>> doubled down on what they said. >> the european sentiment has been cited as fighting invasion. >> the fed monetary policy based on what would be best for the united states. >> it is hard to say have at is going to affect people. announcer: this is bloomberg surveillance with john keene,

tot -- tom keene, jonathan ferro and lisa abramowicz. jonathan: a momentous week in the united kingdom, a transition from queen to king just now. time: four more as king charles said, the example of selfless duty. as we talked about here, he has to make the shift from prince charles to king charles. we've seen some of that happen over the weekend. jonathan: making history in this very moment. >> this queen is a massive transition for the united kingdom, for the world. with king charles entering a very new regime both in economic and social levels. tom: the stunning television footage i saw the other day, i was honored witnesses.

to see it on tv, the ascension onto the must of been a shock for the nation. jonathan: all knew this moment would eventually, but you feel utterly unprepared for the emotion that comes with it. tom: as an american in the united kingdom, i thought it was stunning and she said you are never prepared. jonathan: it week of gains on the s&p 500, about 3.65% on the s&p last week. futures right now, positive 20 point on the half of 1%. yields coming into that a basis point or two. 10-year gilts have been climbing. six straight weeks. lisa: it is sort of stunning

especially considering that so many people had seen ahead at deutsche bank put out a survey saying that more people sought yields on 10 year treasuries to 5% than 1%. we are tracking the movement in eden borough. dealing with the emotion not only of her passing, but also the reign that really exemplified an entire era for the united kingdom. king charles ii flying to scotland and he is going to be meeting with the first minister of scotland. 8:00 a.m. eastern time, in frankfurt, one of the biggest moves is the euro. strengthening the most in six

months vs. the dollar talking about how to counter some of the weakness that has been driven by high electricity prices. we are watching the food backdrop, and this comes as -- i don't know if you've experienced this, but i've gone to the grocery store looking for foods and vegetables, and there is nothing left available. if you look at the actual data, it is also going out. a whole host of issues. jonathan: are you feeling wealthier in the united kingdom? i would love to the truth. lisa: absolutely, 100%. you could feel the difference because you could kind of transfer it. tom: it was an interesting weekend.

i attended the requiem mass for the queen at the westminster cathedral where some of this was for the extraordinary -- was really extraordinary. jonathan: a walk and talk. i gave her a history of the city of london. we went down to westminster. tom: did you go the other way? jonathan: made it to mayfair. lisa: it was phenomenal, incredible walk through the streets. jonathan: let's start the team coverage. lizzie is outside buckingham palace. can you walk us through what we could expect today and the rest of this week? >> i arrived here before the sun

came up and people are paying their respects. now, they've got the bagpipes, pomp and circumstance is going to continue dated today. king charles it's going to go to edinboro for a ceremony of reflection and tomorrow they will meet back here. until the funeral from september 19, the queen the lion state at westminster hall. the u.k. newspaper today, a different estimate, expected to file past a their respects. this really is a huge moment. tom: for the american audience,

for the international audience, explain the symbolism of the day of scotland gained the linkage to england and the rest of great britain. >> it is a real difficult moment for charles to become king. the calls for independence have been growing. it is also the commonwealth, which really is a sort of post-empire, just a family of nations. really, this is why you are hearing in his success in -- succession speech, his commitment to rule with loyalty. the former nation convey u.k. and this family of nations that make up the commonwealth. increasing republican sentiment in different corners of the globe.

lisa: we did see the united kingdom very much facing regime change with the question about the monarchy as well as the new energy regime. i wanted to touch base with you about what happened over the weekend on the energy front with european leaders with price caps being put out there as an ordered to counter russian profiting. has anyone talked about what it would mean if russia did retreat, how that would affect the energy and the gas situation? >> the question is no, purely because everyone here in brussels was stunned on saturday. they are able not to push the army back, nothing short of imagistic's catastrophe for russia.

today, the question is not so much about the energy, but what happens next? can ukrainians actually win the war? this is an embarrassment for russia and the obvious question now, within go from special operations the full on war? that could unleash a lot of forces that we haven't seen until now. jonathan: as any of this change the fact that we still have a policy response to this war that regardless of the outcome of it, it is very unlikely if this war ended tomorrow, that the europeans would go back to consuming russian gas and quite the same way? the question i want to ask that has been acknowledged much more is the persistence of this, the duration of it. the fact that it might not be

one week, it could well be two. >> belgian prime minister said it was going to be five very difficult years for the european union. we are talking a complete change of systems. but i do want to say i have new data that came out today. the european union was importing about 40% of gas from the russian federation. that number has now gone down to 9%. what i hear every time on the record is that the energy relationship between russia and the european union is over. this is the end of it until perhaps, in some way, the end of the russian federation as we know it. the time being, every european special company, this is --.

jonathan: we appreciate your time. germany has prepared for russia to launch -- because of the war against ukraine. the worst type and paste outcome has become the base case for a lot of people, and that is that more and more politicians say that this can't go on way beyond the winter. >> if the worst case becomes the best case, why are natural gas prices in the united nations and in european union falling. how much are people responding to the worst case? how much are people getting caught up seeing the whites of the victors eyes?

[over talk] tom: the united kingdom, being a meteorologist is like heavy lifting. [ove talk] tom: king charles -- jonathan: coming up, a u.s. banker in chief investment officer live from london. this is bloomberg. >> keeping you up-to-date, king charles the third addresses settlements of time today, telling lawmakers he feels the weight of history will surround us following the death of his mother. charles is due to travel from parliament to edinboro and

accompany the coffin to the cathedral where a service -- for a of remembrance. meanwhile, u.k. continues its period of national mourning, the u.k. economy recovering slower than expected. 0.2% expansion a 46 percent decline in june growth the medic product was -- -- gross domestic product was --. tens of thousands of u.s. railroad workers could be on strike by the end of the week. negotiators met through the weekend trying to reach a deal with two unions hovering across 57,000 engineers and conductors. they are demanding better working conditions. more stoppages could pose a potential risk to president biden and other democrats. 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.

but this is bloomberg .

♪ >> i support continued increases in the policy rates and as far

as i know, as of today, i support a significant increase at our next meeting on september 20 and 21 to get the policy rate to a setting that is clearly restricting demand. jonathan: the federal reserve governor speaking, not alone, leaning more strongly toward 75 at this point. from london this morning, good morning, it is the price action for you, but let's get to this equity market. a snapshot of foreign exchange. the dollar getting absolutely hammered. the euro is not alone. 9/10 of 1%. tom: snapback is the right phrase. we are thrilled to be here through the week. we are going to continue to look

at economic finances very quickly. king charles edinboro is that his airplane, we will continue to cover his travels up to scotland for an emotional walk. the queen consort, we say good morning. perfect weather for the king and his great britain. right now, and exceptionally important note from the chief investment officer. we saw i believe a percent headline inflation. 6.1% core inflation. you say that as a pivot in the fourth quarter ahead with the 10 year yield at 3.5%. what does it mean for equity investors? >> we think that 3.5 is a level

that really has to hold. we've been saying that because the fed, we will hear more about cpi in the u.s. tomorrow, but shifting its viewpoint from inflation can't just be better than expected, inflation has to be an absolute basis lower. we think that chair powell has had a chance to reset expectations but it really helped her to save up to kind of come out on a more sustained basis. there is a trapdoor 3.5%, so we are still a little cautious. a little bit as we wait for that retest. tom: the important fed meeting, then the closest will be on q3 earnings report on the first quarter.

you are an interesting position on this without being part of the research operation and a major wall street bank. what d.c. for earnings --what do you see for earnings? >> a moderation lower both in this year to next year, thank you really have an effect lower. we still see the downside pressure. if you look at what is happening , that change as well of the enterprise spending, it shows some moderation. you're seeing consumers really reach from a credit perspective. they are helping in demand for credit to see a little more activity that occurs again as well. we do think there is some

downward pressure. lisa: eric, just to build out what people are concerned about, some pretty stark wording about the demand picture, the deterioration. a couple of weeks ago saying we continue to believe we are entering the worst investor downturn in a decade. why has that not been priced into the biggest producers of fruit that used semiconductors if that lack of demand comes from their products? >> number one is because there is a vaccine game happening right now. now across settings, but across retail as well. enterprise studying will hang in there. there is a focus right now on

the labor force, but we are packing back to an economy where cfos are going to spend more on your -- two really emphasized what they are going to spend on. specifically, broader infrastructure. i think there is hope, still, that there is going to be some follow-through next year with respect to enterprise spending with some degree of hold right here. jonathan: thank you for being with us. picking up on what many of you have picked up on, the progress being made by ukraine and the war against russia and how the market is picking up on it as well.

lisa: for progress that ukraine is making versus russia, it is wonderful because you have seen the decline in natural gas prices. there is a question of whether this is all the bad placed in or optimism. nevertheless, it is interesting to raise the question, what is the consequence, if there is some sort of russia -- tom: a stunning article in the last 12 hours, paragraph by paragraph out of world war ii. just village to village and the defense minister of ukraine making clear there is a point where you have almost gone too far, and they are there this morning. jonathan: lisa, i think you are right to question the durability of this move. one thing that has frustrated me is the way that we say the or,

the war. it is the response to the war that is given -- driven gas prices to where they are. even if we resolve some of the issues militarily, until we adjust the policy that we have implemented in response to it. lisa: you think they are going to say let restart nord stream 1 and rebuild nord stream 2 and let's go? no way. jonathan: live from london, it is tom keene, lisa abramowicz and jonathan ferro. this is bloomberg.

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♪ jonathan: live from london this morning, good morning. this is bloomberg surveillance. if you are just waking up, the biggest week of gains on the s&p 500. we add them on equity futures by about half of 1%.

a look at the bond market, closed. multiyear hike on a two year yield. yields going to come back by a couple of basis points. as i said earlier this morning, the 10 year yields currently. came on the program the exception of this program and said that maybe -- tom: i know we've been talking about it on bloomberg radio and. i believe there is an inflationary report tomorrow. i think that is an important benchmark on the way to 21st. jonathan: a real weakness, that catches on the euro.

tom:tom: a little bit better for europe, relatively speaking. i feel stronger at 1.16. we will continue to monitor the travels of king charles iii. an emotional day with his two brothers and sister, and the walk on the royal mile. live support, one of the grade students of continental economics. what is a distinctive uncertainty you have in the fourth order? you're covering for your of a continent that war. what is a distinction in uncertainty inflation in the fourth quarter?

>> usually we have been led spending on. we have this major search on the price of gas. we are still waiting on how twisted the market can be going forward. >> this could have a drafting back.

tom:tom: a good backdrop into 2023, europe and the recession. >> all of the polls are saying that is probably going to win. there are questions, obviously, as to their approach of the commitment. to be fair, market is probably a -- it is a pleasure that winning

this -- across europe to economy -- accommodate. rising injury rates, it is going to be increasingly hard to maintain policy and also sneak to high school. troubled gunowners. do we find for now, able to -- the rolling part of the rising gas prices. lisa: thank revealed insisted a few -- happens. or whether it is this and you versus -- something has to give

here. >> we are mitigating the current shock everywhere in europe including u.k., which will pivot. they are going to drop energy prices. so the depth of the recession which is booming right now is probably going to end of shallower than a few months ago. but at the same time, what we're doing is increasing productivity. at some point, and we don't know exactly when, but probably 2020 3, 2024 at the latest, there will be efforts on fiscal policy .

anyway, we're just changing the timing. and it makes sense. we need to deal with the crisis right now, but this will come when the price is right in 2023 or at the latest, in 2024. lisa: manufacturers in germany, the company closing down for early curtailing some of the activity for the energy concerns, the energy cost. how much is that going to really affect the reassuring, the desire to avoid the interest rate hits and the currency hits that a lot of nations have been feeling? >> it is a big issue for germany because the industrial situation of germany is very sensitive to the price of energy, beyond the fact that it is so reliant on

russian gas. the very sentiment of the german industry is quite an energy --. the question is to how this model could continue maintaining on german territory. it is not the first time. this question is becoming even more crucial today. what is helping germany is that they don't have much -- the wider economy. there are questions specifically to germany. tom: what is the power of russell's now? the force of brussels right now? or is it every nation for

itself? >> actually, i would say that what has been achieved in europe, it is quite high. you have, for instance, confirmed. the first president to say publicly that it would actually have helped germany with gas supply this winter. one of the issues we have, however, is that there is an issue in terms of leadership. he is not only going to be prime minister, he wants to have a big role in shaking things up the chancellor of germany is under massive domestic pressure. obviously, not in the same

leading position russia was in the or. so there is hesitancy, if you want. very large. jonathan: good to catch up. a good manner to catch up as well. and cannot just say how much of a good sign this is. the bank of england delayed from next week because of the events in the united kingdom. to see sterling almost break 1.14 last weekend than 1.17 early in the session, i have to admit, last week, that was kind of touch and go for sterling.

we might be running into a bit of an issue you with the currency. that has got to be music to the ears of this governor. >> just because you are not seeing declines on more weakness. people saying it could go to parity and below because that is what investors are willing to fund. now people are talking about have interest rate hikes are actually going to be meaningful and what we're seeing throughout the european region. jonathan: her very good reason, it is not on the front pay for this country, a really big issue for him. ultimately, what it means to policy. what it means the bond markets. and what it means for the weaker pound over the last several months.

tom: spiking rates, the government is going to be spending more. there was no real input to the gdp. tom: it is a better statistic. when the new king is anointed comcast what to mark all the problems are still there. >> keeping up-to-date with the news from around the world, king charles iii interest parliament for the first time today, telling lawmakers he feels the weight of history which surrounds us following the death of his other charles is now on his way to edinboro to accompany the queen for session to a --. a power plant deep behind ukrainian lines today causing blackout broth the northeast of

the country. ukraine says more than 30 -- of ress initials in airstrikes over the past days. at least two power plants were officially hit but ukrainian troops are continuing to vance. president xi asian think -- xi xinping will make his first trip abroad since the start of the covid-19 pandemic. beijing says he will attend a leadership summit of the shanghai cooperation organization. russia announced that he will meet with vladimir putin at the summit as moscow seeks to bolster ties with beijing. the u.s. health care system has received full marks. a new poll from the associated press has show that fewer than half of americans surveyed say health care has generally been handled well. even cost of prescription drugs,

the only of care in nursing homes, and how mental health care is handled. 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.

>> -- are likely to be with us for some time. lately requiring policy response. the constraints continue to bind policy. jonathan: wasn't she brilliant? tom: she was brilliant. we were making a lot of humor about her new puppy but jackson

hole was the greatest, most unaffected reality of diversity of guests i have ever seen in economics. absolutely nailed eclectic, informative set. >> already, some people still looking good. i'm not going to tell you what they are actually going to do. >> you need the markets to move in a certain way to work for them. then they will continue to reverse course. another half of 1%.

inflation, and that is what tom: we are focused on. round that up to where we continue to monitor the travels of king charles, his two brothers and sisters this morning. right now, we had to book months in advance. far morford -- and unraveling. that is certainly what we have seen your the weekend. the washington post article showed the brutality paragraph by paragraph. >> we know that the war has just been dashed throughout the whole summer. it is notable that headlines are actually focused on because of this extremely impressive ukraine offensive.

even despite the devastation we have seeing left behind. tom: i believe when the allies went across north africa, pushed back from time to time. to the russians at the capability to push back as we saw from the end secretary of the ukraine this weekend? >> as much excitement as i think warranted -- the this weekend, we should be cautious with that as well. russia still control about 20% of the country, very strong in the south. most importantly, they still have a lot of wildcards in terms of conventional and unconventional or fair. jonathan: can you think of a resolution of this war that leads to a recalculation of what

is going to happen with supplies this winter? there is a clear market reaction to the value where cash prices were lower, -- stronger. >> it is a great question because it changes the narrative right now and. the course of the war is still likely to be very wrong. obviously, these weeks are still seeing the years. i don't see what happened over the weekend, narrating all these concerns. it is good news for ukraine in the sense -- the -- vladimir putin. how does he tried to stay safe, potentially dangerous -- >> we never know what putin is

going to do next. we do know many fields backed into a corner, that is often went he is the most tense. we've already seen them respond in terms of targeting infrastructure in the province where gains were made, so we can expect more of that. the president of the united states has success. one voice to address what is happening in ukraine. do you see any signs of cracks around that story about the speculation at the moment? >> biden and biden administration have been so focused on that even before the start in reality, i think he has a little bit of leverage going

into the energy crisis now but very later, i don't think -- we're hearing what very realistic, pragmatic conversations about what policy financially adjust the energy crisis, what that means for ukraine at the same time. i think about countries pushing back like this. we heard some earlier commentating or leadership. i am watching to see how they play things --

>> more than half of the respondents were the sanctions on russia saying it is hurting the european union and the u.s. more than it is hurting russia you see russian making money and you see the e.u. struggling. jonathan: we joked about a future in the narrow. how much do we have to maintain the current energy policy they have? tom: when you see the political pressure over the weekend ongoing in italy, what if the difference between -- and and the belgians can come back here.

the prospect of this to on. tom: i would suggest into monday of next week as a distraction >> the problems don't go away, they are going to year with a vengeance next. guy's, from london, this is "bloomberg surveillance."

>> central banks have doubled down on what they said. >> the european -- undecided with fighting inflation. >> the fed calls monetary policy based on the united states and the consequences and the rest of the world. >> is hard to say that this started with the pipeline.

announcer: this is "bloomberg serveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: anglicans country today, paying tribute to queen elizabeth. good morning, this is bloomberg surveillance. tom, you said it all morning. those problems will not go away. tom: they will not go away. the problems you centered around the inflation picture we will see in the united states tomorrow. so much more going down the embankment and looking over. that is just one issue for the united kingdom. jonathan: lisa, ukraine starting progress over the weekend.

lisa: with a count of russian soldiers fleeing ukrainian areas that the police the catcher, getting pushed out as ukraine repeatedly is reclaiming that land with the help of the u.s. weapons systems and the weapons systems of allies. how much does this change the backdrop of the energy crisis? tom: for a miracle they can up this morning, five hours difference this morning, an extraordinary moment. i can't say enough about the importance of westminster hall with his coffin will rest recently today, with some gathering today including former prime minister johnson and others joining to your a somber speech from king charles. the symbolism come extraordinary. jonathan: the week ahead, the words of the king early this morning. as i mentioned, i think we all feel that over the weekend and the next week as well.

lisa is going to go through the day ahead. the best going back to late july. equity futures are positive or tense of 1%. yields just a little bit lower. but one thing you will notice front and center, the euro-dollar, that comes to be positive. lisa: it is not just the dollar versus the euro. it is also the dollar vs everything else. there is the feeling that perhaps it is going to recover, and the euro definitely catching eyes at a time of great change. here is the latest that we are hearing as king charles the third is going to arrive at 12:45. then he is going to join in this procession behind the coffin of his late mother starting around

9:35 eastern. we will be catching up with you throughout the day. course, you're going to be hearing from isabel of the ecb, and it does follow some hawkish comments over the weekend where a number of officials said there is a reiteration of the willingness to hike rates again after the stepper rate hike. at 12 :00 p.m., a focus on the u.s. food apply. not only the united states, for the world agricultural demand. jonathan: a few headlines of the weekend after reports that you seeing progress in creating.

support for ukraine as long as it takes. and this one said no prospects at all. certainly, they are attributing the move in the euro. gas prices, no way. lisa: if there is progress, what does it look like? willing to talk and come to some sort of agreement with the big fear that is having a vladimir putin that is unpredictable. how does that change the quote. jonathan: we accomplished that right now. maria, can we start there? what have you heard about development over the weekend in ukraine? >> one, european leaders were

astounded by how quick this operation was on saturday. and when you look at just how big this country is, the amount of land needed to win back is enormous. you always have to look at a map to figure at just have significant -- these are just tiny villages. for the ukrainians, is world trade, it has been since crimea and that makes all the difference on the battleground. so i would expect that from now on, they will push the europeans. they have to put more weapons in their hands. when it comes to the russians, the big question to europe is what -- does it do? does it get to a point where he

moves from specialized inflation? there is a huge influence to watch a war, to be called to go on the battlefield against an army that has proven very effective. tom: maria, i look at the news over the weekend and a question for the defense department and the united states is how the length ukrainian effort in the war to ukrainian effort down south toward the black sea? is that even feasible now? >> at this point, they can move down. of course, russia has retreated to regroup for what they say is not a defeat, but regrouping to protect some of the areas they had already conquered. can you manage -- imagine the embarrassment for vladimir putin if the ukrainians do manage to get back?

the options for vladimir putin would get very narrow. ukraine, that post yesterday saying we will liberate everything, having the country back, everything also shows that the ukrainians at this point have no incentive to stop. they will continue if they have the weapons. lisa:lisa: this brings us to the united states which has been supplying a lot of those weapons. how much and how far does that support go from the european nations struggling with a natural gas crisis? we did talk to united states about possibly capping the price that people pay russia in order to get gas. but what else are they doing? what else is going to work besides natural gas? >> two things.

first, this summer, no one really talks about it, but the fact is u.s. natural gas supply to europe has been bigger than the russian supply via pipeline. this is the first time on record. many have seen the united states sending more energy over to europe which is of course more expected, and my reporting on going back to early this year, u.s. officials, right before ukraine thought this was even possible, if there is an event with natural gas that they could get to europe, what you are going to see is a continuation of that. on the defense front, we heard over the weekend that it is not just the military equipment. both the u.s. and the u.k.

intelligence. that is going to continue and the white house asking congress to add in more in terms of help for ukraine work out the stopgap funding measure. jonathan:jonathan: thank you. the big events taking place in ukraine, the war continues. progress over the weekend. some headlines for you from the prime minister's spokesperson. later this month, how big a fiscal package will actually be in could you basically guess where gas prices are going to be? it is still being worked on. this is the reality in the u.k., this is how we found it is grim. we will pause in this country for late global news that will dissent on the capital.

these problems will lead to the address. the data, as it were, still needs to understand. it has got to be difficult, almost impossible. lisa: there are trying they get this out if it is going out october 1. i believe today is a market holiday in the united kingdom. when we open, be a kind of responsive to get those -- if we get on the road back to the first. the markets will be shot, and we finally got a --. tom: a week from today is world leaders attending

. >> 117 last week. lisa and tom, i'm jonathan ferro. this is bloomberg. lisa: keeping you up to news from around the world, king charles is valuing to uphold parliamentary democracy and what because the duty of his mother, queen elizabeth ii. the king said he felt the weight of history surround him. charles is now headed to scotland where he will lead a procession following the queen's through edinboro. then, workers could be on strike by the end of the week. negotiators met over the weekend to try to reach a deal with two union.

they are demanding better working conditions, work stoppages and a potential risk president biden other democrats. japan is easing some copenhagen era restrictions. the country is planning to end the daily limit upon arrival from overseas visitors. japan is also said to be considering for leaders to enter trips.note to elon musk >> -- his latest move is invalid and harmful according to a filing today. the billionaire says the company's treatment of a whistleblower gave him another reason to walk away from that $44 billion deal. global news 24 hours a day on air and on bloomberg quicktake.

powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

>> it's remarkable that people were saying that the dollar's day was past not very long ago,

given its current strength. my guess is that there is room for this to continue. at jonathan: that was larry summers, -- tom: we spoke to -- the other day, the queen of england to university of cambridge. i'm sorry, the rest of them, they have massive --. people like mark mccormick. i'm sorry, these people nailed it. lisa: we all know exactly. jonathan: anyway, futures, the

positives. the equity market. at tom: that is an adjustment, but what we have is a data dependency looting the bank of england and also the data dependency. bob miller, head of the fixed income decades of experience. what is the symbolism at the to return aggregate index and higher yield? how do you redefine the bear market if we get that technical breakdown?

>> good morning, tom, hope all of you are. good to be with you. yields are now reasonable. yes, yields can go higher from here. but we are in the range of regional. fixed income offers some reasonably attractive opportunities today for the first time since 2018, and certainly after a period of no opportunity a year and two years ago. treasuries, high-quality credit, even high-quality high-yield in the 8.5%-9% range. the portfolio for the first time in years, specifically in u.s.-fixed income, we think that is something that investors are already thinking about for the next year.

and there is no near term in sight. these valuations the reasonable to us. lisa: they look reasonable compared, perhaps to a year ago. some people are suggesting they could be. are you in the camp that says we have seen peak yields on 10 year but we are close to it, even as we do see some of the highs in the cycle? >> i don't know if we have seen the peak, but we are close. we are in the camp that inflation is going to decelerate, growth is going to decelerate. i think is really important to keep in mind the magnitude of the financial condition tightening that the fed has engineered in just six months. they are going to raise rates by another 75 most likely, and that is a six-month period, 600 basis

point annualized. this is not an insignificant move. this is a meaningful move and it takes time. it takes time for policy adjustments. it is coming. i think it will be very unlikely that we look up in 3-6 months and growth and inflation haven't slowed by a sufficient amount that the fed will probably want to pause with rates around 4% and just sit there for a while. in order to get a 5% 10 year on a one-year horizon, and a lot of things have to go wrong. maybe it could be, but a lot of things already have gone wrong and it is a little dangerous to extrapolate the last nine months into the next nine months without considering what is happening to financial conditions in the u.s. economy they are tighter.

lisa: the consumer having some strength, prices coming down a bit. have you fully take into account the fact that europe -- the biggest ever rate hike last week and is poised to do more? global, synchronized rate-hiking cycle that we really haven't seen in modern history? >> that is a great point. i would argue that it adds to the reality of financial conditions tightening in a lot of different places, not just the united states. that will ultimately have a delay, but likely a real impact on growth and inflation over the next year or two. keep in mind there is one that they would likely be forced by their own index in japan, sometime over the next excited nine months. we wouldn't be at all surprised to see the yield curve at some

time, at a minimum adjusted slightly if not by a reasonable amount. jonathan: i want to pick up on that final question -- what does that mean, and have the rest of the global bond market respond to a move like that? >> if you asked me about the scenario that lisa mentioned with 5% treasury yield, what is the scenario where that is a reality, it is either just unrelieved -- unbelievably, persistently high inflation that the fed can't get under control, so the front end is likely that high if not higher, or eta is some resumption of global -- by the ecb not only turning off --, but perhaps pursuing some runoff in the baggage that has abandoned yield curve control. each one of those is individually pretty low odds, but a scenario where if you want

to get the parish on bonds, i think you have got to have something like that in mind. jonathan: great place to leave here and continue the conversation. as we think about the global bond market over the last decade or so, two very heavy anchors weighing down yields. tom: expect the unexpected and certainly, talk about a snap back. i am not going to push it. jonathan:jonathan: it is early right now on the u.s. 10 year.

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jonathan: touchdown at edinburgh for king charles iii. tom, before we get there, i understand there will be an arrival for the god of honor at the queen's palace in scotland.

there will be a funeral this time next week. tom: many, including an american, will say, what is the "why" here? the queen mother's heritage of scotland, and the answer is all of this imagery, king charles will visit the different parts of the united kingdom, jon. they are separate since england. britain is not england, is it? jonathan: remember the media, we have seen what we see operation london bridge, and that is mid london, buckingham palace, even windsor. she of course stayed in the summer at balmoral, the holiday home for the royal family and that was operation unicorn. centered around scotland doesn't go through the next phase of bringing the queen back to london, tom.

this plan has been in place for a long, long time. tom: the expected will be the emotion this morning. everybody come of course, is covering this worldwide come on radio and television. lisa, jon, and i will try to give you perspective during the market coverage we do. jon, i cannot emphasize the amount of symbolism we will see in this movement from king charles iii. jonathan: i cannot agree more, tom. we have to go through equity markets moving. good morning to you in london. it is now -- in new york. his is now good afternoon in london. as we wait for the opening bell in new york city, yields lower, 3.2925. the euro-dollar 1.0133. we can head over to new york now and catch up with kriti gupta. kriti: hi.

you have twitter shares actually lower, and they do have the shareholder vote tomorrow, as the legal battle with elon musk continues, who has, for a third time, but he needs to withdraw from the deal. twitter says his claims are invalid. cryptocurrencies rise, blockchain sharing and some of that glory, up about 3% on the day. for me, the real macro here will be railroad strikes, and could increase the supply chain world come across the country, think kansas, texas. joe biden is going to pop in here and try to push them back. trading a little higher, almost 2%. look at the other major micro story, that will be the chip sector. the expectation in the market is that president biden will try to broaden some of the restrictions

when it comes to x tips -- exporting chips to china. he has already tried to do this when it comes to other technology. on the expectation of that move, nvidia, intel all up on the day. tom: kriti gupta, thank you so much. we appreciate that. we say good morning from london, as we look, as jon mentioned, equity markets doing better than good, maybe the second rally off of what we saw in the horror of june. joining us is chief research strategist at alphasimplex on trend, at m.i.t., she is a slave to trend, and, full disclosure, i am, too. katy, what did we see in the last two weeks of june? katy: we saw the short bond signals as well as long positioning in dollar be very dominant recently, but in the

last two weeks, we have really seen an influx of risk-on behavior come a lot of buying pressure, particularly in the equity sector, and this is some indication people are getting optimistic. they are willing to put money back in the market, but the question is going to be, is it too early? tom: is that the question -- jonathan: is that the question that citi is asking? despite the pricing hikes, risk-on prevails. as inflation continues to slow, maybe the fed will incentivize a major risk rally. do you agree with that, katy? katy: i do agree with that, but i also think it will take longer than people expect, and the fact that the fed has remained steady, they are sending a signal that they are thinking a little differently than the market. we have been surprised. the market is more often than fed commentary, that suggests

perhaps a little bit more than we think about going forward, and we would like to see a little bit of divergence. you see what the cpi looks like today. you will have to see how it unfolds and how we handle energy issues and other problems. so i think it is going to take time to know, but i am a little bit less optimistic in the market. lisa: katy, jon was talking earlier about how we could talk about this all day, and that might be as good as interviewing prognosticators on the markets, because that might determine the market. what is the bond response to a breaker, one in which the energy shortfall becomes more, too? katy: this is a theory at issue, because you see people dealing with higher interest rates, in terms of their payments. you also see people dealing with higher costs. a could be a difficult situation, particularly for europe, and so i think people need to think about looking at

those prices as we roll into the winter season. we are just now starting to move toward december contracts, and stronger out of the curve, so i do agree with john that it is going to depend on how we weather the winter, as the price pressure israel. -- is real. lisa: the u.s. got a 30% gain in alphasimplex's main bond as a result of selling short funds, something that has not worked for years for it out what point do you on an opposition, thinking the markets got it wrong and underestimating the fed's resolve? katy: what we do is follow trends, and the trends in the markets, particularly in difficult environments, is often a better bastion of information than one individual or anyone particular view. what we see now, which is kind of why i am saying it is surprising, is that the short bond trends are still there. that positioning is still very strong in the data, and we can

definitely see, even though rates are reasonable, then becoming more unreasonable in the short term. tom: right. could you correlate short bond, bond price down, yield up, into an equity back on trend? katy: yes. i mean, once we see that things have leveled out, i have always said that this is not an equity story, it is a bond story. was we see that bonds have stabilized and we have a much more healthy curve and risk premium out of the curve, so we see a steeper curve, i would think that is more they risk-on signal that we can also think about those premiums as opposed to the potential disruption of rate rises. because we all forget, even though it is better going forward, the bonds now really take a hit. tom: ok, katy, we are doing this on a monday, we could go math monday as well. is the distant version of a curve important -- disinversion

of a curve important? katy: for me, it is much more the inversion of the curve that is going to matter. that tells you something about the disparity between what we think about with short-term rates and long-term rates. if you look empirically at signals in terms of trends and directions of bonds, you can see that bonds continue to fall if the curve were inverted, and thus if we continue to see that emerging signal, we will see a bearish view on bonds until we can kinda of see that longer-term risk premium, that steepness really be an issue. so i say first derivative. tom: katy kaminski at alphasimplex, lisa, came to point out the bank of japan, two angles around the world of the bond market for the last 10 years has been the ecb and the

doj, both with qe and negative rates, and negative interest rates in japan weighing down yields. winding down that process of the ecb versus a rather large rate hike in the last week or so, the next step, but what we need to see happen is the next to computer late here, because that -- capitulate here, because they are not running only very low interest rates but also keep in the yield on tap in the market. lisa: they came out and raised concerns once again on began and the devaluations they had seen and the concern about importing the wrong kind of inflation. at what point do the voices get together, like you say? tom: you can go off the bloomberg very quickly in the weekly chart, dollar-yen, if you get the standard deviation, strong yen is 16 big figures. jonathan: i do find it interesting on a day when everything is really running against the u.s. dollar, the

euro, sterling. tom: yeah. jonathan: it is what it is. it is just there. tom: not helping. a euro-yen at 1.4446 shows that. i am waiting for the tuesday inflation report. jonathan: it is just around the corner. lisa: right now, the japanese yen is not correlated in the same way, because they are not playing by the same playbook that everybody else is. at what point do they decide to play along when they are basically staving off the same inflationary pressures that everybody else is, and, frankly, an energy shortage everybody else is as well. jonathan: we will keep following king charles iii, who we understand touched down. he will make his way to an audience. tom: he will walk up the royal

mile. jonathan: a little bit later, yeah. lisa: he will do -- i will do a mea culpa, i said edenb urgh earlier, and it is edinburgh. jonathan: this is bloomberg. lisa m: keeping you up-to-date with the first word, i am lisa mateo. blackouts across the northeast of the country in ukraine. ukraine says more than 30 settlements have suffered russian missile and airstrikes over the past day. at least two power plants were reportedly hit with precision rockets. meanwhile, ukrainian troops have continued to advance. the u.k. economy recovered more slowly than expected. a slump triggered by an extra

public holiday in june. the 0.2% expansion followed a .6% decline in june, when gross product was off because of the queen's jubilee. food, tents, and other supplies sent to pakistan. the country is struggling with food shortages. more than 1400 people have died in the flooding. more than 30 million people have been displaced, and 90% of the country because crops have been destroyed. billions of dollars to expand into software to make machinery more productive. "the wall street journal" reports the country will have tractors and sprayers. 10% of its annual revenue will come from the software. global news, 24 hours a day, on air and @quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries.

i am lisa mateo. this is bloomberg. ♪

>> the fed actually wants the dollar to be relatively firm, because a stronger dollar strains economic activity and reduces inflation, because it reduces the cost of imports into the united states. so the fed is not unhappy with the dollar strength, it is just part and parcel, one aspect of how you tighten financial positions. jonathan: that is william dudley, bloomberg opinion and former new york fed president. from london, good afternoon, with tom keene and lisa abramowicz, i am jonathan ferro. the s&p 500 up .5%, and yields

lower. 3.2774. the dollar a whole lot weaker against the euro and u.s. sterling. euro-dollar 1.0138. king charles iii touching down in edinburgh, making way for the god of -- guard of honor. an hour later, something deeply emotional to witness, tom, an hour later, the king will be behind the queen's coffin, from the holyhoodhouse. tom: what we saw over the weekend was the queen's coffin into edinburg, but i would suggest all the symbolism of the moment begins with i believe a meeting of the resurgence of the scottish parliament, which is just across, and we hope to

bring that to you. jonathan: equity is firmer, tom, yields pretty stable, and a dollar a holdout weaker. tom: ubs, fx, microstrategy, as we try to frame the picture of where we are. the symbolism we see in pound sterling, if we move beyond the period of mourning, king charles iii, his domain, what are the challenges that can move? >> the domestic political challenges are pretty clear, and i think they have been largely outlined by the bank of england, and some of their recent communications. really the risk of a deep downturn, i think, from the current perspective, that could mean that, you know, your inflation remains relatively high, and that is a fairly

negative view for currency, obviously. as important as it is for the u.k., i think it is in the same boat as the euro in the sense that energy prices have really been, in our mind and in our models, kind of the dominant rivalry here. the reason i think you are seeing some reprieve toward sterling, most of the euro today, has a lot to do with natural gas prices coming off some of the pretty extreme levels we are seeing almost every week. they are certainly nowhere near normal, but it has been a little but i correction their, and frankly, i think that is where we are going to focus going forward. tom: where is the opportunity right now? we have the fed meeting, we've got a bank of england meeting right behind it? so where is the foreign-exchange

opportunity, end of september? vassili: i think that, in terms of some of the recession rate trades, if you like, it is very clear that the global economy is in a very weak phase we think the dollar-yen is starting to look fairly misaligned. i know there has been a lot of buck over the past week. i think it has become increasingly difficult to justify current levels of dollar-yen, even with the u.s. rate. so that means we are in this overshoot zone that, for some extent, is testing the resolve of japanese policymakers. that being said, i think it is really in japan bonds, u.s. inflation as well, right? the week has been fairly soft, by recent standards as least. -- at least. we will see some further correction in dollar-yen.

the u.s. dollar is weaker but not against again today, and that seems to be kind of at odds with the current economic backdrop. i think that is one where things are fairly misaligned in the newsroom. lisa: vassili, are you saying that you are long the yen? you think it will strengthen against the dollar regardless of where the bank of japan is headed, abandoned its yield curve control? vassili: there could be several for the same outcome, right? if you think about the broad range of scenarios, it is possible that global inflation can continue to push higher, and boj does nothing. i think that is a possibility, in the world opinion. but the two other scenarios i think lead to a stronger yen, that is either global inflation continues to push higher, and finally, boj caves in,, right? and we are starting to see a little but of noise in that direction.

or we are going to see finally u.s. inflation moderating kind of more prominently, and some of the impulse for dollar-yen highs being removed naturally, right, from the u.s. side of the equation. it is a fed market overshoot. that is what they tend to. the dollar-yen much higher at 1.33 or 1.34 seems to be on the momentum rather than any plausible evolution, using u.s. rates or japanese policy. jonathan: vassili, i want to return to the euro story. the sequence, the logic behind the move today is essentially progress in ukraine against russia, makes gas prices lower, euro stronger. do you question the logic behind that, that sequence from one to the other? vassili: i'm not sure this is just the situation in ukraine,

right? i think, to some extent, if you look at gas stories and things like that, they have been above sort of, you know, ahead of schedule for some time. i think the markets simply took note of that. i think the euro has been very efficient in capturing some of those develop. it more or less trades the way it should be based on those natural gas prices where they are today. i would agree with you in the sense that we are not out of the woods, right? this crisis is by no means over, which means it is probably not the time to value euro. jonathan: vassili, thank you. vassili serebriakov therefrom ubs. what is the problem? jerome need to show up at the fomc with a hawk on his shoulder, and instead of taking questions, squeak like a hawk for an hour and a half. [laughter] lisa: i love that.

i am hoping he will take that under consideration. jonathan: only a few weeks we had that address in jackson hole, a few people are questioning the results. lisa: could that have been clearer? and then other speakers came out, could not have been cleaver, we are hawkish, we are hawkish, we are hawkish. jonathan: we will look at the data tomorrow. you aren't bored with that, are you? david riley is coming up from hubei asset management. this is "bloomberg surveillance ." ." 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 before they happen... and insights on every buy and sell decision.

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>> the ecb monday is about inflation. >> from the u.k., no stimulus is

going to make their job harder. >> they need to continue to be diligent in order to stave off inflation. >> the fed is not unhappy with the dollar strength, it is just part and parcel, one aspect of how you tighten financial conditions. >> it is a new economy, a new normal, and it needs a different type of analysis in order to adjust. >> this is "bloomberg surveillance," with tom keene, jonathan ferro, and lisa abramowicz. jonathan: we are seeing a transition of power, from queen to king, from mother to son. from london, good afternoon to you, this is "bloomberg surveillance" on tv and radio. alongside tom keene and lisa abramowicz, i am jonathan ferro. the king touched down in edinburgh, scotland. tom: one of the things, if you look back in history, this is the bottom of the royal mile , the scottish parliament,

first, the coronation, just adjacent to the palace. the symbolism and the space of scottish independence. if you go earlier this year, there was a different dialogue, to the insurgence of scotland and the london politics. jonathan: and he will have an audience. a little bit later on. lisa, there will be a succession of the guard of honor and an emotional walk to take place behind the queen's casket. lisa: it is going to be incredibly somber and he is to strike the right tone. that is the important thing, unity in the united kingdom at a time of so much change in so many different places. jonathan: we are a witness to history, a momentous occasion for the history of this nation,

and i would argue for the rest of the world, looking on as well. the problem that global leaders have to deal with, to descend on the a week from today, but after that, they've got to grapple with the same problems. there has been one good piece of news, i think one really important development over the weekend -- ukraine progressed in its war against russia. tom: and the war experts saying it is huge. going back to the february 24 invasion by russia. we have good follow-up on that this morning. i would suggest it dovetails into -- lisa mentioned earlier -- national gas prices, oil. jonathan: dollar weaker. tom: it has to be good news into october. jonathan: the u.s. stronger. lisa: really driven from this feeling of relief, development over the weekend, but perhaps it has to do with the fact that natural gas has been rising

steadily over the past few weeks. at what point, though, is this just noise? and we have to determine a softer landing or a hard one. jonathan: no recession in the baseline for the ecb. when i think of the baseline, it is not weather but how deep it will ultimately be. the severity on the continent. tom, we come back to how this will be. tom: yes, i agree with this, but just as important after september 21 in september 22. is the united kingdom in recession? jonathan: at the moment, most people would know. in the future, possibly. it is just massive, massive fiscal intervention from this prime minister. tom: which will pull you away from recession. jonathan: you would hope so. but lisa, regardless of the new

cap from this prime minister and the willingness to take on unlimited liability, still much higher than they were a year ago. people have still got to grapple with that reality. lisa: you are seeing that worn-out in the data earlier this morning. tom: right. lisa: the uk's stagnating. what point is it driven to see, people feeling the potential, double-digit inflation rates for a longer period of time. tom: a different shot as the king enters edinburgh, the castle, and he will descend down to the holyroodhouse. we don't need to do a history lesson at the moment, but this isn't a regional moment, i would suggest, in the united kingdom. jonathan: something many of us have never seen before, tom, and something many of us will possibly never see again. tom: you think of the economics that we cover every single day, the coronation of the k

queen, sterling ws $2.82. it is almost a higher statistic, but just to see the challenges that are going to be faced as we will cover with our great team. i really commend bloomberg u.k. it is an extraordinary effort to be up-to-date on the set of crises, and that is an issue -- it is not one crisis. it is different from the united states. as is a set of crises. jonathan: of all the challenges, of which there are many, one we were hoping to avoid, and that is in the fx market. the fed was on this a little bit earlier this morning. i think we should do this again for the very fact that we were having a look at 1.13, 1.14, and now this morning, this afternoon in london, we are back to 1.17 levels. the meeting with the bank of england governor will almost be difficult how to complex.

the very idea about sterling, the bank of england, that is a positive development, relatively speaking, from what we were looking at just a week or so ago. tom: it is a bounce, and i will not say "technical analysis" here, but certainly it is cutting the right way for a new prime minister. she has been out of the picture for a few days. we have a new prime minister. dr. hansoti: we do -- jonathan: we do. lisa has been on top of this. front and center for the british public, a real solemn test at the moment, but we have still got an energy crisis, we still got a lot of problems to work through, and they don't go away. lisa: that news earlier this morning that october 1, that aid was going to get started for consumers. so what does that mean? we don't know, necessarily, for businesses. but to get that through during a period now, out of respect for the queen's memory, will be quite a feat. jonathan: we will continue to

follow. the palace of holyroodhouse, from there, it will move onto to the cathedral. the emotional walk is set to take place in the next hour or so, walking behind the queen's coffin, from the palace's holyroodhouse to the cathedral, tom, the next phase set to take place as we work away through this time next week. tom: it is a path forward, but for the family, this is different. it is different than the other castles, and i would suggest scotland is different. and again, what we will hear, and i will say just for when we actually observe these events, that they are steeling themselves for significant symbolism, which goes back beyond charles i in roughly 1620. jonathan: what we are witnessing here is a seamless transition of power, from queen to king, from

mother to son. tom: don't forget that. and william, same thing. jonathan: we will continue to follow these pictures as they come in from scotland for you can we follow development's in this market, with equity futures down. the dollar a whole lot weaker. the very fact that we have all this and still struggling to find some strength. we speak with david riley, the chief investment strategist at bluebay asset management. what do you make of the dollar weakness this morning? david: i think some of the weakness we are seeing in the dollar is reflecting, you know, both the repricing of the rate for the euro after last week close the ecb meeting, and i think also, you know, a little bit of optimism in terms of recession risk, including for europe.

but i think the u.k. has a huge package. we know the succession is going on in brussels -- discussion is going on in brussels about the energy prices as well. it is a near miss, thinking, well, the rates may be the worst case scenario in case of a severe downturn in the euro. other things being equal, i think that is what it is for the euro, sterling, especially the y en stand. tom: david, i have been dying to talk to you, with your holistic knowledge of the gilt market. we have seen shaking hands in scotland and all that is to come on the physical solution that lisa abramowicz talked about. can the united kingdom withstand this fiscal impulse? david: i mean, the europeans and certainly can finance that

without having a sort of, you know, outright, if you like, sort of funding crisis, but i do think it does imply that longer and gilt yields will be higher. i think it will be welcomed news by the prime minister. i do think looking at this package and saying, i don't see an import, drives higher, bank of england base rates. so, you know, u.k. and u.k. government better finance this package, but i think it will have to pay price for it, and i think ultimately that will be higher yields and, you know, relatively bearish on sterling. lisa: david, what do you need to see from the plan that evidently is going to leave consumers with some aid from the u.k. government, as soon as october 1? what do you need to see to assess the path forward for how high gilt yields could really go? david: we actually still don't have an official costing for the

plan that was announced, when we had news about the policy of queen elizabeth. we actually don't have those numbers. we have instruments floating around, ranging from 100 billion british pounds up to, you know, 115 billion plus, but we still don't know really the details of the plan, announced in terms of the cost. so i think that is going to be important, in terms of working out, you know, what the path forward for gilt will be. and also the bank of england and the bank of england reaction. one thing from the u.k., going as europe, is that we are now starting to see the emergence of a fiscal quote, if you like, in terms of growth. but i think that will be positive, but it does mean that we are keeping high inflation for longer, and i think we will

see that actually rates stay higher for longer as well. jonathan: david riley, thank you, of bluebay asset management. thank you very much. we continue to follow king charles iii as he makes his way through holyroodhouse. tom: what is presumed to be after the funeral on monday, which is a tour of his great britain, it will be fascinating to see -- we talked about this on friday -- the shift from prince to king, but also the shift in moving to the grind, the royal grind of duties, and part of that is to visit wales, visit scotland, maybe the northern island, i'm not sure on that. jonathan: for many, who are grieving the loss of their queen, there will be a deeply emotional scene taking place in our, when we see the king walk behind the queen's coffin, from

holyroodhouse to st. giles' cathedral. lisa: she was the queen for a commonwealth that may not ever have a monarchy again. have a monarchy again. jonathan: ♪♪ 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.

>> as the head of the central bank right now, they are

fighting inflation and growth that is falling because of it. energy you can't control, means credit spreads are at a premium. jonathan: they don't have the premium, brian weinstein of morgan stanley, says for sure. from london, good afternoon to you. it is the fate of things right now in market, particular look and where equity -- looking where equity futures are positive. we are now 12 minutes away from the opening bell. equity yields lower by four basis points, 3.2659. all ahead, tom, tomorrow, we will be counting down. tom: i was going to say, 24 hours. which is more important to you? jonathan: month on month core. it will dictate -- tom: even people modeling?

jonathan: they want to see a convincing decline over time, which gives the fed confidence that we are heading back to 2% inflation. tom: we welcome you all on bloomberg radio, bloomberg television, an extraordinary monday, history and scotland, or in ukraine, of course what we are seeing in the markets. it has been an absolutely unique weekend in ukraine of infantry movements. then hargis -- benjamin hodges is a former army commander, but so importantly, been hargis -- ben hodges, i'm going back to you doing what you do best, an instructor at the united states infantry school. when you discussed infantry, rapidly retreating russians, what should they do? ben: three things.

number one, do not let up the pressure. do not give the russians a chance to stop and then turn around and fight. that is one. number two, keep moving your combined arm. in other words, infantry, tanks, artillery, engineers, all of these things working together, that is what ukraine is doing so well and that the russians have not done well. and then finally, unleash ukrainian airpower. even though the russians have all the advantages, they have never been able to dominate the airspace of ukraine, and i think the ukrainians are going to try to take advantage of that. tom: this conversation reminds me of one u.s. grant, an unknown going down the mississippi river and teaching the north how to prosecute a force invasion. what do we need from ukrainians now to be like grant in our civil war? is it simply that they need more material? ben: for sure they have the same

sort of strategic eye as general grant day. this is about you have to crush your energy. it will start with crimea and end with crimea. what they need from supporters are two things. one, they need continued delivery of the type of weapons and ammunition that are helping them to destroy russian logistics, destroy russian command-and-control. but also the sanctions, the sanctions really are having an effect on russia's ability, both in terms of their own defense industry, but also domestically. i think more and more russian people are beginning to feel this war, that putin is trying to shield from them. lisa: that is where i want to go, because there is some discussion about the possibility of conscription, if vladimir putin does not want to come to the table, does not want to come to a resolution, if he is running out of troops, as

suggested, what is vladimir putin's to this? how concerned are you about some retaliatory measure that is perhaps unexpected? ben: you are right that they have a very serious manpower problem in the russian military, which is not what i would have said a year ago. most of their recruits now, many of them are conscripts, come from way outside of moscow and st. petersburg. the kremlin has tried to avoid drafting anybody from the two major metropolitan areas, because again, they want to shield the public from what is happening in ukraine. but nobody wants to fight. nobody wants to get involved in this war. they know what is going to happen if they do get sent into ukraine. but i think one of the reasons president putin has avoided doing this general mobilization is because he wants to preserve the fairytale. it is also humiliating.

people will not show up. they do not have the uniform and weapons to equip another 100,000 troops, and it will still be months before they will be affected in any way. lisa: general, how does it end? does it reassert russia or does it leave it incredibly isolated? ben: i think it will be a long time before we can work with russia again and things will be quasi-normal. this will end, i believe, early next year. the ukrainians are going to push russians back to the line by the end of this year, i believe. i could be wrong. but that is how i think that is going to happen. and then crimea, probably sometime early next year, a combination of fighting and perhaps some negotiating contingent. but ukrainians are not going to stop, nor should they stop. what does russia look like when

this is over? of course, i cannot be sure what type of friction and things are happening inside the kremlin, but we are all seeing very supportive things that are happening there, a lot of finger-pointing, people may start falling out of windows again. it will be a scene around moscow for the next two months. jonathan: general, thank you. ben hodges there, former commanding general of the u.s. army. i know the general will agree with the sentiment, forecasting politics is difficult, forecasting anything right now. i think the other thing is oil price, or gas prices, for that matter. gas is down today, the euro stronger. there are plenty of reasons for that, but when you think about a move like this one, if you've got a conclusion to this war, i keep going back to the sanctions and the policy response to it, that is not going to get unwound immediately. lisa: that is the reason why i

asked ben hodges, former lieutenant commander, whether we would see a return of russia back onto the international stage. because, if you don't, does anything change with the energy backdrop, even if the war ends? jonathan: future just about positive. we are fading, though. equity futures are positive .33% after being a fair bit higher than that a little bit earlier in the session. the euro-dollar 1.0148. joining us shortly, stephanie aaronson from brookings. from london, this is bloomberg. ♪

jonathan: good afternoon from london as we count you down to the opening bell in new york city. good morning to you. equity futures positive on the s&p 500. yields are stable to lower. yields have been climbing for six consecutive weeks, lower today by three basis points.

the euro is stronger. the dollar is weaker. lisa, you and i have been going over that for much of this morning and into the afternoon in london. the connection to the stories, the news over the weekend about progress being made by ukrainian forces against russian forces. one thing you and i are on the same page on, it is not the war alone that has caused this move in gas and energy, it is the response to the war, the politics, the potential for the change in policy we need to focus on. ben tannenbaum, a good friend of this program, sent me a message, these sanctions will not go away for years. lisa: it is going to take years to come up with the alternative. the european union discussing what their emergency energy plan is going to be. we were hearing officials debate

that they are going to have a mandatory power demand cut. this is not going to be clear-cut. it is not clear to see an easy read through to a currency response at this time. jonathan: some gas prices down about 9%. tom: a technical study of the netherlands, i am going to say they are down but do not signify a downward trend. we have broken some form of technical level. i do not see it. all of our hydrocarbons. jonathan: we were down 7% this morning. we are now down about 9%. the week before down about 36%. tom: what a moonshot it was. jonathan: we can pull it up to look at. tom: i would suggest the pricing we have seen is a result of the ukrainian advance against russia. jonathan: it is the policy response that matters.

even if we have a conclusion, and i think we all hope we have a conclusion, sanctions are not going to go away for a long time. can we resolve some of these issues in the energy market? tom: general hodges was telling us the sanctions work. futures up 13, dow futures up 42. stephanie aaronson with us, economist at the brookings institution. as we look at the state of the american economy, this inflation report, just a general mixture of the american economy. how complex is the american economy now versus what we see in europe? it seems to be more successful, quieter, maybe with a better plan forward than what we see in europe. stephanie: i think it is true that the situation in europe is much more complicated. there are certainly spillovers from the war in ukraine to the u.s. economy.

our energy markets are less affected than they are. there are a lot of direct spillovers to the war in europe in the form of the refugee crisis. there is much more tumult now in europe, while certainly spilling over to the u.s. economy, it is less complicated. tom: i would suggest that brookings owns the high ground on the research of the effect of inflation and the effect of slowdowns across deciles and quintiles of america. it is unevenly distributed. how bad is it unevenly distributed? how much is the middle class of america getting crossed right now? stephanie: lower income and middle income americans spend a lot more of their budget on things like food and gas. one thing that has been striking in the past year is how much these prices has risen.

the effects are much larger for them. jonathan: can you tell us about jackson hole and your take away from jackson hole and how surprised you were about how hawkish some of the central bank participants are? only a few weeks later market participants are coming on the program questioning the credibility of those institutions and their resolve to do what they have told us they are going to do. stephanie: yes, i think the fed and other central banks were clearly trying to send a signal to their public that they were on the case of inflation, and this was their main priority now , even potentially at the expense of there being significant slowdowns or a recession in the economy. i think part of it was a response to the movement we have seen in the markets leading up to jackson hole, where there seems to be some sense that perhaps the fed and other central banks would not act as

aggressively. i think clearly now they have sent the signal that they are going after inflation first and foremost. lisa: which raises an interesting question at a time we are expecting cpi price to be softer, maybe even negative in the headline number, albeit the core is expected to continue to rise. you are seeing gasoline prices,, even certain retail companies put clothing on sale. you are seeing movement toward lower prices ahead. how does the fed respond? do they remain hawkish in the face of progress even though people are seeing it continue to accelerate in certain sectors? stephanie: i think clearly the step down in oil and gas prices is very welcome, and that is probably going to depress the headline number, or it could even decline. i think there is a lot of momentum still in the core.

we are expecting housing prices to be very persistently hi, other sectors as well. i think this one reading is not going to be enough to dissuade the fed from a large movement in its next meeting even if it is a bit softer than the numbers have been coming in recently. lisa: what are you watching to gauge how quickly inflation is coming down? we know used car prices have declined, gasoline prices have declined, though that is questionable whether it will stick once the strategic petroleum reserve is no longer being deployed. what about rent and other areas? stephanie: clearly looking at some of the other sectors, what is happening in goods prices is going to be key for monitoring inflation going forward. i am also looking at the labor market. the fed is going to need to see a real slow down in the labor

market. you have made a little progress on that front. the three month moving average of payrolls is still above 300,000. that is a big number. we are going to need to see that slowing down further before the fed can feel comfortable that they are going to be able to achieve their target. tom: we see the study of labor participation, cultural, institutional, male, female over 30, 40, 50 years, the dynamic of labor participation, what does that signal about two americas? an employable america and a less employable america? stephanie: these hit on important factors going forward. some of the decline in labor force participation we have seen over the past decade is the natural result of the aging population, but there has also been a decline in the labor force participation of prime age

men, 25 to 54, who we would expect to be working right now. a lot of that decline has taken place among lower skilled men. it does speak to the difficult labor market that these men face. that is going to be a long-term structural problem the u.s. is going to have to deal with. jonathan: great to catch up. fantastic to see you in jackson hole, wyoming. stephanie aaronson of the brookings institution. we went back and forth on this after we caught up with fed's officials -- fed officials in jackson hole. they can talk up higher rates all they lie, but once you start to see materially higher unemployment, there is going to be a lot of questions about this policy, more than they have already had. lisa: there is a political question. a lot of politicians are seeing

inflation is the foremost concern. what happens when you start to see that deceleration? how much results and they have considering this is uncharted territory. jonathan: the language of the white house so far has been we will give space to the federal reserve to do what they need to do to bring down inflation. when unemployment starts to shift, i wonder about the weeks and months to come. tom: shock because of the data which shows how important tomorrow's data is. jonathan: the good thing for the federal reserve, not good news per se, is unemployment was climbing based on the lost jobs report on the back of labor force participation. i'm not sure anyone is jumping on that particular conviction and saying that is going to be the trend for the next several months. maybe that is the opening for the federal reserve to start talking up a so-called soft

landing. lisa: you can say it, whatever it means. i am not sure. recession, the unemployment rate does not rise? the theory is any perfect scenario is all these people on the sidelines of the labor market are going to come back, participation rate will go up, and wages will get a little softer, and everybody will be happy because people will not be laid off. tom: i thought about that this morning. x number of months ago, what percentage of the punditry was calling for a recession? it was a lot. jonathan: at the end of the year, go back to the summary of economic projections come in december 2021, get another forecast at this meeting in a couple weeks time. they were looking at 0.9% on fed funds by year-end this year. that was the forecast. we are talking a 75 basis point

hike in a single meeting. that is a change. lisa: i love the way you did that. you are showing the way there forecast can be treated without in mind. tom: really. [laughter] you need to watch and listen to "bloomberg surveillance." jonathan: futures up 0.4% from london. ♪ >> keeping you up-to-date from news around the world. king charles iii is vowing to uphold parliamentary micro c and following what he called the selfless duty of his mother. the king said he felt the weight of history surround him. charles is now in scotland where he will lead a procession to carry the queen's coffin. the queen will be laid to rest one week from today. the euro surged the most in six

months after a european central bank policymaker said further hikes may be needed. further u.s. data this week could underline the need for further tightening in the u.s. 75 basis points last week to curb the fastest rate of consumer price growth in the last decade. warning about the risks of u.s. auto debt. she said the prevalence of ride hailing services means people will not prioritize paying car loans as they did in the 2008 financial crisis. the used car market is showing signs of softening after prices skyrocketed airing the pandemic. twitter is saying no to elon musk's latest effort to cancel his agreement to buy the social network. he says twitter's latest move is wrong. the billionaire says the company's treatment of a whistleblower gave him another

reason to walk away from the deal. it is his third attempt to withdraw his offer. global news 24 hours a day, on air and bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo. as a main street bank, pnc has helped over 7 million kids develop their passion for learning. and now we're providing 88 billion dollars to support underserved communities... ...helping us all move forward financially. pnc bank: see how we can make a difference for you.

>> what we have had so far is moves across europe to accommodate the shock from rising energy rates. it is going to be important to maintain this kind of fiscal policy. jonathan: the chief economist for axa investment management. equity futures are positive on the s&p 500. looking at s&p 500 futures 16 points up. yields are lower three or four

basis points. look at that. 1.0141, stronger euro, weaker dollar. tom: stronger euro versus the yen dynamics today. we have a chart in new york on a monday. >> you have to talk about the power crisis. i want to put it into perspective for our tv and radio audience. we are looking at german and french power prices going back two years. you see this big move back into 2021, a parabolic move in 2022, which is coming down from its peak in late august. i want to put this into perspective. this is largely linked to gas prices because the sources of energy dip into the same grade. gas prices drive the market. here is what it means for americans. the eiffel tower, their lights are going to turn off or

earlier. the london tube is experiencing delays. this is going to be a key story about whether or not these power prices come down as they deal with the issues that come with gas prices and renewable energy. tom: thank you so much. appreciate it. terrific journalism today at bloomberg news on oil, hydrocarbons. leading that coverage is will kennedy, our managing editor for energy and commodities. thank you to all of our london team for what you have done the last number of weeks and months. today, i got a double barrel multiplied, david as well rights on the unintended consequences mr. putin may have unleashed. let's cover that conversation good what are the unintended consequences? >> clearly putin has made energy

part of his campaign on ukraine and not supporting the west. in the short-term, it has been working. it is causing huge economic pain for european countries as they pay unprecedented prices for power and gas. the point david is making is how long that will work for and what comes next. what comes next is a continent that says we have to find a way to live without your gas. the point he is making and drawing a comparison with the arab embargo in the early 1970's, ultimately the winners of this are not likely to beat moscow even if it works in the short term. longer-term, other suppliers of gas around the world and new forms of energy are going to win. lisa: it is such a hard issue to get your arms around, not just because of the forecasting error , but just gauging what is going on on the ground, whether there

is sufficient stockpiles on the ground in germany to last through a cold winter. what is your sense of that based on where we are now? >> in terms of stockpile, germany is ahead of where it wanted to be. that looks good. it is going to be the second half of the winter which is problematic as stockpiles run down. it is going to be hard to secure the gas supply they need. the weather will matter. it is interesting what happened to the price. it has come down from the extreme levels we saw in august. that is a sign policy makers are starting to get serious addressing this question. that has taken some of the extreme heat out of the market. it is going to depend on the weather. jonathan: in the u k, i wonder how you would respond to this, it seems like they are almost incentivizing demands. how is this going to work out?

>> you have a big contrast between the european plan where we have been reporting a specific target for demand reduction. there is no target apart from a few warm words for demand reduction in the u.k. people will respond at the margin. you have no strategy to bring demand down in a serious way. interesting contrast. tom: complete unfair question, unfair monday, what percentage of the united kingdom public is oblivious to the high price of hydrocarbons? is it a razor thin rich margin or a good percentage of people? >> i think it is something everybody knows about. this has been a matter of interest the past few months. in the past it was not something people thought about much. energy was relatively cheap. we were probably paying about a thousand pounds a year. you are talking about a two and

a half percent increase, that gets everybody's intention. -- attention. jonathan: we are still ironing out details. it is going to be a huge concern when you hear the reports out of germany that some industries are just shutting down. lisa: what does this mean for industries and companies that are trying to re-shore production at a time when their currency is losing power on the global stage? how do you deal with the inflationary inputs of having to input more of your industry if they get shut down because they do not have the energy to keep going? jonathan: commodities softened, sterling stronger. cable, that is a turnaround from where we were a week ago. tom: i think turnaround is the phrase. technical bottom, i will leave that to other people.

the real yield sitting at .90, stunning. now a positive .86 basis points. it has not gone to where jerome powell would like it to be. jonathan: market expectations have just done this, rolled over. lisa: which raises this issue. the fed, the ecb can get inflation under control, where they will get the cooperation of oil and gas, but they might not have to inflict the kind of pain they are saying they will. this is an interesting dynamic with the market not fully buying it. tom: i think someone was writing about the anchor frayed, the inflation anchor frayed. jonathan: chairman powell last week went on and on about that. tom: maybe the governor of

england will speak. jonathan: still don't understand what that was last week. lisa: in fairness how much of it was his fault and how much was the cato institute? jonathan: move his panel to an hour later. what was the cato institute going to say? we cannot accommodate you. lisa: the one who interrupted your press conference. jonathan: going to interrupt yours. not sure that is what happened at all. the opening bell is about 35 minutes away. from london, this is bloomberg. ♪

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>> this is an extended addition of bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: equity market rallying into the opening bell. live from london for our audience worldwide, this is bloomberg. alongside tom keene and lisa abramowicz, i am jonathan ferro. we wake up monday with the better tone to the market. tom: a better tone coming out of good news. for more it is about a quiet sent inflation inflation