>> we have this situation where growth is slowing and its tightening. >> they need to slow the economy down so the stronger it is now, the more hiking they had to do. >> i believe the fed targets inflation and by time and financial conditions, they get there. >> there is an increased probability of a soft landing. >> this is bloomberg surveillance. jonathan: bramo is back. tom: she hasn't talked to me yet. lisa: how's it going? jonathan: for our audience worldwide, good, futures are down 1.2% and the bears are back. tom: it's a market moving day. there are some real moves.

they look at eurodollar, they look at dollars yen and then they get euro yen. it's no surprise a weak euro. jonathan: can we put european gas into the mix as well? it's absolutely surging. tom: there is a war going on and it was a challenging weekend including the bombing in moscow. there is an overlay that leads you to a more negative market come with futures at -49. jonathan: the bears are back with futures down 1%. lisa: how much are we trying to position the narrative? what has changed over the past couple of weeks. people are just exhausted and now they go back to the fundamentals which don't look that great. i think that is the story. you can give jackson hole a lot

of credit for this. tom: a push against the consensus, selected big tech. jonathan: jp morgan had a constructive note. believing cyclical indicator in a broad-based weakness in the second half with warning signs flashing in the housing market, the consumer and increasing the labor market. lisa: he is not alone. we heard this from morgan stanley over the weekend as well. an increasing number of people are coming out and saying the fed is going to back against this euphoria about this week. they have to reckon with the fact that earnings of not in that great even though you've gotten the earnings gain from oil companies. jonathan: i missed you lisa. lisa: i missed you, too.

tom: it's great, i'm working here. jonathan: we are going to jackson hole later this week. down by more than 1% on the s&p 500. euro-dollar briefly breaking through parity and clinging to negative a third of 1%. lisa: jordan was talking about how this is different than the prior euphoria. we are looking at a much more dire situation when it comes to european natural gas. german chancellor olaf scholz is going to canada and meeting with justin trudeau. how much will this be about how much oil canada provide and how much gas they can provide to europe?

natural gas is reached a new record high, it's more than doubled since june. this faces some of the concerns going on belief the surface. i know you will laugh but this is incredibly important. it's an audit of the farming of the united states. with all of the droughts in the heatwave, they don't have a sense of what this will be at a time when we are concerned about the potential out but from the ukrainian and russian region. we've gotten most of the earnings. the round trip here, this is what has happened since the pandemic. it's search dramatically. we're looking at how much potential there is and how much ahead of ourselves we've gotten. there is the euphoria that people have experienced.

we face a pretty big pothole now. jonathan: thank you, we are counting it down to jackson hole, wyoming. the coverage begins thursday morning into friday. tom: we've got a great set of guests lined up thinking about what global central banks are doing. mr. powell is the focus but there's a huge international deal to what the kansas city fed does. u.s. dollar heads off to jackson hole. will the dollar breakthrough dx why? jonathan: the dollar is stronger. we will pick up on that in a moment. let's get the week started with lori. this is an important one to address, can you establish before we see the big eps

forecast cuts? >> i keep getting that question from clients and is not only that you can get the bottom of the market but you look at major periods 2018 and 2016, that is often the case where the market pushes for several months before you get into positive territory. i'm not sitting here telling you that reducing earnings estimates further will not be a headwind for the market, i think it is, but it's something that tests the lows. i think we put the low for this cycle in place in june. tom: where is the sentiment this morning? >> 85% of the people i talked to are still bearish and 15% are bullish. over the last couple of weeks, it seems the bullish cohort

group is about 5-15% stop but if you look at the data and get the quantitative read, i think sentiment has become euphoric again and we are getting closer to the highs we've seen in recent years but if you look at some all caps, we are still very much in the early days of recovery off of an extreme low. the dow and the small caps are off of a new low. it's a bit of a mix. i think overall positioning has still been pretty depressed. lisa: what will drive small caps fire -- higher when we see consumer spending still resilient? >> i think the issue with small caps is that they have very kodaly baked in a recession. we have gone through a bunch of the numbers and what we have seen is you look at small caps against jobless claims, they are making in a pretty big fight

even with the recent move in small caps. there also having a trough like move. it's coming but it hasn't happened yet. the other issue we see is that historically, longer-term investors know that recessions are usually good buying opportunities for small caps. at the end of the day, small-cap is the one part of the market that has clearly baked in an economic downturn. lisa: when we talk about our ensuring manufacturing from china from asia and supply chain disruptions, is this more talk than action? >> i don't think we are seeing it in a massive way yet but in my recent travels with investors, that issue is something that portfolio managers of small caps are

highly focused on especially when it comes to the industrial sector. there is a view for money managers that that will ultimately be a good thing for the small-cap industrial stocks and maybe challenging for margins of bigger cap companies but there is a view that this will be something that will be a tailwind for the small-cap space that has not played out yet. jonathan: what do you tilt clients now? >> i think the arguments that valuations are too high, i think it's a concerning data point. we are close to 20 times my numbers for next year and this year but i think these are year end targets and are trying to guess where the market will be on december 31. i think we are setting up for further volatility which is short term especially if we get favorable indications by the end

of the week. this could go a little bit longer but i think it will be some choppiness and volatility by the end of the year. jonathan: kicking off our coverage this week, counting down to that important speech friday at 10:00 eastern time friday. tom: we have some good guests lined up. do you realize when we have to get up? jonathan: it depends on how much time you need. you have to get up and get your makeup on. you have to fix your makeup at 2:30 a.m. tom: i can get makeup on the way to jackson hole. jonathan: is that how you do it? tom: that's what you have to do. jonathan: welcome back, lisa.

tom will stumble out from the bar into the studio. are you sure you want to come back? lisa: i am here. it's good to be back in is good to take time off as well partly because you see [inaudible] maybe you will find out this year. i notice how dry everything is this year. i think that's the big story. jonathan: we will pick up on that later. futures are down but a little more than 1% with not much good news this morning. we are lower on the s&p 500 and lower on the nasdaq 100.

from new york, this is bloomberg. ♪ ritika: keeping you up-to-date with news around the world, traders are backing up that fed policymakers will double down on their projections. jerome howell may make a speech on jackson hole -- at jackson hole on friday. in thailand, the government is trying to alleviate things and banks have lowered their benchmark lending rates. that's days after beijing said special allowances will be made. china has increased its energy from russia. spending on oil, coal and gas has increased $20 billion from a

year ago. in the u.k., the country's largest port is on strike. they have predict -- projected an 8% wage hike. there is a leadership shuffle at credit suisse. the deutsche bank treasurer has been named as cfo. they are trying to turn around credit suisse by global news, 24 november. hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

>> dip china open sub significantly after covid, there will be more pressure on demand, and that means upward pressure on prices3+.we are watching what happens globally but we. supply and demand and keep the

prices coming down. jonathan: the u.s. energy, futures negative on -- 1% on the s&p 500. we are off the session lows. just about above parity on the u.s. dollar. pretty defensive out there with yields unchanged on the 10 year. we are racing toward jackson hole later this week. tom: it wasn't about gold. it was a paper by ben navarro and citigroup with eight teen .6% inflation. jonathan: did i say 117 handle on sterling, 112 right now. tom: that's the statistic of the morning.

18.6% in january. we take advantage of the work that anne-marie ward dern has done from moscow down to kyev and ankara as well. after the festivities, the tragedies and battles of the weekend and the horrific bombing in moscow, there is a sober tone this monday morning. i feel like it's the first battle of manassas in the civil war. anne-marie: this war will not be over soon and you have individuals representing russia telling the financial times they do not expect this to end soon at all. they are saying the mediators have not done their job. it's an important point because wednesday, we have ukraine's independence day and president zelenskyy is concerned about that.

in the last six months of this war, the war is still raging on and many are concerned that the fighting in the eastern part of the ukraine will continue and that's the outlook. tom: for our american audience, are we funding ukraine with military material alone? are we alone in this? anne-marie: no, but we are certainly the biggest and you see that across a number of countries in western europe wanting to make sure, especially old soviet europe military equipment that the ukrainians are used to using. that is going into ukraine. lisa: how does the explosion in moscow that killed the daughter of an official, we had nothing to do with it?

anne-marie: muska says we are responsible but it's reminiscent of what you saw in russian in the 1990's which there were lots of car bombings. then we have the reign of president putin which is tightly controlled and you don't see a lot of moments like this. it depends on where this is coming from but it likely would've sent some chills through the kremlin. the individual doesn't have a ton of inflows directly but vladimir putin has quoted him before. he is a staunch supporter. his daughter was killed and he was supposed to be in that car. he is a staunch supporter of the war in ukraine and his political and social and religious idea that all ethnic russians should be united. lisa: russia is pausing their natural gas on nord stream 1 which is leading to renewed

concerns and that's why you see the surgeon natural gas prices a and in the euro region. how far are they willing to go? what's behind the latest stop start? anne-marie: there are times when the pipelines need to go down for maintenance. this is supposed to be a three-day maintenance but it's clear that vladimir putin has been using natural gas and oil and he plays politics with it. thanks this is his only point to have leverage against the europeans. the europeans are incredibly concerned. they are telling their population that they need to conserve energy. this is incredibly worrisome for germany because nord stream 1 one is how they get their natural gas. you had havoc over the weekend telling local broadcasters that you need to conserve energy. tom: what's the distinction over

the last couple of days of the focus on crimea? is the united states at war with moscow? anne-marie: economically, russia would say yes. tom: what about the sophisticated missiles that go along way? anne-marie: they are providing defensive weapons is what they say. russia believes they are at war with all of nato. jonathan: in new york, and marie porter. runaway. this one's for you. explained that that was a not -- that was a goal by an american. tom: how much was the goalie paid to put that in?

jonathan: he's a big guy and they are under so much pressure from the manager. tom: is it modern that when they score they go up to the fans? i love that they do that versus the distance of the athletes, they been doing that for a long time. i don't even know who's playing. each team has like four uniforms. jonathan: what do you mean? tom: the kit thing? jonathan: yes, you have a home kit and and away kit. did you watch football this weekend, lisa? lisa: not really. tom: the farm bureau thing was good. chime in here.

should i waste time watching the new game of thrones? this is a serious question. you've never seen the original? lisa: it's too much time i have to commit. it's too much commitment. jonathan: welcome to new york, anne-marie. keep digging, tom. from new york, this is bloomberg. ♪

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jonathan: you are killing me. it's all about manchester united. futures down 1.13% stop the nasdaq 100 is down but just by 1.44%. we are counting down to jackson hole, wyoming. last week, the two year is totally unchanged and the 10 year could have done worse and the gap is narrowed a in.

a little bit more inversion there. max kentner tremendously bearish this morning once more. he is so negative about the outlook at the end of the year step tom: the disparity right now over the weekend is remarkable and most of it was about length of time and i wonder if that's what we will focus on with jay powell. jonathan: the euro is negative. eurodollar just about holding onto parity. gas prices in europe are up and never -- another 17%. lisa: also the concern that the stockpiles are up heading into winter.

they don't want the nuclear plants phased out very quickly. jonathan: nord stream 1 one is going down for maintenance until the end of the month and the big worry that it might not come back on. tom: 3.5% standard deviation move, that's my chart of the year but it's moving so fast. you wonder what the fed voice will be at jackson hole? we get a voice on china right now. the duration of the chinese slow down is jaw-dropping. 24 months, 3-5% making 4% china

gdp. what does that do to the labor mandate that beijing needs? >> we just cut our china forecast and we don't see a real bottom yet. prices are falling and volume is falling. it's a huge chunk of the economy and has been a big engine of growth for the last couple of decades. it will put real pressure on the market. there will have to be some substantial policy action because the local authorities are being tasked with dealing with this and don't have the resources. the central government is resisting and they will have to step in with a lot of public money eventually. if they don't, they will find an economy that is weaker than they want. it's a real threat to them and a threat to the global economy as well.

tom: the ambiguities of the inflation, do they export this inflation and deflation in making some of the inflation fears overwrought? >> at the margin, it passed through from europe into the u.s. no question about that. it's important to appreciate that the bull -- bulk of these shocks are in the u.s. but also in europe. they have been through margin expansion in the retail services sector and that's not really china contingent, it's more of consumer spending and supply. central banks everywhere will take everything they can get. china gives them a little room to move but it will not be the heart of the disinflation story

over the next year. here, we are still dealing with the energy inflation shock. we still got some really big problems. jonathan: let's talk about u.k. labor, how bad will things get in the u.k. and across europe for that matter? >> the ecb will still hike because of the german influence on the anti-inflation story is intense. the u.k. is different and there's a reasonable chance that inflation can be averted but only if the new prime minister is just takes some more drastic action to bail out households. it's the forecast right now and i could be wrong. the u.k. could enter into recession by later this year but

the politics is looking more aggressive and the effect it's having on households, that will allow them to take over through the second half of the year and prevent inflation. there is a real squeeze going on there. avoiding recession is not the same as everything being ok. it won't be ok for the foreseeable future in the u.k.. you still have brexit dragging the economy down over there even if inflation goes away. jonathan: emil how llows bar in europe? >> it will probably not be very long. they are in recession already.

got to get through the worst of this first. things are a real mess, there's no growth anywhere in europe. growth will be patchy because the housing market is a catastrophe. it's nowhere near as bad as it is in europe in the u.s. will avoid recession quite comfortably. they are thinking the u.s. will not move into recession so if seeing upward pressure on yields again. lisa: nothing is positive in europe so it what point has this been priced in already and at what point will this require a broader and more drastic repricing of risk assets across the board? >> that's a good question.

if you are not expecting recession in europe, you probably have not been paying attention. the fundamental problem in europe is that the rising energy prices has made everyone in your poorer. there's no way to avoid that by cutting interest rates or anything else. it's just delaying the inevitable. in energy price shock in an energy consuming region makes everyone poorer. there is no way to avoid it. you can work through it but you can't it away from the fundamental factors of energy prices going up. it's worse in continental europe and the u.k. europe is at the front and center because of ukraine and their energy policy over the last few years and they will pay

the price. this environment is very difficult and it will probably not be a quick turnaround. lisa: we talk about how the united states is in a better situation3 and there is an inventory glut that a lot of analysts are expecting including big retailers. they say ordering too much stuff will be disinflation area. how much will this take some of the pressure off the fed? >> i'm watching this more closely than anything else. when we had the energy shortages last year, there was a widening of retail margins. especially in the vehicle market where margins tripled. that's the official number. that leaves things at an overextended level.

we are in a position now where that enormous margin expansion could take two or three or four percentage points off of core inflation over the course of the next 12 months. it surprises me that the fed is not talking about this. for an investor, you're looking at retailers facing a margin squeeze of unnatural proportions over the course of the next year. from the fed perspective, this is good news because this is what we need to re-normalize inflation. it's a long way off but the return of inventory is what will

bring about the margin compression and drive inflation down. jonathan: if only football games and did in 54 minutes -- ended in 50 or minutes -- and 54 minutes. what a beautiful thing that was. >> that's the best thing that could happen. tom: advise us on the game today, liverpool and the other manchester. they lost jonathan: the first two games of the season. i imagine they will get crushed. tom: does the coach go in? jonathan: it's too early for that. >> it's a bit early.

but if it carries on, yes. jonathan: great to catch up. manchester plays liverpool a little bit later. tom will be napping. tom: damien is chiming in. jonathan: from new york, this is bloomberg. ♪ ritika: keeping you up-to-date with news from around the world, china is ramping up support for its troubled real estate sector. there putting this they're offering $29 billion in special loans to buyers which would make it the just message yet from beijing to handle a property crisis.

the treasury secretary once the federal reserve to deliver a message on the economy and says the fed should be clear that it will be driving up the inflation rates to quell recession. president biden has spoken with european leaders about a nuclear deal with iran. there considering tehran's position on the latest pozo. the u.s. has said it agrees with israel and iran can never wire a nuclear weapon. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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>> i think inflation is foretold in the united states and the strong dollar and lower commodity prices will continue to go down. in europe and the u.k., commodity prices have not fall on same way. i think you've got stagflation every forces where the u.s. has probably passed the worst of that. jonathan: he said if you are not expecting recession in europe, you are not paying attention stop futures this morning are down a little bit more than 1% on the s&p 500. mohammed a larry and writes in. hopefully your talk about soccer does not crowd out the success of the mats. lisa: they're comparing the mets

to the 1986 champions. a lot of people are. tom: they were good in 1986? lisa: are you serious? tom: it was too long ago. joining us now, peter tribuwicz. professor, thank you so much for joining us. what happens after six months in a war? what happens to the two forces of this war in ukraine? >> i want to go on record saying i'm an all-time mets fan so i

did not hear was you had to say there. it's clear that this war will continue going on. i think what caught my attention over the weekend was announced friday was that joe biden would send another 770 $5 million in military aid to kye iv think the timing. of this is no accident . it's both symbolic and serves a strategic purpose. symbolically, it's ukrainian independence day. and coincidentally there's a six-month mark in a war that we thought would be around for moscow. in a way, this administration is trying to underscore ukraine

security and tenacity in the face of long it's. -- of long odds. i think the administration's announcement also comes at a time when european financial and political support for ukraine -- ukrainian case, it's flagging. there are downward trends and european support for the war is not as stout as it was in the spring and partly this is because of concerns about inflation, the price of gas. also fears of recession which is fairly widespread in europe. lisa: how does the bombing in moscow that killed that official

change the conversation? there was speculation that this could hearten the nationalist sentiment against ukraine and the united states. what is your view on how it changes the narrative? >> it's speculation about the attackers and how vladimir putin will respond. one thing i think that's pretty clear already from the attack is that vladimir putin's regime looks a little weaker today than it did before the attack. whether it was the result of the ukrainian strike, i doubt it but it's out there, for rivalry within the kremlin or domestic resistance to putin's nationalism, the fact is, the attackers succeeded. this will fuel doubts about putin's ability to guarantee

security. he will look for some way to strike out perhaps against kyev and he has plenty of reasons for doing that this week. he could interrupt independence day but it will add fuel to that fire. lisa: we heard about president biden having discussions with a number of western allies about the iranian nuclear deal that will seem to give support to oil prices dipping. how much can that replace russia and then does that further isolate russia's pipeline going forward? >> i don't think there will be an agreement any time soon. there is a lot of people to placate inside the region and is just hard from a political

standpoint, he domestic political standpoint, biden pushing for this first before the midterm election. after the midterm election? i can see them moving on it then. there is a lot of push in the administration to make this happen partly for the reasons using just, alternative sources of energy but also because it was a mistake fundamentally to undo this deal that was struck during the obama years. jonathan: great to catch up with you this morning. the latest on europe, ukraine and beyond. the latest estimate updated to 25% and a 7% rally and electricity prices in u.k. earlier last week. the cpi in u.k. pete at 18% in

january. -- pete - peaked at 18% in january. tom: how strong is america and how long is america? i want to ask about game six of 1986 with all this talk about buchner but john mcnamara blew it by keeping calvin sure in it. i was stunned. jonathan: when was the damage to the red sox, in the 70's? i find baseball history confusing. tom: the yankees always do it to us. jonathan: i believe that was in

the 70's. tom: 1967 is when the world began in the 70's it was challenging. and then in the 80's, it was the 80's. jonathan: thanks for that. lisa: i was the one who shared that. tom: get in and turn on that.

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>> we have situation where growth is slowing the fed is tightening. >> they need to slow the economy down so the stronger it is now, the more hiking they have. >> i believe the fed targets inflation and by tightening financial conditions, it kind of gets there. >> i don't think the fed will be doing much in terms of hikes next year. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: the bears are back. good morning. [laughter] this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and the brilliant and sometimes bearish

lisa abramowicz, i'm jonathan ferro. it is europe's summer of discontent. tom: it really is. difficult news with the war in ukraine. you see it in natural gas priced out in the netherlands. i will use this phrase carefully, these are jump conditions. jonathan: jordan rochester talking up the prospect of jumping out to 95 on euro-dollar after another brief rake of parity this morning. tom: jordan rochester staying the shorts were there. this time is different and it gives momentum rapidly out into the winter, ever lower. jonathan: if you are just tuning in and you missed ian shepherdson, that quote, i will read it verbatim. "if you are not expecting recession in europe, you have not been being attention."

it is that bad -- not been paying attention." it is that bad. lisa: he actually thinks this time is different because the bearish positions have been more washed out. you have less of a positioning squeeze. i'm still focused on farm journal and the drought, also in europe, adding to that summer of discontent. jonathan: tom asked the right question this morning. can the of the economy decouple from the weakness we are seeing abroad, not just in europe, but in china too? tom: i don't think powell will address that jackson hole. it is too sensitive. it is the usual script and all of the punditry. he is central banker to the world and he is going to adapt and adjust. my head is a blur with the call from goldman sachs. i think one part of the jp morgan combine came out and said

there will be one more lift, and that's it. i was too busy watching leeds score that goal. jonathan: we will get to that. just save the premier league. kick the ball from further out. that is his advice from every premier league. when it comes to the federal reserve, when this chair acknowledges weakness, he risks coming across as dovish when he doesn't want to. that is going to be interesting later this week when we hear from fed officials. helping advocat this which is so obvious for all to see abroad -- how do they advocate this which is so obvious for all abroad? lisa: they were really giving a nod to the concern about raising too quickly and not seeing the impact until it is too late. are they going to say we will hold rates higher for longer, and that will be the issue

rather than we are going to raise them incredibly high right away? jonathan: we will kick off our coverage on the ground thursday morning. if you are just tuning in, here is a state of play in u.s. markets. equity markets lower on the s&p 500, futures off by more than 1%. on the nasdaq 100, down by 1.4%. euro-dollar clinging onto parity, -0.25%. crude positive 0.5% on wti. your u.s. 10 year basically unchanged, 2.97i've 8% -- 2.9758%. lisa: today german chancellor olaf scholz is headed to canada to meet with prime minister justin trudeau. the goal here is to potential he increase the exports of gas from canada as prices have more than doubled since june, to give you an idea of how much it is

deepening in the entire euro area. also today, the pro forma midwest crop tour begins. this has been the story of the summer that is most underplayed, the incredible drought everywhere. yes, i am biased because i just came from a more rural area, where you can feel it. but this is all across the world. it is also over in china. you are seeing industrial production start to come in. what happens if the u.s. cannot plug the gap in some of these crops from ukraine? tom: a more rural area. there were more black flies than people. jonathan: where did she go? lisa: i went upstate new york, and there were not as many flies because it was so dry. this is my point. anyway, we could go into form journal. i don't think we will, but i think this is really important. aftermarket, zoom video reports earnings, a stock that

skyrocketed during the pandemic has reversed that. jonathan: you can't discuss something really important for more than 30 seconds without tom taking it somewhere less important. [laughter] lisa: i am trying because this is import to the world's food supply. jonathan: i agree. welcome back. it is good to see you. chris harvey joining us now, head of equity strategy at wells fargo. awesome to have you with us. you wrote a wonderful note in the last week, and i reached up to you and told you that. it was absolutely brilliant. you pushed back against the humans gloom and the people that say the move off of market lows is about positioning. can you walk us through it? chris: let's just make a couple premises here. one premise is the equity market is a growth market. the other premise is the equity market can rally once the fed begins to toggle things down.

not that it pivots. but when it toggles things down. that is what they have said. we will toggle things down. at the end of the day if we are going into a growth market, you should see a slowing economy, inflation coming down, rates coming down, that is what we will begin to see. what did you see in the first half of this year? we think there's a real opportunity here. in the short-term it is going to be a little choppy, but overall we are going into a growth market, and that is pretty positive. tom: you've got a really important insight, which is the fall conference season is really going to matter this time around. everybody walks through to the hotels, they zoom and all of that. explain why this time is different for the boring fall conference season. christopher: we are a little more than halfway through third quarter. third quarter is the last number

you are going to get if you are going to re-exert that bear case. you need to see companies renounced to the negative side. we need to see them bring numbers down. you need to see them talk about doom and gloom. so you are going to see companies talk about the underlying fundamentals, the here and now. if companies do pre-announce, it is going to be really sloppy between now and year-end. if not, we can get back on our horse and start moving forward because you are not going to have that opportunity until next year to talk about numbers coming down, margins getting stretched, and the doom and gloom-type scenario, so it is exceptionally important this year. lisa: what is the take away from the earnings season at a time when a lot of people are saying you actually saw margin expansion? you said that margin expansion purely came from energy. christopher: i think what happened as we came into

earnings season, a lot of bears were saying they were getting ready for the i told you so. i told you we were in recession. i told you margins were going to compress. you just did not get that commentary. it is not that things were great. you just did not get that opportunity. underneath the surface, rates, the curve began to invert. rates begin to go down. that is great for growth. you started to see things really improve. underlying everything is the fact that you had the fed toggling things down, rates going lower, and to us everything else was beta. earnings was more beta. a lot more common in the marketplace. but the underlying fundamentals was really about the fed, was really about rates, and every thing else just help us move higher. jonathan: you think we've got more upside here on the index on the s&p 500 into year-end, and ultimately that weakness won't come into the front half of

2023? christopher: what we've said is our short-term trading range is 42 to 43. we will probably see a bit more pullback, but we do think you are going to end the market higher than where we are right now. we are still sticking to our 4700. i don't think earnings season is going to be bad. i think it will be ok. but we will see. at the end of the day we want to take in that information and make our changes, but i do think we have more upside. jonathan: i said it to you last week, it was a really nuanced note and a pleasure to read. in q2 you and the team. just with a different perspective on things coming through into year-end. tom: you look at the tea leaves here, and just moments ago, euro swissie is at safe haven. maybe litmus paper of the european system. breaching 0.96.

that strong swiss franc reconfirms the emphasis out there of parity europe. jonathan: we've got problems in europe, without a doubt. what we face is a shutdown of nord stream 1 into germany potentially at the end of the month. that is what the russians are telling us. the fear and the question everyone still has is when it goes down for maintenance, does it come back up? when gas prices go up, the year i negative. when the euro is negative, a lot of this is self-fulfilling. lisa: it becomes an inflationary headwind if you have low euro. you have to import more gas, import more goods. governor bailey is going to be at jackson hole, i'm told. tom: i did not know that. jonathan: is that exclusive reporting? lisa: no, it is not exclusive reporting. tom: can i do a "surveillance" enhancement here? al from new jersey emails in, and thank you for listening, --

was 1978. jonathan: i haven't heard from al for weeks. old-school. are you going to share bucky aft end -- bucky f. dent? tom: we've got a northeastern intern. the harvard interns in the stocks right now, researching that. jonathan: from new york, this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm rick agrippa. former trade second -- i'm rick agrippa. -- i'm ritika gupta. former trade secretary lawrence summers says -- appeared on bloomberg tv's "wall street week." citigroup says you can place and is on track to rise above 18% next year for the first time in

almost half a century. city pop -- citi is basing that on the retail price cap. citi is forecasting the british government will come up with a support package. 2000 british dockworkers have gone on strike. it is the country's largest port for handling exports and imports. they have rejected a wage hike as inadequate. bloomberg has learned $29 billion in special loans be offered to ensure stalled housing projects are delivered to buyers. that would make it the biggest commit and from beijing to contain a property crisis that has led real estate sales to plummet. 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 rick a cooped up -- i'm ritika gupta. this is bloomberg. ♪

annmarie: he's not a mitch mcconnell candidate, mehmet oz. tom: but they are on the same side, right? annmarie: mehmet oz is very much down in the polls. tom: you and i know annmarie has her asparagus with sparkling water. lisa: i thought he was looking for tequila? jonathan: lisa skipped last week based on the substance of our political conversations. lisa: i did research on the cart or basket debate. i wonder why we are hearing about mim and oz and talking

about ascot versus carts, we are not talking about president biden campaigning for any democrats. we are not talking about kamala harris at all. how unusual is it to not be invited to all of these campaign trips? annmarie: open can -- "the washington post" did a poll about this. do you want the president to show up and campaign for you are not? i believe the words they used were "unenthusiastic," unenthusiastic responses. if he shows up, we would love to give a mentor. this is what many candidates are worried about, that this will be a mandate on the biden presidency. you already see a number of ads coming out in tight races with republicans really going after the administration on things like the economy and inflation, so you have these democratic candidates in tight races wanting to make sure they put a lot of distance between themselves and the white house.

that is not exactly unusual because most of these midterm elections in a first-term presidency is usually a mandate on that administration, but it could be worse for president biden because he is so low right now in the polls. on top of that, his own party is talking about the fact that they don't think you should be the candidate for 2024. but on thursday, the president be going to maryland, and this is going to be the kickstart of wanting to campaign for the midterms. will he be invited to other places? that is the big question mark. jonathan: when does d.c. get interesting again? annmarie: i would say early september, when the president is going to have this huge announcement, almost party, for the bill he signed for the climate and prescription drug pricing. d.c. is going to get exciting because of the midterm elections , but there's not going to be a lot that is going to get done

because everyone is going to be so focused on their constituents at home. tom: i've got to thank you for lightning it up on a monday. it is august. let's be honest. there has been a rush of emails, tweets, etc. on your ignorance over "game of thrones." i did a poll out there, does she remind you of an older are -- older arya stark bore -- stark or margaery tyrell? margaery is coming in. annmarie: it would take me more time to watch it. tom: well, i watched it over time. . lisa: fantastic. tom: between bramo and amh, i am going down in flames this morning. jonathan: annmarie, come back anytime.

amh in new york city. futures down 1% on the nasdaq -- futures down 1%. on the nasdaq, down 1.4%. tom: are we out three big figures on the vix? no we are not. but bridging up to 23, it is clearly an equity setback. some of that is off of mr. kostin's note at goldman sachs. jonathan: the bond market not doing much, 2.97%. lisa: i think most of this is positioning. honestly, chris harvey, he was talking about how it is all rates driven and has nothing to do with fundamentals. that was basically his big takeaway as he talked about the earnings not being that great. are we all just sitting here waiting for the fed to give us some sense of what is going on? tom: we are going to fall conferences where there's beverages of my choice, and

lovely hors d'oeuvres. jonathan: what did you just call them? tom: you go down, you have an order. i can do this. jonathan: have a break. no idea where this is going. jonathan: anyway, we are down 1% on the s&p. sonal desai of franklin templeton joining us next. this is bloomberg.

jonathan: weakness on friday spills into weakness this morning. good morning to you this monday morning. down more than 1% on the s&p 500 , done by 1.5% on the nasdaq 100. two reports out this morning, one from j.p. morgan. this could be the last big outsized rate hike from this federal reserve at the september meeting. max kettner of hsbc say and focus on the economic weakness still to come in the second half of this year. max underweight this equity market and starting to thick about buying this bond market.

last week your two-year, even with all the news come of the noise, nothing. flat on the week. anchored at the front end. the 10 year starting to come up a little bit. we started to narrow the difference between twos and tens, and this morning, two-year back out basis points. perhaps contributing to this move lower in risk assets. your tenure, 2.97% in unchanged on the day. the weakness still to come in europe. how problematic is this? nord stream 1 shutting down for maintenance at the end of this month. the big question, will it reopen? gas prices absolutely flying, euro-dollar rolling over, negative to just about parity this morning. tom: it is different than what we saw at the end of july. today it is a nice move down, and from here, who knows? jonathan: euro-dollar negative a few tenths of 1%.

that's the cross asset price action. let's get you some single names this money with lisa. lisa: the meme stocks have been selling often pretty dramatic fashion. for bed, bath & beyond's decline, down in premarket trading after the emerging a value on friday. this is because suppliers are halting some deliveries or suspending them because they have not gotten the payments in time. there are fundamental reasons for some of the weakness. whether that actually matters for some of the names that have written on sentiment is another story. gamestop shares down nearly 6%, and mc shares down 31% in premarket trading. other shares we are watching this morning, zoom video communications. we have been talking about how they are reporting earnings later today after the bell. those shares down about 2%. the expectation here is how much can they continue to add

subscribers at a time when, as we were just hearing from chris harvey, everyone is going back to the conferences. you can feel the sense that the era is over, so the adopters have already gone to it, and the others perhaps are using other technologies. wayfair shares down more than 3% after a massive decline on friday as well as they start to potentially lay off of their employees dealing with some of the slowdown in that sector. msg entertainment, doing this because the harry styles concert was last night, those shares down 2%. the reported earnings on friday, but yesterday i was coming home and leaving the train from penn station, and saw these ladies and bellbottoms and boaz and i did not know what was happening until i saw what was on the sold-out notice. jonathan: did you go to the concert though? lisa: i didn't have my boa and my glitter makeup. jonathan: are bellbottoms the tell for a harry styles concert?

lisa: it was really uncanny. jonathan: i've noticed the styles changing. tom: you know fashion. fashion is back big time. i think it is outstanding. they've got new sweatshirts that don't shrink. it is incredible. jonathan: it is shrink proof? we will check that out. tom: if you put a $900 sweatshirt in the dryer, it does not shrink. joining us now, sonal desai is the chief fixed income officer at franklin templeton. right now, she and others in bonds are just trying to survive. the bloomberg total return index, -14% and rolling over in the last couple of weeks is brutal.

price down and yield up. when does it end? when does the capital loss and for bonds? sonal: i think when they have sold off enough, and i am not sure they have yet. we are really playing a game where the market desperately wants the fed to react the way it has done over the last few decades, but certainly most recently in 2018. the market hates this way, and historically the market has soothed it delivering more liquidity, less tightening, something along those lines. i just don't think that they can. so when does the pain stop? i think yields still need to go up quite a bit more, and i think that the volatility will continue until the fed can convince markets it is going to what it says it is going to do, to raise rates. jonathan: i've had the pleasure of following the evolution of your thinking through 2022, and

you and i have caught up quite a few times. i think what stands out is that inflation is going to be so much stickier then so may people expect, and that fed funds is going to peek at a much higher rate. can you give us your latest thinking on that come on where you think inflation is going to be year end, and how much work the fed still has to do? sonal: i think the big divide among most of us in the market, certainly amongst most economists, is the extent to which you believe this is all supply-side driven, the russia-ukraine war, code related supply chains, etc., and those of us who believe that the fiscal impulse was large and had an important impact, and that is what is showing up in labor markets, what assuming up and spending. keep in mind the inpatient we've had so far effectively knocked off one month's wage from the

average american. it is remarkable how well consumers have held up. they've held up because they've got a lot of resources still, or sufficient resources to write out inflation for a while longer, so the economy slowing down sufficiently to curb inflation is not happening yet. the last time we spoke i said we could get a negative number in july. in the end we got a flat number on the back of gas prices. i think we could easily see that again, but then again, you see what happened in retail sales. if you look at the control group, retail sales were up a lot, up over 8%. so i still see a relatively strong consumer. for year-end i see inflation closer to 8% and 6% which is what most of the market are expecting, because i see a lot of stickiness and shelter in a lot of other areas. just to finish off on the issue

of gas prices here in the u.s., at the end of august, the strategic reserve sales actually end, and i am curious what we see in an ongoing way, a continuation of a decline in gas prices or not. lisa: one reason why some people say the gas prices have rallied so much is because jay powell did not push against the rally they had been seeing. they did not seem to be that concerned about loosening in financial conditions in the bond side as well as the equity side. do you expect that message to change at jackson hole? sonal: i'm really curious. jay powell has, over the last several meetings, managed to sooth the market, perhaps more than is ideal because the fed needs financial conditions to tighten a bit. they raise rates as much as they raise them, you get this massive rally in the markets that means financial conditions are looser again, and you are not going to

get the cooling that you need. the ideal bringing inflation down consistently, not just one month, two months, but consistently back towards their target is going to require some slowdown, a genuine slowdown and a cooling off of the labor market, of the economy more broadly. jay powell has managed always to soothe the market, or the market tries to cherry pick the more comforting soundbites. he did not expect many supersized rate hikes. so this means you're going to see more rate hikes for longer. the fed is guiding us towards 3.8 percent, close to 4%. i think they need to do probably a bit more than 4%. i see hikes into next year. there continue to be rate cuts priced extremely quickly, and

that is the area where i think i am most out of step currently with market pricing. i just don't see the rate cuts. do we end up 3.75%? that is the smaller question relative to when and how quickly. jonathan: i agree. mary daly is talking about it. they are not talking about rate cuts yet. great to catch up. can you imagine if they did start talking about rate cuts in a very different market? i want to talk about gas prices in europe. it is important to frame this over the last year. you can see the breakout at the peak in spring, and that is when crude broke out and peaked in spring as well, and we have not looked back. we have rolled over. gas is still surging. that chart, is it fair to say it has gone vertical over the last few days. tom: i think you can say vertical on a standard deviation basis. what is important is this is not a substituteable item.

we are not looking at the price of apple or something like that. this is a tangible thing that everyone needs, industry. as one of our guests said, that shutting down of that zinc smelter is a real harbinger of what is going to come here. jonathan: you've got euro-dollar down by 0.4% off the back of this difficulty because nord stream 1 is going to shut down at the end of the month, and we don't know if it is going to reopen. so you get a weaker euro, which means you have to import more inflation. we saw the euro. how do you get out of that negative we'll? that circular story is just brutal. lisa: christine lagarde will not be at jackson hole, so she will not be answering those questions, but hear that isabel schnabel will be. how do you get a sense of where the emphasis is at a time of growing miss and ecb futility? jonathan: i wonder if we can

catch up with her. out of everyone on the ecb, she's one of the best communicators at the european central bank. i would love to hear from her later this week. futures down 1%. from new york city, this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. president biden has spoken with european leaders looking to revive nuclear deal with iran. the u.s. is considering a response to tehran's position on the latest proposal over the weekend. axios proposed the u.s. wants to calm fears and israel about a possible deal. the u.s. says it agrees with israel that iran can never acquire a nuclear weapon. the u.s. and south korea have begun their biggest joint military exercise in about five years. that is taking a break on -- involve thousands of troops and will stimulate a response to an invasion from north korea.

it and million dollars ad campaign rolling up this week highlights climate provision in the inflation reduction act passed by congress. the measure carries historic funding to cut carbon emissions and transition to clean energy. the campaign is paid for by the league of conservation voters and other advocacy groups. they want to make sure democrats get credit for the measure going into november's elections. since the start of the war in ukraine, china has increased its purchases of energy from russia. according to the latest customs figures, spending on oil, coal, and gas has risen from $20 billion a year ago to $35 billion. that is has other countries shun russian goods as punishment for the invasion. 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. ♪

>> you've got the u.s., you've got europe, you've got china. china we know is struggling. we think beijing, through various sorts of policy, will come to the rescue, but the question is window these -- is when does the infection point happen, and is it a big rebound or soft? jonathan: from new york city this morning, good morning. tom keene back with us, lisa abramowicz. on the nasdaq 100, down by 1.5 percent. equities softer, euro weaker. euro-dollar in and around parity, -0.3 percent. not much price action in the bond market. maybe can it into the move lower in risk assets. in the commodity markets, crude is about natural grass --

natural gas out of europe. it is a tricky moment for the european economy. tom: worth noting the ultimate safe haven, euro swissie, really gets my attention. right now without question our conversation of the week on china, leland miller is cofounder and chief executive officer of china beige book international. more than anyone i know, wired into the menasha of china -- the money shot -- the minutia of china. do you leave in 3%-ish gdp? leland: i don't even think we will hit 3%. people have come around to the idea that this is a weak economy. they are lying a lot less about the numbers, so people can actually see how week consumption is, how weak every

aspect of the entire economy outside of exports has been, and even exports now are fading. the data aren't great, but what they are signaling is that not only are you nowhere near 5% gdp, you are probably significant less than half that at this point. lisa: we are also seeing how little power the pboc has to stimulate the economy that already has gotten some stimulus and is not really responded. leland: absolutely. the story actually goes back about six to 12 months on this. we were at the end of 2021, beginning of 2022. we saw loan demand increase from firms across the country. we saw four straight months where loan demand was increasing. i think firms are starting to get back into it because it was a party congress year. maybe they saw some uncertainty going away. but then the covid lockdowns hit , and they were strangled with that for several months. even when the lockdowns eased, you have seen a refusal to get back into it and borrow and

invest and hire. now that they are dropping rates, had this been done nine months ago, you would have had some sort of kick with it. but now you're just trying to stop the bleeding. lisa: how much is there a recognition of the reality that you're telling them, of what the ramifications of china's slowdown in a much more extreme fashion will have? leland: we have been screaming into the wind on this. i think people are starting to get this now because the government itself is admitting that the economy is in and asked ordinary weak position. we would sit on panels and people would say there is big stimulus coming. the big recovery is coming. party congress year. all of the old platitudes about how the economy would get there simply because of the politics of the country. that is not the world we live in right now. it is not the chinese economy we are tracking. i think only when the government started to admit that july got worse than june, lockdowns are

easing, the economy is getting worse, all of a sudden oaks off around the world right now. tom: i want to talk about an idea i learned from the engineer from lyons, sean claude trichet. he would talk about how you diffuse productivity, diffuse a fiscal impulse. how does beijing, given their artificial structure, diffuse a large fiscal plan? how do they actually do that? leland: i think they are going to have a very hard time doing any type of stimulus, physical or otherwise, until covid zero is gone. there does not seem to be any sign of that happening. right now, lockdowns are easing, so the markets that we are going to see a big ounce back. but what firms are telling us on the ground is they don't want to borrow, they don't want to invest. now they don't want to hire because they don't see this covid zero night air ending

anytime soon. unless you convince businesses that things are going to get better, you convince consumers they should be spending, and unless you can convince people in china rate large that there is improvement coming and not morlock downs, you will have a very hard time stimulating the economy, no matter what your vehicle for that is. lisa: i have been focusing on the drought and the heatwave taking place across the world that is having very real world ramifications not just on food supply, but in china on industrial output. you're seeing this in test -- in session on -- in szechuan in particular. how much is this something that will further disrupt manufacturing? leland: i think it is very real, and it should be concerning people a great deal. what has held chinese economy for the last two to three years? it has been big-time production, manufacturing, exports, while

everything else has been week. property, retail, and services have been a mess. so what has held the chinese economy up? it has been this production. now you're getting hit by the heat waves shutting down hydropower production and causing all kinds of problems from that, and on the other hand, global slowdown. so the demand is faltering around the globe. china has got a lot of problems to worry about right now, not just a normal one, two, or three. jonathan: leland miller, good to catch up, as always. that was fantastic, lisa. that line at the beginning of the conversation, they are no longer lying about the data, it is that bad. it is that weak. lisa: it shows how little power they have to do more. they did make a move overnight that had a little bit of an effect, lifting the mood in equities, but a lot of this was trying to shore up support for the housing market, lowering mortgage rates potentially to

some of the lowest on record. how much is it actually going to bring people back when that investment has been completely decimated over the past couple of months and years? jonathan: allow me to tee up the next hour. matt hornbeck of morgan stanley will join us to come you don't to jackson hole, wyoming. we will catch up with jordan rochester of nomura. then on to a conversation with tina peterson of the conference board. that is coming up in the next hour. tom: it will be interesting to see what the formula looks like, the present state of the american economy. i must admit over the weekend, the idea of american recession has drifted away. it is still there. i get that it is probabilistic. there is a chance. but nothing like in europe. it has really drifted away. jonathan: it is more immediate and europe. it is right now. in china, there is a real weakness. for the global economy, getting closer and closer to what people would call a global recession.

in the united states, what did chris harvey of wells fargo allude to? they pushed it out. maybe not avoidable, but delayed, pushed to early 2023. tom: liz saunders making it clear, the strongest dollar since 1997. jonathan: euro-dollar parity once again. your equity markets, -1.15%. for our audience worldwide, heard on radio, see on tv, this is "bloomberg surveillance."

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>> i'm uncertain how long this bounce goes on for, but we still have a period of significant volatility ahead of us. >> i don't think the market has really priced and how bad it can be in europe. >> we do have to realize that where we are in the cycle, things are going to deteriorate from here. >> i think it is too soon to call it a recession.

>> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom:tom: good morning everyone. it is not august. it is august. it is boring, it is lazy. forget about that. europe in retreat, led by natural gas spiking higher jonathan: winter has arrived already in europe. it is problematic. we will see nord stream 1 shut down for maintenance at the end of the month, or maybe even longer. gas prices surging. europe has got problems. tom: we are trying to get to jackson hole. we will do that this week. within that is where is europe the end of august. how does europe get to september 2, 3, and 4? jonathan: it sounds to me like you want to make a trip to lake como. chairman powell has a speech this friday. does he try to navigate the

global economy? tom: i don't think he does. jonathan: if he does, it is going to sound very dovish because the global economy is not a great place. if he focuses on the united states, we've got to talk about financial conditions because financial conditions and will recently have been getting all a lot easier. i thing we are all asking the same question. we'll chairman powell be pushing back? tom: we will talk about that in a bit. governor bailey will attend jackson hole. maybe jackson hole won't be jackson hole -- maybe chairman powell won't be international, but governor bailey has to address a beleaguered europe lisa: this federal reserve, even to this day, has nodes of the transitory idea still baked into some of the rhetoric. there is still this feeling that it will abate. the market does not buy it. the market thinks the fed would have to go much further to get inflation back down to that 2% target.

it is not going to take a very short time to get there. at what point do you get some sort of cohesion of central bankers facing a very different situation in terms of inflation and? their economies -- and their economies? tom: this is the research over the weekend, peter navarro of citigroup with an 8% number on inflation. jonathan: i will share the quote with everyone. our latest estimate updated for the further 25% and 7% rally in u.k. gas and electricity prices last week points to a further upside shift in u.k. inflation. now expect cpi inflation to peak at over 8.7% in january. i think the big difference is we are talking about a peak year-over-year cpi that is behind us in america, and in europe it is in front of us. in u.k., and a much bigger way.

tom:tom: let me go to the swiss franc. euro swissie, it is a new profound swiss franc through 0.96. that is a massive move for global wall street. jonathan: that is the story right now. euro-dollar at parity once again, trying to cling on once more. yields are unchanged on the 10 year at 2.9 7%. crude not doing much. natural gas up and away. in the equity market, futures done by more than 1% on the s&p. on the nasdaq, down by 1.5%. tom: matt hornbach joins us. you leave your note with the rabbit holes of wyoming. which is the rabbit hole that chairman powell wants to avoid? matt: thanks for having me on the program. think the fed and powell in particular needs to get across

the message that the job is not yet done. inflation in the u.s., obviously inflation outside the u.s. is still high and rising in certain areas. the job to bring inflation back down to the 2% goal is far from accomplished, and i think that is the main message powell needs to get across. the concern in the market had been that this expeditious move to neutral might continue to be expeditious. i think in the july fomc press conference, powell board -- powell poured a little cold water on that idea, suggesting they might slow the pace -- the pace of rate hikes. i think that is what people will be very interested in hearing. jonathan: with that in mind, how does that shape your view of

what will happen through the fx channel with euro-dollar? you've got that strong dollar call. what are you thinking now? matthew:matthew: we think the dollar has further to go, in part because of what is happening in the u.s. the underlying inflationary dynamics are still strong here, and we think powell the focus on inflation on friday, but also what is going on outside the united states and in europe in particular, we are seeing increasingly, increasing downside risks to the european economy. what is going on with the natural gas situation is a key contributor and factor. we are targeting 97 on euro-dollar. we think there is more weakness to come for the euro and more strength to come for the dollar. we also like dollar-yen higher. that is something we could see making its way back to 140. generally the dollar still has room to strengthen, and that is what we are recommending investors position for.

lisa: how much is this hinging on fed chair jay powell coming out and pushing back against the feeling that they are not going to go as quickly as people had expected? how does he parse the line between not raising rates as quickly, but holding them wherever they eventually end up for much longer than people are currently pricing in? matthew: i think you can do this very simply by just talking about being in restrictive territory for a period of time in order to ensure that inflation comes back down to their goal. the fed does not know where the neutral policy rate is. it is a theoretical concept. they've got some educated guesses about where that neutral rate is, but they don't know. he could talk about the uncertainty around where neutral is. he could talk about the need to keep policy in restrictive territory until they are convinced that inflation will make its way back down to the 2% goal. you don't really see that in the price of the market at this point, so that could put some

upward pressure on short-term interest rates in the u.s. and keep that dollar appreciating. lisa: how much is that going to become a risk factor, especially as you talk about $97 on the euro? if you get an ascendant dollar at an increasingly perilous moment for europe and other regions? matthew: in a way come of the dollar is trying to bear the burden of what is happening outside of the united states. it is trying to help other countries cheap enough their exports. that is the market doing what it does best. there's these release valves that occur in different areas of the macro marketplace, and i think the dollar currently is acting as that release valve. that is something that is very normal in markets, and we think the dollar continues to be that bastion of safety that people will come to, and in doing so, how out other parts of the

world. jonathan: have you thought about where the fed funds peaks? does that number go higher, lower, stay the same? matthew: of course, we think ultimately, islands and their -- ellen zentner has this call, and she sees the fed funds rate at 3.5% to 3.75% per get the dot plot has it a touch higher come about at the end of the day we think the u.s. is one that raises the risks certainly to our official call that the peak rate is higher. i think the fed is going to discover datapoint to datapoint just what that terminal rate, that peak rate in the cycle is going to be. for now, they are still going, and that is the main message powell needs to get across on friday. jonathan: good to catch up. matt hornbacch of morgan

stanley. when we talk about the balance of risks around where fed funds peaks, they just gave a little hint that they think the risks are skewed to the upside. tom: everybody is everywhere. there will be by balance of risk at 10:00 a.m. thursday morning? jonathan: 10:00 a.m. friday. tom: if we are still there. i think it is just a back-and-forth. jonathan: are you planning on leaving? tom: i was going to take the gulfstream, and now we can't because i'm getting all sensitive. jonathan: what arejonathan: we getting sensitive about, price? tom: no, it is like the taylor swift thing. we are flying all over the place. lisa: someone has a celebrity tracker on tom's personal plane. jonathan: you're saying they track tom what they track taylor swift? tom: should i lose the "surveillance" nap this afternoon to watch liverpool? jonathan: absolutely.

are you still sleeping at 3:00 p.m. eastern time? tom: it depends. the weekend was arduous. jonathan: tom, that is a proper game. tom: the guy i love with liverpool, he didn't interview where he says he did not mention tottenham, but says these are the two great teams history wise. jonathan: historically they have the two most titles. the tots might get something done in the next couple of years. can't believe i'm calling them the tots. the spurs. tom: who is the buggy -- the bucky f. dent of the tents? jonathan: give me three minutes to come up with a name. have we come up with what the f is? on the nasdaq 100, down by 1.6

percent. from new york city, this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. former treasury secretary larry summers once the federal reserve to deliver a stark message on economic pain. he says the fed should be clear it will need to impose restrictive monetary policy that drives up the unemployment rate in order to quell inflation. summers appeared on bloomberg tv's "wall street week" with david westin. citigroup says u.s. and patient is set to rise next year. citi is basing that on the retail price cap, which analysts expect more than triple by next april. citi is forecasting the british government come up with a $47 billion support package. 2000 british dockworkers have gone on strike. it is the country's largest port for handling containerized

exports and imports. they have rejected a wage hike as inadequate. china ramping up support for its troubled real estate sector. bloomberg has learned $29 billion in special loans will be offered to ensure that so-called housing prices -- that stalled housing projects are delivered to customers. that would help contain a property crisis that has led real estate sales to plummet. a jump in apartment construction in the u.s. may provide some relief to renters. they faced soaring prices, according to a study by listing service rent cafe. 20,000 apartments are expected to be completed nationwide, the second year in a row that the industry top 400,000 units. that mark was last reached back in 1972. 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 think we are going to remain strong at least for the next six months, as the euro is holding relatively well. this is about dollar strength right now. of course there is euro weakness and the energy story is really important, but this is about dollar strength. jonathan: jane of rabobank on that dollar strength. euro-dollar breaking through parity briefly, 0.9996 on

euro-dollar. equities down by more than 1% on the s&p 500. on the nasdaq 100, down by 1.6%. in some research for you, tk. last time you wo the league titlebn -- you won the league title, 2008. tom: as we get prepared for today, romania defeated tottenham. that was one of the worst defeats ever. april i think of 2018 or 2019, sanchez just killed us. jonathan: i don't remember any of this. tom: we couldn't be chelsea. jonathan: we are talking about tottenham, but ultimately looking forward to a bigger game 3:00 p.m. eastern time. jordan rochester joins us with nomura international.

this is a must listen. the partial differential, is the euro weaker, or is this just dollar flight is witnessed i strong swiss franc as well? jordan: i think what james foley was saying -- what jane foley was saying, it has been mostly a dollar story. euro has not performed as much as i think it should. i think the fx market is mispricing the situation in europe. i think credit markets are doing a better job of raising the risks. european equities essentially say it is going to be a mild slowdown towards average growth in europe, where every single day we are seeing the energy price spike is getting worse. the situation for european energy markets, if you look at the past 22 days, 80% higher energy prices this month alone. we have been talking about this for months. they were awful before we got to

august. now 80% higher. if governments do nothing, the u.k. household, if they have no subsidies, and we know they will have, but imagine a world where they don't. they would be spending 20% of their disposable income on energy bills, destroying the light on and heating their homes. so this a complete rethink of the economic model in the euro zone. it is strange for all of us to see the euro selling off so slowly. i thing it be much faster. we will be testing 97.50 in the next few months. jonathan: so you think may be down to 95. i would ask off the back of that, at his interest rate policy even matter in this world to this currency, given we are expecting 50 basis points again on september 8? jordan: there is one central bank that matters, which is the fed. if you look at fx, idiosyncratic stories in europe and all the detail we can go into have been largely irrelevant for the past few weeks. all you needed to know what was going to happen in u.s. rates and you knew where euro-dollar,

where cable was going to go. i think in the winter, the extreme recession taking place in europe, those idiosyncratic factors of this energy story, what is going on for the european consumer will matter. the other factor to take into account is that it is not just about what the ecb does come up with the fed does. you have to take into account inflation premium. why is the euro lower when non-yield spreads would say euro-dollar should be higher? it is because there's now a large inflation component in yields of u.k. gilts. you have to treat it more like an emerging market. their rates markets are selling off, and the currencies are heading lower. that is very different to what we have been used to for the past 20 years. lisa: the fact that you think the euro is wildly mispriced, that the market is underplayed some of the weakness, is in stark divide with what we heard from ian shepherdson on the show. he said if you are not expecting recession in europe,

you have not been paying attention. why do you think there has not been the recognition you are talking about in the equity markets to date? jordan: i think the market has been looking at the fed. we had that cpi number and the market pressing a fed fish pivot, which has kind of come out of the price a little bit. we have seen rate cuts for next year at one stage of 75 basis points priced in. that has eased off to below 50 basis points i think this morning. essentially the markets are feeling pretty yellow about the euro zone, but it is only credit that seems to be affecting it. it happens all the time. markets are not perfect. they are not always rational. they just sometimes need to be given the alarm bells, such as the ecb. we think they are going to keep raising rates next year if there's blackouts in germany? that could trigger moment when the lights are turned off for german industry or parts of it, where it just becomes unreasonable for the euro to keep levels where it is currently at. jonathan: i'm not comparing the

situations. i just look for a catalyst. back in the pandemic, we all saw this risk brewing. the market was unshaken. i thicket was the weekend when italy shut down the people woke up and thought, this is real. it is coming and it is probably going to come to the united states as well. are you thinking of that kind of catalyst? like you say, all of this is so obvious. you can see it on the screen. you see it in the numbers, and yet, very slowly just egging down again. with the catalyst that is going to lead to the wake-up call? jordan: i think the human mind is part of why it is difficult to price this in. we are linear animals. when these prices are rising exponentially, it is difficult to comprehend the impact of it. we do expect that governments will step in. if they don't they will be risking civil strike, so there's an aspect of the market that says don't worry, it is pretty bad in energy, but they will do

something about it on the government side. the point i make is when prices keep rising, it is difficult for governments to keep up with those moves. so there's two aspects of that. the trigger could be when jiminy -- when germany triggers phase 3 of its gas plan. it will slowly to give up the cost to the consumer. we've got an energy levy coming in october, but there offsetting it to some extent. when phase 3 comes income of the government just needs to do demand instruction policies, literally saying you can't turn on your industrial plant. you need to turn down your gas usage. when that happens, it becomes clear that the eurozone will use a lot more imports to help their supply chains continue. factories will still want to keep producing, but products like steel and aluminum, glass, ceramics, anything at the lower end of the supply chain will just get imported from

america, from china, where energy is much cheaper. that way on the arrow much more. jonathan: price target, manchester united, what are you thinking? may 2023. season is over. where are we going to be? jordan rochester of nomura, good to catch up. were you more interested in that, tk? or the euro-dollar? tom: come on, these teams are both flat on their backs. they will both be fired up.

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city, good morning. futures down, off by 1.2% on the s&p, nasdaq up. weakness friday, because this morning. yield down a basis point, euro-dollar down one third of 1%. right now, we are at parity. gas prices up 18% on the day on the month. that is almost 18% over the last

30 days. tom: right to the peak, it is got a life is on. it is at standard mediation. you could say it is jump conditions. jonathan: 95 potentially on euro-dollar. we are not sure how to process these moves and what it could mean for gdp destruction later this year tom: there is big figure discussions in foreign exchange, how to make money, how to not lose money, but a huge part is what it indicates about per capita gdp slowdown and the agony that is going to get there. it is not just one country or region. look at china. jonathan: they have got storage levels up in a way that we were

hoping for just a little earlier, but that is a small, small ray of light. jordan was talking about the next phase of gas in places like germany. ultimately, it is demand destruction. maybe that is the point where we wake up. tom: only have to do is look at the markets. do that as we can right now, a brief on what will greet chairman powell at jackson hole. dana peterson is good at building in emotions with the actual math out there. dana, you do the gdp equation. there is a domestic component and then foreign dynamics as well. as the domestic component in recession? dana: certainly in the second

quarter it was slightly negative. looking at the third quarter, the data is out of median indicators which has fallen for five consecutive months. we have already called for some time that there was going to be a recession in the u.s.. our hard forecast is the fourth quarter. maybe it is happening even right now. tom: does this hurt our listeners and dealers? dana: the strong dollar is great for bringing down inflation. it means we can work things more expensively but it does hurt our export. simply because our products are too expensive abroad. the good news is the u.s. does not export that much, but a strong dollar is good for bringing down inflation.

lisa: janelle expects inflation to come down to 8%, not much of the decline. do you agree? dana: we have inflation softening the figure the peak have been order lynn murray that is true, but you look at food prices, they are being affected by global activity and that weather events. when you look at services, a big chunk is housing costs. even though housing activity has slowed, prices are still elevated. we could potentially still seek some pressure on him services going forward from housing. lisa: you mention weather, housing, food. i have to go there nobody else will go in the this morning. i have been talking about the drought and lack of farming

supplies. how big of a concern is this in terms of food prices? dana: we are very concerned. it is not just the u.s. issuer. it is happening in europe with elevated heat and in china. we are seeing crude crunches happening despite the war in ukraine which has also placed a lot of upward pressure on food prices. ceos are going to push for higher costs for food. the is going to continue to be a pressure that the fed is not have much over. tom: our headline today is with hyperbolic energy prices out of the u.k. they are looking at 18% inflation. recalculate the conference boards inflation gas for our listeners and viewers. do we stay at 8%? dana: our hope is no.

some underlying things are starting to come off. inflation for autos is coming off. some of that is because people cannot find cars and also because it is more difficult to finance a car. many people are moving away from goods toward services. prices are going to be going up for -- off of goods. tom: chairman paul is listening. what is your ended number of topline inflation forward? do we come down and stop at 6%? 4%? dana: we are probably going to see inflation above 5% by the end of this year. that is high. we do not have inflation can back to 2% until 2024. this is an extended period of nation, while about 2%. lisa: how important is the

nature of that inflation? u.s. natural gas features are rising substantially in tandem what we are seeing in europe. how much does this need to add inflation that will necessarily cause a session i can do what we are seeing in europe versus wage gains and things that can foster more of a positive spiral young dana: -- spiral? dana: wage gains get passed on to inflation. the same people getting those gain are also employees of companies that are saying, we will not absorb these higher costs. then you start having a wage crisis spiral, which the fed does not want. when you look at energy prices, that is going to eat into budgets. certainly into the budgets of your average american. all of that bodes poorly for the

consumer and businesses. lisa: how much are you about the housing market weakening and the sentiment dragged but it will have on tumors that have not been -- on consumers that have not been felt yet in the u.s. data? dana: the housing market weakness is par for the course. the that has raised interest rates. we had limited supply and high prices. all of that shakes into an outlet that is negative for housing. we have already seen housing activity cannot. it will continue to weigh on the economy and contribute to what we are forecasting. tom: paul krugman wrote a fantastic essay on the durability of rent inflation. do you agree that the -- that rent inflation is durable? dana: means there is a long lag where valuations guys now and

you see that coming up still six months from now, that is accurate. we think there is going to be this persistence in terms of rents pushing up inflation. as part of the reason why not have inflation getting back to the 2% target quickly. jonathan: that is the stickiness we are all thinking about. thank you. gas move in the u.s., guess move in europe, a recession in europe is almost unavoidable was that we had from william shepherdson earlier? if you are not expecting one, you are not paying attention. lisa: how can you see anything other than that if you are looking at the price of natural gas, double-digit inflation in germany, 18% potentially in the u.k. how do you see this ending well?

the question comes how deep is the decline? what have we priced in already? jonathan: great lineup in the next hour to talk about this. it is easy to get gloomy about your at the moment. awesome timing for this conversation. tom: this is important. wilensky is something -- is a student of the pacific rim. at some point, the covid night more is over and -- nightmare is over at the pacific rim will move on. jonathan: based on the incoming data? tom: i will go there but it is underestimated how things will get solved. the number one date everybody lisa: there has been this big

discussion about businesses moving away from china in light of zero covid that help sustain has that exodus been? i wonder what that creates for china? tom: what did you see in liverpool? jonathan: man united. three games, three losses. not a pretty sight for that football club. tom: that would be like the yankees in last place. jonathan: i have to work out who is going to do it and who is going to come in. at this point, who wants to come in? tom: arnoldo. lisa: this is you guys talking offline. [laughter] jonathan: people right in and think do not and along.

they see us walking to breakfast together and cannot believe it. thank you so much for listening. lisa: what does tom say? jonathan: get a life. tom: jon and i were at the state regency. the guy almost spilled coffee when he is together. jonathan: this is bloomberg. ritika: president biden has spoken with european leaders looking to buy tgl with iran. the -- u.s. considering a response. over the weekend, it was reported the u.s. wants a possible deal. the u.s. agrees with israel that iran can never acquire a career prepping. since the war in ukraine, china

has increased energy purchases from russia. that is reason some $20 billion. that comes as other countries shun russian goods. the u.s. and south korea have begun their biggest joint military exercise in about five years. that is after a break on drills failed to bring a kim jong-un into talks. this will simulate a response to an invitation from north korea. the ceo said he will step down next year and search for his replacement is underway. the company and the board have mutually agreed he will state in place until the new ceo is found. global news 24 hours a day on-air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta.

this is bloomberg.

>> you have chair powell saying we are close to neutral. then the governor essentially contradicts him. it would be nice to have the more consistent communication strategy. the market is doubting in either direction what the fed is going to do. tom: an intelligent conversation on the equity market the euro dollar right now is .997. kriti gupta is the class. pretty: the talk about how believable this rally is. the s&p 500 has rallied some 19%. let us talk about how things are viewed by professional

investors. i've never -- we are looking at s&p 500 not long position in between asset managers and leverage bonds. that has never been so short going back to 2016. how much of that rally is rallying simply on low-volume? tom: joining us, we harken back to 1981, she is got some left great -- something of greta garbo, something of betty davis. she plays a great song. why is now like 1981-they need to? >> there are few instances where you have a double-dip in u.s. history. it gdp has declined for two consecutive orders get

economists are anticipating the official recession to come in late 2023. the only time i can find in history in which we had similar, he here was the early 80's but economic conditions were different, the fed was hiking the policy rate to levels most of us cannot conceptualize at this time. but at that time, the most important thing was inflation. even though the economy went into a worse place in the latter part of the double-dip, the first contraction was the stock market load, so i do think they take away is that if we are in a double depth or extended period of weakness, what they met her most for the equity market is inflation. tom: stephen ross was not at

m.i.t. and maybe factors were not dominant but what the factors site about the battle between bulls and bears? gina: last week was the first week in something like two months and which sectors -- in which most sector families outperformed last week in an environment of weakness. could suggest that we are moving back towards the first half trading type of environment where factors generally work and where the value space generally starts to perform better, a bit of a reversal of the past two months, which have been dominated high-quality, growth stock, tax specifically coming -- tech specifically. lisa: i would love your take on this that perhaps stocks could trade range bound and be ok for the remainder of the year, but next

year is when we are going to see the weakness and feel the sundown. do you agree? gina: you could make the case of the 10 stocks priced the 2022 recession, according to our model, stocks priced the recession by june of this year. have they priced the 2023 recession? that is a big question. how weak are we going to get into 2023? what will that look like you're in an environment where inflation is accelerating? have a alcove rocky chops. i -- you have a period of rocky chops for stocks. it is hard to make a lower low and tight you get closer to an environment in which growth is truly decelerating or likely to

fall off a cleft. right now, inflation is decelerating but growth is too. that is different than an environment where growth is dropping. lisa: you put out a chart this morning was fascinating. even though some earnings per share estimates were better than expected, analysts have been downgrading estimate. what do you make of that? gina: not only when they downgrading those expectations, but they were doing so consistently through the first half of 2023 it was a broad-based downgrade. prior to the second quarter earnings season, it was all concentrated in tech, communications, consumer stocks. but the weakness spread and spread to the value index. more than 70 percent of s&p 500.

value forecasts felt for the next three quarters at large. we started to see a broadening of the weakness. fortunately for the equity market outlook, that weakness is not an actual anticipation of earnings decline. those declines happened in 2022 but will we continue to see them? good is a big question for investors. tom: then laid letter, be grateful, wrote a note that the quality of big tech is there. are they different? gina: a contact has become a loaded word. what do you mean by it? amazon and tesla have very different dynamics than apple and microsoft, which are different from facebook and meta. maybe we have given up on facebook.

but i think that is the important clarification. we are seeing a downdraft in correlations among what was formally big tech and are darting to see some distinguishing winners versus losers where apple and microsoft are pulling away from the pack and others are experiencing a different. tom: it is something to see. it is country by country warfare on this fight? lisa: we are seeing natural gas futures in europe search almost -- surge most 20%. this is with the shutdown of the pipeline extended. maintenance of nord stream 1 could be a protracted closure. how much of a premium do we get baked into natural gas because there is an expectation of disruption from russia? tom: i am going to go to the

euro swissie and the strong swiss franc from 1.04, now down under .96. this is the thermometer of a beleaguered euro. stay with us. an event so -- an eventful week, wednesday, jackson hole. ♪

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the countdown to the open starts right now. >> everything you need to get except with the start of u.s. trading, this is jonathan ferro. jonathan: we begin with the fed making a comeback. >> infect percent of people are bearish. -- 85% >> as their markets get older, the rallies got larger. >>