kriti: stocks are paring there earlier gains. bloomberg markets starts right now. kriti: we started off the day with green on the screen and it was supposed the another rally but that has turned around. the s&p 500 is now in negative territory but it's not just stocks. 419 on the 10 year yield. the intraday volatility is perhaps taking its cue from

what's going on in the u.k. you also have the bloomberg dollar index going in the other direction and weakening. also a story of what's happening in the u.k. will be crucial with ripple effect stateside. a function of that will be the bloomberg commodity index strengthening as a whole. all roads today seem to be leading to the u.k. and the contagion effect is what we will discuss throughout the hour. prime minister liz truss quit as a -- every brief and chaotic tenure, resigning after 44 days in office, potentially becoming the shortest prime minister in british history. here is look back at her time in office. >> i have a bold plan to goal -- to grow the economy through tax cuts and reform. it was becoming a distraction so that's why you immediately change that policy met the kind of government we are. we will keep an iron grip on the nation's finances.

mr. speaker, i think the last thing we need is a general election. we need to act now to reassure the markets of our fiscal discipline. i have therefore decided to keep the increa incorporation tax plan by the previous government. i'm a fighter and not a quitter. i therefore have spoken to his majesty the king to notify him that i am resigning as leader of the conservative party. kriti: a truly historic moment and guy johnson joins us from london. the guidance she game and -- gave in her resignation speech is that the new leader would be elected within a week but we make it an answer as soon as monday. walk us through that. guy: the process of been announced. test the process has been announced. ultimately, the way it will work is the nominations are open now, the bar will be very high so you

will have to have 100 nominations behind you by 2 p.m. monday to be able to make it to the next round. they are looking for three candidates and it may be less or more. at that point, we will then see mps voting on who comes next. we could ultimately get down to two candidates. here is another tweak -- they will have an indicative vote by mps on those two candidates and then those two candidates, with that vote in mind will go to the grassroots of the conservative party. however, it is likely there will be considerable pressure placed on whoever loses that vote to drop out. ultimately, the conservative party members will basically be presented by a candidate that comes from the parliamentary party that they will effectively

have to accept and will become the next prime minister. the idea is that probably to keep boris johnson out of the mix and ultimately for mps to be able to control the process in the way it did last time. the mps want to control this. at the moment, the favorite is richie sunac. kriti: talk to us about the of richiesunac. he went up against liz truss but what are his odds now? guy: the odds are not zero. he is on holiday in the caribbean at the moment step he has been there while this has been unfolding. he will come back with a nice suntan but he will have a residual amount of support

within the party, there will clearly be some candidates that will back him. problem is a lot of mps are looking for stability which is why jeremy hunt is in number 11 downing street as chancellor of the exchequer. boris johnson and jeremy hunter do not necessarily go in the same sentence. penny mordant and richiesunak will fight it out. there is a lot of water that will go under the bridge between now and then but that is what things are pointing to. kriti: a lot of moving parts no doubt. thank you for joining us from london to break it down. looking at the market reaction, they are reacting quickly

especially with the resignation of liz truss with the pound rallying in anticipation of the news, a good sign potentially for those that were still bullish on the u.k.. colin martin joins us from schwab center for financial research. thank you for joining us. it's interesting that you had this triple whammy of reasons to leave the u.k. from an investment point of view. the stocks are taking a beating as well. can we be sure of a bull case for the gilt market? >> i'm not sure there's necessarily a bull case right now. this certainly takes out some of the? send potential uncertainty. when the expansive fiscal plan was announced, that threw a wrench into the whole plan when you have high inflation and throwing tax cuts in confuse the

issue. we don't think this will necessarily provide stability but it might remove some of the instability. where we are now is more questions. we have to go through the process of seeing who the next leader will be. the problems that are affecting the u.k. are still there, the potential for slower growth or a recession with inflation their 10%, the need to act to hopefully help growth and maybe prevent a deep recession while reining in that sky high inflation. the problems have not gone away but maybe some of the uncertainty has waned a little bit. kriti: what would return the certainty? they are dealing with in a store cost-of-living crisis. how much of this is a result of the instability and leadership as opposed to things like an energy crisis or brexit? >> i think it's all of the

above. when you look locally, you see the potential for slower growth across the board. inflation is not just the u.s. for uk thang, it's a global issue. when you add that together especially when you add the european continent and what will happen approaching the winter as it relates to oil and natural gas and the russia-ukraine conflict, that is one more risk that's out there so it's a global issue. i think the solution is to be determined. i think there is no easy way out of this. we are likely to see slower growth pretty much everywhere but it looks to be more of a risk in the u.k. especially with inflation so high stuff kriti: let's talk about the contagion effect. an article yesterday talked about the henschel of something on a larger scale happening to the u.s. treasury market. can we learn anything from what's going on in the guilt space right now? >> we are a larger and a little

bit more liquid market due to the size and the u.s. dollar being the reserve currency but there are risks out there, of course. we have high inflation, we have the fed obviously not buying anymore and slowing and shrinking the balance sheet but at the same time, a lot of other central banks are stepping away from u.s. treasuries as they deal with their own domestic issues. treasury liquidity has been issue. we seen that from a volatility standpoint with the move higher, we are seeing it just in the day to day movements if you are in investor with treasuries, you are seeing spikes nonstop with two-year treasuries hitting a new recent high. that is our theme going forward. it's tough to see volatility come significantly down when we are seeing those factors and the fed stepping back in the global central banks stepping back in a situation when growth is slow

and inflation is high. kriti: 459 on the two year yield. they are pricing in a 5% policy raise in the first half of next year. we thank you for being with us. still ahead, we will hear more about the u.k. turmoil from the blackstone president and coo. first, time for first word news with mark crumpton. mark: former u.s. treasury secretary stephen mnuchin will not have to answer questions about his firm's investment funds when he testifies at the trial of the colony capital founder. a federal judge barred prosecutors from asking steve mnuchin how much.uae money was invested with him he will appear in court today as a witness who is accused of trying to influence the trump administration as an unregistered uae agent.

protests in chat over the military junta to introduce civilian rule erupted yesterday, leaving two people that and at least 30 were injured. security forces used firearms to put down the demonstrations in the country's capital after the interim president imposed a state of emergency to address major flooding in the area. in malaysia today, the chairman announced the election commissions decided information delay. while nominations are fixed for november 5, the southeast asian country will hold elections on november 19. the statement comes as the prime minister said his party looks to capitalize on a victory streak in local polls. a total of 222 parliamentary seats will be contested stop 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 mark crumpton this is , bloomberg. ♪

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markets. 5% is what fed swaps are and is the policy rate for the first half of 2023 moments after federal reserve bank of philadelphia president patrick harker said officials are likely to raise interest rates to well above 4% this year and hold them there. let's discuss this. is that a reasonable take from the market at 5% policy rate in the first half of next year? >> that is certainly what fed officials are consistently communicating. what has changed that i think has markets skittish is that the fed has never held interest rates at a high level. if you go back to postwar history, they've never been able to maintain a high level of fed funds without starting to ease.

it is that particular aspect of the narrative more so than the final level of where the fed funds rate gets that i think markets are trying to grapple with. we've had no experience with such persistence. kriti: we are looking at record highs on the two year yield and climbing. i'm wondering if the 5% policy rate which was a contrarian call a couple of months ago go, is that no longer contrarian? >> i have to say that the two year yield is nowhere near a record step it might be a record for this cycle but i'm old enough to remember when it was double digits when i was a kid. i think the great air.

-- digest that running hotter than the fed has wanted. the signaling has been pretty consistent. if you weeks after the sep, they push the envelope toward more and more tightening. it's almost pavlovian, once the fed starts talking hawkish late the tickly after a high cpi or inflation report, the market naturally begins to reflect that in pricing. it's pretty rational at this juncture. kriti: you are right, is not the record high but the record high for this cycle going back to august of 2007.

if we are looking at a 2% or 2.5% long-term inflation target, is that a fair number two look at in a time when the fiscal policy is oriented around more manufacturing in america which by definition is also more expensive? can the federal reserve adjust their long-term inflation target? >> it's certainly feasible and we are seeing areas that drove inflation higher reverse and turnaround and supply chains have become less disruptive and car prices and that is coming down. we are seeing home prices turnaround cleat and the idea of lag has been compressed in the cycle because of how large the fed and have the fed is tightening policy. there is a lot of on ensuring discussion going on. that means we will be looking if we are successful, we will be looking at a higher ultimate

level of inflation compared to the past several decades where we been importing deflation from primarily china. that would be a change in the dynamic and i think the fed could adjust to that. i think they would be happy to get back to 3%. kriti: is the market ready for something like a longer-term inflation rate at a higher level? >> to some extent, that is the question that markets are asking. there is a reason that companies offshore to china and asia and latin america. it's because wage costs in particular were a lot lower. the re-on ensuring is one of the potential great macro themes of the next decade or so but it will bring about more volatility. it's going to make inflation a

lot more attuned to domestic wage trends. meanwhile, greater demand for to mystic labor will have a secular upward push on domestic wages. i think there is an argument that we will be looking at a higher secular degree of inflation moving forward. will the wage income be distributed in a way that workers as a whole can absorb that? at this point, it's premature to say. kriti: we will watch that quite closely. thank you both for your time and insight. still ahead, with the u.k. new leadership still in doubt, what does it mean for the market in the panama will find out what like stones john great thanks. that conversation next, this is bloomberg. ♪

kriti: this is bloomberg markets. it is an historic moment, getting another british prime minister. right after liz truss resigned, we had many conversations. i want to show you this chart, the history of liz truss after her fiscal plan was announced. it's showing this trickle-down economics and the bank of england pushing down the bond market are you see the 30 year yield come back down. there are questions of how long the boe can stand to do that. you see the pullback right up here until the reports come around that her time in office is coming to an end soon and that's where you see the turnaround. with a new prime minister, how long will that last and do you continue to have the friction between the boe and the fiscal government? we have some important

conversations about this and we spoke with blackstone president and ceo jonathan gray earlier. >> we are big levers in the u.k. long-term. near term, there are challenges around energy come around inflation. but long-term, the u.k. has some great attributes. it's a country that has a real magnet for talent, particularly in london. it's got rule of law, transparency, liquidity, and english-speaking population. we think over time, capital will come back to the u.k. and as investors, sentiment has been really negative. the pound is down 17% year to date, the stocks in the u.k. market are trading at less than nine times earnings and that represents opportunity. the near term may be tough but as long-term investors, we like to look at these things and think about the opportunity to make investments into dislocated

moments which is clearly what we are seeing now. sanali: on the one hand you have profit lower than a year ago but still brought in almost 50 million -- $50 billion. i'm curious as to how those things square off. do you think this environment will get tougher for blackstone but investors will seat roof it or do you think the tough environment will keep people away from private markets for some time? >> as it relates to our quarter results, we are proud because our mission is to deliver great returns for our customers and that's what we did in the quarter with markets down across the board. we protected capital, we outperformed. that has really driven our business and that's why you continue to see these inflows into our various products, $45 billion in the quarter, 183 billion dollars in nine months. we deliver solid results and

investors trust us with more capital. the markets are more challenging but if you look back over time at blackstone, there are all sorts of downturns like in the early 2000's and the early 90's, many downturn in 2020 and we outperformed. what you are seeing is a continued vote of confidence in our firm and the breadth of our platform. we deliver results and we can track more capital and we continue to focus on what we do but we recognize it's a tougher economic climate, it's a tougher investment climate. kriti: that was a conversation with the blackstone president jonathan gray. still ahead, we will get insight in investing in these volatile markets here and abroad. mark machin will join us.

you are still seeing some pain in the stock market in the s&p 500 is down about 4/10 1%. this is bloomberg. ♪

>> welcome to bloomberg markets. let's dive right into the price action. right on the screen, states i, when we look at the s&p 500, we are down 3/10 of 1%. if you ask me, i would say we had a rally on our hands. but that is not the case anymore. it's in the stocks and bond market. the two-year yield has record highs, going only back to august of two thousand seven. we see pain when it comes to the bond markets, specifically eight basis points intraday movement.

in the other direction as the dollar. that comes from this pain and strength of the pound. a little bit of pain on the long dollar trade, down 1/10 of 1%. the commodity indexes on the flipside of that. a bit stronger. up by .3%. >> the fed speak is changing the tone with financials under pressure through the day, but a number of earning stories that are standouts. at&t is among them. it is up .7%. pretty strong customer performance even in the waves of inflation. ibm is up 4%. the software consulting side of the business is standing out during next quarter. all day, we have been watching the underperformance from tesla after their results last night, and staying with technology, we will be watching snapchat after the bell for a taste of what is happening in the digital ad world as we also wait next week. earnings from other players such as facebook, meta, and google.

>> will keep an ion that, but earlier today, we heard from jeffrey you about his reaction to the macro story. how markets are going to take the rough -- reaction of prime minister liz truss's resignation. >> we may see some more volatility according to the process. if the members are going to be given a say, i wonder about the logistics. the markets may start to get more towards libertarian experiments, but i think the markets are expect ding that who comes in, the new plan will remain in place. as a result, you're not going to see a similar reaction for now compared to when the budget came out on the other cited it. there were expectations, must not forget that matters as well.

>> for more, we are joined by victoria bateman. a college lecturer in economics and cambridge. thank you as always for joining us. your initial reaction to the news? >> she had to go, didn't she? she had no credibility left, and the british government was literally falling apart and it seems. i think realistically, she was doomed from the very beginning. she was elected as the leader of the conservative party is our prime minister on a series of promises that were simply not deliverable. she promised a fairytale, and we know it happens when a fairytale meets the real world. the speed of her downfall is interesting. it reflects some aggressive markets, give -- given that tough global circumstances right there. markets are at a rather nervous point in the cycle. but having said that, it is hard to imagine a bigger catalog of

self-imposed errors that she has inflicted. she has behaved like a medieval monarch. her fiscal plan had numbers that simply do not add up. it was eight complete lack of respect for what are really basic, but fundamental institutions of economic policymaking. she didn't speak to the bank of england about her many budget plans. she sacked a top treasury official. she was refusing to work with the office of budget responsibility which is an independent watchdog that ensures transparency and truth telling when it comes to government text and spend, so behaving like a medieval monarch. no credibility left. there was simply no alternative except for her to go. >> now that were going to be

hearing about a whole host of other candidates over the next few hours, and certainly days we are watching, the idea of storing trust -- how does that play out? >> we simply don't know what is to come. where will we be a week from now? will we have a serious, honest and knowledgeable prime minister? or will we have, quite frankly, another clown? whoever emerges as the new leader is -- knows they cannot win the next election, and on the one hand, and they have nothing to lose. so, i think the volatile time will come, and i do think it will take we will rebuild

stability. >> there's a credibility factor, but it comes to stability, i don't know how much it is pinned to issues with the war of ukraine, in the ensuing energy crisis. the issue of global inflation regime, and also the effect of brexit that have a bigger impact than the former two. >> since the brexit referendum, we've literally been on the yellow brick road. we've been told that were heading to the emerald city, with all of the promises of a glittering future for the british economy, and much is in the wizard of oz, a series of imposters behind a curtain. first of all, there is boris johnson, now liz truss, and good knows who will be next. i said at the time of the 2016

brexit result that brexit leaves britain naked. i think that is becoming more and more apparent, and oddly by the day. >> care to take a guest on who will emerge as the main front runner in these next few days? >> her opponent when she ran for the leader of the party, rishi sunak. he was a serious, honest and knowledgeable contender. i would like to see him throw his hat into the ring, but i'm not sure that is happening. he was someone who realized that the economy needed conservative party members to choose a fairytale. the question is, are they choosing a fairytale, again, or the economic reality that is needed.

i think many of us have lost faith. >> whatever story, we will be watching it closely as it continues to unfold. we appreciate your time. from the university of cambridge, you join us today. coming up, insight on these volatile markets. we will speak with mark may chen, the ceo of opto investments, and the former ceo of the pension plan investment board. plus, we will hear from our exclusive interview with dominic barton. this is bloomberg.

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volatility in public markets has put fresh focus on private investing, and the former head of one of the world's largest pension funds wants to give investment visors more access to the private market. mark mage and spent a decade with the canada engine plan investment board. since then, he has teamed up with the cofounder to watch the platform. he joins us with kamaron leach was been covering the story for bloomberg news. nice to have you with us. we finished a segment on the u.k.. i would imagine that if you are looking to build a case on volatility that we experience, we would see a play out in front of our eyes. >> that would be right. we are not covering the u.k., but we will one day. with regards to the situation the u.k., i will quote king charles and say dear, oh dear. >> has displayed over into the private markets? how are you gauging that for your investments? >> a few things -- there is a

little bit of exposure, despite the best efforts for the alternative community to private assets today. zero to 4% of the average investment advisor in the u.s. is exposed to alternatives. that's the first thing. second, we think that people who are going into alternatives, 95% of people need the investment advisor to help them guide them and put in the portfolio. when i was at the pension plan, i had a privileged position of almost $1.5 trillion of investment capital. long-term money. almost two thirds of it was a liquid investment. you could define that as an alternative, and i saw the power and benefit of having diversification into a liquid asset. that was the problem and opportunity that we've seen, that were trying to solve. >> what is interesting is the

exodus out of private markets are kind of this haven of sorts, but in the macroeconomic sphere, there is so much doom and gloom, and the pricing of the recession could come in a couple of months, and it is arguably already here. doesn't the private market kind of function on a light to the public market? isn't the inevitable doomsday going to hit the private markets anyways? wax is not a complete on correlation. we think there are two components. there is an index return you can get, and there is an alpha value added piece. in private markets, we have a belief of seeing that an action before that the ability to pull the levelers patiently and private assets, creating value, it is really powerful, and particularly in a world where you have a low rate of returns, the alpha component becomes more

and more valuable, so if you're going to put your money anywhere, with liquidity, you can obviously plan or rough economic times ahead, but if you have some extra liquidity, good place to have a piece of it is diversified into private assets, that is a problem we are trying to solve it >> in terms of numbers, investment advisors will continue to be interacted with, and the kind of investments have no insight to share this. >> we are solving a problem of access, so private equity, real estate, infrastructure, and private credit, the goal is to find the absolute best managers in that space, and to make sure we have curated access to the best of it, and use all the insights and network that we have from my asset world, and from private venture capital, the office world.

but we are trying to do is create allocations with registered investment environment. they will look at what is in the portfolio, what exposures they have with real estate, and may be long technology. they create a customized allocation. >> what differentiation will there be. for some of the other competitive. >> we are tech lead, so there is a tune of technologists and people who come from places like other software companies. the software -- the second thing, they are on the side of the wealth advisor. there a lot of people who are

racing towards the gp. there hasn't been anybody else firmly on the side of investment advisor. they are a great investment. >> less tech about -- talk about the tech angle. the tech is not thriving. in terms of attracting talent, and what time horizon will this turnaround? >> i think from our point of view, it's an opportunity. with a first-class engineer, they are looking to raise 145 million dollars in this round, so from our point of view, it is fantastic to when -- i don't know when it will turn around, so i think it will require some type of recession and recovery

from that before markets start blooming again. they have no problem attracting talent, and it is really excellent. >> there are a series of options after the r schmidt -- departure. i want to talk about this departure. following it trip to dubai, is there anything you can tell us about the circumstances surrounding the departure? ask my time was incredibly privileged. it was an incredible time. it is almost a half trillion u.s. and investment capital. there is an enormous capability. 65 investment teams with seven offices around the world. it was a thrill and a privilege to do that, and to get insight into the world of alternatives

from that bush, where i can see the absolute best managers and opportunities across these asset classes around the world. i would say, a fabulous opportunity and i was thrilled to be there for almost five years. >> you been there for a decade. did you anticipate, or were you ready to leave? >> i had a very good run for five years, and you never know when markets might turn, and you never know what will happen. i felt that i had achieved a lot, and i changed a lot. i had identified a successor who is first-class, and it continues to thrive from strength to strength so i am thrilled for the continued success of them. >> roams out of time, but we started this conversation watching what is unfolding in

the u.k.. would you be anticipating in this time of uncertainty more situations like what is unfolding there, or over the next few months, a year of uncertainty? >> i think you will see, unfortunately, the macroeconomic situation, you will see in the next couple of years, what is likely to be negative growth around most of the major economies in the world. you will see electorates get frustrated with those who are leading them. you are going to see more and more bold policy moves that may not work, and people getting x-rated, and change happening. i think it probably will be a feature of the geopolitical landscape. >> always a pleasure to have you. thank you. on the president and ceo of the canada pension plan. as well as bloomberg's kamaron leach.

president biden is delivering remarks on infrastructure, speaking in pittsburgh. if you want to watch the comments, follow that life did is from the bloomberg terminal. coming up next, you'll hear from dominic barton, the former ambassador to china and a chair from bloomberg.

>> the former ambassador to china is addressing claims he leveraged his vision with one of the largest companies. it generates a large amount of revenue. we spoke with him on wednesday. in an exclusive interview. >> i don't want to sound

arrogant. i wasn't looking for a -- there is a whole notion that somehow, i did this to make money or do it, which is patently ridiculous. it is -- i went because i was asked to serve into a job and get it done. what attracted me to this was the initiative, but the energy transition, the assets were good that we had acknowledged relationship, but i had that for years before it i think it is a set of business issues. i am known as a business leader. probably more than a diplomat. i think, there are a lot of stories about what motivates a full to do things, and what they're doing afterwards, again, my you is i was asked to help in a pretty tough situation, and there was a mission to be done, and when the mission was done, i wanted to get back to the private sector. >> and want to talk about what you are doing with that mission.

but another partnership with that canadian government had a big announcement with nokia and the expansion of that in this country, so part of this relationship story is what is happening on the ground in china. but you mentioned earlier in the conversation, what message does it send when canada expands his relationship with a company like nokia which competes with a company like yours? >> i don't know enough of the detail about where that is, and how it works. i do think the government is following an industrial strategy. part of this is the energy transition, which is a huge opportunity for this country, working with the private sector to get that work -- to work. my personal views you look for the organizations that can actually help you get what you

need to have done. there is also, the lg, and a range of korean and japanese and other players involved. to me, the big story is around the industrial policy we are seeing in the u.s., as well. humongous investments. $3.5 trillion. a public and private, and that is very exciting and encouraging. >> that his stomach written, the chairman. the former ambassador to china has been talking in the markets about the situation in china, and the bloomberg report of possible changes to covid quarantined for anyone traveling to those countries. we saw the global economics for a player. we are wondering about where china will fit into that. >> what is interesting is how much of that is still a factor when so much of the rest of the world is actually opened up and is perhaps near shoring war of the globalization. that will be crucial russian for the commodity space. on the markets, the s&p 500 is

still down by the tune of 8.1%. stick with us. berg market lopez net. i'm pretty. this is -- i am pretty good debt. this is bloomberg.

>> the highest been set. 100 and people's will be needed to get onto the ballot. >> we fix the threshold, but it should have been achievable by any serious candidate who has a realistic prospect of going through. there is a threshold of parliament. nominating a candidate. it allows for three candidates, potentially, to come forward, and we clearly have