>> don't expect this rally to continue to have the same legs we have seen. >> the systemic risk is that we have priced in the old deluxe scenario. >> is the fed going to be able to engineer another 550 basis points of rate hikes from here? >> they're going to process with rate hikes. they will persist at a slower pace though. >> this is " bloomberg surveillance" with tom keene,

jonathan ferro. jonathan: from new york city this morning, good morning. i'm with tom keene, bramo back monday. onto jackson hole, wyoming. tom: it is august. it has that august field. after economic data, the jobs report cpi, the interesting retail sales report, all that matters now is the speech in wyoming. look at this green -- the screen and i find it pretty accommodative but we are looking for the next information to drive us forward. jonathan: allow me to wake you up, for caps on goldman gdp. goldman sachs 3% for 2022. numero down to a two handle,

2.8%, a two handle for chinese growth. tom: number has years and years of pacific rim coverage. those are important numbers because they are all across the pacific rim and that is how you get the global gdp of 3%. we all laughed at 2.8% but now they look smart. jonathan: they are global recession type numbers. not pretty. kailey: we know that china is going to do something to try to support that. we have talk of more fiscal policy with potentially two to $29 billion in bond sales from local governments, they say they will persist with opening up the economy. they are dealing with a downturn in the property sector, the covid zero policy weighing on the economy. can you have enough stimulation on the monetary and fiscal side to work with that?

whatever your bias was going to that meeting, you gotta confirmed. because if you were dovish, they said they will eventually slow rates confirmed that to you. if you are hawkish, you would hear them claim about being persistent in inflation. jonathan: you read them, i read them, do you know who did not? tom: thank you. talk about commitment. a lot of people do this, predict our copyright, julian emanuel at evercore with earnings, i'm shocked. it was a surprise to the upside and he rounded up, and inflation at 13.9%. nominal earnings up 6.4%. the world is not going to die. jonathan: how much is that synergy? tom: it is part of it, no question.

have we discarded the "omg recession' talk? jonathan: i think maybe. we have pushed out the delays, but ultimately avoidable. tom: we will talk about -- we will talk to jim, jackson hole. and he will save no, no recession. jonathan: maybe next week we will go through our lineup. futures right now positive for .1% on the s&p, nasdaq up .2%, 1%. yields up, 288, prude positive. 89.36. kailey: and the fact that oil is so much better than it was speaks to the demand. it will be a focus

going to get weekly jobless claims. we are expecting tuned 44,000 on initial -- 244,000 on initial claims. this goes back to a week when we have seen a steady decline. it speaks to a cooling in the labor market that arguably is with the federal reserve is trying to engineer. at 10:00 a.m. eastern time we will get existing home sales. they have engineered a slowdown in the housing sector with mortgage rates about 250 basis points above where they were a year ago. we've seen in the data, we expect a 4.9% decline in existing home sales. that follows new home sales we got this week, also a slowdown in homebuilder sentiment that is followed. the longest streak since 2007. the kansas city fed in minneapolis said the president will speak in the next hour.

i'm more interested in him. he was a dove but now he's clearly a hawk. he sees the fed at 4.4% in 2023. how much does he double down and try to clarify a fed minute that could be read in multiple ways? jonathan: given where inflation is, some people might say the whole lot of them are still dovish. are they still a bunch of doves or hawks? tom: no, i think we have switched to are they more hawkish in that idea. that is with optimism in the american economy and the way forward. if you believe in a recession you've to go the other way. jonathan: joining us now, you've had quite a rally since we last spoke. >> hard to say. if i with the fed, i would be inclined to stay hawkish. even if markets anticipate the worst of inflation is behind us.

the last thing the fed wants to do is slow -- over equally dutch over eagerly slow this. excluding inflation for moment, look at the u.s. economy in cash, it is still growing fast. relative to what you would want it to be growing at, it hits 2% target. tom: we have spent a lot of time about inflation and disinflation. maybe there are kinks and stopping point along the way. the united kingdom's needs to be different. do they need an emergency rate hike to get it out of the ways of the government and the new government can move forward? kallum: it's a good question. i don't think you can do anything to see where inflation will peak. that is a supply story. but you have some of the

demand-side pressures the u.s. has, some of the supply-side problems countries in europe have. there's a role for the bank of england to shape inflation and the ecb is more like a fed situation. i focused, not just in the u.k. but the u.s., on the markets to come. i don't think markets are going to enjoy what happens. if this works, the firms are able to pass these costs onto consumer prices. that is the reason the market is overreacting. but that margin does not seem to come. kailey: danny was speaking and saying they should be cutting rates because of the recession they are about to cause. it brings me back to the fed minutes. from your point of view, is there a greater risk of under

doing it or overdoing it? kallum: driven by experience of the last 18 months, the risk is central banks under do it. and i'm focused on the difference between the economy in nominal terms, cash terms and real terms, output. in cash terms, they are going far too fast but at the same time they are being squeezed by supply problems, and output is what defines the recession. when economists state the economy is slowing, i ask them what they are focusing on. if we think about it in nominal terms, which central banks care about, the problem is overheating, not the slowdown. jonathan: i need you to translate central bank speak. the chairman talking about the neutral rate, it was criticized by the likes of larry summers, saying how on earth are we neutral? paraphrasing but you get the point. there are two concepts, the shorter run neutral rate and

longer-term. for people not familiar, which is a mean and what is the story? kallum: theoretically they exist but for the policymaking near-term they not helpful. it balances out inflation. the long-term rate is what would balance the economy in equilibrium. when the central bank has used this kind of language, they give the impression they can fine-tune economies and they can't. there's too much uncertainty and too many complications at the moment. the only thing central banks can do is take a gradual approachi÷, focus on inflation expectations. keep raising rates without fully taking the economy in a way that keeps inflation expectations angry. hope that once demand starts to normalize, you arrive at something like 2% inflation. let's not faced with uncertainty, given the

impression that they can, with a scalpel, fixed interest rates on inflation. they simply can't. jonathan: thank you, to pick up on the language pages use, the institutions, using precise language. tom: i will go with that. they're coming out of the pandemic and i would cut them some slack. i would emphasize, this goes to jackson hole, they are making it up as they go. i cannot say that enough with the data dependency. i don't even look to see with the new economic data is other than claims this morning. what if we get a jump in claims? jonathan: bit of a trend to last month or so. something to watch for an 8:30 eastern time. tom: they're looking at continuing claims, i broader statistic, but i'm going to go back to julian. corporations delivered. jonathan: i will go to -- we

will catch up with alex webb we have not caught up with for a while. he wants to talk football. he will join us in about 30 minutes time. yields down about a basis point, futures positive .2% on the s&p. from new york city, this is bloomberg. ritika: keeping you up-to-date with news around the world, i'm ritika gupta. the u.s. and taiwan following through on a promise to deepen ties despite opposition from china. the countries will start formal talks on a trade and economic initiative this fall. a trade agreement may be more symbolic than substantive. democrats and republicans are reluctant to embrace free-trade agreements. officials agreed to eventually dial back the pace of interest rate hikes. they want to measure how monetary tightening is curbing inflation, according to minutes of five policymakers at the meeting in july. officials also tried a

significant risk of entrenched inflation. the summer of discontent in the u.k. is about to get worse. britain has faced some of the most widespread disruption due to strikes by rail workers, and bus and subway staff. that will be soloed dutch followed by another strike monday. in china, covid cases have surged to a three-month time, driven by an outbreak in a province, the biggest. there are more than 433 new infections wednesday, more than 2000 medical workers brought in to help. exports of the swiss watches rose more than 8% last month, the highest level since 2014. demand from luxury timepieces like this sort during the pandemic and it is the biggest market for swiss walk it -- swiss watches, the u.s.,

overtaking china last year. 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. ♪ ♪

what if you were a global bank who wanted to supercharge your audit system? so you tap ibm to un-silo your data. and start crunching a year's worth of transactions against thousands of compliance controls with the help of ai. now you're making smarter decisions faster. operating costs are lower. and everyone from your auditors to your bankers feels like a million bucks. let's create smarter ways of putting your data to work. ibm. let's create

>> although we still have about 4 million people out of the pre-pandemic workforce, we continue to see strong

employment gains and lower unemployment rates. the kind of labor market that has pulled in more workers historically. jonathan: michelle bowman, federal reserve governor. we'll hear more of that next week. i'm jonathan ferro with kailey leinz, bramo's out . yields are lower, about a basis point. news out of germany that is noticeable. kailey: yeah, the chancellor is speaking to energy -- speaking in berlin about energy, germany will be cutting the value-added tax on gas to 7%. they say it will last until the end of march 2024. governments in europe doing what they can to lessen the burden on consumers and energy prices are ushered on michael. jonathan: jumps out to me that it is march 2024. not next spring, were talking

about going into 2024. tom: let's look at the calendar, you are looking at leaves changing color from canada to northern england. the third weekend in september. jonathan: don't know what that's about. tom: we should road trip woodstock, vermont. jonathan: would you like to do that? tom: but the weather is coming up. but that is to me advancement by scholz. 30 days, 50 days, 90 days, this is -- jonathan: i'm saying winter is coming for the european economy. tom: annmarie hordern with a brief look at washington. i understand that is sleeping washington right now. how overwhelmed is president trump with the various sum of

news flows, legal matters, even if he's not involved? witness mayor giuliani in florida. annmarie: president trump and the organization. we know his cfo is pleading guilty in an investigation to the trump administration dutch organization. he did pay income tax and they paid them in things like manhattan apartments and vehicles. so he has a number of investigations and this will be telling because we will have this year. media organizations and conservative groups have asked for this and we will be heard from this judge. the doj has been clear they do not want this to come out

because they think this would hurt the investigation. tom: he is raising money off of this. the vice president is pushing back, stop yelling at the fbi, not out of language. where do you perceive president trump will be in 30 days or do we not know? annmarie: i'm not sure we will see -- i'm sure we will see the much of the same. it really depends what comes out. we have to wait and see if we get this affidavit. one thing was interesting yesterday, a speaking engagement, former president might -- former vice president mike pence said he would consider an invitation to show up at the january 6 select committee. i potentially think when congress is back in session, the committee has a few months, given the fact that representative liz cheney -- we

will have to see where it goes but certainly trump will spin this and use this not just for campaign dollars but potentially to fuel a 2024 run. kailey: it raises the question if it will be more explosive or not. where does the biden administration come down? annmarie: silence. the administration has been silent and they say they do not want to get involved. they are not briefed on this and they are leaving it up to what they say is the independent body of the fbi. we should note the head of the fbi was appointed by former president trump and the biden administration does not want to touch this. jonathan: a special story in business week this week. we look forward to catching up down d.c.. we want to talk about the seasonal changes.

welcome to bloomberg surveillance from 6:00 to 9:00 eastern time. tom: i think we need to do this. the number number -- november 2 fed show, 18 years, it gets lucky here. 18,000 trees on a fiery glow. we will have mayor's in to talk about the effect on the great city. @5

on-time no -- autumnal-- jonathan: i will -- i used to live in the same building as you . the view is greatéy yeah. jonathan: you are calling it autumnal. tom: autumnal. jonathan: all right. the euro-dollar, at the executive board this morning. tom: what are they waiting for? i'm baffled. jonathan: there waiting for a .9%. kailey: hot ecb. i'm wondering how -- that is not a problem that will be sold. that is a large part because of russia. kathleen: == -- jonathan: if they get them to where they want to be, where they want them to be at the time they want, it's going to be a difficult winter for the europeans. tom: we have already joked about this but this is serious and it comes over the united states as well as a lesser level. what we can do is road trip. think about when it will be autumnal in charlottesville, virginia. late november, john. we can do central park and then kailey -- can join you, me and bramo. jonathan: is it warmer? tom: yes.

jonathan: calling this a smooth august morning. will keep you awake as well. futures positive .1% on the s&p 500. snapping a three-day winning streak on the nasdaq. deep losses, bouncing back to about .1%. take a look at .210 -- .2%,

about eight basis points off the high for the two years of our. you have to go back a number of years to get to those. after these fed ministers minutes, dovish, hawkish, right now changing on the 10 year, 2.88. tom: to summarize, i believe it is 11 ratios invented by michael rosenberg. it is very gullible and shows huge a common -- valuable and shows huge accommodation and moves from a bunch of things the fed desires. jonathan: the euro dollar, the german economy, german bond the euro is looking like this, creeping a little bit higher.

at the exec÷*á ecb interview with reuters talk about another 50 basis point move in september. the concerns have not been alleviated and look at inflation this morning. a .9% in europe. how long have you and i been talking about europe? did you ever think we'd hear about inflation in this percent? tom: no, europe is raising into an economy that doesn't have the technology gift america does. jonathan: an energy crisis later this year. tom: maybe madame lagarde is listening. we would love to see you in jackson hole. -- maybe draghi can attend. david should attend as well, chief executive officer, he has

done holistic work for bank of america over the years. thrilled to have you this morning. i want you to partition the the real economy, the curve, the financial economy. which matters to our viewers and listeners? david: it depends where. thank you for having me. in europe, the curve is shifted to the left. based on the result of the war in ukraine, natural gas prices of europe at an all-time high this morning. clearly there is a negative supply shock and that is a problem. it is a problem because clearly, as you know, this is associated with basically high inflation. in the u.s., food prices and oil prices had basically started to

moderate. but there's no doubt in the case of the u.s.. there's no doubta5÷ that policy remains and especially monetary policy like you said before. it is four weeks in a row. this is why europe and the u.s. are in a different place right now. tom: if we have a debate at jackson hole about a path to 3% or 2% inflation, to those differences affect america's productivity? if adam poses 3% inflation, or the fed wants and powell wants a 2% run rate? david:]2eñzágozx what really hae by surprised is how the market is right now, basically inflation steering months or policy. you have to look at the inflation outlook right now. when your breakeven is trading around 2.5%. thinks basically

inflation is going to be backup 2.5%. the market thinks the fed bonds rate is going to go through .25%. if you look at the united states going back the next 70 years, you've never had this cycle without real rigs -- rates having gone to at least zero. at least positive. the fed is going to be able to bring inflation back down to .5%. i find that completely crazy. v

2.5% and that is still crazy. kailey: we will see how much he has to talk that back in jackson hole next week. when you talk about how getting inflation back down to target is unrealistic and crazy, where do you think it is going to settle and where are fed funds when that happens? it depends if you ask me as an economist or a political analyst. i think a lot is going to happen. especially with mar-a-lago, with 90% of trump candidates having won$ it's going to be huge. v■/89çzdran environment in whics describes economics. they have made it quite predictable. but i think most likely, more ÷ían$m■likely, inflation is notg çó more likely we will be a 3% and higher. from that point of view, the lack of gold is going to do fairly well. when the market reaches that realization. but right now i don't see how the fed is going to be able to bring inflation back down to 2% without taking rates to at least 4% or higher.

kailey:fqç to bring inflation d, is recession necessary? david: we can sit here and talk about recession. i actually think the u.s. economy can cope with high interest rates much better than most people. household leverage is at the lowest level in 20 years. corporate leverage, it is basically about all-time low. if you look at make leverage, it is an all-time low. from that point of view, normally it goes up, that causes companies to pull back. this time it is not happening. incredibly, the last 20 years, this has basically moved on to the government balance sheet. and the government is not going to stop because of this. i actually think the u.s. economy can withstand higher interest rates than people give it credit for and another reason i think rate hikes will have to

go higher. tom: let's go back to your art skills of time ago and talk about china. is there an optimal one for china or is there such a fiction that it does not matter? wv the chinese right now are getting very nervous. it is not so much about the real estate market, not even covid. it's about the u.s.. they think it is about to blow up. cold war. i developed a cold war survey in toronto. it's amazing, only three months ago, 20% of the chinese view america as an adversary or an enemy. as of today, that has jumped almost 40%. largely as a result of nancy

pelosi's visit to taiwan. but there is no doubt that russia and[úv$ç china think thee in the same boat. from that point of view, i think the chinese, the way they are thinking about their policy, is how are they going to be able to compete with the u.s. in a world in which they see this coming together? from that point of i think they also realized a do not have much time yet. -- left. i think they're going to be stepping on it and given the latest batch of data out of china, i think you will see more stimulus because they feel they have to get ready for a more direct conversation with the u.s. neík■ear. you saw the u.s. and taiwan begin to portray negotiations. i think that is the kind of upgrade they will get. especially with china -- congress as you know trying to

push the policy act, and overhaul of the relations. they had to get their act together soon because they might have to -- kailey: you are talking about it in the near term, but when you talk with the geopolitical factors, potential decoupling of the two largest economies, what is the long-term economic ratification? -- ramification? david: 70 people are too young to remember. so much of the good times and wall street the last many years is trying to slow down interest rates, driving up the stock market. from that point of view, there's no doubt that this means we have to build two of everything. two payment systems, framing systems, technology systems.

and two will be more than one. this will be a major source of inflation. i have no illusion, the taxpayer, they have ponied up $60 billion for semiconductors in the u.s.. it's that means they are going to get more expensive. more and more, business is fabulous. it is too bad. jonathan: it is good to catch up, david woo, ceo. he's not the only one. some people want to put some money behind that. tom: we have that from bank of america ages ago and this is not to be taken lightly. we are making jokes about this. but this is a serious time. a lot of people are getting crushed and the answer is we've got to find a theory to hang on. it is there somewhere, i'm just not sure which. jonathan: coming up, a later story.

manchester united and alex webb out of london will join us. futures up .1% on the s&p, from new york city and on radios, tv, this is bloomberg. 7p3!■♪ ritika: keeping you up-to-date with news from around the world with the first word, i'm ritika gupta. china flashing out at a $52 billion program to expand american manufacturing of semiconductors. they say it contains efforts to undermine fair market principles. some extending production in china. china plans more fiscal stimulus as the economies outlook gets worse. local governments have about 229 billion dollars in bonds to fund infrastructure, and budget gaps.

this they have cut the forecast for gdp growth in china. there is a worsening physical outlook -- physical outlook. a big tax cut promised by the two candidates. government borrowing next year, government borrowing next year, expected to be $20 billion á)q) than forecasts duee impact on inflation. the longtime cfo of the trump organization, allen weisselberg expected to plead guilty today to tax fraud. he willuwt not implicate the for president but will be required to testify against the trump company. experts say he -- criminal conduct could mean trouble for the business. massive chronic illness left in the wake of covid. the university of oxford found their higher rates of dementia and similar conditions, at least

two years, based on the records of more than one or 2 million -- 1.2 million. 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.

>> we are going to process with the rate hikes. they are going to persist at a slower pace, though. that gotten wind of and may have seen this big equity market move off of a low, the long end of the curve. jonathan: have you ever seen a moose in the wild? tom: i'm researching our two day trip. i don't have time now, i'm looking at leaves, so i'm looking at moves roto's in new hampshire. it's too early in the season. i'm looking north of toronto but they are already having the season.

jonathan: futures up a 10th on the s&p. nowhere on the nasdaq. how about some of that leverage cash into manchester united? the ted lasso hybrid managing investor. maybe somebody from manchester. tom: all of these things we are talking about an english football, they have made a ton of money. jonathan: they haven't made a lot yet and our next guest will talk about that. there's confusion and thought needs to be addressed. tom: ok. why don't you bring him in, jon? you know more than i do. jonathan: alex webb of bloomberg joins us. great to have you. tie this up, there was a leveraged buyout in 2005. what i heard you do this morning that is important, because many

don't understand, including men united fans, it's about the interest payments on the debt. that's a piece of that. alex: yeah, i went through the statements into a probably state many of this -- 250 million quid. but they have taken outcome outlining their own pockets, about 400 million quid. it comes out about $24 million per year. a lot of money by anyone's measure and less than a lot of their top players earn per year. the real money is what the use to pay off that debt, in terms of repayment and paying the interest. that comes out about $1.1 billion over the course of 17 years. and the crucial point is that is what is supporting the value of their equity stakes. there were half $1 billion in

terms of the trading piece. if they sell it in a private market, as is reported by our colleagues, a could be worth a lot more and that is when they start crystallizing. jonathan: let's talk about the prospect, we looked yesterday that they are selling a minority stake. does anyone want a minority stake? isn't that a cash machine for them and not for the person buying? alex: it would seem that way. there's always hope particularly in the u.s. that this will increase the malleability of the club. -- value ability of the club. jim ratcliffe, written's richest m7

said he will be thinking about acquiring a minority stake but only if there is a majority stake. we are not sure there's much prospect. jonathan: -- tom: i wonder what this does to bernardo silva. jonathan: that is a manchester city player. don't confuse the clubs. but they are tracking them -- they're in a worse place. what it means for building out the management of the team come out recruitment of players, when this is going on in the background? re the general electric of soccer. they have not spent money efficiently on young players to come through. that is not the case and a lot of clubs.

a lot of people look at the wage ratio, how much ofzn is spent on salaries? manchester united spends a disproportionate amount. if your team is tottenham hotspur, they spend a small percentage. similar with liverpool. bdçit is not actually a terribly well-run club. it is notzf, clear they've manad to change that. this process did they learn from the chelsea uproar? jonathan: that you can get more money for a club than they thought. when i thought they were selling, i thought it would be much less money. i said i wonder what it means for the price of this club down the road. htv big offer and say they willh2c takee whole thing. z9yhn >alex: everybody has thei, fundamentally, but is there somebody willing to pay in the order of five or 6 billion

pounds? chelsea was valued at about 2.57 pounds. i would not be surprised if the timing of these talks have a correlation to the deal. they look at chelsea, they think it is smaller. they might say if chelsea is valued at that, they should be valued more. jonathan: do you want to call them as smaller club? you're welcome to. alex: to me there's another biggest club. jonathan: there you go. if you are a west hempstead, -- alex: well his uncle used on the club. jonathan: he's fantastic and he's right. the leverage buyout for this company, this club. tom: important question and

unfair. in north america, the toronto maple leafs are considered the most valuable franchise. there are the cowboys and that. how do these british giants compare financially or in terms of balance sheet and asset value to the cowboys and the maple leafs? jonathan: manchester united is right up there with the cowboys. they put out a list annually. manchester united is right up there. you expect it based on a global fan base to be worth more even )éi the team is not as good. 0÷ñtom: this weekend they startd off, but i think you and me and lisa that beautiful new stadium. jonathan: after the amount we have put her through, we should bring kailey leinz as well. tom: sure. but the spurs needs an american love.

jonathan: particularly from tom keene. have you talked to mr. levy? tom: my people will talk to his people. jonathan: i was trying to put a consortium together. i was teresa money. do not work out. -- trying to raise money. -- down to basis points, 2.87, joining us shortly on tv and radio, this is bloomberg. ♪

>> i certainly don't expect this rally to have the same type of legs we have seen. >> the systemic risk is that we priced in the goldilocks scenario. >> the question is, is the fed going to be able to engineer another 120, 5 hundred 50 basis points of rate hikes from here? >> they going to process with the rate hikes. it will persist at a slower pace though. the market feels it knows what the path of the fed is going to

be. >> essays "bloomberg surveillance" with tom keene, bloomberg -- jonathan: i'm over it. from new york city, good morning. from our audience worldwide, this is bloomberg surveillance on tv and radio. we are with the brilliant kailey leinz. are you on jackson hole next week? tom: on the way to jackson hole next week. we have claims a 90 minutes. buried in this note is a great maxim, recessions come suddenly. jonathan: does the data speak to that? tom: no. the bloomberg financial index pushes against that. other things push against it like actual data. but nevertheless, recessions

when they come come quickly. jonathan: you look at retail sales pretty decent, -- kailey: and they have been trending up sometime. it feeds into a labor market, the federal reserve in theory would like to see. that's what they're trying to engineer. i wonder at what point softer data becomes problematic because the market is expecting it will become so problematic it causes them to pivot. jonathan: we have seen soft data in europe. the data in china, brutal. the numbers you are seeing out of some banks right now, number, the gdp in china, mesa talked about it before she went away. she said imagine handling that in 2022. the number of forecasts, 2.8% in china this year.

tom: and it is a time to be idiosyncratic. i have stayed away from it because it is a distraction. the mother of all idiosyncrasy, the u.s. dollar, turkish lira gives way. a bank in turkey looking at some real challenges and the turkish lira is -- i'm sorry, 318, it is a huge deal. jonathan: they are cutting rates, not a hike and rate. the 100 basis point cut for moments ago. kailey: it is interesting to see the divergence from developed economies. turkey cutting rates, some political influence there. and the political implications for china, they delivered it surprise rate cut earlier this week, trying to --earlier this year. jonathan: they will pick up on

that story in a moment. yields look like this on a 10 year. a couple of basis points, make it three, three basis points lower. talking about cpi over europe. a .9% in the euro zone. just .1%, 10173, -- kailey: and they need to do it by 50 basis points again because inflation is so severe. a lot of that has to do with energy, a situation getting worse in europe even as the energy prices ease in the u.s.. we see inflation cooling off. we're not going to get more data in the u.s. but we have plenty coming down the pike, when we get those jobless claims we were discussing, there was a gradual pickup in that number over the week, the last several weeks really. softening in the labor market. but if we get more than 300,000

come what then? i 10:00 a.m. eastern, existing home sales likely to see a drop of nearly 5% month on month, the latest in a string of data that shows a softening in the housing market. housing starts dropping to the lowest level since early 2021. more data on the homebuilders side showing sentiment is the worst going back 2007. all as we see the average climb about 250 basis points over the year. that has to do with fed policy. we will see how much more the fed wants to tighten. they have to clarify exactly what they meant in the minutes, talking about not wanting to overdo it on the one hand but a fight against inflation. jonathan: i'm still shaking my head at this, inflation in turkey in july, 79.6%.

core, 69.6%. tom: we don't need a history lesson come up with her ghost of the 90's. when the facts change, i change. in turkey, they have domestic issues with the facts change. why is china any different from turkey with the way they are accommodating rapidly ads daily? jonathan: 18, 218 and weaker. i asked about guests -- our guest an hour ago. will there be any easing in the next couple of months? >> i don't know. but i think he has a pushback against easing financial conditions. more they need to slow down the economy, and that is what is happening in the last month and

the last couple of weeks, the market has become more dovish. they need to get back in control of the situation and that does mean he does talk a hawkish came next week and hopefully it will be enough to convince markets. i think it is a different question. tom: it's important, we tell guest by her bookcase. and with seema shah, she has ben bernanke' s "the courage to act." >> -- they will slow further. and despite economic growth, they continue to have that rate. they have to do that because containing inflation, if

anything is the number one priority. i think that's what we need to hear from powell next week. over the coming weeks and months as well, we continue reiterating that message. we will do damage to both the market and the economy. kailey: which asset class he think he needs to speak to most directly, the bond market or the equity market? especially because the rally seems to show that yields are lower. >> they need to talk to the equity market. yields are concerned about the risk of recession. there's a split the word between that and the bond market. they are optimistic about much everything. so it is really the equity market and that is where you see any using in the financial condition. jonathan: is there anything you

do like in this market? >> [laughter] yes. the point at the economy, it will go very slowly because parts of the labor market continued to be strong. if the pressures are still with us for some time longer, they are maintaining the assets. the assets can continue to do well. infrastructure is slower. essentially there are relapses. jonathan: go to catch up with a principal global investor of the market. does it all come down to one thing, whether chairman powell says we like it or we don't like it? tom: no. will have to see. claims at 8:30 this morning is as important as a single

sentence in a speech. but i would say it is 100% certain he's going to tilt toward data dependency. we have had an historic surveillance response on twitter to the need to see eva unc after the fomc special show. jonathan: is this basketball? tom: no, the leaves change, this is football. jonathan: i did not think those colleges were go to football. tom: no, they are terrible at football. but it's the leaves. jonathan: why would i want to watch two terrible teams play football? tom: it's the leaves. you can go watch on the lawn.

jonathan: should we watch alabama? tom: no. the leaves don't change. jonathan: i thought we liked winners in america. tom: no, here we like losers. we like the red sox. there losers. they are up early, good to see you are getting ready for the fall and she said tell mr. ferro clore fell -- chlorophyll or lack of is why they change. jonathan: you can reschedule. join is it about 8 p.m. eastern time.

-- jonathan: this is bloomberg. ♪ ritika: keeping you up-to-date with news around the world, i'm ritika gupta. the u.s. and taiwan following through on a long time promise to deepen the ties despite opposition from china. there will be a trade and economic agreement this fall. democrats and republicans are reluctant to embrace pre-trade agreements. the summer of discontent about to get worse. the most widespread disruption yet, followed sunday by an eight day strike by dockworkers.

the biggest is contained in the u.k.. the weight will soon overtake the federal reserve. market implied projections of where the key borrowing will be one or three years from now, overtaking u.s. equivalents. in china, the number of covid cases has surged to a three-month high. 3400 new infections wednesday, more than 2000 medical workers have been brought into help. one more legal problem for former president trump. the last time the -- allen weisselberg expected to -- we will testify against the company. an expectation that criminal conduct could mean trouble for the business.

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. ♪

>> i have worked in the obama administration, i have worked in federal policy, now is a member of congress will tell you it is

not wave one. but it is getting a bill done and that is what you are seeing. i call this president biden's south carolina mama. he got a gun safety bill done, a science bill done in gaudi inflation reduction act. jonathan: a democrat from washington. -- michigan. good morning. jonathan ferro, tom keene, lisa abramowicz is back next week. the nasdaq up .1%, yield at about three basis points, 2.86 on the 10-year this morning. ruth david and david talking about manchester united, reporting a family might make a minority stake in the premier league football team. they're confirming what has circulated already, a management company has already expressed interest.

tom: does that surprise you? jonathan: another name, elon musk joked about a deal. just joked. but has not signaled any involvement. tom: we turn now to a reality for every news organization and if there are foreign correspondents in harm's way at any moment. then there's a moment where you are sitting at your desk and the phone rings and your life changes. our annmarie hordern speaks now of very bad days, an important article in bloomberg businessweek, it barely describes what you went through in extricating people from afghanistan. what was it like, that first phone call from anastasia ellis? annmarie: it was heartbreaking and confusing because i did not know much of what i could do.

but she is a good friend, an incredible mentor and manager and this is someone she had just hired. i spoke to him and he went into a congress -- conference room to tell me what the reality would be like for his family. i said i would make a few calls and i got a group of individuals from bloomberg and we worked on this together. it was a massive team effort and it would not be possible without the backing of the company and founder. it was eye-opening which is why felt we should write the story. there was support, reflective of how difficult it is. the crisis was getting worse. tom: there was the triangulation of afghanistan, the u.s., europe and pakistan. the most important thing from a reporting standpoint is what did you learn about the odd place pakistan fits?

annmarie: in this crisis, pakistan is overwhelmed. most people go to neighboring companies like pakistan. they have at least 100 million refugees from afghanistan at the moment. but i have learned we are fleeing to get asylum. pakistan was helping these people lead even though some of the documents were not in order, they do not have the correct visa as part of the family members i was working with. pakistan was able to set of these government interviews, interview people and make sure it was clear, working with host countries, greece, canada, the united kingdom. a number of them were in limbo and the government has a crisis organization, working to act as the human corridor to get these people to safety. others are living in camps on the border in that is different. jonathan: our attention shifts

quickly from one crisis to another and a year later, many of these stories have been totally forgotten. we also forget often how many refugees there are around the world and how there is very little agreed on on how to do with it. when you're learning about this process it would've they dealing -- doing about it? kailey: -- >> there are lots of processes around the world, there are a lot of refugees in limbo. there are a number of schemes but they're not close to with a promise, in the united kingdom, about 10,000 afghans living in hotels. 81,000 afghans have come to the united states. if you don't have a special immigrant visa, your path forward and how you stay here is complicated. and this is just afghanistan.

what was so obvious when russia invaded ukraine is the amount of refugees they were going to deal with. syrians, afghans and ukrainians all fled to europe and fair dealing with their own to massive politics. it will get much harder to get that aid and support to these individuals seeking asylum. kailey: on the subject of aid, the u.s. and allies are giving aid. but the inflow to afghanistan has stopped. as the humanitarian crisis worsens there, will there be pressure for that to change? annmarie: there has been pressure, that the united states should loosen the grip on that aid. nothing can be given to the taliban. as you mentioned, before the fall of the government, more

than 40% of their gdp, keeping the country operating is from international aid. now that you have the taliban charged with global isolation it is sanctioned and there is no money. you have afghans so desperate they are not fleeing, selling off their young daughters to feed the rest the family. in the winter is only going to get worse. the u.s. says afghanistan, it is 40% for -- higher for food and energy in the winter months. so it has been a lot of pressure to have these talks between the united states and the taliban to loosen some of the funds. $9 billion is stuck with the central issue that potentially the taliban needs to confirm if they want some of these funds is women's rights. girls cannot go back to school past the sixth grade, they're

forced to cover up and they can't go out without a man. this is something the international community wants to put pressure on. jonathan: you are one of the hardest working journalists i know. i'm actually proud of the work you've been doing. annmarie hordern and washington, d.c. and if you have not read her piece in bloomberg businessweek, authored by amory and revealing her role in the effort taking place over the last 12 months, from new york city, good morning. with tom keene and kailey leinz, jonathan ferro. an hour away from jobless crisis in america. this is bloomberg. ♪ ♪ - [announcer] imagine having fuller, thicker,

more voluminous hair instantly. all it takes is just one session at hairclub. introducing xtrands. xtrands adds hundreds or even thousands of hair strands to your existing hair at the root. they're personalized to match your own natural hair color and texture, so they'll blend right in for a natural, effortless look. call in the next five minutes and when you buy 500 strands, you get 500 strands free. call right now. (upbeat music)

jon: -- talking about autumn. tom: a tumble. jon: wendy leaves term -- when the leaves turn brown. yesterday, a day of losses. tom: do the leaves not change in the united kingdom? jon: when you have lived in the

u.k. your whole life and it experienced two weeks and you go to america and it lasts three months, you do not celebrate it. the winter is brutal. it lasts about five months. why would i be happy about that? tom: i saw a movie where disraeli went to scotland and the leaves had changed. jon: i am lost. i am very, very last -- lost. take a beat. i am moving to the bond market. we came close to the highest of the year at a two year yield. intraday high, free 45. 337 with the move yesterday. yields backed away after the fed minutes. yields down to 326 right now, 326.43. down a couple of basis points on twos and tens. tk, to wake you up, we are going

to go back and talk -- anyway. [laughter] breakthrough 18 on dollar euro. i miss -- dollar lire. talking about the success of the country. it is down in flames. dollar lire, up through 18, 100 basis point cut with inflation. you do not get to speak again. we are done. tom: all right. jon: i cannot let this go down into flames anymore. we have to get to kylie -- kailey leinz. kailey: i will bring the hose. wolf speed, the big semiconductor manufacturer, beating expectations when it comes to revenue guidance. plus, they are investing in more capacity. stock up 21% before the bell. cisco systems, big i.t. and

network software maker, it beat expectations when it comes to revenue. the semiconductor shortage is easing. that is allowing them to have more supply to meet demand. it is up 5% before the bell. you had a profit beat for pj wholesale, up by 6%. the not so month -- not so fundamental moves, -- stocks. after a 400% rally, bed, bath & beyond, we are seeing them give back gains. down 13% after filing from ryan cohen, he may share that state, up to $7.8 million. gamestop, lower by 2.5%. apple, stock down by .3%. pressure coming into those large cap tech names.

set the state on your calendar, september 7 is when you can learn about that new iphone 14. tom: the 14 pro with a new chip. it is going to have a new bionic chip, which is always a step forward within their product development. thank you so much. what is important is to watch flows. when it is august and it is slow, flows matter. emily griffey a at our absent division reporting today on a massive switch in flows we have seen in the equity income, wrapped around quality, the search for quality have seen in flows. emily was looking at the equity market, what do you see in flows and bonds? emily: we have seen large moves within the fixed income market over the last few months. if you thanks about what the market with pricing and terms of

recession probability implied with bbb spreads or the equity market, it was as high as around 80% in mid june. now, it is down to 40%. have seen a large retracement and high-yield spreads, down to the mid-to low for hundreds. what we feel in terms of that movement is, we understand why there has been a repricing. there is increased probability of a soft landing. this level of spread is no longer protecting you from the still material risk of hard landing if inflation remains stickier. jon: where does that leave the treasury market and how that is priced right now? chris of wells fargo wrote this in the last one for hours, the eight force five basis point inversion seems to have gotten more attention in the 50 basis point inversion last week. why do you think that is? kelsey: we have been positioned for curved flat nurse. i was here last year on july 6,

we were calling for higher front year ends on a front end curve. we think that makes sense. the fed has done two supersized rate hikes. what we are looking at, the market is pricing in that fed funds rate getting around 3.5% by the end of the year, in line with the fed. the real diversions comes in 2023, where the market is pricing rate cuts and the fed is expecting to continue to hike. the minutes gave us insight into that. one of the things that stood out to me was the fact there are a number of people on the committee that expect once they get the policy rates restrictive, they are knowing that -- going to need to keep it there for a period of time. we lean on that side, expecting the fed is going to keep policy rates higher. although we got one decent inflation report, the are seeing a lot of wage pressure. one of the data points we

thought was under appreciated last week was a unit labor cost. productivity adjusted wages, which are very strong. jon: relative to previous cycles, previous hiking cycles, how much longer do you think they are going to keep it, that peak rate at this hiking cycle, relative to cycles gone by? kelsey: we looked back at the last 5, 6 hiking cycles, the modern hiking cycles you think of. a couple of things stood out to us. one, the fed ever stop hiking rates when the real fed funds rate is still negative. to put it out there, the fed funds rate is still -6% if you deflate it by headline cpi. we have a lot more to go. in terms of how long they are going to keep policy in restrictive, on average, we see that the fed keeps rates at that terminal rate for about seven to 12 months, about a year. we have been given the magnitude

of the inflation problem, given the fact the on a plane meant rate continues to tick down despite -- we will watch initial claims later this morning. we expect them to be more in-line with the historical average of the last four tightening cycles. kailey: let's talk about the 1970's. i noticed research out of barclays out of credit, saying when you look at this inflation growth environment, it is most akin to 1973 to 1975, 1975 to 1980. this time is not going to be different, will it? kelsey: we are more cautious on specifically high yields, given the retracement we have seen. there are probably some things that are going to put resistance below 400 on high-yield spreads. one, we expect that issuance is going to start ticking up. if you start breaking it down

between the categories within the high-yield, one of the areas where you are going to need to see a lot of retracement to get spreads materially tighter would be ccc's. these lower quality companies are starting to feel the pinch of higher prices, higher interest rates. where we are more focused is in charade gated investment credits, higher quality, charade gated -- credits. they have better all in yields, we can feel more comfortable with the credit quality. if you look at how they performed in this rally, they lagged relative to the u.s. high-yield market. kailey: where would high-yield spreads need to get to for it to look attractive? kelsey: back in june, we got around 600. at that point, we thought we were at least starting to price in and get compensated for those risks, harder landing for an increase in default. i do not want to ignore the fact

that, on a high level, credit fundamentals are extremely strong. we are starting from a every good point for both investment grade and high-yield companies, high cash balances, they have termed out there debt. there leverages is on track and looks good. relative to pre-covid. we have to realize that where we are in the cycle, things are going to deteriorate from here. margin seemed to hold up that are in this last earnings report . we see that is not something that is going to be sustainable as inflation pressures remain. jonathan: awesome as always, wonderful to catch up. kelsey berro of jp morgan. i am pleased she is here to lead the way on this conversation of how far along we will be, that is the big debate for 2023. tom: the debate on what they are doing in bonds a, it is about the x axis. it is a mystery. jackson homes can provide

clarity, but to me, it is the duration of where rates are as much is the level of rates. it is good to see people thinking about that. jonathan: deutsche bank did stuff on that. last three fed cycles, seven months, 2000, 12 months in 2006. 19, a lien listening to kelsey, it is closer to 12 months. tom: nobody is pricing that in. we've got that power game of when they cut rates. i am looking at taylor role models, which everybody things the work of john taylor is antiquated. the diversions here as kelsey mentioned are still substantial that time is the only thing that helps familiar rate that. jonathan: i cannot forecast next week. tom: next week is south of pocock one park, not quite to toronto. it is down from -- jonathan: are you taking time

off in the fall? is that what this is about? with vacation? is that why he asked about whether we had seen a moose earlier? i do not get it. futures up .2% on the s&p. tom: i saw one on 2nd street once. jonathan: you saw a moose. tom: a moose in central park. jonathan: i am done. from new york, this is bloomberg. ritika: china lashing out at a $52 billion program to spend a many -- american any fracturing, contains elements that violate fair market principles and targets china's own efforts to build a chipmaking industry. legislation prohibits companies that would receive funding from expanding production of advanced chips in china.

china plans more fiscal stimulus as the economy's outlook gets worse. state media said local government could sell more than $229 billion of bonds to fund infrastructure investment and plug budget gaps. goldman sachs and more have cut their forecast for gdp growth in china. trouble department blasted its outlook for the year, hurt by inflation and taking steps to cut inventory and a lower expense is. american honors of the iconic english -- united may still a minority stake into the team. a buyout for global management have expressed interest. jim ratcliff is another name in the early mix, not just united fans -- change in ownership because of the teams disappointing performance in recent years. 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. ♪

>> i would bet in the next 6-12 months, you see zero goods inflation globally in the u.s.. that is a big deal. services inflation is sticky. i think that will give the fed some optimism to slow down the pace of hikes. jonathan: mike collins of p jim, turning more conservative, less constructive on high-yield credit in the last four hours. good to catch up with him. here is a snapshot of the price action. equity futures up .2% on the s&p. on nasdaq up under -- nasdaq 100, up .2%.

yields up three basis points on a 10 year. dollar lire, a move of .7%. not a major move, but a big move for the central bank. central bank cutting interest bet -- interest rates by 100 basis points. with interest rates year over year running close to 80%, that is happening in turkey. tom: turkey and china, as well. i want to put the political overlay on what we are watching within the bloomberg world. that -- there is a summer conference, i am going to let you decide where would i a is. it is private, secret, in a totalitarian regime. they dashed into the party congress in november. what is the body language of this important, secret summer conference, given the set of crises china faces? >> we might get some indication

from the state press over coming days over what went on there. it is a gathering of top party officials, it happens every summer on the east coast beach resort. at this time around, the concave was happening when speaker pelosi was in taiwan, it would have made conversation interesting. it does not appear to be over. president xi and the prime minister are out getting photographed. in terms of broad policy, it took a while to start dribbling out -- but -- tom: they used to do photo shots in beidaihe, with 8% gdp. what is it, 3% gp? jonathan: 2.8% for this year. tom: there is gotta be a different chemistry, a different urgency. >> there is in the language.

we have had some news today about how local governments have got to get on with spending money on infrastructure. we are talking about $200 u.s. billion. talking about how the economy has slowed more than we thought, they are going to keep an ion what is happening with youth on them. it is not according -- going according to plan. at the beginning of the year, the growth target was 9.5%. on the economic front, it is challenging. we have to see where they pivot on the policy front between now and the end of the year. the pressure is real. jonathan: do you remember, was it the new zealand central bank, maybe eight years ago at the height of what people described as the currency or and they discussed bringing a p shooter to a currency war? a pea shooter, does that make a

difference for the central bank? enda: no, i am sure they wouldn't claim they would. they are clearly doing what they can do in terms of the bank, trying to bring down interest rates. there is no shortage of credit in china, the cost of borrowing is not the issue. the story is about structure in terms of what they are going to do on the property sector to rein in debt and leverage, and the ongoing destruction with covid zero. people today are told this fiscal spending coming up, they evened out money, by the way. that is where the action is going to come, on the government side of things. kailey: how much are policymakers in china held back by the peer of inflation? it is interesting we are seeing these stimulative moves in the last few days.

enda: it is an interesting question. on a headline basis, there hasn't been inflation in china, not on a consumer level. there was sky high factory and producer prices last year that is impacting factory costs. there was the bait of how much costs were overseas in terms of merchandise. consumer prices are higher at the moment, mostly due to core prices. there is distortion there in terms of how this skits -- this gets skewed. we are worried about inflation, but they are trying to sell themselves. they are critical of qe, critical of the western approach to the crisis. they are critical of laks, fiscal and monetary standards. they are trying to model paragon probity. there is no warning of a major

inflation outbreak in china, not yet. jonathan: you are the best. enda curran, breaking down the latest moves on the policy front. looking at forecasts, they are unreal. to see 2.8% as a number for the forecast for gdp in china. tom: the carner -- cardinal rule, the pressure to employ people has ways been 6%. that has been the run rate. from past, 6% to 3% is or than 3% on gdp. as we read on articles from bloomberg, the youth unemployment. amid the gloom, can i suggest how far we have come and on the record high watch, we are, spx up another 12%. nasdaq has a long way to go. i am looking at the bloomberg

screen with dow 34,000, spx almost two 4003 hundred. things are not that bad. jonathan: things are not that bad, relative to what? middle of june? i agree with you. we have taken more than 50% of the draw down the s&p. tom: let's look at the gloom we have heard this week. the gloom is off the chart. jonathan: there is good reason for the gloom. a central bank tightening into what many people think will be weakness worldwide. if you ask anyone in europe, they are anticipating a recession in the second half of this year. we talked about the world's second largest economy dropping to 2.8% gdp. tom: we are going to see modern medicine find china in covid. jonathan: it is a piece of it. they have to confront what is looking like the bow she recession.

i agree with you, if you get rid of covid zero, you get a snap back in the economy. they have other issues in the housing market, the commercial market. tom: with all of my history here, it is up and down. now, it is a new level of down. jonathan: futures .2% on the s&p. on the nasdaq up -- nasdaq 100, up .2%. in the next segment, we catch up with morgan sheets -- matthew sheets with morgan stanley. tom: he was at brown university. jonathan: i do not know how we got onto this conversation. kailey: i want a pumpkin spice latte. ♪

when people come, they say they've tried lots of diets, nothing's worked or they've lost the same 10, 20, 50 pounds over and over again. they need a real solution. i've always fought with 5-10 pounds all the time. eating all these different things and nothing's ever working. i've done the diets, all the diets. before golo, i was barely eating but the weight wasn't going anywhere. the secret to losing weight and keeping it off is managing insulin and glucose. golo takes a systematic approach to eating that focuses on optimizing insulin levels. we tackle the cause of weight gain,

not just the symptom. when you have good metabolic health, weight loss is easy. i always thought it would be so difficult to lose weight, but with golo, it wasn't. the weight just fell off. i have people come up to me all the time and ask me, "does it really work?" and all i have to say is, "here i am. it works." my advice for everyone is to go with golo. it will release your fat and it will release you.

>> much of the bad news the market had to grapple with at the beginning of the year has happened. >> the market continues to remain high.

>> the inflation stickiness is not going away anytime soon. >> i would bet in the next 12 months, you see -- inflation is still evolving. >> this is "bloomberg surveillance." tom: good morning. bramo using my vacation days. kailey leinz pulling the short straw and joining us. andrew sheets coming up, his note is brilliant and how the fed pivot will stop this bull market. jonathan: we will not get that durable pause anytime soon. this rally, it is a move of about 17% off the lowest of june. this federal reserve has said, we have got more work to demo -- do. next big stop is jackson hole next week. tom: i wonder if powell speaks to the central banker of wyoming

and the united states of america, how does the international theme color what we talk about? we see this this morning and the shock of turkey, the 3% shock of china. jonathan: if he starts talking about the rest of the world, a lot of people would interpret that as a dovish. for that reason, i imagine he might stop talking about the rest of the world. they've got work to do. the difference, jp morgan, 30 minutes ago was brilliant. the difference between where the market is now and what the fed is telling you is what happens in 2023. any minutes, it is telling you when we are done hiking, we are going to stay there and stay there. watch and wait and see what happens. the market says, once you are done, you are going to start coming. tom: i keep screaming about,

look at the x axis. kailey, what you read, as a matter of 50 or 75 basis points, what matters is the duration of a rate hike sequence. kailey: it is the destination and how long we stay there. we have gone back and forth between calling on the sides of rate hikes. the fed said they are going to slow them eventually. it is less about the journey then it is about the destination. it is like a road trip through fall leaves. jonathan: do not give him encouragement. tom: bramo would never do that. jonathan: tk is obsessed with the climate, the brown leaves. tom: the brown leaves, no one calls it brown leaves. we will get to this in a moment. turkish lira above 18, showing the challenges of a frontier economy. jonathan: 100 basis rate up. if you do not get it, many other

people do not get it. futures quarter -- futures positive .25%. jobless claims, 27 minutes away. tom: tom: curve inversion, we got to -39, -37 right now. a big deal, i want to show the bloomberg financial conditions index. that is a pro statistic. what it shows is the great accommodation we have seen. andrew sheets, chief strategist at morgan stanley has to synthesize together, pieced together all of what morgan stanley is doing. i am going to suggest in august, your head is spinning. we have got to get from august to september. what are we going to look like in september? andrew: i think markets are in this interesting pause, this interesting quiet before you get a lot of important evens

arriving in september, october. you have an important -- important fed meeting in september where we think the fed is going to hike interest rates by another 50 points. we think is going to be coming down slower than the fed would like. you also have a earnings season where we think the numbers are going to get reduced further into third-quarter earnings. at the moment, the market has been getting some relief from the fact inflation has been better, sentiment was bearish. you had better than expected economic data. i do not think these issues have been resolved. i -- we think the fed has more to go. also, will ease policy less next year as they want to stay serious about inflation. jonathan: at times, i think even the team is being fairly uncharacterized as -- at best. you were out front saying let's buy this market, let's go.

can you determine the difference between now and then? a lot of people remember people telling them, do not buy this, do not buy this, then we got 40% down off the lows and we feel like we missed the rally. what is the difference between now and then? what are the signals then that triggered by that are not being triggered now? andrew: i think in early 2020, after that decline, you had early cycle signals. you had very depressed economic data, very depressed sentiment. very easy monetary policy with very low inflation. we had that infamous negative number of traded per barrel of oil. you had very low valuations, or much lower valuations. a lot of things you usually get around a recession. as we fast-forward to today, valuations are not necessarily expensive on all asset classes,

but they are not as cheap as they were in early 2020. or importantly that the monetary policy backdrop is night and day. it has gone from whatever it takes response to an unprecedented pandemic to one of the fastest pace is -- paces of rate hikes in the last 30 years, and attempting to get to the highest rates of inflation we have seen in the last 40 years. i think it is that resolved from central banks, especially the fed, that continues the big differences. kailey: that makes logical sense. yet, we have seen return of the meme stock. speculative behavior we thought would be long gone in an era in which central banks are tightening policy. what kind of signal does that send you, and how hard you think the fed is going to have to push back on that behavior? andrew: any time you are on the cautious end of the spectrum and are incorrect about that, as we have been over the last couple of weeks, you need to think hard

about that thesis and if you are missing something. i think if it was a rally that was being led by new leadership, cyclical leadership, a sign that we had had the worst of the slow down behind us and things are going to re-accelerate, i think that would be encouraging. i think that would be the signed this is a midcycle slowdown, or we have had the selloff of a recession. i think the rea version of some of the biggest beneficiaries of low rates, zero rates, quantitative easing in 2020, 2021, that does not feel like the new cycle starting. that feels more like shorts being squeezed, investors being fearful of missing out. sentiment not being as depressed as we might like to think. i think from a fed perspective, the fed has to think about financial conditions. its goal is to tighten financial conditions. as we have seen stocks bounce back and the most speculative areas of the market bounce back,

that is going against one of the inks the fed is trying to a comp was. jonathan: when do we get the wake-up call? what does it look like? is it one speech from chairman powell next week, the data, what is it? andrew: a number of things we need to look out for. i think the upcoming window for markets is important. worse things are going to happen, it is going to happen in the next few months or not going to happen. i think that trouble would come from inflation not coming down as fast as expected. the upcoming cpi, especially core cpi, core pce not declining as much as the fed would like, i think that would push the fed and the market to remove the rate cut expectations for next year. we like pushing against those rate cut expectations next year. we like being longed for dollar. this is earnings data.

this is something my colleagues have been focused on, the earnings expectations they think are too high. third-quarter is often a relatively weak quarter seasonally for earnings, that is often when companies take out -- come out and take that and stand. our concern is that the risk of that is still elevated. we would like to get through that third-quarter earnings season first. jonathan: the second half is up for grabs. andrew should -- andrew sheetz of morgan stanley, awesome as always. a lot to think about. tom: i would almost suggest, it is so uncertain right now you would see a massive publication towards labor day. the first week is september 12, that is when we start up again. everybody has got to reset, the bears have to reset. the uncertainty is so great. i do not envy these people. it is a tough job. jonathan: we've got to reset.

jobless claims in 20 minutes. tom: to look before the pandemic, 200,000, we were in shock over those numbers. we see massive gyrations with the pandemic. it has been a very gradual, yet persistent climb up to the 260 level. jonathan: since the middle of march, we got to 262. we are looking for another tick higher in another 20 minutes. kailey: they are low by historical standards. where can it get up to before it starts to make the federal reserve think, if this isn't intended. jonathan: they got blown up by the jobs report, didn't they? they looked at payrolls. tom: the vector of claims is directed with a map of america. it is --doing work on this, tuscaloosa, friday before bama,

auburn. thanksgiving. jonathan: now, you onboard. tom: we go to bama, we go to little -- little river canyon, we see the fall foliage of alabama. jonathan: very cool. we can watch real football. tom: after we watch uba. jonathan: they do not play good football, tom. tom: they are. jonathan: they are good for what? tom: family network, jon. i do not know what he is talking about. jonathan: this is bloomberg. ritika: u.s. and taiwan following through on a promise to deepen ties to fight opposition from china. the countries will start formal

talks on a trade and economic initiative this fall. there trade will be more said -- symbolic than substantive. in the u.k., the summer of discontent is about to get worse. britain's face some of the most widespread disruption yet due to strikes on rail burgers -- rail workers and bus stops. that will be a eight day straw -- strike by. workers. more legal problems for the long time cfo of the trump administration -- trump organization, expected to plead guilty to tax fraud. bloomberg has learned he will not implicate the former president, but will be required to testify against the company. trouble department store chains blasted outlook for the fall year, customers have been hurt by inflation and taking steps to

cut inventory and lower expenses. 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. ♪

how will your business adapt to change? you could hire an office full of peyton mannings. what's up, peyton? good morning, peyton. hold for peyton. they'd huddle.... welcome to the peytonverse. such a visionary. game plan... you go. no, you go! and call audibles... double our investment in omaha! omaha! omaha! omaha!

or you could use workday. omaha. the finance, hr and planning system used by over half of the fortune 500. for a be-agile-like-an-mvp world. workday. for a changing world.

>> as the result of high gas prices, european gdp is going to decline by 1.4% by next year. we think the burden will mean we

are going to see steep contractions in the european economy next year. jonathan: that was amrita, the director of research and energy aspects. good warning. lisa act with us on morning as we take you down to jackson hole and the fed's annual get together. futures up .2% on the s&p. 285 .85 on the u.s. 10 year. euro-dollar doing absolutely nothing, 101.76. tom: he said, -- francisco, i want to touch on one paragraph of your new report, which was shocking. you tore apart our key distillate, which is a 47,000

gallons on a going 77 that all of us need, that we all take for granted when we fly around domestically and internationally. you say, watch jet fuel. why? >> i think we have china in lockdown, large parts of asia in partial lockdown when it comes to international travel. i think that is going to open up in the next 6-12 months. we are down 25% on jet fuel demand globally from pre-covid levels. we could see a pickup of half million barrels a day, maybe more on that front alone. this has been the leading fuel for the last 12 months. i expect it to be the leading fuel in the next 12 months. tom: how will that come over to the new brent crude price? francisco: i am constructive on brent. we pulled back after the seasonal driving peak in

america. i think coming into the winter, you are going to have jet fuel demand, demand from europe because of the record high natural gas prices you have there. also remember, we still have a tight, global system for a variety of reasons. i think that is going to drag us back. tom: 14 things. i have to go to the social reality europe faces. this is not about masks, spreads, it is about multiple, multiple, standard deviation moves that become social policy. tell us how your world can help europe in this crushing social policy of where prices are, electricity in france as an example. francisco: europe faces a complicated situation. if you look at european natural gas, 40% comes from russia, used to come from russia. you have lost around 10% of the

entire energy supply of europe with russia curtailing that gas. that would mean a 10% gdp contraction. what is happening now is essentially, europe is trying to price it self back into the global economy by attracting liquid gas from japan, china, bringing -- bringing it to the european continent. we are seeing the shutdown of smelters, aluminum smelters, steel plants and fertilizer capacity. that is important. a european energy prices are rising above mobile prices. a lot of the domestic produced energy intensive commodities like steel are also being displaced out. that is the way europe is going to avoid a steeper session, probably end up with a mild one. kailey: what i find ironic about france's nuclear, we are

supposed to help them out. because of climate issues and river temperatures, that is inhibiting their ability. with the signing of the inflation reduction act in that effort, there is metrics within that like a messing tax for u.s. producers. how is that going to reflect supply of fossil fuel? francisco: one of the hardest parts we often forget is the 2020 covid collapse in demand or investment, 2020 was not just a demand show, it was a supply show. we had negative oil prices, natural gas in europe dpf at one dollar btu, almost like a cryptocurrency. not precisely bitcoin. this is a real commodity people use every day. i think fossil fuels have a tough future ahead of them,

because nobody wants to sign long-term leases. no major financial institution wants to be financing thermal coal either. it is hard to get financing for conventional oil and gas or shall gas. i think the issue is going to be in the medium term, we are trying to move fast into a greener economy. we have pressures coming from climate. you talk to french nukes, part of the issue in french nukes, we do not have enough water in european rivers, which is a function of glaciers melting fast. we are starting to get the compounded effects of climate change across the energy supply system. i think it is important to move quick to green fuels. at the same time, we have this cap. prices are balancing item or supply and demand in commodity markets. we suspect high volatility,

continued inflation and a lot of basis risks in terms of differentials, time spreads and cross commodities across the company. i think commodity markets are giving us the solution, but it is going to be extreme pricing for a while. jonathan: i've got 30 seconds left. can you tell me what you think europe looks like this winter? are we going to a four day work week? what is going to happen with the effort to curb consumption? francisco: europe is going to have to curb consumption. it is happening already with curtailment's of energy supply to industry, but also curtailments, temperatures of home -- at home during the summer and winter. we are going to see force reduction, potentially rolling brown outs in some parts of europe. it is almost like new developed

markets are becoming emergency -- emerging markets. jonathan: francisco, awesome as always. we've got to prepare for something we have always desk -- always -- just started talking about. tom: to your point, this is not about economics, finance investment and the rest. these are social, policy issues in europe. jonathan: big policy decisions that will need to be made later this year. features positive .2%. jobless claims coming up next. this is bloomberg. ♪

millions have made the switch from the big three to xfinity mobile. that means millions are saving hundreds a year on their wireless bill. and all of those millions are on the nation's most reliable 5g network and most recommended wireless carrier. that's a whole lot of happy campers out there. and it's never too late to join them. get $450 off any new purchase of an eligible samsung device with xfinity mobile. or add a line to your plan today at xfinitymobile.com to finally lose 80 pounds and keep it off with golo is amazing. i've been maintaining. the weight is gone and it's never coming back. with golo, i've not only kept off the weight but i'm happier, i'm healthier, and i have a new lease on life. golo is the only thing that will let you lose weight

and keep it off. who loses 138 pounds in nine months? i did! golo's a lifestyle change and you make the change and it stays off. (soft music)

jonathan: jobless claims and america coming up shortly. mike wiki is going to break that down. treasury yields down six basis points. even with that move in yields, unchanged on euro-dollar. jobless claims figures, mike mckee.

michael: jobless claims fall significantly, down to 250,000 for the week last week. that is significantly lower then the initial 262,000. we are waiting for revisions to come in. continuing claims, 1,437,000, that is a little gain of 900,000 more than last month. it suggests we are not seeing people who lose their jobs staying unemployed for long. you are able to get off the unemployment rolls very quickly. philadelphia fed comes in at 6.2. last month, it was at -12.3. we had earlier, the empire index and a major collapse there at down 42 points. the philadelphia fed changes the other direction and goes positive. philadelphia fed new orders index is at negative five,

compared to -24.8. that is an improvement, even if it is still showing a little contraction. the other thing about the philly fed, prices paid is jumping around on my screen here. prices paid is 43.6 versus 54.2. prices paid came down significantly. another signal that may be inflation is backing off a little bit and we will have to see how this translates to the ism the week after the jackson hall. jonathan: pretty decent, relative to what we were expecting. features positive .1%, i said treasury yields were lower five basis points, down about three basis points lower to 286 on a tenure, down three basis points to 325.

data is ok going into jackson hole next week. tom: it is ok and will drive forward to the speech to jerome powell. i like what our next guest says, he goes back to coal hand luke. it may not be paul newman, he looks like paul newman. on a failure to communicate. stephen stanley, let's go to the fed right now before jackson hole. how must they communicate as we stagger tool -- to wyoming? >> you are the first person to ever compare me to paul newman. i will take that as a great comment. it seems like every time the fed tries to indicate, they pound the tables, stomp their foot, whatever expression you want to use that they are going to tighten until inflation is brought under control. the markets find a way to take out of it something dovish. this happened at the f1 see

meeting a few weeks ago, it happened yesterday with the minutes. the markets are focused on the idea the economy is soffer -- softer and the fed is not done yet. maybe by the end of the year, we will be close to done. the fed continues to push back hard and in the markets are not having it at this point. tom: did greeks been communicate? long ago, we try to decide if he was eating a ham sandwich on the way to the meeting. do you suggest there is an over communication versus what we knew about alan greenspan? stephen: i think the fed, maybe are feeling a little bit regretful about the fact they went to this saying of being specific about what might happen at the next meeting. they did that a couple of times and it didn't work out quite as they had planned. they stepped back from that in

july. it feels like it is a one-way ratchet. which, become more transparent and communicate more, it is hard to take that back. i think the fed is trying to be explicit about what they are doing. at the end of the day, it is a different view about the economy. the fed officials for the most part are continuing to push the soft landing story, the economy is fine, everything is going to be ok. we are going to slow down but not see a session. the markets are thinking, we are in one or about to be in one. not only is the economy weaker, the economy is going to quickly bring inflation down, which is another variable in the equation that i think the market may be too optimistic about. jonathan: i think most participants are inking it is to dovish. most part or dispense -- participants are picking up a lack of -- i know these fed

minutes are long and you can make them tell you whatever you want them to say. it is likely it would be appropriate to slow the pace of policy rate increases while assessing the effects of hemolytic economic adjustments on inflation. pair it together with this, many participants remarked that in lieu of the changing environment and the monetary policy effect on the economy, there is a risk there could be a tightened policy to more than necessary to restore price stability. you put those two things together, it undermines their effort to say the following. they reaffirmed their strong commitment to returning inflation to the committees to percent objective. that doesn't sound as strong as it did a couple of months ago. do they have to stop saying what they say in the minutes for people to start believing? stephen: there is always going to be something you can pick

out. i thought it was interesting, that second quote you read that participants felt there was a risk you would overdo it came at the end of a paragraph about risks. the primary risks would they would have to buy more, inflation would force them to buy more than what their base case. you are right. there are always risks on either side. as i said, i think the market has a different view of the world right now than the fed does. they are willing to put more weight on the risks on the more dovish side. at the end of the day, what matters most is what the fed does as opposed to what the messaging. last two moves happen 75. they cannot go 75 forever. this idea they are going to slow down at this point, it is obvious. even if they go 50 in september instead of 75, the bigger question is, how much longer are they going to have to keep going?

i feel like inflation is going to stay high much longer than what seems to be embedded in the markets right now. kailey: to that point about the stickier parts of inflation, i look at that philly fed number. in theory, maybe that is having to do with supply constraints easing at the consumer level. that is goods inflation. in services, that is where we are seeing things pick up. if those are persistent, where does that leave the fed if headline cpi is coming down because of gas prices? stephen: that message was delivered in the minutes. the sentence i just mentioned, a risk inflation would stay high longer, there was another sentence in a different place said they felt like it was going to take a long time for inflation get back to their 2% target. in some ways, i talked about the debate over the economy and where the economy is. the most important bait around monetary policy in my view right now is, how long is it going to

take for inflation to get back to the fed target? we had high inflation for long enough. the longer term expectations numbers do not suggest we have seen a sea change in how people look at inflation. you can see in the straws in the wind that it is starting to become a fact of life for people. i do not think it is coming down quickly. you mentioned rents, wages, those are the things that are going to give inflation spending power. i have confidence the fed will do it -- what is necessary and get back to something close to 2%. it make two three years, rather than six months. kailey: we had this conversation earlier. how long do you think they have to stay at the terminal rate? stephen: i think that is unrealistic, you heard that last week out of a number of fed officials. i would be interested to see what the speakers today have to say. i look at the dots.

my own fed outlook is more hawkish than what the june dots showed. it suggests the fed to be at peak grade before they ease. i think that seems reasonable. they are not going to start easing until inflation is in the neighborhood back to the 2% target. jonathan: what is your peak rate? stephen: four and 5/8. jonathan: that is one heck of a number. awesome to hear from you. stephen stanley, chief economist. that is a big number. tom: we are not used to it yet. bloomberg economics is even higher than that. the path to that is what we are talking about, the timeline. there has got to be a timeline in 2023. this is not going to be fixed by

this miss. jonathan: somewhere close to two. kailey: as we are having these conversations with economists, strategists, all who are saying this -- the market had it wrong. this market is hiding the federal reserve. how hard does chairman powell fight back next week in jackson hole? jonathan: still waiting for confirmation on that speech in jackson hole. i think it will be in person. tom: where was the place you took me to in jubilee? the breakfast place in london? tom: it is like a morning breakfast lays in london. jonathan: i cannot remember the town. tom: it was expensive. citigroup out with an american

equivalent breakfast on krispy kreme. john towers says a krispy kreme doughnut is highly discretionary. jonathan: that is a different breakfast. kailey: never had one. jonathan: never had a doughnut? never mind krispy kreme, never had a doughnut? tom: sheltered childhood. jonathan: we can talk about that another time. in the next half hour, we talk about markets with matt brill. tom: jack danley -- that manley wants to talk about foliage. [laughter] jonathan: this is bloomberg. ritika: a new study highlights the burden of chronic illness left in the wake of covid. researchers at the university of oxford found survivors remain at high risk of psychotic disorders, dimension and --

dementia and similar conditions for two years. shippers may get relief along europe's important rivers. the level is at a point where many barges find it uneconomical to transit the stretch of the river. china lashing out at a 52 billion dollar program to expand american manufacturing. of semiconductors. an industry association says it contains elements that violate their market principles and tiger -- targets china's efforts to build a chip making industry. the legislation prohibits companies from expanding conduction of expanded chips -- advanced chips in america. manchester united may sell a nine already stake in the team. buyouts on apollo management have expressed interest in --

united fans have called for a change in leadership because of the team's disappointing performance in recent years. powered by more than 2,700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomb

>> what is vulnerable here are the stocks that have rallied the most. when you think about the long-duration tech stocks, they bounced back the most. if they bounced back because the 10 years looked lower. i think there is going to be some sort of aversion to the means there. tom: stepping carefully through the optimism of the moment. we have heard that from many people. she is with bny mellon wealth management. it is inspired -- important to speak to daniel, he has been steadfast in his optimism and has got a massive victory lap going the last eight or nine

weeks. apple computer, 2% to 3% below a record high. tour de force four cupertino and dries, he joins us now. you know what i care about, the chips that are are -- are in these miracle toys we use. the new apple phone in september will have the a 16 chip, which is five nanometer technology, blah, blah, blah. is that enough to get kailey leinz to buy a new phone? >> i think what you are going to see here, this is a catalyst that speaks to the pent up demand we see. 240 million of one billion iphones worldwide, we are underestimated. tom: i take a huge issue with

the way the media talks, omg, why would anybody buy a $900 million toy? has that worked out for apple and the cell phone providers? daniel: it has. it is about 40%. if you put that together, it is ultimately, especially with the $100 increase on the iphone promax, it has become more digestible. we haven't had a price increase in 4, 5 years. we are starting to see consumers look at $1000 iphone as a -- paying the price of what they expect to be when comes to apple. kailey: what about in china? we have seen apple doing discounting in china on higher end models. that is an important market for them. what is your read on how that is going? daniel: i think in china, we

estimate about 30% of the chinese consumers in terms of iphones are in a window of an upgrade opportunity, and acting more towards pushing towards a higher ahp promax. that is the hearts and the lungs of the apple story. this week, we have confirmed demand against the iphone 14, coming out the first week of -- after labor day. kailey: september 7 is coming up fast. i have a ton of apple products. it is about the ecosystem. i have the airpods that works seamlessly with my phone, it is the whole thing. when people upgrade an iphone, what about the rest of it. daniel: that is been key to the valuation reading we have seen. that is $90 billion of annual revenue going into next year. that is what they have a -- on,

based on that. tom: the 1% tax on share buybacks, is that going to ruin your world? daniel: i view it as noise. it is not going to change buybacks. tom: i want you to frame for the gloomsters on apple, three years out, where is this $170 stock? daniel: i view this as, it extreme -- exceeds 3 trillion more cap. 240 is our whole case, this continues to be what i view in the middle in a unprecedented upgrade cycle, despite the dark storm cloud. tom: thank you for your work. it has been historic on this hugely popular part of the market. i have vegas memories of a nifty 50, the volk of madmen era. as a kid, i would hear kids

talking about it, johnson & johnson, anaconda copper. the nifty 50 is this love affair with apple and the rest of them. you say to yourself, when does this in? that is what the bear case is. kailey: when we talk about these companies and their businesses, we are talking about the vast majority of the s&p 500. the weighting of apple, the world's largest economy in the s&p alone is 7% of it, 7.5%. it is remarkable. we have seen a comeback in these stocks. these growth stocks have led the rally off the bottom in june. can they continue to lead the way, and how much is dependent on bond yields? tom: listening in the shenandoah valley, which is spectacular in the fall. he took immense as you -- issue with the subservience with uva football. basketball dominant, right.

kailey: we used to be. we are getting back there. tony bennett is a great coach for defense team. we are traditionally better at basketball than football. the only football game that matters if you are a uva fan is against virginia tech. tom: how far off distance are they from charlottesville? daniel: a couple of hours. kailey: a couple of hours. virginia is an interesting state. [laughter] central virginia, northern virginia, politically aligned. you get outside of those population centers, it is a different story. tom: i was trying to get her in trouble. sounds like she is running for office. virginia is a interesting state. crypto, what are we going to do with 23,000 crypto? you are getting ready for a tuesday show right now, it is externally. kailey: you have seen speculative behavior showing up in the mean stocks, you are not

seeing it translate through the crypto universe. there are fears about the crypto winter, it doesn't seem retail investors are as anxious to get back into crypto as they are the other stocks. tom: should these gazillion aires apologize? kailey: it has been interesting, the celebrity to have injured -- endorsed these companies. tom: thank you for sitting in for lisa through this extended holiday she is on. we are getting ready for jackson hall. stay with us. this is bloomberg. good morning. ♪ >> rafael net doubt is out.

he went down to croatia's. he may return to his tour after an abdominal injury forced him out of wimbledon. he was looking for his fifth title of the season and will have to find some hard-core former head of the final major of the year in new york. on the women's side, the former u.s. open champion is beaten in straight sets. tennis child's daily life cover from the queen city starts at 11 a.m. eastern

jonathan: live from new york city this morning, equity futures just about positive this thursday morning and the countdown to the open starts now. ♪ >> everything you need to get set for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪ jonathan: live from new york city, we begin with waiting on wyoming. >> jackson hole next week. >> the fed cut is not done yet.