jon: welcome to bloomberg markets. scarlet: that's get a look at the markets. macro concerns outweigh big bank earnings in the s&p 500, only banks are higher on the day, uncomfortably high inflation expectations putting a damper on equities.

the 10 year yield past 4% but staying there concerns about inflation but also demand following lackluster demands as well as liquidity issues. janet yellen spoke about that and will be speaking later on in the show and we will go to her. oil set to end the week down 6%. the stronger dollar remains the story but keeping an eye on the pound taking center stage. bloomberg reported that liz truss does not expect the new chancellor, jeremy hunt, to make changes to economic plans she has you turned onto berg measures that absent markets. and their qe set -- plans she has you turned measures. jon: is speaking on the global

slowdown and impact of emerging markets and trade and he joins us to talk about his current view. welcome back. on days like this we are reminded of the uncertainty we are living through. how are you feeling about the road ahead? jose: if something characterizes the outlook, it is uncertainty. we have seen the highest uncertainty -- uncertainty since the financial crisis and the pico covid. there are many questions on the horizon and quite a number of charges. facing a storm of political challenges with inflation and growth slowing down and the energy and food prices in some countries and it

cannot ask for more problems. scarlet: for central banks, challenges to bring down inflation while maintaining financial stability. higher rates are a huge disruption to markets and companies. do we need to change what we think about qualifications for financial stability? jose: there are some challenges to financial stability in different parts of the world. this is something that is not completely unexpected, because we knew when interest rates were low when the policy stimulate his work remove that you would have issues. when we speak about financial instability, one should not just look at market corrections, a means something breaking down in the financial system which may compromise the systemic

stability. we saw that in the mobile financial crisis and covid when there was a big liquidity squeeze that created problems for lots of countries around the world. have seen some market liquidity issues but fortunately we have not had any other risk to financial stability materializing but there will be challenges as interest rates continue to increase. jon: i am lead you mentioned what has been happening the u.k. and the word stability came up with the prime minister, liz truss and her latest announcement, an effort to ensure economic stability. what has been your overall take and what has been unfolding in the u.k.? jose: i think this is been a quite remarkable set of events which started with an announcement of a set of fiscal

measures that markets heard at the same time and there is more to come. the combination of these two things made markets very uncertain of how the fiscal numbers add up and therefore put into question the medium-term sustainability and the u.k. there was lots of uncertainty. that was reflected in the movements we saw in the market and there are market frictions at the same time at fed pension funds had pursued. some macro economic doubts and in some sections of the gilt market because the adjustments and in particular on the guilts. -- on the gilts.

still, we need to see the measures, because so far we have piecemeal information. the bank of information played an important role in is stepping in and trying to avoid innate materialization of risks. scarlet: do you agree with larry summers that the u.k. is having like an emerging market and if so, what should be the prescription for that? jose: well, rather than putting a name into a country, what i would say is the markets have become less on fiscal measures with cast a doubt on stability of public finances this is an issue that is associated with emerging markets. in the u.k., this lack of

clarity of how the numbers add up without a forecast by the of its of responsibility led to some of the same type of market reactions that you would see in some emerging markets when similar announcements are made. that is where the connection comes. jon: within your own industry, there is a lot to watch these days, the market has been closely monitoring the situation around credit suisse and the strategic review. as you observe but also think about the road ahead, could you see yourself doing a deal with credit suisse tied to any assets? jose: we have our own corporate plan and strategy and we are very busy and plummeting our corporate plan and making sure our own strata it -- strategies is what we are focusing on we

are working very hard on delivering and have had a very good set of numbers. we are happy about the upward slope and we want to keep up working in this direction without any distraction. scarlet: looking ahead overall to the banking sector and how investors and people involved are reacting to this new environment we are in, what surprises you the most overall of adjusting to this regime of higher interest rates? what two people misunderstand the most? scarlet: could you repeat the last question -- jose: could you repeat the last question? scarlet: what are people misunderstanding the most in this regime of higher interest rates? jose: it is something that we knew was coming, but it is happening with more speed and strength than many observers had

obsessive hated -- had anticipated. net interest margins going up, i think this is going to post a pain on the economy and i think banks and other creditors have to be watchful of when the economy cools down the risk management is in place to deal with any difficulties that may arise. i don't foresee this being a big issue in advanced countries. in some emerging markets, there may be some challenges arising, particularly for local banks. scarlet: bank you so much for joining us. he is the chairman of standard charter joining us from washington. janet yellen is speaking right now at the imf. we will go to her when she begins her q and a portion. the s&p 500 off by 1.7%, the

nasdaq losing 2.2%. this is bloomberg. ♪

>> it shouldn't be surprising what's going on in the markets. i am surprised every time i see someone on tv is surprised by it. we had zero interest rates for a decade, massive stimulus, the first land war in europe in 70 years, the highest inflation in 40 years, and the fed had to move. scarlet: that was james gorman, ceo and chairman of morgan stanley. james gorman speaking earlier on the earnings call along with

citi and jp morgan. let's get more on the overall bank earnings picture. office stephen biggar -- also with us . what is the big takeaway? sonali: you have the stocks of jp morgan, citigroup higher on the day, two are up more than 4%, showing you the boost in net income is staving off a few worries given the you are seeing some provisioning for loan losses tick higher. jamie dimon said if the economic environment were to get worse, those provisions can also get bigger but all in all he is saying not only can they navigate the storm, they will remove -- give back to shareholders as well.

they are worried about the classic investment banking businesses and also concerns around trading and the longevity of trading is misses as these firms -- trading businesses as these firms take on more risk and you see cracks form in clients around the world may be more constrained. jon: she is addressing some of the looming issues the banks are preparing for, coming into this year there was disbelief that higher interest rates would provide an opportunity for the banks. how did you feel about what you saw in the results today after the rate harks -- hikes we have seen? stephen: coming into the year it looks that way. the problem pivoted when the fed got more aggressive. higher interest rates are generally universally positive for banks and provide a nice

tailwind for expansion and you also have a benefit from higher loan growth. at some point higher rates start to crimp the economy and our wing, higher borrowing costs and generally that means less lending. the fed has a couples, -- a couple goals, and they are looking at rate increases and also to try to increase unemployment which is obviously not good for banks. a double edged sword this time. he saw terrific market expansion for the regional banks, but at the same time, you have banks adding to loss provisions. pnc was a good example, charge-offs were bad but the reserves are twice the rate of charge-offs page you can see what the thinking is for banks

looking into the next couple of quarters being more cautious. scarlet: i looked at jamie dimon's comments and he talked about consumer spending, solid balance sheet, job openings and businesses healthy. does this suggest banks are in a better position to ride out the uncertainty we can expect? stephen: i think so. his comments today were a bit different than a month or so when he talked about the hurricane coming. the consumer by and large is in good shape. the on up limit levels, until recently wet twice the number of job openings relative to number of unemployed. there is no better correlation in the banking than the net charge us in unemployment.

i think the regional banks in particular are the place to be. there is just not a lot of visibility for when this improvement in capital market activities and training will take place. you need more liquidity and more favorable equity environment to see that. jon: there is a lot to watch. thank you very much. we do want to get live to washington, janet yellen addressing the media. sec. yellen: economic policy responses we should be undertaking, it is obvious what the most important is and everyone agreed, russia should stop its war on ukraine and that would address the most significant problems that africa faces.

in an environment of high inflation, tightening monetary policies, capital outflows from emerging markets and pressures on currencies, debt problems are growing more and more acute for african countries. we discussed these problems in many sessions, the g7 finance ministers had a meeting with the african finance ministers and we recognize the importance of making progress and having a better and more effective framework for resolving excessive debt, and relate the barrier to making greater progress is one important creditor country, namely china. there has been discussion on what we can do to bring china to

the table and to foster a more effective resolution of their problems. the second part of your question concerned the price cap, and you mentioned an attempt to get countries into the coalition. i want to slightly correct, if you don't mind, the way you put that. the coalition is essentially the g7, the european union and australia has signed up as a member of our coalition. all of these countries have agreed to ban the provision of services that are involved that supply for the transport of russian oil and the sanctions package includes shipping.

beyond that, we are not trying to sign up additional countries to a coalition. none of the coalition countries are buying russian oil or will i russian oil, and none of the countries al qaeda coalition are really important suppliers of any of those financial services, so we, the members of the coalition, we will implement the price cap once it is adopted and make sure that the suppliers of insurance, trade finance, and other financial services that may be provided throughout the world can only be provided if the purchase of oil by whatever country occurs at a price below the price cap and what we really

need in the rest of the world is simply for potential purchasers, firms and those countries and in some cases governments, but usually it is firms in countries throughout the world to civilly understand how the price cap is going to work, that when they negotiate purchase contracts with russia, that they are subject to the cap and can have access to the premium services provided by western insurance firms and banks, as long as they purchase at the price below the cap. we need them to understand that is the condition they face for access to those services and that we will be making sure that western firms abide by that, but we honestly are not asking other governments to do anything.

companies and governments can buy without being subject to the cap if they can find insurance, trade finance and so forth that is provided by non-coalition members, that is fine. the very existence of this price cap really raises the leverage that countries, even that are not using services have when they negotiate with russia. for us, success will be not how many countries raise their hand to say we endorse what you are doing and are part of the coalition, we are not doing that. we want to see russian oil continuing to flow in the market and countries are using the leverage provided by this cap to bargain lower prices and that is

what is going to effectively reduce russia's revenue. we want to reduce russia's revenue and keep oil flowing. we are not benefiting from the cheap russian oil. we hope it'll be countries in africa, latin america, asia that will buy oil. remember that on december 5, the european union is essentially going to cease purchases which will make a substantial amount of oil available at low prices for countries around the world. >> could you tell us what your reaction is to the latest financial and economic turmoil in the u.k., including the resolution of the chancellor who was just here yesterday and the new plans announced by prime minister liz truss?

today, a commissioner said there are lessons to be learned in terms of fiscal prudence in this environment. do you share that belief? sec. yellen: i had the opportunity to meet with former owner -- former chancellor this week. i don't want to comment on british politics or economic policies. we have a deep and long-standing important relationship with the u.k.. we cooperate across a range of issues and including support for ukraine and global challenges. i would state more generally a theme that many participants expressed in our discussions during these meetings is that fiscal policy generally, and

countries where there is high inflation, especially advanced countries, are trying to tame high inflation and it is important for fiscal policy to play not the prime role but a supportive role. >> you said a moment ago that this week has left you better informed and coordinated on the global economic picture. can you elaborate on the tones you are hearing from your counterparts on dollar strengthening? sec. yellen: i certainly have looked at the most recent forecast in the world economic outlook, the imf report, and their prognosis for their forecast for the global economy has weakened.

europe faces particularly serious strains because of what is happening to energy prices there, particularly natural gas prices, and many emerging market countries, as i said, face a host of very little fiscal space and face a host of significant problems, including higher energy and food prices. they are driving another 75 million people this year at risk of starvation. so we certainly discussed those challenges. i see the appreciation of the dollar relative to many other currencies as largely reflecting

differences in shocks that we face and differences in our positions in terms of what we are doing, what our economic policies are, and what we are focused on. my position would be that market determined exchange rates are the best regime for the dollar. that is what we are supportive of and i think that exchange rate movements by and large have been a response to economic shocks and other fundamentals. nevertheless, there are spillovers from tightening monetary policy in advanced countries dealing with inflation to developing economies high interest rates and weaker currencies tend to exacerbate debt problems and that is one of the reasons we are so focused on

providing relief. we have discussed food insecurity and what we can do in the -- and the united states has provided $10 million to a set of agencies to try to address food insecurity and low income countries, but there are spillovers and as a global community, we want to provide the support that is necessary for countries to address it. >> i wanted to ask on oil and the price gap, it sounds like discussions are focused on what the price cap will be. he said something in the 60's could be a level that would allow russia to retain an incentive to produce. is that the high 60's of the low 60's. sec. yellen: i want to be very

clear about what i said and what is happening with this. the coalition of countries that are imposing these services bands will jointly decide on what the appropriate price is. it is also a price that can be adjusted over time once a decision is made about the level and no decisions have been made. i did not say that, under consideration is a price in the 60's. i simply said there is several -- i meant to say is there are several benchmarks that are relevant in deciding what a price should be. one question is, what is the marginal cost for russia of producing oil?