>> the rate hikes they have already done, we have not felt the full impact. >> we should be focusing on the objection of the fed, which is to get growth down and inflation and now they are just a means to an end. >> we are back to the don't fight the fed mantra. >> there is a recession in the u.s. and a recession unavoidable in the euro zone. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa

abramowicz. jonathan: september, where did that come from? live from new york city. good morning, good morning. this is bloomberg surveillance. alongside tom keene i'm jonathan ferro together with anna, bramo will be back on monday. michael: on 2 -- tom: on tuesday, monday is labor day. jonathan: no one told me. tom: here we go. the markets are moving. forget about a lazy august thursday. every part of my launch tag on bloomberg has an important story. we start with a crushing new weakness in sterling. jonathan: 1.1599 on my screen. i was looking at the performance

last month for august. gilt yields were up 94 basis points on the 10 year and still pound sterling posted the biggest monthly loss going back to late 2016 and moving forward .5%. high yields are not helping out pound sterling. tom: we will brief you on all of these aspects and give you the research literally coming up in real-time. hsbc publishes and emphasize the longer tightening cycle europe and the united kingdom need to deal with. jonathan: more frontloading as well. we are teeing up 75. everyone is getting on board. bloomberg talking about 75 on thursday. tom: september 8, the date matters, serena williams will be hitting the ball at that time as well. this is important. you see it in foreign-exchange. all of the seven 140 is here on

japanese yen. jonathan: we have to discuss china again. 20 point 9 million residents facing lockdowns. is this 2022 or 2020? anna: the details of what lockdown means for people, it sounds like a distant memory but that is not the case in china. jonathan: it is a policy change. how many times have you raised that issue? how can we have an announcement on the global economy without an understanding of whether we have covid zero from the chinese. tom: they will have to figure it out in their own original way. the story for our viewers and listeners, i say i go to china, i go 845 feet from the pacific ocean into the mandarin hotel. it is not about the fancy pacific rim, it is about greater

china. jonathan: equity futures down about .7% on the s&p to kickoff september, we are negative more than 1%. a four day streak on the s&p 500 over the last four days, we have defined almost 6%. yields unchanged on the 10 year. had a look at 350 on the two year. where are we now? euro-dollar just about holding onto parity, negative one third of 1%, and back in the 1980's, the 1980 -- and back in the 80's on wti. tom: we preview on oil as we go towards $2.99. amrita sen will be with us and thrilled that on short notice francisco blotch of bank of america. jonathan: i miss that one.

looking forward to it. tom: you are not at the 4:00 meeting because you slide in here at 5:52. jonathan: i get here a little bit later. this move, are we heading back to jude lows or not? phil: we think we are. our macro policy committee met a week ago monday after the equity market had just rallied 19% between mid june and mid august. the markets perception was inflation had peter and was going to have this immaculate decline back to 2%. the fed was done tightening, they were going to turn around and start cutting interest rates by the middle of next year, and we just felt that was a head fake and we took more chips off the table a fortnight ago and our view is that 19% rally, we will retrace some or all of that

over the course of the next month or two. tom: to channel john templeton, how do you determine when shares are on sale? philip: we think they are on sale right now because the market got the fundamentals wrong. jay powell last friday, while you were in jackson hole, read the market the riot act and said you got the call on inflation wrong, you got the fed process wrong, we will continue to hike interest rates, channel our inner paul volcker until we get this right and get inflation back to our trendline. we think we will measure that process from an inflation standpoint in years, not months. tom: federated the collapse of pittsburgh in 19731974, the great shock in western pennsylvania. you and i have seen inflation rises that become disinflation.

is there a risk you miss a disinflationary trend? philip: at this point in the cycle no. it is not one thing. it is sticky. it is wages, it is shelter, it is food, it is energy. the federal reserve knows that. what did powell say? we have a good july number but that does not mean the fight is over. we could see energy prices rebound over the next couple of months as russia weaponizes energy with europe. we have drawn the spr down too much in the face of a hurricane season that has not developed yet. opec is talking about cuts rather than increases. energy prices will rise and inflation could fall. anna: a lot to talk about with commodities. sticking with how far stocks have to fall, i can't up with mike wilson yesterday and he

says stocks have dropped, but not on cuts to outlook, and he suggests we have another leg down because we need to be more realistic about what companies will be able to deliver. how much weaker does that story have to get? philip: agree. we talked about retracing back to the 3600 level. we think earnings estimates and the second quarter started to come down. we think the third quarter could be worse in terms of rightsizing estimates given the slow in consumer spending. this will be a challenging back-to-school season, it could be a challenging christmas season. our view is earnings estimates need to come down and i am not sure that is completely in the stock market right now. anna: we also keep an eye on the inflation data and the jobs data. how does the jobs data factor into your model?

how do you digest what is happening on the jobs front? we all know it is important. philip: that is a significant trend because the ability of the consumer or businesses to spend as a function of people being gainfully employed, you look at tomorrow's jobs number, consensus number at 300,000. our internal models are showing about 170,000. you look at the adp report yesterday. the consensus was 300,000, they came in around 170,000. look at initial claims. claims are up 50% over the course of the last five months, about 80,000 claims. historically when claims increase by 50,000 or more off of their trough, you start the recession clock. the recession clock indicates the economy typically glides into recession 12 to 18 months later. we think we are looking at a

recession at some point next year. we do not think that is in the market in terms of earnings estimates or share prices. jonathan: tomorrow if we get a disappointment, is bad news good news? philip: bad news is not good news. look at the adp report yesterday. we missed on the jobs number but what was the wage inflation number? that number was north of 7%. that is a very dangerous combination. stocks have to go down. we think stocks are going to be choppy. jonathan: what a tough time for the equity market bulls to hear phil say that. good news earlier this week was bad news and apparently now bad news is bad news. jonathan: phil orlando. we need to talk about these strikes out of germany. lufthansa to cancel almost all frankfurt and munich flights.

anna: they in good company if you're looking at strike action. strike action within the u.k. within the aviation sector and other parts of europe's. a lot of people talking about how this gets tougher and tougher through the winter. jonathan: the economy minister talking about german businesses shutting down because of energy. tom: we will see a lot more of this and i want to channel the irish times. i'm doing this on the british our. anna edwards, jon ferro. jonathan: we appreciate you being with us. tom: let me pretend i'm at the bbc. ireland, galloway, this is directly west of the blood. -- a little west of dublin. a high end coffee shop. poppy fields cafe, they do full irish with black-and-white putting. the utility bill was $10,000. jonathan: it will put out. anna: you can afford it with

your dollars. ♪ tom -- jonathan: tom keene, anna edwards. coming up, john beau biden out of blackrock -- jean bouvin out of blackrock. we will catch up with him later. futures down .7%. from new york, this is bloomberg. ritika: with the first word, i am ritika gupta. former president trump has accused the justice department of criminalizing his possession of personal documents. he made the allegation in a court filing making his case for a neutral third party to review documents seized by the fbi. hundreds of highly classified white house records. in alaska the democrat has defeated former governor sarah palin and a special election for the states only seat in the house of representatives.

that widens the democrats narrow majority and sets up a rematch with palin in november for a full term. she told us abortion rights was seen as one of the deciding factors. in the u.k., liz truss made a couple of promises in her final pitch to become the new prime minister. she rules out introducing any new taxes or energy ration in this winter. the next prime minister will be announced. hong kong -- public health officials are pushing back on a plan because of a resurgence of covid cases. lufthansa says it will cancel almost all flights to and from its frankfurt and munich hubs after the german airlines pilot union called for a one-a-day strike. about 800 flights and 130,000

passengers will be affected. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> that could be necessary to

move the fed funds rate up above 4% by the end of next year. i do not end his abate the fed cutting the fed funds rate target next year. jonathan: that was loretta mester but it could be anyone on the fit. alongside tom keene i'm jonathan ferro. bramo will be back on tuesday i am told. apparently it is long weekend stateside. anna edwards alongside us. on the nasdaq we are down a little more than 1%. the hits keep coming. we can talk about the chipmakers later. let's talk about the lockdown in a city in southwest china. 20.9 million residents. the hit the boards are taking every single morning. tom: right now in hong kong, they are even talking about blowing up what is an attempt of major meetings and their

financial capital because of covid. jonathan: maybe they make a move there. i want to talk about sterling. a weaker pound sterling. here is the number. 1.1582. 1.15 after the weakest month for pound sterling going all the way back to 2016 in the weakest level going all the way back to spring 2020. tom: the heritage of bloomberg surveillance as we adapt when the news changes. overnight we put an fx push on. we are thrilled to bring you out of bank of america, global head of gf strategy. jon has a lot of questions on the dynamics of selected payers. i want to go to the -- you frame nominal gdp being too high and you bring it over to flows and balance of payments.

explain why recession changes foreign-exchange. >> central banks -- the market the problems -- however if central banks target nominal gdp , then nominal gdp growth is well above the historical average. not only that, the forecast for next year will remain well above the historical average. it is hard to argue the fear of recession would stop the central banks. we continue focusing on inflation and this is what is driving fx right now. tom: august of 1998, the summer of 1991 as well, there is a to em. i see the loonie out to 132.

i see selected asian currencies rolling over after 2004 weakness. can this rebound over to emerging markets? >> so far emerging markets are adapting well to the dollar rally, which has not seen the sharp selloff we have seen in past cases. conditioning is also not extreme. the markets are short em but slightly so. we would be cautious. as long as the dollar is strong, as long as the fed is hawkish it is hard to see recovering emfx. a lot depends on china. a cautious approach for now. maybe the em will -- this will require the fed to pause. anna: let me ask you about one

currency that is very vulnerable to the strong dollar. that is the pound. one of our colleagues writing about the u.k. in his calculations having one of the largest deficits in the world, he puts that 11% of gdp, he says that is a lot of kindness from foreign capital. how low does the pound get? he says thinking about parity is not off the table. >> you go back to 1984 to see such a low level at the end of the tightening cycle. it is the perfect storm for the u.k. and the policy picture. the highest inflation risks are political uncertainty. i think at this point everybody is bearish for a good reason. [indiscernible] what matters after we get a new prime minister next week is fiscal policy, we need a

responsible fiscal policy. second, what will we see on brexit? we need to compromise on the issue of northern ireland. if on both of these fronts we get a negative outcome, sterling will weaken even more. anna: what about longer-term inflation expectations? a survey of financial professionals, over 4% in three years. this is not inflation risk coming down in a hurry. >> u.k. inflation has not peaked yet. i know some of our competitors think it is even higher. we do have a recession in the u.k. we clearly have the most at risk recession scenario of the u.k. it is to do with labor market

bottlenecks, a stretched labor market, not because the economy is doing well. it is also to do with brexit constraints. we are keeping inflation high -- it is a difficult policy. the bottom line in the u.k., which is not seen the worst of inflation. jonathan: thank you. sterling 1.1586. if we get a parity on cable, i am putting in a transfer request and going home. tom: these are serious things. do not make light of that. jonathan: i am not. for real. the american tourism into europe is booming. all i could hear was american accents. most people have heard the same. tom: it is the dominance of the dollar until it does not work.

a long study of dollar to say when we get to a plaza accord when people say enough? we are not there yet. that is my major message. tom: i have not done the work. i have to look again and euro. anna edwards, you and i are here. the last week of the summer. the closest i get to valencia, spain is the orange at whole foods. why do some of our staff on that island? jonathan: how do you pronounce it? tom: anna is there every winter. anna: i do not speak spanish. jonathan: we should ask maria tadeo. ♪

jonathan: ♪ berg news breaking ♪ ♪ ♪ ♪ ♪ every asset classes. -- jonathan: commodities done on the month, equity down on the month.

we are down about .7% on the s&p. tom: we have to keep with the data check, but the correlation is tangible in september. jonathan: i tough month of august. down almost 6%, something like 5.8 percent over just four days as yields a search climb higher. the highs of the year of june 14 in the last four hours or so, yields a comeback, backing away from 350. 348 on the two-year. at the work that we have done in europe. the snapshot of the u.k. and germany. and look at the foreign exchange rate as well. sterling, these yields have moved more than 100 basis points . 286 on the u.k. 10-year. and yet it is down by more than 5%. the last month, big move higher

in yields and yet still, a much weaker currency. that is true with europe, yields higher across the board. that is problematic for the central banks. i'm trying to find footing in that affects market. tom: quickly, in italy, we are not sure if it spread wide, the difference between italy and germany. i would argue italy is so fragile they can't afford a fed breakdown. jonathan: they will still hike on thursday. what can they do with the balance sheet, fragmentation, can they achieve it given the backdrop and the recession? most people have seen that is the case in europe with the central bank is determined to get rates higher. tom: the series of eight weeks ago went out the window. we are going to go back to what matters to you, the jobs report tomorrow.

the weekly claims in a few hours. our guest joins us, channeling the international views of carol weinberg. bring it back to america and what happens, the adp report, wages clocked 7%. what will we see on a wind spiral tomorrow? >> good morning, thanks for having me. we are expecting to see may a slight tick up, you're on your changes and average hourly earnings. the central point of this is what are we seeing at we really are not seeing any concepts. it is going down. the civilian labor force, a decline of the last three or four months. that is where it lies. without that, the fed is going to remain focused on these things and the trajectory is not

going to change at all. tom: i find the analysis of a fed action, this goes to kashkari in minneapolis, but the fed action to move the on employment rate higher to be too simple. what part of that matters for viewers and listeners? rubeela: we are seeing expectations and the labor market, supply and demand imbalances. does the fed want to see the on employment rate go up? no. that is not what central banks want. but in this instance, we keep seeing feis hearing about the labor market and jay powell said the labor market is tied to an unhealthy level. so that is what we are trying to figure out. how can this fed orchestrate a rate hiking cycle when there is still positive growth, unemployment goes up but not by much? i think the best case for them

is that the demand is strong and you are going to see limited increase, but i'm not sure that that is possible. anna: good morning from london. you talked about this having dropped off, and from covid. what is your analysis of why participation is so poor? it is clear why it is poor here, but what is the story in the u.s.? rubeela: interment contributed in a large way. we are still seeing people facing the effects of covid. and you are still seeing some challenges in terms of participation, health care issues and others. those things are still

persisting. it is not clear that we are going to see any relief. what we did see last time, as we were going into that, the covid crisis, we saw people, the market did draw people back into the labor force. that is what the fed is waiting for. strong job growth, high inflation. higher wages. clearly it is not something that is part of the best case scenario anymore. we have been expecting it to go up and we have not seen it. anna: so if a job wants to come down, it has to come from unemployment and layoffs? rubeela: not necessarily. is it just that demand is strong or we don't with the reluctance? they have suffered from persistent shortages. tom: here is the mystery

question right now. here is nonfarm payrolls normal number? it used to be 200, 150, we all got there and that was a great long call of the decade. we are now rocking 280, 320 thousand per month. this what is normal? rubeela: it is difficult to assess what the -- what normal is and where they are going to balance out. if we look at the numbers, breakeven is probably around 100,000. tom: really? rubeela: exactly. but we are basing our analysis about things from before the pandemic. right now what we are seeing is extremely solid job growth and also, it is not tying in with the concept of an economy that has flattened out in the first

half of the year. but what is appearing now is adding to their workforce, and the unemployment rate may be even is set to go down a little more. and the fed is facing a huge challenge. jonathan: a massive challenge. and state ecb has a challenge as well. getting you set up for the day, jobless claims a little later this morning, mike mckee it will break down. and i is in manufacturing later. the s&p global of the united states is brutal. we are waiting, we will get this at 10:00 a.m. eastern time later this morning. tom: much a member this as we fall into the tunnel season. thank you for the comments on the poetry corner yesterday. two standard deviations is a trend in place.

in the last 20 minutes, the trend in place on tom's early desktop sterling is frightening. that is life-changing for the united kingdom. jonathan: i read about this this morning on socgen. it's at high yields are helpful as people see them as the price of u.k. pays to suck in huge amounts of money. we need to talk about the contest to see who will be the next prime minister and i wonder how much about what we are seeing is about what the next prime minister will have to do to offset pain in the energy market. anna: yeah, they were talking about fiscal stimulus and getting clarity from the next leader on what kind of fiscal stimulus is going to be. how to not provoke the bank for even more hikes. tom: you have such skills, including your interviews over the last number of years. for our american viewers and

listeners, i will ask a question. i say it with respect. his list trust -- he is lays trust -- liz truss like theresa may? anna: -- well, she might be the person you need to think about. the labour party are look that are running of the polling. if you look at the polling for the next general election, it is couple years away. jonathan: they face different problems. one is the government issue, brexit. but the other issue, the cost of utility bills and the u.k. are huge. they are struggling, consumers will struggle later this year. it could get a lot worse. but now fiscal spending. i'm going to bed into the market moment.

how accommodating is this bond market going to be? tom: let me go to you and drive it forward. mike churchill having six lives, can pry minister johnson comeback? jonathan: i think he could if he wanted to make a comeback. anna: it has been talked about but you want to keep it here and now. fiscal policy, how targeted it is going to be and the tax rises. what does that mean for energy businesses? jonathan: the number one issue of senate points out, we can't even think about boris johnson running for another term in the u.k.. can we get to the end of the year first? and once we go through winter, do we have to repeat this dreadful act? the winter after? tom: i think we should do the british our more often.

jonathan: you look it more than i do. tom: and shelly. jonathan: someone corrected you. tom: nate shelley. jonathan: that is ted lasso. from new york, this is bloomberg. ♪ ritika: keeping you up-to-date with news from around the world, i'm ready ago debt. russia holding exercises with china and india. the way of pushing back against attempts by the u.s. and allies to isolate him from the invasion of the ukraine. more than 50,000 troops and many ships taking part of this. in china, a city locking down its 21 million residents. this is in the western region of

the country that has so far been untouched by the coronavirus. a lockdown could affect electronics and automaker supply chains. in california, averted so far in -- blackouts averted so far and a heat wave. triple digits in much of the state. shares of nvidia and other chipmakers, morning there are new rules to demand millions in revenue. they say these programs are likely to be used by the military. serena williams has extended her stay in the u.s. open, the grand slam winner -- in a second round match. this may be her last tournament. after last night's match, she said there is still a little left in me.

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 reddick a good job. this is bloomberg.. ♪

>> i'm optimistic about this sustainable progress made by our teams and the entire g7 toward making price caps a reality. and they would advance our objectives. jonathan: the treasury secretary. janet yellen, u.s. treasury secretary, so much expertise. tom: don't get me going. jonathan: i won't. do you want to go? tom: what is great about janet

yellen is when she gets angry, her voice changes to brooklyn. it is something to behold. she has a high ground, and analysis of the labor economy and she owns the phrase "slack." she was courageous during the great financial crisis, tried to help americans understand this new labor economy. and in a different way we see it right now, i won't mince words, she has been muzzled. jonathan: the expert prude tom keene and jonathan ferro with anna, down about .25% on the s&p, the losses continue. look at the bond market, yields about unchanged, a 10 year, looking at 350 earlier and backing away. let's talk about fx and not just

sterling but also the euro, sterling breaking down about .5%. across the street, wall street and europe, calling for a 75 basis point hike. yet here we are, basically parity on the west -- the euro-dollar. those dynamics in a be the -- it be set -- ibiza. tom: he can have the beverage of his choice waltzing across the beach. jonathan: in jackson hole, wyoming he arrived at the diner. real cowboys sat there having a meal. we walk in in suits looking very new york and out of place. tom markson -- tom walks in with two parties with all it -- tom

walks in with two martinis with all lives, he orders estate well done. i said, stapled on? it's tom: you send the beverages of your choice out. lengthy dinner as they say. we are with intelligence. joining us, director of research and aspect, francisco coming up on a macro and the dynamics rate out. which part of the micro matters now for recoil? >> carolina. that is the number one concern in the market and a big driver of sentiment, not just in oil price, but if you look at our balances, they have been talking about it despite the week in european and demand. it is asian demand that is stronger and our expectation has

been that china will be recovering. that is not quite happening. tom: what is the dollar dynamics? dollar, philippine, peso, weaknesses as well. there are other selected currencies. but the aussie yen shows maximum strength. what does that mean for hydrocarbons in the pacific rim? >> that is happening because australia and other commodity producers are benefiting from high commodity prices. it is to be expected at that also means that commodity importers, the vast majority of asia-pacific countries, -- there is that exchange rate which means the import costs are higher. outside of china, demand is still strong. the u.s. numbers, 700 --

$700,000 a day. we have had many talking about gasoline demand. the epi numbers, -- tom: john at airline travel. they are one and a half standard deviations a strong and. that shows the swing now. -- australia. that shows the swing. anna: -- congratulations to have her is in the background. congratulations to you. fabulous. i wanted to ask about the end of december. we get to the point where it europe is not supposed to buy anymore russian oil. how can that be? >> it will not be small

especially if we don't have clarity on the deal, and if there is an iran deal it might not be until january. the eu particularly needs to get rid of another 1.3, potentially 1.7 barrels a day of russian oil. that will not be easy because you have seen what happens, everything went to record highs with the physical market. imagine another 1.4 on average. i'm not sure where we are going to get that. tom:-- jonathan: thank you. we are looking at energy aspects, she said china. let's talk about china. 20.9 million residents will be locked down, tom.

we're so doing this in china. that is the latest news. tom: and it is sort of a rocking city. it is 800 miles from hong kong and sort of a huge city. it is like the one place they are happening away from china politics in beijing. can we say it is the size of new york city? jonathan: bigger than that. huge. tom: and here the headline. china august yields down 31%. it folds into what we see in the screen and comes back to markets in america. jonathan: the issue and china will clearly be an issue in the commodity market. anything in the commodity market is including copper, corn. without china that is almost impossible.

anna: and that has an impact on equities in europe which we see clearly. like today we see retail selloff, you see all of these luxury companies give and other fresh reminder, another slap in the face reminder. jonathan: a punch in the face. the europeans, especially the germans leveraged to the chinese economy, russian gas supply. all of that coming together. tom: the singular salvation away from this is a disinflationary trend. jonathan:

>> the rate hikes they've already done have not fully impacted them yet. there is tightening in the pipeline. >> we should be focusing to get growth down, get inflation down and the interest rate hikes are a means to an end. >> now we are at a point where do we go back to the don't fight the fed mantra? >> there are stories about

happening to people in the economy. >> they are the farthest in the euro zone. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: goodbye august, hello september. from new york city worldwide, good morning. alongside tom keene, i'm jonathan ferro today with anna edwards. bramo coming back tuesday after a long weekend. we had to the losses of the previous four day. tom: we wonder about robert mccloskey. the screen does not show this in the jobs report. we are focused on the international and currency dynamic and john, with all of those expertise, the bank of canada, it is important. jonathan: the month of august

taking down sterling, the euro, the risk asset for the month of august. commodities down, high yield, particularly the end of jackson hole. tom: the fancy talk, acceleration and bond yields. the first thing i looked at yesterday, today, the german to your yields up as we see asian currencies down. tom: -- jonathan: we can pick up on that in about 30 minutes time. anna edwards, bank of america, j.p. morgan, qatar economics, bloomberg economics looking for 75 basis points on the ecb. anna: yeah, forecast is hawks. we have certainly been the only major ones out with those comments, flagging the risk, if

you can correct course. but they are just hawkish. jonathan: do you consider this a given, because most people see it that way. anna: there are flags that they see as up-and-coming, but we don't know how long those last or how deep it gets and a lot of it comes down to the weather and how the economy has managed to whether the weather. how they cope with the cold. there's a stockpile, but is that enough? jonathan: we talk about the europe and u.s., 29 really -- 29 million residents, if you thought things could not get tougher that is extra fuel to the fire. tom: there is a war in europe and it is not funny. on two fronts in ukraine, a war in asia. it is a war on common sense and

science. it collapsed overnight, 800 miles from the pacific rim. tom: we are taking it back -- jonathan: we are taking a back to the cold war europe. getting inflation down. it is a lot of conflict to try and digest, process and work out in this market. tom: currency will adjust part of the inflation. it is part of a differential on inflation, but nothing will bring inflation in like week growth, the growth global slowdown we will see that is what you heard this week. jonathan: that is the number one question to ask. what is the gdp price to pay to get it lower? tom: i agree. to see dollar canada is absolutely stunning. why don't you bring in our guest. jonathan: you know how this works. futures down .6% on the s&p and the nasdaq lowered by .9%.

yields a little higher, not much higher, 320 this morning, right now 319.46. 87 .45, sterling is weaker, the euro down to 100.19. with us, john from the blackrock institute. i have been following your research and your writing. your writing something i don't think enough people are thinking about. the appropriate type of risers to bring inflation back to target with the backdrop we have at the moment, what is it and why are we not talking enough about it? john: i'm old school, but there used to be key principles. one was that you need to be comfortable about dealing with trade-offs and delivered without. the other is about being forward-looking. those principles are part of the current discussion.

we are dealing with a massive shock that is more supplied in nature. and that leads to -- we were talking about how much gdp costs. we think the gdp cost is significant. we want to bring inflation down quickly, to percent of gdp recession price, the short order. that is a brutal cost. and nowhere right now to see this being acknowledged, discussed, or wanting to manage it. we used to say in the face of this, we would take longer to bring inflation back. tom: i want you to talk about the asymmetry of strong dollar versus weak dollar. i am not going to ask about cap -- canada, but what is the

application of a weak dollar? we have a strong dollar right now. it seems no. -- new. >> i think we always bring that down, typically by two, one is interest rate differentials and the other is a broad risk on risk off global sentiment. i think we are in a world now mostly driven by overall risk sentiments. i see the gyration about whether we are risk-averse, which goes to the u.s. dollar, and at that point we see some weakening. we have not seen the full implication of this yet. the pressure is not there globally, but emerging markets. so that has not played out yet . tom: we are talking about standard deviations, a rare occurrence. tell me about the pacific rim a

risk that we face, or are they protected from the to mold in the western world? >> no one is protected. there are headwinds, we are seeing this in china, the growth there has certainly been challenged with the mutual on the region over some time as a result of this. and i think the global recession or slowdown that will be significant will have some effect there as well. we will see the transmission of the slowdown. anna: good morning from london. afternoon now. what we have to keep in mind when we're are talking a policy, -- we should be correcting inflation. what are the lags in focus? >> in general, it is doing well.

monetary policy, a year to 18 months, that is the number we get typically. i think that is still the case. and i would argue it might be more delayed because the interest rate is the source of the inflation we are experiencing. so we will need to -- the interest rates, part of the economy which is not the culprit of inflation at this moment, we need to upset the other inflation pressures. none of the wage hikes we have seen so far are in inflation. we are getting restrictive in that has an impact, but that will be about 24. and what of objects of central banks are tracking stuff on inflation, but this is an update

on the policy on inflation with the economy. jonathan: let's talk about what is the take if you get bullish on the equity market. what do you need to see? >> we need to see a couple of things. we are expecting a path of policy tightening. jackson hole has been crushed in the hopes of backing up. if we do that properly, the part that is not yet there is the earnings story. we think we will have obsession earnings in 2023 in the u.s., earlier and deeper in europe. so to turn bullish, we will have to look in the next few months for when we will look for the size of the recession for a

handle on this and the second is when we get to the point where central banks are waking up to damage and they are reaching out. i think we will be in a position to really talk about this slowing down or stopping and that will be a more positive. jonathan: thoughtful stuff, from blackrock investment institute, a couple of things to look out for on the day ahead. coming up at 8:30 eastern, mike mckee will break down the jobless claims. 248 k, up from 243. that is expectation in our survey. later, bringing down the manufacturing number. a little later, the estimates, 53.8. the s&p global pmi's dreadful. and tomorrow, you mentioned the estimate of 300 k.

i can tell you it is coming just a little bit to 298. tom: a little change. sterling is up to new weakness moments ago. jonathan: i saw that. coming up, we will catch up with him. let's call it 50 minutes away. life from new york. this is bloomberg. ♪ ritika: keeping you up-to-date with news around the world with the first word, i'm ritika gupta. the former president accusing the justice department of criminalizing his personal documents. he made the case in a court, after the fbi seized document from his florida home. they found many white house records. i democrat has defeated former governor sarah palin in a special election for the only seat in the house of

representatives, widening the narrow majority. it sets up a redo in november. the u.s. jobs report sent to tip the scale toward a third interest rate hike this month. one of the bow -- last big releases officials will have in their hand before the policy meeting. there is high labor demand. the u.k. has made eye-catching promises in the final move to become the next prime minister, liz truss ruled out introducing new taxes or energy rationing this winter. the next will be announced monday. answer forecast -- and at the forecast on friday, coming after the german allies at the climate meeting called for a strike. about 830,000 passengers will be

affected. 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. ♪

>> hearing from central bankers and academics around the world, the clear priority was bringing

inflation down and that lines up with my own priority, being as the dow and fed, and as a policymaker. my number one priority has to be storing price stability. jonathan: fantastic to hear from lori logan. the new president making this. good for her. i'm jonathan ferro. bramo will be back tuesday. payroll, to 98, going into futures, down about .5%, nasdaq down. the 10-year is very close to 320, 319. a weaker euro, negative .1 third percent -- -.33%. let's discuss it calmly. how do they convince people and

how many times did i answer the question? how do they convince people higher unemployment is the price with paying to get inflation down? how do they do that? the objective might not sound is controversial, but once you get there, when you see unemployment climbing, it is year-end. what is the reaction? tom: the real estate issue is tangible, other than that, second-order is -- including the price going up,. anna is saying, why did i set up for this show? anna: he was talking moments ago about how long it takes to bring inflation down. drawing out the particular drivers to inflation, --

tom: the british do analysis way better. jack fitzpatrick pulled the unfortunate straw and we'll talk about second choice voting. but before that, i got to go to alaska and say that the geography lesson for today is kansas, the hudson river. now the great state of alaska with one congressional vote. is the vote in november just about abortion? >> it is a huge factor going into the midterms. the alaska race seems like evidence of that. the democrat who just won the special election played up her opposition to the supreme court ruling significantly. it was to draw inferences

nationally from a wrench turn -- bring to choice raise, i democrat in alaska beating somebody like sarah palin, i love her or hate her politician. it is a huge factor. tom: we set this on the british our with edwards and pharaoh today, but second choice voting is un-american for us. the democrat won, going from 40% to 50%. did she lose the election because of rain choice voting? -- rank choice voting? >> potentially. the democrat got the first dutch of most votes for the first pick. if it were not rank choice voting and they went to a two person runoff, it would raise

the question of could sarah palin consolidate the vote and go to the other republican. in this case, people pick to their second choice was and only 50% of the people who voted for the other republican give their choice to her. the rest were split between the democrat or saying none of the above. tom: beautifully explained. anna edwards, this is more crazy than british politics. anna: that might be. i was drawn to the statistics over recent weeks that showed just how many women are coming forward to vote for the house. it outpaces the number of men coming forward. across the united states, the impact of the supreme court ruling is there. some of that is in swing states. this could still make a difference. >> could make a significant difference. i'm sure it will make a

difference, a hugely motivating issue for women, for democrats. it is not something that plays to the same degree of motivation for republicans. there have been other statistics. if you look at the generic ballot polling that looks good off and on since the supreme court ruling for democrats, the question is how good news is it for them? where does it help them the most? is it in the key swing districts and are we talking about democrats having the chance at winning the house, or more likely losing by a narrower margin and holding onto the senate, but it is significant in some key races. nationally that is probably the biggest factor playing in favor of democrats and motivating democratic voters heading for the midterms. jonathan: thank you, jack fitzpatrick and d.c..

that is domestic politics covered. we need to talk about international issues. a report came out from the yuan, anticipated, and included something stressing that we have discussed many times. it said china has committed serious human rights abuses. they went on to say that the forms of torture and other punishment. you are also familiar with what has been happening with the uighurs and other muslims as well. there is a broader campaign of rights violations, international crimes and crimes against humanity. these allegations also leveled by the previous administration. this is beijing's response. they are calling this quote the lie of the century. there going on to say it is to smear and slander china and the foreign ministry, the report is

now null and void. i want to talk about the coming days. we have not seen a response yet. tom: the response would be our iphones from china. it was -- it's about the fallback of globalization and the trade relationship. it has captured the dysfunction of our trade relationship with china. that is the raison d'etre. jonathan: that was the multinational response. here we are. it will be interesting to see how multinationals respond to this. live from new york. this is bloomberg. this is bloomberg. ♪ fler, 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)

jonathan: what a choppy start to september. live from new york city, futures down .5% on the s&p. over the last four days on the s&p, four days of losses that totaled five point 8% on the s&p 500 for the month of august, commodities lower, high yield credit lower, treasuries that

were, equities down, brutal across the board. millie wang from bloomberg news breaking that down as yields eat into this equity market. up 60 basis points on a two-year, reached 350 earlier this morning. backing away by a basis point of two on a two-year, 347.89. yields problematic for the equity market. doing nothing to help the europe fx market. sterling and euro over the last month, let's pay attention to this. yields have broken out by more than 100 basis points on a 10 year yield. yearly have broken -- yields have broken out by 18 basis points. you'd think with those moves that maybe you would get some kind of currency stability. it is a problem. euro-dollar negative 2.5% the last 30 days. sterling, cable at 115.69.

we have had the worst month on sterling going against the u.s. dollar, going back to 2016. we are talking about, how do we attract that foreign capital into the u.n. if this new government needs to offset some of that pain because of the energy problem? tom: i am going to channel roberts when from years ago, there is a point when you switch from interest rate analysis to flow analysis. our we there with these flows in and out of the u.k., based on worry matter? jonathan: the former deputy government of charlie been speaking to us yesterday on the london team. best time to think about the issues in a bigger way. for europe, we are talking 75 basis points hikes from the ecb according to banks of america, goldman, take your pick. all seem to lead in that direction and we cannot kill --

cannot it real traction in currency. tom: the economic data, because inflation numbers are unimaginable. jonathan: that is why they want to make a move and do something about it. the currency story is not helping. let's get you single names to move. hey, kriti. kriti: specifically circling back to the chips, where you are seeing pressure. nvidia, a major player in the chips based down 4.5 percent, dragging down the chips sector. it is a triple whammy, follow that inflation and currency story. it is going to be, there is that china lockdown which is going to be a major tech hub. it is going to affect the supply chain of a lot of major american tech companies. early pressuring this sector. i think the cherry on top for

nvidia specifically is the warning they gave, they have the u.s. government putting restrictions on exports, chip exports, especially artificial intelligence related to china. if a company like nvidia wants to access the chinese consumer, they have to get special permission from the u.s. government. that warning could actually hurt their bottom line by hundreds of billions of dollars in revenue. a lot of pain in nvidia, it is rippling across to advanced micro devices, down 2.5%. micro under pressure, down on .7%. you see it in names like intel, which just broke ground on a new manufacturing facility in ohio, something president biden went to himself. ed bath and beyond, -- bed bath & beyond, liquidity still an issue. a 27% drop in yesterday session

after they said they might sell quite a line of stock. hangover is not over for that stock, down 3%. a pocket of green when you look at 3m. the shares are up about 4%, .4%, excuse me. this follows them talking about massive job cuts and job losses. on the surface, that sounds like bad news. this is a similar reaction snap shares, when they announced a 20% cut to their force. this is something a lot of stocks are being rewarded for. tom: futures -13, a 27 handle on vicks gets my attention we are looking at oil, francisco launch scheduled to be with us. this lazy august summer, we are thrilled to bring you this morning ian lyngen, head of u.s. strategy, bmo capital markets. his morning note is definitive on wall street. what nobody is talking about, i want you to do this for jon ferro and the real yield filmed

tomorrow, it is the inflation adjusted yield creeping up. what are the ramifications that the real yield breaches through its previous high? ian: the real yield story is important given where we are in this cycle. we are seeing breakeven start to compress, which means compensation for investors to move further out the curve. it is going to remain under pressure. if you get real yields back at the highs, that means financial conditions are going to be tighter. that fed's actions are becoming more and more relevant to the real economy. that is something we have been watching closely. tom: is the real yield as it moves, and after the jobs report and when john films in pana vision on friday, is the real yields something that can change what chairman powell and the fed do? ian: i think it can shift the cadence of their rate hikes, but it will not define whether or not they are going to continue to hike at every meeting for the balance of this year.

anna: how far do you think the fed goes here? i saw in your notes, you talk about how they are more likely to overshoot than to show restraint. when do we get a sense of that? ian: i think at the next fed meeting, you will see updated seps, the fed will tell you where they think terminal is. at that point, all else being equal, i suspect they are going to err on the side of targeting maybe 375 to 4% range by the end of the year. they want to hold that as long as they can. we have heard that rhetoric from jackson hole and other fed speakers. they are going to get the terminal and hold it ideally through 2023, if not into 2024. the big question becomes, will other financial markets allow them to do that? we suspect the answer is ultimately no. anna: there is a hike and hold, not a hike and cut. we have been talking about

whether there is a whispering of increasing coming into the sterling bond market, the challenges facing the euro zone economy. what is the read across these markets and do treasuries? ian: in terms of how impacts the treasury market, there has been global upward pressure on rates. to some extent, if you have the ecb going 75 next week, that is going to impact local commodity markets more rate to some extent, take the heavy lifting word and all the fed. in an environment where one might foresee the fed heading above 4%, say 4.5%, if everyone else is hiking, that makes it easier for the fed to target a lower terminal rate and keep it there longer. tom: and if i look at the

series, the fact is, we are rolling over. price down, yield up. if we have breached the lows, is it like equities or bonds in aggregate have a convexity trend to seared? bonds, we do not know. we haven't had a bond market like this. do we get convexity in fear and sweat, and catharsis acceleration in bonds like we are used to talking about inequities? ian: i do not think we are going to see a wholesale capitulation comparable to what we see in the equity market. a lot of that comes down to the fact that the people, or institutions that hold treasuries are major central banks. they are major investors, do nos to get out and realize those losses. tom: then you take the loss. ian: exactly. jonathan: before you run, we've got a long list of people we think we have seen the highs on a tenure for the year. the major of ecb, i can think of more. what is the risk? ian: i think we have seen the

yield peaks for the cycle. it proved a lot more of a compelling argument when we were at 251 recently, it is certainly going to be an interesting next two or three weeks in the run-up to the fed. if we break 350, it will be between now and the 21st of september. that will be a massive buying opportunity for a lot of investors. jonathan: thank you, in lincoln of an email capital markets. that was on a 10 -- back in june. tom: i am linking a level on my triple leveraged cash fund. i've got a shortened duration. i am putting it to sleep. i am running away. i have shortened the duration of my cash count. jonathan: what are you doing? tom: i do not know. i am hedging out. jonathan: he is just trying to get the first word.

tom: [laughter] that one is from me. can you do that again in the studio? we are waiting. come on, give me your first word. let's go. jonathan: that is the visual cue for us, on radio. tom: in our radio, they are, tom, shut up. jonathan: things get better, down .4% on the s&p. on nasdaq down .7%. tom: the interns are gone. the interns are back in college. jonathan: did you see the u.s. open last night? tom: i was not there. the gronk was pitching. did not want to go up it jonathan: you are watching baseball? tom: when i went to the top of the stadium with binoculars, i can watch the mets while i watch them go down in flames. you cannot do that with serena. jonathan: i am conflicted with serena. i want her to win. at the same time, tickets are so excited.

-- expensive. maybe if she drops out, they will get cheaper. she was pretty yesterday, that form. they are outrageous, absolutely outraged. features lower on the s&p -- futures lower on the s&p. live from new york, this is bloomberg. ♪ ritika: the largest u.s. airlines are making more explicit pledges on how they will treat passengers when they cancel or significantly delayed flights, that comes after pressure from the u.s. government appeared the department of transportation has unveiled a website publicizing airlines plans. the carriers are promising meals and hotel rooms in some cases. in jackson, mississippi the water crisis making life miserable. many cities residents have been waiting in line for water to drink, bathe, cook and flush toilets. following a flood.

local authorities blame decades of deferred maintenance. in china, a city locking down its 21 million residents. it is a huge move in the western region of the country that has so far been largely untouched by the coronavirus. a lockdown could affect electronics and automakers supply chains. a new report says u.k. households are set for the biggest squeeze in living standards in a century. the resolution foundation warned of a 10% fall in disposable incomes in two years, unless there is a support package of tens of millions of pounds. soaring bills have had inflation. serena williams wins in the u.s. open, she is hinted in the last tournament and in an interview

after last night's match, she says there is still a little left in me. 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.

the most costly expect -- mistake we will make, cut interest rates because the economy is showing signs of weakening. dd -- the way to deal with the lags is to get somewhere and sit there until we are convinced we got inflation down. jonathan: a conversation when the minneapolis fed president. it is one of those conversations where you are surprised people are surprised by what someone has to say for it happy with the reaction to jackson hole, excited by the market reaction to tom: the last fed meeting.

it is a rare and beautiful thing. is this a two hour interview? i think we can do it now. jonathan: 12 minutes. tom: in 1961, a young boy named mick jagger went to the london school of economics and when down in flames and mathematic. tracy alloway followed on from it jagger and got through the math course to get along at lfc, went on to a sterling journalism career including working with mr. wiesenthal. she joins us on the euro space engineer from indianapolis. >> the interesting thing about cash car, he has transformed from the fed's biggest of into the biggest hot -- dove into the biggest hawk. like cain, he changed his mind peered that is the interesting thing about him. tom: what is so important is one of the monetary pros, maybe it is john williams and a few

others, what do they think of the president shooting from the hip? tracy: that is quite a question. jonathan alluded to this about the interview we had with kashkari, talking about how he welcomed that stock reaction, stocks going down. following jackson hole. cannot believe markets were so surprised. you had a fed and bankers on the fed talking about how they want financial conditions to tighten four months, and a component of financial conventions -- conditions is stocks. jonathan: they need stocks slower, spreads wider. what is the biggest piece of pushback you had against that? i was watching commentary over twitter, those surprised about the biggest surprise. what was the biggest piece of pushback from this interview? tracy: a lot of people talking about how the fed was talking about the quiet part out loud.

if the fed to push up asset prices, they can have situations where they want to push them down. now is arguably one of those times. the fed is expressly telling you it needs financial conditions to tighten in order to get a grip on inflation, the components of financial conditions like mortgage spreads, bonds and stocks. i am not sure why people were so surprised. anna: hi. it was a fascinating conversation you had with him. you mentioned the other way to get tighter financial conditions. do we have a sense of which of the elements the fed would prefer? we've got kashkari saying stocks doesn't mind if they go down, but that is not the same thing of saying you want them to drop. tracy: i think the big question in markets right now is, why with the fed job owning, why financial conditions haven't tightened more. why are investors dragging their feet when it comes to this issue? does the fed have a preference on what moves the most, i think it does not onto see anything

break in the financial market. it doesn't want to cut off capital inflows, does not want to see acs up in the credit market, which is something we almost saw over the summer. it still want something to happen. the longer this tension, the standoff between investors and the fed goes on, the more likely we are to see a big move from the central bank that gets us there. anna: that was interesting in the context of what we saw from ubs and others around credit markets, saying credit markets are not pricing in enough chance of a recession. you saw from ubs, they said higher chance we get to a recession in the u.s. maybe this is the mismatch you are talking about. tracy: this is the amazing thing about the credit market. high-yield spreads, risk premiums on junk rated bonds are supposed to show concerns about the looming recession first. we are far, far from those

levels. i think it is something like 800 basis points on the high-yield index. we are at 450 right up. many people saying, do not look at junk bonds because the junk bond market has changed over the years. it is double be rated debt now, far from what it used to be. look at something like leverage loans, these are the floating rate loans that junk rated companies took out en masse the past five years. they are supposedly risky, there are some people in the market who think they are risky. there's where the first signs of stress could show up. if you look at the s&p average loan index, we are at something like 95 on the cash level now. 85 is generally tom: tom: considered distressed. when you were at the convert of the secret art in tokyo, you use to seek -- sneak into the imperial hotel. tracy: how did you know that? tom: rumor has it. what does japan do as jp morgan says it could be a 145 yen?

tracy: this is the other big question i have about the fed, i asked kashkari about this. what happens to the rest of the world when you are raising rates at the fastest pace in decades? we have seen the dollar appreciate considerably, we haven't seen u.s. financial conditions move as much as we might expect that we know financial conditions elsewhere in the world are tightening. that seems like a problem for me when you are talking about europe emerging markets, to some extent, japan, that are experiencing and energy crisis and everything is priced in dollars peered the fed is keeping pain on the rest of the world. the u.s. economy is relatively resilient, but at some point you are going to get that new meringue effect where it comes back and impacts the u.s. economy. jonathan: it has been too long. tracy: it is out now. tom: got to have it, come on. tracy: i was talking with tom,

he was our first guest when we launched the podcast. jonathan: downhill from there, or uphill from there. uphill. tracy alloway. tom: you guys could do a football. jonathan: that really is a downhill. tom: we could do joint things, we could all -- jonathan: we could do a joint talk. a podcast. tom: i figured out tracy's asia's experience, party, congress, china. tracy. the five of us on a piece hotel looking over the boon, the five of us. a suit and tie. jonathan: much more relaxed kind of look. he has got longer hair. check out all lots, brilliant

from tracy -- odd lots, a deep dive into major issues and the reaction from the conversation with kashkari. jackson hole raises risk or equities this fall, still underpriced policy risk. bed writing inflation through financial conditions, risk asset allies allowed them to hike more aggressively. this we know has become obvious in stocks. tom: it will be in play in 35 minutes, claims and the jobs report tomorrow. jonathan: futures lower by .3% on the s&p 500. on nasdaq, down .6%. live from new york city, good morning. this is bloomberg. ♪

>> the baseline inflation story plays out, if you get weaker wages, i think we are in good

shape to >> >> have an expansion. the key, does the consumer hold in in september. >> we are seeing the growth impact. >> i wouldn't be surprised if equity markets go further from here. >> this is "bloomberg surveillance" with jon ferro, team -- tom keene and lisa abramowicz. tom: forget about the dog days of august, the markets are on the move. in this hour, they will move further. we've got data, we've got productivity data. at 10:00 a.m., the first look at august. jonathan: a survey on manufacturing will be important from a niacin. jobless claims in 30 and its. then, payrolls friday. 298,000 on payrolls. i said, it is good news, bad news. he said, bad news is bad news. not good for the equity market now. tom: we see it with the data.

the data in a europe is grim. anna edwards in for bramo, thrilled with her view on the linkage to the political debate in the united kingdom into the grim data. jon, you go to anna. sterling says all. jonathan: weaker with a big back up in the yields this morning, a clean break. 150.52 is the low. we are above those lows at 150.70. walk us through the challenge the u.k. faces and the whole of europe faces. anna: the u.k. in the u.k. case specifically, waiting to find out who the prime minister is. we get that during your holiday on monday. that clears the political vacuum. the questions over fiscal policy then follow up because of the cost of living crisis, the cost of energy, twin deficits in the u.k. put sterling front and center. tom: bring the inflation number over here. in my right that goldman sachs

published a 22% statistics earlier this week? jonathan: that could possibly be the peak after city said it was something like 18. bank of england could be something in the region of 13 percentage points. it is going to get worse, not better. that is the difference between the u.k. europe and what is happening in the united states. we have seen eke inflation story, and the minds of many in europe and the u.k.. the peak inflation story in our future, not our past. tom: let's go to the data, to year yield in germany lacking up to new yields peered a data check starting with foreign exchange, dollar-yen, 140. jonathan: inflation up, rates up, yields are going to be higher. we are looking for a 375 basis point move from the ecb. sitting on parody on euro-dollar , negative 1.5%. a higher interest rate, lish or bearish -- bullish or bearish?

what does this mean for this currency, eager or stronger in these interest rates? what happens when the price of gas and electricity, not how deep, if we get a recession in europe, how deep it will be. tom: in august, we have recalibrated. this august, strange august, it was a strange jackson hole, we in spades recalibrate to the fourth quarter of 2000 22. marvin lowe provides leadership at state street local markets, he is senior global strategist. i am going to say, you need to rip up the script on september 1. what does the new script look like? marvin: i do not think the new script is that different from the old script. i think back to what we were talking about before the june flm see, which prompted the bullish crowd. we had yields somewhere around

here, if not higher, and we were expecting a transitional data story that was not going to be clear until we got into the fall. we are back there at this point. it is thinking back to what scared us in june and realizing that certain economies are worse off. whereas, the u.s. is moving towards the story that we have spent a lot of time at the beginning of summer. jonathan: we do not need things to be great or good, just better than expected. do you think they can be, and what you need to see to get illusionists it -- bullishness in this market? marvin: we need to get a sense of the inflation story and how it evolves. that tells us the fed it's comfortable slowing down. they have said the data is volatile, inflation is volatile, they do not have a handle on it. until we get a better sense of how that plays out over the

course of the next couple of months, which for the most part, markets are expecting fairly aggressive improvements on the inflation front. if that proves correct, i think you can start putting toes in the water. jonathan: what is the price to pay to get inflation lower? do you think you see that reflected in the price of height yields right now? how low is that bar? marvin: i think credit markets, in particular the high-yield market has been able to avoid dealing with that situation. i do not think it is priced in from a spread perspective, we are 400 basis points away from what we are expecting a session. we have been saying that the fed ultimately through its actions at a minimum is going to cause a mild recession. the longer this goes, the harder that recession gets. anna: good to see you from london. what is it that wakes up the credit market to what you are suggesting? what are the data points that mean the credit markets see

those spreads widen? marvin: certainly, there has been a repricing and credit the way we have repricing of a lot of other risk assets. it is starting to wake up. ultimately, the faults have not increased as much. financial conditions for the most part remain either average over long-term perspective, but certainly loose given how much tightening we have put in the system. once we start hitting to fall, because financial conditions get tighter, the shop has gone across at that point. anna: we spent a lot of time today talking about the fed, and a lot of time talking about the fed and driving markets sentiment. today, we get a wake-up call from china where we see another city locked down. 21 million people to lock down in an area of the country that has not seen much covid, a reminder of the big risks that hangs over here. how much of a threat is that? marvin: i think it is absolutely

significant. obviously, the importance of china in the global economy cannot be overstated. in a lot of ways, they are pursuing a philosophical approach that will lead to reverse. there is no way to avoid that. they are going to be doing that at a point when the world is slowing down. you have risks from that perspective. the lower they go on -- longer they go on with this, the more challenging it is. there are clear correlations between china and the emerging markets. from a global perspective, when the rest of the world is slowing down, it does highlight the challenges we have going into the next couple of months. jonathan: what do you make of the current consensus for the u.s. economy if we get a recession, it will be shallow? i keep asking that question, i want to understand the risks around that given and since we have been wrong so many times.

this cycle is moving so quickly. marvin: absolutely. it comes down to job markets. every first friday of the month is the day we get all energized in terms of that number. it is incredibly important. a jobs market that is creating even a few slowdowns, between 250,000 is a good number before the pandemic. that creates wealth. i think that ultimately has cap some of the expectations around a recession more mild. what we have heard from jackson hole, there might be pain at the household and business level, that is direct from the jobs market. unless we get a lot of people coming back end of the jobs market, you are going to need to see low growth and/or negative numbers to get the fed where it wants to be. jonathan: marvin lowe, state street global markets out of austin. looking ahead to payrolls

tomorrow. we haven't talked about it yet. we heard from 3m, another company planning to eliminate jobs as part of a broader cost-cutting drive. he talked about how cost cuts would come, here they are from 3m. here is a quote they put out and a statement. 3m is taking action to position the companies continued growth, we are adjusting to the challenging macroeconomic environment. that means job cuts. tom: my mother was a traveler in minneapolis and chicago long ago. this is not the manufacturing of my childhood, this has been a challenged company with a six point 1% total return over the last 10 years. they started cutting jobs five years ago from 1996, 1997 level. it is a continuation with an excuse now of the turmoil out there.

jonathan: as we prioritize our investments and resources, we will be adjusting the roles and responsibilities needed for future growth. that future growth picture looks softer. tom: it has been an industrial exercise. at that point, we spent too much part-time, we love to talk to dan eisen and others about apple, apple, apple. showing one other stock, this is about industrial america. service sector of america. they are being buffeted with this slowdown. jonathan: when do we see that in the data and payrolls? i've got further, the leverage of the employee had versus the employer last year has changed. when you hear the banks, goldman, morgan stanley, let's get back to the office, they are saying they need everyone back in the office on a consistent basis. this is what i think, relatively speaking to last year, i think you've got less leverage this

time around to say, i am staying home. tom: i agree. i do not know if anna agrees. i think it is a real debate. should i go to three days a week? jonathan: to what, four? you know we are supposed to be doing five? tom: we are going to sleep from office. jonathan: from new york, this is bloomberg. ♪ ritika: former president trump has adjusted his department is -- he made the allegation in a court filing seeking to bolster his case from a mutual third party to review documents seized by the fbi at his florida home. the agents are investigating the presence of highly classified white house records. in alaska, democrat pal told a

has defeated former governor palin in a special election the states only seat in the house of representatives. the -- that widens the democrats majority and sets a rematch with palin for a full term. support for abortion rights is seen as one of the deciding factors. in u.k., promises in the pitch to become the prime minister. truss has stated -- rules out into introducing any new taxes or energy rationing this winter. the next parliament will be in-house house monday. a problem, $69 billion purchase of activation will be sent for an in-depth review unless the company offers remedies to address the uk's watchdog concerns. regulators are concerned the combination will lead to fewer choices in the gaming sector. gamestop says they are willing to work with them. 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. ♪ at fidelity, your dedicated advisor will work with you

on a comprehensive wealth plan across your full financial picture. a plan with tax-smart investing strategies designed to help you keep more of what you earn. this is the planning effect.

>> china, that is the number one concern in the market. our expectation has been that china will be recovering. that is not quite happening. outside of china, demand numbers are very strong. jonathan: amrita with one word, china. as china locks down 20.9 million residents, another headwind to

the global economy. live from new york city, good morning. bramo back after the long weekend, equities lower by .5% on the s&p 500. on the nasdaq 100, down 84 points. yields pushing higher. 321.92 on a 10, up three basis points. did you see the latest news in california, they are going to take the nation to conserve energy, get away from electricity and do that from 2 035? telling residents not to charge their electric vehicles because it is stressing the grade two much. tom: what we are going to do is stop, not talk to francesco blau nche about the price of printer. let's talk about the greater energy moment we are in, a crisis in germany, a crisis in

the united kingdom. it goes to the grid. francisco, i have seen endless studies, davos, you can fill the promenade with fancy studies about what to do. why can't we fix this energy crisis? why can't we fix the global grid of electricity and hydro -- hydrocarbons? >> the best answer i can give you is the uncertainty we have created in terms of where the future for -- what the future for energy looks like. if you start with the cash liner agency scenarios for 2050, there is a huge gap between the business as usual scenario, the aggressive scenario or the net zero scenario. it is hard to tell which way we are going to go into 2050,

whether coal demand is going to collapse, hold in, or oil demand will collapse, or maybe it won't. i think this applies to electricity. that is the root, making it difficult to make a decision. how to allocate their capital. we have had the russia-ukraine situation which has made things worse. tom: surveillance research is that you and sir vena are on speaking terms with bank of america, she provides stunning leadership in the quantitative aspects of esg. when you have a cup of coffee with her, can you state that esg is here to say, or is it dead with the war in ukraine? francisco: i think it is here to stay. in most peoples minds. think that is true for investors, true for governments, which means for a lot of the pieces of the energy sector with how you fix them, i think you are going to

have to end up with more government involvement. we have seen that in germany, france, with the takeover of you to occur and adf. i think we will see more global percent of patient -- parsippany. opec --the countries have been leading an investment through other parts of the world. i think governments are going to get more involved in the energy space on a forward basis to essentially get us through the current mess. jonathan: do you think climate change has become a convenient excuse as to the challenges we face, when a lot of it is about investment, or a lack thereof, or a lack of planning? i think it is a excuse, we have tried to transition too fast, too quickly and move away from fossil fuels without a more resilient plan in place. which one is it? francisco: i think the climate

change data we are getting every day points to the urgency of doing something about the current emissions we have on a daily basis. we are working on the plan quickly, we have seen that in pakistan more recently with catastrophic outcomes. we have seen a complete drop in the alps, which is leading to lower water river levels across europe. i think climate change is real, we are seeing one of the biggest droughts in the u.s. recently peered in europe, we had the biggest droughts in i've hundred years. you are having a lot of data points out there that suggest that i met change is happening quickly, and that is restraining our energy system as it would. i think it would be the current situation -- we would not be in the current situation if we have not lost as much russian energy as we have the past six months. anna: can i ask you about

proposals in europe to cap gas prices and what you think of that? we had a guest earlier, who said she does not want to see a cap on gas prices. she thinks the school stimulus should be given to those struggling to pay because with a cap, you do not have a strong price signal and we need that to make transitions on the investments you talk about. francisco: i think that is completely wrong. you need to put a bigger cap on the price of gas. the price of gap is -- gas is higher than the gas -- price of electric city. say the price of electricity is 1000 per megawatt per hour. you are not incentivizing at that price point. i think it should encourage governments to take action. it is simple stuff. most european industrials cannot

operate. when you are at 100 megawatts per hour, the business is passed a point of demand destruction and past a point of supply increases to the future. you only need 1000 euros of megawatts per hour. you need a much lower number. i think governments should take the right steps to cap the price of gas. it is going to be a subsidy, but i think the consequences of not tackling the current shortage of gas in europe could be devastating to consumers and industry over the course of the next six months. you are destroying about 5% of european gas power every month with this kind of price levels we are seeing. jonathan: massive numbers, i think we have still internalized and recognize how bad this is going to be. we appreciate your time.

in the ft yesterday, they put out a story. they were talking about how german companies manufacture some, shutting down. tom: most of america is complacent on this. i think of dan fossett sales, we borrow electricity under stress like from québec. texas is our only analog to what is going on in europe. jonathan: thank you to europe to -- thank you to francisco bringing up what is happening in pakistan. it is like a monsoon in -- on steroids. jobless claims, next. this is bloomberg surveillance. ♪

pst. girl. you can do better. at least with your big-name wireless carrier. with xfinity mobile you can get unlimited for $30 per month on the nation's most reliable 5g network. they can even save you hundreds a year on your wireless bill over t-mobile, at&t, and verizon. wow. i can do better! yes you can! i can do better, too! now you really can do better! switch to the fastest mobile service - xfinity mobile. now with the best price on two lines of unlimited. just $30 a line. hi, my name's steve. i lost 138 pounds on golo and i kept it off. so with other diets, you just feel like you're muscling your way through it. the reason why i like golo is plain and simple, it was easy. i didn't have to grit my teeth and do a diet. golo's a lifestyle change and you make the change and it stays off.

golo's changed my life in so many ways. i sleep better, i eat better. took my shirt off for the first time in 25 years. it's golo. it's all golo. it's smarter, it's better, it will change your life forever. (police radio call) (sirens) (news report) (sirens) (news report)

jonathan: jobless claims comes out in a couple of seconds. good morning. bramo back on tuesday after a long weekend. anna will be back on monday to guide you through the leadership contest, the outcome in the u.k., who will be the next prime minister. jobless claims coming in and the

right direction. run us through it. michael: it depends on what you are trying to calm was. jobless claims fall to 232,000 in the last week of august. that is weird in the since the fed is expecting jobless claims as part of unemployment to rise as they tighten financial conditions. that is not happening. continuing claims go up to 1,438,000. a little bit of a change there, people who are getting unemployment for the first time, more of them are staying on it. not a significant amount, but something to keep an eye on. the number out this morning is productivity and unit labor costs, for the first time since the second quarter. it is still bad news. productivity down 4.1% after

falling 4.6% in the first quarter. that is not good news for the economy overall for obvious reasons, the fed would like the that go up. as productivity goes up, you can use fewer workers. we are using more workers and producing less. unit labor costs, up 10.2%. that is a decline from the 10.8 percent we saw in the first quarter. labor costs going down a little, but overall, good news on the labor front in a way. bad news on the productivity mark. jonathan: i think the both refused to call the downside to price on jobless claims, bad news. good news for the labor market, problematic or the bed looking to get inflation down. this is evidenced the labor market is still tight. francisco: you have over 11

million jobs still out there. people who are losing their jobs are unable to find new ones. it is an interesting situation. we are wondering, win the fed is going to bite. tom: i'm going to make a joke, it is not a joke. dollar legs stronger, that is a fact off of this. jon and i have been making jokes all morning. the basic idea, it is a prisoners dilemma. the big two of the four boxes, there is bad good news, good good news, and other opportunities. which of these is it for jerome powell? francisco: it is probably bad-good news in the since it suggests that somewhere out there is their goal, and they are not there yet. you can see why people maybe have -- the markets have moved too much today, tomorrow is going to be definitive.

what we can do is go from there. anna: what are you expecting tomorrow? given what we have seen here and how the markets are responding, where does that leave us tomorrow? francisco: -- kriti: payrolls has dropped. michael: payrolls has dropped. i am not sure that makes a whole lot of difference. anything in that range would probably be considered good or average, even though it is much higher than what we were seeing before. anything above that would be a shock to economists. i've hundred 28,000 last month was roughly double what -- 528,000 last month was roughly double than expected. the fed is going to have to to tighten further, that will have an effect of where they go from there. jonathan: thank you, buddy.

this is a interesting economy right now. i find it fascinating. how strong is this economy? how much damage needs to be done to get inflation down, and how high do rates need to go? the labor market doesn't seem to be responding to this yet. yields are higher on a 10 year, 325. tom: sterling rates down a new weakness moments ago, 115.50. real yield, you are going to have to blow up your show on friday as we dive into the three-day weekend. .78% on the positive 10 year real yield is extraordinary. jonathan: we have breached 350 earlier. i know you noticed that. did you see the quote this week? tom: on lobster chowder? jonathan: yeah. i think it is pertinent to the conversation. just got back from yoga, teacher

kicked off the class by saying the same buddy of water that kills the lobster softens the potato. that got me thinking about the fed, the fed thinks the economy is a potato. if you caught up with that, congratulations. that is a important thing to think about when it comes to the economy, how resilient is it? tom: [laughter] very good. she is going, why am i doing this? we welcome her this morning. lorena, what does the dollar signify. if you are sitting with chairman powell at the eccles building and see new dollar strength in a some condition, what does it signal to him? >> i think we should think about what does a stronger dollar do for the u.s. economy and take it from there. i am sure a central banks struggling with high inflation,

some of this from goods that are imported externally. you might see a stronger dollar is going to help bring that inflation down if the margin may not be the main force driving, easing inflation pressures. personally, the fed could use any help from any front it can get at this point. a stronger dollar is going to be challenging for the u.s. manufacturing, and that trade in general. it does soften the outlook for the economy. more broadly, we were to take a signal from strength in the dollar, it is telling us on a relative basis, the outlook for the u.s. economy might be stronger than its trading partner. the fed is going -- is on a path to tighten interest rates at a faster pace, to tame them for longer. other major central -- other

major central banks may signal. other banks may be convincing the market of, i would take it anna: as a positive signal. do you see weakness in the labor market increasing? we see yields jump up on this data and the dollar on the rise, suggesting the market thinking get more hikes in the fed. they are in it -- not seeing the weakness in the labor market they want to see. are you seeing weakness? blerina: we just saw the claims data earlier. what we think time and again, the surprising resilience in the labor market and surprisingly strong momentum. right now, i am not seeing a lot of weakness in the labor market that would make me feel like -- when i look at the payroll report coming out tomorrow for august, i would spec -- expect the pace of job growth versus

july. when i see the july pace of employment growth, it seems to me at odds with what is happening with the rest of the economy, were tightening and financial conditions is having an effect on slowing demand and growth to mendham -- growth of men -- growth momentum. it is bound to accelerate. i do not inspect -- expect it to increase significantly. we got the adp report yesterday, this signaling job growth has been slowing in the economy. --expects either a hiring squeeze, or a firing has increased in recent quarters. anna: with all of that, tell me, what is the employee -- unemployment rate? blerina: i am a -- having a hard

time hearing you. jonathan: we will let you go if you are having a technical problem. tom: i am having a technical problem, can i go? jonathan: you can go if you like. leave anna and i alone. dollar strength up, what a move. what are we at now, 152? basically the lowest at the session, yields higher. anna: it is a lot. the market reacts a lot to that data we just saw mike mckee breaking down. to your point earlier about whether good news is bad news and bad news is good news -- [laughter] jonathan: i think at the end of the day, good news is bad news because good news apparently means that has to do more. that news is bad news, this is the outcome the fed desires. tom: if afterthought completes your summer reading on time, is

that good news is good news or bad news is good news? jonathan: good news is good news, the policy year is going to get hammered. good news, bad news, tom. tom: -- would tell you this game theory is baloney. jonathan: we have both said it. where is yellem? next thursday in detroit, the secretary of the treasury will deliver a major address to discuss the biden administration's economic agenda. that is very good news on that front, good news. we need to hear from the treasury secretary, don't we? tom: two standard deviations technically on sterling, 1.518. we are not there yet. jonathan: a year -- on the tenure, a breach. coming up, morgan stanley wealth

management. they will run you into the open. do you want to join us, tom? tom: yeah, could be good news, bad news, do not know. jonathan: anna, looking forward to catching up on payrolls friday. this is bloomberg. ♪ ritika: the largest u.s. airlines are making more explicit pledges on how much weight passengers cancel or significantly delay flights. the department of transportation a website -- plans, carriers are promising meals and hotel rooms for distractions. president biden headed to midterm elections to talk more about trump and less about the economy. he says the republican party is still under the spell of his

predecessor and the false claims of the 2020 election. tonight, president biden will have a speech in philadelphia. in china, a city is walking down its 21 billion residents, a huge move in the vast western region of the country that has been largely untouched by the coronavirus. the lockdown could affect the electronics and automaker supply chains. the u.k. has set the biggest squeeze on the living standards in a century. the resolutions warn of a 10% fall of real disposable income in over two years. a support package of tens of billions of pounds, soaring energy bills have driven inflation into the double digits. a list of financial firms that want their employees back to the office. asking staffers to come back. according to a memo, no issue to work from home -- it once eu

bankers to be coming into motivate their accounts. 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. ♪

>> the earnings risk is a bust, we are cutting numbers and think the numbers will come down further the next two quarters. the bottom line, the multiple is wrong because the fed is not going to be hawkish, but the equity market is being too optimistic about the earnings outlook. tom: best performance this summer, mike wilson. really has the high ground on challenging stockmarkets. he has done a great job, we will see where he stands at the end of the quarter. features -21, anna edwards in for bramo.

jon is off trying to get ready for the 9:00 show. kriti, what do you have? kriti: weakness in the japanese yen hitting a 24 year low, weakness on the yuan. i am looking at the korean won, the key third player when you look at that trifecta. this is important when we talk about trade coming out of the asia-pacific and the story on chips. we know the chips export out of south korea have dropped year over that is not good given the momentum we are seeing in the demand space. my chart of the day looks at the dollar versus the korean yuan. record weakness going back to levels in the global financial crisis and the asian financial crisis, not looking good for those who want to buy chips. tom: off the script to talk to anna edwards earlier about truss. the moment in hand away from the united states of america is

emerging markets, burying in the headlines of a busy end of august is gore gave up to the rescue. the imf doing it differently. damian sassower our was arguably his most important interview ever. boy, are they early and tactical and surgical. >> we have seen today alone $1.3 billion loans paid to them. another $2.9 billion going to sri lanka, another $18 billion in credit lines protected to chile. a lot of barricades to be made for emerging markets, that is tough to fight the imf. fighting to defend the emerging-market land. this is a step in the right direction. tom: we are seeing it unraveling. kriti gupta talks about korea, marcus junior taking the philippines is enjoying new

philippine weakness. we can pick up seven other nations. does this have a 1990's tinge to you? >> we have seen the philippines, indonesia raise rates. tylan, you name it. the philippine peso, weakest on record. the china yuan touching the seventh handle. the real has failed to break five, the mix peso up 18. currency weakness at large. the imf seems to be getting the message and stepping in. tom: joining us from that emerging market from the united kingdom, anna edwards. [laughter] anna: you upset some people on downing street and the treasury. let me ask you about weakness in currency elsewhere. you mentioned what the imf is doing to help those in emerging

markets that are struggling. what about coordinated action of dollar strength? are we talking about that seriously? every now and again, that subject raises its head. >> i am surprised the ecb and poa haven't been talking about it already. it is coming. there seems to be one think that is a staple in the latter part of three years, you cannot not king dollar off its pedestal. it has been ruthless. all the stuff that goes hand in hand, the fed said non-dollar access -- assess. if you listen to the experts, diversification only works if you are in dollar assets and dollar currencies. it is a tough job for portfolio managers, especially emerging market portfolio managers, to allocate across this regime. i think you will find more people caring about emerging

markets. anna: have the fund signal shows renewed interest in iain m debt. where are we going? damian: starting prior to this weekend, for the better part of last month, high data assets rallied and high markets emerging for and we are on the others of this. even though you see the likes of blackrock prove fidelity scaling back on their bearish china calls, the pyramid is collapsing in china. tom: because of time, i have got to cut to the chase. it is the end of august. this is not fun. i am looking at the bloomberg local aggregate index price, back to 2011 a levels -- levels. why is anyone saying to be in e.m. right now? damian: it is $59 trillion, down to trillion dollars in the last

two weeks. two weeks. tom: you have been great on this. people go, get into e.m., get into international. damian: it is nondollar fixed income. the dollar impact is basically impacting the global investable fixed income market. tom: do you get a jump condition? will we see price down, ecuador, thailand in the 1990's? damian: it hasn't happened yet. u.s. financial conditions have come roaring back. we have been waiting, i think we will continue to wait. two years are what the experts are saying for spread widening. you've got to look for spreads to jump for financial conditions to tighten. tom: serena all the way? damian: oh, yeah. what a crowd. dr. ruth was there. you had tiger woods in the crowd, she was awesome.

her and her sister have a couples match, right? wow. tom: anna edwards, did you survive today? anna: i did survive today, i survived better than, emma in tennis. tom: i was in the stadium. it was right. are you going to come back tomorrow? anna: i will think about it. tom: anna, tomorrow for jobs day in america. futures -24 on bloomberg radio and bloomberg television. ♪ >> u.s. open update for bloomberg and tv from tennis channel. the serena williams farewell tour continues at flushing meadows. the 23 time major champion came

through a thrilling victory over world number two, the third round and putting a hold on retirement from the sport. the hands inside a packed stadium want serena to go on and on. >> [applause] >> earlier, coco gauff advance with a victory over alayna derosa. america's want 10 of the last 12 matches. up next, former finalist madison keene. do not forget, tennis channel live at the u.s. open has all the news you need from the big apple. it airs daily at 9:00 a.m. eastern. ♪

jonathon: the day is up on the s&p 500. live from the city, good morning. futures down seven tents of 1%. the countdown to the up and right now. ♪ jonathon: live from new york, we peaked