>> uncertainty is approaching those critical levels. >> the uncertainty continues to weigh on markets. >> the fed message is clear that they cannot and will not wait for the supply side to move favorably. they are acting aggressively now. >> we expect the fed to moderate the pace of hikes. it becomes clear the labor market is beginning to topple over. >> stop looking for the fed to be your friend, stop looking for powell to say something conciliatory. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. jonathan: what a messy monday.

this is bloomberg surveillance live on tv and radio alongside tom keene and lisa abramowicz. i'm jonathan ferro. futures lower .8% on the s&p. it is all about the fx market. tom: is about the foreign exchange market. we will dive in and take the pro approach and tried to -- there is a tweet. his jon ferro paid in sterling? jonathan: in dollars. tom: that is why he is smiling. sterling has elements of the early 1970's, back before decile inflation in my math, not even a shilling, two pennies, three-part things. jonathan: 10350 the lows of the session. lisa: now the market is pricing in a 50% chance you will see parity on the pound with the dollar by year end. a complete shift in fortune.

it highlights the problem most acute in the u.k. how does the rest of the world deal with king dollar at a time when the economy globally is deteriorating and energy bills are crimping the growth of nations worldwide and the federal reserve is dead set on raising rates. jonathan: i've refresh the year to date moves. sterling down 20% against the u.s. dollar this year. japanese yen down 20%. the swedish currency down almost 20%, the norwegian currency down 17%. the swiss franc is the relative winner, down about 7%. these moves are massive. lisa: and they are destabilizing. and we are starting to see the destabilizing aspects of this. the reason people are concerned about a currency crisis. it is good you mentioned the yen and the yuan. there is increasing concern they

will not be able to control these moves without more drastic action. tom: let's explain quickly. you take the sterling, beleaguered, and run it against something that is equally beleaguered. i took sterling against the korean yuan, it is almost four standard deviation strong. that is the definition of instability. jonathan: you can throw in euro starlight. not pretty. europe is in trouble and sterling is in trouble. let's go stop futures down .8%. for the nasdaq we are down .6%. do it during the commercial break, not live on air. yields are up on the 10 year. your two year has been climbing for 13 straight sessions. yields up another 10 basis point. lisa: last week we saw more than

500 basis points of rate hikes globally from central banks. this has been an unprecedented global tightening, the likes of which we have never seen before. what is the response as people start to feel the bite of those higher rates in addition to higher energy prices. today emmanuel mack ron will present his budget to parliament in this comes as you -- incredibly elevated relative to where they have been historically. this raises the issue, the reason people are watching the u.k., people are watching italy and saying what is the political response? how much do these governments want to save their budgets and their fiscal backdrop in the picture for foreign investors. this is highlighting the fraught moment in this regime change when it comes to an economic perspective. at 9:00 christine lagarde is

planning to speak before the european parliament. i am watching italian 10 year yields because of the election but you also talk about closing the spreads. you are talking about how the ecb says christine lagarde says it is not her job to close the gap. italian yields blew out, it was her job to close the spread. much of this has become complicated at a time there is increasing skepticism and concern? today who is not speaking from the federal reserve? jay powell. everyone else seems to be. atlanta fed president at noon, dallas at 12:30, loretta mester at 4:00. how much of them start to talk about the concern a strong dollar will torpedo the global economy, if this will come back on the u.s.? we heard from raphael bostic who says he sees the possibility for a straw -- for a soft landing. that gets more obsolete. jonathan: can you imagine not

even a week after chairman powell delivered the news conference they start back trapping -- they start backtracking because of moves in foreign-exchange? lisa: i cannot imagine they would because right now it is not hurting the united states and if they did that it would muddy the credibility of the fed more than help the backdrop from a foreign-exchange. tom: standard deviation analysis is in order. these are huge moves. jonathan: let's get to the portfolio manager for the blackrock global allocation fund. i'm trying to work out when rick and bob get on the phone on monday morning, the call goes out and they say back up the truck, let's buy these bonds. are we close to that moment? >> you're probably closer to buying bonds than stocks. it is an enormous move. let's talk about real yields for a moment.

as recently as march, 10 year real yield was -1%. this morning you are about 130, 140, the highest since 2011. granted we get a different inflation environment back then. what is interesting is that for the first time in years you can build portfolio with bonds, particularly the short end of the curve. bonds are not acting as a hedge, but you are strong to get to levels where the incoming is becoming more interesting. lisa: we will hear from a host of fed speakers today. do you expect them to push back at some of the hawkish resident -- the hawkish rhetoric because of the strong dollar and what that does internationally? russ: i am not sure. the fed was pretty resolute. i think there is no doubt in anyone's mind after last week.

they are looking at user demand. while we have seen some softening in some deceleration of realized inflation, it is not obvious given how intense they are being. there enough clear signals they will give the market a break. the dollar is a challenge. we are seeing the dollar heading to the tightening of financial conditions. if you want to know why risk assets are down as much as they are, you want to look much further than the fed in this very rapid shift in financial conditions. lisa: what is the trigger where you go all in? you say you are closer to buying bonds. what is the trigger to let's go? russ: there never is that trigger. this is about a continuous change. we were much more underweight bonds than we are a year ago today. we have closed a lot of that cap. in terms of yield, what are some

of the milestones? in terms of the short end you already getting a pretty good yield. one thing to consider is typically long end yields have peaked or the terminal fed funds rate is. we know from last week, the fed funds rate is not there yet. as we get closer, then think about closing some of the underweight, closing the gap. tom: -- jonathan: a bit of a mea culpa from chris harvey at wells fargo. he says i believe we would not be 10 lower until the first half of 2023. we fill the market bottom has not been established and stocks will make lower lows in 2023 as estimates come down in the fed tightens into recession. that is the next shoe to drop. you think we have seen enough of that? earnings expectations come in? russ: probably not. you look at earnings estimates for next year, you are still

getting modest growth. is that consistent with the economy? i have some sympathy that the next leg for equities is more about earnings estimate and about revisions and about multiples. multiples already come down a lot. inflation is sticky, there is room for multiple compression. one of the things we are doing in the portfolio -- the equities we do have we are emphasizing consistency. margin consistency. profitability. these are the characteristics that will be challenged in 2023. jonathan: good to kick off the week with you. equities down and yields much higher. tom: there's so much to look at. it is such a rich moment. currency history being made. the vix, 32.56. we are over 30. i am doing some studies on it.

the question, is there catharsis? i do not since the catharsis from thursday to where we are now. jonathan: what is the phrase? the cathartic puke. tom: that is not cfa talk. jonathan: chris harvey's phrase, not mine. lisa: when i say that phrase, people are like that is so unladylike? jonathan: are you serious? that is ridiculous. lisa: i agree. it is cathartic puke we are looking for. jonathan: is just a neutral term. down .6% on the nasdaq. down .9% on the s&p. yields up eight basis points on the 10 year. the two year climbing for a second straight session. last time the two year at a down day was september 7. live from new york, looking

forward to covering these markets with you, for our audience worldwide, this is bloomberg. lisa m.: keeping up-to-date with news from around the world with the first word, i am lisa mateo. in the u.k. concern about chancellor kwasi kwarteng fiscal policies has sent the pound plunging to an all-time low. sterling fell below $1.04 at one point after he said there is more to come on tax cuts. their fears cutting taxes even more will send inflation soaring. the oecd has slashed its global growth forecast, saying the world has been jolted by the war in ukraine. the paris-based organization says the global economy will expand just 2.2% in 2023, down from its previous forecast of 2.8%. the oecd also expects further

interest rate hikes. italy is on track to have its first female prime minister. giorgia meloni one a clear majority in sunday's election. that sets her up to lead the most right-wing government since world war ii. there is growing speculation that russia may restrict its borders to keep men eligible for the mobilization from leaving the country. russian men and their families flocked to borders over the weekend. witnesses reported hours long lines at moscow's main airport. the new poll says most democrats want the party to replace president biden as its 2024 nominee. according to the washington post, just 35% of democrats and democrat leading independence support the president for nomination. 47% of republicans want former president trump to be the gop nominee. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700

journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

>> what i'm determined to do as prime minister and what the chancellor is determined to do

is make sure we are incentivizing businesses to invest and also helping ordinary people with their taxes. that is why they feel it is right to have higher national insurance and a higher corporation tax. that will make it harder for us to attract the investments we need in the day and harder to generate new jobs. jonathan: liz truss on cnn over the weekend. monster moves in this market. let's start with equities down .8%. on the nasdaq down .5%. yields higher on the 10 year treasury. the euro-dollar .90 648. -- the euro-dollar .9648. pound sterling trading right now with a 1.07 handle, this morning 1.03.

tom: stiller shock. you mentioned euro sterling, important for the euro and the united kingdom. i did not realize the move. this is the kind of thing we can see the imf going, this is the kind of thing we get the new york fed desk going. five standard deviations out on euro sterling. that is extraordinary. jonathan: unreal. with us is lizzy burden in liverpool. you are at the labour party conference. can you tell me where sterling is trade -- if every mp has the bloomberg app on where sterling is trading? lizzy: everyone has asked me where the pound is out so they are certainly not ignoring the markets despite kwasi kwarteng saying markets will do what they will. the shadow chancellor rachel reeves has been making it clear

that the labour party can be trusted if they are the next government. it is the same message from pat mcfadden, the shadow chief secretary to the treasury that they will be more credible. they are trying to set out their vision. we need to be convinced that they can afford all of the funds they are sending out as well of all the public spending. over the weekend, the labour party said they would carry on with the proposals from the tory government, including the cut to basic income tax and the reversal of the rise in the payroll tax. they have scrapped the top rate cuts but they are very expensive purchases. jonathan: given we also have the conservative party conference later on this week, can you tell me how united that party's behind some of the moves by their government? lizzy: it is a bit of a mystery

here. this is what we are waiting to see. will the rishi sunak faction -- we have heard from john glenn at the treasury saying he disagrees , the chairman of the treasury select committee was rishi sunak's campaign chief. on the morning of the package on friday he was saying the office of budget responsibility official watchdog should have been given a chance to assess the economic impact of these funds. you have to ask about whether part of these market moves are because these funds did not have the credibility of an official forecast. tom: most of us in america get our labor and tory politics off of movies like the queen and the crown. how close is the labour party to tony blair and gordon brown or is there something new about it

beyond two decades? lizzy: i think the big difference is the handling of the union, which is a hot topic right now given we have -- around inflation, and strife, including here in liverpool at the port, the doctors saying they want to be paid in line with inflation. at the top of the labour party you have the deputy leader saying she would repeal all of the government legislation stopping the strikers. you have the opposition party leader saying his bench cannot be on the picket line backing the strikers. there seems to be a bit of disunity there, whereas tony blair managed to do a very different job when it came to unions. lisa: there's also disunity with the bank of england versus the government. there is some pricing in the

market of the bank of england meeting in between meetings and raising rates to stave off some of the kleins we have seen in sterling. what is your view on how the government would respond to that? lizzy: definitely all eyes on the bank of england. the government welcomes if the bank of england steps into save the currency. you talked about how much the pound has tanked as a result of kwasi kwarteng announcing how much packages would be in the pipeline. before those moves an analyst at deutsche bank was saying bank of england needs to step into regain the ability in the situation. it is 160 five basis points of hikes in november which implies we will get an intro meeting hi. it is difficult for andrew bailey because he does not want to be seen to be responding to fiscal policy more than inflation. the other question is are they

going to put the brakes on active gilt sales, which raises the same dilemma. jonathan: lizzy burden, thank you. we will cover the conservative conference later on. u.k. policy is in conflict. we have talked about that a lot. the prospect this will happen. we have loser fiscal policy. i think the greatest unknown at the moment, it is still unclear whether the boe will step up and validate market pricing. unclear how the government will respond to that if they did. tom: i thought the economist did a great job going back to reagan one. there were two parts of the reagan supply-side experiment. number one was a lot of like what we are seeing right now, a lot of optimism, this will work, this will work. the second part of reaganomics was -- i wonder how quickly that occurs? jonathan: we will see how

quickly that kicks in. can growth bailout the story? lisa: and how quickly do they need to get that? you are raising the point about the interaction between central banks and governments, especially if they are at odds with each other and you've been talking about this successfully. we've not seen anything like this in history. jonathan: mohamed el-erian wrote in the guardian in the last 24 hours and he has this idea that pressing the accelerator and the brakes at the same time. what happens? the smoke is coming out of sterling. that is what happens. tom: arsenal and taught a ham, number one -- arsenal and tottenham, that is number one, it is cheaper, it is more affordable. ♪

jonathan: good morning. kicking off the trading week and a big way, futures down 6/10 of 1%. the bond market and the foreign exchange, treasuries, a 13th consecutive session. this morning, by seven or eight basis points.

if you get to what is happening in the u.k., let's have a look at where the two year yield is on the treasury market. 88 basis points over the last month on a u.s. two-year. 169 basis points in the uk2 year. that is why we've seen the move in sterling, too. tom: what it comes down to is the heart of the matter is flows. moments ago with deutsche bank, he goes through the usual litany that everybody has but he really talked about the nation are going to have to rely on the kindness of strangers. not sterling or a real economy with real employment, but other economies that are going to fall flat on their back. jonathan: you raise an important

point. you take a look at the makeup of the gilt market, the cork opponent i think of the u.k. debt market separates it is that the u.k. doesn't have this huge outstanding debt of foreign-denominated debts. that is a key feature that differentiates themselves from having this negative downward spiral that an emerging market might have. tom: we continue to monitor foreign exchange as best we can. somebody on the streets of new york who is british and poor. what is it like to be paid in sterling and to enjoy a cup of coffee -- let's get to it. your insight here, great work.

your immediate insight on this experiment? >> i think if we had more credibility, markets would be more sanguine about it markets don't like brexit. they've been nervous about what is going on in the corridor and it is just the view that the u.k. is going to borrow more. if i look at the moves in interest rate expectations, inflation expectations, what i see is that captures all of the moves. we don't have an outside move here, and can the bank of wien? -- intervene? i don't think they do, i think they stand by. tom: they stand by and see how the politics plays out as well? do they risk their independence? >> the problem with truss

onomics's we only have two of three parts so far. if you look at the details, they don't go as far as the headlines might suggest. not hiking corporation taxes. the regulatory stuff looks good. the markets the third element is what happens when we have expanded. i would not be surprised at the government actually sees this to shore up confidence that we are not going to be borrowing. expect some policies to balance both sides of the trade. jonathan: from what you are saying, you think the government blinks before the bank of england does? kallum: i think if the bank of england steps in here and hikes rates against this huge supply, the context of all of this is

that markets are incredibly worried at the west is heading into a recession. the u.s. is probably going to trail a little. in the bank of england and the u.k. treasury have to borrow all this cash. this is an experiment. the bank of england doesn't want to double down on the recession pressure about hiking interest rates in order to get these inflation expectations down. it would be better if the government said if you look at the tax cuts, on the barbie side, it is not necessarily the fact that the bank of england is going to have to help the government bring down inflation. it is a complicated issue. jonathan: with a lot of people uncomfortable over the last couple years, consensus, is there a small part of you that thinks that perhaps this risk might be a risk worth taking? kallum: i think the tax cuts by

a large make sense. i think the regulatory policy by a large makes sense. i don't think we should have a growth target in the u.k. of 2.5%, going to be virtually impossible to hit while you've got brexit. but again, i think the u.k. lacks credibility and markets. since the bank of england let the inflation get so high, the policy issues asking for a -- reaction. if we had a more credible government, the markets will look more carefully. some decent deregulation policy, that should be taken positively. they are not pricing on fundamentals and the u.k. is basically asking for a reaction and it has got it. lisa: jon recently requested

that we have a meteorologist on a regular basis. how much does the u.k. budget make sense with a warm winter? kallum: good question. the real policy folks are the energy price caps. i think markets would be fairly happy with a fiscal move. but the government has said is your energy prices are not going to hold up over the next few years. we could be looking at eye watering energy bills if you didn't have a crisis somehow. could have just focus on the household that really needed, but that policy basically could take at least three percentage point off of. -- peak inflation. we are not going to be worried this time next year. that is a fairly good policy.

essentially, an energy crisis would be warm winter cold winter, this is probably the right thing to do. >> but on the flipside, there is a concern that you are just going to have the same problem all over again, create a spiral of spending to fueling the pickup in demand price offsetting the whole point of the program. what would you like to see from that demand-driven type of policy that could potentially bring us more into balance? kallum: demand is certainly a part of it in the u.k., no doubt. but what you don't have is a u.s. situation where demand is raising well ahead of the pre-coded trend. what you have is a supply problem and robust demand in the u.k. so the question is what would inflation be? inflation expectations might provide a good guide. looking at about 2.6%.

that is high inflation but it is not incredible inflation. that is the thing to focus on here. tom: my study is that current account balances matter. we love to talk about sterling to four decimal points. the united kingdom current account balance as a percentage of gdp. 1974, 19 89, 2016. it gets fixed. are we close to where it gets fixed? kallum: i don't think so. the u.k. is mainly borrowing from sterling. most of it is domestic, 30% international. what you have here is the u.k. importing much more energy.

if you look through this recession, sterling is likely to be stronger, energy prices will be lower. jonathan: thank you as always. tom: great, great. jonathan: really important at this moment to get a better understanding of the market. the reason is because the average fertility of the gilt market compared to five years in the treasury market. u.s. century bank with a balance sheet. you could be waiting a long, long time. situation the u.k. is very, very different. tom: this is really important, folks. it is clearly a crisis, no other

way to put it. one of them is the way mortgages are done. here, there is a whole fixed mortgage rate culture. jonathan: not just that. that is the important difference between the u.k. and the u.s. when you get a central bank hike from the ralph -- bank of england, that is the bigger difference. tom: well i am learning every day. we've got to go back to close the real estate. jonathan: you think we should go back and have a look around? done. we will stay here. yields higher.

bramo has always wanted to come to the u.k. with us if we go to the u.k.. live from bloomberg real yields, fantastic. from new york, this is bloomberg. >> keeping you up-to-date with news from around the world, the selloff in the u.k. -- overdrive. an all-time low before rebounding and government bonds were slowed. progressive rate hikes. the latest was fueled by comments on sunday that there is more to come on tax cuts. in china, the communist party has reaffirmed president xi jinping. the party published the list of almost 2300 delegates to attend

next month leadership summit. the announcement brings a step closer to an unprecedented -- at the event. talking to rush about buying fuel and other key commodities. the president told bloomberg to be national interest overall concerns about the war in ukraine. >> maybe they can loosen up and provide us with some fuel. lisa: the philippines is close to reaching deals with russia and other countries. and -- plans to retire at the end of 2022 after only five years on the job. a to mulcher was period with consumer goods company botched a potential $53 billion deal and left investors with lackluster growth. they say they are starting the search for a successor. global news 24 hours a day on

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>> i think that u.k. is behaving a bit like an emerging market turning itself into a submerging market. he would not surprise me if the pound eventually gets below the dollar's current policy path is maintained. jonathan: i'm sure that sounded like a good call at one point but we are pretty close. live from new york, good morning. down 6/10 on the s&p. not the what you might expect given what is happening in the bond market.

seven or eight basis points. the dollar strength, the dominant story for the year so far. the euro-dollar, 96.51. it is over those five days that cable is making it six percentage points. tom:tom: when we are trying to do given the turmoil, to do the voices that matter. stress, can't -- strategists, economists, in liverpool. from goldman sachs, global foreign-exchange. wonderful to speak to you this morning. i think i want to go to of the politicians need to do. how do we get fromtrussonomics to reagenomics which is tax

increases and a pullback? how do we get there? >> i think you mentioned reaganomics. already high inflation. the dollar is a reserve currency, but you also have the fed clearly moving interest rates to bring down inflation. tax cuts partially reversed. they need to see some combination of what is going on in currency market, what is going on in the pound specifically. indication that that emphasizes

the fact that fiscal credibility monetary policy will be firmly targeted at bringing inflation down in the medium to short ways. jonathan: do we have a recipe of a self-fulfilling downward spiral if we don't have the ingredients present in the u.k. field market? 6 >> i think you are right. >>i think they are very unhelpful comparisons, not least because of the pound this year. the u.k. does not have foreign currency denominations. they have a very low majority of the debt in terms of public burden. the concern here is not so much that the u.k. cannot serve, that is not really the issue.

if the concern is more about the path that is announced, not particularly targeted, will inflation lead to more yields? and then requires the cheapening of guilds. the moves are extreme, but they are explainable. lisa:lisa: a lot of people are talking about a currency crisis proving unlike we have seen in decades. they refer to what is happening in the united kingdom but even more what is happening over in asia with respect the yen, the chinese room in the. how -- the willingness to stage some sort of intervention when the u.k. doesn't really have the currency reserves to be the stage an intervention even if they wanted to? >> you are right, but first,

yes, we are in the midst of the dollar continuing to begin and that is making a lot of currencies rethink the part of that. but the bank of japan has an explicit policy to keep yields fixed even as they go up and the rest of the world, and particular, the u.s. in the case of china, they are actually lowering interest rates as part of the easing conditions. in terms of moving rates higher, policymakers to they don't like to see these things happen. ultimately, meaningful or

sustained shifts in the policy framework, that is not something that we expect. lisa:lisa: at what point to the united kingdom or asia moves become a trigger point for something larger that that has to respond to? >> one of the issues right now is that the stronger dollar is actually helping with client they should probably to the extent that they are focused on bringing inflation down, the stronger dollar is helping from that standpoint. as far as that is concerned, i don't think that is really bothering them. some inflation starts, i think

that is the point to which the fed starts. for now, i think that the combination of steady growth and large hikes is going to be hard for a lot of people. jonathan: it is difficult right now. great to catch up. this from mike wilson of morgan stanley this morning. it is a quote on the u.s. dollar. the reason moves create an untenable situation for risk assets that historically has ended in a financial or non-prices, or both. a rolling year-over-year chart of the u.s. dollar, up something like 20% or so in the last year. different crazies over the last few decades. tom: we lived this with ecuador and a bunch of south american economies.

all i can say is we are becoming overcome by events. we are committed and not just showing you how sterling, this is much more -- on the nasdaq, yields are high by eight basis points on the 10 year 3.7 6% on a u.s. tenure. live from new york city with tom keene, lisa abramowicz and jonathan ferro, heard on radio, seen on tv, this is bloomberg. ♪

♪ >> uncertainty really is approaching those critical levels. >> the uncertainty is something that just continues to weigh on markets. >> the fed message is clear that they cannot and will not wait for the price side to move favorably so they are acting aggressively now. >> it becomes clear that the labor markets.-- >> stop looking for the fed to be your friend. stop looking for powell to say

something and cilia to. he's not -- conciliatory. he's not. jonathan: yields up, stocks down. for the audience worldwide, good morning morning, good morning, this is "bloomberg surveillance." futures down 7/10 on the s&p. the dollar still climbing. tom: this is not just about the united kingdom, it is about emerging markets all reacting to this. we will commit to that today and what it means is you got to look for the shock along this path. jonathan: 13. eight consecutive weeks of 10 year treasury yields climbing. last time we had a down week on a 10 year yield was back in late july and the yield was 265. tom:tom: the answer is he wants

to really yield afternoon with jonathan ferro. what the pros are doing is they are distilling the down to a really yield. she could be with you. global bond market, negative rates worldwide. lisa: the real yield equation, we heard this earlier, that suddenly you are actually getting income. we take a look at the 10 year inflation-adjusted yield, nearly 1.4%. based on the decade or so of zero or negative, this is offering an attractive opposition to risks like stocks.

we've already seen it, and how much further it has to go, and what is the rationale going to be? this is going to be a really interesting aspect of this. is it because of shrinking margins? or is it because there just isn't the same command at a time of hiking rates? this will be the most interesting part. tom: 32.4 one, and none of that without catharsis. that doesn't show me the sweat, the emotion you need. >> jp morgan, just pencil that one in. we will see if we finally get that because there are still some holdouts right now. lisa: do you think that if they have the capitulation -- jonathan:jonathan: maybe maybe publishing at lunchtime today, we will see.

lisa: if he does, i have been wrong. i have been really wrong. jonathan: futures down a tenths on the s&p. yields higher on a 10 year. is not just about sterling weakness. dollar strength is so, so powerful. lisa, that currency negative by half of 1%. lisa: that is very much at the strength of the u.s. and the fed , but it is also a political story, and increasingly so. emmanuel macron presents a budget to parliament. how much they try to offset some of the higher energy prices of consumers? this really goes to the political question. can you have your cake and eat it, too?

the market is saying no. christine lagarde will be speaking. how much do you get the sense that they are committed to these potentially rate hikes that they are all but committing to. rafael bostick around noon. do they talk about the dollar? how concerned are they about weakening, the ramification of very hawkish rate hikes? jonathan: he just laughed. lisa: uncontrolled laughter. it really raises this issue of the tension between the real leadership and all of the noise

around the message. jonathan: you think it is noise? lisa: here is the issue. it is noise that you have to pay attention to. try to influence the conversation but don't necessarily pay attention to the conversation of the leadership. what does that do to the credibility of the fed? jonathan: entirely agree. staying awake all weekend waiting for aaron judge to do something he never did. one good week right now, what is it? >> one good reason to be bullish is that we he g to the point ata minimum to provide some balance. it is really transitioning from an environment where folks are really worried about elation, to a point where growth and earnings and margin compressions

start to take hold. the bond market shift should play in the portfolio. but here is the real problem. policymakers wish they could use a scalpel. instead they are using a sledgehammer, and when you use a sledgehammer, you are going to break things. we have no real reason to adjust that at this point. tom: to your point, it was scathing about the fed in the middle of last week and reaffirms that this morning. he just says they flat out fluid a year ago and they are blowing it right now. how does your world changes chairman powell blinks? >> anyway, they are getting

there, because most of their tightening is already done. there is no fed cut with inflation rate, but they have completely bought into the fact of maybe another 50 next year. at that point, they can pause. i think they are really afraid of going by 75 basis points. they have no expectations. tom: lisa, do you get to a point on what is intermediate or so low that it is too low? what do we do? lisa: it will be too low to see the fed going about this global growth. this goes to your underrated stocks in your portfolio. what are you holding? what are you buying? >> here is one thing that caught our eye on friday. the american association of individual investors has not been this bearish since march of

2009. and we all remember that with the bottom of the market and it got very bearish. but again, we are not at the point where we are adjusting just yet. we are very, very interested in the front-end of the u.s. curve. things like cash which i used to call trash in the world of negative interest rate, zero interest rate politics, those sort of things make some sense. we also like investment-grade corporate bonds. the positive real rate story, that really hurt some of the portions of the market. corporate bonds in the front-end of the u.s. curve makes --. this isn't the most glamorous trading. i wish i could come here and say we should be buying stocks here, but not just yet. cash makes some sense in the portfolio. jonathan: so we just left behind

a market regime dominated by zero interest rate negative rates in various central banks? we have blown that up in the last 12 months. so any reason to believe we have to go back to it anytime soon? phillip: also, john, the bloomberg aggregate index is having its worst year. tom: it's too much. we are in shambles here. the index that he is talking about, -18%. phillip: at this point it is hard to imagine going back anytime soon. however, as i mentioned a couple of weeks ago, they are almost at the end of their tightening cycle. what happens when we do get to the point where inflation starts to move lower and then you have an environment where growth is scarce again, which brings to

the forefront all of those stocks? however, that is not right now. right now, look for the opportunity to add back if and when the fed pauses because of a deliberate and explicit move on inflation. that is not any time in the next couple of months. jonathan: does judge get it done? phillip: of course he does. he is aaron judge, of course he gets it done. tom: this question is tough. what uniform is he wearing next year? phillip: he's wearing pinstripes, no doubt about that. tom: this just screams of -- to pony up the big money. phillip: aaron judge is right there. jonathan: how much do they have to pay to keep them in a yankees uniform? phillip: inflation-adjusted, a

lot of money. jonathan: hundreds of millions? phillip: a little more than the previous season. jonathan: unreal. thank you, sir. it is down. -- futures down. this is bloomberg. lisa: keeping you up-to-date with news from around the world, and the u.k., conservative lawmakers say the bank of england may need to step in over the plunging pound. joining us for an all-time low today with the concerns about the new government tax cuts. emergency interest rate hike looks extremely likely. a global forecast for next year, saying the world has been dashed

by the war in ukraine. the organization says the global economy will -- 2.2% in 2023, down from the previous forecast of 2.8%. first fema -- italy is on track to have its first female prime minister. that is a look ahead to the most right-wing government since world war ii. and ukraine's president is: on the russians to avoid the kremlin's effort by fleeing or surrendering. he says that would help bring a quicker end to what he calls the criminal war. vladimir putin ordered up another 300,000 troops. 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.

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♪ >> we are taking it seriously. it is not the first time president putin has made a nuclear threat and we have communicated directly, privately

to the russians at very high level that they will be catastrophic consequences for russia if they use nuclear weapons in ukraine. we are planning for every contingency and we will do what is necessary to deter russia from taking this step and if they do, we will respond decisively. jonathan: the national security advisor over the weekend. live from new york city, this is bloomberg. yields are higher by 10 basis now. the euro-dollar has to get comfortable, just used to 96.31. tom: i look at the screen and every time it is a shock. right now it is the euro breaking down. the euro is almost through the .

9626 level on new weakness today. we are not even watching it. futures remain down. jonathan: -- aaron judge. lisa: i didn't want to break into heated conversation, but just to make that clear. let's be honest. tom: we will give aaron judge equity in the franchise. jonathan: what do you think, tom? tom: i think that will give him equity in the franchise. it is part of that. steve, if you are watching this morning, we love to have you on. right now we are going to talk politics. washington policy, what we've got dear, decades of experience.

about 1600 pennsylvania avenue's response. i don't care. i want to know what the pentagon thinks about the eastern front of ukraine and russia. what is the pentagon doing, given a new putin and a new nuclear analysis? >> i think the white house would say president biden is the commander of the pentagon as well, and i think that the thought here is that the message has been clearly sent to putin, to his generals. what i think putin would have to be very concerned about is how well we were anticipating the ukrainian invasion, how good our intelligence is. and i think the subtle or not-so-subtle message was that regime change would be at the top of the list if putin were trying to use any sort of nuclear weapon to respond to ukraine. so he has to be fearful,

personally, if he were to do something to escalate this war. tom: a great summary recently. we really didn't have good intelligence on the soviet union at the time. as a washington watcher, the you suggest our intelligence is better here than it was back then? edward: i think it will lead up to the ukraine invasion, it was pretty good. i think it was so good that our allies did not believe us, and that was probably one of our biggest challenges. they did not believe us because we have had some pretty big intelligence failures. look at afghanistan, iraq. but we knew exactly what putin was going to do before he did it. unfortunately, he did not stop the invasion, but it certainly send a message to the kremlin that we are watching you and we know exactly what you're doing here. lisa: there is also a sense of desperation coming from the

kremlin officials. attempts to flee the nation at a rapid pace from russia trying to get out before being sent to the front lines. we are also seeing russia try to make ukrainians into soldiers for them after grabbing their territory. what is the endgame here? how concerning is it? edward: you are right. what we are seeing here is some acts of desperation coming out of the kremlin, coming from putin. the concern is that they do have much more that they can escalate. we've described it as an attempt to escalate may go going to a stalemate, trying to just re-center what is happening in terms of the ukrainian pushback. what we are watching is one of the ways in which putin could kind of escalate through his militarization of energy. there is an energy embargo on

russian oils and i think the united states is trying to do a first time ever price match to allow that oil to slow build into europe, but if putin further weaponizes energy, how much does that add to the economic determined that we are seeing in europe? how much does that add to inflation? how much does that add to the fragility, potentially, of the u.s.-nato alliance? jonathan: it could be a tough one. good to catch up. thank you very much. financial markets. there is still three months plus to go. lisa: the consensus right now to be buy short bonds and go to cash. this is not exactly a ringing endorsement. there is no reason for them to go. they are actually earning

something to stay where they are and the uncertainties are just growing, especially with the backdrop of the political uncertainty and a dictator who is completely unpredictable and fact into a corner. jonathan: that is only one part of the story. then you've got a dollar that is absolutely dominant. the prime minister spokesperson in the u.k. said he won't comment on daily market news. this isn't a daily market move, it is a yearly one. it has been a yearly one for three business days. tom: that goes to what they are worried about including the managing director of the imf. the rate of change and change, the rate of change. the canadian dollar acts as an acceleration as well. how do you do a 14% depreciation if you are -- niagara falls and

the buffalo? you are getting killed. jonathan: looking forward to catching up with him. joining is very, very shortly. the dollar stronger against the pound and pretty much everything else. futures down, as they say, three quarters of 1%. for our audience worldwide, heard on radio, seen on tv, this is "bloomberg surveillance."

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♪ jonathan: live from new york this morning, good morning, here is your monday morning price action. the s&p down by 7/10 of 1%. looks like it become a five-day losing streak. the nasdaq down about a half of 1%. sitting right on top of it. look at the bond market. yields up.

12 consecutive sessions become 13 consecutive sessions of yields higher at the front end by 10 basis points. you can do the math. tom: big moves, and then the real yield. nine basis points now. that is a wild statistic. jonathan: the year to date carnage. looks in the something like this. we are higher on the u.k. two-year year-to-date by almost a hundred basis points. 388, 389 height. tom: this is moving very, very quickly. it always comes back to washington and the new york fed. that is what i would watch. jonathan: that is the epicenter

of it. lisa: where is the two-year year yields on this? what is happening underneath the service? not even the global economic outlook, they have heard from fedex, they've downgraded their expectations for earnings. you could argue this is just a rebound from the pandemic. whatever you want to make at the argument, there is a direct correlation with these stocks going down and economic prospects deteriorating pretty rapidly. the s&p over this period is only down 10%.

this is what i find most interesting. and transportation names. economic momentum heading into the end of this. tom: this is hugely valuable, getting us away from. just brilliant. one question on the globe, sterling, i look at the intervention experiment of the japanese. what happens to the yen, what happens to those institutions when the yen weakens back to

where it was before they intervened? >> they put the pressure on the politicians to do something rather than waiting on the intervention. the main problem is for japan, they are one of the few central banks to still have low interest rates. until they stop, they have done is taken the steam out of the trade. it does make us question what is the upside with one of the largest assets in the world. but at the moment, the japanese most likely to use their cash balances with the u.s. rate markets, and if it carries on, it will probably be the high u.s. yield which will lead to a stronger yen. tom: you mentioned earlier japan has ample cash, maybe the united

kingdom does not. jonathan: it is a very domestic bond market. a lot of is priced in and. -- in yen. yes, a lot of them might be --, but a lot of it is sterling-denominated anyway. i think the issue we are trying to grapple with in the u.k. right now, is this just a normal, required adjustment leading to attract capital. >> i don't want it to be worse.

as you know, we've gone through that. the current account, there is a story with high energy prices skyrocketing. now looking for 97.50 by year-end. i've been caught up on whether to make that call sooner. the concern about the bank of england raising rates and supporting the sterling, but now we have switched to emerging-market-style prices and even with rising interest rates in the u.k., as this crisis goes on, before christmas, probably by the end of november. end of march next year, if nothing is done and if the high

prices continue. i could be wrong, though. the first one, if we have the bank of england raise rates, some sort of warning in the market suggesting that might happen today. if they don't raise rates, about 80 basis points by this week. the main thing is the bank of england, what they turn to. not having fiscal policy with fiscal rules having market expectations for a sustainable 2%. there's more tax cuts to,. that is why we expect more of this sort of news to come, too. lisa: let's pick up on some of those clients. 200 basis points of rate hikes by the bank of england by november. there is a question, what do yields have to do to get to that 97.50 level without complete --

by foreign investors? we are looking at five year yields going vertical. up half a percentage point every day, it seems like. where do we stop here, given your outlook? jordan: the market is doing pretty well getting close to that. almost 500 basis points everything the federal reserve will get to. we've just literally revised, looking for 50 basis points, now 75. the reason i mention this is there are two ways. the first one is aggressive rate hikes.

lisa:lisa: as you said, there is some talk about the potential for a bank of england news conference in the future. what were they potentially do? jordan: they need to talk about financial stability, foreign-exchange stability. the market gets into a framework for the bank of england is reacting to it. that main point will probably slow down. quite used to having -- since brexit. it is not the first time i woke up seeing -- tumble. usually, this leads to a sort of

new emerging of cash, but as i said, this time around because a fundamental regime change taking place in the u.k., in 2016-2019, the market was trying to price in what brexit could look like. now we know what it looks like. this is the definition of -- that should be -- in the market. until that changes, until energy markets further, on the bank of england side, that could have --. jonathan: if they did that, they are responding to the move in the market, or fiscal policy? what does that look like going into the weekend of a conservative conference?

jordan: it would be quite -- because they have been given a heads up. this is the market reaction to the fiscal side. a hawkish 50 basis points. it kind of falls down. what we heard from the budget last week is fiscal rules are out the window until we get an idea of what they would be. and uncertainty has made the fiscal side, that uncertainty as to what the u.k. looks like. jonathan:jonathan: the range of sterling today, one of 3.50.

right now, just short of 108. that is a monster, monster range against the u.s. dollar. from new york, this is bloomberg. lisa: keeping you up-to-date with news from around the world, this is first word. u.k. assets has gone into overdrive. the dow plunged to an all-time low before rebounding government bonds. now there are calls for aggressive rate hikes by the bank of england. there is more to come on tax cuts. in china, the communist party has reaffirmed president jinping. delegates will attend next month's leadership summit. the announcement brings xi a

step closer to clinching an unprecedented third term in power. and the strength of the dollar and fears of a recession. $85 per barrel at one point for the first time since january. -- naming long-term investment banker -- officer. taking over from co-founder -- in january. he has been close with the firm for more than two years and has worked on some the largest transactions. credit suisse says it is working on possible asset and business sales, looking for ways to cut costs and a more strategic plan to be announced next month. no details yet, but bloomberg has reported that -- is considering a sale of a latin american wealth management operation. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries.

this is bloomberg.

>> we are going to do all that we can at the federal reserve to avoid deep, deep pain. there will likely be some job losses, but i think it already historical history here, there is a really good chance that it is going to be smaller than what we've seen in better situations. jonathan: from new york, a whole lot more fed still to come. futures down 6/10 or 7/10 of 1%. futures on the nasdaq down about half of 1%.

futures down on the 10 year. the dollar dominant, as it often has been this year. for tens of 1%. -- 4/10 of 1%. jay powell seems determined to push the economy over a cliff. destroying jobs and crushing wages for millions of workers, reckless and dangerous. recession is not the solution to inflation. tom? tom: she's got a lot to talk about here and what she is talking about is instability. jon, i would imagine focusing on where we are in jackson hole and with the events of last 4, 5, 6 days, not just the united kingdom, but the script has changed for all of these fed speakers today. jonathan: over 100 basis points now. tom: well-said.

jonathan: lisa, right now, the two-year at 4.29. lisa: growth expectations, particularly in profit. why are we not seeing a big ramification on stocks? in a day when the dollar is preeminent, stocks like necessarily tanking. this, to me, is one of the biggest questions that we've seen over the past few months. jonathan:jonathan: what do we go back to? if we're just blowing off a decade of zero interest rates, has that bubble just burst? what are we going back to? are we transitioning for something very different? lisa: and what happens if big tech doesn't return to a leadership position in equity? who takes the mantle? is it health care stocks? that is where people are hiding

out. can it really be the industrial names? some sort of economic downturn? there is an entry point and you can feel this in every institutional investor who comes on getting cash, looking for flexibility. where is it going to be, and what is going to be the goal? jonathan: how compromised will the index be now? they've done so well over the last 10 years. lisa:lisa: that is what a lot of managers are saying, this time is different. you actually could get hammered on some of these index strategies. we will see. it depends if we get what we were talking about earlier. all of a sudden, you get the buying opportunity.

jonathan: i tell you what, i would love to catch up with chris. forecasting is tremendously difficult and often you get it wrong. this is what he says this morning. we viewed the market is not being established. the estimate come down, is the last piece of it that people have been waiting. waiting for that shoe to drop. tom: and it is the unexpected trussonomics as well. incredibly thoughtful. we go risk on, things start being unstable. the meeting in october, some

levels of liquidity. that is the worry that is out there right now. jonathan: the informed word, orderly. is anything about it disorderly? lisa: yes, the united kingdom market right now which is why we are focusing on as much as we are. it feels unworn when you see a 50 basis point move every single day in consecutive days. you start to see the pound and people basically saying parity is around the corner with dollar. we have never seen this before. those are disorderly and my wife some response perhaps from some policymakers. we don't know, we are hearing rumors. at what point do we get a trigger from japan? at what point do we get a trigger from china where you see the yen we getting to levels we have not seen in more than a decade? at what point do they come together to create a tension that has to be addressed?

jonathan: rate hike prices over the boe. my next year in november. could the boe actually step up and validate the kind of crises we see baked in on markets for 200 basis points? sounds like crazy talk. tom: it sounds like crazy talk and when you look at the bloomberg screen and you look at the standard deviation moves, these are crazy talk moves. i would think of the second and third order ramifications of that rate increase that were talking about. jonathan: ahead of a conservative conference later this weekend. lisa, a critical aspect of this not lost on anybody. lisa: let's say the bank of england hikes rate by 200% -- 200 basis points. we are going to basically guarantee the economy torpedoing in order to get some kind of rationale back into the markets.

what is the political stunt? you've been asking about this. how do they flip them from some of their power? jonathan: trying to address when they first -- the rate hike initiative and how they respond to a bank of england if they do step in as part of that spiral that is so unnerving for everyone. the biggest fiscal package is booting this idea, that monetary policy steps in, and the government comes back and says there is more to come. that is the kind of thing they could get even messier. tom: the circuit breakers are going to be there in obvious things like a political battle of great britain. but i would go back over the pacific rim to look at some of this money from j.p. morgan, the series away from yen.

and what it shows me is instability there as well. this is not just about the soap opera known as the united kingdom. jonathan: it is about the dollar, about global bond markets, about everything else. about 20 basis points. now it is 4.28. tom: 77 on west texas intermediate? jonathan: futures down 6/10 on the s&p. the nasdaq, half of 1%. this is "bloomberg serveillance"

>> is about global growth, hawkishness. >> this is all because of the way the market interpreted the >> fed's rhetoric. >>monetary policy is powerful,

but not a swiss army knife. it is not a multipurpose tool. >> it is not something we can tap out. >> this is "bloomberg surveillance" with jon ferro, tom keene and lisa abramowicz. tom: a historic monday how occurring -- occurring. jordan rochester, the prediction of sterling below parity. jordan rochester says, hope is not a strategy for your united kingdom. jonathan: 97th by year-end, 95 by q1 next year. dollar dominance continues over sterling, a victim of that. tom: these are unique times, global unique times. we are thrilled to bring you brandon -- later on, jean to

news 02 talk to us about the damage in fixed income. the damage is pretty much everywhere, although equities are sort of doing ok. jonathan: down .6% on the s&p. repricing a terminal rate of central banks, looking at a extra 200 basis points from the bank of england by the end of next year. by november meeting, 200 basis points, phenomenal stuff. 12 months ago, 20 basis points. right now, close to 430. massive, massive change. tom: a headline from bloomberg, when they are important, we do a red sticky. bank of england still to decide if it will comment on sterling. jonathan: a move we have seen, sticky stuff for the bank of england. a series of conservative party

conferences this week, politically, it is tense. the bank -- does the bank of england need to respond to something if they believe if it is disorderly? to finance, amongst the deficit? tom: we will see its original economics. lisa is looking at yield up and prices down. as we mentioned with phil of jp morgan, i am sorry, price down is -18% from the joy of months ago. lisa: on the flipside, let's talk about how much yields have risen. in the united states, how high real yields are going. in the credit sphere, it is possibly one of the most interesting stories i have seen in the past decade, where you are seeing real yield, absolute yield, nominal yield, yield, yield, yield. it is nearly distressed, yet,

still not enough to learn people in. what is the entry point to lower in capital around the world in specific areas and for corporations? tom: we will begin the data check with a pro to. this morning, e.m. is crushed. dxy half -- up .5%, bloomberg index is up. that is a quick way to see that e.m. is crushed on strong dollar. jonathan: equity market, down .7% on the s&p. u.s. dollar, dollar stronger. year-to-date numbers, we did that earlier. the numbers are staggering, 27% move on sterling, weaker. 20% move on the end, weaker. swedish currency, weaker. norwegian currency, 17%. 15% in denmark. 15%, the aussie.

the canadian dollar, 17% weaker. that is a real weakness, that is relative outperformance this year in -- and these numbers, the brink -- bank repricing. tom: fed speak or comments, institutionally, these people -- the imf in october. that is the next benchmark where everybody gets together to say, what now? jonathan: let's get to the end of the week, first. then we've got a whole quarter until the end of the year. tom: jean, how has your world changed since friday? >> the world has been changing all your, it has been a volatile time for the bond market. i think what the bank of england and the fiscal policy making in the u.k. brings to the bear year, it is not just domestic

horses driving yields in the u.s., it has been a painful time in the bond market. there are forces happening in other developed markets that are unconventional policy driving yields new highs. tom: i look at the price decline, let me be more optimistic today. investment grade paper, i can finally get a legit yield. if i can get 5% on corporate stuff, how much of this do i want to do? how much do i want to load the boat moving from 2% yield up to 5%? gene: lisa said it, yield, yield, yield. i think this is the year fixed income got its last name back. if we look at investment grade assets, these are bonds from companies with significant cash flow that can weather economic and inflation volatility. we are at a level where not only is that overall yield higher on our real basis, on nominal basis, but relative to other

risk assets like equities. we see that dividend yields are almost 4% higher -- corporate bond yields are for percent higher than dividend yields. the value proposition is attractive. we have been moving that way in portfolios. we think it might be early in high yields, given the potential for more economic weakness. investment grade, we think is attractive here. lisa: when you start moving into high yields? gene: we haven't seen that capitulation yet. i think that there are reasons why a default cycle, even if we go into a recession, will be more muted. we have recently had several default cycles within the last seven years, we have had a handful of them that have washed out energy companies, that have washed out other, weaker balance sheets during the pandemic. we tend to think if you get to that 700 or 800 basis point range, lower than the 1000 basis

point spread that typically characterizes a recession for high-yield bonds, we think high-yield would be attractive at those levels. jonathan: something that was reflected on this morning was the fact that we have just blown up a decade of stimulus, qe, zero rates, sometimes negative zero interest rates. we have blown that up in the last couple of months. do you think there is anything about that era that sticks, is there anything we return to? gene: i absolutely do. i think the toolkits we put into place from the financial crisis to the pandemic are tools that will remain in the toolkit. i think what we realized is central banks can move and heighten very quickly. we have to remind ourselves, the fed only started tightening sixth months ago, that was very gradual at the start. we have seen the economic impact of most of the tightening, yet. i think that will is what we are going to see in the fourth quarter, real evidence that these measures that have tight

monetary policy and move the fed funds rate to restrictive territory are having a real economic impact, and will start to his towel that compelling evidence of inflation easing that he is looking for. lisa: this is where stocks traders give us their opinion on rates, rates traders say you are not going to feel the effects until the fourth quarter. i am not going to go there with you. i am wondering, if we have a sense of when the bulk of the rate hikes has been baked into market expectations, will really hit. you said we will be seeing it more in the fourth quarter. how much is the lifetime? gene: six to 12 months. we are at that point now where if we thing about making investment decisions not over a six-day or six-week period, but a 12 month period, which is what we try to do at a minimum for our clients, we think you will have evidence that inflation is

easing. if we look at a four and recorders fed funds rate from a terminal rate perspective, it is priced in the spring. we think that is probably too high, or chance that is too high, and the fed under delivers on that. the symmetry in the bond market is very different than it was a year ago. i would rather look at those forward-looking indicators than the dot plot from the fed, which is mostly backward looking. jonathan: thank you, giving that final point. a really good one. reminds me of something ed -- said on twitter last week, there is a difference between the fed actually achieving what they have signaled and what they are signaling. it doesn't mean they are going to deliver it, this is what they want to signal right now. perhaps, they fall short. lisa: this is the mind twisting aspect, the fed is not going to be able to go through with it and play mind games of the markets so they can get the market to where they want it to

be to affect change they want, so they can take their foot off the gas next year. it is hard to understand what the market is going to cooperate and what is going to happen. jonathan: financial conditions ease, the fed has to keep them tighter. lisa: someone is screaming at the tv right now. jonathan: i am sure they are. until we find a circuit breaker for that, this carries on. lisa: people are starting to buy the message from the fed, and it is not just the fed. we are seeing this with the central banks around the world. how do you bring the confidence of the banks together? it is never been done before. tom: we will see what happens with the bank of england today. what i would note in the last 10 minutes, we have seen -- intermediate deteriorate, down 37% from mid june. net gas in the united states down 34% over the last month or so. jonathan: these are the moves

gene was talking about. what a crazy couple of days. from new york, this is bloomberg. ♪ lisa: in the u.k., conservative lawmakers say the bank of england may need to step into halt panic over the pound. sterling fell to an all-time low against the dollar, over concerns about the new governments tax cuts. some conservatives believe an emergency interest rate hike looks increasingly likely. a bank of england has yet to decide whether it will comment on the pound. ecb has slashed its global growth outlook for next year. the paris-based organization says the global economy will expand to .2% in 2023, down from its previous forecast of 2.8%.

oec p expects further interest rate hikes. italy on track to have its first female prime minister. georgette maloney won a clear majority in the election, the most right wing government since world war ii. maloney emerge from the political fringes after leading the opposition to mario draghi's administration. kendra -- next chief executive officer, bed my is taking over from cofounder peter weinberg in january. he has been copresident of the firm for more than two years and has worked on some of the firm's largest transactions. more than half of u.s. shoppers are willing to pay more for healthy food, even as inflation cuts into their budgets. a survey finds consumers see a connection between well-being and food choices. to save money, they are saving -- switching from brands to private labels.

global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries. i am lisa mateo.

>> -- fuels the selloff of the pound by doubling down on the

package, suggesting there is more to come. not what financial markets 12 here. they want to hear the chancellor's serious plan to help the public's finances. now, we have that reaction in global financial markets. jonathan: rachel reeves, the u.k. chancellor talking about balancing the books, which is what the conservative party is about, the labour party. tom: that was brilliant. can i ask a dumb question? the people of the conservative party support truss? jonathan: that is one of the questions of the moment, do they support how the month of action has gone? tom: i am afraid to look away from the bloomberg terminal, futures -31, vix up 2.45 points.

a good ask use to speak to the chief fx strategist at society general. can you commit a trade on sterling? can you advise stop gin clients of a tradable effort in pound sterling? >> i do not think near-term you can sell it on a monday afternoon after a big washout. if you buy, you have to have deep enough pockets. we have extraordinary levels of productivity, both in terms of what the market is trading and what is coming. i think we will get a lot of volatility both ways in the course of the coming days and possibly weeks. until people start to be more confident about what is happening in the economy. jonathan: you published early this morning and put this chart and there, a massive divergence between the guilt treasury

spread and what is happening with sterling. why is that important and what does it tell you? kit: this is a loss of confidence to some degree and policy. normally, -- managed to put rates up in fiscal policy, since the dollar to the moon. at one level, the u.k. chancellor into bank of england did the same thing. that tells you this is a crisis of confidence, which, if the economy holds and pulls together , that will provide buying opportunity. you cannot solve this crisis of confidence overnight, you need to be careful how you manage it. if the bank of england comes in this afternoon and raises rates again, with an added percent of panic, or will that calm things? why are bond yields rising?

they are rising everywhere. why has it panned down? everything is in -- everything is down against the dollar this month. lisa: does that make what we are seeing orderly or disorderly? kit: it is becoming disorderly, slightly more chaotic. this is very much like the beginning of the final chapter of this dollar move, because we've got volatility levels spiking up so much. also because they cody markets are -- i think this is the backend. disorderly, yes, because this morning's moves were disorderly. let's see how it goes. that doesn't mean we cannot go lower before we are done, and

you can put order back into this market. lisa: you just said -- final throes of the dollar's dominance. what does that mean? what is the reversal, a normalization in terms of x -- fx volatility? kit: i think we will see. i think it stays true to the fourth quarter of this year. thank it means, at a minimum, the dollar is going to be weaker at the end of next year than it is today. i think we are at the level where, if i bought 10 that your notes today, i would probably be ok in the long run but suffer more pain around christmas. if i bought pound, that is the same thing. monetary policy in the states is worse, equities are lower, the whole curve is spiked higher.

you will get that in all of these countries, that doesn't mean it is easy to trade the next mother to. jonathan: the bank of england came out today, what could they say? kit: i would be very surprised if they -- the u.k. doesn't have a large stash of foreign reserves, they could bring forward the rate hikes 40 30th of november. maybe if they do 75, they could talk about doing 1%. i do not know is front loading your policy tightening makes for a huge amount of difference when what we have is fiscal easing on

one side, monetary tightening on the other side. tom: very quickly, i did a fancy study of the bloomberg financial conditions index for the united kingdom. there has been a for standard deviation move accommodative of -- policy when you put the secret sauce into the index. if the bank of england moves, they do not get back to where they where they were. how far back do they take away the new accommodation if they make a move today or tomorrow? kit: they take some back and change the nature of it. the bank of england accommodates, takes back accommodation given to a weaker currency, raising the cost of foreign. you scramble everything up a little bit more. i do not think it alters the fact the u.k. economy is heading into this model already, a

recession at this point of time. a nominally tight labor market is part of the challenge. you like more growth but need more slack in the economy to beat inflation, these policy messages from all sorts of angles, it is hard to sum it up in one financial condition. they are not going to get bank -- back to the same financial conditions as before. jonathan: thank you. good the hear from you, what a wild time in foreign exchange with the dollar dominant. future down .6% on the s&p. from new york, this is bloomberg. ♪

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jonathan: 60 minutes away from the opening dow. nasdaq, down .4%. yields higher, up seven basis points, 375.87. euro-dollar, 96.54. a ton of weakness from sterling this morning. david with the meme of the

moment on twitter, your member that meme, the boyfriend holding the hand of the girlfriend? these markets, the girlfriend is the italian election. the girl in the red dress is the tax cuts. no one is talking about the italian election this, at all. tom: i think that is fair to say, it is moment has and speaks to what is going on in brussels. it has been overwhelmed. i would say, one of the first things i looked at today was the italian german spread. to see it unravel. safe to say, it did not unravel. jonathan: heels heading in the wrong direction, depending on what side of the charade you are on. higher worldwide, with the exception of japan for specific reasons. tom: euro from 112, it will never go below parity.

.96, speaks to a important point. chief economist at city global wealth investments, terrific experience, parsing corporate profits, corporate america into what we expect to see in our economy. stephen whiting, how have you adjusted to the new rates of change in foreign exchange, bonds in the real interest rate? how do you adjust to the last 10 days? >> you are either in a defensive position or either looking at a lot of immediate pain in portfolios that you cannot turn back on. we have been adding u.s. treasuries, not because the yield is some incredibly high, beautiful, inflation gusted level, but a sense of asset -- sensitive asset that is going to work for a period when the economy terms. we are heading for -- in the american economy, i think we will go well below the rates on

that. the fed is signaling for 2023. tom: 90 days ago, we were thanks ting about corporate earnings. i think they did better than good. someone house october 14 -- has october 14 as the launch date. are we shocked again at eight resilient corporate america? steven: we probably should not be. look back at the third quarter, it is going to be a period of rising production and rising inventory. that is a problem for next year's profits, not this year's profits. financial markets and financial profits is telling us where we are heading for the coming year. we would expect a 10% decline in u.s. ups next year, a level short of the fed funds rate that they are guiding us to within, trying to maximize the impact from the notion they might

pivot. if you look at what the fed is forecasting, the unemployment rate to be about a half point within this range the next three years, we think it is unlikely. we think the u.s. is closer to 2 million job losses net over the course of the next year, that is if the federal reserve will not continue to tighten through those job losses. we would not expect this, the -- between where the economy started to absorb these rate hikes, it is not going to be immediate. we would expect mom curtails to grow the rest of the year. one example, look at what happened to the home sales. down 51 percent. home completion spending, instruction spending, or even employment in residential construction, down 2%. that is because we were building

houses and starting these projects a year ago at a lower interest rate level. these are the types of things that have to work through the economy, a forward-looking financial market to look forward to next year. lisa: where are we heading in terms of a new normal? a rebound the likes we haven't seen since 2009 if the fed doesn't shift gears, or if there is a washout event? or, are we heading toward a lost decade of profit where you get leadership meandering from one area to another and not from big tech? steven: we can have a cyclical coverage in 2024. unfortunately, we have run a procyclical monetary policy with the help of fiscal policy makers turning covid into a -- not having targeted, limited stimulus, giving a boom and then taking it away and driving a bus . these are not the things that

drive economic growth over a 10 year period of time. these are rough elbows from policy, but not going to stop innovation, take a look at 2002. that was a period where the nasdaq fell 38%, some key innovations that drove growth over the coming 20 years were invented at the time. apple's ipod ios, these are examples of things that gave a trillion dollars in economic gains for years to come. lisa: adapting, adjusting, innovation. on the flipside, there is the social aspect overlaid on top of this, especially as inflation starts to fight into the lower and middle income american income -- middle income americans globally. we are seeing that in the strikes and uprisings. how do you price in political

risk at a time where it is coming to the forefront? steven: it is not terribly easy, and usually, these types of political risks, nine out of 10 cases in the last 80 years have not been turning points for the world economy. they matter a lot in terms of guiding local, regional crises, but do not turn around the world economy. there is a lot of bad news to absorb here, markets could have seen more of this coming then they overreact to this. ultimately, curing inflation and what we expect will end up a good deal of cyclical economic pain. it is going to come at the expense of the labor market. we are not going to have long-term inflation to deal with. that is what i think one of the messages we are going to see. i think we will see interest rates peaking at a low level, and we had to go through a --

cycle. whether you can see that to a particular political outcome that will change the economy, all we can do is have safe assets in our portfolios. tom: looking at the citigroup platform, you guys have been phenomenal with helen horst on the fed call and all of that. stephen, when does the united states not ignore what is going on internationally? when is the point where it becomes like what you and i studied in the 1990's, where international matters? steven: it could take time. federal reserve is focused on landing economic indicators. domestic service, more services -- power to them, they are a component of the index of economic indicators. 2%, we need that 2%, we could be

deep into a recession until we see 2% on these measures again. these effects from around the world will compound the downward pressure on the economy, downward pressure on prices. we do not expect every cpi reading to look like august on the core going forward. it is going to be a while before you see that in the economy. --, the banks have run out of it. one thing we have heard out of chairman powell at jackson hole, it is going to take time to get inflation lower. if they try to achieve it quickly, we will end up with a much more cyclical trade up, more than necessary. jonathan: and feel pain along the way. thank you, i have to say, things are settling down this morning. features down .5% on the s&p 500. sterling, unchanged on the day

against the u.s. dollar. euro-dollar, 96 .68. some of that dollar strengths, faded that a little bit. slightly settling down in the last hour. tom: i'm going to signal, the bank of england rumors. is that the right rumor -- word? jonathan: speculation. tom: yeah. that is the hallmark as people tried to adapt to adjust to what they would see. my opinion does not matter, they've got a choice set. do nothing, job own it, do something tangible, think about doing something about it, wait. jonathan: the next meeting a while away, in november. lisa: if markets are pricing into hundred points of rate hikes, -- if they do come out

and say something and raise rates, what kind of political bullseye are they putting on their backs? if they don't, maybe the market will move away from what they are expecting. jonathan: things are quieter today. uk2 europe 51 basis points, 10 europe 28. lisa: are we seeing the beginning of the end of the dollar run? are we seeing the washout fades of the peak hawkish in us? i hear grunting going on, growling. he is not a bear, he does grunt. that is what we do here. we will have to see, maybe peak hawkish in us didn't work a couple of months ago. will it work now?

lisa: [laughter] jonathan: tooth pain. lisa: you doing all right? jonathan: no. tom: taken ice cold beer and hold it against your cheek. jonathan: and drink it. lisa: is it working for you? jonathan: --will count you down to the opening dow in a moment. this is bloomberg. ♪ lisa: the bank of england has not decided whether to make a statement following the collapse of the pound to its lowest level ever. conservative lawmakers say the central bank may need to step into halt panic. some believe an emergency interest rate hike is likely. in china, the commonest party has had to reaffirm president xi jingping.

the party has published its list of almost 23 delegates to attend next month's leadership summit. the announcement brings him a step closer to clinching a third term in power at the event. initial sales of the iphone 14 in china were smaller than the devices predecessor a year ago, according to a note from jeffries. 900 87,000 units were sold in the first three days, 11% decline from the sales of the iphone 13. credit suisse says it is working on possible asset in business sales. it is looking for ways to cut costs and restore profits under a strategic plan to be announced next month. no details yet, but bloomberg has reported credit suisse is considering the sale of its latin american wealth management operations, excluding brazil. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries. i am lisa mateo.

this is bloomberg. ♪

we are forecasting a significant slowdown of the economy. euro area going 0.6%, still a slowdown in china. next year, globally, significant slowdowns. tom: the ecd acting chief economist, good to hear from him. this is oil moving downward, 78 point 62, down 37% from the panic of $20 a barrel. right now, this is a joy for me.

long ago and far away, we had to reopen our san francisco offices. they said, we want to do an event. they said, who should we get? i said, there is only one name on the west coast that intellectually lights it up every day. he had a website, sloshing towards utopia. his name was brad delong, presser of economics at vertically. finally, finally we have his i've hundred pages, slouching towards utopia. when i want to emphasize before we bring the professor in, this is a book for conservatives. it is a book -- liberals love it, i get that. more importantly, this is a book for conservatives going, what the hell happened? brad, you mentioned fascism 7, 8, 9 times slouching towards

utopia. italy, the shock today. hungary, has well. what the united states has been through the past couple of years. how close are we to mussolini? >> we are far away from mussolini. we are closer to someone like andrew jackson, who stole a third of the land in north carolina from the cherokee and sent them to oklahoma, or similar politicians who find internal or external enemies and focus people against them as a way of trying to deal with the fact they cannot handle managing the economy they have been given. tom: it is middle liberals or middle conservatives, read slouching towards utopia. what is your prescription to get the middle of our political economics back in control of the voice, or is it further polarized forward?

>> well, we never have had control since 1870. sometimes, we have been extremely lucky. since 1870, for the first time in human history, the value of human technology has been doubling every generation. governments have been unable to ride this particular jump in creative destruction, largely because governments have been looking backward and, yet, each generation the technological underpinnings of the economy are so different that successful economic policies have to be different. a generation ago, what worked, no longer works. lisa: we are looking at a rearranging of order in a lot of ways economically with the end of the zero rate world. we are seeing the beginnings of a push to reorder things in a political regime.

what is going to be, from your perspective, the defining feature of the next decade politically, with some of these policies as they try to move away from these concepts of modern monetary theory? you cannot print money endlessly, inflation is a real thing, where does fiscal support play a role in this? >> in the united states, i suppose it depends on whether jay powell and company realize that all of the tightening of financial and monetary conditions that happened last winter and spring have not yet hit the economy. there is a lot of monetary contraction and austerity coming down the pipe that is not visible yet. if they are common patients and recognize they have done a lot more to cool off the economy than they see in the data, they might manage to make our way through. if not, then not.

certainly, the width of the straight between the monster skillet and charybdis, there was a wide path that those through last november, even last december. come february and vladimir putin, all of a sudden, the straight is narrow and the ship may not be sailed through it. there may not be a straight at all left. lisa: how optimistic are you of the potential improvement, given the text has not been able to create the utopia that you or a lot of people thought would occur once some of these developments had gone into place? >> it is plummeting. humanities technological prowess doubling every generation since 1870, that means for the first time in human history, we can fake basic -- bake a

significantly large enough pie for enough people. -- killer robots still stock this guy in ukraine and syria. tom: one more question, there was a professor at berkeley's named chad jones. he went to another school across the bay. chad jones owns basic economic growth, it has failed so much of america. where's the optimism we can develop to take half of america not participating and bring them back into the fold? what is your prescription? >> it is to recognize that we have been trapped in this world since 1870, at which each

generation, technology races forward at an unbelievable rate. each generation, a huge number of people are left behind. the midwestern formers -- farmers in the 1890's, etc., etc. essentially, recognize this is not a new problem, this is something that we have been grappling with and failing to deal with since 1870. let us see our current situation in perspective. tom: brad delong, i cannot say enough. all you need to know, the delong depth, slouching toward utopia. >> it is a transoceanic book, not flying across the east coast book. tom: it is something you have to read. my two cents on this is simple, it is a book for conservatives. i know none of them believe me, but delong has written a book on our economic history that is

quite extraordinary. utopia is out there, isn't it? lisa: we haven't gotten there, yet. despite the fact that we have enough, this is going to be an important point. we have a fascinating moment we are in with collective rate hikes, with increasing inflation. tom: john taylor comes in, thank you for emailing in. he says, jones is at a school called stanford. good to clear that off. thank you. thank you for clearing that up. more markets through the more markets through the 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. with zero-commission online u.s. stock and etf trades.

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jon: good morning. the countdown to the open starts now. >> this is "bloomberg the open", with jonathan ferro. jon: live from new york. we begin with these big issues. >> you can actually get