>> i don't know how long it will take to come down but clearly the momentum is down on inflation. >> they are down but far away from the fed subjective. >> there is still a lot of work for the fed to do. >> with the economy slowing they want to make sure they are on the right track. >> the fed looks at this as the beginning of their battle. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: thanks for being with us on

a friday. there it is again. $100 a barrel on brent crude. lisa: and this comes after mixed reports yesterday. you have the iea saying they expect increased demand for oil and then you had opec coming out saying they expect the surplus. the market has voted with the iea. they are not taking the opec view. tom: a great drop out of frankfurt on this mixed nature lisa talked about. stephen schork joining us yesterday. surges was the word he used. lisa: he sees this weakening and demand, this is a big debate, is it signal or noise? is it signaling something negative in the economy that goes beyond the technicals of oil. that is not only what stephen schork said but mandy xu of credit suisse saying she moves -- she views this as a symptom of the slowing demand in the economy.

this is the demand side of the equation that has been weakening. tom: a raging debate today. kailey, i love what thomas vargas says. it is simple. oil is attached to the surge we see in equities. kailey: and what a surge it has been. the nasdaq 100 full of big tech stocks that have performed well and seen this remarkable renaissance. it is up four weeks in a row. that is the longest winning streak back to november last year. equity markets rallying at a time the fed would like to see financial conditions tightening, not loosening. where does that leave us? tom: is the bond market as confused as the oil market? lisa: the bond market is following the same logic the oil market is following if you view it from the demand side and you view it from this cooling inflation story.

you saw the biggest inflow to investment grade credit back to september 2021 in this past week. people are flooding back to bonds and equities. this is a distillation area story, then moving away from the hawkish tilt story and this is a feeling we can achieve a soft landing. tom: an interesting friday. good guests. we will get to ryan temple in a moment. all i can say is an extraordinary friday to stagger onto jackson hole, beginning to prepare our coverage of jackson hole, wonderful guests scheduled to be with us there. dow futures up 1.50 -- 150. not quite back to where we were with the enthusiasm of yesterday but nevertheless a vix -- nevertheless a lift. the vix shows it with a 20 level. yields are all over the place. 2.1% on the two year yield.

curve inversion less than before the inflation report. the dollar churning, and i guess with euro 102.96 showing the definition of churning. sterling 1.2142. huge challenges in britain and france on wildfires and trout. there is never a drop in the brief. lisa abramowicz. lisa: yesterday we talked about the 10 year option and it was dramatic and part of the pivot of markets with yields higher and stocks lower. we will get to that later in the show. 10:00 we are watching the university of michigan survey. the headline number could rebound from incredible march downward, how much is being driven by oil prices and how much is that reflected in the five to 10 year forecast of inflation put out as part of this survey? if jon ferro were here he would say how any people delay survey,

why have i never been surveyed, and we would question if this is just a signal. 12:00 usda world agricultural supply demand report will be fascinating at a time we just saw food prices surge the most since 1979. that was one of the biggest takeaways from the cpi report. what are the supplies going to look like? this goes to the weather disruptions we have seen in europe, but also in the united states, this has been try and how much does that creep production of wheat and soybeans. saudi aramco will be reporting earnings, reports it will perhaps double its profits in the wake of what we are seeing in oil prices. what we get in terms of an issue with respect to the oversupply that opec is talking about. we see that in the earnings or the guidance for saudi aramco? tom: i see it for oil but it will also move over to natural

gas, which is mislabeled, it should simply be called methane. natural gas is front and center. a huge amount of noise out of the war in ukraine. the u.s. surge in energy one is a shock. lisa: and it comes also as we are dealing with the heatwave across america and we are trying to export to europe. tom: is a toxic brew. lisa: is a toxic brew. tom: kailey leinz is not used when we talk about a toxic brew at the 5:00 hour. ron temple makes us smarter this morning. lazard asset management. i want to cut right to the equity paragraph in your note. you are focused on the grand conundrum into next year, which is measuring the persistency of cash flow, the persistency of free cash flow. how do you do that?

ron: this is all about doing the bottom up fundamental analysis, looking out and trying to understand what makes a company generate high returns on capital and what are the drivers of whether that return on capital can stay high or whether it declines. what i am looking at in the equity market is trying to avoid the speculative earth stocks that are all about earnings that might come down the pike in five or seven or 10 years when all of the value of that company is in the terminal value and much more vulnerable to higher discount rates and avoiding the cyclical stocks most at risk of recession and stayed in the middle of the continuum on the quality stocks, pricing power, brand advantages, strong balance sheets. that is where you want to do the work to understand what makes a company so strong and how they can maintain that position over time. lisa: we have heard this from people trying to gird for

recession, but it feels like the mood sifted -- the mood shifted, have you shifted anything about your thesis and even what we are seeing in terms of fed fund futures? ronald: i think the market is reacting to the positive side we have probably seen the peak in inflation, we have finally seen inflation rollover. it is cyclical items, the items we all thought were transitory. 25 basis points or 40 basis point deceleration with pars and airfare. those are factors we knew would rollover at some point. what i am watching a shelter, wage growth. i think investors should be careful because as i listen to the last few minutes, there is a propensity to say this story is over, we will go back to the old playbook. the fed will not raise rates as much and i can buy the companies

that are call options. i do not think that is the right call. when inflation does settle, i think it will settle with a three handle, not a 1.5% to 2%. i would be a lot more careful than i am seeing in the markets of overreacting to data in the short-term. kailey: if you are more careful, does that mean you still view what we have seen as more of a bear market rally that a sustainable rally? ronald: i still believe it is a bear market rally. i can always be proven wrong. i think we need to wait for data next month. we need to see cpi come down again. there are signals in the job market. if you look at the job opening labor turnover survey, we have seen a million job decrease in the number of unfilled positions in the last two months.

are those jobs going away? which means labor has less negotiating power which means you are less likely to see wage growth which is less likely to see prices going up for goods and services. we need to watch more data but right now this is a bear market rally, and i would be careful of running back to the playbook that works for the last 10 to 15 years because i think that playbook should be thrown out. tom: if we throw out quality large-cap stocks edges the mantra right now we will read about five times this weekend, what will the new mantra be? ronald: i think quality is the playbook you want. the playbook for last 10 to 15 years was by the call option, by the company that is a cool business plan. it is getting access to capital. at that end of the spectrum i think is more at risk. there has been event diagram overlap where a lot of the quality and the growth for the

same company. i still like the quality growth company. that is great if they were the right valuation. by the way, the valuations have come down. tom: they have. ronald temple, thank you for starting it's off strong. i am fascinated to see what the different shops to with their equity calls, and particular what i will call the plume crew -- the gloom crew, team lisa, how they do a nuance, did they take spx up 100 points? i do not know what they do given as mr. temple says a bear market rally? lisa: mandy xu is a gloom crew member and does see stocks going down but she thinks this rally could continue because of oil prices weakening and that has

been the fuel for so much of this. tom: 99 point $95 on brent crude is not weakening when as a kid you were pumping $.44 a gallon gas. stay with us. this is bloomberg. ritika: with the first word, i am ritika gupta. fbi agent reportedly searched donald's florida home for classified documents related to nuclear weapons. the newspapers as people familiar with the probe did not say if the documents were recovered. the former president has called for the search warrant. the justice department has already asked for a court order for the papers to be unsealed. president biden is prayer to relaunches -- is preparing to relaunches reelection campaign in the months after november. those close to president biden described him as upbeat over recent legislative, economic, and foreign policy victories.

san francisco fed president mary daly says the core inflation reading for july is welcome and she believes it may be appropriate for the fed to slow its interest rate increases to 50 basis points next month. she told bloomberg she believes the fight against inflation is far from over in rate hikes need to be dependent on data. three of china's biggest state owned companies plan to do list from state owned exchanges over fallout from whether american regulators should be allowed to inspect audits from businesses listed in the u.s.. the way has been cleared for samsung's lee to formulate take the helm of the company. he spent 18 months in prison before his release on parole one year ago. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta.

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>> the justice department has filed a motion in the southern district of florida to unseal search warrant and property

receipt relating to a court-approved search the fbi conducted earlier this week. that search of the premises located in florida belonging to the former president. tom: whatever your politics, these are delicacies of classified material. we will dive into that with futures up 16, dow futures up 108. i will call a lift to the market. brent crude crunching $100 a barrel moment ago. the focus on washington this weekend, it is difficult to imagine how we get to the sunday talk shows. emily wilkins with ruberg government in washington. there are three levels of classified material. it is sort of -- it is sort of a modern definition of confidential, secret, and top-secret, but within that there are some hugely delegate topics -- hugely delegate topics

, including from 1954 what we see with restricted data and formerly restricted data. what is the what if if some of these classified materials were restricted data? emily: the big concern is national security, the fact that according to the washington post , reporting some of these documents the fbi was looking for related to nuclear data, nuclear weapon information. we do not know a lot of details, we do not know if this had to do with u.s. nuclear weapons, with other countries nuclear weapons, if that data was found by the fbi when they did their search. there is a lot left to be determined. we are hoping to find out more, potentially as soon as today, now that former president trump has said he will encourages lawyers to unseal that warrant. tom: that is pretty visible. i guess we will see something today and into the weekend.

what you are interested in is the affidavit, which is the documents and persuasion that parties used with a judge to search the president's residence . emily: yes. the main question we are all trying to answer is why did the fbi need to search mar-a-lago? how much was at risk for this search? how much was on the line as far as u.s. security and national security? those were all the big questions. smarter legal minds than mine -- mine is not even a legal mind -- will be parsing through the warrant. i will that them do the analysis. one interesting thing in washington is we saw a lot of republicans with strong statements after the fbi search on mar-a-lago. we have not heard a lot of republicans weighing since attorney general merrick garland presser.

a lot of people are now waiting to see what happens with this warrant and what happens when things are unsealed. tom: we now turn to our legal mind lisa abramowicz. lisa: i was going to ask less about the legal side and more about the political side. i wonder if the republicans who are using this as a talking point and calling it a rate and having it be -- is it working in the polls? emily: at this point it is too soon to tell. pulling takes a few days to get done to make sure it is correct. at this point we are seeing a boost for democrats. if you look at the generic ballot, if you look at polls asking folks whether they would rather have republicans or democrats in control, this was a great week for the democratic party, the fact that the house is on track to pass the health, climate change, and tax bill today.

the fact he saw president biden have two bill signings, one for chips and semiconductors, one for toxic burn pits. democrats are going to be able to claim a lot of wins, and they are in the position they can go home to their constituents and talk a lot about what they have been doing. plus the cpi data was really good for joe biden this week. lots of questions about what the numbers will look like in coming months. we still have 8.5%, but at least democrats have the potential scenario that has peter. kailey: democrats with some wins ahead of the midterms, but there is a long way to go before 2024, yet we have fresh bloomberg reporting about president biden's intentions to run again. if the matchup is biden and trump come is there confidence in washington that biden would be the winner in that scenario? emily: there actually is.

democrats will point quickly that even though biden does not have a great approval rating, when he is paired up against trump he winds up on top. narrow margins but still out there. that is why biden ran in the first place. the more likely it becomes trump is going to have another run in 2024, the more biden thinks he needs to be that candidate. tom: cut to the chase. you'll have a mint julep this weekend with the senator from kentucky, mitch mcconnell. is he giving up his house majority? have the republicans screw this up so bad it could come down to a few seeds of majority or even lose it as greg valliere alludes this morning? emily: is a great question. tom: a good one. can i go home? emily: p alludes to the fact it is both the house and the senate will stop mitch mcconnell has to be a little bit worried.

you've seen some senate republican candidates falter in their campaigns. a number of negative stories written about them, love questions about the ability for republicans to win in states like georgia and pennsylvania. greg valliere a had a great piece about the house, that it was initially looking like republicans would have this wave election, a large majority next year. now there are questions about whether or not that will be the case. greg as well of another -- greg, as well as a number of smart analysts think the republicans will win the house in this november, there is the historical precedent. inflation is still high. we are expecting republicans to win, but if republicans only have narrow margins that might limit what they're able to get done, especially if democrats are able to hold the senate. tom: i will tell you, legal beagle, lisa abramowicz, how i

am reading background and trying to keep up with you or others who own the high ground on this. lisa: the subpoena presented to former president trump was not revealed and will not be revealed, that is more detailed, what he had to present to the judge to make the argument for why they could do that. tom: the affidavit. lisa: excuse me. incredible legal mind. tom: she will watch perry mason await. kailey: i had to google it yesterday. tom: thank you. it is friday. futures of 15. dow futures up 101. stay with us. this is bloomberg. ♪

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tom: "bloomberg surveillance" on a friday. equities, bonds, currencies, commodities. hydrocarbons front and center today with the brent crude at $100, on the way back up. we are watching natural gas in europe. chart of the week without question. electricity in france. truly a moonshot and a moonshot

of worry. kailey leinz and for jonathan ferro. lisa and i were talking about it over breakfast at the saint regis yesterday. lisa, ferro has gone full european. this is not a one-day holiday. it's a substantial -- lisa: someone on twitter saying it is so european. tom: do we expect him on monday? kailey leinz with the short straw and joins us today. right now as usually anticipated for november book. when stephen roach writes a book on china, it has a focus and intent on the economics and politics like the weather. " accidental conflict: america, china and the clash of false

narratives." it is hugely anticipated by the chinese watching community. the china center at yield law school. -- yale law school. why is this one different? mr. xi is going to the party congress. stephen: in the past five years we have gone from a trade war to tech wharton now -- war now. conflict is escalating. there is no real framework to manage this conflict effectively, let alone conceive of the slight assemblage of revolution -- resolution. the smallest spark can lead to a major clash. we have seen one in the last week over time one. i am very worried about the possibility of military action

in the taiwan straits occurring in the context of this escalating economic and technology conflict that can lead to a serious outbreak between the united states and china. the book is the conflict would not have happened if it were not for the false narratives both nations harbor with respect to whether -- the other. tom: what is important here is what manner of diplomacy is needed. what is the roach approach to a new diplomacy that can perhaps calm down these pressure points? stephen: my idea that i developed in detail in the final part of the book is that the current structure of engagement, whether it is leader to leader phone calls between biden and xi jinping or earlier economic

dialogue has failed miserably. i am proposing a permanent institution i call, for lack of a better term, a u.s.-china secretary it that means 24/7 staffed by equal number of professionals on both sides of the relationship whose full-time job is to deal with all aspects of the relationship from economics and trade to cyber and human rights. we need a new approach. this is one idea. it might not be perfect but it beats the current failed approach. lisa: there might be a lot of uncertainty on the policy side. businesses have to make moves, either expand in china or withdraw. we have seen a number of companies do that on the margins. we hear more and more about on shoring of u.s. companies away from china.

how will that shift the dynamic of trade at a time when people say this will be inflationary? stephen: i think it will be inflationary. the re-shoring is an outgrowth of geostrategic tensions between the united states and china. they can better be addressed through a structure like the when i outlined, lisa. make no mistake, this is very destabilizing. not just for the u.s. and inflation, but for china. china benefited from globalization. it has the most to lose as we now move from globalization to deglobalization. lisa: our larger issue for the economy, and we were hearing about this from ron temple. perhaps we will get down to a 3% inflation rate but not much below that. we are in a new paradigm.

how much is china the main part of that if you have re-shoring and slower growth in china because of what you said? this will affect the world's second-biggest economy significantly. a slower growth and higher inflation environment for the longer-term. stephen: we debate how much china has held down he was inflation over the past 20 years. it has been significant, as has the rapid expansion of global value chains or global supply chains. as supply chains are disrupted by china and other developments around the world as we move from offshore to onshore, good luck getting inflation down to 3%. it will be very difficult. tom: you build morgan stanley economics. give the first economists that tried to make a three-leg fed

policy. watch the balance sheet, the expansion of the balance sheet. all of that came through. if you were to parachute into jackson hole at the end of august, what is the theory you will find about central banking? stephen: it's hard for me to know how they will phrase it, but the fed theory has to go back to basics. forget this balance sheet as a dependent economy. it has blown up repeatedly since greenspan and bernanke tried it in the 1990's and early 2000. the fed has to go back to inflation targeting, not average inflation targeting but plain old inflation targeting. we need a dose of simplistic but tough and disciplined approach by paul volcker.

jay powell said he's very much committed to doing this. the fed is taking big steps but it's small compared to what they have to do. the federal funds rate is still sharply negative. you will not control inflation -- tom: help me here with the real economy unemployment rate. if we pop it up to 4% or 5%, what does that mean to america's unemployment rate? stephen: it will go up, tom. tom: give me a magnitude. no one is watching. stephen: somewhere in the 4% to 5% zone, a small price to pay. not for those affected by it of course but a small price to pay to get inflation back under a more stable path consistent with sustainable growth in the u.s. the path now does not cut it.

kailey: obviously there is a trade-off between keeping inflation in check and supporting growth. to tie it back to china, the pfc was saying we are going to go with massive stimulus despite the turmoil in the property sector and the covid zero policy causing issues because we are worried about inflation. you expect eventually if china will not take steps to breach of 5.5% growth rate but the federal reserve will? stephen: are you asking about the fed's concerns over u.s. economic growth? kailey: yes. stephen: the mandate is going from dual to single inflation. they cannot afford to flinch on bringing inflation back because of political pressures that will be evident as the unemployment

rate starts to rise. the fed has to be fierce and focused on its independence and his desire to bring inflation down as soon as possible. tom: stephen roach, wonderful to catch up to you. yale law school and formerly of morgan stanley. lisa, i cannot say how alone stephen roach was 20 years ago in saying this is a fed policy that is not congressional amended policy. there was a sophisticated to the links they would have to confront. lisa: you are concerned about what the notes would be over the weekend. the concessions for the big bears. how much will it be this? this structural inflation people are not accounting for. if the fed wants to get back down to the 2% limit, if they don't take the 3% view of things, are we further from that

place people think? is it a lot less attainable because of this re-shoring, the separation of the two powers? tom: we will have to see. jeff degraff with neal dunn. we've had a 50% move, the retracement, off the bottom of this grim bear market. it is not any number of guesses over where we will go. dow futures up 108. we are all doing that. we are all in anticipation of what equity strategist will write this weekend. kailey: i can't wait to see any actual revisions to the year-end target for the bears out there warning of margin pressures and talking about producer price inflation putting pressure on companies. does that start to change the fundable calculus as well and make this not just a meltdown? tom: maybe august we are looking

for and not year-end. a curve inversion. we've gone from -49 to -34, less inverted. this is bloomberg. ritika: keeping you up-to-date with news, there is report that fbi agents searched for were classified documents related to nuclear weapons. according to the washington post, people did not say of the documents were found. the former has called for the release of the search warrant. the justice department asked the court for the papers to be unsealed. president biden was four more years. he is set to launch his reelection campaign in the months after november's congressional election. he's encouraged by recent legislative, economic and foreign policy successes. most democrats would rather have another candidate. ukraine's ambassador is

cautioning the u.s. against fatigue over a were costing billions in security assistance. she told bloomberg it would be costlier in the end to let russia president vladimir putin go unchallenged. he if he is not stopping ukraine, he will attack other countries in europe. the right river is likely to shrink to disrupt transport throughout europe. the water level west of frankfurt is said to go below 16 inches and continue dwindling. that makes it uneconomical for barges caring coal and oil to transit the river. in the u.k., the economy shrank and the second quarter for the first time since the pandemic. fl .1%. retail sales and drops in household consumption were factors. so were declining covid testing and vaccinations. 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 am ritika gupta.

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>> they are significant and they are saying we are seeing some improvement. they are not victories. we have inflation reports and on the planet reports coming out before the next meeting. it behooves us this day data dependent and not call it. tom: mary daly. why the anticipated in a heated battle into the weekend. as we just heard from steve roach. good to hear from him as well. right now, got a friday feel to it. lisa, in anticipation of retail sales next week. i don't even know what day it is. lisa: today is friday.

i want to point this out that citi put out a report saying their credit card transaction data -- it is friday -- shows the decline in spending in certain retail areas. it is across the board. in real terms even more. how does that factor into this disinflationary environment at a time when people are counting on soft landing? tom: that reported week as well. we will digress. 20 schiller --wendy schiller, a writer of textbooks on civics as well. we alluded to this before, we ndy. i want to talk about two candidates will be 78 at 82 in 2024. that means if my math is right they will be 82 and 86 on the

way out the door in 2028. how did we get the fossils friday for president? wendy: i think general trends in aging are good. people are aging better across the country. that's a good thing. i think we came out of a very long recession. the world has become less stable. the cold war ended and we all celebrated freedom around the world, but it brought with it a lot of unpredictability. we had the wars in iraq and afghanistan. when you have that much uncertainty, and the 9/11 attacks, people want comfort. they want people who have been around to tell them that this shall pass. people look to the familiar, to people with "extremes." donald trump had -- "experience." lisa: i'm struggling with that idea.

we have seen poll after poll saying they would like to see new blood leading the democratic party. they would like to see a younger slew of congress members as we enter a very new phase. is it a good thing or bad thing for the democrats that president biden announced his intention to run again? wendy: hi think it is a good thing. you can't have a president not ending his second full year in office who says i'm not in anymore. if there is the sliding chance -- slightest chance he could be president, it makes a difference in terms of public opinion. you saw this with clinton at the republicans won the midterms in 1994. he won two years later relatively easily. you have to maintain the exercise of power and the illusion you want to keep that power. it is a strategically important thing to do. lisa: you think this is more about the visuals? the illusion and less about a true intention to run? wendy: he can stay in this race

until somebody in the primaries starts to beat him. the myth it is bad for the presidential level is debunked. it generates turnout and people registering to vote. they get out the door. we know it increases turnout amongst the party members. that means it is a good thing to have some fighting and challenging in anticipation. if he is in it and people want to challenge him, that means more democrats get in the game to vote. we know the republicans will be very, very energized in 2024. we don't know who they will pick. i think there will be more than one person in that race. lisa: obviously there are multiple variables. let's assume the 2024 candidate is president trump. is there anyone on the democratic side of likely potential candidates who would be able to beat him other than president biden? wendy: if it were held today, unclear to me anybody could

except for biden. people like what they are used to. there have been victories for the democrats on economic issues easing up. the president -- former president trump is facing a lot of inquiries. some are more scary than others to voters. that independent suburban voters is key. they rejected trump and 2020. there is not any reason to think they will welcome him back in 2024. that is what the democrats are counting on. you get pritzker in illinois. gavin newsom in california. kathy hochul if she went to new york becomes a player. someone in the cabinet might want to run. that could make for awkward cabinet meetings. we are seeing energy on the republican side. now we are seeing more energy on the democratic side. you have to maintain the energy and give people a choice. you are the most powerful person in the world and why you would walk away from that two years early, that is political malpractice. kailey: if we can look to the

immediate future and the midterms, there was a sense that democratic momentum was building. you had the inflation reduction act, gas prices coming down, looking optimistic for the administration. yet you now have this galvanizing force when it comes to president trump's face because of the fbi search of mar-a-lago. does that cancel each other out and we left with the same outlook on the midterms as we had before? wendy: outstanding question. i think for democrats and the independent group if trump's face will get out the door and they are behaving in ways that are frightening to some people, like trying to bust into an fbi office being armed, i think that scares suburban voters and independent voters. it looks like this will give trump momentum. the same forces are out the door on the 2018 on the democratic side.

i think it will help the democrats. i don't know if it saves the house but it could save them for the senate. tom: wendy schiller, thank you for joining us with an august update. she is at brown university. you said year end and you wonder if it is getting to august end. lisa: her comments were fascinating. when you get a contested primary, which is unusual with a sitting president, you get greater turnout. you generate more interest. there's a greater debate that brings eyeballs into the fold and could be helpful not only for the midterm elections but for what we will see in 2024. an interesting point lost under the headlines of is he really going to run again? it's an interesting point. tom: i would go back to the markets. with the stunning move since june 16. two discussions are going on. a reaffirmation by the financial

system that things can recover versus all the myriad of uncertainties out there removed from what we look at every day on bloomberg surveillance. lisa: uncertainty on many policy fronts when it comes to just policymaking in washington. who will have control of congress and the legislative agenda. then policy making on the side of the federal reserve. how much changed for them this week? tom: two avenues to good discourse. "balance of power" at 12:00 new with david westin. and sound on at 5:00 p.m. on

>> i don't know how long it will take but clearly the momentum is down on inflation. >> very far away from the fed's objective. >> there is still a lot of work for the fed to do. >> the economy is slowing, they want to be sure they are on the right track. >> you can look at this as the beginning of the battle and having more work to do. announcer: this is "bloomberg surveillance." tom: good morning.