>> the market is already worried about u.k. fundamentals. >> things are unsustainable at the moment and it is all tied to raising rates. >> someone can say, we are just cleaning up the mess made by fiscal policy. >> they never seem to be fully priced in. >> 8% to 10% in this kind of economy. jonathan: we get it and we have listened. this is "bloomberg surveillance,

live on tv and radio." i am jonathan ferro and we get it and we have listened. tom: i got up at 1:17 and all i can say is the excitement of last week falls into this week. around all of the present news, it is a huge week. jonathan: i think we called the u.k. a u-turn. lisa: how much does this actually give credibility to this administration that has caused incredible turmoil in the markets? the question is how to follow that up with credibility, and a sense of unity. jonathan: for me, how the market responded last week is so much more interesting the policy announced the week before. tom: some of it is simple. 10-year gilts, it has improved

but right at a yield basis very little makeup off of this u-turn. jonathan: 5 billion is a total package. i spoke to david goodman. the numbers haven't had to spend that much to calm this market down. tom: on the britain pension crisis, every adult i talked to says be aware, there could be more. jonathan: financial market stability. lisa: everyone seems to think there is this whack-a-mole going on right now where policymakers try to bandage over it for the time being.

tom: where is the labour party in all of this? jonathan: they let this play out you just give them some more rope. give them a shovel. tom: do you have a schedule of elections in the united states? jonathan: we know it will take place by a certain time. tom: absolutely fascinating. what do you have? jonathan: starting with credit suisse. they are down by 8% in swiss trading. getting hammered. lisa: this comes as the ceo says wait and enough time for us and the market is waiting. how they addressed more quickly and come up with something comprehensive. they have a lot of issues. jonathan: you are going to have

to wake for the ceo until october 27. tom: for those on the terminal, 0.21. that is 1/8 of jp morgan. in america, this get solved and the mystery to me is i am uncertain is it swiss regulators or london, i just don't know. we are at a delicate point. where are the regulators this morning? jonathan: are they going to raise capital? they have to raise capital to instill that. tom: i am thousand dollars. jonathan: credit suisse down by 8%.

equity futures are just about flat this morning on the s&p. yields by at five basis points on a 10 year. euro-dollar at 97 .63. lisa: ministers meeting to discuss what is going on with energy prices. we will catch up with maria tadeo later in the show. we saw a year-over-year if you take a look at the overall euro, inflation has reached the highest level in the history of the block. how do they deal with this? i am so interested in how this is going to play out.

opec-plus will be the first time in person since the pandemic, potentially cutting oil production by the most going back also to the heart of the pandemic. at a time when you have president biden saying please do more in please produce more and by the way, guess who may come? the russian oil minister, and how does that play into the alliance and create friction between opec-plus, the united states, and western allies? high expectation and projection is for 389, the low is 200,000 jobs. what is the nature of those jobs , part-time, full-time question mark are we seeing people coming into the market when a lot of people are saying we need to see the unemployment rate go up to 4.5% in order to reduce the inflationary pressures.

how much are we looking for some deceleration in the labor market to say to the fed, have you don't have to go quite as quickly and maybe you can just hike and then wait? jonathan: it is good news, bad news. i know you are excited. tom: cute taught me that monday it matters. jonathan: i agree with you. -- you taught me that monday matters. jonathan: i agree with you. joining us is lizzy burden. lizzy: i am here, it is a wild morning. the chancellor amounts reversing course.

at the other end, the chancellor said he would cut benefits of people not tried to get a job. >> a key point is that it is about getting more people into jobs and higher wages. we want to be able to deliver more. for example, putting money straight back in peoples pockets, adjusting for the lower rates and a cost-of-living package. my role is to get people into those jobs and that is powerful. lizzy: the one thing the prime minister promised yesterday was

that she was raising the rates has the chancellor ask you to look at cutting? chloe: benefits are pricing. i can't tell you here and now what that would be because i have to wait for the data. the key is how we can protect the most vulnerable in our society. this is cost-of-living support we have been doing and taking payments and what will be coming out shortly to support people. lizzy: why is it fair to protect pensions in a cost-of-living crisis? chloe: how do we protect those who can't raise their own

earnings. it may well include us as well. let me say this -- we are helping more people into work. we should be looking at what people can do rather than what they cannot do. helping people to work. lizzy: last week the bank of england said it will bail out from the systemic crush. are you having discussions with the regulation managers? chloe: the cost of the pensions, i can't give you further details but i am glad they took the action they did last week.

we have to keep a close eye on the situation. lizzy: thank you very much for joining me. the question remains, what happens to england's rescue package. unclear for lgi's. jonathan: looking forward to catching up with you. a lot of people describing the october at 14 is a cliff edge for the bank of england and the government. lisa: how much will this have to be a response we see from policy. how much is it going to have to be that at a time when they are dealing with inflation get the bank of england is caught between a rock and a hard place. jonathan: walking back on a top rate tax cut will mean less

cost. tom: the uproar of this politically the market pearls are watching other data, including the recent inflation. is it going to be higher? jonathan: live from new york city, good morning. this is ""bloomberg surveillance." ♪ lisa: british prime minister liz truss has done a u-turn, dropped a plan to cut taxes for the highest earners. the chancellor says they will be hoping to end the days of market turmoil following the fiscal package. the price of oil jumped today,

indications that the opec-plus alliance may/production. -- may slash production. another defeat for russian forces in ukraine. several thousand russian troops withdrew from a key town. they were outnumbered and increasingly encircled by ukrainian forces. in brazil, the presidential election headed for a runoff. on october 30, voters will choose between jair bolsonaro luiz inacio lula da silva and his formal -- and his formal -- former rival luiz , inacio lula da silva .

credit suisse has a strong capital base and liquidity position and he will announce a turnaround plan october 27. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> all of you who are looking for a pivot, be careful what you wish for, because this pivot only happens for an economic or

financial accident. jonathan: just absolutely fantastic through last week and got us through the market carnage. good morning. the s&p 500 relatively unchanged after three consecutive quarters of losses on the s&p, the longest losing streak one back to 2009. futures up .1%. 9th street weeks of 10 year yields climbing. -- ninth straight week of 10 year yields climbing. tom: it is about the construction of yields, including in japan where the yen almost back to the intervention point. that is leaked into the yield

manipulation. jonathan: you have got this. we will work on our accents. tom: do you become posh? jonathan: my cousins had the accent too. tom: are we done? a decade spx way out does russell 2000. spx up 12% per year, russell 2000 up 9%, small caps underperforming. jonathan: shift lower? tom: let's talk to lori calvasina

? is it small caps time? lori: i think it is. we have been in a trading range all year on the relative trade. looking at small caps, historic valuations on an absolute and relative valuation. typically you want to buy small caps when the unappointed rate starts to tick up. you want to keep that in mind. small caps are more domestic and we are hearing a lot of interest in small caps, even from people very bearish on the market. tom: and the turmoil we are in including low gdp, will there be transactions and combination that combined small caps into mid-caps? lori: it is interesting we have been combing the trends and i

wouldn't say it is necessarily imminent, but in a sluggish growth environment, that is the price we have to pay. i think companies will try to go out and buy growth. we find a lot of small-cap companies are much better run than they were in the past. we think it is more attractive than it may have been in the past. lisa: is overrating a fight to lose less or to get returns that are bigger with the negative returns we are seeing across the board in indexes? lori: in the short term, as stocks search for a bottom, it is unlikely they will go up well every thing else is going down. it may simply be finding the absolute bottom. when you talk to people who have

done small talk -- small caps for a long time, the pivot back into small caps tends to be sharp. this is an area if you wait around, you tend to make a lot of outperformance in the early days of trading. lisa: the target for your and is 4200 p what is the trigger and pivot point? is it just the bear market rally we heard about from a number of analysts? lori: that is one thing you can look at. if you look at the s&p 500 in 2022, 70 2% correlation -- 72% correlation. there was shock an initial rally. if you go through the playbook, you had a rally and they gave most of it back for the first quarter. it seems a plausible way for things to turn out. what about the midterm

elections? going back to the summer, i started getting an careful about how that could potentially be the catalyst for markets. if you look at the generic congressional ballot, after several weeks of shifting, we saw the republicans pull ahead of democrats in the generic congressional ballot data. things are shifting in a more market friendly way. jonathan: nike, fedex, apple, tesla missing this morning could what are you learning form corporations about how quickly the downturn is coming around? lori: we are starting to see some companies risk of the earnings. that is something investors were saying they needed to see happen. people said, we want to buy stocks around 15% pe and we need certainty and need to see the numbers come down.

i do think getting the earnings expectations down is something we really need to see. jonathan: lori calvasina there from rbc capital markets. a lot happening. lisa: the correlation or causation of the bank of england is the intervention on the same day jp morgan reports earnings. it is going to be really pivotal. i don't know how much it will be the harbinger of what is to come and nike and tesla might be more of a harbinger when people are looking at supply chain disruptions and not just financial markets. jonathan: for tesla, that statement could have happened 12 months ago.

we are talking about supply chain disruptions. tom: it is really important to take the supply chain thing and pull it out farther and you get more uncertainty and particularly in the united kingdom where they are usually constrained by supply and demand and falls into brexit. this is the date in october this week. jonathan: we are pushing out supply chain problems in bringing forward earnings. that is not great going into next month. lisa: mike wilson said the light at the end of the tunnel is freight train. jonathan: thank you, lisa. this is bloomberg. ♪

jonathan: the price action this monday morning rate on the s&p 500, loss on the s&p, -9% on the s&p 500 in september. positive .2%. yield last month on a two-year come up 79 basis points in a single month. the bond market, to, at 10 and

30, yields lower by nine basis points. down six basis points. last week at sterling, the best since march 2020? numbers are numbers. sterling just short of 111.97. tom: on yen come up against innovation, developing currencies working this morning. jonathan: i doubt the volatility is over. i think that was the story of what happened in the last week. i don't think it was the policies enacted by the u.k. the fact that the market was so fragile in response and the ink of england had come in with a gilt market operation speaks volumes. tom: they looked like manchester

united. jonathan: not a great week. that was the gilt market. ritika: we want -- tom: from jp morgan on friday after the tumultuous week, they said this friday matters for november 2. we need to get the report on friday. bruce kasman joins us now. the fed will decide. how close are week to a fed that will decide what to do over the next timber of meetings? bruce: i think the basic message the fed is telling us is that they are committed to creating a softer market, pushing the unemployment rate up and the picture on inflation has been concerning enough and they want to gain control over credibility.

unless we get a big downward surprise, i think we are not only on track for a 75 basis point move but for their big moves in the next couple of meetings after that. tom: what does your rate get out to, and what does that mean for the bank of england and the bank of japan and the bank of indonesia? bruce: well, i think the fed as we would see it goes up to the mid-fours and stopping at the mid-fours does require material slowing and job growth but i we see we haven't seen it yet. i think the bank of england story will be dependent on how much the government gains credibility. they are on track to raise rates to 4% and more as we go through the next few months. there are a number of other central banks that wanted to slow down and they have been

using fx intervention and rhetoric but with the fed moving and the volatility we are seeing, it is harder and we have been backing off of what we thought was some moderation going on in the central banks. lisa: at what point does the dollar become the u.s.'s problem as well as world problem. other nations struggling in the face of the greenback. bruce: big issue is you don't get the controlled moderation in labor markets and growth and does it see inflation come down. on the inflation story, the dollar rise is combining with what we think is a fairly significant saving in both commodity and supply chain pressures. we think we are set up with a decent drop off in goods pricing in the next few months. we have already seen it on energy and the economy looks

like it is tracking 2% to 3% growth in the first quarter. the fed may get a benefit on inflation in the next month but it may not get the job market and the growth number and in which case the concern is not so much that the dollar is itself a drag but the fed keeps going in away that it doesn't pay attention to the lags and next you let's realize the risk looking six to 12 months down the road. lisa: this speaks to a column written in the new york times where it basically said is the fed breaking too hard, the wrists have moved -- risks have moved to possibly yes. do you agree? bruce: before we ask, is that fed intending to break things? if you listen to some speakers, they seem to be preparing us for

significant slowing and job growth and possibly a meaningful rise in the unemployment rate. there is a risk that they move too hard. they are concerned about seeing results in not paying attention to the lag in the monetary mechanism and also the concern the fed has decided it is much more appropriate to risk a recession than keeping inflation unusually high. tom: not of a -- none of this is in the textbooks. with the data on friday, i have a three month moving average of payrolls of 286,000. that is job formation. his jp morgan saying that will break or slow down to a moving three-month average of hundred 60,000? bruce: to have a forecast of 300,000 job gains on friday so clearly that is a high number.

to get the fed to pause, you need job growth slowed to 100,000 a month over the next two to three months. that is a harder one to get confidence in. it is what is based on the forecast that they are ready to pause. that is the key, both in terms of getting the fed if they don't see that and they go farther than they actually need to. tom: that is a stunning number. i have a run rate of 150,000 dollars and maybe 200,000 on payrolls and is a healthy and normal america. you said we need to get down to 100,000, 100,000, and then another 100,000 to get the fed to blink? bruce: if you want to have an economy in which the unemployment rate is moving in a controlled way to roughly 4.5%

unemployment rate, you need job growth to halt 100,000 out -- 100,000 may not do it. lisa: do you think it is inappropriate for the federal reserve to be targeting the unemployment rate at the time when the jobs market has dramatically changed post-pandemic? bruce: i think it is appropriate for the fed to target offsetting the market and appropriate for the fed to be paying attention to what is happening to wages, and wage expectations. it is also appropriate for the fed to be forward-looking and recognize they are getting the policy in place. the difficult call is, do you stop on the tightening before you have gotten everything you want to see in the data? that is the tough call they will have to make here at some point.

i think somewhere in the range of 4% to four and a half percent seems reasonable to be pausing but they may not have the labor market outcomes at that time that makes them comfortable to do so. jonathan: how can you be forward-looking if you are chasing a lagging indicator? bruce: exactly. you are also being uncomfortable by the fact that inflation is in's -- persistently high and you are worried about the lag in inflation affecting prices. it is important to be forward-looking but it is hard to look forward. jonathan: wonderful to hear from you. how can you be forward-looking when you are chasing a lagging indicator and if you are involved in data, are you seeing some of that play out already? tom: you don't how much i flunked leading contingent and lagging. i just don't believe it.

but things change. some lagging becomes indicating. jonathan: it has been said that the weakness you are expecting will be in the first half of 2023 but then said it is happening much faster than i thought it was. credit for coming out to saying that. it is happening quickly. lisa: it was said the ripping off of the band-aid with the earnings results in with a look forward to and is it ripping off the band-aid or is it so quickly that the readjustment will have to keep continuing and the earnings season and the next quarter will be the most important data point when it comes to risk assets. jonathan: you could read the lines between the different

speakers. it was said we are committed to not pulling back. lisa: paul krugman said the reason why he spurred so much controversy that the risk is the fed is moving to slowly but high interest rates will cause severe damage. that is the asymmetry people are looking at. tom: this will be we go to washington and i think we will quiz on this. there is a mental ballet to get out to where we have a new higher inflation level from 2%. where 3% is the new 2%. lisa: they are saying no pretty aggressively. jonathan: not pulling back prematurely. what would happen if they started flirting with 3%? i think it would be harder to

get to 2% -- 3%. lisa: they are not going to do that. tom: it is unheard of. jonathan: that would be like, try getting back to 5%. lisa: that is the reason why they are not going to do it. jonathan: you should go to the conservative party conference. tom: wait a minute. lisa: i can go right now. i have my suitcase. jonathan: did you bring a prop in? tom: they are over here. my fashion people got it for me. jonathan: ok, all right, ok. tom: how do you say liverpool? ♪

lisa: a humiliating reversal for the british prime minister, she has dropped cutting taxes for the uk's highest earners just 10 days after it was announced. the move was her attempt to -- for her own conservative party. it was said that the tax cut plan had become a distraction. he wrote, we get it. according to a new forecast, demand for european natural gas will slump. it is said that high prices will result in european consumption by 4% in 2023 for a record decline. supply constraints and markets tight as demand flows. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries.

i'm lisa mateo. this is bloomberg. ♪

>> the rate quickly became a point for discussion. to not proceed with the rate simply because it was just drowning out the other elements of the plan. jonathan: british politics is brutal. that was chancellor kwasi kwarteng speaking earlier pillard -- earlier. on the s&p 500, futures just about positive peer yields lower by six basis points.

yields much higher over the next couple of months. a look at credit suisse, down in trading by almost 8% as we await the plan for the end of the month. tom: how do they get to the end of this month? let's talk about this. do they do a new cash call or so up to deutsche bank? what is the best guess? jonathan: the focus will be on shares and asset sales. how one have we been talking about this? i remember having that conversation then and we are having it now. tom: is a 20 year work out i became familiar with the struggle and it has been

decades, but here we are on this friday with the bloomberg reporting over the weekend and you wonder where we will be next writing. -- next friday. lisa: the longer they wait, the more difficult it will be to get out from underneath this. if they raise equity, considering their valuation was $10 million, if they start to raise $4 billion into the the equity sale, how much do they have to pay off? jonathan: it is a third of what it was in the spring of 2021. tom: there it is paired we will follow it with our great teams in zurich and london. sebastien galy joins us now. you say inflation will plunge, why? sebastien: the way you look at

it is you have this big surge in demand from the u.s. and a big issue in terms of supply chains. some is because of low investments for a long time and that has created a surge in inflation. everybody it's incited -- gets excited and fearful because it is unhelpful. when demand slows down and inflation is high, one of the raisins -- reasons it is high is because of price gouging. it stays too expensive and as demand cools off, markups fall. some goods have been overpriced so much that there is no demand for it because it is oriented towards weaker households. they have to cool down. tom: to be simple here, what

does it mean for the u.s. dollar question mark everybody is on a one-way tray to a resilient and strong dollar. is that into next year? sebastien: no, because as the fed into news to hike, it is awesome for u.s. equities. if the fed enters into it, it doesn't make a difference. it still gives you the long dollar trade and remains a consensus and becomes a u.s. equity oriented type of trade. inflation comes down in the u.s. also abroad. tom: that is a massive international economic ambiguity. many would say he doesn't know what he is talking about. lisa: others will say he is dead on. a lot of people are talking

about the u.k. as one example and what happened in the gilt market not being an outlier. what is the next area of concern you are watching? sebastien: if you look at what happens and an environment where people are looking for consensus trades, there are very few bullish trades and there are bearish trades and people coming out with stories and regulators and sitting on people trying to create a phenomenon, bearish phenomenon on the top of the hill. it gets very exciting. the reality is a bit different. financial stability is very weak and that is in general a bull market but in china, india, if you look at financial stability, go from sovereign yields and emerging markets but also saw it in the u.k. with gilt rising.

and centering in on italy and spain, the pain of inflation too high, can they sustain a high level of debt? it is quite difficult going ahead. jonathan: consensus colored which is on top of the hill. -- call it witches on a hill. lisa: there are people hoping for something catastrophic in the idea that there could be some washout catharsis. i am not rooting for that. no one wants to see a meltdown what you do here the feeling that the trade, there isn't the trigger breaker. the fed and policymakers can't be the way they have been. jonathan: the prime minister in the u.k., there are things you

never want to say. you never want to have to call up investors and as a spokesperson for the prime minister you never want to say i have confidence in my chancellor. tom: maybe not now, but maybe at the end of october in london. the witches on what? lisa: on the top of the hill. jonathan: it is a potential contagion. tom: they were so good. jonathan: good memories of the 1970's. lisa: they open for the cathartic pukes. jonathan: heavy metal cathartic pukes.

they are sticking with most of it. the top income bracket they will cut and not anymore. tom: we got through the weekend. jonathan: it has continued into monday morning. equity market just about positive on the s&p 500 as we kick off q4 with equity markets, futures just about positive. up 11 points on the s&p. yields lower at seven basis points. coming up, daniel skelly. this is bloomberg. ♪

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♪ >> the market was already worried about a global crisis, now worried about u.k. fundamentals. >> things are unsustainable and it is tied to officials raising rates. >> smitty commitment to, we are cleaning up the mess -- somebody came out and said, we are cleaning up the mess. >> it is priced in. >> sure, absolutely. 8% to 10% in this kind of environment. >> this is "bloomberg surveillance" with tom keene

jonathan ferro, and lisa abramowicz. jonathan: hello, q4. good morning, good morning. this is "bloomberg surveillance" on tv and radio along with tom keene and lisa abramowicz. an ugly q3. tom: ugly q3 and for many people it continues to q4. the other thing is we need a roadmap of how the government comes back. jonathan: absolutely killing it this morning. you take a train. down to houston. not sure how much that costs anymore. anyway -- lisa: keep going. [laughter] jonathan: high volatility, poor liquidity, financial stress. that is the bond market. lisa: that is the reason you are seeing concern trickle into the

other markets because that is what we are hearing. just now from sebastien galy that if the risk is in the sovereign debt complex, how did that triple out -- trickle out to the rest of the market? jonathan: and if we are facing a recession, a bomb will behave like you expect bombs to behave. tom: we have to watch volatility in the u.s. market. it is tangible. i want to go to the united kingdom. standard deviation. the basic idea here is, how much was trust that how much has -- how much has truss made back? jonathan: tremendously difficult to do that. david goodman announced a 65 billion sterling operation but only have to spend three to

four. it gives you an idea of how powerful central banks are when they talk about stepping back in. lisa: ok, so now the question is, will policy cooperate so they don't have to spend that? the fear is they spend all of it by the end date of october 14, when this plan exercise is going to be over. then what? does it become a spiral where they have to keep fueling it? jonathan:jonathan: the question of last week, can the central banks do something about addressing financial instability and at the same time do something about bringing inflation back down? tom: theoretically, you can do that. what they have to do is maintain credibility. the chancellor this morning was trying to maintain credibility i believe. that is to sell the message. maybe we will see that this week. jonathan: we will hear from someone a little bit later. lisa: i held off on some of the

fed speak. i will do it tomorrow. we will have a lot of fed speak. what exactly is going to do to change the market dialogue right now, honestly? i gave it a lot thought this morning. should i talk about the fed speak, or does it matter anymore because unless they come out and say we are more concerned about financial stability, more concerned about some of the weakness we are seeing overseas, what difference is it going to make? jonathan: will you include the bond auctions? lisa: that is important. jonathan: the price action falling. in switzerland, down 7% right now. futures up 0.4% while the s&p 500 after last month delivered an ugly loss on the s&p, down a percent, the third straight

quarterly loss on the s&p going back to 2009. ugly. even lower by seven or eight basis points. euro-dollar. lisa: it is important to say we are looking at the possibility of 9778. we are looking at the fact that there is no rollover inflation even though you are seeing the topping up of the ecb rate hike more aggressively. still 10% year-over-year cpi for the euro region. today and tomorrow, finance ministers will meet to talk about what to do about this. how much policy will they come out with? a price cap to oil and gas, what would it do to lower the inflationary pressures? wednesday, opec-plus meeting to decide how much to cut production. could be the biggest cotton

production going back to march 2020, the peak of the heart of the pandemic. also notable that opec-plus is meeting for the first time in person since the pandemic. there is speculation around whether the russian oil minister will join that. you are seeing a pop in crude today but you have seen a steady downtrend as people get more concerned about a slowdown in economic growth. on friday, that is a key event. high expectation on wall street for 389,000, the lowest of 200,000. how much does it matter unless we get down to the potential of 100,000? consecutive months. that is what bruce was saying is necessary for the fed to pause. how much does the unemployment rate need to rise? jonathan: 9:05 this morning. lisa: thank you, doubling down on that. jonathan: in the studio with us, the head of market research.

tom: i don't know. i did not watch it. i just can't. i sort of glance at the headlines and move on. it is like the base book. jonathan: you don't read the base book? tom: no, i never have. the orange book that was valuable. jonathan: let's learn something from daniel skelly. fantastic year. notoriously bearish through much of 2022. it worked out perfectly. we are wondering for you, what are the conditions you want to see, the checkbox to equity exposure? 5 daniel: good morning -- daniel: good morning. good to be in the studio and have the band together. [laughter] daniel: your question -- look,

we have done a lot of damage in the last quarter and the first month but we are still trading around the june lows. notably, that has been around rates. we have not seen earnings reflected yet. investors want to hear management speak at this point and throw in more of a towel. number what is earnings. number two is pmi's. we have not seen the contraction yet. number three is jobs. we have a big update coming this week but we have not seen the rise in unemployment yet. tom: the research you got, which is real simple. look at dividend growers. how did dividend growth change? how did given growth -- how did dividend growth change and how does it filter? daniel: when you look at companies's m&a, deals have been dried up this year so you look at companies being more defensive. buybacks are obviously very huge.

and dividends. investors are rewarded with dividend growth widely this year. tom: dividend growth versus the riffraff out there. daniel: when you look at the income styles, they are down single digits this year versus the s&p down 20% plus. lisa: at the start of the show, we were talking about our bonds going to react the way they normally do? tom was saying he doesn't think so but a lot of people do. do you think so? daniel: we have a plateauing or moderation in inflation and the bonds will act better but that was the case earlier this year. the first 4.5 months of this year was all about stagflation. you saw stocks and bonds down together. it got a little bit better over the summer. bonds have sold off quite rapidly. around the 4% level on the 10

year, there is more value for bonds to do their job in a volatile environment. jonathan: i asked a good friend whether you guys can to get uncomfortable when everybody starts to share your view. when you start to see those on wall street in the market capitulate, that close on friday, do you feel uncomfortable when everyone starts getting comfortable with your way of thinking? daniel: you do, but your thesis is still in check. we joke about the lonely island. you look at the sell side, the buy side, hedge fund that exposures. so everyone is inching. we are here in studio. to jonathan's point, we are growing in the more nervous about that consensus. that does not mean things cannot

go lower still. jonathan: 3150 for year end from 4300. tom: when the facts change. jonathan: that island is very crowded right now. daniel, thank you, sir. fantastic. tom: nailed it. transitory and on a dime, she switched. jonathan: to a tighter federal reserve. bullish, nothing wrong with that. the surprise has been the war in ukraine, a massive move from the federal reserve. about where we started in 2022. they had 90 basis points year round. everything changed. lisa: the fear is that now people have changed with the fed needing to overshoot with respect to the rate hikes, and what if the facts are changing on the ground?

jonathan: something we will keep focusing on. coming up shortly, the head of microstrategy at bnp paribas. futures positive. from new york, this is bloomberg . ♪ lisa m.: keeping you up-to-date with news from around the world with the first word, i lisa am mateo. they plan to cut taxes for the highest earners just 10 days after it was announced, an attempt for liz truss to fend off rebellions. the price of oil jumped today. the opec-plus alliance may/production by more than one billion barrels a day -- may

slash production by more than one million barrels a day. the presidential election is headed for a runoff. on october 30, voters will choose between president bolsonaro and desilva, who has the biggest share sunday that fell short of the majority needed to win. on the first day of its new term, the supreme court will hear something. a long list of industry groups including the national association of homebuilders and the american petroleum institute. shares of credit suisse fell to a record low today. bonds against default climbed to a high.

a turnaround plan will be announced. this is bloomberg. ♪

♪

>> it offers no sign it is ready to stop tightening. >> from more than 120 countries, the moment news breaks, 24 hours a day, bloomberg, your global business authority. ♪ >> the ecb has the problem that they cannot fix this problem on their own or if they tried to fix it on their own, they will make the problem worse. they need the support of

governments. governments are the ones i can raise supply or help raise supplies of energy and therefore lift supply overall. jonathan: big problems in europe. we will talk about those problems in a moment with a european economist. live from new york, good morning to you as we kick off q4 and the month of october in this market. futures positive on the s&p 500. the equity market down. another quarterly loss for q3. every single quarter lower through the year so far. 37283. 9772. a bit of feedback this morning on twitter. tom: you mentioned the things that are changing in october and one of them is arsenal keeps winning. jonathan: i like that. [laughter] tom: we were supposed to be at

the derby. you and i were not. we failed. what an interesting day. it is about the greater economies of the world. madrid has the best museum in the world. it is a must visit. it speaks to the healing of tourism in spain. spain is blooming like paris and london. it has been a very strong story. but with it, up to 10% inflation. maria with the deputy prime minister of spain. >> tom, thank you so much. we are joined by spain's finance minister. good morning. i have a lot of questions about europe. but first of all, i have to get your thoughts on what is going on in the u.k. today we are seeing a huge u-turn from the government. i don't want to create trouble, but when you look at that country, isn't that a message of what not to do going into the winter for you? >> in particular when it comes

to the reduction of the taxes on the wealthiest, a master of stability so it is about fairness. it is about how to support our economies, how to fund our public services, and we need to ensure we have fiscal stability, financial stability. maria: so that means essentially to tax the rich more to some extent. nadia: that is what all institutions are recommending. it is with the spanish government has been defending when it comes to the international framework. generally, we need a fair tax system. a race to the bottom is making us poorer. we need strong states with the black male coming from russia. maria: i don't want to create trouble between the eu and you

case a let's talk about europe. it seems to me there are forces pulling. you have demand pulling. we have an escalation in the war and an escalation in the energy worker get in your view, what is the outlook for europe going into the winter? nadia: we are at a very challenging moment now. we see the nord stream supply was cut the first of september. the poverty element here is that prices are not continuing to escalate ask in past months with the vladimir putin energy black male. actually what we see now is the storage level is appropriate but having a stronger voice when it comes to the natural energy market, and we should continue that direction. also, based on solidarity. maria: when you say solidarity,

last week, germany came up with a package to save their economy. is that solidarity for you? nadia: i understand each country is subject to a different challenge. the increase of energy prices hit spain before other countries because of the flats ability of our electricity market but we see inflation going down in spain. we see in germany the situation is very different. so we have to be respectful of the different situations of the different countries and ensure our framework and our rules allow this flexibility at the national level. but we are european instruments for companies throughout the eu. maria: on wednesday, the spanish part minister will meet with the

german chancellor. is he going to convince germans to drop their opposition to the price tax on gas? nadia: i hope so. we have been pushing for a european response, price caps, and overhaul. we managed to have something very exceptional, which is allowing us to have gas prices, and we are saving more than 2 billion euros and allowing us to have lower prices. the gas price from the mediterranean, which shows we could act and change things if we act together. i am sure this will be discussed in the summit between spain and germany and i am hoping to move in this direction.

maria: diplomatic ties are changing between spain and berlin over the past three weeks in particular when it comes to potential gas supplies coming from spain. thank you so much for joining us on bloomberg tv this morning and we hope to see you soon of course. nadia: yes indeed. maria: thank you so much. jonathan: thank you. one of the best, maria, alongside nadia. comfortable with how easy some of these four leaders are making comments about fiscal policy in the u.k.? we heard that from spain now, from the u.s. government, from the imf. very open about how they feel about the u.k. fiscal policy? tom: most of it is way out of line. frankly, if i am at the imf meetings, it is my first question, the first question. jonathan: like why the u.k.? tom: why the u.k.?

you have a few other headed to worry about, but walk us through this process. can we agree about the letter? lisa: there is a larger question about whether markets are dictating for ski policymakers's response and whether they are getting the ok to come out pretty aggressively against this move because of the move in markets and the threat to international stability. jonathan: u.s. fiscal policy quite the same way. lisa: but markets liked it at the time. jonathan: they like it now. lisa: that is the issue, how much does it shift the narrative completely? jonathan: good morning to you. this is bloomberg. ♪

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jonathan: live from new york city, good morning. here is the price action on the s&p 500 and beyond. futures up by .1% on the nasdaq 100. can we find some gains going into earnings season?

for a night consecutive week, yields higher on the 10-year. on the front and, sub 30 basis points. right now, 14.36. that is the bond market. sterling, cable. cable looks like this at 1.1189. we can build on that later. starling last week through 1.12 briefly. biggest week of gains against the dollar going back to march 2020. tom: bonds don't move like fx. to equate sterling moves with gilt moves is maybe amateur hour. jonathan: there is a lot of

data. at the end of the month, ecb. in the middle of the month, will be here from the bank of england with the gilt operation set to expire on october 15? starling, 1.1198. let's say good morning to grandma -- bramo. lisa: it will also be important because jp morgan. will it be ripping off the band-aid from what we heard or is this just the beginning of what is more to come? tesla shares down 5% after reporting deliveries for the quarter were disappointing because of shipping issues. supply chain issues have not abated. blue apron, some of the pandemic darlings, down nearly 19% at this point ahead of the open after reporting the recorder

warnings that missed estimates. you have to wonder if this is the response to an earnings miss, what is priced in? how much earnings pain have we acknowledged in equities? nike reports earnings after the bell on thursday. more than 12% declines in the shares, biggest decline going back to 2001. even with all of this, people are not seeing the value. people moving away from their overweight because there are more of these downside surprises. tom: kim kardashian in equity,

bonds, currencies, equity, was in court to. jonathan: i will stick to the press release. charging kim kardashian for unlawfully touting crypto securities. the press release announcing charges against kim kardashian for touting crypto as it security without disclosing the payments she received for the promotion. it goes on to say, she agreed to settle the charges, pay 1.20 $6 million in penalties and interest and cooperate with the commission's ongoing investigation. the second paragraph reads as follows. the order finds that car -- and failed to disclose she was paid $250,000 to post about a crypto as it security being offered by ethereum max. tom: we make jokes about this but this is serious stuff.

the answer is celebrities and influencers, and that is really interesting. is this the first time this institution has gone modern? lisa: and how much are they using kim kardashian as the poster child for don't do this? setting a precedent when it comes to social media and influencers. jonathan: two issues here, posting what you do on instagram. the other thing, celebrities touting any kind of financial vehicle, security, asset class makes me deeply uncomfortable. when i see those interviews in the financial media, i absolutely despise them. tom: what does this mean for mr. musk? twitter is a publicly traded

company, so is tesla. is he a celebrity, influencer when he is using social media? jonathan: the key issue is disclosing that you were paid for a post on instagram. it goes back to something i said repeatedly. if you see celebrities on tv touting any kind of financial security, asset class, whatever it may be, that is merely only about the media trying to get clicks, eyeballs, and it drives me absolutely insane. let's leave the sec story to one side and talk about the general media. how they cover the likes of crypto, any new fad. we should get going about this because it's a big problem. the media also has a responsibility not to chase the latest fad in financial markets just to get eyeballs and clicks to get the audience up for a couple of weeks.

tom: you are correct. what upsets me is not so much people paying a quarter million dollars to do whatever, but are we showing the academics and the people really thinking about all of this digital stuff? the media runs away from that because it is born, like this show. in crypto, there has to be entertainment out there. jonathan: on a serious note, kim kardashian feeling to disclose she was paid 250 thousand dollars about posting on her instagram account. probably will not be the last. we have seen this repeatedly on a range of circumstances. lisa: misrepresentation and acting in an inappropriate manner. that is an age-old credence, what we are looking for from the sec. tom: we say thank you to deborah

cunningham, as we move away from that sec statement. absolutely thrilled, perfect time to speak to her about liquidity. i don't care about the fed right now, i care about the operation of the global fixed income markets. is there liquidity particularly in the short-term space? >> first of all, let me tell you, i was entertained by the discussion that you had on kim kardashian and celebrities emoting products, especially financial products. dealing with the sec is a different ballgame, and i need to learn from that. the global and bond markets, there is liquidity in a constrained sense. it is therefore both buying and selling, plenty of securities

out there. you have to make sure you know what the value is that you are looking to purchase, that you are looking to sell. that is where the questions exist right now. there are market makers, but in some instances, you can drive a truck through the good as it spreads. tom: i want to be respectful of the heritage of farragut -- federated hermes, with the challenges of trusts, how does that affect the plumbing of a major bank with people like federated and your good competitors out there? how does that give and take change on a given day with the bank challenged? deborah: there are two main ways of dealing with our large banks here in the u.s. and globally, and that is from a credit

perspective as well as a counterpart perspective. from a credit perspective, the second that we see problems from any kind of loan loss reserve, any kind of issues with regard to their earnings, profitability, those types of issues will require us to no longer continue funding them. from a credit perspective, the ability for us to lend the money in instances where there is deterioration from a credit process exists. on the counterparty side, depending on what trades you are doing, other riskless trades where you are looking to the counterparty for some form of execution but you are also not giving them anything until you receive something in return simultaneously, there is less of an onerous issue, less of an onerous process under which we review who our counterparts are,

those that we extend credit to would be. lisa: based on where we are right now, how concerned are you about some liquidity event, withdrawal of liquidity from a monetary and policy stance that everyone seems to be talking about and preparing for? deborah: i think we are still not dealing completely from where we are from a week effective. so many in the market today think zero rates are normal, and they are not. i'm not sure what is normal in today's environment, but i think it is no longer reality to think that 0% is normal. you have to get used to the new normal, at which point, liquidity becomes more of a front and center issue. you cannot deal with a marketplace that doesn't have equal buyers and sellers at a price that is agreed-upon in a

pretty rational way. you are in the midst of discovering that. we are certainly seeing somebody market revolt. i don't know that much of it is because of what the fed is doing from the standpoint of rates, or a standpoint of quantitative tightening. the 90 plus billion they are doing per month in the marketplace actively reducing their balance sheet, but it is all contributing to a little bit less from a market-making capability for some players in the market. jonathan: i spoke to a lot of people in fixed income last week. overwhelmingly the consensus was that in the u.k., it dominates the gilt market. what happened last week manatt had been elsewhere. would you agree with that? deborah: i would. i was in london last week. i was watching it unfold and thought, how different this is

from the u.s. marketplace. there are some similarities and comparisons, but the issues that were taking place from a pension perspective in london are unique to that area of the world. they are not something that we should be experiencing in the united states at any point. jonathan: fantastic to catch up with you, deborah cunningham. the bond market experiencing a wild ride in the u.s. so far. the bond market not behaving like a bond market about to go through an economic downturn. if it were, we would expect yields to be going lower. lisa: unless we are talking about stagflation, persistently high inflation at the same time that you are seeing growth declines, which is right now a big fear. tom: captured by corporate america. jonathan: the s&p 500 this morning, good morning, just

about positive by half a percent. getting closer and closer. this is bloomberg.

>> it would be a pity if we have to rely only on u.s. banks. european clients want in the and stable counterparts that are there always, not only in good times but also bad times. we see that often when you have a crisis there is a tendency to concentrate on your own market. jonathan: that was the chairman of societe generale. price action shaping up as follows. credit suisse and getting absolutely hammered this morning. down by 7.8% in swiss trading.

tom: hugely qualified to opine on the state of eu banking. also on eu banking is marion halftermeyer. she joins us with a brief this morning. what are the options that this beleaguered management has? marion: good question. they will have to present something strong at the end of the month to reassure the markets on the state of the banks and whether it can continue existing in the state it is. some of the options they are looking at, what can they do with this costly investment bank? jonathan: cutting costs money. there's a conversation about whether they have to do the capital raise. what are the numbers hearing

about how much this would cost? marion: the ranges are big, going from a billion to $4 billion. it depends on how much they cut, and therefore how much they need to fund the cutting. that will not all come from job cuts. the capital raise right now looks difficult, which is a stock at an all-time low. lisa: we were hearing from the ceo of societe generale talking about the importance of credibility. can this bank make it until the end of the month? marion: also a good question. they have been staggering along this whole year. they have two weeks left to make it to the announcement, but then questions about whether that will assuage the market, and whether they can make it until the end of the year without further announcements. we will be on the lookout for more communications. lisa: how are they keeping their best talent right now? marion: a lot of conversations

around bonuses, retention payments, but there has been a lot of flight over the last few years. it is hard to say what they'll be able to keep. tom: we need to be respectful of the ongoing concern of any institution, including in zurich. in america, it is done different. jp morgan buying for two dollars a share a beleaguered investment shop in 2008. how close are we to that drama in zurich? marion: i think you have a lot of important, knowledgeable voices including the analysts who cover the bank day in and day out saying let's not get ahead of ourselves, they have capital buffers. that is not to say there may not be a takeover offer but it is not a situation where -- tom: where is your government,

is it diffuse because of the canton structure and the domestic nationhood of switzerland? is there a regulatory body in charge? marion: there is a regulator. they have been looking at the bank ever since we had the multibillion-dollar losses in 2021. there has definitely been some oversight and conversations behind closed doors. until we get to a point where the bank is in a dire situation, the government and regulars manatt step in. jonathan: i imagine they are checking with you before the end of the month. banks in europe so i tried to cut their way to growth. it is a vicious spiral, very difficult to get out of. tom: we are not in the room or business here. what i would suggest is it always comes down to regulatory

pressures, no different than nixon years ago. where other regulators saying do this or it is over. where are the swiss regulators? jonathan: that could take place at the end of the month when they come out with the strategic plan. the capitol arrays that goes alongside that strategic plan faces a complication now. 3.65 is a big change from 12 months ago. lisa: it comes down to this downward spiral and what do they have to pay up in order to attract new investors. if you have a $10 billion valuation. it is a fraction from what it used to be if you try to attract new shareholders, you are not raising that much money to make

it worthwhile. jonathan: the message out of the bank, i trust that you are not confusing on day-to-day stock price performance with a strong capital base in the quiddity position of the bank. when you hear companies say those things, they are in a tough spot. lisa: when you think about attracting business, it's a highly competitive environment that has become even more so because there are fewer deals to be had. what is the competitive edge to win the confidence of clients when you see these rumors swirling, share prices plunging, credit default swaps surging? the highest level since 2009. jonathan: what do you make of that market, the way that it behaves? lisa: what is it, which is circling at the top of a mountain? jonathan: it is worth a conversation. tom: i am not a big fan.

i see too many other times where it is off the mark on a deviation basis versus other more reliable series. i am not knowledgeable enough to say do not do cds. lisa: i would argue this is signaling a high probability of a restructuring, not that it will become insolvent, but people are preparing for a wholesale change in a bank that used to be a mainstay. when it bought dlj, it was the leverage king of wall street, to put in perspective the financial engine it was. jonathan: remind me of the deutsche bank situation. tom: yes. the people that we talked to, as a general rule, are in research, away from these immense challenges of profit-making and certainly investment banking and trading divisions. jonathan: and suffered after

poor leadership. i would argue particularly over the last five years. tom: we can speculate. ubs takes them out, deutsche bank. jonathan: futures positive .4%. kicking off october. tom: strange kickoff. jonathan: sam lynton-brown will join us in about five minutes time. knocking on hedge fund managers doors with t-shirts on.

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>> what happens when the bank of england takes away this extraordinary support of the gilt market? >> seems to be making its way around the world, likely to

continuing our view. >> we are looking for recession sometime next year. the question is exactly when. >> i think we are getting close to a blank. >> this is bloomberg surveillance with tom keene jonathan ferro, lisa abramowicz. tom: we are together with you, the first day of the fourth quarter of 2022. a slow news day. jonathan: how much more news do you want? tom: we were overwhelmed the last week, and here we are with a u-turn by the british government essentially, but other u-turns out there, as well, including the economic data. jonathan: the biggest issue last week was not the announcement from the previous week from the u.k. government, it was out of the market responded to it. the instability, i central bank have to step back in. that is a key fear for many

people, that we start to see more of that across europe and perhaps here in the u.s. tom: my theme of that research weekend, many people saying don't get distracted, as the chancellor was distracted by tax, from the u.k. ballet. jonathan: the question we were asking in the last six months, do we have to make a choice between accepting higher inflation or recession? i wonder if that question has changed a little bit. is it now between recession and financial stability or higher inflation for longer? tom: financial stability is in the calculus. the wonderful interview with the spanish official. 9% modeled inflation is 10. when do we have cpi here again? in a week or so. lisa: what does a central bank do in the face of financial stability? is the u.k. playbook, the bank of england coming in not with

qt, but quantitative easing, buying bonds to stabilize markets? can they do that because of what you are saying? tom: let's get to our important guest, frame out the data. 145 print on yen. i thought stroman would move more off the u.k. announcement. jonathan: we had a sizable move last week, pretty sizable move for pound sterling. they feature of this morning's price action that gets my attention is how much yields are moving by. to see the two-you're down by 15 basis points, not exactly a big morning for market moving data that would whipsaw this bond market around. but look at these moves, 10, 15 basis points. is this a new normal for what a volatile market will look like? lisa: can there be a steady

rally if you have such volatility in benchmark asset classes, rates? that is what people are looking for to stabilize before they get conviction. jonathan: will bonds behave like bonds? tom: what did you observe in the spread market? lisa: people were saying they saw signs of dysfunction. bank of america said they were coming close to some sort of liquidity event. what we see is a site -- slight bid into credit on friday. perhaps looking to that blink, pause, whatever we call it. tom:vix, 31.68. jonathan: the s&p just about positive, leaving behind an ugly month of september. down on the quarter, down for a third consecutive quarter on the s&p. futures up .6%.

tom: there are points where there is a division, you either get it or you don't. sam lynton-brown is with bnp paribas, head of global macro strategy. what is the econometrics of this market telling you now? can you find the trend, believability, or are you making it up as you go? sam: thanks for the question, good morning. the first trend that i will focus on is genuine conviction and higher rates in europe. we think the ecb will take policy rates to 3%. when you look over the past 50 years, bund yields have only been beneath the policy rate on a few occasions. bund yields can rise. jonathan: one point, if we can

get the ecb rate to 3, bunds are coming along for the ride, where is italy trading at that point? sam: this is where the ecb's prevention measures, protection instruments will be important. it is also why we don't think the risk assets in europe will respond in the way that one particularly expects to the rate hikes. if the ecb frontloading titans into what is likely to be a recession, with italy, one of the offsetting factors is with inflation high, nominal growth is also high. that sustainability concern should be alleviated. we believe the ecb can get to a 3% rate without triggering the types of significant systemic personal spreads. lisa: i want to understand the

euro in this context. you are having quantitative easing on one hand to suppress the yields in the paris while raising rates to 3%, a level that many could not have imagined in recent years. how weak does the euro get against the dollar? sam: he ecb frontloading into recession is bearish. the key question is why the ecb is cutting. they were rising rates as a result of the better growth backdrop. the negative supply shock was -- train down to 3000. euro-dollar, already at cheap levels. [indiscernible] lisa: how does the u.s. and companies do? this is one of the notes i read over the weekend, i when a

strong dollar becomes a problem for the u.s., for u.s. corporations. at what point does it lead to some protracted pain that causes a fed response? sam: that is a question that the markets will be focused on the next six months. w that we have got is it is not in the offing anytime soon. first, the dollar is not nearly as strong as it was prior to coordinated global intervention to weaken the currency. second is the inflation trajectory. the u.s., prior to the last time we had coordinated action, decelerated several months. the third point is the u.s. were cutting rates than.

there is also the political point. given how important inflation is in the midterms, the probability of biden agreeing to transfer purchasing power we think is low probability. jonathan: next move of the ecb at the end of the month, how big do expect the hike to be? sam: we think 75 basis points, what the market is already pricing. this ecb understand they are behind the curve. in contrast to the u.s., inflation is yet to be accelerated. even with some of the fiscal support we have seen. that fiscal support is key for the medium-term. it will not stop a recession now but it may mitigate the severity of that.

that will support reagan term inflation which will require the ecb to do more. jonathan: what a call. that is what will make a market. someone on one side thinking that we will get to 3% on the ecb rate. tom: who has the crystal ball? i don't. by the way, there is a war. deutsche bank says there is a lot of government spending that goose up nominal gdp. jonathan: i did not expect to see the 10 year at 2% in germany. i will not say that i don't have conviction. we got to 2 in a way that i didn't imagine. lisa: is it to hike rates on the front and, by bonds on the long and? are we all becoming japan? is this becoming a massive exercise and curve control as central banks try to engineer but will not be a complete financial crash, while also

mitigating inflation, can they have their cake and eat it too? that is one of the questions emerging. jonathan: i couldn't agree more with the bank of england. i would argue it started with the ecb, the moment they talked about a rate hiking cycle, all waiting for this mechanism to keep yields down in italy. tom: i looked at that this morning. italy is an important point of study. i have real trouble with the world becoming like a japan scenario. such a unique story in japan. jonathan: when it comes to the intervention, that is the point that lisa is making. well others have to follow? lisa: well you have to dampen market discovery mechanisms yet again in order to achieve goals that are incredibly difficult to achieve? some might say impossible. jonathan: price discovery, how

can you price risk when you are having great difficulty pressing the risky asset? lisa: how do you price risk when there might be the ultimate put up policymakers stepping in? jonathan: from new york, this is bloomberg. lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. british prime minister liz truss has done a u-turn. she dropped a plan to cut taxes for the highest earnings just 10 days after it was announced. it is an attempt to fend off a rebellion from her lawmakers in her own conservative party. the chancellor of the exchequer says the tax cut had become a distraction. he will be hoping to end days of market turmoil that followed his fiscal package. the price of oil jumped today. there are indications that the opec-plus alliance may slash

production by more than a million barrels a day to revive prices. a cutback of that size would be the biggest is the pandemic. opec-plus meets wednesday in vienna. in brazil, the presidential election is heading for a runoff. on october 30, voters will choose between shire bolsonaro and former president louise ignacio tallulah desilva. reality show star kim kardashian will pay almost $1.3 million to settle allegations that she illegally touted a crypto token. according to the sec, she used social media to promote a crypto asset security offered by ethereum max, but failed to disclose that she was paid $250,000 to do so. tv channels owned by walt disney are back on dish network after a weekend blackout that left millions of customers without access to channels like espn and

abc. disney said it reached a tentative agreement that reflects fair value for its content.

>> can we have a bear market rally? absolutely. 8% in this environment is not unheard of and provide you opportunity if you are short-term in nature. jonathan: the global macro

strategist at state street. futures positive on the s&p 500, half of 1%. in the bond market, a 10-year done by 12 basis points. the two-year, 4.55%. asking guess last week, will we still be doing qt at the start of 2023? i got a yes from three, i'm not sure from mohamed el-erian. wondering that can continue given the financial stability concerns. tom: the data dependency, the theory that at every central bank has to keep their options open. one of them is keeping people

guessing. jonathan: bond vigilantes are back. tom: perspective on that now from edward yardeni, president of yardeni research. decades of study of wall street. we have never seen this. you call it a bearish opera, and on we go with the media. how do you figure out what is going on if everyone is speaking italian? edward: the idea of the opera came to me on friday when fed chair lael brainard gave a speech where she indicated that the fed is sort of in between a rock and a hard place. i think it is actually between voelker 2.0 and bernanke 2.0. it is kind of a bearish opera.

the opera is not over until the fed lady sings a more optimistic tune. she was concerned about fed stability -- financial stability. you said on a show that financial stability is one of the mandates. the question is how important is it? i think it is number one. tom: great. the fact of the matter is, when something changes, any central bank changes. how close are we to the facts changing where we observe it in the fed dialogue? edward: i am totally mystified, surprised that fed officials do not seem to acknowledge, just focusing on the fed funds rate is a part of the monetary tightening cycle is a mistake when you also have qt and a soaring dollar. these are very restrictive monetary developments.

i believe they will not get up to 5% on the fed funds rate. i think they have one more rate hike coming in november, and that will be it, because the financial stability issue will be a primary concern. lisa: hold on. you think they will raise rates possibly by 75 basis points, and then that is it because something breaks? what breaks? edward: i think it is already breaking. the soaring dollar has been associated in the past with creating financial crises on a global basis. we have to have a global perspective on this. tight monetary policy here is having a tremendous impact on the rest of the world, especially in the emerging markets, where companies and governments tend to borrow in dollars. the soaring dollar is killing them. lisa: you have been constructed on the u.s. stock market long-term. mike wilson over the weekend said that light at the end of the tunnel that you might see

from a fed that does pause or pivot is actually a freight train of the oncoming earnest recession that the fed cannot stop. how do you deal with the earnings recession that will ensue from the tightening that would be necessary, prerequisite for the fed to maintain that pause? edward: again, from a global perspective, i agree with mike, there is a recession out there, but i think it is in europe and china, basically the rest of the world. the rest of the world needs a safe haven. the safe haven is the united states. the dollar remains strong, money remains to pour into u.s. credit markets. i think you'll see money also come into the equity markets on a global basis. i see earnings going sideways. i think we are already in a growth recession. two quarters of no growth. three quarters something similar to that, slightly positive. fourth quarter, continuation of

that growth recession. that is what we experience. on balance, i think we make it through this in much better shape than the rest of the world. jonathan: on the bond vigilantes, you coined the term, do you think the central banks will allow the bond vigilantes to wreak havoc with the bond market through the week? edward: what the bank of england did was a template for what others are likely to do. i think there are similarities between what is going on, moving toward the japan model of keeping the peg on the long and. jonathan: herrmann intervention even when they are hiking. thank you. edward yardeni of yardeni research. we can all come up with scenarios, how the federal reserve causes, pivots. is it bullish if they pause because of financial instability?

is it bullish if they pause because of a deep recession? the way i phrase this is as follows, if you ask someone if the fed pauses because they are worried about recession come is that bullish? someone says yes. if you phrase it differently, if that that is not cutting in the next session, is that bullish? that doesn't mean they will start cutting. lisa: mohamed el-erian and others have made this point, be careful what you wish for. if they pause, the circumstances have to be pretty negative for the rest of the economy, taking a step back, even if the fed pauses, if inflation is not rolling over naturally, you have a big problem. it is not just a fed engineer to downturn. that moves the equation of the fed even being able to be a put. it is unclear what would be the savior. jonathan: is the fed stepping

in? tom: basically there are three scenarios. what i would focus on, to ed's point, you have the economics of it, you have the fiscal of it, and you have the financial stability of it. once every 10 years, the green book matters. jonathan: it is dominating right now. futures positive .7% on the s&p. yields lower by 13 basis points on the 10-year. 3.6983. coming up, jeffrey sachs from columbia university.

jonathan: live from new york city, good morning to you. this is bloomberg surveillance. alongside tom keene at least some of its, i'm jonathan ferro. yields lower by 12 or 13 basis points. 3.70 on the 10 year. 97.66. crude up 5%, 83.56.

a conversation of output cuts at opec-plus. lisa: one million barrels, the most since the heart of the pandemic. that is a significant amount of barrels cut, not added, a reversal of what we've been seeing. you have opec-plus saying we need to support the integrity of pricing, but it has helped many nations with lower inflation. tom: futures up 22. the heart of surveillance is the quality of our guests. we speak now to jeffrey sachs, economics professor at columbia university. he was 10 years out front on the collapse of american education and the structural -- struggle of two america's. i must digress on your take on

the war in ukraine, the russian that you knew so well under yeltsin. they are equating you with the realists out there. which should be our response to mr. putin with your thoughts on war and aggression after the human atrocities that are reported? jeffrey: i was attacked in the atlantic for being on the side of peace. i confess i am on the side of peace. i am worried that we are on the path of escalation to nuclear war, nothing less than that. we have essentially a war where russia feels it is at the core of its security interest. the united states insists it will do anything to support ukraine's defeat of russia. russia views this as a proxy war

with the united states. whatever one thinks about this, this is a path of extraordinarily dangerous escalation. tom: you lived this with yeltsin, gorbachev. i remember when you got off the plane after that first experiment. do you have the feeling that mr. putin is alone, is the military and support for him? jeffrey: a lot of the world is watching the events in horror. a lot of the world does not like this nato expansion which they interpret as the core of this. they want to see compromise between the u.s. and russia. in vote after vote in the united nations, it's been the western countries that have been voting for sanctions, denunciations,

other actions. most of the world, cap to buy population, is on the sound lines. they see this as a horrible clash between russia and the united states. they don't view this, as we described in the media, as an unprovoked attack by russia on ukraine. anyone in the united states would say what else is it? it is because of the way the media has been reporting this. this conflict goes back a long time. it did not start on february 24, 2022. the war itself started in 2014. even that had antecedents. most of the world does not see it the way that we describe it, but most of the world is just terrified right now, frankly. it is unbelievable to be hearing, on one side, we will

use new fear weapons if we need to, the other side saying, you cannot frighten us. lisa: i share the concern. i also spent the weekend reading articles about the u.s. coming up with proposals of what they would do in response to some of these attacks. definitely a big concern. it is also an issue, as you see the sea change in the economic trajectory in europe and beyond. some of this come from the energy crisis. but suddenly we are talking about inflation we have not seen since world war ii, since potentially another time of incredible distress, military intervention. how close are we to, i don't want to say hyperinflation, but persistent inflation well above target in germany, euro area, as they look to alternative ways to suppress the region of rates getting out of control on the front end? jeffrey: europe is in a very

sharp economic downturn. a sharp decline of output in living standards also shows up as a rise in prices. the main fact is that the european economy is getting hammered by this, the sudden cut off of energy. to make a definitive, the destruction of the nord stream pipeline, which i would bet is a u.s., poland action -- tom: that is quite the statement. why do you feel that was a u.s. action? what evidence do you have of that? jeffrey: first of all there is direct radar evidence that military helicopters normally based nearby were circling over the area. we also have the threats from the u.s. or other in the year, that one way or another, we are going to end nord stream.

we also had a remarkable statement last week by secretary blinken who said this is also a term of this opportunity. it is a strange way to talk, if you are worried about the piracy on international infrastructure of vital significance. i know this runs counter to our narrative, you are not allowed to say these things in the west, but the fact of the matter is, all over the world, when i talk to people, they think the u.s. did it. even reporters on our papers tell me privately. it does not show up in the media. lisa: i don't want to get into what happened with nord stream because i don't have the evidence, we don't have a counterbalance to this. the issue at the heart of this come the lack of trust in the u.s., lack of cohesion in allies, in the midst of

incredible political and economic strife. do you see the likelihood of working together at a time when there are such disparate interests, feelings of distrust? jeffrey: the biggest problem is we have major geopolitical conflict. not only u.s. and russia, but also u.s. and china. again, with a tremendous amount of provocation coming from the u.s. side as well. we are breaking any sense of stability right now. for the moment, many in europe are saying the u.s. is our closest ally, we need to hold on. but watch what is happening politically. there is upheaval in europe, country after country, we are entering a period of enormous instability, and we are unstable in the u.s., as well. we went through an insurrection,

we are not past that. we are entering the most unstable geopolitical era in many decades. entering the first hyperinflation in more than 40 years. entering the first escalation to the nuclear precipice in 60 years, 60 years exactly this month was the cuban missile crisis. this is the most dangerous moment since the cuban missile crisis. it is an extraordinary overload. we see no attempt to tamp this down, quiet it down. every day is about escalation, we will defeat the other side, we have our rights. speaker pelosi flying to taiwan. so many provocations in the midst of huge instability. tom: we have to leave it there. greatly appreciate it. we are getting a fiery response in this interview. jonathan: are you surprised?

tom: this is what we do on surveillance, the difference of opinion out there. i would say small but there is a considered opinion out there internationally along his lines about the expansion of nato, too far too fast. jonathan: i will be as diplomatic as i can. we speak to experts on things that they are expert about. as an economist -- tom: i will say it was a rant on international relations, but jeff holds a special spot because he was the lead economic advisor to the failed yeltsin experience. he has huge russian study. after that, you are right, we heard a lot of things. jonathan: i heard very little about the actions of vladimir putin, their rhetoric coming out of russian leadership, any of those things. an article in the atlantic, the

journalist picked the quote from jeffrey sachs. "from 1980, the u.s. has been in 50 wars of choice. china has been in none, russian only one. beyond the former soviet union, excluding georgia, excluding what happened in ukraine." also in a sense opens the door to say it was not beyond the former soviet union, so georgia and ukraine is ok. incredibly complex, some of the accusation that the economist is making about international relations behind any evidence of it so ever. the reason i'm uncomfortable with someone like that saying those things is because they presented no evidence other than saying, people don't want to talk about it because it runs counter to the narrative in the media. if it turns out to be right, it turns out to be right. but as a journalist, you don't

say those things unless you have evidence to say that. that is why those things are not being said. he is not a foreign policy expert either, and we should not dress him up as one. coming up, we speak to a bond expert. priya misra from td. lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. it is a female eating reversal for prime minister liz truss. she has dropped a plan to cut taxes for the uk's highest earners just 10 days after it was announced. the move was her attempt to fend off a rebellion in her own conservative party. the chancellor of the exchequer says that tax-cut plan had become a distraction. he wrote, we get it, we have listened. the european union is open to reach a deal today on a new sanctions package to punish russia. poland's ambassador to the eu said it would likely include the political backing for a price

cap on russian oil. bloomberg has learned hungary has been an obstacle in the talks. the death toll from hurricane ian continues to rise. at least 68 have been confirmed dead. all but seven of those were in florida. president biden will visit the state on wednesday. ian was one of the strongest storm to make landfall in the united states. the latest attempt to consolidate the british telecom market, vodafone says it is in talks with hutchison about a combination with rivals. the deal would include a combination of the two businesses with vodafone holding 51%. manhattan's ev charging sites now outnumber gas stations more than 10-1. according to data from the u.s. department of energy, there are 320 publicly accessible charging stations, compared with a 29 gas stations listed.

gas pumps still dominate citywide. 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.

>> the eu has done a great job of reducing it short-term dependency on russian gas. the added threat will create upward price pressure. it will continue that. but the recessionary fears, the rampant inflation you have been talking about, that creates a downward pressure that keeps us more balanced. tom: the global head of energy at kpmg. international economics and politics of hydrocarbons. futures up 32. vix comes in at 31.45. lisa, help me out on the economic data.

it is a deluge. ferro tells me they are important. lisa: they are, especially with seeing services go down in tandem with goods. we also get a bunch of housing data this week. the main point of the week will be the labor market report, nonfarm payrolls coming out on friday. much is that point to a slowing labor market? tom: right now, on opec, opec-plus, we go to will kennedy, who knows more than me. it is about azure by jean, bahrain, south sudan, mexico, sudan, and russia, opec-plus, yet everyone focuses on the path from moscow to riyadh. what does the path look like this morning? will: as we say, there are 23 countries in this opec-plus, but

the two countries that matter are saudi arabia and russia. it is an alive between riyadh and moscow, the world's two biggest oil exporters. the fact that they are meeting in person shows it's very important for saudi arabia to keep this alliance going, to keep the group together, to think about what policy will be in the year ahead. we have huge things ahead on the backdrop, global slowdown, monetary policy, higher dollar putting pressure on oil prices, development of the war in ukraine. it will be very interesting to see how radical a policy response we will see, the first face-to-face meeting since the pandemic, on wednesday. lisa: how much political pushback will there be if opec-plus does go through with a production cut? not a hike, still in the face of inflation concerns worldwide? will: prices have come down a

lot since the summer. that has been a concern to opec producers. there is some worry that the world may see a little bit oversupply, but it is hard to see that when you look at the numbers. demand is still fairly robust. clearly, opec feel the need to get ahead of things. it will be interesting to see how washington reacts. a million barrels a day is almost 10 times the hike that came out of the meeting between biden and mohammad bin salman early in the year. lisa: how much will russia be a part of this particular opec meeting? will the russian oil minister be in person with them for this meeting? will: we don't know yet. that is not clear, we are still trying to get a final list of the people that will participate in person, those participating virtually. he has been sanctioned by the u.s., not in the eu, so it

is possible he will attend if he wants to. tom: we are fortunate to have you here with your teams work in denmark, around the baltic sea, nord stream, all of the upside of the rupture. not sure if you are aware, we just spoke to jeffrey sachs, hugely controversial interview, where he implied that the u.s. and poland were involved in some sort of rupture and damage to the pipeline. it has created a firestorm for surveillance out on social. what is bloomberg's reporting on the damage of nord stream 2? will: the reporting is that the damage is severe, it will be hard to repair these pipelines, although the russians have said it would be repairable. we don't know for certain who did this. that is the important thing to say. we know it is sabotage, it was done deliberately, and it is hard to understand why those

countries would want to do that. beyond that, i think we need to wait for people to investigate. it is interesting that sweden and other nearby countries are putting assets in place to look at the pipeline, determine exactly what happened, beyond the fact that this was done deliberately, we don't know how it was done. until we know how it was done, we cannot say definitively who did it. tom: i sought reports in sweden, undersea robots, even divers looking at it. will: that's right. we can also send people, probes down there. as that happens, we can slowly build a picture of how this was done. once we know how it was done, we may get closer to know for sure who did it. although lots of people have their views. many people, including the pols,

have pointed toward moscow. tom: we appreciate your team reporting on this hugely controversial story. what a firestorm of a conversation with a gentleman who was with elton years ago but has changed over the years. lisa: difficult not to make any allocation without any tangible proof. we should not be making allegations. whatever we have on, it applies to them, as well. there is an issue, as we try to figure out who did it, what is behind it, is the potential for escalation. that kind of concern, particularly for moscow, with fingers pointing their, what kind of response this is. the fact is we have energy ministers speaking in luxembourg, talking about how we deal with a very difficult winter. the idea that we cannot rely on russia anymore for energy needs. tom: you brought that up well, the calendar matters. the first business day of

october, and all of a sudden, winter is upon us. i have seen different reports. frankly, as professor sachs mentioned, it is a sobering time. lisa: his remit, professor of economics, it's an interesting time there, as well, when you look at inflation rates, seeing what we have seen since world war ii in europe. how do you grapple with that after becoming accustomed to federal reserve intervention, ecb intervention on lowering rates further? this is a totally new world. tom: we go to the jobs report on friday. sterling with a big continuing through the morning. 1.1225. stronger off the news flow there. even the yen is stronger against

a flat dollar. lisa: here is a debate, how much will japanese official be willing to keep supporting the yen? is this just a controlled weakening in order to wait, to buy time for the dollar to depreciate? tom: we will talk about it tomorrow. one calculation is the wealth of japan is so great, they have many tranches of intervention if they choose to do it. the eventful news flow continues on radio, television on this monday, jobs day on friday. stay with us. this is bloomberg.

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jonathan: live from new york city, good morning. equities rallying. the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg the open with jonathan ferro. jonathan: we begin with the big issue kicking off q4. >> we have done a lot of of damage third quarter. >> the dollar is a challenge. >>