dani: this is "bloomberg daybreak: europe." i am dani burger in london with manus cranny in dubai. these are the stories that set your agenda. manus: another hard month. u.s. inflation hits a 40 year high. a jumbo rate hike expected next month by the fed. u.k. tax you turn. they appear to have abandoned measures of economic agenda.

racing back to washington, planning to press ahead with his strategy. >> our plan has not changed. i will come up with a plan for them to taper. what i am focused on is delivery on the mini budget. manus: we will see how long they both survive. what a monster day. it was not supposed to go this way. 1982, it was the eye of the tiger. that was top of the charts when inflation was this hot. dani: always a fun fact to have.

i am looking at down 2.4% up for 2.6%. if you look where others things happened, it was during times of tension and markets. it is the nature of the beast, these days. manus: our guest yesterday said they are so sure. we have to bear in mind, the biggest reversal since 1990. diamond calls a soft landing likely. there could be another 20% on the downside from here at $6 trillion in losses. wow. what a winter day. dani: remarkable to see you turn

around like that. the market is pricing in almost 75 basis points. the market is still up today. equities are turning higher. blame whatever you want but s&p then futures are up. of course, a monster -- monster rally that happened when your was closed. asia, also strong this morning. at four than 2.5%. manus: i told juliette saly, the end of today, you will have a lot of notes. the fed will have to move from talking a talk into walking a walk.

up 24 basis points in the trading session. we will get some reprieve this morning on the back of that. 100 basis points hikes. cable, managed to run up almost 2%. will they move from number 10 to cut the budget. 89.90. the moves from the oil market are trying to push it to the global economy. 34 year low on the dollar-yen. dani: i will take the other side of your bet. i will say we get no. i for like i will lose that one -- manus: it is normal. [laughter] dani: reporters around the world

before i lose all of my money. they are hand to unpack. manus: let's get to juliette saly. how do you market those? i am good. i will come back later. dani: she is not ready yet. i am too excited for this friday. we can be delay again. cpi is at 6.6% in september. president biden acknowledging there is more to do to come back restless. >> america's are squeezed by the

cost of living. fighting this battle every day is a key reason about why i ran for president of the united states. that is the voice on the white house. talk to us about what you think, we should eclipse him before the end of the year. charlotte: inflation is going in the wrong direction. 6.6%. way outside the fed to present a target. there are price pressures across the board. u.s. inflation has proved to be stickier than expected.

december, that looks like they are on another 75 basis points move. it is in territory. it will not have consequences for you, it will spin off for the rest of the review as well. dani: a little birdie told me you want to one up about some appliances. ways different from 20 years ago. i know wife place. manus: you are the chief economist, you can outbid me. dani: let's stay with inflation.

we have china's numbers. a totally different story. i am manus cranny in dubai with dani burger in london. -- if they think they are more concerned, wouldn't this signaler. on the economy? completely opposite direction for the u.s.. kailey: thank you very much. treasure held -- treasury yields is on the back and. it hit -- the highest level before vegas. let's get to bloomberg david. they continue to move these

markets around, but are they sustainable? certainly. one of the key things is fighting 10 year exit take and feared there will be worries that inflation gets embedded into people. we are back to the hawkish rhetoric feared you have esther george. of course, we have the pce data. we know the fed looks at that. we have another case for us. the market will start thinking, i predicted a rate cut, are we achieving it?

message has unchanged. that will support the yield and push a higher. manus: jamie talking about four point -- 4.6%. there are attacks coming after recent test in the markets. u.k. chancellor has cut short his trip to the u.s. and is heading back to london. lizzy burden is outside the bank of england. good morning. lizzy: good morning. this u-turn, the mother of all u-turns.

it seemed inevitable after markets yesterday. corporation tax would beat the next future. probably to boost u.k. groove. she said she is not going to quit spending anytime soon. rushing back from washington ,kwarteng, or his allies, shunning those comparisons. it means he has played a blinder really. if the market zero zone continues, we may see a more creative, targeted solution.

perhaps they will give some assistance to the funds that needed it. the markets will punish bad policy. francine: thank you so much. bloomberg's boe. jules, i know you have been waiting for it. take it away. >> you have to give everyone something to wait for. asian stocks today are a. probably on the back of what we saw in trade. each report coming through there. it is about the momentum we are seeing and rebound. .

singapore, monetary decision to try and rain back -- to tried the greenback. let's take a look at jade. speculation again. when you look at the futures spiking, there are some suggestions. it has only been will herbal. -- vulnerable. a lot of focus on what we are going to see next. the main thing we are going to see is volatility. it is quite team compared to where we were in september. matt: the debate rolls on. a little bit of action is enough to stop that monster move.

to come on the show, pivot, --. u.s. core inflation rose in september. likely to secure another rate hike. kailey: you want to prevent? we will also discussed u.k. prime minister as her chancellor rushes back to the u.k. we are watching this is bloomberg. ♪

>> i don't know if it is a soft landing. it might. we have a tough recession. you would expect that market, i am liking those odds. for all of us who have to worry

about risk -- and you should worry about those things. manus: jp morgan's ceo signing the u.s. chance of avoiding a recession. that is the debate. dani: the debate is fueling insane volatility in this market. helping us navigate it is the ceo of a $3.6 billion content a firm. i hope you had a law of coffee this week. where have you done, how have you been moving around the sidelines of this market insanity? we have been very busy. there are technical opportunities that we are running toward and those we expect. retailers have held onto the

stocks. m thee second case and it kind of grows. . forms of rescue dance. the same time, a tremendous imbalance with its volunteers. there is a very large amount of that stuff coming along. we will seek each minus opportunities there. manus: let's unpack some of that. i like that you and dan got a good morning to you. the public is pinching themselves in regard to this credit.

what growth credit are you using or putting to work? >> we have had a tremendous bull market and growth. a lot of that has fueled the development of businesses that have the option of creating even. very low bar, very good interest. the number of these businesses needed to cut things out in order to revert towards profitability. many were expected to pay high monthly rates. otherwise, potentially dan for. it really lies at the medium of the lining. anna: in terms of the cracks,

folks continue to pile up money into private capital. it is because this idea that is not market to market. it does not look as ugly as current products look like. are they starting to emerge and how ugly does it get? charlotte: people -- >> people do not recognize losses that much. at my alma mater, we said, things are good but i am watchful. the numbers are what they are, but we expect some changes. mixed equities are down. our very same assets are somehow up.

with that means is there is a tremendous disciplinary nation for that with large-scale aviation. ultimately, there is a positive cash flow. it allows you to dutch, dodge, try and move around to really pay the bill. matt: someone has to pay the bill in the end. when you are talking about the market, a lot of options. when you have to move market to market and liquidate. that is what is happening. borrow being closed off. let's talk about europe. we are macro obsessed with the united states. $10 million from here into there. what are we not talking about in

europe that we should be talking about? we can stay in crisis mode for the rest of our lives if we want to. charlotte: we are -- >> we are looking at various properties. it is from the gse originally. we are looking into the notion of the customers. it is despite the gun change. things like litigation, finance, loyalties, that sort. with public markets, there is a lot of opportunity. manus: lots to do and even more coming as this starts to crash.

lizzy: your sister is going to think it is hilarious, martin. at what point is it attractive enough to jump in, despite the losses we have seen? >> when you say, jump in, what i have to fear has been around long enough to become short. is really in the next 24-36 months. great companies, great products, situations where the jury is not want to kill you. there was a lot of that stuff that makes a lot of sense. matt: a lot of people are using the terms breaking. it is not 2008, not a small

moment. i just got back from europe and people were talking about watching it at home. this individual moment we are facing but a consequence of war and the energy crisis to make this conflict -- make this conference everything? >> i would agree. it is a 1970's moment. it will be a lot longer than a moment. a combination of responsible monetary policy that will take an enormous number of rate rises. at the same time, after all the spending that is out of control, whenever you see that, you see some significant inflation. things like stagflation in other more difficult things, they take

a long time to work out. manus: we are certainly in panic mode. cio of marina. through the day, we will hear from top policymakers including truss. the governor of deutsche bank president, right here on bloomberg. ♪

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of daybreak europe with me, manus cranny in dubai and dani burger in london. dani: u.s. inflation hits a 40-year high, all but guaranteeing a jumbo rate hike next month by the fed. the s&p 500 swings for a loss to close 2.6% higher torching the bears who sold in the wake of yesterday's cpi report. liz truss abandons key measures of her market agenda following weeks of market turmoil. kwasi kwarteng races back from washington vowing to press ahead with his strategy. >> our position has not changed.

i will come up with the new fiscal plan the 31st of october. what i am focused on is delivering on the mini-budget. manus: so dani, the consequences of that potential u-turn from number 10 turning on number 11. the hottest cpi since 1982, and you had the whip around rally in stocks. you are looking at dollar-yen spectacular. mini-intervention, the dollar-yen at a 30-year low, nothing can stop the rot. dani: yesterday was the biggest

turnaround in u.s. equities since the data started in 1990. the gains continued today, up more than half a percent for s&p futures. nasdaq similar climes, similar climes for euro stoxx 50 futures. look at this turnaround in hstech, it has been getting crushed because of that ship story. it was up 5% moments ago but still nearly not that much at this point. alright manus, let's go back to the banking story, not necessarily the u.s. we will get there shortly but it is all about credit suites. every day i feel like we are getting a new story about what assets are for sale and who may be interested. manus: exactly, it's a question of the quality of the interest. the bloomberg's scoop,

mizuho will step into the fray in the securities product -- securitized products business. this might be a big fire sale of credit suites assets because it has got value. dani: this is the kind of portfolio a lot of these managers want to beef up. you are right, it is my world. blackrock reported assets that tumbled 16%, they did have inflows but that also missed estimates. might be a little bit of nervous news for asset managers given the damage in markets. manus: well let's carry on our conversation on banks because it is earnings season. third quarter numbers are going to hit the tape. what can we expect when financial reports hit today?

we've got citigroup, j.p. morgan, the giants that reported today, the set of earnings heavily scrutinized as to the direction of where we go towards the end of the year. let's take it to the cio for greenwood capital, the lens is what has it in theory. but we will have not such a soft landing according to jamie dimon, talk me through the net interest income, and how important that is and where we are with wall street banks. walter, good morning. walter: good early morning. there is going to be a couple of dynamics at play with bank earnings. on the one hand, net interest margins, and the traditional banking business taking deposits is going to be really strong because interest rates have added up much more aggressively than people anticipated. and we have banks that haven't

really had to raise their deposit rates so that spread will be significant. you are going to see big beats i believe on that metric for a lot of these banks. everything outside of that traditional business is kind of in the tank right now. you look at housing and the mortgage market, at a standstill. dealmaking in investment banking , that's down significantly. and wealth management with blackrock, that component if you are a major money center bank is down as well. which one wins the day, we will wait and see but we have the fact that certainly some of the bigger banks like j.p. morgan are down significantly into these earnings numbers. so valuations are much more attractive than they were six to nine months ago. dani: can i add another potentially negative story, walter? manus mentioned it, jamie dimon talking about that fact that a soft landing is unlikely. translate that for me into what we're likely to see in terms of

loan-loss provisions at j.p. morgan and bank of america. what will that look like if we have executives talking about a for her full outlook for the u.s. economy? walter: that's a great point, one of the things banks benefited somewhat from in 2021 was the release of loan reserves they took touring the height of covid. that has certainly eased and could be a big swing factor in quarterly reports. when he think about what's happening with this twitter deal, tesla buying them and having to shop that loan financing right now, with reports they will take significant losses on that. so what are the other kind of things hidden under rocks that will happen potentially in the future as the economy slows down. that's part of the reasons banks in general have not done that well. not that financials were the best performing sector yesterday. they may start to improve incrementally over the past

couple weeks. manus: walter, i'm interested to get your view, and a lot of people have lampooned me when i have tried in front of the tv screen about 7% mortgages, people in america harel things back at me and say you don't understand the american mortgage market, it is based on refinancing every two years to propagate your overall network. 7% matters in terms of mortgages in america going forward. six and have half percent is what we had last week, 20 year high, extrapolate the risk for mortgages or reward? walter: the risk is the housing market is totally i don't want to say frozen necessarily. but the activity level has dropped precipitously because of that rate increase. we were at 3% at the beginning of the year, so just 10 months ago, and now over 7%. what that calculates into in terms of a mortgage payment,

prices are going to have to come down to reflect that change in interest rates. manus: housing crash, 7%, or just a mini-drop? walter: real estate is local. in part of the country, you will see significant declines where you see the most increases. that activity level is slowing and will continue to slow. this is one of the things we wish the fed instead of looking at cpi numbers on rent which no one pays, and look at the data today which is rents are starting to come down, housing prices are starting to fall. the latest schiller data month over month was actually down for the first time in a decade, so prices are coming down. dani: are you describing the fed about to overdo it if they go 75, if they go with manus in my bet, over 100, is that the fed

overdoing it? walter: yeah, i think the market is telling them look at the 2's and 10's curve -50 basis points can, the most it has been in years. breakevens were over 6% nine months ago. the market is trying to tell the fed you have done enough, let's wait this thing out. of course, they are going to raise another 75 as he said and another 75 likely in december as well. the risk is increasing as we move forward. dani: we get these days of extreme volatility. we have not had the swings, the most since 1990. walter: it is the story of icons accidentally calling emergency services while people are on roller coasters. i'm surprised traders' phones haven't done the same thing.

200 point swing from yesterday to where we this morning. there is probably some follow-through given the magnitude of the reversal but fundamentally nothing has changed. we will still have to see earnings come in, but expectations are very low for a lot of these companies reporting so perhaps we can see better than like we saw in the last reporting season as well. dani: we are stripping in tight here. walter tot, cio at greenwood, thanks for staying up in south carolina. let's take a look at things we are watching out for today. in just under an hour, you can home prices will give us clues as to how fragile the u.k. economy is considering the extreme swings in rates. 1:30 p.m. u.s. retail data sales, which will show the

impact of fed hikes on u.s. consumers. speaking of which, we will get the closely watched you cmh consumer sentiment and business inventory data. later today, the boe emergency bond buying program is set to end. and later we will hear from a slew of ecb speakers, and the fed's esther george. manus: liz truss is reportedly preparing to abandon a central part of her tax cut plan. her plan, or kwarteng's plan? we bring you the details on bloomberg. ♪

>> our position hasn't changed. i will come up with the medium term fiscal plan on the 31st of october, and there will be more

detail event. what i am totally focused on is delivering on the mini-budget, making sure we get growth back into our economy. manus: a defiant kwasi kwarteng, chancellor for the united kingdom. despite that, reports are that liz truss is preparing to abandon the text p -- tax cutting in her agenda. herb left seems to have worked. -- her bluff seems to have worked. dani: lizzy burden is outside the bank of a look, what was the turning point? >> between the clip you just played and the evening when kwarteng was asked if the corporation tax freeze would mean the next u-turn, and he said let's see to the telegraph at the imf meeting in washington

, what changed was that markets priced this u-turn in. and it's made it seem almost inevitable because earlier in the week, liz truss said she would not cut public spending. so it leaves only u-turns on tax cuts as the means to find this 60 billion pounds she needs to plug the hole in public finances and restore credibility in markets. kwarteng is on his way back to washington -- from washington to the u.k., it reminds us of the greek sovereign debt crisis. kwarteng vetting away those comparisons but perhaps this is the moment when kwarteng realizes this is the moment he cannot ignore financial markets. the former boe governor mark carney said they will p unish policy. you have to ask if the rest of trussonomics can survive this

pressure. manus: is this government acting with arrogance or ignorance, but it has provoked feet fx traders. that arrogance is always challenged by markets. they are shutting up shut behind it, they would be buying gilts later today. will bailey extend the bond buying program? that's what we need to debate. lizzy: in terms of this game of chicken between kwarteng and bailey, bailey is playing blind. kwarteng set of the market turmoil continued, it would be a matter for the governor. if the bailey stake his credibility on today being the deadline for the program. given that kwarteng is the one making the u-turn, it seems bailey has won. however if the market turmoil

does continue after today, i'm hearing perhaps we could get a creative, more targeted solution. that's what former policymaker martin wheel turned me he would do yesterday. with perhaps more targeted support for pension funds. but what andrew bailey will want to do is not be prioritizing financial stability over inflation fighting and not appear to be dancing to the tune of fiscal policy, which is how it would seem if this bond buying continues. manus: the backstop of the backstop. lizzy burden at the bank of england. if you look at the money market flows, we often talk about the plumbing of this system, which warns that the gilt market -- fitch warns that the gilt market outflow, this mass liquidation of risk by asset managers on ldi risk but also turning to money markets. those very stable bonds.

this is all very reminiscent of a different time in my life, but no it's not go there, but money market outflows have surpassed march 2020. dani: i'm just going to plug it, i wrote a piece, liquidy mess message --- mismatches, that is on mliv . manus: she is outshining me. i am out of fast facts about what was number one. she is the intellectual on the show, writing about fast facts and markets. let's look at the pound, it put on over 2.4 percent yesterday the question is how quickly do we accelerate if there is a u-turn on corporate tax? we rose the most in two years,

up 2.4%. my question is, is nomura right? is this one of the best opportunities to re-attack a short position in sterling as opposed to dollar strength? maybe there is more blood on the street to come for sterling than there is for the euro. dani: let me show you the risk in this gilt market. if you want to talk about a u-turn, this market has done a u-turn, it was up 5% at some point, falls dramatically. but i love the risk that a pension advisor at lcp puts out, saying this is more than just the technicals, it is a demand peaking story. if this marks peak demand in gilts from pensions, who is going to buy all the gilts? we are going to get qt at the end of this month from andrew bailey and the boe, how much of the gilt market expansion was because of pension buying, and

has that evaporated because of this latest turmoil? again, too many bonds, not enough buyers. manus: don't forget, of course, andrew bailey was being pilloried in the middle of the week in terms of his communication, and the chaos from the institution that he leads. but chaos theory that are because of him saying one thing, to say bailey has won, we all need to be careful with let's give an a star to bailey, and a z rating to quach hang -- kwarteng. where is the next leg for sterling, that is the debate? who is going to buy these gilts, what issues do you have and do you need to find the tax cuts or fiscal i suppose savings of 60 billion pounds. euro-sterling rallying, a little

bit of a move of the last three days as well. we are going to talk about the china communist party congress. there is a big event in china on sunday, president xi jinping expected to secure a record-breaking third term. more on the story right here on bloomberg. ♪

dani: welcome back to "bloomberg daybreak: europe", i'm dani burger in london with manus cranny in dubai. some big events in china this weekend. manus: is taken us 53 minutes to get there. that just shows you the shift in tonality on global risks, that communist party congress begins this weekend. joining us now is our chinese government reporter, cullen murphy, how you doing? what's he going to say about zero covid? good morning, good evening, good

afternoon. >> basically we're just coming up to the weekend. we are looking to the kickoff of congress on sunday. so that tensions are quite high in beijing. there is a lot of rigid applications of the covid measures as you can imagine. as the dow gets are coming into town, people including the security personnel are all on guard to make sure there is no major hiccup in the run-up to the event which kicks off on sunday. dani: speaking of high tensions, we have had a rare protest in beijing. what do we make of it? >> well it's really striking because as i just mentioned, there is so much security. and this is definitely the key event of the last decade i would say. for this to happen in such a bold way is really, really surprising.

just to recap, but there was someone unfurled two banners on a prominent bridge in northwest beijing yesterday, that caught a lot of attention. the banners were calling for more democracy, denouncing xi's move to take on the title of people's leader and so forth, really unusual. not surprising, one day later almost immediately there has been a massive clampdown on censorship, including some people's access to wechat pay, which is a lifeline for many people with many other functions including pay mechanisms. people are getting vans for life on wechat because of post related to this. so it is pretty serious. under normal circumstances, be sort of small protests may be put down are not broadcast on

social media but it did get out. and made it to international media, so it is very and barest thing. it's quite an embarrassing moment for the party and xi especially so close to this congress which is just two days away. manus: let's see what the weekend begins. our chinese government reporter cou murph -- colum murphy in beijing. dani: what a way to end the week. hong kong tech taking off like a rocket, up 5% at one point. blame shorts, the bears have been burned. manus: the question is, do you listen to the king of wall street who reckons there is another 20% on the downside? we leave you with a view of hstech. "bloomberg markets: europe" is up next. ♪

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