>> what you are going to see dominate over the next couple of months is volatility. >> there is still work to be done. >> lower equity prices and a stronger dollar re-think will continue into year end. >> if you are a longer term of this -- investor, the tide will turn. >> it's been priced and so we get this little bounce. >> this is bloomberg surveillance. tom: good morning everyone on radio and television, an interesting week of economic data. the equity markets, we will get to that in a moment. kaylee is here. dow futures are up, i have to go

big picture, 10.1% inflation is not 9.9 inflation. kailey: lisa: you are talking about lisa: inflation reads hotter than expected and that's the reason why fed officials and other central bankers are getting worried hearing the rhetoric and markets are pricing it in. tom: we see it on the bloomberg screen today that in elation adjustment here, i don't know where to start. is the real yield on the 10 year friday? lisa: the real yield is friday but jonathan is not. tom: he's either in glascow or edinburgh. 1.64% on the 10 year real yield. lisa: if you look at the absolute nominal yield, is the highest level going back to 2000

eight at least in the united states so we are looking at people wondering where that neutral rate will be and how much has to be reset in markets given that we have a more expensive cost for a longer period of time. tom: the midterms gone and it is about inflation. kailey: we have less than three weeks to go and the economy is number one so what is the most present to the american people other than gas prices. the u.s. administration is making his next move on strategic petroleum reserves. there is only so much the biden administration can do to control the price at the pump stop lisa: at what point is it an emergency? tom: how empty is the salt mine? lisa: we are the lowest going back to the early 1980's. tom: to the equity markets, netflix got a big pop in the

other media is surging as well. it has cratered. kailey: a double digit move in pre-market trading is nothing to sneeze at and they are no longer losing subscribers. is it the worst is over? it's not the kind of growth we are seeing from netflix in years past. lisa: who is watching netflix anymore? everyone -- all the kids are watching jeffrey dahmer. kailey: this is what they are talking about. there watching a serial killer and someone who eats people? tom: paul sweeney is with us at 9:00 a.m. and he's truly expert at this. equity markets, three days in a row, up we go. futures are up 18 so another

good day. lisa: how much is this on the heels of earnings that are better than expected. i'm focused on the yen, breaking out to new post 1998 highs. they are wondering whether the bank of japan will intervene and they continue to reiterate their confirmation that they will keep yield control. tom: julian and man u well, and incredibly sharp memo and he says we are in a recessionary average pe. kailey: he says earnings are down 5.3%. what's also notable is you're not necessarily see a huge downside surprise. the average surprise is 0.8% and one point -- and 1% respectively

when it comes to earnings and sales. tom: the 10 year yield is up to new highs. i need a brief. kailey: let's talk about fed speak. the minneapolis fed president is speaking again in the st. louis fed president will speak twice in the chicago fed president, the beige book comes out at 2:00 p.m. the minneapolis fed president yesterday said if core inflation does not stop accelerating, there is no reason for the fed to stop hiking rates young 5.75%. this goes to the higher yield going forward. tom: these guys are like senior economists? lisa: exactly. kailey: we are also getting a slew of earnings.

proctor and gamble reported this morning and i'm interested in that because it's a read on the consumer and tesla and ibm after the bell. 13.8% gain before the market. lisa: i note united airlines, you will speak to the ceo later this morning step we are at 7% because people are still flying and people have budgets to do so. at 1:15 p.m., present biden is delivering remarks with additional actions to strengthen energy sick. he at a lower cost. that's the way he described it and will he announce release of the strategic petroleum reserve? i'm looking at diesel prices and we are focused on gasoline, diesel continues to search and you look at the stockpiles, they are the lowest levels going into winter. this is one of the most concerning issues because this affects everything we do and

everything we buy. tom: to me, it's all politics. the head of global foreign exchange joins us now at goldman sachs. i want to talk about my conversation at imf the gentleman from the former bank of india but we will not do that today. we will talk about the goldman sachs dollar call. how do you determine when enough is enough on strong dollar? >> i think we are still some way away from that. we are learning that even over the last few weeks that the u.s. economy still looks somewhat overheated, the unappointed rate is at a historic low and corinth nation is at historic high levels and at the same time, you are seeing already some other

central banks in the world starting to slow down the pace of their hikes. we saw that with the rba. we will probably learn from the bank of japan next week that they are still maintaining yield curve control and you are seeing struggles on the u.k. side and it's an important question whether the bank of england can deliver and deliver market expectations. the dollar remains first amongst equals in this. the fed looks the most unconstrained amongst global central banks. lisa: when you talk about rates, the conversation is around where we will end up post this disruption stop how much do you see the likelihood of zero percent interest rates post whatever this is, once we work through this cycle? are we going back to a 2% fed

funds rate as the base case? >> it may be some time before we get back to those rates. i think the baseline for many people and for us will be higher rates for longer even under the most optimistic inflation projections. inflation only comes down slowly. at some point, some of these underlying pressures will fade and i think there are encouraging indications even in the recent cpi report whether it's good prices and some parts of the commodity complex have softened compared to earlier in the summer. over time, some of those other parts of cpi will fade as well. i think you will see in nation come down as well as rates but i think it will be a slow process. kailey: let's talk about where rates of state down and that's in japan.

$1.49, what is the breaking point for corona and his team? will we get there? >> we don't expect it. they are meeting next week and we think yield curve control will be maintained. it's not the level of the currency even when you take into account their last enter pension. that's what they wanted to achieve so this is not about levels, it's about this deed of the move dollar-yen that could move beyond $1.50. tom: on india, we had another breakout of india 84. 83 to the dollar. is it a crisis or is it

idiosyncratic urgency in india? >> it is not a crisis, the rupee has been one of the better performing currencies across most of asia versus the dollar. you had significant reserves being used to get that outcome. what you are seeing is a recognition that you don't want to keep using reserves and draw a line in the sand when there is a broad dollar. they are letting the currency move alongside the u.s. dollar. tom: thank you so much. i need an auction update? lisa: there are no auctions. kailey: why are you excited about the beige book? tom: i get very little out of it. futures are up 17 and dow

futures are up 81. kaylee is with us in jonathan ferro is not. this is bloomberg stop ♪ kriti: keeping you up to date, alix:isa: the u.s. military claims 18 drones were shot down overnight. officials reported more attacks against the country's infrastructure and president biden's administration is pressing congress for new authorities to speed up production and transfer of weapons for ukraine stop the hong kong chief executive has unveiled the plan to move foreign talent and ease housing woes to revive the city's status as an international finance hub and they announced they would cut property duties for nonpermanent residents and relax visa rules. years of tough covid policies and political turmoil triggered a brain drain in the city. inflation is keeping travelers

close to home in the u.s., new data shows about 31% of americans surveyed plan to travel between thanksgiving in mid-january, down from 42% in 2021. financial concerns of the number one reason and the number of households that expect the economy to we connect year also rose. the delco ceo has resigned after a nationwide service outage that caused chaos in south korea. he apologize for the disruption to the countries top messaging and social media service, saying it will take a long time to recover people's trust. the outages led lawmakers to look at government oversight of the country. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo this is , bloomberg. ♪

>> everybody is looking at the u.k. we are all confused. what we need for the currency and what we need for the market is for the volatility to go away and for everything to calm down to end this massive uncertainty. tom: quite good on the total picture of foreign-exchange. we will do great britain in a moment. we've really got to focus on what we see in the yen and we are on an intervention watch.

oil is $84, brent crude is up to $91. we are looking at the shift in dynamics of the yield market and the spread is 42 basis points as futures are up 16. i love jeremy warner today in the telegraph who echoed churchill. the blood toils with and tears of pmq. lisa: kailey: it seems as though this is been a difficult time for liz truss but also a make or break moment. lisa: lizzie burton is joining us from london, how important are the pmq's coming up in 40 minutes time? >> apparently liz truss has had

extra stuff this week because rhetorical flourishes not her strong suit stop this week, the opposition is likely to focus on austerity 2.0. she needs to save another 40 billion pounds. they want all government departments to shape 15% of their budget. they are not guaranteeing to protect pensions. that's an important constituency for the party but at the other end, they might want to raise banker profits. that could potentially make the u.k. less competitive. tom: this is not a brexit analogy. the analogies are back to 1976. kailey: this is a difficult moment not just for politics but a huge economic question because

you have the energy costs and the cost of living crisis. you have 10.1% inflation in the u.k. in the data this morning, how does that put additional usher on the fiscal side? >> i was speaking with the foreign secretary earlier in westminster and he said inflation is concerning. it makes it more worrying that they are not guaranteeing that they will protect pensions. in terms of the bank of england, there was a debate between 75 and 100 basis points. this is a slight beat on economist expectations. the other interesting thing is the bank of england has said it will know ahead with quantitative tightening the day

after the halloween budget except at the long end of the curve so the boe showing it wants to fight inflation and it won't be beholden to the government but it will keep an i on financial stability. a confident foot forward from andrew bailey. lisa: is it safe to say the boe is reclaiming credibility? >> i think andrew bailey is getting more credit for his handling of this rather than how much he earned. he was making contravention comments about pay rises. kailey: where are we right now as far as where they will go? do they have to raise as much and if they don't, can they curb inflation that came in at the hottest paste going back decades? >> i think it depends partly on

how the labor market reacts. that's one of the reasons why qc this rise past the double digit mark. there will be members of the committee who want to go for the hundred pieces went hike to front load and clamp down on inflation expectations. given that jeremy hunt is taking away the sugar rush, the recession risks are high. we are back to the difficult struggle of not wanting to add to this by hiking to aggressively. tom: we greatly appreciate it. i want to go back to earnings. it's earnings season and procter & gamble today with a dividend growth of 5% in a world that doesn't get it done anymore. lisa: people are looking for that much more because they are not getting it on the risk-adjusted returns.

the nestle's chief executive officer just out the used increases in price going back decades. it's on the price of products in the ceo is saying there is more to come. this is tension. there has not been a push back significantly against the world's biggest food company when they raised prices. when do consumers say no mas i question. kailey: don't they want to see demand destruction? they want to see consumers pushing back against that and if we are not seeing that yet, is that problematic? lisa: what don't you get? tom: i don't get the idea that monetary policy can manage the demand choices of different cohorts of the american public. kailey: this is the other end of

the spectrum. if you have food makers that pass along price increase that are figure than decades, where is the marginal dollar? tom: if they are going to raise the price of my instant conditioner, i'm still going to buy it. kailey: do you still use bowtie wax? tom: i don't. kailey: is that expensive? tom: it has gone up and tang went up which is tell about -- which is terrible. what is the nuance of crypto? kailey: crypto is the least volatile of any asset class which is the exact opposite of what we not news to. crypto has stayed pretty static. tom: are there more losses to

come? kailey: that's a big question but we've been in this range around 20,004 months. -- around 20 four months. there is a huge regulatory question mark. tom: that covers crypto until the end of the year, bloomberg surveillance, good morning. ♪

tom: bloomberg surveillance, good morning, everyone. it's an odd week, the turmoil, 10 .1% inflation in the u.k. that with an equity lift with futures up seven. help me with the yield story. lisa: the 10 year yield is also rising and this is not just the front end rising in the long and declining.

4.07% is the highest level since 2008. tom: jonathan ferro is on sabbatical. he is at a symposium on the history of the dow jones industrial average and he's giving up paper on the ftse and the dow. it's like a 42 page paper. he got it couple of kids at nyu to write it for him. let's talk about the dog of the day which is from santa barbara california. omiplex down a gazillion dollars today and we thought we would go to the shampoo that is so expensive. tell us about down 45%. kailey: it's brutal but this is not cheap products, high and hair bonding stuff.

this is the stuff i splurged on before my wedding. it was by definition a splurge, this is not drugstore shampoo and they are seeing their sales slowing down most of its pointing to reduced spending power on the part of the american consumer. why would you spend $80 for a small hair care products? tom: i just use that irish spring. lisa: there is no way you use irish spring and you don't use it on your hair. their shares are down about 45% and if you miss given how expectations are, you get pummeled. to me that's the upside which is not that significant unless you are netflix and the downside is really significant. this speaks to where people are at least in sentiment.

tom: to me, they are hoping for a sellout to a larger company like proctor and gamble. i would say that has changed. lisa: you cannot just hope for a better future. the hope has been eliminated with rates above 3%, headed above 4% so how do we reshape this? how many zombie companies will come out of the public and private side as you start to reset? people are talking about where the final risk-free rate will be. tom: it jump starts repairs deep within the hair strand. kailey: use number 3, 4, and five together. lisa's point is interesting about the longer-term changes. how long will it be that we are talking of doubt?

neel kashkari said there is no guarantee on a pause and you are seeing an acceleration in underlying inflation and you will probably not be able to do that so as the market has adjusted to what it thinks the terminal rate will be, the markets says something else. lisa: how is he the most extreme? he's now the most extreme on being hawkish. tom: we will address the path with not only economic data today but the path to get to september 21. at the imf meetings in washington, the one name the cap coming up is brainerd. she was absolutely unique and i

think of the names you mentioned. i wonder if the only voice that matters is the vice-chairman step lisa: for voice has been decidedly a little more dovish than neel kashkari. the numbers keep coming in hotter than expected stuff these consumer companies are able to pass along price increaseso. omiplex notwithstanding, they have more to go. tom: as we vamp to get you set up, we end up talking about the fed and the importance of lyle brainerd. explain the importance of the gentlelady from wesleyan. >> i think she holds an important role in terms of tempering expectations. we have heard opinions drive

prices significantly higher, she is not offering solace to the market. she said the fed is looking at inflation and there is more to be done but there is also a need to pause the earlier policy decisions. that's a stark contrast to what we hear from neel kashkari out of minneapolis saying there is essentially no ceiling to where rates could potentially go. that sends a more volatile message, scarier message to the market place. kailey: maybe that's because he is looking at the stock market and saying the more you see a selloff continue and the more yields climb, the more they will achieve their goal more please of this could be some messaging. he says if core inflation continues to accelerate, then perhaps they will not stop at 4.75%.

what are the chances that core inflation will not by the end of this year? >> i certainly don't think his message is unjustified particularly against the backdrop of the latest core cpi number pushing back to a new cycle peak at 6.6%. i think this underscores the idea that the risk to inflation is still to the upside to the nate -- the notion that inflation will calmly material decline over the coming 12-18 months, allowing the bed to not only reach that terminal rate near-term but cut the rate by potentially the end of next year. this highlights the overly optimistic sentiment in the fed's forecast. if inflation continues to rise or even remain elevated, the fed will have to paint a more aggressive pathway to get

inflation under control. when we talk about peak levels of inflation, that matters less than the west and of inflation remaining elevated beyond the timeline the fed is anticipating in order to get it more reasonable terminal level. neel kashkari's is maybe not and i tend to agree because inflation has shown such a stickiness in the numbers, particularly in the service numbers. i think it's too early to say we are on the downside from here. lisa: this is something that has been keeping me up at night, diesel prices. prices have remained so elevated and storage levels are so low and this is pivotal for everything we transport and everything we do particular with heating homes. how concerned are you about inflationary in close going into year end from diesel prices that continue to climb despite some of the spr releases and the other issues to drive down costs

and other places? >> i am absolutely concerned and a lot of the headlines seem to be misguided by the slight decline we've seen in terms of gasoline prices for the average consumer. from a headline perspective, that's with the average american is filling the car up with at the pump. when we go to the grocery store and buy goods and or purchasing services across the economy, one of the biggest input cost is transportation. as diesel and labor costs rise and materials rise, these factors go to a heil level and are being forced onto the consumer. kailey: we are seeing these companies passing on the higher input cost of exercising pricing power for the consumer and we are seeing with companies like nestle that their consumers are tolerating that. how problematic is the retention of profit for corporations for

the federal reserve? >> the consumers are tolerating it but it doesn't mean it's not causing a change in behavior. we have already seen a precipitous nominal decline in terms of consumer activity from about 8% last year to just about 2% this year. some consumers are nominally reducing the amount of goods and services in their basket. for other consumers, they reducing the wally or price points of the goods and services they are purchasing so maybe they are not purchasing the expensive shampoo and they might be getting walgreens shampoo. for other retailers, they may forgo bigger purchases. regardless, consumers are changing their behavior which should be a red flag for businesses that continue to try to pass on 100% of these

increases to the consumer. kailey: do you use that shampoo? >> it's beyond my budget. tom: talk to your derivatives trader, thank you so much. of course the firestorm of response we got this morning is about irish spring. colgate palmolive invented a billion dollar brand out of nowhere. they came out with these ridiculous ads that were literally can't be first day they came out and now they have all these different -- they vamp the brand out. thank you, anthony for watching. we know too much information. thank you.

lisa: body wash is four dollars and $.99. ♪ lisa: the european union is said to be sanctioning three iranian generals and one business for providing military support to russia in its war against ukraine and their involvement in providing moscow with drones. the targeted business is responsible for the iranian drones that have been supplied to russia and the generals involved with the kremlin. soaring food prices drove u.k. inflation into double-digit numbers in september. consumer price index rose 10.1% last month from 9.9% the month before. that matched a 40 year high

reached in july. mitsubishi financials is considering loan acquisitions from credit suisse. there biggest lender in japan is considering the global loans in various sectors and suites is looking to raise funds with just over a week to go until the unveiling of a critical turnaround plan. the global smartphone market has its worst third quarter since 2014. economic headwinds are pushing consumers to delay personal electronics and shipments of smart phones fell 9% in the three months -- in the last months which is a decline that has lasted most of this year. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo this is , bloomberg. ♪

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>> the core services inflation keeps climbing we keep getting surprise on the upside. >> you don't see progress on core inflation? >> i don't see it stopping at four .5%. tom: neel kashkari, one of my favorite people and always interesting. entertaining as well. what is the distinction now? lisa: he is very concerned about the fact that we have overwhelmed expectations time and again.

i believe he uses irish spring. he said i will stay away from inflation and go for 4.9%. tom: bullard of st. louis with kathleen hays and i'm looking forward to that interview this afternoon. that's a very important discussion as we have a regime change at this moment. green on the screen and the markets. there is volatility out there with the vix elevated at the 31 level. new highs in the 10 year yield and the two year yield has some flatness right now. the headline for me is the real yield, one point 65%, breaking through the 161 level in the

averages about 2.05. lisa: it's about three weeks on the till the selection and it's about inflation and the economy and that's it stop you're getting almost sorts of things so we want to get a sense of what this will look like. we have the editor-in-chief of gallup. what are you looking at in terms of turnout for the election where we have seen the odds shift dramatically over the past few weeks. >> the number one issue voters have in mind when they vote is the economy. we also see this in error data. they mention the economy or reference inflation as the number one problem. that will be front and center more than anything. in terms of turnout, we have

seen higher than average turnout last we checked. the social issues are critical in some of these contests but overwhelmingly, the economy will be central on people's minds as they go to vote. tom: 159 million is a big number for the 2020 election. what do you people see on the turnout of america for this election? >> it's still too early to tell. tom: interesting. >> we don't know and i don't think anybody knows for a few reasons. we ask americans if they plan to vote and if they are excited to vote this time then in previous elections. that metric is tracking higher than average but certainly not as high as we saw two years ago.

it's about 10 points lower than that step as we get closer to the election, there are many factors that play into making this one hard to guess the turnout. people's voting habits have changed and second, people's attitudes about voter laws have changed. people want to open the doors to make it easier for people to vote will step most americans support voter id but they also support a series of other measures that make it easier for people to vote. in addition to excitement to vote, they are -- there are structural changes to the way we vote in america that will continue to roll out over the next several elections. kailey: when we talk about excitement about, there were a noble of social issues that would be a galvanizing force in these elections and one is abortion-rights. is that taking shape and doesn't have as much firepower as initially thought several months ago? >> we certainly have seen an

uptick in people saying it's important for them as a voter to vote for someone who shares their view on abortion and now it's about 52% of americans hold that view and that's a relative high compared to before. it's only really about a 10 or 11 point jump from before the roe v. wade overturn decision was leaked. it has not exploded but it certainly has risen in terms of being an important issue. everybody voting is thinking about inflation because we are all impacted by that but everyone whose voting is not -- does not have abortion on the ballot. tom: you have a monitor and body of knowledge from when lbj stepped aside. what do presidents do the evening or day after a midterm election? >> most incumbents usually don't

do great in a midterm election. it's always an uphill battle no matter who the president is. president biden is not facing an easy route. the social issues and some of these other factors may play a role in really helping the democrats not fair as poorly. the other thing we are not talking about is the jurisdictions in how districts are managed throughout the united states and what seats are at stake between republicans and democrats. democrats are facing a huge challenge in terms of the seats up for grabs. tom: thank you so much. david westin is leading our coverage of the most interesting tuesday evening. alan ruskin published moments

ago from deutsche bank. it's a short note but that means it's always interesting on the nature of the money coming into america. he says this time is different. the inflows into america and the nature of them are more balanced, they are not tactical races to short-term paper. he says that speaks to a dollar renaissance, more resilient dollar. lisa: the idea that it's not just positioning. people are not moving into derivatives to hedge their that, it's people making a longer-term bet that the dollar will be the place to hide out because the u.s. economy will weather the storm better than others. at what point do something else break? we are getting procter & gamble results most they are seeing fiscal year earnings-per-share at the low end of guidance because of the dollar.

this exactly speaks to that point. at what point does it become a problem for the united states in a way the federal reserve cannot ignore? tom: this goes back to unit and price. organic sales in proctor and gamble say they will be low for the rest of the year as rice increases are slow. kailey: the dollar impact will show up in more results. you so that with netflix after the bell as well. tom: we will give you more in a bit, futures are negative one. from new york, this is bloomberg. ♪

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>> what you will see dominate over the next couple of months is volatility. >> there is to work to be done before we can say the bear market is done. >> we think this will continue into year end. >> if you are a longer-term investor, eventually the tide will turn. >> it's been priced and so i think we will get a bounce. >> this is bloomberg surveillance. tom: good morning, everyone will step we are on radio and television, november 2 beckons

and double digit inflation beckons as well. jonathan ferro is over in scotland to deliver a paper and we are thrilled about that. the u.k. is 10.1% inflation and that matters in washington. lisa: going back to the highest level in 40 years. higher-than-expected hits to consumer balance sheets and it ratchets up the pressure on central banks. tom: the netherlands central bank had great guidance. we are losing perspective on double digits. lisa: i think we are looking at a scare that is not been seen in years.

we heard a tone from jerome snyder of pimco is we probably end up close to 2% and we will not go back to zero. how much are markets fully themselves, pretending we will end up where we started at a time when that doesn't seem likely. tom: at this moment with the yen breaking out, we will focus on a really important headline from procter & gamble. these are jaw dropping consumer product headlines about the consumer. the bottom line is they are saying the organic revenue lift is over? kailey: they have just raised their prices and now they are navigating their ability to continue doing that at a time when the american consumer spending power is deteriorating.

the strength of the dollar is the story here. i think we will see the dollar headwind grow. tom: usually a 2% haircut but they are modeling 6%. these headlines are really germane for procter & gamble. consumer's willingness and ability for -- to afford staples is waning step lisa: shares are popping by more than 2% in pretreating and people are still spending. people are willing to spend but they are bringing less home and expect that to end and there is a feeling that it's oh k but what about in six months? tom: let's go to london.

these images are historic of the united kingdom back to the middle 1970's. for those on radio, ms. truss is leaning over the desk and it's original for americans. lisa: she is saying she is sorry for mistakes and economic plan saying it's right to make changes to the economic approach. this comes after she saw her entire agenda reversed. her popularity rating is below 10% so how do use time when you have no popularity. tom: you wonder what the response will be from the opposite side because we don't know when the general election will be step kailey: two leases going, it's a question of credibility that we have seen u-turns in terms of these policies.

they still have tens of billions of pounds worth of budget gap they need to plug so do they tax excess profits for banks and energy companies? they still haven't ironed out all the questions not to mention the fate of the prime minister herself. tom: futures are up five. the vix is 30.99. stronger dollar, the yen is $1.49. lisa: and we are watching the pound hitting new lows. today we will be listening to the fed speak. the minneapolis fed president neel kashkari speaks again and jim bullard speaks twice and the chicago fed president charlie evans is also speaking and we are getting the beige book at 2 p.m. earnings will be front and center.

the procter & gamble report is being saved well but how much visibility do we have in the future? we heard netflix is doing better than expected, up more than 13% premarket. tesla and ibm among others after the bell. 1:15 p.m., this could be the most important point of the day with president biden speaking about what to do with energy prices. some would argue that the immediate concern for gasoline has gone front and center and he has pledged to potentially release more from the strategic trillium reserve. what is the policy and what is the process? tom: we have john hancock with us. thank you so much for joining us. when you look at the quality of quality whether it's bonds or equities, the nature of quality to the end of this year and next year, do i need to buy quality

or do i need to take more risk? >> remarkably, there's been a dislocation in the macro economic back trial. -- backdrop. market leadership doesn't make a ton of sense. the s&p 500 is down in bear market territory and high-yield bonds are outperforming the aggregates and this is not the type of leadership you see in a global recession so it's a nice opportunity. tom: she confused me with jonathan ferro. john uses expensive shampoo as well. lisa: when you talk about leadership, what does that mean to you in terms of what the market is getting wrong since the earnings are pretty good? maybe the signal is correct that perhaps the markets of overreacted to recession risks. >> q3 was fine, you think about

the connie and the leading indicators were doing all right and is the end of the quarter where we seeing significant deterioration in the data. everything we've heard about the consumer in the third quarter, still willing to absorb higher prices, netflix seeing more subscribers and nestle's saying they can pass along higher prices to consumers. but we are starting to see cracks in the story develop whether it's something anecdotal which suggests that potentially, a cajun rental properties are starting to see significant declines in occupancy rates. more traditional rate alike retail sales coming in flat, forward guidance from some of these consumer staples companies indicate consumers are starting to protest higher prices given the elevated cost and given the persistent elevation of commodity prices. i think the consumer is the workhorse of the u.s. economy and we got to watch the deterioration there.

kailey: if we are seeing the demand deterioration, that's with the federal reserve wants to see. is it better corporate earnings but possibly good for monetary policy? what does that mean for the equity market? is -- is it a better good thing? >> it's tough to parse that out now. the fed is probably happy with the fact that the equity market is showing a little bit of challenge this year. financial conditions are tightening but how far is the fed going to go? the gloves are off and the flight -- the fight against inflation i think the fed can get inflationary pressures to subside but at what cost? they will be dealing with a much bigger problem next year. tom: you are in framingham given

a seminar and someone from the cheap seats says i'm down 28% my bond portfolio, how do you response? would you call up colgate palmolive and tell them i need irish spring shampoo? >> this is the worst year in history for bonds. you have to go back to 1928. it has been absolutely rueful but we don't think about bonds the same way as stocks. when we are looking at stock their markets, we want to chip away. our favorite stocks are cheap and we don't talk about bond bear markets. we have seen this grizzly bear of a bond their market and no one is flipping the script to talk about that you are getting 5% on the aggregate bond.

we have been able to say that in 10 years. move up the capital structure and get paid to wait as this macro backdrop plays out. tom: thank you so much, don't be a stranger. i literally wish we ran the wonderful commercials. that way everybody can see what we do commercial break. it is a firestorm of girl talk today on oliplex. every single guest that has come on knows about it. lisa: how many are talking about irish spring? tom: it's the same. i wish jonathan was here because he uses number three and number four and number five in the oliplex system.

lisa: you went there. tom: i did, you can't make this up. good morning. ♪ lisa: keeping you up-to-date with the first word, ukraine's military claims 13 drones made in iran were shot down in the southern region overnight. officials have reported more attacks against the countries over -- infrastructure. the biden administration is pressing congress for new authority to speed up production and transfer weapons to ukraine. the hong kong chief executive has unveiled a plan to get back foreign talent in an attempt to revive the city's status as an international finance hub stop he announced he would cut duties for nonpermanent residents and relax visa rules. years of tough covid 19 policies and political turmoil triggered a brain drain in the city. the nestle's ceo says

inflationary pressures will continue into 2023. in an exclusive interview, he spoke about the company's effort to protect margins with price increases and the impact of energy costs in europe. >> what we are clearly seeing is some of the inflationary pressures continuing. this is not over yet and some of this will go into 23. when it will peak, a lot of it has to do with the energy situation in western europe. lisa: he remains bullish about the rand because demand is strong and sales are surging. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo this is , bloomberg. ♪

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>> we've seen a lot of headline ping-pong from the u.k. but at this point, given what we've seen in terms of walking back the budget, the guilt volatility will come down and we see that stabilization in global term premium which can allow the yield curve in the u.s. to go back to that flattening trend. tom: jp morgan asset management, yield up, priced down and that's the analysis you need to know. the two year yield is 4.50. lisa: it's breaking through and you are seeing it throughout the entire curve. neel kashkari said we are not done yet. tom: quite serious is a moment

in british history. members of the house of commons have weighed in. here is the prime minister of the united kingdom. >> chaos in the markets have wrecked the economy. >> mr. speaker, we face very difficult economic times. i have admitted the mistakes i've made but i won't apologize for the fact that we have helped households through this winter with the energy price guarantee and we have reversed the national insurance rise and we are taking action to get our railways running rather than being disrupted by trading. tom: the questions from the floor as the prime minister's weeks. as we go to lizzie burton, it's all over twitter, the gentleman from labor apparently -- a book

is being written about the time of liz truss in office. apparently, it's going to be a christmas release date? lisa: liz truss made one promise about not having spending cuts for public spending and it took a week for that to go away. what is the point of a prime minister that don't even last a week? this has been a brutal session. lizzie burden is tracking it in london most what are you looking for here given the lack of credibility? do we get a sense that there is nothing liz truss can say to make -- or break her tenure? is it already over? >> she has been the best performance she could possibly give. she is coming out fighting. i have heard she has had extra

rehearsals this week in the message she wanted to deliver was that she is sorry she's made mistakes and made changes and is getting on with the job and delivering but really, the damage has been done to people whose mortgages have gone up in many of her own mps have made up their minds. many of them have put in letters to ask for her to go. former minister said it's not when -- it's not if but when she should go. tom: i'm sure you will be there to see the white smoke come out of the chimney. what is the timing of counting up letters? it -- is this thursday/friday or into november or into christmas? >> it's a great area because liz trust was meant to be shielded

for a year from a confidence about. they have already received a rash of letters and they need to meet with the board to decide whether they want to raise the threshold to all tory mps. these decisions will happen perhaps this week. the chancellor, jeremy hunt will address the mps at the 1920 two committee later today. it's all happening in hours and days really. it depends how she does on this performance as well. it doesn't just matter about the questions but it's how aggressive her own mps are and you hear them questioning her now step kailey: she said she is committed to the triple lock on pension payments to make sure it's in line with inflation which is 10.1% in the u.k..

is mr. hunt on board with that where is she speaking out of turn? >> who is in charge? it's not clear if it's jeremy hunt or liz truss. jeremy hunt needs to find 40 billion pounds savings to plug the fiscal hole. everything is on the table except for defense or health. how can they achieve growth when they are under such pressure. they say it's efficiency saving. tom: i think this speaks to global wall street, is the pension crisis in the united kingdom all clear? can we say we moved to that? -- we moved beyond that? >> we don't know what market

turmoil lies ahead they could bring his back to that situation but the bank of england seems to be confident these ldi forms have fortified themselves at a time when the boe is in emergency expenditures. tom: sterling was $1.12 and fractionally down. the 30 year bond is that one point 04%. it's not raking through to a lower yield. lisa: perhaps it's a victory considering there hasn't been more disruption. at the same time, they pushed back by one day on the budget, the quantitative tightening but will go forward with this. will this be viewed as a positive or a mistake?

i haven't seen that represented overnight stuff kailey: they are not touching the long and so is that a compromise for andrew bailey? does he want to retain their credibility by going forward with qt? tom: i don't understand qt and its completely original. it's every bank for themselves and they are making it up as they go step by step. lisa: a $9 billion balance sheet and at what point does it create disruption? this goes to the liquidity of markets. tom: seven basis points on the 10 year yield. lisa: who are you? you are rounding it up? kailey: it's wednesday. lisa: this is the reason why you see the dollar continue to

strengthen because people see that rates are going up and they see procter & gamble coming out and are still beating estimates even with inflationary pressures and the strong dollar. use every excuse in the world and they are still beating. tom: the most important economic data of the. mornings procter & gamble earnings you wonder how the sell side will come back and reach calibrate -- and recalibrate pricing power. the vix is 31.29. this is bloomberg. ♪

tom: markets on the move. good morning. bloomberg surveillance on radio and television. you see it in the global 10 really yelled out eight basis points, 1.67%. we are migrating there as we do the 10-year yield, 4.08%. these are interesting markets.

green on the screen has become a little bit red. -18 on futures. we are going to move from a story about a bankrupt salon to procter & gamble, and then finally staggered to the story stock of the morning. here to straighten my hair, lisa abramovitz. lisa: that was quite the intro. i did look up what colgate-palmolive are doing. they are down only 13% this year versus olaplex which is down 66%. netflix shares popping after reporting better-than-expected earnings, mostly also they are not about to go bankrupt. that was the bar they set for themselves. user growth is not tripping anymore, it's great, but it is not as positive as it used to be. tom: two tiers, a lot of people

by the lower tier. does the average money they taken from a given person coming down? lisa: it is good. they are basically saying everyone and their children are using the same account, so how can we get more people to pay? if they lower prices, does that mean that profits eventually go down? procter & gamble came out with earnings this morning, we have been talking about it since. you see inflation come in, fx impact, the dollar is strong, earnings from overseas is lower and pricing pressure is even greater for international customers. still managing to come out and increasing scales more than expected. what does that say about consumer resilience? olaplex, we have been talking about all morning. levels 3, 4, 5.

the issue here is some of the darlings that grew up at a time of free money. at what point do you see a massive deflation that has a broader reach than just some idiosyncratic potholes? tom: years ago they were role ups, specialty chemicals. what would you do if you spun it off. are we going to have a zombie roll up? lisa: do they lower the price? tom: kailey leinz in for jon ferro today. brent, $90 a barrel. thierry wizman joins us now from macquarie. we have a raft of questions. i have got to talk about what we see some -- from procter & gamble, the effect of inflation. corporations adjust but there is a point where inflation hits the consumer and corporate america.

thierry: i'm surprised that a company in consumer products with a large materials cost base and do well in this environment. i also think maybe the customer is not buying the salon shampoo, trying to get a lower price point product at a time when they are squeezed by their real wages coming down, higher mortgage payments on their home, all of this. i would rather look at this from a macro basis. let's look at what the consumer product sector does, not just one company. that will give us a better sense of where we are. tom: are we in a global recession? the united states is not participating in a global recession, right? thierry: technically china is in either as well, still growing, emerging markets are still growing. the recession we are seeing right now is for the most part a european recession.

they are feeling the brunt of the energy crisis. are we going to see a global recession? i think the u.s. will join this recessionary ground in the early part of 2023. it's a matter of time before we see consumer spending come down in the other advanced economies, like canada, as well. lisa: there is a theory we are pricing in peak fed hawkish this. that sort of seems to be a feeling right now in markets. have we fully priced in the ramifications of that? at what point does that factor into the dollar and create weakness when higher rates cause lower growth? thierry: you will not see weakness in the dollar until the other economies start to do as well or better than the u.s. in terms of their economic activity performance. perhaps it doesn't have to do a lot with rates after all because rates follow growth. if you are doing well, you are likely to have inflation,

central bank is lucky to tighten. the u.s., to its credit, is still doing well. it may go into resection next year, we believe it will, but even if it does, it may not be as strong as other advanced economies. in that context, the u.s. dollar can continue to go ok. lisa: do you see 2% rates pass this era, coming down never again to than 0% bound? thierry: i don't see 2% rates coming back anytime soon. what we are speaking about now is not the drivers and inflation in the short-term like energy, tightness in the labor market. it has to do with the structural trends in the u.s. economy and global economy. climate change, demographics, deglobalization, let's put that went into the hopper. those are the three megatrends

that will likely to be inflationary over the long-term. lisa: where you see rates ending up? thierry: they will be in the positive real range, which means if inflation is running at 3% or 4%, its possible nominal policy rates and up slightly above that. kailey: so a 2% inflation target is no longer realistic or this post-covid world? thierry: let's put it this way. central banks have not subsumed into their thinking the long-term structural issues that will cause inflation to stay high. once they do, they may become more tight, they may stop at 4.75 year, but after a period of waiting, if you are to ask me what is the likelier part of the move on the fed to go up or down from there, it is probably to go up. these structural trends are creating inflation. when the central banks realize these are permanent and not

temporary, they will be realizing it will be much more difficult to get to that 2% target, and therefore may need to raise rates. whether we get to 2% depends on how much they raise the rates by, but there will be a re-think. it has to do with the structural trends, not cyclical trends. tom: give us a level of optimism you have in the pacific rim, if china can extract itself from this covid antiscience? thierry: if they can grow again, it is generally positive for the pacific rim. if the western economies continue to disassociate themselves from china commercially, some economies in the pacific rim can do very well by capturing economic activity that is otherwise going to china, investment. tom: is this a labor arbitrage,

in this covid opportunity, vietnam picks up martial manufacturing? thierry: absolutely, latin america, too, north america, perhaps africa. it is not just vietnam. it is a lot of countries that can benefit. tom: i look at this and it comes to the question of dollar supremacy. you cannot have an em up unless you have dollar weakness. thierry: it used to be that case. a lot more when i was in emerging markets, doing solely that. a lot of emerging markets had debt on their books, but markets have learned from previous crises. they are relying much more on local financing, supported by local financial institutions like pension funds. therefore the strengthen the dollar is not catastrophic.

we are seeing it with how well some of the majors in latin america are doing. tom: you came with an entourage of five people. what happens when yen prince 1.50? thierry: maybe you start to see inflation in japan, which is what they want to see. the issue is how quickly it gets there, and whether on the way there, it causes disruptions. tom: if we get a 1.50 yen, they intervene, they capitulate, and we open at 1.27 yen. how destabilizing is that strength that is theorized? thierry: i don't think it is that destabilizing. margins in japan have to go up, they have to. their workers a bit more. by way of a weaker yen they are achieving some of that. we haven't seen any financial stresses so far caused by the weakness.

the weakest of the currencies this year, we have not seen any stresses. lisa: thank you so much for being with us, thierry wizman of macquarie. what he was saying is so important about this idea of where the real rate ends up, this idea that we could end up with novel rates above 2% for a long time because aware inflation is. something not priced into the markets and counteracts this discussion about how it is too indebted, and then basically saying it is what we have to handle. tom: i look at this as a return to what i grew up with and somehow survived, and with that you clear markets. zombie companies, we make jokes about it, but we are living in a new world. kailey: tom keene growing up and surviving the irish spring. $.99.

tom: futures at -17. stay with us. this is bloomberg. ♪ lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. russian president vladimir putin is set to hold a meeting of his security council to discuss migration issues as russian occupation officials called on residents of her son to evacuate, warning of an impending ukrainian offensive. the region set program and officials were evacuating for the main city but about moscow forces would keep fighting. mitsubishi financial group seems to be evaluating an acquisition of some loan portfolios from credit suisse to expand its u.s. business. japan's biggest lender is also betting bundles in various sectors.

they are racing to raise funds with just over a week to go until an unveiling of a critical turnaround plan. the global smartphone market had its worst the recorder since 2014 as economic headwinds pushed consumers to delay discretionary purchases like personal electronics. shipments of smartphones around the world fell 9% in the three months ending september, extending a decline that has lasted all of 2022. nfl football is coming back to black friday. the national football league has struck a deal with amazon to stream a game on the friday after thanksgiving in 2023. the league and amazon says the plan is to become a permanent fixture. the deal deepens a partnership between the two which of this year started to stream the thursday night franchise. 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. ♪

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>> big picture we still have growth that is slowing over the next three to six months, a lot of monetary tightening ahead of us. the wei du think about this is a bear market rally, short, sharp, it still matters. but the big picture still has not changed. there is work to be done before we can say this bear market is over. tom: always brilliant. mike wilson. let's cover that quickly. a lot of bit of a turn. bearish to less bearish. lisa: in the near term, and then more bearish. people are basically like, i guess things are not so bad, and then they could slant.

tom: coming up, a conversation with one of the brightest lights at 1600 pennsylvania avenue, amos hochstein, the special coordinator for global security. light now, we do better with will kennedy, senior executive at bloomberg. let's start with the strategic political reserve. it is wrapped around the politics and all of that. javier suggests to me that we are selling oil now into the market to make the price go down, except both republicans and democrats have us buying oil back pretty soon. isn't that confusing? will: it is, and there are mixed signals. they are selling oil now, they may release more over the winter

to keep prices subdued, and then there were mandated sales for years to come, so there are lots of plans to sell the oil. then they are saying we will buy it back around $70. it is confusing about what is going on. what is clear, the spr has become extremely political. the administration is willing to use in a way that previous administrations have not been. lisa: we have been talking about how vulnerable this makes us into the winter months. i am looking at diesel, how low the barrels really are, and this question of what the administration can do about that. that goes into everything. what is the proposal there, how much of that is on the radar? will: the spr is a red herring because it is crude oil. the tightness in the market is diesel. stocks are at the lowest we have seen in decades, just as people

are getting ready to fire up their central heating in the northeast u.s., where they use diesel to heat their homes. it's a critical situation and there is a very small reserve but no strategic reserve for diesel like there is for crude. that is why export restrictions remain on the table, active debate in the administration whether they should limit the export of diesel to europe which has been buying a lot of u.s. products. lisa: what does that do politically? tom: what does that mean for liz truss? will: that is a serious question, actually, tom. lng, diesel is helping. if the administration decides to restrict those exports for political reasons at home, that will drive up prices in europe, where diesel is also short. we had a refinery strike in france which has constrained diesel.

it's a problem on both sides of the atlantic. acting here will be a problem for the administration partners in europe. kailey: tightness of supply driving prices up. there is a plan in theory to buy that oil back and shore up those reserves. if the administration says it will buy between $67 and $72 a barrel on wti, we are already down 32% from that level. when you have opec constraining supply more, is it realistic to think that we will get there anytime soon? will: rejecting the oil price is impossible, and we are only a few years away from negative oil prices. we just don't know. it is true there is a real tug-of-war going on here. they are setting a floor with that buyback range. opec has signals a desire to defend prices at the $90 range. what is fascinating about this,

it is extremely political. people are using policy on the consumer side in the u.s., producer side, and it has become a tug-of-war. kailey: we know the administration have been pushing for opec to do something else, which they did not do, but at the same time, they have asked producers back at home to pump more oil. you need to be able to turn that into product. what policy solutions are there to solve that problem? will: that is a huge problem and we are not building any refiners anytime soon. the reason capacity is so tight, it goes back to the situation in europe. russia's overcapacity and refining. they have a big system and the exported a lot of diesel. europe is moving to a place where it will not buy that diesel anymore early next year. that is putting pressure on the system. people always focus on crude oil but it is really on the refining

system, the supply of products, where a lot of the stresses are showing up now. lisa: we will be speaking with amos hochstein. what can i do other than making broad proclamations to make it look like they are doing something before the election? will: we need to trust them on export restrictions. somebody said that they would not do that before midterm elections, but if things get tight over the winter, it seems that is on the table. tom: javier blas gets all of the headlines, but you and others created the hydrocarbons team here. the movie looks really good. i want to ask you within your team, is the united states energy independent? will: no. tom: why do you say no after all

of the political garbage i hear from washington? will: this is a global energy system. the u.s. imports oil from around the world, exports products. it is a global system. i think you will never be in a place where you are insulated from that, where you can have a truly independent policy. i don't think that is realistic. the shale industry, one of the key question going forward, what is the future of shale? people are starting to worry that it is slowing down. the administration revised down its estimates of u.s. oil production in the last week or so. some are saying that production may peak within the next two years. that is a bold call, but as we look forward on energy, u.s. energy independence, the future of shale is really going to be a critical question. tom: will kennedy, thank you so

much. i'm sorry, this is a huge deal, this energy independence thing is incredibly emotional in washington. lisa: a lot of people have been talking about peak shale because they cannot get returns at the same prices, and that is what you are seeing with the production at some of these wells. tom: amos hochstein, special presidential coordinator for global infrastructure, the oil czar for president biden will join us in a little bit. ♪

>> a lot of factors are putting us back into a more traditional 1980's mindset. >> we still have growth that is slowing. >> we think we will see peak inflation. >> i think we still have a small chance of a soft landing, i

don't think we will get it. >> things are going to break. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. lisa: good morning. stocks flipping and flopping as they balance the better earnings after inflation goes higher. jonathan ferro is off. he is not playing ftse with the dow. rates higher, 10-year yield in the u.s., the highest level going back to 2008. tom: on a wednesday it is supposed to be quiet. all of the talk to me is in the yield space. i go to the real yield, 1.66%. not a -1% of ages ago. lisa: this is the big takeaway of the past couple of weeks, not just in the u.s. or u.k., but

around the world. where are we going to end up? we are not going to end up at zero. that has to be a reset for companies in quarters to come. tom: this morning across wall street, they will have their year end review, their first look at 2023. good luck with that. lisa: where is the visibility? that speaks to their earnings we are getting, procter & gamble front and center. it highlights the fact that consumer facing companies dealing with all of the industrial headwinds are still doing ok for now. kailey: the operative phrase there, they also lower their guidance. they have been able to raise prices for the consumer, pass on those higher input costs, but the consumer is starting to change behavior a little bit at the margins, even if it is buying the cheaper alternatives. it's a question of how long that pricing power can get these companies through and if we will

see that material pressure that we have seen. we have not seen it showing up yet in the third quarter results. lisa: you were talking about writing your wall street review for 2023, but i'm wondering whether companies can write that either. what visibility they have at a time of such quickly changing winds. tom: with all the earnings we see, focus on big earnings, what we saw from procter & gamble is a huge deal to the late and great jack welch, focus on pricing power. you nailed the microeconomics of this earlier, the difference between unit dynamics and price dynamics. lisa: i keep going back to neel kashkari, does not represent the millstream -- mainstream, but

coming out and saying 4.75% may not be anywhere close to the peak. kailey: he is now one of the most hawkish members of the federal reserve instead of the most dovish. if you are seeing that acceleration, we will not be able to stop at 4.5%. thierry wizman was saying, even if they posit 4% for some time, it is likely they go higher than that after the fact. we are in a different inflationary environment right now where a lot of this will be structural. he thinks to percent is no longer a target for the world we live in. lisa: looking at what the markets are showing us, we were positive and they flipped negative pretty sharply heading into this hour. part of this has to do with gloom we are hearing about what could potentially come down the pike, what higher rates do. tom: rates are leading the story today but foreign-exchange follows behind.

1.4967. there is almost a force to japanese weakness. do you follow it all day? no. but you keep your eye on it. lisa: there is a perception of euro weakness. italian 10 year yields near highs. how much pressure does this put on the ecb? it is important to understand the 60/40. where is the balance? what will work as the balance is done? dr. and woody bahuguna joins us now. what will be the ballast going forward if we don't get some stability in rates in the near term? >> thanks for having me. i think 60/40 has been a bus this year, for sure. a lot of the conversation around these days has been about fed

watching. you all nailed it when you talked about real yields. stability will be the ballast, but i keep coming back to what does stabilizing real yields? we go back to inflation data. we have not seen any peaks in that. there are forward-looking metrics if you look at inflation expectations as measured in the bond market, those have come down sharply, but not at levels where one can say we can declare victory. tom: the idea, the boston heritage of mutual funds. lisa mentions the debacle of 60/40. do you invest now assuming 60/40 stability going forward or do you invest with a different

calculation? anwiti: i will break that down into two parts. if i look at all of my strategic forecast for the medium-term, they are better than ever in 10 years. 10 years ago, when we were looking at what fixed income may return for us, we were looking at zero yields on the safer bonds, 2%, 3% on the riskier part of the 10-year. now we are looking at 4%, and you don't even have to take a lot of risk to go up to short duration ig and get 5%, 6% in a very safe, risk-free equity bond portfolio. similarly, i don't think equities are cheap. equities are probably fairly valued given what we have, but the medium-term projections are looking better. tom: everyone has been blown up

in this unique pandemic induced bear market. are we going on to something new , or back to decades ago? anwiti: i don't think we will know until after the fact. tom: was that kashkari? lisa: carry on, please. anwiti: this is an important question, tom. is this the new structural regime for inflation? does inflation stay around 3%, 4%? we don't know that. you could have theories of deglobalization and whatnot will keep inflation higher for longer, but for the moment, i have not seen enough evidence that there has been any sort of break in the way things function. yes, we are going through a

painful period in the markets. i am living it every day. but if we have a medium-term perspective, you stay the course, stay the strategic allocation you have in mind, and do not panic when that 60/40 is already down 25%. kailey: in the more near-term, i wonder how you view political risk? we see what is ongoing in the u.k., the questions u.k. prime minister liz truss has been getting this morning. we are three weeks away from the midterms in the u.s. is it time to be thinking about domestic political risk rather than geopolitics as we have been talking about for the year thus far? anwiti: absolutely. excellent question. no one had been talking about the political risks here in the u.s. you saw how the ldi market reacted in the u.k. when the market did not like the fiscal plan that came out of that administration. here, all the data i'm looking

at, opinion polls and looking at are saying we are likely to have a divided government for the next two years. i think the market can live with that. but if we see a sweep and run direction, and at this point it means a sweep in the democratic direction, what sort of fiscal policies come through, and how does the market react to that, is a key risk at this point. lisa: thank you so much for joining us. to that political question, one thing we keep hearing, exactly to the u.k. risk point in some of the upcoming debates has been reducing the deficit. we heard that from senator warner yesterday. kailey: he admitted the size of the fiscal stimulus was a bit too large in hindsight. it becomes a question of, is it a bad thing to see the status quo, potentially more spending? if you had a divided government,

it would not be able to make its way through. lisa: you have been out in front, where we allow inflation to stay. it may not even be in the realm of control. what if there are the stickier parts of this that last longer than we can tolerate? tom: in washington, nobody talked about this on camera, everyone talked about it off-camera. there is hope of lesser inflation may be with pauses along the way to what? i'm not even sure the what is. maybe it is 5%. lisa: the political question of how much pushback this federal reserve gets as it continues to raise rates and we have the crimping in the lower deciles.

coming up, conversation about where we are with the dollar. this is bloomberg. ♪ lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. for providing military support to russia in its war against ukraine and their involvement in providing moscow with groans .global news 24 hours a day, . shanghai will build an isolation facility that can house thousands of people near the city. it's another sign china is unlikely to shift away from its covid zero policy anytime soon. the facility will be constructed east of shanghai's business district in an area covering 35 acres, and will have more than 3200 bets when completed.

nestle ceo mark snyder says inflationary pressures will continue into 2023. schnider spoke about the company's effort to protect margins with price increases and the impact of energy costs in europe. >> what we are seeing is some of the inflationary pressures continuing. this is not over yet. some of this will go into 2023 p.m. when it has peaked, a lot of it has to do in western europe with the energy situation because that is a big driver of inflation. lisa: schneider remains bullish about the brand as sales are surging. it is a coffee crossover. starbucks has entered into an agreement to sell the seattle brand to nestle. this will allow the company to focus on elevating the coffee experience grew its own brand and global -- strengthen the global coffee alliance. 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. ♪

>> i think we still have a small chance of a soft landing, i don't think we will get it. but that is what the markets will start pricing in. lisa: this is really the soft landing debate. a lot of people are saying softish, maybe not a super hard landing. we are seeing that in terms of what we are pricing in. citigroup coming out saying stocks have priced in a recession more than other assets but it is not overdone yet. we are seeing a bit of softening. you were talking about this whi ppyness. we have retraced some of the more extreme losses. i keep going back to 10-year

yield's. this may be one of the key stories. breaking out of 4.1%, going back to 2008 highs, fed by the discussions of where we end up with inflation once we are done with this post-pandemic search -- surge. tom: the 10-year yield is coming up but inflation dynamics, a larger real yield, 1.66%, that is a change as we go into this wednesday. one of the great points today was away from fx, procter & gamble with a set of headlines that are perhaps a new reality for multinationals in america. from ubs, vassili serebriakov joins us right now. i don't want to do the euro or the sterling, but when you advise procter & gamble in

cincinnati, what the dollar strength means for their operation. they made clear there are fx headwinds. vassili: absolutely. you are seeing it more in u.s. corporate earnings. the earnings season we have entered is probably going to show more of that. i think corporate's and investors in general should be repaired for the strong dollar environment, persisting for a bit longer. the dollar is certainly expensive but it doesn't mean that it is overvalued. to your previous point, if you account for real rates, also account for the global growth the downturn, dollar strength is easy to adjust. tom: i was talking with axel w eber, and he made clear to me it is not so much the rates have

changed now, but the level. if the dollar sustains at this level, what is the ramification for other nations? vassili: the ramifications are, it is once again our currency but your problem. in a sense, policymakers around the world would probably prefer stronger domestic currency at the moment to fight inflation. but they are not getting it, they are getting a weaker currency. only the u.s. is getting perhaps the benefit from a stronger dollar fighting inflation. the issue is we are not detecting a lot of serious concerns about dollar valuations. this is not like the pre-plasma years where there was a strong sense the dollar was divorced from fundamentals. generally policymakers have said markets are functioning well. if you look at rate differentials, terms of trade,

if you look at growth, all of these things combined can justify the current levels of the dollar. i don't think anything will change that from the policymaking front, the g20 coming together and changing the dollar policy. what will change it ultimately is the peak in the u.s. inflation and global growth rebound. that remain some way away. lisa: where is europe in terms of strength and weakness? we see ongoing euro weakness. you are seeing ongoing weakening in some of the parochial rates given the inflation, given the economic outlook. how do you view the necessity for europe to have a recovery before dollar strength gets diminished? vassili: it is an essential part of it. i will offer a glimmer of hope for the euro. european gas prices are at multi-month lows. at least some of the energy

sector pressures appear to be abating. that is why you see the euro trading around this 97, 98 level, not going below to 95, where many were anticipating. we have a sense of hope and stability but it is really hard to see the euro doing anything, rebounding significantly, until you get through the winter, get the sense that we can pull through without energy rationing. the things that you mention such as italian spreads, that is just the side effects of a weaker economy, where those market metrics tend to play more into the psyche whenever overall backdrop of growth is weak. there is some stabilization from gas prices but we are not at the rebound stage. kailey: you talk about the prospects a weaker growth, something facing china, not an

outright recession, but certainly not the growth they have been used to. the offshore yuan now at a record low against the u.s. dollar. can china do anything to stem that weakness? vassili: change zero covid policy. as you said, that does not look to be likely very soon. to be fair, china has been in a weak economic phase since the second quarter of this year. this is not necessarily new, more of the same. we are seeing beginning attractiveness of the yuan from the interest rate perspective, capital flows perspective, growth perspective. in terms of recommendations, we have been solidly bullish the dollar against the taiwan dollar. that has not changed. we think there is more upside. if you look at this dollar rally

from a 1, 2 have in your perspective, the chinese currency has lagged in weakness versus the euro and the yen. there is still some catch-up going on with the chinese currency. unless we see a change in zero covid policy, it is really hard to change the view on the yuan right now. lisa: vassili serebriakov, thank you so much for being with us. tom, i think about the back office conversations you had with the imf, people talking about where inflation could end up, how it could be sustained because there is nothing that really breaks the moment that we are in right now. tom: i go back to, the media loves yx analysis, surge, plunge, crater, whatever. the adults are on the x axis worrying about time. we are not transitory anymore.

we are out somewhere with a complete unknown into next year. lisa: at what point do these fed officials have to say we got it wrong? something is not working and we understand we made a mistake in the parameters we are looking at. right futures are lower. the s&p down 19. the 10-year yield heading for 4.17%. the real yield surging. 1.66%. ♪

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lisa: moments away from the housing starts wednesday, which is what i assume we are calling it. the s&p lower by .6%. michael mckee is with us here to break down the numbers as we get them. mike: we are getting them right now. it looks like a little bit less on expectations, down from last month. 8.1% decline on a month over month basis on housing starts.

1,439,000. the expectation was for 1,461,000. building permits, coming in at 1,564,000. that is better than expectations. they revised it here. 1,500,042. it shows that builders have some business left to do. i was going to say some confidence, but we saw the homebuilders index yesterday fall to the lowest since the 2008 financial crisis brought on by housing. it doesn't look like they have a lot of confidence but they have a lot of backlogs, are pulling permits, would put some of those permits into the ground. lisa: you are seeing the two year yield breakout to the newest ties going back to 2007.

you can see the dollar gaining, the opposite effect. what is good for stocks is good for bonds. what is bad for stocks is bad for bonds. this really speaks to what you been talking about which is how much are people looking at housing, the resilience. .7% right now on the s&p. tom: you see it north of the border in canada. a more persistent inflation again. on a global basis, this is a theme, this new persistency of inflation. is it a theme that drifts away or do we go into the end of the year, into next year further distant from transitory? mike: that is a big debate right now.

a lot of people suggesting there are forces out there that will bring inflation down. we can only see them on the horizon but they will start affecting the overall level of inflation even others are saying the problem is no longer the transitory stuff which may go down. it is the cyclical aspect to it. cyclical inflation is the hardest thing to get rid of because the only way to get rid of it is to end the cycle. the only way to get rid of it would be to have a recession. that is concerning to him. the one thing we can say about housing, and there is a large backlog supply out there, housing is the one area that has responded to the fed. mortgage application down 50% since the fed started raising rates. by some measures, 7% 30-year mortgages now. kailey: we talk about the need to get inflation down, what the fed wants to see, but we keep

seeing these upside surprises. we have had conversations that inflation is not getting back down to 2%, we could be looking at something structurally higher. when does the fed make that call, that they have to go farther to get down to 2%, or that they will start to target something else? mike: the idea of changing the target is something that people are beginning to talk about, but that is months if not years away. probably would wait until their five-year review comes up in about two and a half years. the idea that they don't get down to 2%, they accept that's a possibility. the idea they have to make a decision about whether to keep raising rates, that it was a meeting by decision -- meeting by meeting decision. there is no more forward guidance here. tom: always a fed speaker, michael mckee running all of our

economic coverage. the director of the white house national economic council. we are knee deep in the political season right now. brian deese joins us from the white house. the singular note which wraps around your remit, the gentlelady from hawaii has exited the democratic party. tolson gabbard was really talking about the elite wokeness of the democratic party. your boss is the most middle-class representative in a generation. joe biden breeds scranton. what be the reset on economic policy for the middle class coming out of the selection? brian: i think you are seeing it in real time. joe biden ran for president based on economic theory that we need to build this economic

recovery, as he says, from the bottom up and the middle out, not from the top down. you are seeing that in practice. if you look at what is happening in american manufacturing, 700,000 manufacturing jobs created, and you are seeing company after company make investments, making a long-term bet in america. just today we will announce almost $3 million in grants to battery manufacturers. i was in cleveland last week. you are seeing this explosion in interest in making the u.s. where we build and innovate. that will pay benefits for the long-term. tom: you were just in cleveland to see cleveland-yankees, admit it. i want to go to the strategic political reserve. we all get the politics of that. you took hydrocarbon 101 years ago. can you explain to me with the democratic politics is of

rebuilding the strategic petroleum reserve down the road? brian: i do have to clarify that i'm a red sox fan. very important to get that out. the president will announce two things today. the first is an additional 50 million barrels for december out of the spr. that makes good on the commitment he made several months ago to release 180 million barrels and provide that stability to the market. he is making good on that commitment with the 15 million barrel released today. secondly, announcing a plan and policy to refill the strategic petroleum reserve when the price of oil falls to $70 a barrel. that protects taxpayers. we sold oil at a higher price at around $90 a barrel. repurchasing at $70 means we can get more oil back into that reserve. second, it provides certainty to the industry.

we will have the authority to purchase when the price comes down to 70, and also enter into contracts to purchase at 70 in the future. lisa: one thing that is difficult as we are not talking about the present, what releasing more oil will do to bring down prices, not only of gasoline but diesel. how much are you thinking about additional measures to shore up both the stores of diesel as well as lower prices? are you talking about banning exports, for example, to europe? brian: let's look at where we are. since the beginning of the summer, we have seen gas prices come down about 30%, about $1.15. natural gas prices have come off the high of almost nine dollars to almost six dollars in trading today. we have seen a real reduction in energy prices, and that is driven by the policies that this administration and the president have directed. at the same time, we continue to

be focused on making more progress, seeing that price come down further. the announcements today will help on that front. lisa: it has come down, but diesel has not. that affects the price of everything. perhaps don't see that in the way they view gasoline prices but this is affecting heating and shipping costs, has raised questions about banning exports at a time when europe is flat on its back. what is your view? brian: absolutely, we are concerned about inventory levels for refined product, diesel in particular, for the east coast. we are operating at on except we're low inventory levels for diesel that are 50, 60% lower than their five-your historical average. this is a conversation we have had with the industry. we need to see more progress in building those inventories.

the federal government has some tools in that respect. we have a northeast home heating reserve, diesel, and we have looked carefully at be prepared to deploy assets when necessary in that context. ultimately what we need to see is the industry building those inventory levels so we don't put ourselves in a situation. to your question about exports, the president has been clear. at this moment when we have uncertainty for american consumers, we have to keep all options on the table. that is what we are doing. lisa: what will be the trigger point to understand whether it is time to look at exports? brian: i will not exquisitely make a decision before the president has articulated one, but the president will continue to do what he has done over the last several months. assess the market, understand where we are, understand the tools that we have today. today he is announcing a release from the spro, but this plan is

something that industry and others have in common for. we think this will make a difference. we will keep a close eye on these things with the understanding that we have these tools on the table and we will deploy them when it is in the americans interest. lisa: brian deese, thank you. all options on the table including banning exports as we head into the winter with very low stores of diesel. tom: i was with spencer abraham a long time ago on one of the energy battles. this was before fracking and all of that. i cannot emphasize enough -- thank you for watching and listening worldwide -- is this white house in the commodity trading business of gaming prices? lisa: saying here is the floor, here is the ceiling. we are going to work with it with what we have got, although it is really a refining story as much as it is a street petroleum

reserve story. right now crude far away from the price they are talking about. still seeing about $89 a barrel. wti, $84. coming up, tony despaired of blackrock. lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. four occupied zones of ukraine and stepped-up security. the action comes as ukraine forces continue their advance against his troops. putin told the security council today that existing military log regimes in those regions that he annexed last month should be extended. hong kong executive john lee has unveiled plan to woo back talent and ease housing woes. it's an attempt to revive the city as an international finance hub. the endnotes he would cut properties for nonpermanent

residents and relax visa rules. years of to covid-19 policies and little turmoil triggered a brain drain in the city. ukraine's military claims 13 drones made in iran were shot down in the southern region overnight. it happened as officials have reported more attacks against the country's infrastructure. president biden's administration is pushing congress for new authorities to speed up production and transfer of weapons for ukraine. rolls-royce has completed the first step toward fulfilling its promise to sell only electric vehicles by 2030. it unveiled the all electric specter. the ceo tells bloomberg that contribution margin per car are untouched and says rolls-royce will be very profitable. 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. ♪

>> we believe these markets require patience, diversification, and discipline. we think we will see peak rates, we think we will see peak inflation. what you will see dominate over the next couple of months is volatility. you will see these type of countertrend rallies. tom: some of the thoughts on the market. since that conversation, the two year yield at 4.25%. higher yield environment off inflation that will not give up. kailey leinz is in for jon ferro. ferro is at a symposium in scotland on the history of the dow jones industrial average. this is a joy. when you go to boulder,

colorado, you know the zoomies are the real thing. an actual pilot running an airline, the chief executive of united airlines, jon scott kirby joins us this morning. i have questions from viewers that have everything to do with the united lounge, this and that. i want to talk about the ratio of business-class to economy fares. i follow one united fare. it is six dollars for every dollar of economy. where is business-class in three years? jon: thank you for the intro, by the way. that is a unique one. business-class demand is really strong. it is strong in economy, but it is even stronger in the premium. category

united has more premium seat than any other airline in the country. overall business demand has mostly come back to europe, even stronger than it is domestically. the other trend that is huge, there is more premium leisure demand. that is enabled by hybrid work. there are people that go to europe, and able work for one or two weeks, worked during the day, go out at night in france or spain. i think it is a permanent step level increase in demand, both for weekend travel and for premium leisure. tom: the total return of stock, is the new persistency of cash flow from business-class enough to give you a more persistent cash flow on your financial statement? jon: i think we will still be

affected by the economy, fuel prices. what it does, more important, it raises the level. the lowest period of revenue will be higher than the lowest point, and the higher will be even higher. it doesn't take out the cyclicality but it does raise the bar across the board. it is just a new permanently higher level of demand. kailey: we have spent the past three hours talking about whether we are seeing a softening in demand, which is what policymakers are trying to engineer to bring down demand. in some parts of the economy the, that means people are spending less in some areas. that has not had air travel yet. do you expect the demand deterioration to come and you don't ultimately have the pricing power to keep fares high? jon: the slowing economy and/or recession are already a headwind demand. there are three trends in aviation that are more than

currently offsetting. we are still in the covid recovery phase. japan just opened up last week. no matter what you think biz a travel will get to, it is almost certainly getting higher from here. the second one is this hybrid work, making every week and a holiday trend. september was the third-highest month in the history of united airlines, that is in off-peak month. what happened in september, and october will be even better. people are now able to work remotely for one or two days. instead of being tethered to their desk, they can leave wednesday or thursday, go somewhere, work remotely. taking extra trips. it is unique to aviation, but it is offsetting those economic headwinds. tom: recall that doing a jon ferro. kailey: the demand side.

there is also the fact that you are constrained on the supply side, capacity is more limited. part of that has to do with the labor equation. can you give us your best estimate whether or not you will be able to ultimately expand capacity again, or is this a structural labor issue in the air economy that will stick around? jon: perhaps the most important trend, while there is a strong demand environment, supply will be constrained for years to come by artificial factors. it is less of a constraint for united. we are at the top of the pyramid for people wanting to be a pilot. but there are not enough pilots in the industry. boeing and airbus are also be behind, supply chains are behind on their ability to produce planes. air traffic control, airports in europe and other places that are full. even if you start fixing them today, it will take years to

fix. tom: when you are in new york landing at new work or jfk, i want to talk about the landing gates, but our ace airport reporter says if you don't ask scott about the 737 moving over to eight, adding more seats -- this is not confidence building with the rebuilding of the boeing max. do you have confidence that you guys and the faa can get together to get that plane up in the air? jon: i think you are talking about the max. good to hear from you, virtually. here's what i think about the max. for united, if the max is not at the current standards, we will convert some of those.

we will also order more airbus. for united, it is not that big of a deal financially, but it is the right safety outcome. the most important point. it is just a different length of airplane. it is the same airplane but different length. you would not want to make two procedures for the same plane. we will get to the right answer where the max seven and 10 will be certified, like the eight and nine. the more important point is for the u.s. boeing is our largest high-tech exporter, high tech jobs. the question is, our airlines around the one going to buy max 10's or airbuses? are they going to be built in seattle, europe, or china?

i want healthy competition, but the right answer is the max 10. tom: we are out of time. we need to see you next time you are in new york. a very strong earnings report. this boeing/max thing will not go away. kailey: something that will continue to follow, especially with the impact of the stronger dollar, company after company warning there is more on debt. tom: the vix elevated. we are looking at yields. watch for higher yields. this is bloomberg. ♪

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lisa: from new york city, yields taking center stage with yields up and stocks down. yields climbs to the highest levels going back to 2007. the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪ lisa: we begin with the egg -- big issue, torn between earnings and inflation concerns. >> there is positive news on earnings. >> it has proven to underscore

that story.