are expecting it because they are getting it. so yes, you are having that to a market where health -- wealthy high income earners are less impacted by inflation and we have seen that in demand numbers but clearly the lower income people are absolutely sweet and shall remain sweet for the foreseeable future. tom: thank you, that was brilliant. come back. it will be interesting to see. did bramo take a shot at me for the hermes bowtie? kailey: maybe. but i think the bowtie looks great. we are color-coordinated on the show today. tom: my wardrobe people called

and said we have to match with her today. kailey: -- lisa: i just know it is a popular name. i do think there is a larger point theo -- point here, apparel companies, luxury retailers are delivering better-than-expected margins whereas the walmarts of the world, target, they are struggling and i feis struggling is a little strong. but are performing worse than expected. how much can we get conclusion from the overarching market by averages that don't speak to these differentials? tom: yeah, what's two claims here. we are a little off the radar and we need to get back on it. i extrapolated out, where do we get the 300,000 jobs claims? this is a round number. i was shocked, september 16,

2022. some people are looking at that to accelerate. there's a wall street journal article this morning that felt fascinating, one company that was both hiring and firing at the same time and we are seeing a bang up job or. we are expecting to see it a number of layoffs pick up and how do you understand such a strange moment in an economy that is facing estranged post-pandemic reality? tom: part of that is technology. the overlay from stubs from jp morgan yesterday. futures advance. under 20, 19.92, claims the date 30 -- a 20.

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>> this is a necessary print for the fed but it is not sufficient. we need to see more. >> we are entering a new phase of the inflation debate. >> we have a positive outlook. >> if the fed is exciting to bring it back down to 2%, global secondary inflation is in focus. >> the idea of peak inflation is a math problem for us. >> this is bloomberg

surveillance with tom keene, jonathan ferro and lisa abramowicz. tom: good morning, jonathan ferro, tom keene and lisa abramowicz on radio and television, after a bang up cpi report, a vix under 20. this weekend to the publishing will be fascinating. lisa: especially pushing back against -- how do you get this disbelieving markets helping to fuel the optimism? tom: we have a perfect guests for you if you are in the equity market, coming up here. michael this morning said in an abrupt move, the rug futures, 12 right now and it is happening in real-time. lisa: and a lot of people are talking the how there is potential upside. is this still the bear market rally that some people have

said, every person has come on this and senate thin trading, what are we doing here? tom: she said i will follow the fed speak. i said good luck with that. the fed distance from the market is extraordinary. kailey: it's like two different worlds. you see -- they think they not on hiking. charlie evans agreeing, saying inflation is unexpectedly high. the equity market is say we don't buy that. tom: look at what was published after the cpi report. i thought this was great on strategy, and economists said it is a double-barreled short squeeze, both bonds, price up,

you'll down and stocks price up are getting squeezed. i think this is remarkable. lisa: can we say it is the revenge of the 60/40 that did not work in the first half of the year and now it's in reverse, people have gotten confident on that side. tom: so important in the data check, we will dash in a minute. russell leading the way, up 4% -- .4%. big deal, dollar weaker, an important note, we will see on that. lisa: to reiterate what brian weinstein said from morgan stanley earlier, you could see a

conversion in that spread that is 100 basis points. we sought negative 250, 240, how do we get back? 8:30 a.m. we get the initial jobless claims, do we continue to pick up, as well as ppi for july? prices that adventurers and factories play -- pay, much to receive lagging behind in terms of a softening effect? are consumers paying less but companies paying more to manufacture the goods? it speaks to the margin compression people are expecting to happen later this year. the key point of the whole day, the u.s. is selling $21 billion, 30 year notes, seven-year notes, they last for 30 years and said of seven-year. but it is a metric of how much people have conviction. tom: this is important, a

goldman sachs note of i will call it insatiable, i'm not knowledgeable enough. in your world, is it insatiable demand for paper?' lisa: it did suggest that. it is a buy if you see yields above 2% at a time when the fed is committed to getting inflation down there and the longer we persist in this environment, the slower growth we have going forward over the longer term. these are some issues not only economists are looking at but also traders and fed officials. we will hear from the san francisco fed president in an exclusive interview with wilbur television. and she has said we have a lot more work to do. when does the market pay attention or is the market right? fed officials are going to backpedal. tom: we will jump to the equity markets here with katie, a chief

research strategist. you can't pronounce her focus at the massachusetts -- massachusetts institute of technology. she joins us with an inside the. knowledge of math and trend. your work with andrew lo and all of the others around trend based analysis leads us to one single question. have we broken the bear market trend? katie: that is a good question. what we have seen lately, the most interesting from a technical perspective, we have seen this e-cig on the last two to three months. so feels like an inflection point. it indicates that we could go either direction depending on what occurs. yesterday shows we might be

going in a better direction than people have thought. tom: paul wilmot and the others from years ago, mostly out of imperial college, have said it raising debate is there value to volume analysis. do you study volume? i don't. >> it is a good indicator to understand whether or not you can trade a market and whether or not your sizing is -- the empirical documents are predictive. there may be exceptions but volume is still a key metric as it tells you something about whether or not the trade ability of individual markets is there. that is how we tend to think about it. lisa: liz mccormick of bloomberg news talks about a paper you wrote how pigs flew, at least in

your view, have you closed that trade out or are you trying to short bonds here especially after the rally? >> that is a big question. we saw in june a big spike and crosscorrelation spiking as well. signals and bonds have dissipated. the reason we wrote this paper is we wanted to clarify that shorting bonds is not a fluke if we continue to see rising rates. but in fact, when you think about a rising rate environment, you have to consider the shape of the curve on whether or not there may be some technical -- tactical short signals in bonds that may work. this is pertinent as we are moving toward an inversion of a steeper curve right now. it could be an indication things are getting better as long as we see that persist. kailey: tim: what we are hearing --

kailey: we will keep hiking into next year because inflation is nowhere near where would like to see it. >> the market as optimistic. it's good to have something that brings lafferty's down. but most of us in the future markets, we have seen those moves in energy. we were expecting this already. i would say it is a little as would expected, slightly better. but that means there may be a little optimism over the first data point that confirms what people really want, which is things to go back to normal and see 60-42 be back in a good place, which is basically what most people are used to. tom: what final question. people are looking at moving averages in their eyes are glazing over, so i'm a huge disbeliever in baloney like this.

can you figure out this is a breaking and the bear market trend? >> if you do use the averages come on your signals will be very mixed. you will have indication that things are better in the shorter term, up with the dilma in the long term. it is unclear and the only thing we can say is there is little signal and room to move in a new direction. tom: a very safe movement. don't be a stranger. katie kaminski with alpha some flex. -- alpah simplex. this was by the late dearly missed -- and someone who is not miss, i saw them in the food court the other day. and others.

this is when katie was at m.i.t. and it was led by andrew low. lisa: it is so important, it goes from the first half of the year at where there seems to be some sort of linearity or feeling of where we were going, have we fully shifted and what are we shifting to? if it is not revenge of 60-40, -- 60/40, how did she get pigs to fly again? tom: i like the idea of 60/40 because it has been beaten to death. lisa: but are we seeing people go back to it because it is what is familiar to them versus a real trend? i wonder whether the conviction people have that longer-term yields will remain superlow and go lower, whether that gets challenged if the balance sheet starts to recover. tom: i like to hear from

strategists that factor analysis. the factor analysis really matters as well. that was nerdy and geeky. we will try to get to the straight and narrow coming up. claims that 8:30. this is bloomberg.. ritika: keeping you up-to-date with news around the world with the first word, i met ritika gupta. inflation data in the u.s. is not changing the minds of federal reserve officials. two are signaling that this will be on higher interest rates. the chicago fed residents as inflation is still high. minneapolis fed president says he wants the rate at 4.4% by the end of 2023. ukrainian special forces reportedly launched powerful attack on russian airplanes in crimea according to a ukrainian government official who spoke to the washington post. nine planes were destroyed, the

largest single day loss in the war for russia. kim jong-un was seriously ill during a recent covid outbreak. a representative says this is because of dirty objects across the border. according to aaa, the average price of a gallon of regular gas has dropped to $3.99, the lowest since early march. it is cheaper on demand, by one measure, consumption lower than two years ago in the midst of the pandemic. drugmakers have lost a combined 40 million dollars of market value since tuesday's close, it is of nazi concerns about

litigation around -zantac- . a once popular antacid. 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.

>> the idea that we are going to start cutting rates early next year when inflation is likely to be well in excess of our target,

it is not realistic. the most more likely seo is we raise rates at some point and we sit there until we get convinced that inflation is well on its way back to 2%. tom: aerospace engineer neel kashkari there with his thoughts on the place where we are now. to be agreed that he has gone -- ? lisa: he went from the uber dove to the uber hawk. tom: this is from ian -- he made it clear that yesterday jackson hole became important. i'm thrilled to tell you the bloomberg tv and radio is giving a full commitment to jackson hole, letting me go, dusting off the two tone tony lummis, we

will try to get kailey leinz to go but michael mckee will lead coverage with kathleen hays. the british guys coming if he is back from europe. lisa: [laughter] yeah, jon will be with us. tom: and we will stop the show off the reporting of craig torres and kata unit -- katerina sarajevo with something that has been a wonderful destruction, so-called trading from fed officials. jack fitzpatrick joins us from bloomberg government. the chairman and the former vice chairman have been clear on various sundry inspector general's and that.

but others have not in the question is not so much rich guys being at the fed but actually the buying and holding and selling back and forth like during a month or two. jack: yeah, it does seem to be focused on the timing of when we saw that incredible amount of volatility around march 2020. there is a letter from senator elizabeth warren now that is expressing a lack of satisfaction. the inspector general report on this issue of trading at the fed did not address a guidance that came out march 23, 2020 that at least warned about not making unnecessary trading. it seems to be a matter of

timing and if there was anything that could be considered suspicious around then, bubbly march 2020 or so. tom: i look at where we are and a lot of people will say the senator from massachusetts is off, mean-spirited, but he read the reporting and you got fed presidents trading real estate trusts -- jack: -- inspector general looking into this. congress appears to not be satisfied, or some members of congress are not satisfied with the amount of information and the transparency around that.

it is not just senator warren, senator pat toomey has also said he has asked for information and is not satisfied with the amount he is gotten. at a time when there has been a broader conversation. even about lawmakers trading. there is a sense of a lack of transparency that can create some pressure on its own. senator warren has not as silly made a specific allegation of this is what she thinks happened and why it was unethical or anything along those lines. but they are not satisfied with the level of transparency around those issues. lisa: picking up the lawmaker point, it raises the question why there has not been something passed even though it has been proposed to create transparency or an outright ban. lawmakers and others from trading stocks especially of the poses could affect those companies. wehre is -- where is that?

jack: not a lot of movement. right now we are in august recess, the house is coming back to try to pass the energy and prescription drug price bill. but when you hear proposals, especially that sounds like a good government proposal on transparency and holding congress accountable, that may be an important idea and there could be bipartisan interest in that kind of idea, but at this point of the year that maybe more of a political talking point then a piece of legislation that is about to be enacted. there is not a clear path forward for it now. it is a serious issue a lot of people are talking about on capitol hill but i not sure we are going to see something signed into law anytime soon. kailey: you mentioned tomorrow they are expected to vote in the house on the inflation reduction act. any potential i cups? -- hiccups?

jack: it looks good. i potential pickup -- a potential hiccup is they've dropped income measures . there are corporate taxes but not potential income taxes. that gives an excuse from new jersey, those types to say we can drop that demand because this is not an income tax bill. it has been quiet and a lot of praise for the bell, not much pushback. it is a narrow margin but it is looking good in the house. tom: thank you, jack fitzpatrick. this is why fitzpatrick is so good, fomc and trading, he has it all -- the rest. i take issue with the idea that if we go back after which guys a net when ownership, they're not going to serve.

we independent bureaucracy may be like italians and draghi. that is the risk. but trading in and out of financial assets while you are in the game, i don't get it. lisa: if nothing else it creates the image of impropriety at a time when a lot of people have lost a sense of credibility in the government. i think that is the issue. how do you restore trust in institutions that are tasked with trying to make things better? tom: washington economics led by chris torres, i will get that on twitter as well. michael purves in the 8:00 hour on stock optimism. stay with us. this is bloomberg.

tom: in one hour, claims. an extrapolation out, 300,000 claims arise in the middle of september based on a recent trend. michael mckee will act philosophical. he is alert -- looking at the larger claims statistic. futures up 14, they advance

lesser earlier. futures up or gene -- 14, dow futures up. off the shock of cpi. lisa will give us the individuals. bond space, curve inversion, 49 aces points to 42 basis points. oil, 98 .1 on brent crude. lisa, on the individual securities, what do you have? lisa: we have been talking about how the macro economic outlook is bifurcated. it is the same with individual stocks. disney shares surging after reporting earnings ahead of the open up almost 9% after reporting better than, increase in subscriber numbers to disney+, rising prices and having a solid performance in their theme parks.

bumble, a disappointing earnings. sonos, the speaker maker, latched back those year expectations. shares down 20%, down 17%. disney was the tail across the board, people coming back to the parks and signing up for parks -- disney+. six flags was the singh story, down more than 12%. is it execution, types of clientele? how do we come up with a cohesive narrative? rivian, down 60%. yes, legislation. you are seeing this in areas like bitcoin. that is what you are seeing with

marathon digital. crypto space doing well because of this expectation the fed will back away from monetary tightening. those shares up 5.4%. tom: jon: as we spoke earlier, kay kaminski, a sophisticated talk about trend following. the dynamics of volume. we know with stephen englander on foreign exchange. he is at standard charter bank and is definitive on cross rate analysis of fx. lisa andkailey want to talk about dollar-yen, the rest of it. i want to go to the angle and are wheelhouse -- englander wheelhouse. you compare it with mexican peso. as an opportunity. discuss euro mex. >> winter can be difficult.

the ecb hiking path is uncertain. as europe goes into recession. by contrast, mexico has a lot of yield. if you think the fed is going to be slowing down, that yield is going to look attractive. you look at the chart. max has been resilient -- mex has been resilient. if there is good news, mex has the beta. it is going to measure euro. it might not be a home run, but might have you earn double. tom: you sound like the san diego padres doing it to the giants last night. i look at where we are, the focus on euro, europe, europe. when you see so much focus on a major, what do you do? steven: you have to assess if the market is wrong. it is possible the energy

situation is somewhat better, my colleague on commodities research has pointed out gas storage is reasonable, above average -- about average this time of year. they thanks they will be able to substitute for russian sources. you have to be careful not to be too negative euro in a way that might low up on you. which points to -- you want something that will benefit if there is good news, that is the key to take out the factors that are -- you are uncertain about. lisa: let's talk about the dollar and how that has in the biggest risk on risk off trait of the past few sessions. yesterday, we saw a major decline on the dollar on the heels of a better cpi print. how sustainable is that, given positioning, how much the fed has to raise rates? steven: i think in q4 or the

second half of the year, i probably spent 75% of my time talking about the fed and the dollar and the u.s. rates. we have been talking about europe, the big uncertainty. there is still covid in china emergency -- emerging. political aspects of china taiwan are there, among other things. we do not think we are in the clear with respect to risk during the dollar trade could come back. at the beginning of next year, we think the economic slowdown will be clear. rates path will become more friendly to markets. risk on is the biggest dollar negative out there. if you see 2023 as being the more friendly year, that is a dollar negative year. q4, we are on the fence because there is a lot more with the fed going on. lisa: how much conviction do you

have about be more positive about euro, or pricing and anything of some of the other regions, when it is a dollar trade, when it is really risk on, risk off and you could see that risk off dollar strength heading into the end of the year? steven: you have to be careful. there is a time to wrap major crosses with both hands, and a time to be careful and wait until you hear something is priced in. there is a lot of uncertainty in the second half of this year, some of which could be resolved. we tend to know how europe is doing as the winter progresses. lisa: essentially what you are saying, it is about a risk on, risk off trade, as opposed to rate french holes. steven: i think so. you think that you find the yield curve slow, the s&p, italy and germany spreads are more

important than what the u.s. five year yield versus the european five year yield. what we are seeing is the risk sentiment. if it does accrue, the dollar does on the broad scale. you have to be patient those things are improving. lisa: to get your thoughts outside of the fx realm, in your research, you called it a 10 out of 10 in terms of risk nine, when realized -- realistic -- how comfortable are you with the pricing we are seeing in the expectation the fed is cutting next year? steven: we think the fed is going to stop in november, around three. we think they are not going to cut next year. basically, they are going to wait and see if the economy is slowing and inflation is coming off, they want to make sure they

are on the right track. we are likely to see a plateau in rates, rather than a spike. the fed is clearly doing a -- saying, no spike. tom: over the weekend, where are you on euro-dollar? are you a below parity guy, a below .95 statistic, or do you amend that? steven: we are below parity in terms of our baseline forecast. we are concerned about howard sentiment -- how our sentiment is going to evolve. the defragmentation tool has a lot of uncertainty around it. we are .98. it signals the dollar is maybe not at the top, but not a mile from the top. tom: thank you so much, definitive and talking of cross rate, which he has acclaimed for euro-mx. i have never done euro- mx

before. lisa: how much do you want to get away from using the dollar as a cross currency, because it is a risk on, risk off trade now. more than anything else, and how much of that has become a theme toward the end of the year and the beginning of 2023? tom: dxy is a traditional index with major trading partners. dxy euro, 58%. yen, 14%. the upper west side has a 4% holding on dxy. bloomberg dxy has way better math. bloomberg dollar is what the pros follow for trend. what is so important, part of that mix is, is it floating or remanded china remedy? kailey: it is essentially sing,

we are not going to go with massive stimulus because of the threat of inflation. when so much about the thesis around china has been predicated on china being willing to step in and interfere as it deals with covid zero and turmoil on the property sector, if they are worried about inflation, their ability to do that will be limited. where does that leave china? it looks like it is not going to reach 5.5% gdp growth. tom: let's get out front, some of the people we have listened to have done this. we are in claims right now, do we have to show up tomorrow? lisa: you mission tomorrow. tom: oh, my word. next week, we have retail sales. lisa: how much do we see some sort of bifurcation? i know that is my theme this morning. what types of retail is selling, who is selling based on the

income on -- and where things are getting crimped? tom: i think michael mckee is in the building. i have not had a sighting yet. we will do claims. stay with us. good morning. ritika: ukraine's president zelenskyy says russia lost nine fighter planes in explosions that rocked an air pace in crimea. russia denies ukrainian attacks caused the losses, the washington post says that russian as ukrainian special forces attacked the airfield. according to the international energy agency, gradual declines will start as soon as this month when russia cuts back refining. the e.u. ban as set to halt most crude purchases from russia in december. the rhine river is set to drop

well below the critical depth over the weekend. below that mark, effectively unable to transit the river. disney is raising the price of disney+ by 38%. to generate more revenue for its online businesses. this came as it once to build on third quarter results, profits and subscriber growths. customer growth in the u.s. will speed up, better than expected revenue growth in european markets. t-mobile business in the u.s. is become the primary driver. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg ♪. ♪

>> between the italian election next month, whether, this unusual weather in europe and drying up the rivers, and supply shock as well it's the energy costs. i think europe is facing a couple of shocks in addition to the interest rate differential. tom: mark chandler on foreign exchange. the euro moving out to 103. we spoke to stephen englander, who reaffirmed parity to .98. a interesting inflation report,

it has moved markets. we see that this morning, s&p futures advanced to the 20 level, the dow putting it up 172 points. fix below 20. we digress, and do what is unusual. the stereotype in conceit is american investors, american tourists aborting europe this year. andrea bonhomie is the founder of investment industrial, he is someone who believes in investing in america. he has done this in any number of forums. what i would say is, he has done this beautifully. he has invested in ducati, matthew miller is an acquaintance with that. what is great about ducati, andrea, is it is right next to one of the best italian restaurants in new york. i love how you put that together. great italian restaurant next to the khadi. trust me, it works out. i have done it too many times. i want you to tell us what the

transactions you did today, and they are smaller and have to do with this, that and the other thing with food. your belief from italy with american investment, describe that. >> if you look at the united states for success in companies, it is the single biggest growth market. we have about 8000 employees across the group. united states will remain important for us. i think there is no difference whether one looks at political or exchange-rate issues. in the medium term, the u.s. will remain an important arc it for italian -- market for italian companies. tom: i get the drill. what it is about is a technology conceit of america. we think we do technology better than italy, better than continental europe. do we? andrea: we do industry better, we do brands better.

i think italy is the single largest industrial producer in europe, after germany. our strength will come through. the growth of the united states will support us in that. lisa: i would like to get to the italian economy, which has been a pivot point for a lot of discussion. before we do, the conviction to buy and make a deal right now as people talk about record uncertainty. you see money, cash, piling up on venture capital funds at a record pace. where do you get that conviction? andrea: we are supposed to invest in moments like this, our usefulness to the world is to provide liquidity wind other people lower scared of putting back. usually, people pull back when they are supposed to invest. this investment we just done in the united states, which has about $2.5 billion in sales of food buildup is important, you

can do it because there are moments like this with supply chain issues, etc. are impacting the market. this is a moment you are supposed to continue investing, not pullback. lisa: it is safe to invest in the u.s. right now as opposed to the euro plan, based on the state of the economy, based on bait -- based on gas prices, fragmentation of the euro project. andrea: in the short term, yes. in the medium-term, no, as prices in europe are climbing now. we will continue both tracks. kailey: that is where, regionally, you are investing. let's talk about company specific, the kinds of companies you are putting money into. you are making food deals, how do you navigate that challenge? andrea: we've got raw materials,

price inflation. you've got problems with supply chain, you've got in on shoring of sourcing. there are tons of issues in the food industry. if you look at the medium term, food is the biggest challenge we have on the global economy today. quality of food, quality of ingredients, we are doing this two major buildups. one on the ingredient side, we have reached about $1 billion in sales. the other is 3.5 billion dollars, our private label. this are spot on where the world is going. you will see major change in food, food will become a central issue because of the droughts, etc. it will be the biggest technology, i think. tom: i've got to talk to you about what matters. i got the letter from the taylor

swift graduation at new york university. this was a huge deal in manhattan. i think what was missed about ms. swift speaking at the yankees stadium to nyu, this was a kid who never went to college. she did high school, worked out of airport terminals as she studied. what was it like having a kid that never did that show up at nyu? andrea: nyu is a university which was born out of the city. this city gives opportunities to everybody. it goes to your question about the united states. the united states is a place where you can have opportunity. that is what nyu is therefore. tom: i've got to make news here. i've got the editor-in-chief, she emailed me. this is boring. make some news. how do you top taylor swift at

nyu? are you going to have mario draghi? andrea: i don't think mario draghi will get the same reception. not even close. tom: [laughter] andrea: he is a good manager, but that will be. tom: that is going to cross all of the italian newspapers tomorrow. [laughter] thank you so much. digging us a hole in the italian press. mario draghi, what do we think, is he looking for a job? lisa: is he looking to seeing, -- sing, look what you made me do? tom: we may see him at jackson hole. seriously. lisa: that is one of the main issues in europe right now, what do you do if you have a government splintering at a time when the ecb is trying to protect some of the peripheral regions from having their spread flow out too much as they

tighten policy? not to bring it from taylor swift to nerdville. this is an issue, given the willingness of the other nations. tom: lisa, i cannot pronounce it. kailey? emails in. says, peyton manning spoke at the university of virginia. kailey: he threw footballs into the crowd. tom: he threw baseballs into the crowd at yankee stadium. you cannot return fast enough, ferro. 30 minutes, claims economic data. this is bloomberg. ♪

>> the market is not believing the fed has done enough to bring inflation down anytime soon. >> i do not think markets are pricing in a severe recession

outcome. >> when we get past the summer, we could start to see more volatility. >> has these forces gather steam, i think the market is concluding the federal reserve is going to break something. >> this is "bloomberg surveillance." lisa: count down to jobless claims, this is bloomberg surveillance. we have jon ferro, he is off. kailey leinz in, which we are happy about. tom, we have data coming out in early minutes. ppi and jobless claims, which is more important to you? tom: jobless claims will validate the worsening economy. high frequency data, weekly claims continuing to me is always more important. that is kyle weinberg 101 to speak of one person elected.

lisa, i think the economic data in whole has to follow on from bank up jobs, banged up cpi, that has changed the tone of the market. futures up again today. lisa: nasdaq up .5%, not that much coming up more than 20% off the lowest we saw in june. we have to wonder how much further it has to go, whether the market has gotten ahead of itself. a lot of notes have come out saying, it has more to go. tom: michael purves here in 15 minutes. we must listen for the bears, he as he goes the other way. from ira jersey on fixed income, this goes to the heart of the matter. nominal labor income growth, i did not know this -- it is 9% plus. on radio, that is ira jersey's exclamation point.

9% plus nominal labor income growth. how is that negative for america? lisa: it is only negative if used see cpi assert itself to the outside. this is what a lot of people are looking for in ppi, it is the margin. it is not the absolute, not the nominal. how compressed are things getting? with ppi, it is important for that mike will some projection of shrinking margins going forward. kailey: right, which is why he has been bearish on this market. he thinks downright said going to show up at the letter part of this year, which raises the question of the fundamental backbone of this rally. it is a melt up, people getting excited of the idea from a dovish pivot from the federal reserve. that does not make inflation cool. if you are dealing with higher input costs and a lack of ability to pass that on, that does not leave corporate america and a brilliant leas. lisa: it is leaving the market

and a better place. we are seeing the revenge of the 60/40 with bonds and stocks rallying. it is broad and sticky. tom: i like how you bring up the 60/40, it has been out of favors. lisa: what we are seeing today, yields coming down across the yield curve. you are seeing a lesser inversion. s&p and nasdaq futures .5%, 32 point or zero on the s&p. crude strength which i find interesting, given what we see in terms of steady weakness. iea report that came up this morning that said we are increasing potential demand because of the transition people substituting from gas with oil to get ahead of potentially a difficult winter over in europe. tom: $100 a barrel, brent crude up today. it has been the upper end of the range, to break out to a higher

statistic would be interesting. lisa: we are trying to understand how much conviction it has. jim paulson says he thinks he has conviction, which is a lot of conviction to the conviction. kailey: [laughter] lisa: jim, you have been bullish , pulling back. the melt up has begun something more concrete. do you buy into this, or see this as a head fake? jim: i'm going -- i am on the buy into it side. a couple of things for me, at the forefront. talk about the fed minute, i think the case for additional fed tightening is rapidly dissipating. we brought real gdp growth down to a crawl overall. i think there is downside momentum on growth as we go through the balance this year, the past tightened policies of money growth slowing, fiscal growth slowing, dollar rising, yields rising is likely to keep real growth sluggish. the inflation evidence continues

to get more and more pronounced. i do not know how long it will take come down, but the momentum is down. i think by september, we are going to see the fed case for, why keep hiking, dissipate a little bit. lisa: i do not mean to interrupt. i am thinking about what you are saying, we are seeing increasing evidence that inflation is coming down. the pushback i am sure you hear, not when comes to rent, not when it comes to food, not when it comes to medical costs or how much it comes to services. you see inflation in some places, but it is not as broad as you would like to see. what is going to broaden out later this year into next? jim: i think having real economic growth, 0% to 2% is a big part of it. having the past economic policies, they have lags and argan -- are going to be a

negative downward force. the recent inflation peaked, earlier, fiscal growth peaked. monetary growth peaked. yields started to go up. that is a one year lag policy has on the economy. if that lag is going to continue to be negative going forward, you can pick parts of the inflation that are still hot, but there are a lot of parts that are not. the inflationary thrust of commodities which was driving this at the leading edge is a deflationary thrust overall. the core rates of cpi, ppi, pce have now decelerated year on year the last three to four months. annual wage inflation was 6.5% at the end of the year, it is now 4.3%. it is a big deceleration, year to date. i think the debate on inflation has peaked.

i think that is over, and now, it is a debate of how fast it comes down. by september meeting, we will get more claim numbers that will probably show more weakness. i think the case is are going to start to go away. this is how more a list, i do not care what the fed is going to do. the fed is not driving this ship. if i look at what is happening, we are already into a brand-new easing cycle right now. lisa: jim. jim: bond yields from 30 years have started to ease. the dollar has rolled over. junk spreads have gone from over six to under five, they have started to ease. real money growth is at -3.2%, you cannot go much lower. i think it is going to start to improve because inflation comes down. fiscal growth has started to go back to easing. do you want to miss an easing cycle? lisa: i hear you. i also hear federal reserve

officials like kashkari saying we are nowhere near done. kailey: we have so much tightening left to do. inflation is very far from our target, even if it is moderating cleared -- moderating. as you talk about these things changing, financial conditions easing in the fed not being in control, does that not mean they are going to be or aggressive to get that control back? jim: i think it is interesting how much attention we devote to the fed. the fed has been behind the curve the whole time. inflation is coming down today, not because the fed lifted the funds rate for the first time in february this year, because anna terry growth, fiscal growth, dollar growth, yield growth are tightening all last year. that is what is bringing the lower -- lower economy, lower inflation. the fed is behind the curve, but the markets are going the other way and starting to ease. why should we give so much dominance to the federal reserve? tom: we had katie kaminski

earlier, a rigor of mathematics and the rigor of trend, the rigor of a timeseries being all that we look at when we look at equity markets. how do we move from what is an obvious short squeeze, futures up 21, dow futures up 83 two days in a row to a constructive, bull market trend. how do you -- to a durable trend? jim: good point. to keep this going, we will have to decide we are not going to recess. that is becoming the bigger issue then inflation right now, are we going to recess soon? if we are not going to recess, that gives you a fundamental undertow to your point of giving sustainability. in the short-term, we are dealing with distillers that of come out. we are dealing with technical levels that are right in front

of us, the 4200 level, the 42 22. if you break through some of those, you are going to see a lot of the technicians that have been bearish change tune. that could ring buying in that could sustain this for a wild. if we fail it, we probably have downside. if we break through that, you could convert bears and brake sustainability for a period. tom: this goes to your auction ability, where the demand seems to be great. as jim paulson says, those on the sidelines and -- in bonds and equities, that is a substantial group right now. lisa: that is why you have four people coming in. he is saying, you do not want to miss an easing cycle. there are signs it has begun, it does not matter what the fed says. tom: oh, lisa. lisa: they are behind the curve on the way down.

tom: it is horse and cart. one of the hardest things to understand in any cycle, markets are always out front of the cart, which is monetary authorities. this is bloomberg. good morning. ♪ ritika: equation data in the u.s. is not changing the minds of aderholt was officials. central banks will stay on the path towards higher interest rates. fed president evans says inflation is unacceptably high. minneapolis that present -- fed president says he wants -- by the end of 2020 three. ukrainian special forces launched a attack on a russian air force base in crime area, according to ukrainian government officials. ukraine says nine russian warplanes were destroyed in the attack.

gasoline prices keep boiling in the u.s.. the average price of a gallon of regular gas has dropped to $2.99. the cost has fallen due to cheaper oil and relatively weak demand. yield consumption is lower than it was two years ago in the midst of the pandemic. snarky gsk and halle on has lost a combined $40 billion in market value since tuesday's close. that has to deal with mounting concerns about litigation and a round of a recalled drug. another month, another record for rent in manhattan. the median rent was $4150. that is up to .5% from june,

$.29 from a year later. the median rent has hit a record in the past six months. global news 24 hours a day, on air and on "bloomberg quicktake." i am ritika gupta. ♪

>> we knew the headline number would be coming substantially down, we could see what had happened with gasoline prices. the core number was better than

most people expected. that is better than the alternative to that. tom: louis summers, speaking on the fed on the optionality, the degree of freedom to any central bank. he has been someone who looked at inflation, he visits wall street week this week where professor summers is on the inflation report. 12 minutes away from an important claim support. ppi, as well. final demand, ppi will be of interest rate claims to me is front and center. we are driven by the research of our guest, when someone writes a piercing note, we say michael purves of -- we do not care you are living large in spain, we need to speak to you. a spanish afternoon, 4:00 p.m. with a sangria or martini by his side. michael purves joins us on

optimism on the market. i would predict every strategist, every market savant asked to come out -- has to come out this weekend and adjust. how did you adjust this morning? michael: i have been arguing the recession, economic contraction was a pretty speculative argument. that was the argument of the day, pretty substantially. in the last two weeks, we have had the three most important economic data points per the isn, nonpar payroll and inflation yesterday come in just the way you want them in terms of affirming that not necessarily in a high inflation, negative growth contractionary condition. when you look at positioning, this is treasury positioning and equity positioning. it is error on both sides -- bearish on both sides. there is a vacuum when you have

those three important data points line up. you are looking at q2 earnings, based on earnings, revenues and earnings, they are better than q1. you are looking at a situation where the market is going to move higher. my year-end call has adjusted to 4500. i am not saying we are out of the woods. certainly, for the near term, the water is higher, not lower. lisa: how much is your conviction underpinned by this idea just heard from jim paulson, which is at the beginning of an easing cycle that inflation is rolling off much more quickly than the fed is expecting and are going to have to catch up with the market? michael: i think, looking at the euro-dollar and -- i think it is 50 basis points right now.

i think that is an aggressive assumption. how assets trade point of view, if we see some facility where peak hawkishness is going from the spread to a being categorically dovish, to now categorically hawkish. that is one of the most aggressive habits -- pivots of fed policy. right now, that is in. whether we get 75 basis points or zero basis points in 2023, as long as we can look at something was in billing some facility the bond market, that is more important than what the average expectation for euro-dollar's. lisa: how much do you look at this idea that you had the biggest increase in food prices going back to 1979, rents are searching. you see areas in nondiscretionary spending that are crimping the average

american household balance sheet. that has yet to fully play out. how do you factor that into your bullish thesis? michael: that is a fair point. i think there is strong arguments for a lot of components to inflation to say, higher or longer. the question is, if the markets and economy can adjust to that, i think the cases of inflationary surges are going to be different than what we have seen the last nine months. it is the surge and velocity of these inflation prints that it disrupted the markets. if we get to a point where we never get down to 2% and are adjusting to a new normal because of deglobalization, delocalization, higher food prices, energy supplies that never fully expand so the world

gets down to $50 again, -- oil gets down to $50 again, those types of dynamics will play out as a much slower than basis economy, the economy can adjust. maybe the 10 year does not go back to 2%, maybe 4%. it stays there, you can have the conditions for risk assets to be supported. lisa: is there going to be fundamental support when we are thinking about earnings? as we talk about inflationary pressures, there has been warning on the bearish end of the spectrum about margin pressure coming on. s&p 500 trading back into multiple, almost 19 on forward earnings, when are we going to have a problem with that denominator? michael: the earnings estimates compiled by bloomberg are up 6.5% at the beginning of the year. that is unusual. usually, they go down.

q2 numbers are pretty good. i think it is important to recognize that if you have a high inflationary environment without a major economic contraction, meaning, pmi is in the 40's or 30's, you will have high earnings growth. in the 1970's, you didn't have a great gp condition. earnings growth was twice as high in the 1970's then it was in the 1960's with real gdp averaged 4.3% in that decade. high nominal gdp helps margins for many companies. certainly, the top line is inflated i that, as well. you are not seeing a lot of margin pressure. i am talking about the s&p 500 index level. there is a lot of specific instances with a lot of culpability.

tom: right. michael: there has been resilience -- tom: we've got to be -- leave it there. i've got to say, --, alexion. lisa: nailed it. kailey: nailed it. [laughter] tom: coming up, michael and claims. this is bloomberg. ♪

tom: economic data, retail sales next week. now, there is a slew of economic data. here to give perspective on the high-frequency claims data is michael mckee. frequently, we talk on thursdays. michael: frequently, we talk on thursday when we get jobless

claims numbers. we are looking at 262,000 four last week, in terms of jobless claims, which is higher than the previous number. i am waiting for the release to load to see what the revision is to see if it is a major change. continuing claims, 1,428,000. up by 12,000 from last month, not a huge level of ongoing claims which tells you people are still able to get jobs. they are on on a plummet claims for a brief period of time. ppi, interesting news. final demand ppi, which is what companies get for their products down .5% during the month of july. that pushes the year-over-year rate from 11.3 to 9.8%. that is interesting. x food and energy, sort of the

traditional core, is up .2%. the forecast was .4%. x food energy and trade, up .2%. that was forecast to be up .4%. the annual core rate, 7.6%, down from eight .2%. energy food and trade, 5.8%, down from six point 4%. a weakening of inflation. tom: the markets lift on this, futures up 31. s&p futures up 31. dow futures, to 63. nasdaq up .6%. vicks has not moved yet. i wonder if we will see a 18 handle. lisa: a two-year move would move significantly. you've got that to year yield down 3.13 percent, that is under. it is fascinating to me. tom: further dollar weakness as

well. is this a mere image of what we saw yesterday? michael: no, a mirror image would imply a reverse. the initial topless claims last week revised down from 260 to 248. this is telling us the labor market is stronger than we thought and is not necessarily getting worse, which some are worried about. inflation pressures have started to ease. looking at overall producer price numbers, looks like 9% drop in energy is what is responsible for that .5% drop in final demand goods, which is not going to surprise anybody. the index for food and final demand goods rose 1%. we are seeing food inflation. lisa: how much is this a head fake?

how much of this is giving the wrong impression because it is all tight oil prices? even if they stabilize, won't provide the same tailwind to this deteriorating inflationary impulse a lot of people are counting on right now. michael: a lot of energy products go into other products. it takes a while to get into the price indexes. as we go along, that should be good news. it does suggest we are seeing and energy driven inflation area, except for overall number, still not matching what we saw the prior week. services ended up .1% higher, services were a big mover in yesterday's cpi. this is good news. tom: we've got to leave that here. it is good news to have you with

us yesterday. michael mckee with our economic coverage. right now, matthew liss eddie, chief u.s. economist at deutsche bank. he was out front in calling for some form of economic contraction in america. matt, with the data we have seen on jobs, inflation, cpi and ppi, can you and peter uber reaffirm u.s. recession? >> thanks for having me. it does reaffirm our view, which is that we are not in a near term recession in the economy. jobless claims data are edging higher, but at low levels. it suggests we are not heading into a recession imminently. it does point to a labor market that is tight, wage pressures that are still above what would be consistent with the fed's objective. inflation pressures, they are

coming down, but are far away from the fed's objection. we saw cpi yesterday, 40 basis points month over month. 7% year-over-year. we would stick with our view that recession is likely to middle of next year and remains one that has been induced as the fed continues to tighten monetary policy. lisa: do you expect this to be a less severe recession based on this decline in cpi and ppi? matthew: we have what i would call a moderate recession, the unemployment rate rising. two percentage points. something that would be akin to what we saw in the early 1990's. he key reasons for that were, private sector balance sheets are in good shape. the fiscal sectors helping in autos have been supply constraint. you did have monetary policy that would ease next year and

help out. on the margin, the inflation data this week -- was weaker than anticipated. it does help our call for the fed to raise 50 basis points at the september meeting. do we see the downside persisting, giving being -- given the trending data, that is ahead of the's objective. which means the market pricing is probably too low at this point. lisa: where are some of the inflationary pressures coming from? we have been talking about rent, medical costs. how sticky are these elements as we see energy prices cool off, as well as the other issues with respect to goods? matthew: the ones you mentioned are the ones that tend to be sticky. especially rent. when you look at minutes over the past year, those are the ones they are concerned about. they are sticky, persistent.

fed research shows if they tighten monetary policy, it pushes down on housing affordability, pushes people away from home ownership. the other point i would note, particularly for ppi, health care inflation is likely to be rising, possibly substantially for the pce health care gauge the next year. that is a function of underlying wage pressures we are seeing in the hospital and health care sector. we think that at 50 basis points to core pce the next year. lisa: which is why we continue to hear fed officials after the cpi saying, our job is not done. kailey: we've got a long way to get it done. how high the bar is, how high a rate of inflation. are they going to be willing to tolerate, 3% or 4% new 2%? do we have to make that adjustment? matthew: we heard comments from

governor waller on that point. he was noted, over the prior month's, we had .3% core ppe prints. he said that annual isis to about 4%, that is more than double our objective and nowhere near where we need to be. you can safety same thing about yesterday's core cpi print. until we see strong evidence inflation is coming down and here hawkish comets from the fed they need to have had ability and keep inflation expectations in check to have hope of getting inflation pressures back down to target over time. lisa: as we say over time, over what time period do you think is realistic? when we get to the start of 2023 when the market is betting fed will cut rates, what rate of inflation do you think we will be seeing then? matthew: i don't think anywhere near the inflation rates the fed

will need to see at that point. if you look at policy roles, any of the ones the fed would look at, none of them would call for rate cuts early next year unless inflation worked really coming down. we are expecting core pci to be over 4% this year. that is double the fed's objective in year over year terms, that is not anywhere near the level the fed would cover it. tom: you are reading my mind. i brought up the chart. the fact is, 4% inflation, we can enjoy 1990. we can enjoy 1970. the massive volatility coming out of world war ii and into korea's. america has survived 4% inflation before. will we do it now? matthew: absolutely. i think we will see the fed achieve that objective over time. we are confident the fed will do

what is necessary to tame inflation pressures, ensure we do not have a repeat of the 1970's. the key question i think, it is the ongoing macro debate -- how much pain will that require in the labor market from a growth perspective? we think that will mean the unemployment rate needs to rise. the recent wage data is the -- tom: wait a minute. is the data that he believes in the income curve? matthew: the supply-side component has been in autos and energy. there has been an important demand-side component. the phillips curve, we think will work in terms of getting inflation down. pray covid, there is evidence it

is steepening now. tom: lisa, did you think he did well dodging that question? lisa: he did fabulous. tom: futures up 29. it is an upmarket. this is bloomberg. ♪ ritika: opec expects global oil markets to dip into this forecast. it will need to pump in the third quarter by 1.2 million barrels a day. opec make it more insight into the minimum production increase at a meeting next week. zelenskyy says russia lost nine fighter planes and explosions that rocked an airbase in crimea. russia denies ukrainian attacks caused the losses. washington post says ukrainian special forces attacked the

airfield. the number of student visas given to nationals -- chinese nationals have fallen. that is according to the wall street journal. the drop hurts finances, chinese students pay out-of-state tuition. the decline is blamed in part of student doubt that they would be welcomed in the u.s. disney is rising the price of disney+ and plan to generate more revenue for its online businesses. it wants to build on third quarter results and subscriber growth. the world's largest asset manager is making a significant move into crypto markets. black rock is offering a investment in bitcoin, to track the price of the biggest cryptocurrency. a demand from a large, institutional client. global news 24 hours a day, on

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>> markets prized for almost 3% inflation. not just next year, but two years from now. the one rate defined by breakevens is almost 3%. the fed is not believing inflation has been brought down enough anytime soon. tom: really great to speak to michael pine yesterday. he has curved out a franchise looking at global length inflation research. lisa, -- kailey, before we get to a show. we've got to stop and suggest what the last five days have

been since friday at 8:30 and the jobs report. we in the media are been numbed by it. kailey: a huge tome shift for this market. labor market and inflation cooling on the other, both on cpi and ppi. the moderation is much more than expected. producer price inflation month on month and .5%. i do not think anyone saw that coming. tom: let's bring in a pd cio affixed income, a twisted view out of chicago. wonderful to speak with you today. shock of the jobs report, cpi, ppi. my feeling is, everybody goes into the weekend and has to recalibrate. how will you recalibrate fixed income? >> this move started with towels

press conference and the message -- powell's press conference. the fed thinks they are in neutral. if we get the data that supports it, the fed would like to slow down price hikes. there is a shift from the fed that if the data allows it, the fed to be more forward looking, calibrate the pace and estimation of hikes to get to that soft landing. the key message of this week, payrolls data and inflation prints, that window is getting larger. the fed has got higher probability of being able to nail that soft landing. there is a chance the hikes are going to go down in pace and the destination we get to. if the data continues to cooperate, and we have a long window until september and the next fed meeting, it is an environment where trends that started the last week -- they've got room to run. tom: the dow points move, 740

three dow points with futures this morning off the cpi report. dow futures up to 54. spx up 30, .7%. are we going to see the same move in bonds? could you all of a sudden invest for a total return, or are you in the mailroom watching the chicago cubs and clipping coupons? ashok: i will break into treasuries and credit bonds and -- the main message of our view is, we are going to go back to a period where bond yields this appear from the headlines. the days of these 15, 20 basis point moves are going to be going down rapidly. we are going to enter a period where rates are going to bounce around 2.5% to 3%. for credit markets, this is noninvestment grade, investment grade credit, mortgages, there is more room or where we think

these spreads to tighten. at this point, best opportunities are in the noninvestment grade market, but also things like short maturity financials and bank securities. i think on your question of total return, there is more total return. right now we think coming from credit income and credit spread tightening, we will see a big drop in interest rates from these levels. kailey: i want to stick on treasuries. we are seeing the curve steepen out, -39 basis points. we are north of -40. brian wayne steen started off our show saying we could go to -1%, 100 basis points between twos and tens. how likely do you think that is? ashok: i think that is unlikely anytime soon. i think our view is, inflation is coming down. from your end, this year, it is something with a five handle. this is referencing core cpi.

next year, it is something with a handle. there is a substantial fall in inflation, likely coming the next 18 months. that, ultimately, thinks -- we think the fed means it will not continue to take the fed rate another 200 basis points higher. the fed -- funds rate in the zip code, likely something with high 3% type of number. that is remaining in an inverted curve, but a level closer to these levels or higher than those larger numbers. tom: one more question. this comes from michael mckee, thank you for forwarding this to me. bloomberg economics reaffirms a doubtful chance of being and a recession now, but there is that angst well into next year. how does fixed income react to that? if we say things are better now, and we clearly see that in the

data, how do you place long-term bond capital believing in stresses that are out there a year from now? ashok: there are two main points. one is, this debate is coming in the bond market -- real recession versus nominal recession. there is a big cap between nominal gdp and real gdp right now. the chance we get from 0% to 1% real gdp possible, likely, yeah. that is still with where inflation is likely to be a higher nominal gdp environment than what we are used to. that is a bit more supportive for a range of credit markets than the opposite. the second is, it is hard to get a recession when we are getting these types of job gains. the u.s. big economy could we see something that is a small slowdown, small, negative gdp, absolutely.

some of the larger issues, we are not seeing a high probability on them right now. tom: my people talk to your people. we make note that you are missing jon terribly. how we get back from ferro coming back from tuesday, no. i do not know where he is now. ashok: i hope he gets back. tom: we are hoping he gets back. they look the same. thank you, greatly appreciate that. kailey, what i think is so important. i want to go to my headline of the day, i stole it from ira jersey. nominal labor income growth is up 9%. how do bad things happen when you have 9% nominal income growth? kailey: if we are watching wages, at what point is people

going paid higher wages to pay the higher prices in their daily life, at what point is it a bad thing because that leads to a wage price spiral? i am watching this market across asset classes. a cool ppi claim means a weaker dollar. bull market, nasdaq 100. that continues. tom: a look at equity markets. spx up .8%. dow up to 70 points. nasdaq 100, up .8%, up 108 points. 13,500. a wild move.

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kailey: announcer: everything you need to get to for the start of yes trading, this is bloomberg the open. lisa: big issue with markets testing the fed. >> markets have been clearing. >> the markets are o