>> the simple thing that foreign-exchange is signaling right now is that the u.s. economy is faring better than the rest of the world. >> the u.s. is in somewhat that are shaped the nero -- somewhat better shape than europe. >> it is highly unlikely the euro zone can avoid a recession. >> right now the dollar strength is as much of a good thing as it is a bad thing. >> i think the energy crisis that is brewing is something investors cannot ignore. >> this is "bloomberg surveillance," with jonathan ferro, tom keene, and lisa abramowicz. jonathan: tk did not turn up this morning. good morning. this is "bloomberg surveillance" on tv and radio.

alongside lisa abramowicz, i'm jonathan ferro, together with the brilliant kailey leinz. equity futures positive on the s&p. over the last seven days on the nasdaq, a seven-day losing streak. lisa: it has been brutal, especially the why. one of the most interesting things that happened overnight was weaker than expected chinese economic data fueling this feeling of deteriorating economic trajectory globally with the european energy crisis, china, and now potentially even in the u.s. jonathan: dollar china this close to a seven handle. how important is that? lisa: leland miller was saying it is not that important, a psychological level, bright now it does not seem like the chinese authorities are pushing back that hard. they are just trying to control how quickly they see the weakening. it seems unavoidable. if you have a currency that

reflects all economic and rate differentials, how does this not make sense that the dollar should continue to strengthen versus the chinese yuan? jonathan: kailey, dollar dominance the big story in this market. kailey: and it is against everything in asia. dollar-yen is the one that catches my attention today, at a 144 handle. that is something we have not seen going back all the way to august 1998, a 24 year low. and yet the bank of japan overnight instead boosts its bond buying program, still dedicated to guilt curve control, trying to keep that 25 basis point gap. at what point does the boj hit a breaking point? jonathan: right now it is not blinking. we've got rate hikes from the federal reserve delivering dollar dominance in the fx market. china lockdown is the second theme. and we have to talk about the response to the energy issues in europe. am still processing the potential of monster relief coming out of the u.k., and still asking the same question

we started the week with. lisa: who is going to pay for it? that is the question a lot of people are wondering. stephen major coming out of hsbc , and he actually increased his forecast for the year end yields for the united kingdom in particular because of this concern of the extraordinary fiscal support for energy prices and what that means for its deficit, what that means for foreigners' willingness to fund it. jonathan: transferring massive risk back to the sovereign. we are asking those questions, and the phrase i have heard repeatedly in the last 24 hours, uncapped liability for the british government if they choose to take this on. it is starting to express itself in some fx forecasts. 106 you end one 06 year-end for jordan rochester nomura -- 106

year-end for jordan rochester of nomura. lisa: that is extraordinary to even think about. the people talking about 90 per dollar for the euro as a base case, you are hearing this more and more simply because of this incredible divergence and the cheery rating -- the deteriorating backdrop. jonathan: tk is lining up for the new iphone. is that true? how much more is this going to cost him? kailey: i have heard up to $1100. raises the question of who is going to pay to upgrade their iphone if there's is still working. jonathan: does that mean my iphone is magically going to stop working in the next couple of months? you know how this works. all it stops working, you need to know and that you need to go and get a new one -- you need to go and get a new one. i am not suggesting anything the various happens. lisa: is this a prediction? are you saying you want one, or you think you will be forced to

have one? jonathan: futures up zero .1% on the s&p 500, on the nasdaq 100. everyone at home is saying it happens to me too. it is magic. lisa: it does not suddenly stop. jonathan: it magically slows down. euro-dollar unchanged, just about hanging on to 99 on euro-dollar. crude, $87.29. lisa: maybe it just feels slower because the others feel so fast when they come out. at 10 :00 a.m., really interested to hear what the bank of canada is going to say. the expectation is for a 50 or 75 basis point rate hike. the bank of canada has been out front. this will be the fourth consecutive outsized rate hike and a time when their two-year yield is the highest going back to 2008. their policy is going to be the highest going back to 2008. how do they do with frontloading policy? that has been a stated policy of

theirs. how do we know it is working, and what does that mean for the rest of central bank's around the world? we get so much fed speak today. for a hot minute we got a little bit of a reprieve, and then all of a sudden, they all line up. what will they tell us that we don't already know? richmond fed president tom barkan talking about how a 4% fed funds rate actually seems possible to him, and that he could see it holding there for some time. we also hear from loretta mester, lael brainard, the federal reserve vice chair. michael barr also speaking at the same time that we get the beige book. do we get any insight about some of the conflicting data we are getting about whether we are slowing down or speeding up with consumer spending picking back up on the heels of lower gasoline prices? today we have a barclays chief executive energy officer conference. alix steel is there, interviewing a number of executives, including the executives of conocophillips, chevron, and devon energy.

gasoline prices have come down, but we have seen crude fall to some oats lowest levels in months, and this does not make sense if you look at some of the fun of mental issues with with spec to opec+ supply cut. get this really speaks to the deteriorating expectation for the global economy. jonathan: thank you. looking forward to the day ahead and looking forward to what vice chair brainard has to say on the economy specifically. i think it is the first time since jackson hole we have heard her address some big things. going us now is margaret patel at all spring global investment. the last seven trading days, the s&p 500 is down about 7%. are you ready to buy this equity market yet? margaret: no, i think what we've had is a reversal of about 50% of the ride we've had in those indexes since their lows in june. i think we are really in a trading range because of the

backdrop. the fed is very much committed to raising rates. you could see economies all around the world are slowing down, and that is really not a market that says we are on the verge of eight, rebound inequities. lisa: so are you moving more into cash? how do you manage in terms of this bearishness at a time when there is still uncertainty and still a potential investment case? margaret: i don't think cash is all that attractive at this level because there is a chance the fed might realize they are being too aggressive, and that could change things. really we are just trying to find companies that are reasonably priced, that have the possibility of continued earnings growth, which i think will be pretty hard to find over the next year. we are thinking earnings are going to decelerate a lot, so pes are down, but that still says a lot of stocks would go down. so trying to see where stocks still have a growth path and aren't too puffed up based on how fast the economy is going to grow.

kailey: how do you factor in the strength of the dollar into your thinking of these multinational companies? margaret: i have never really found that a big help in making money in stocks because often the market will look through dollar strength. i think what it really tells you is it reflects the strength of the u.s. economy compared to europe, compared to emerging markets, compared to china, so it says to me we are still the best place to invest in the dollar is really a reflection of that. we still see money coming in from foreigners because we are still the best economy in the world to buy. lisa: when does this become a headwind? this is something people increasingly ask. when does the dollar become a liability for u.s. companies trying to sell their goods overseas? margaret: i think that is really what you're seeing, a trend for slower growth and knowledge meant from many companies of where they saw a rapid growth in the emerging market. they are now seeing that scale back, so i think it is part of the backdrop of earnings slowing

down around the world, growth slowing down around the world, so therefore you're going to have to be more choosy and finding companies that can get through a period of very low growth. we have not had that in quite a while. here we have everything coming together and they are all negative as far as future growth. jonathan: the bulk of your portfolio is in equities. we used to talk to you exclusively about fixed income. we are seeing signs that sovereigns in europe are willing to take on uncapped liability and transfer massive risk away from the consumer to offset some of the pain sparked by energy issues across the continent. what do you think the consequent is of that are going to be? margaret: when you have that kind of massive innovation, the result is that those policies have a way of backfiring. in england i think they did have some price caps a few years ago under theresa may that has not worked out very well. so i think it is really a negative for consumers, and

negative for those economies. we are lucky enough that we don't have that here. outgrowth looks better than worldwide. jonathan: thank you. this is the issue i think for a lot of people, and why we will hear more people say that is while at the united states relative to the mess taking place elsewhere. lisa: you know how we were talking about goldman sachs' call for 22% inflation in the united kingdom? what did we hear from some? that this was outrageous. jonathan: sell side marketing was one guess. lisa: a chief economist at the bank of england was testifying to parliament today, and he's has it is possible, the 20% rate. jonathan: there you go. is he doing some sell side marketing? [laughter] lisa: clearly. jonathan: someone just wrote in detroit tigers forever, my iphone already feels slower just listening to you to talk about it. you see? magic.

as soon as it launches. it is the day of. . i am not saying anyone did anything. lisa: oh yeah. everything go time. jonathan: from new york, this is bloomberg. >> keeping you up to date with news from around the world, with the first word, i'm lisa mateo. the eurozone economy grew more than initially estimated in the second quarter. gdp rose zero point 8% from the previous three months, 0.2% higher than the first report. u.s. officials say russia wants to buy millions of rockets and artillery shells from north korea. it is the latest sign that moscow is being pressured by international sanctions. there is no indication that any weapons sales have been completed. last month the cia said russia had approached iran to buy armed drones. there's a report that one of the

documents seized at donald trump's florida residents describes a foreign government's nuclear weapons capable of these. it also says some of the documents discuss closely guarded u.s. operations. in china, export growth slowed more than expect it last month. global demand weakened while covid lockdowns disrupted manufacturing production. meanwhile, imports barely grew as domestic demand continued to struggle. new research says about half of u.s. workers to be described as quiet quitters. that is they fulfill their job description, but are psychologically attached -- psychologically detached from their work. a survey of more than 15,000 workers says most quiet quitters are looking for a new job. 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 lisa mateo. this is bloomberg. ♪

>> we have had volatile markets in the last six weeks or so. the point that hugh has been

making is that we are seeing extreme volatility in energy markets, and i think it is important that there's a clear way -- a clear way forward on policy. jonathan: stating the obvious, bank of england governor andrew bailey. you feel the same way. lisa: there is a lot of volatility out there, particularly in energy prices. jonathan: there's a lot of pressure on these guys. saying something can move markets, so you just state the obvious. tk is away today. he will be back tomorrow, i am told. on the nasdaq 100, up a little more than 0.1%. yields come in three basis points on the 10 year, 3.3168%. did you see vladimir putin's comments? he said russia put itself in a sanctions dead-end. he said that the price cap on russian oil and gas is "another stupidity." the question for us at the moment is whether the unity can

hold, can stick through the winter in europe, given what is about to transpire. lisa: we've both picked up on the italian survey over the weekend that put about 51% of the population against some of the sanctions, saying they were a bad idea at this point, as domestic pressures become that much more pressing. how much does this become a mainstream idea not only in europe, also in the united states? how cohesive can that alliance remain? let's go down to d.c. and check in with anne-marie. how much is the risk that this starts to break? annmarie: already there is concern. an essay from jens stoltenberg, the nato secretary-general, talking about this exact problem. he is saying that the unity, the solidarity, even though it is going to be tough, we must maintain it. we face a difficult six months with the threat of energy cuts,

disruption, and perhaps even civil unrest. there is serious concern about what this is going to mean for european countries, and we are seeing it across italy, and germany, and france, and most notably in the united kingdom, which this week is going to shell out potential he to hundred billion pounds to help stave off some of these rising energy costs. lisa: a lot of the questions pile back on to the united states as they do play a role in the exports of natural gas to europe, play a role in trying to support the economy in that region to keep the alliance together with respect to russia and some of these sanctions. so where is that come of the increasing and exports, the increasing in production of the united states to get it over to europe? annmarie: they have been trying to do this, and they mentioned this when the president was in brussels, that they would try to move more lng exports to europe, and a lot of lng exporters are really taking this potential at hand and you have these spot prices at the moment starting to

spike, starting to shift some cargoes around to take advantage of that. for the united states, we should also mention that we are talking about soaring electricity bills across europe, which we are seeing at levels we have never seen before. in the united states we recently had a story about how one in six american households are already behind in their utility bills, and now what you're going to have as well is a very discomforting winter, the fact that in july, electricity prices for consumers were up 15% as opposed to the following year. all of these power prices are linked to natural gas, so the administration has really been focused over the course of the summer about getting gasoline prices down at the pump. this could potentially become an even bigger problem for them into the winter. lisa: vladimir putin also said all you have to do is give us some turbines and we will pick back up in the nord stream 1 pipeline. and by the way, we could get

nord stream 2 back online, basically holding hostage this idea. is there any discussion of really getting into that? annmarie: olaf scholz spoke just a few hours before president putin was speaking at this economic forum on the far east part of russia, and olaf scholz says he is using this as blackmail and the turbine is ready for use, and that they are saying it is not useful because they will use energy as a weapon because he wants to squeeze the europeans. this is really is single piece of leverage left. while the russian government and president putin says that russia is absolutely fine, able to withstand sanctions, and interim report bloomberg saw actually shows there is a deepening recession, much more than many expected happening in russia, and for russia to even get back

to the prewar level of their gdp and capacity will take at least to the end of the decade, if not further. so this winter, which is going to be one of the harshest for europe given the fact that they have really cut themselves off from russian supplies and russia also cutting themselves off from giving those supplies, is one of his last pieces a leverage going into this winter, and what he can use against the west in terms of this sanctions were. jonathan: -- sanctions war. jonathan: thank you. the confusing thing i think for a lot of people right now is the character of the effort, the character of the policy. i don't think you can begin to estimate how much it is going to cost because we don't know what gas prices are going to do over the next 12 months. without doing anything to complement, to curtail demand, i think for many people in makes even more problematic. kailey: it is a very complicated

equation as you hear bank of england officials in the treasury select committee today talking about the idea of capping energy bills and the impact it is ultimately going to have on cpi. it is a similar story on demand as well. we heard european commission proposals to cut it by 10%, 5% in peak hours. they want to cap electricity not generated by gas at 200 euros per hour. it is very difficult to do when a lot of these things seem to offset each other in some sense. jonathan: what is going to happen with prices if you have an economy like the u.k., maybe not just a one-off, that they have to do it again? it is basically saying we will cap things for the consumers, we will pay the difference to the suppliers, so then you've got uncapped liability. i imagine demand is not don't change too much either, and we do have a supply issue. doesn't that just exacerbate the supply issue through winter? lisa: you would think, right? you can't really fix this by

throwing money at it that you frankly don't even have. that is the other issue. you don't know how expensive it will be to get this. gasoline prices in the u.s. falling for 84 consecutive days, and you are starting to see consumption pick back up in other places, which should be a good thing, but that means more tightening from the federal reserve. basically we are getting back to a similar place of difficulty highlighting some of the difficult is right now. jonathan: ed morse will join us. he has a lot to say on this. we will catch up with him a little bit later. crew right now, $87 --

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jonathan: good morning. equity futures pushing up higher this morning. on the nasdaq 100, further by one third of 1%. negative, close to 9% over that time period. is it time to buy? looking at the bond market where the two year started to build out a little bit more over the last couple of trading days.

right now, it is down three basis points. yesterday, a new closing high for the year on the front end of the curve. on the long end, that is what has surprised me. the 10 year back to you 332, 64. traditional bond bulls have to reassess what is going to happen this year. lisa: he got more hawkish because of the comments from the jackson hole. a lot of the actions, because of the volume of corporate debt sales, there are some technical things under the table for the long end. jonathan: can we assess what is happening in the fx market? let's take a look at two currency pairs. the dollar index is stronger since june 2002. also close on a dollar handle, the yen, 144.

you have to go back to august 1998 to see the japanese yen this weak. kailey: just over 24 years and it has been that long. what does the doj do? nothing about it. they are boosting their bond buying, being the older dose in a world in which everyone else seems to be hawkish. i wonder how long they will be able to hold onto that. jonathan: 144.46. what did we say, 150? lisa: a lot of people have said that the bank of japan is not going to blink until there is more dollar weakness. right now, that does not seem to be in the cards. jonathan: how much yen weakness do they want to see before they blink? it is ridiculous. lisa: it is because of the inflation they are importing. so much of the inflation story has been oil and gas and people have been calling for prices to surge to new record highs. one person pushed against them. he said you guys were all wrong. you underestimate the power of a lack of demand as the global

economy slows. that one person is edward morse, citigroup head of commodities research. he came out and he said no, prices are going down. we have seen that steadily, even with a potential supply cut from opec-plus. how closely is this particular energy story tied to the slowdown we are seeing in china? edward: it has a lot to do with it but a lot less to do with it than people think because chinese demand is peaking. we did not expect it to go anywhere this year. the increase in chinese demand, they came back to where they had been through the recovery and there was no place further to go. they had already cut back on gasoline demand. one bright spot was chemicals from natural gas rather than the oil pool or the refinery pool. china has influence the market.

there are some concerns that they basically stopped exploits and that has reverberations around the planet. the one thing that we missed and the world as a whole missed was that when we had natural gas prices getting by on a content basis, prices for gas are highly are -- are higher than prices for diesel at a point where the world was moving barrels of diesel. china cut off their exports. that is 700,000 barrels per day of diesel. they have not looked at it at all. some of what is happening on the planet is a result of china but i think it is more chinese policy. kailey: the fact that you say it has less to do with china than people think is a pretty dire statement compared with economic activity in the united kingdom, the air to an and the united states at a time where all regions are looking to support

households as they continue to contain demand. can you explain more why demand is falling off their people seem to think from the data at hand? edward: we have the best data in the world in the united states. we started seeing at the end of march, the beginning of april that u.s. demand really had come off and it had as we got out of winter. week after week and even if you do it on a four week moving basis from march to today, u.s. demand has gotten lower than a year ago. it is close to $2 million per day lower than august 2021. at one million barrels per day, 300,000 in diesel which reflects what is happening in the retail market. the rest, the remaining 700,000 is in the gasoline market and that is because people decided to drive less and we have data that proved that miles traveled have gone down. high prices, we react to

that by not buying as much. we have seen effectively conservation working as a result of consumer response to high prices across the united states without a recession other than a technical recession. we have seen wealth in the labor market that is formidable and even so people are driving less. you can let the market work to some degree. people are concerned. one of the big experiments that the world is conducting is how much people will be allowed to conserve. the other experiment is what will happen politically as people get more concerned about inflation in their pocketbook and jobs than they do about russia and ukraine. we have elections coming up in a couple of weeks. we will see what the consumer rebellion against where these

high consumer prices are. kailey: we are hearing from the eu commission president ursula vander line talking about how the eu world for pros a mandatory target for reducing electricity, the kind of response from government you are alluding to. as europe faces this winter, there is a sense that this is not just going to be a this winter problem. we could see years of restricted supply in europe. when you are trying to model out of natural gas prices and what they could look like, how persistently higher could they be and is that something ultimately that the consumer will just have to tolerate? edward: yes. the question is not whether they will stay higher, but how much higher will they stay. europe is moving back to fossil fuels, natural gas, and coal. they have had a double hit this summer because a lot of nuclear reactors in france had to be shut because of a lack of water to clean the nuclear plant. those will almost certainly be coming back but as we look at

europe's move back to natural gas and the world's response, it will be summer 2025 and 2027 that we will see prices in europe coming back to where they were at the beginning of 2021. one of the major difficulties that europe is confronting is that it is suddenly seeing consumers sit on their pocketbook and job losses in energy intensive industries and some industries are migrating. where are they migrating to? places in the world where energy prices are lower, namely the united states. we have seen the migration of of fertilizers from europe to the u.s.. we have seen zinc and aluminum slowing down or closing altogether. kailey: to that point about migrating to the united states, what is the risk that the energy prices -- the energy crisis is going to bleed through an immaterial way to prices here in the united states? edward: the risk is not on the

gas line directly. it is on thermal coal prices. when we get to $9 and $10 natural gas prices again, it was not because of production. it was because the price of coal had shot up. as europe and china bought more coal and the $9 price of natural gas is now eight dollars but that is equivalent to where thermal coal prices were. with the thermal coal prices coming up again for a variety of reasons and with that, u.s. natural gas. u.s. natural gas will be seeing a significant increase in supply. we will see some boost in lng exports. we can only produce as much lng as you have capacity and it does not grow overnight and that is the reason why europe will have to wait until later in the decade to get to the point where there will be enough natural gas from the u.s. that will be able to replace that russian natural gas.

we also have to remember that the russian game plan is not to second-guess what mr. putin will do. he simply said what they are doing on oil and gas is a reflection of price caps being discussed. russia will be running out of places to sell gas pretty soon. european destination of gas from russia other than a bit of liquefied natural gas cannot go anywhere else in the world. there is only a modest level of switching they can do to sell gas by pipeline to other countries. it is mostly former soviet union countries and the demand is limited. the 30 bcm of natural gas that europe is being provided for by russia is not going to be replaced by another market so at some point they might say we

want to maximize the revenue we are getting from natural gas. it would not be surprising if they turn back natural gas as we got to the end of the season in europe. back to the point where europe will be brought in storage and prices will be high for the winter. that is what they want. jonathan: edward morse of citigroup, thank you. just to recap those comments from the eu commission president, speaking to reporters moments ago, a mandatory target for reducing electricity. what do you make of that? kailey: they are trying to reduce demand, to your point earlier about yes, we can take all of this action on the supply side on trying to cap. it goes back into feeding demand for electricity. the other interesting headline, the eu will facilitate liquidity support for energy companies. that just means give them more money. jonathan: more money. it is all coming together very

slowly. lisa: it is coming together but it is an imperfect picture that just feeds into even more demand. jonathan: we will talk about some of this with richard haas, president of the council on foreign relations at a difficult moment for foreign relations. this is bloomberg. ritika: -- lisa: vladimir putin predicted russia will emerge stronger from the invasion of ukraine. he told a reporter, we lost nothing and will not lose anything. he lashed out at european and u.s. sanctions fever in response to the war. the ceo of deutsche bank says that germany is headed toward a recession. he told a conference in frankfort that energy prices will stay high for some time, present thing a threat to the economy. they are trying to come up with ideas that keep the energy crisis from turning into an economic meltdown. california narrowly avoided blackouts for a second day in a

row for several hours late tuesday. the state imposed its highest level of energy emergency. consumers were urged to turn off their lights and curve air-conditioners. triple digit temperatures push demand for electricity to a record. authorities are preparing for more pressure on the power system today. the price of oil is now at the lowest level since january. concerned about global demand escalated. the dollars surge to a record. that makes oil more expensive outside the u.s.. west texas intermediate fell toward $85 per barrel. an oil giant is making a shift away from fossil fuels selling a quarter of exploration division to a u.s. private equity firm. the price, $3.4 billion. they are waving funds to help pay for low emission projects while reducing the cost of capital. global news 24 hours a day on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries.

i am lisa mateo. this is bloomberg. this is bloomberg.

♪♪ energy demands are rising. and the effects are being felt everywhere. that's why at chevron, we're increasing production in the permian basin by 15%. and we're projected to reach 1 million barrels of oil per day by 2025. all while staying on track to reduce our carbon emissions intensity in the area. because it's only human to tackle the challenges of today to help ensure a brighter tomorrow.

>> i will deal hands-on with the energy crisis caused by putin's war. i will take action this week to deal with energy bills and to secure our future energy supply. jonathan: on the first day. abramowitz, welcome to work. lisa: welcome to hell. jonathan: a lot of work to do. i am jonathan ferro. futures from her by 0.8%. yields are lower by a couple of basis points. your 10 year this morning, 332.64. joining us is richard haas, the president on the council of foreign relations. the author of a book coming out early this year. always great to catch up with you.

i have seen the latest article in the foreign affairs magazine. we need to start there. why is this decade going to be so much more dangerous than the previous decade? richard: a fair question. the short answer is it is an imperfect storm. we have three things taking place simultaneously. you have the reemergence of large-scale geopolitical tensions between europe and the united states on one hand and with russia, china, iran. you also have global challenges with climate change, infectious disease where there is a large gap between the threat and the willingness of the world to come together. thirdly, all of this is taking place against the backdrop of a united states that is divided, distracted both figuratively and literally at war with itself and there is a question about whether they united states will be willing and able to play the significant role it has played the last three quarters of the century.

you add those three things up and i would say anyone watching this show has to assume that going forward there is going to be far more turbulence, far more instability in the world than looking backwards. kailey: from a business case, what does this mean in terms of doing business in china of the increasingly tight relationship between china and russia and what kind of international presence is to be expected given some of these backdrops? richard: for russia, so long as mr. putin is in charge, you have to assume draconian sanctions. with china you have to assume more restrictive sanctions in anything getting with technology in either direction. i think there will be a major policy conversation in the west, not just in europe, but places like japan, taiwan, south korea, the united states about whether it is wise to remain so dependent on the ability to export to china and imports from china. you would have thought that one

of the lessons of the current conflict with russia is that any form of economic dependence, not just energy, energy dependence confers leverage on the other side. we are now providing china with enormous potential leverage shed over the next you for years -- should over the next few years there be a conflict with taiwan. yet the downsized our economic relationship with china. bringing home certain types of productive activity i think is a reaction both to the turbulence of supply chain plus growing uncertainty about relations with countries like china. kailey: is this a government option or something each business has to decide for themselves? a lot of people have been surprised that there has not been more exit is from china for manufacturing there by u.s. businesses given the fragilities exposed by the pandemic the increasing tensions. richard: some businesses are

living in lala land. they are essentially hoping against hope. they do not think a disturbed environment politically with china, that china does not face internal issues. any business now needs to right size, downsized its relationship with china. it cannot assume that it is going to be business as usual. anyone in the technology space for sure, but anyone those -- but even those beyond technologies have to assume that if there is geopolitical friction with china, sanctions will be introduced that will be broader than technology. any business that does not have a plan b and has not begun to move towards it is putting itself into a position of vulnerability. kailey: obviously, from the perspective of the united states they are looking outward at china and the geopolitical

tensions you are highlighting at the same time that there is a sense of a very real democratic crisis internally in the united states and i'm just wondering if threats to democracy domestically hamper with the united states's ability to tackle those challenges moving forward especially when midway through the decade you say it will be so dangerous we could have a new president inaugurated. richard: you are absolutely right. we will have a new president at some point. what we do not know is what that president is going to do when it comes to the u.s. relationship with the world. in the old days no matter who was elected, we had a pretty good sense of the parameters of what this individual would do. that is not true anymore. we have the potential to lurch dramatically. that means our allies are much more guarded about being so reliant or dependent on us. it means our foes may see opportunities, what we did in afghanistan, i expect it influenced mr. putin to do what he did in ukraine. i think it could be harder to

drum up resources for sustained american involvement in the world because so much of our attention is going to be turned inward. i expect in certain areas, the partisanship will infect foreign policy it has. we had a very rough debate potentially if united states tries to reenter the agreement with iran. it will be harder to conduct consistent foreign policy against this backdrop much less promote democracy. how are you going to say be like us if we are choppy with our politics, given the fact that life expectancy is going down in the united states, we have had all the problems with lost academic time because of how we managed covid. the american model is not quite the shining city on the hill we would like it to be. jonathan: just to finish up, what is the solution? do we need new institutions to come to some kind of collective agreement and the west will deal with these issues? what is the solution? richard: i never use the word

solution. these are not problems that will be fixed. if we are lucky, we will be able to manage them. it might mean solutions, new institutions, new policies, new behaviors. but there is no solution. history does not offer those and we will not get solutions now. jonathan: that is a worrying conclusion to this conversation but a reality check for everyone. richard haas, thank you of the council on foreign relations. on the day that we are talking about apple launching a new iphone, it is not lost to anyone that they are fitting neatly into the conversation. lisa: there was an article in the past couple of days talking about how apple first tried to move the supply chain out of china and they realized how difficult it was and they doubled down on increasing the presence in that nation. the nation has done a very good job of creating, becoming the sample of how they move away and whether they build the

infrastructure to do so has yet to be seen in any meaningful way. jonathan: people like richard haas on china make me think back to the warnings about companies in russia. maybe 8, 9, 10 years ago and you wonder whether we end up in the same place. foreign affairs magazine, "the dangerous decade." take a look. coming up, emily roland, with futures up a little bit more than 0.1% on the s&p. from new york city, this is bloomberg.

>> the simple thing foreign-exchange is signaling now is that the u.s. economy is doing better than the rest of the world. >> better shape than europe. >> in near term, it will tighten , but it is highly unlikely the euro zone avoid recession. >> i think recession in europe and the energy crisis that is improving is something that cannot be ignored. >> this is "bloomberg surveillance." jonathan: rules to appearing on

this show. we had an agreement. i am jonathan ferro. futures up .1%. good morning. equities turning around a little bit, but it has not been printing for the nasdaq. lisa: it has been on the heels of hawkish discussion. ecb tomorrow expected to possibly raise rates by 75 basis points, unheard of. now it is base case for an increasing number of people, followed on by two 50-point rate hikes for the year. jonathan: i think it is ridiculously ecb pushed back the news conference to accommodate the u.s. day. then chairman powell has just dropped a speech in the middle of the ecb presser. i wonder if that gets changed.

lisa: do you think it is deliberate he is strength to mask himself and deemphasize the discussion? or is he trying to overshadow christine lagarde? bottom line, it is unclear what will be more important for markets, the ecb meeting tomorrow or friday with the energy ministers from europe on the energy crises. to me, that might be a bigger market mover. jonathan: could not agree more. if you could tell me what will happen to gas prices, kailey leinz, i have a much better actor of what next year looks like -- i have a much better picture of what next year looks like. kailey: it is whether that will actually materialize. there are questions about how they might be able to rein in demand, allowing people to potentially for more electricity. the problem in the u.k. is something that lists stress --

liz truss will have to speak to in parliament. jonathan: good luck. i think it is an occasion where circular storm -- where sir keir starmer has to let the prime minister talk. lisa: would you want to be prime minister right now of the united kingdom? jonathan: i used to think theresa may had a tough time when she became prime minister, but perhaps this is a different moment. we have to say how brave these policymakers were to do these massive things. the bond market was wide open to do massive things. much more complicated to calibrate the right policy response when monetary policy and fiscal policy is almost in conflict with each other. the decision now is not the policy decision -- something mohamed el-erian said a month ago, you have to come up with the least worse decision, and

that is tough for policymaker. these two perhaps it explains why conservative leader is coming out with some of the biggest spending plans have ever seen and a host of other financial support for households around the country. everything getting turned on its head. jonathan: the climate over the last week or so in the u.k. backing away for a moment. price action, futures of .1% on the s&p, nasdaq around .1%, as well. yields lower in the u.s., too. the dollar is strong, strong, strong. -.1% on the euro. we are coming close to 1.45 on dollar-yen. lisa: and it keeps climbing. where is the breaking point? this has been a discussion point for a long time. yet again, even as the bank of japan doubles down on its position with monetary policy.

10:00 a.m., the bank of canada rate decision. the bank of canada has been out front, first mover among the developed market economy, expected to raise rates by 50 or 75 basis points. this comes at a time where rates are at the highest levels and heading toward the higher levels seen since 2008. what is the road path ahead? we will not get much guidance from them, but perhaps we will get an indication of how the bank of canada is leading. the richmond fed president at 9:00 a.m., and others to follow. vice chair of supervision speaking at 2:00 p.m., the same time the base book is released. how much pain are they willing to see, and are they willing to go further because people have been going out and spending more? discuss with the theme of the morning. -- this goes with the theme of the morning. when you support gas prices and

keep them lower, people stay more, and then monetary policy, you do not have to worry about inflation. worse though, they come out and doubled him. that is a concern. jonathan: even as you try to set policy over the next 12 months. lisa: the berkeley's ceo energy conference taking place in new york city -- the barclays ceo energy conference taking place in new york city how did the executives see the path of oil and gas moving forward, given the fact that it is unclear how much demand is falling off a cliff in response to the slowdowns engineered by monetary policymakers? jonathan: lisa, thank you. kailey: windfall tax will put companies out from investing. how else you plan to pay some potentially 200 billion pounds in support of energy companies

and consumers? jonathan: let's think about what it is doing, capping the prices for consumers and then paying the energy companies the difference, but you are not containing demand. prices against that kind of backdrop, essentially they are just giving money to the energy suppliers. at the same time, saying we are not going to tax them more. this will be difficult. the detail of this effort in the u.k. will be hard to keep together. kailey: she will make a parliament statement tomorrow for more clarity. but everything is just said, that is true, valid questions. also, does this spin fuel inflation future -- further? 22% inflation, it is said to be possible. jonathan: ridiculous, bramo. stephanie roland joins us now

from hancock investment management. general of contagion from europe to the united states, what is the main channel, financial, economic, what do you think it is? >> i think it is a big element, clearly we have seen the dollar continuing to strengthen here, tightening financial conditions, creating ripple effects across assets. i think what is going on in europe is confusing. you have laid it out well over the last couple of days, massive conflict now between tighter monetary policy and now a bazooka of fiscal stimulus potentially coming on in europe. those two things do not go together. i do not know if you have noticed the guests you have had on the last few days and you guys, kind of this wide-eyed cockles when it comes to the idea that the ecb will raise

rates by 75 basis points tomorrow at the same time these potential gas caps will come online. how do we pay for that given the fact that the supply of oil is so limited? is it a weaker currency? what are the impacts of that? it is a meaningful move. lisa: there has been a resolve of central banks to raise rates into concerns about funding costs, leading to a division on wall street, those who believe that fed officials and ecb officials will keep raising rates, and others say we do not buy it, you're going to cut rates in the near future what's -- once again where do you stand? emily: we see this push and pull happening, going from inflation concerns to growth concerns, sort of a macro battle in the background. eventually the fed usually does win out in the form of slower growth and eventually recession. so we think the central bank

needs to move aggressively this year. we agree that the bond market's assessment of that at the stock market, everybody sort of ignoring the inflationary pressures in the u.s., clearly coming off the boil and pricing in a very aggressive fed here. we think growth is slowing, seeing it in leading indicator areas like housing. the fed is looking at economic data. we are all friends on this show, and we talk about runs do not let france's backward-looking economic data. as we move forward, we are just getting to see the impact of fed tightening actually transmitted into the economy. we think the economic data gets worse before it gets better. not a great time to be loading up on risks, and we think bonds are attractive. lisa: i know you love bonds. and it comes to the equity market, is the bottom not in yet? emily: i just do not think that the risk reward looks very

attractive in this market right now. stocks are still trading at fairly elevated levels. frankly, we have not seen the impact of fed tightening on earnings estimates yet. this morning, 12 month earnings growth or sort of flattening out appeared we have not seen earnings growth estimates low -- rollover yet. i think that happens at the 2023. we want to own some parts of the equity market. we like higher-quality companies, more defensive equities, areas that will benefit from this change in consumer behavior away from the things that we want and towards the things that we need. but we just do not think this is a great time to load up on cyclical companies, ones that need to capital markets to grow, and that is what a lot of investors are doing. jonathan: it will slow down. emily: i don't know.

jonathan: iphone slows down. it happens. emily roland, thank you. she might belong capital. just saying, might be. lisa: look at those markets. jonathan: from new york, this is bloomberg. >> jonathan is up to something. u.s. officials say russia wants to purchase millions of rockets and artillery shells from north korea, the latest sign that moscow is being pressured by international sanctions. no indication that any weapons so something completed. last month, the cia said russia approached iran about drones. vladimir putin and xi jinping will meet next week, according to russian officials. the trip would be the first foreign journey and two and a half years.

they met in beijing in february, weeks before the criminal and sent troops into ukraine. they signed an agreement saying relations between the two countries would have no limits. a document seized at donald trump's florida residents described a foreign government's nuclear weapons capabilities, according to the "washington post," which also so some of the documents discuss closely guarded top-secret u.s. operations. a warning from j.p. morgan chase, the cost of in the u.k. has only just begun. retail analysts at the bank say consumer spending on discretionary items may shrink by mid-single digit percentage year. that is even if the yuan k energy price cap is frozen. new research says about half of u.s. workers could be described as quiet quitters, meaning they fulfill their job description but are psychologically detached from their work. gallup surveyed more than 15,000 workers and says most quiet quitters are looking for another

job. global news 24 hours a day, on-air and on bloomberg quicktake. i am lisa mateo, this is bloomberg. ♪

>> ultimately, the president is going to do everything we can to make sure gas prices keep heading in the right direction, which includes a number of things like a price cap, which is ultimately set up in a way that reduces the u.s. revenues that allows you it -- allows oil

to slow. jonathan: the u.s. deputy treasury secretary speaking to bloomberg. as soon as that was announced end of last week, suddenly nord stream 1 is not reopening and output cuts at opec-plus. coincidence or not? lisa: for sure. i will not weigh in necessarily what i thought, but there is a confluence of issues pressuring the energy story, and this will not be going away, only getting worse. jonathan: futures up .1% on the s&p. nasdaq up .1 percent also. yields down, 3.32. euro-dollar basically unchanged. looking at dollar-yen all morning, 1.4473. we are getting closer and closer to 1.45. kailey: it is remarkable, we have not seen these levels on

dollar-yen to 1988, and intervention was involved then. we have got verbal intervention from japanese policymakers, clearly worried about the weak levels on the japanese yen, but it does not look to be enough of a problem for them to change course. jonathan: dollar cnh, as well, came really close to a seven handle. liz truss, new prime minister of the u.k., facing first pm q's in parliament now. she will make a statement thursday in parliament. has the call taken place with d.c.? annmarie: talked about the obvious issues like china, iran, and they also talked about making sure they can collaborate in terms of securing energy, especially as the u.k. right now

has skyhigh prices. another point of interest, they talked about the good friday agreement, making sure that that stays in place. this is something near and dear to president joe biden, something he likes to talk about, his roots and background, irish american. the worry is any u.k. policy that can upend that. it can be awkward because liz truss, the new prime minister, just over a year ago, she said the special relationship is special but not exclusive but talked about the fact it should not be like a beauty pageant who will cozy up like a teenage girl to the united states. so could be an awkward moment if they meet at the general assembly later this month. but they rely on each other and have a deep history. kailey: how reliable has the u.s. been as an ally to the u.k. and european union, especially as we head into the energy crisis?

annmarie: the u.s. has been trying to make sure they can shore up support on the european continent in the wake of russia's invasion of ukraine. that is something that we are all stern to grapple with, the question on the policies enacted by the united states and its partners, is that going to really hurt european economies the most, and what can the u.s. do to make sure that they stay in place? jen stoltenberg today said it will be a really tough six months. how do we keep this unity alive? he even alluded to the fact that we could have civil unrest because this is going to hurt your can't -- the european economies much more than the u.s. lisa: does the fact that the midterms are now within two months away and people may be looking more internally domestically in the united states impact what the u.s. is likely to do for its allies? annmarie: i think it definitely

impacts the messaging we will see. the president has been in wisconsin and pennsylvania, going to ohio. treasury secretary janet yellen going to detroit. they are on the campaign trail, trying to make sure that they show that they are policy -- that their policy should continue. they were able to get gasoline prices down. and they are trying to draw a line between them and with the culture maga -- ultra maga republicans and some of these races. but we want to make sure the united states are helping european allies and ukraine. we will have a stopgap funding measure, and with the white house is asking for is nearly $12 billion in more aid for ukraine when it comes to defense and also some money for u.s. energy. so you will hear about it, still in the news, but it will not be front page news.

the u.s. will start looking a lot more internally, and a lot of these races will get very heated. jonathan: you mentioned something there, gas prices. there has been a monster sbr release. what happens now that a lot of that is behind us? annmarie: one thing is for this money they are requesting, ukraine eight, some of that money would go to u.s. energy infrastructure. it was a monster, we talk about it all the time, but they cannot continue to tap it. one thing on the u.s. side they probably will not like to say out loud is the fact that china is still dealing with a covid zero policy, which means they have had demand destruction since the covid outbreak. once china comes roaring back, it could be very difficult for this administration, especially when those eu sanctions kick in

in terms of the shipping and insurance on that russian crude. and then the fact that they will not be able to tap that the same way they have been. it could be incredibly difficult, but at the moment now, you see a trend lower. not just on the sbr, as the u.s. would like to say, but obviously on a number of issues, especially with people worried about recession. jonathan: and ray her turn, one of the best. -- anne-marie her during, thank you. you have this backdrop in opec-plus where they are worried about capacity and have cut supply into a market they think is not picking up on some of these issues. where do you think we are now? lisa: ed morse saying it is really the u.s. and europe, not just china come over the lack of demand is. petroleum reserve at the lowest level since 1984, down about 24%

so far this year, very much at a record in terms of the pace of the decline. it raises an issue of how much further they can go, and what is the capability of dealing with another crisis? jonathan: do you think this was a crisis this year? lisa: a crisis of confidence, and political. jonathan: you would both call it crisis? lisa: what would you say? is the iphone just slowing down? is that what is going on? clearly. ♪ if you wake up thinking about the market and want to make the right moves fast... get decision tech from fidelity. [ cellphone vibrates ] you'll get proactive alerts for market events

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jon: running a poll on twitter, does your iphone slow down --? a .2% on the s&p. nasdaq up as well. eight to nine percentage points every day over the last seven days. emily rowland at john hancock

said just a few days ago, she wants to see more --. still max underway. still trying to work out what that means. on the 10 year, the highest is just south of 350. 332 on a 10 year running three basis points. 250 to 3% on the 10 year, year end. ultimately speaks to the fact that capitulating to this point of the year. they think ultimately yield is not going to come down. on the two-year, we have seen the high. right now we come back by about four basis points. what is happening in the bottom

markets with things right now, ripping right through. just south of that. 147. 1.1%. katie, i think you said it all morning. you have got to go back to the summer of 1998 to see the japanese -- this year. kailey: what is the japanese do? buy more bond. jon: a look at apple now. kailey: this is barely moving or not really moving. there has not been that much action under the hood of the indexes which are fairly positive. i am looking at certain energy companies in the u.s. that are gaining despite the fact you see crude prices falling. lisa: some people talk to me

about warren buffett premium because he had favored some of these stocks. .34%. .4%. that is not a mover. it is moving a little bit more. valero up 1.2%. gain earnings after the bell, we are watching those shares down ahead of that 1%. -- .1%. they're going to get into crypto asset i had that timing. that seems to be weighing on stocks. apple, we are going to be talking about that pole. kaylee, you can tell us what is going to happen before 3.4%. i am not going to weigh in on the computer -- on the conspiracy. perhaps it's not sensitive enough to notice the incremental slowdown of the drip, drip. so do you buy a new one

everything on time? jon: no. lisa: this is a fair complaint that people say with update. jon: it is just to complain about -- hasn't tom made a career out of that? lisa: complaining? i think he has taken off to grow a beard and plan a trip. united airlines upgraded their forecast on the higher demand. this was the busiest weekend, even for passing -- even surpassing pre-pandemic norms. there is some optimism still. jon: i can confirm united it's tom's preferred airline to fly with. lisa: i have heard that more than three or four times. jon: personal preferences, there are other airlines to fly with if you want to stay out of trouble. the small print. [laughter]

head of fixed income, getting closer to the high of the 10 year. everyone has told me we have seen the highs. >> we are seeing the two-year breakdown. probably sometime today. in the 10 year, we are 15 basis points from --. in europe, we see the 50 basis points probably tightening in the ecb. we probably challenge 3.5%. gregory: that is something influencing the u.s. markets. it is a bearish market and rates are going up globally. kailey: how much does it have to do with the credit side? it seems that had a lot to do with it. these corporate sprinting to the market looking like they are maybe going higher. gregory: also the ism numbers.

all in, you are seeing higher rates globally. inflation in the united states still increasing. it is going to be a real problem before the fed is there arm around the demand side. kailey: how much cash do you want to have question mark gregory: if ever there was a time to build a quiddity, it is right now. one, it is very difficult to raise liquidity if you have to sell assets and it is getting tougher in the fixed income markets. measuring treasury liquidity with the impact of tutees starts to work within the treasury market. an overall we think there is the opportunity. there is the kind of gap you saw yesterday with yield down 15 basis points. strong issuance in the market, as you pointed out, you want to have advantage to -- you want to be able to take advantage of that if it happens. lisa: have you ever had more cash than you have now?

can you give us a sense of what that means? gregory: it depends on portfolio objectives overall. it is not going to be 100% cash in that. five to 10% boost in the minimum and we are shedding durational as well. if anything, we see steepening in the yield curve. you will be rewarded with higher yields with 2, 3 and five. kailey: wondering about credit, do you think it is still a leading indicator question mark or is it a lacking one? gregory: it moves in tandem with stocks. the ones that underperform first, talking about capital structure, -- it worked his way up to double-b. fundamentals are quite strong. also for a higher quality, high yield space. a little bit more down on quality. first i look for a break in market. that will work its way through

the ign market. >> i want to sit on this for a minute. hanging in there as a reason to be bullish on stocks. a lot of equity investors will look at. the credit market leaks, why is this time different? why is it not going to lead but lag in tandem? gregory: we are looking at an economic slowdown. we don't think that is going to have a negative effect overall on credit markets, but it is going to lead to a shift in capital and less appetite for what we are seeing now. technicals increase supply, should take it as an indicator the treasurer is looking for the open window to push corporate debt into the window. perhaps his window is not going to be open for a long time. >> i go back to this idea, if credit is not the leading indicator, if credit breaking is

going to cause the fed to reverse and move away from rate hikes, perhaps that will not kick in as quickly as tuesday's equity this time around as it has in the past. jon: rallies were seen to be solved and necessary things to be bought. greg, is that the case for you? i just got a message from -- driver who was -- if we get back after. gregory: the opportunity to take advantage of other issuance. i don't think this is a situation we are going back up to 4% and a situation where going to see a breakdown overall in credit the way we saw in march of 2020. watching carefully because you have this three legged stool. this fed policy reaction and market reaction and equal 9 -- economic data. the signals from anyone of them

to pay attention from the other two to be flat-footed and put your money in place to months down the road. jon: greg, we always appreciate your time. always welcome. gregory staples, dws investment mgmt americas inc. a very short list of people, including greg staples saying that is not the case. lisa: we saw -- changes view. that to me was significant. a case for yields to go higher than they did. jon: we see how that develops in the coming weeks and days. that engine story the last couple of months. lisa: talking about a 70 point isis hike from the ecb.

a fiscal policy, borrowing more to plug an undetermined gap for an indeterminate amount of time, kind of concerning. jon: if rising rates and qt have seen rising -- have seen radically different backdrops. we are going to get a 75% basis point. i don't think that should be lost on anyone. this is a big deal. kailey: it devil he is a big deal. my question is what impact will it have? when you have inflation driven by an energy crisis that in no means looks like it is going to be resolved quickly and the euro is weak, not just because the euro weak, because the dollar is strong, how much does it make a difference in either of those equations question mark -- in

either of those questions? jon: the yield down -- basis points -- just a little bit in the last 20 minutes or so. .25%. from new york, this is bloomberg. ♪ lisa: with news from around the world, with the "first word", i am lisa mateo. trust says she will build more nuclear power and -- oil for the u.k.. >> i am against a windfall tax. i believe it is the wrong thing to be putting companies off, investing in the united kingdom. lisa:truss said the u.k. --

it's pattern to growth. putin told a form that gas flows to europe could resume as soon as sanctions are lifted and russia can get the pipeline turbine serviced. he said "give us turbines and we will turn on nord stream 2 morrow." steve bannon will surrender on thursday to criminal charges in new york. last month prosecutors were investigating whether bannon fraud investigators. donald trump hardened bannon when he was thrown with several fraud charges. reality tv star and entrepreneur kim kardashian has a new this is venture. see -- she is some of her partners are launching a private equity firm. according to the wall street journal it will focus on consumer business. the apparel business card is she and -- kardashian started in

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>> we move from a world where in the last two or three months we are worried about a global recession. now the combination of european problems with energy and china is the more significant problem. jon: this -- from j.p. morgan -- i think it is fair to say. they had a conversation about how bearish on the economy. we know the economy is not the stock market. kailey: i wonder if those two are going to --.

jon: the nasdaq down a little bit more of .1%. yields down basis points. on a 10 year right now, 333. coming back by a couple of basis points on a 10 year yield. kailey: the story of the morning has to be the dollar. crucial as we talk about this race for stronger currency from the two longest a comp -- for the two largest economies in the world. we are looking at a histogram of chinese exports to the united states. chinese economy shrinking for the first.

this is price in dollars. it really speaks to the effects of the trade. what happens when those exports decline further on a year basis and that exacerbates the issues you are already seeing. that is going to be the question. jon: kriti gupta, thank you. joining us now, a man who knows something about china, the chief of bloomberg economics. lockdown on, locked down. ultimately, it is up to them. how much are some of the forces unleashed in the chinese economy

this year, how much it out of their control? >> we are seeing the limit, new, more infectious variance. forcing them to lock down entire cities. we are seeing it in real estate as well. yes, china's policy makers retain tools to upset and prevent the words -- prevent the worst -- but certainly they don't have the space or the tools they need to prevent a crunch in correction. all that means for their growth. lisa: right now we are also seeing exports falling overnight. shutdowns affecting the international business. what is the real pain on the ground? what is the latest for what we

can expect for gdp in china this year? tom: what you really need as a chinese leadership facing a severe drag from covid zero lockdowns and some of the shrinking real estate sector is oil exports. this is a movement where china wants to see those export numbers is surging in the u.s. and europe upsetting some of those -- at home. that is what is happening. covid lockdown, real estate -- to the mix, it is difficult to be optimistic about china's growth prospect. the government is predicting five point 5% growth this year. they are certainly not going to get that. we think it is somewhere between the three to 4% range. lisa: the increasingly tight relationship with russia,

exports of refined oils increased, they are importing russian oil and tending it back to europe, how close is this relationship? are we getting a sense of that? tom: at the start of this year, before russia invaded ukraine, who traveled to beijing and the chief and the two of them declared a pardon between the two countries. the relationship is there. china has an explicitly blamed us on russia's side. they have not said they support the brutal invasion of ukraine. but neither have they lined up with europe and the united states and supported these sanctions. showing increasing trade between the two countries, we can all draw the interpretation from that. kailey: speaking with the

council of foreign relations earlier in the show with the risk for americans and companies doing business in china, john raised the point we used to talk about the threat of doing business in russia. we have seen the exit is of companies from that market. if something were to happen in china because it becomes too contentious and difficult to conduct business there, what impact with that ultimately have on the chinese economy? tom: there is a big difference between russia and china that we need to keep in mind. if american businesses stop doing business in russia, that is a little bit of a blow to their current revenue and future great prospect. if they stop doing business in china, china is the second biggest economy in the world. and i decades time, they could well be the biggest economy in the world. pulling out of china is a big decision, potentially a big blow to revenue and future prospects. it is not something companies are going to take lightly.

the growing hostility on china and the united states, the threat of sanctions, the threat of tariffs are taking a toll. all of these things are forcing a reconsideration of the u.s. and european business strategy when they think about how much business they want to be doing there. jon: i remember when you first came out, the bubble that never pops and we had a conversation about the title. have you reconsidered that title yet? tom: i haven't reconsidered it. not only have i not reconsidered it, i just published a second division. [laughter] i am hoping i do not have to make a call to draft for a new title. my view is that there are serious stressors on china's economy right now. covid zero, the real estate slowdown. at the same time, policy -- china's policymakers -- china's

banks are very well-funded which means they have a cushion to absorb the inevitable increase that is going to come as the property sector contracts. the bubble is the first thing, i can see the air coming out of this acceleration. jon: tom, brilliant to catch up with you. tom orlik, bloomberg economics chief economist. i am jonathan ferro, this is i at fidelity, your dedicated blo 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.

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>> you're looking at a very precarious global situation, you certainly have to do something. >> i think central banks is starting to understand they are not --. >> this is a market talking

itself into a friend. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa's the noise. jon: future down .10%. this time tomorrow, -- will have a rate hike. lisa: not only with president lagarde, and at the same time, we are going to hear from fed chair jay powell. she has got the more pressing job, how farther they are willing to go. with gasoline prices and natural

gas prices, net gas prices determining policy? jon: if you could tell you what is going to happen with gas next year, i have got a better idea of what monetary policy will be like. the head of the european commission spoke this morning and said she wants to stabilize its prices for europeans. i wonder whether you can actually achieve both at the same time. kailey: it seems there is a lot of competing objectives for europe and the u.k.. including the fact they are talking about capping energy prices so consumers can afford their bills. they can afford more energy spending. which doesn't do anything to affect amanda but they also want to bring the man down so they

can get through the winter. it is so difficult. i don't ultimately know if there is a good policy prescription for pricing like this one. jon: that is the big problem, we are in a situation where you don't have the optimal policy decision to make. this comes down to what is the least, worst decision. lisa: the least, worst decision politically or economically? and more is probably has interesting things to say, saying the market works. you're seeing demand man fall off in the u.s. for gasoline. it is evidence people are driving less, reducing consumption in the face of higher prices. i won't europe take the lesson? why are they trying to plug the gap in find themselves in this ever spiraling whole? jon: the big issue with this u.k. exports.

if you're going to cut prices in take on liability, shouldn't we be doing something about demand given limited supply? limited supply for the next several months? lisa: how many aspects can you really control at one time? deutsche bank coming out saying a recession is inevitable in europe at this point. what cannot government do to offset? it is just supply and demand dynamic. jon: deutsche bank ceo. deutsche bank ceo saying how deep it will be. kailey: the secretary of treasuries says also during recession, it is a likely recession -- it is a likely scenario.

it is plausible. it just speaks and very difficult picture across the atlantic right now. jon: 11423 -- 1.1423. the nasdaq 100 down point -- down .1%. not final regulation, not crypto, on the economy later. 333 on the 10 year. lisa, when is that address? lisa: 3:33 p.m.. jon: a combination of a huge deficit and some rate hikes could be a positive sterling backdrop. i expect sterling to hit 110 this year. lee sterling joins us right now.

what is going on? lee: everything you have been talking about, you can argue it is undervalued gas, you can argue a credit position, yes, that has been true for months. still, we are down to 114 now. my first argument was 115, we hit that. no reason to change the view the trade is downward. with the energy prices, the economy is going into recession. the bank of england told us that a few weeks ago. we have yet to see the package tomorrow. it is going to expand the deficit. it is going to be huge. projections are 170 billion pounds. the whole deficit in 2019 was 50 billion. you are blowing up the deficit. lisa: when do you get concerned about capital outflows? a lack of concern for foreign

investors being called upon to fund this effort? lee: you look to the price action over the last couple of months and you can argue that we went around 160, 170 in 10 year yields to 3%. we didn't see moves like that anywhere else. you could argue that may already be happening. you have 70 billion uncontested. we will see how she is going to fund it. a massive dollar increase. you have got a significant -- and the u.k. as well. you can have both deficit in the gb -- in the gdp. kailey: liz truss and pmq talking about she does not want to have -- profits for oil and gas companies. it raises the question how this is going to be paid for. if we could come back to how this reads through, talking

about the weak pound you describe, the other side of that is strong dollar. is there any barrier to that dollar strength right now? it's just keeps on going. lee: arguably the two biggest barriers are inflation and positioning. that has been the case for a while for the dollar against the euro, the dollar against the yen, the dollar again sterling. it has been that way for a while. the fed are going to be hawkish and keep doing what they're doing, but the u.s. economy is in much better spot. it is not a great spot, but it is in much better spot than europe. the euro is a little different. the yen of all is the most overdone. when you look at europe, the dollar is in much better spot. in relative terms, yes.

that is what we are seeing is that is why the euro is down here. but now these moves are going to continue. there is no reason for them to stop right now. jon: a relative case for the u.s. is better than europe? is that a reason for europe to buy right now? lee: it is if you have capital flight from europe. if your investors don't want it there, you want home. maybe european investors, you want to invest domestically in the currency that is declining, or do you increase allocation overseas? if they want to keep going, then, yeah. jon: if you come to the united states, where do you go? dollar assets, what assets specifically? lee: you can go to cash in the

u.s.. you're getting zero right now. 50 basis point or 75 basis points. but what the dollar gives you right now, if you are a european investor, you get a yield and you get a safe haven. you're buying for your overall portfolio, but once you get your yield, why would you do that? jon: is that the general trend of things that will continue until year end? lee: i do. the first half of this year, 50% of the invasion happen, that was safe haven. we know the dollar is safe haven. then we got that rallying in equity. the dollar still went up. that is when it became more of a carry trade. investors are not massively positioned to risking their portfolios, but given that, they are still nervous. the dollar gives you that and it gives you curry.

-- gives you carry. it doesn't give you any yield so why would you choose the --? jon: i say this as we get closer to 145, would moments ago, 144 .99. the height of recession. lisa: what is going to break it other than a root weaker dollar? even being in cash in the u.s. is a better trait than anywhere else. and possibly equity. what do you buy? a lot of people with the dollar, certainly saying yes. jon: a 1.5% wu aussie dollar, yen. kailey: the new iphone, 75% say

yes, their old iphone slows down with a new iphone comes out. jon: what do you make of that? kailey: it is a conspiracy. jon: who said anything about a conspiracy? kailey: the people have spoken. jon: they feel like it slows down. from new york, this is bloomberg. ♪ >> keeping up-to-date news from around the world. i -- with the "first word", i am lisa mateo. according to the washington post, the newspaper said some of the documents closely discarded top-secret investigation. top leaders in china meet -- putin and ching met in beijing in february weeks before the

kremlin invaded ukraine. they say relations between the countries would have no limits. tomorrow new british prime minister liz truss will set out her plan to help households and businesses to deal with the soaring energy bills. she's old today during her first prime minister's questions session in parliament. >> and our energy plan, it will help support businesses and people with the immediate crisis as well as making sure there are more -- there are long-term resources available that will help businesses and households. lisa: a traffic tax on energy companies. global passenger demand remained strong according to the iata. traffic was up 59% in july from the previous year. it is now about 75% of precrisis levels.

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>> inflation fees are beginning to break. you have corporate consumers that up till now are remaining remarkably resilient. the fact of the matter today, the u.s. economy is re-accelerating now. jon: yesterday, been laid learn. everyone ignored that global pmi. lisa: breaking down why and showing a direct correlation to lower bills at the gas pump to higher bills elsewhere as people settling into traveling over the weekend. jon: can we have a conversation

and go to -- about the iphone. let's talk about the new iphone. what is the price point of this was going to be? >> i don't think there's going to be a price increase or price decrease this time around. the camera might change a little bit on you. because of the name of the event and what elon musk did a week or so ago is perhaps adding some space connectivity to this vice. jon: what does that actually mean, walter? walter: it means if you happen to need to send an emergency text message and maybe there will be a satellite constellation to help make that connection. which is very different from what elon musk trying to propose. what elon and t-mobile were attempting to do next year. kailey: there were not that many advancements to the previous

edition which is why people said this could be the problem. you see one chipmaker after another saying the demand for hardware in general has been going down significantly. what do you need to see to remain constructive on apples outlook should mark -- outlook push mark -- apple's outlook? walter: i am not sure this product this quarter will matter. if it is the same price, 100 or $200 cheaper, not going to happen. are consumers going to be willing to spend that type of money going into this december and into the march quarter? that is a big question for all of us to figure out. kailey: it is not just a question if they want to spend on the new iphone, what about the new watch, the new?

walter: that is a valid point that appetite could be waning. on the flipside, the apple ecosystem is superstrong. it is the watch, the airpods, they originally came out and many people thought they looked ridiculous. now everyone has them. you see the stats apple gets every quarter in terms of new customers who never had a watch or never in the apple ecosystem. the apple ecosystem is so strong, they give you a new watch, maybe at some satellite connectivity, maybe your battery is getting a little weak, there are plenty of reasons. kailey: i don't want to still john's question -- still john's thunder with that question. i we more worried about -- on the demand side? walter: i don't see how you can get past supply side concerns. there are still geopolitical

issues you have to address. if you want to move manufacturing from one location to another location, where you're moving it from, there is a country they are where they may not want that to happen. there are some things they can do in terms of limiting purchases and things like that they can impact. you are never fully out of the woods. can cook specialty is supply chain. he is a supply chain specialist. hopefully tim has got a better handle on that. jon: we caught out -- we caught up with richard haass this morning. that is a perfect example of a company stuck between china and the united states. do they have to make a decision at some point? walter: hopefully they don't have to make a decision. there is always noise to watch. visiting taiwan and that is going to create additional

friction between the u.s. and a u.s. based company like apple and china. hopefully this doesn't lead to anything, for all of our sakes. you have to keep watching the tea league to see which way this is going to bend. lisa: does this mean it is going to be more expensive? there has to be some built-in redundancy to offset the risk. walter: unfortunately, you cannot slept -- you cannot snap your fingers and create redundancy. as we have seen in various forms of the supply chain, where we learned there are certain products made in countries where the country, for whatever reason if they cannot ship things out, it impacts us globally. this is tim cook specialty on the supply side. it is still not easy to snap your fingers and switch supply from one location to the other. jon: i want to give you

multiple-choice, we can talk about liverpool in the league, or we could talk about iphones magically slowing down when new ones come out. walter: i think the handshake with coffee, that was the final straw. jon: i have been dying to discuss at our morning. lisa: i don't hate football, i am just into rounders. jon: a short pass, rather than a long pass. i think it is what baseball was based on. lisa: [laughter] let him get out of it. jon: i gave him a choice. i don't want people at apple thinking this is an agenda i have got. it might be magically, it might be coincidence. it might be my experience,

someone pointed out, you get used to something much quicker, it seems like the old one is much lower. lisa: did you borrow all of your friends phones to see how fast they are? [laughter] jon: the updates, -- then all of a sudden it seems sluggish. lisa: the charging is also an issue. jon: what are you upset with about the charging? lisa: after a while it is hard to charge the phone and some charges don't work. it usually happens when i am not fully locked in and i haven't had vacation in a while. jon: all right, coming up, we have got a poll out there, on to kaylee's twitter.

george saravelos, with the euro breaking down 19. that currency pair is negative. about .8% of 1%. a recession higher. having a look at 145 all morning. from new york, this is

jon: why even buy new things? a poor framing of the question. good morning to you. kailey leinz, jonathan ferro.

cable right now, 114.35. came very close to a second handler this morning. 145 over the last hour. 144.99. it is all about dollar strength. fx research over it deutsche bank, george saravelos. george: you take europe and the producing over the last 18 months, what does that mean for

how much it has impacted the market doesn't really know and tried to grapple with that question. you mentioned the yen. the dj -- the doj is the equivalent. it is basically following a policy of neglect. we haven't spoken about the yen for the last two months. if you had all these things together, ending up the safe haven of choice. there's all these issues in the rest of the world. it becomes very difficult to understand and calibrate their value given these huge moves we have seen with energy prices and change in prices, as japan and the covert situation in china. lisa: when did we reach a breaking point, george? levels we are last seeing or the paces of levels we are last

seeing, 2020 which prompted --. george: some countries are even exceeding that. if you go back to the 1980's, 19 84 back then get going. the dollar kept going. it became a bit of a softer filling situation. what it took to turn things with called intervention. i still think we are far away from that. one thing that -- one thing that will be able to shift things, of

course we have issues outside the u.s. with europe and asia. it is very difficult over the next few months to see these fundamental issues with some certainty go away. it is very difficult to call the dollar and --. lisa: what is going to stop the euro from going to 90? 0.9 on the dollar? what is going to stop begin from going to 150? what is the pivot point for some of these currencies if there is not some sort of circuit breaker? george: there are two things that could present extreme moves. in japan, the bank of japan rises -- the ecb becoming more aggressive. i don't agree with the argument that it is going to be negative

to the currency because it hurts growth. you're going to see the yield -- the ecb is one and the right fiscal response as far as the energy situation goes. that is one of the differences is a become more interesting. kailey: you are saying the ecb can support the hiking, but not the bank of england? george: the ecb is central banks can slow down the -- but it is not one of the essential drivers. you need a resolution on the energies side of regulation. i am still surprised by the lack of urgency from the bank of england. how much more they can do. you have got inflation pictures that we are very likely to get

very sizable fiscal amounts from the u.k. that may help inflation. they are not going to allow for any correction on the demand side. i worried the u.k. policy -- is not there. this is self may be quite harmful. kailey: how harmful? what probability would you put around -- at parity? george: what stands out is the position is much more vulnerable. you have got a very large deficit. real rates feel very low. it is all about policy credibility and alignment.

i fiscal stimulus and the bank of england the point of regulation and not hiding -- not heightening 75 basis points. i worry the very large deficit the u.k. has for the rest of the world. the challenge can be very few levels. the u.k. has struggled. lisa: you were talking about how the appropriate fiscal policy -- what does the appropriate policy look like given that a lot of households are really struggling. it is not five dollars a barrel of gasoline in the united states is very -- is way more extreme and punitive for households. is there something that could support the euro? george: yes, you have to target

policy, especially for the lower income households. but at the same time, you have to see how principles work, how demands drop. the european policy response has been quite aggressive in that implications very extreme. at the same time, the risk to support low in households. it is not completely unfunded. the significant energy summit happening on friday, but what allows the market to go to work, preventing more of the more extreme risks, it is headed in that direction. kailey: you mentioned the japanese yen a few times. flirting with 145 to the dollar,

the weakest level we have seen going back to 1998. you also said japan is sticking with its motto. is there a level on dollar-yen for working point four corona? george: i don't think there is. from a macro perspective, you get extreme disorderly moves. then it becomes easier to invoke the g7 agreements on market moves. even the yen move, 25% is orderly. and it is being aligned with what the doj has been doing with policy. i find it very difficult to be in a situation where the yen will be credible from the dollar perspective. what may happen with corona, for

example, you get an governor with a slightly different approach. i am not sure it will be credible. the news will need to be higher. they are not especially volatile. jon: george, thank you. what a world you guys are in right now. george saravelos, at deutsche bank. how can the doj complained about this? it is orderly, it makes perfect sense. lisa: when does it become a problem? we can support this because inflation is good and we have 2%

inflation. it is not great. we still need to get the economy going faster and it supports us. on that fundamental point of view, is not importing too much inflation. jon: maybe the situation with the fed balances things out. for a japanese policymaker, maybe that comes first. lisa: one set dollar comes out, it will be easier. jon: i told you everything that was going to happen this year. you wanted that safe haven, trade has not knocked it down. lisa: everything has gotten flipped on its head multiple times. couple of months ago people were saying duration. jon: u.s. dollars worked out. katie, where did that pole wrap up? kailey: it is ongoing. still three quarters of people

say their phone is slowing down. jon: can i say, thank you, on a serious note. fantastic to have you on the program. tk is going to be back with us tomorrow with lisa and jonathan ferro. dollar dominance is coming up. this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world. with the "first word", i am lisa mateo. putin blames west for pipelines -- for the shutdown of pipelines. he says

turbine service. he says "give us turbines and we will turn on nord stream 2 morrow." russian being pressured by international sanctions, there is no indication sales have been completed. steve bannon will surrender to face criminal charges in new york. at last year they were investigating whether bannon defrauded investigators in the we build the wall project. donald trump pardoned that but that pardon doesn't cover state charges. in california, avoiding blackouts for the second day in a row. for several hours tuesday, they impose the highest level of emergency. consumers are urged to turn off lights and air conditioners. authorities preparing for more pressure on the power system today. 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 lisa mateo, this is

bloomberg. ♪ is as much a good thing as it is a bad thing. fast-forward 60 months, euro may be at --. we talk about coordinator intervention, i don't think you can roll this out. >> the breaking point for the dollar hits the highest level since 2002. one of the biggest factors in deciding the dollar's strength and how far it can go and what central banks have to do to flight -- to fight the inflationary -- it has been incredibly difficult to get the story right. cheap officers of big energy

companies, -- in new york is joining us with ryan lance, conocophillips inc.. alix: conoco stock is up. in the midst of gas prices, --. talk about a solidarity contribution for fossil fuel companies. where it has paved the energy crisis. what is your response? ryan: all different conversations going on. we are going through a transition. we have to do it more sustainably. struggling with the right policy. to figure out how they want to go through the transition.

reducing supply long-term, you have to think through how they are going to manage their whole supply chain situation. what it means to eliminate russian supply. it is according to that. it is something they are going through. the solution, tax what you want more of in the short term. you are going to put your money and other places and supply it's going to go down. alix: for you, you are and oil company. the kind of investments you have been making are pretty tremendous, whether it comes up from equity stake here in the u.s., -- announcing yesterday about a jared starting up a u.s. hydrogen plant. what is the runway to process right now? ryan: we looked at a couple of transactions over the past two years. contract positions and shell

acquisitions, going to be rising over time long-term. gas has a transition fuel. that led our discussions. ultimately we wanted and lng position in the u.s. so our gas doesn't get stranded and we can take advantage and some of the arbitrage we see long-term. that is what led us to that recent decision to partner with --. their west coast position as well as grow further on the lng side. this is working with our customers we have known for 45 years trying to transition into blue and green hydrogen. we have the resource to land position in the cold.

alix: what is next on ryan's list? any other kind of partnerships? ryan: we are investing more capital, growing the company. we are pretty please at what we have got in the portfolio right now today. it averages less than 30,000 a barrel. we are giving 30% of our cash back to our shareholders every year. and growing the country -- growing the company at the same time. alix: are there any other kinds of deals, stuff you can do? ryan: to grow on the west coast to mexico, we will take a look at that, grow additional trains in port arthur. we are interested in growing more in australia. we are interested in playing --.

alix: at what point do you think you -- to get more gas out of the wells you have here, versus oil? is there every time that happens? ryan: we are interested in stable programs going forward. our company says we won't invest on anything over than 40 -- supply. the margins we see in the business and returns, we know our gas position is going to grow as our oil position grows. we don't want to be dislocated from the market. alix: all of that is in support of being -- cash holders as well. you have got to grow, be in the right energy space and deliver cash returns. that we know all those cash returns we are seeing are sustainable? ryan: our community gives -- to our shareholders. alix: that is a lot.

ryan: you better have a company that can grows 70% of your cash flow. the question is what can you do at 50 and $60? that is our commitment. we have worked really hard over the last few years to get our portfolio in place where we can invest 70% and grow our company on that. keeping a balance sheet is really strong because volatility , you have got to have a strong balance sheet to manage it. alix: is there ever a time when people think it is too much on distribution -- question mark -- too much distribution --? ryan: it is different from what the capital programs going to be. we have commitment to our cash flow and 30% back to the shareholders.

some of these companies have to be careful. among bunch of cash to shareholders. we won't let the capital rise to really grow their companies. alix: do we get back to two dollar natural gas? ryan: we get back to 50 and 60, there are times we will see that. i don't think we are going to see that in the short term, the supply and demand are driving us to these kinds of prices. that is the world we are going to be living in for the next few years. alix: do you see any sort of demand from china, europe? ryan: covid coming back and impacting china's -- spritzing demand growth, you look on the supply side, the lowest level

they have been in five to 10 years. we have got to rebuild inventory. what happens when they leave the bargain? we are going to see these elevated prices for a while. alix: you guys are still working on your budget for next year, but do you have any idea how much higher costs are going to be next year than this year? ryan: i would say a 7% range around the company. you will see a reset of capital programs and operating programs as we go forward. a permanent base, you see much higher rates. all industry seeing that as well. the advantage of being a global risk company, --.

our supply model suggests we go to the lowest we can. alix: ryan, it's always a press -- it is always a pleasure. ryan lance, ceo of conocophillips. back to you. lisa: certain backdrops, not only when it comes to the supply and the man, but at a time when the u.s. and europe are trying to keep things under control. that was ryan lance, the conocophillips ceo. i have a question, kaylee, i am looking at oil prices at the lowest since january. crude -- and wpi. we were talking about this with ed morrison earlier this morning. the why is less -- than you

think. it is also europe and also the u.s.. how much is that we are really seeing? kailey: that demand side rather than the supply side, focused on previously. as we talk about the global risk of a growing recession, recession is in evitable and germany. it is the most likely scenario. no longer does this seem like a china central problem. lisa:lisa: we are also looking at a stronger dollar helping things as terms of bringing down prices. other markets seeing a retracement of yields yesterday. across all of the developed markets. the dollar still front and center. the strongest going back to 2002 in a broad index. kailey: it is absolutely

remarkable. the levels we are seeing, down to 114, the yen has seen 145. these are remarkable moves. for now there is nothing that is going to stand in the way. lisa: coming up on "bloomberg balance of power", to really push this conversation forward in terms of supply and demand, what they are planning for and the policy potential for windfall taxes and what they will do with that. this is bloomberg. ♪ >> welcome back to another bloomberg update. caroline garcia --

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>> from the nasdaq compensate it has been brutal. from new york city this is looking to get into a drop on the s&p. the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg "the open" with jonathan ferro. jonathan: live from new york we began with a bank issue. >> strong dollar. >> unrelenting u.s. dollar strength. >> it reflects the strength of the u.s. economy