>> the day today volatility is mind-boggling. traders are whiplash. >> we do think we will see some moderation in inflation. it has been surprising to the upside. >> investors are waiting for the other shoe to drop. >> we are all talking about the risk of recession but markets do not have it priced in. jonathan: live from new york city for our audience worldwide, , good morning, good morning. this is "bloomberg surveillance, live on tv and radio.

equity features negative. tom: it starts today. we roll on to thursday. jonathan: did you see hsbc coming out? tom: i read it thoroughly. they are a china subset. i read every word of the report on hsbc and you wonder if that is what is coming down the pike. jonathan: chinese equities got hammered and this morning again, renewed currency weakness china. lisa: how is this going to influence the policy? it will not be the check it was for the united kingdom because xi jinping doesn't care as much about the market spots. as hsbc continue to double down

in china or do companies move away because it is economically sound? jonathan: what did you make of that? tom: the currency is managed around a band and we are unmanaged on the chinese currency. i am going to go to a log access in real-time. there is convexity in china and an acceleration of yuan weakness. jonathan: let's get to the price action. equity features on the s&p 500, big tech reporting, features -4% , down 15 point. yield lower by five or six basis points. the euro stuck at .9865.

we will catch up with jordan rochester a little -- in a little bit. tom: later on from deutsche bank, i will call it idiosyncratic story but fully in with jordan is sterling. we are going to the sumac but a massive now what -- we are going to sunak but it is a massive now what for the u.k. lisa: we have a number of economic data points, including the shiller index coming out at 9:00 a.m. how much do you see a rollover and houses and how does this lead into rent? was saw rent come down

significantly but it will not trickle into the cpi for quite a while. at what point does it matter to the fed. at 1:00 we get the selling of notes. can we breach the 4.5% and sell at that level and how many people pile in because this is the peak. today, the earnings after the bell, microsoft expected see the slows growth back to 2017. alphabet i am more interested in because that is the advertising tell and the other side of the story. are we seeing advertisers pulling back and could that be a sign of the broader trend? jonathan: earnings right now. revenue in line, 2.96 versus 2.65, the estimate was 2.85.

reaffirming a fog year outlook. tom: on a national basis with federal express, julian emanuel has a revenue modeling right now up 8.8% revenue. that is the inflation induced revenue and corporations. jonathan: looking forward to gm. really want to find out what the tone is. can you imagine going out and buying a new car? tom: the interest rate story is profound. we have a global story and what the interest rate impact is on rates and the cars with a three year depreciation. we haven't even talked about a 7% mortgage and what does that do in america? jonathan: i wonder if we go from undersupplied to oversupply just like that.

tom: we don't talk enough about it but that is the david rosenberg theory that you will see a rapid path to disinflation. we saw that twice in 1947 to 1953. jonathan: looking forward to those numbers. matt miller will catch up with the ceo of gm nader. we are going to check in with jordan rochester. i saw the number in your note. walk us through it. jordan: at this time last week, i set next to you in the table. we set in connecticut as well we are looking at 1.55. what you have seen over the past 12 hours is an extreme lack of a volatility.

the previous two weeks we have been on a big high with the march up to nearly 152 and the near sweep down on friday. let's quiddity -- liquidity was then and the wall street journal talking about the fed possibly becoming dovish. we have had some temporary setbacks for the long dollar-yen trade. the u.s. interest rates are rising and the japanese are not. on the fundamental side from the trade side, the dollar-yen is likely to keep rising from japanese importers this winter going out and buying lng, coal, oil, even though prices are cooling down but as we get into winter that should accelerate. tom: i had the honor of the formal tea at the japanese fed.

give us insight on the debate at the bank of japan. is there actually a debate like there is at boe or fed? jordan: there is definitely a debate. he represents the bank of japan when they speak. moving into march and april, who will be the next to lead the bank of japan and will it lead to policy change? if you look at rates markets, it tells you something will change. will they give it up altogether on the 10 year? looking at the japanese jgb, 10 years trading above the sort of level set by the control. the markets are challenging the

bank of japan as we speak. the rest of the curve is pricing a change in policy to come. lisa: is the message that currency vigilantes will win and we are seeing that eventually when it comes to japan and it has already come to great britain where you see a little bit more upside, at least versus are used to with the pound? jordan: it is to be everyone's risk off hedge of choice. the only clients i have met that are using in their portfolio as a potential risk off in case we get dollar weakness, and as you have seen that hasn't worked. the fundamentals changed for the yen compared to the global financial crash. it tracks u.s. yields quite well. on the trade side, the trade deficit is not the risk of currency of choice. for the u.k., i think they are the canary in the coal mine for

everyone around the world, even for the u.s. and for the fed. don't want to you -- to do u.k. when it comes to budgetary constraints and interest rates. don't get dovish and allow inflation to run hot. i know we were talking about the used car prices that will continue to fall quite aggressively but labor markets are tight and the risk is a second-round effect for services. that is a lot harder to tame the at -- that inflation. i think it will do 75 and then do 75 and then slow down into the new year. it was talked about slowing down to 50 in december. that is the top right now. everyone is waiting for the fed meeting next week. i think the message will be we are still staying hawkish and the dollar will rally. jonathan: and waiting for cbi the week after that. jordan rochester, good to catch

up here he was talking about the intervention for japan. 4/5 of the weakness in japanese currency has come out of trading. that is why the intervention from the boj is coming outside of the japanese trading. tom: it is completely clumsy and comes back to court theory and some people can -- core theory and it comes back to that. what is absolutely critical is everyone is looking at liquidity and the ois in place and spiking up and write at the moving average from the pandemic level. jonathan: maybe it is boring now relative to what we have seen over the last few months. coming up jean boivin

from blackrock. looking forward to that conversation. live from new york city, good morning. this is bloomberg. ♪ >> keeping you up-to-date with the first word. in the u.k., rishi sunak spent the summer predicting that liz truss would trash the u.k. if she becomes prime minister, and now his job is to fix it. he is meeting with prince charles to formally replace her. bloomberg has learned that adidas plans to end the partnership with kanye west. he has made controversial statements, including anti-semitic posts on social media and that has turned his line into a lightning rod for criticism. it has accounted for a percent of adidas' sales. the u.s. will change is stance toward china with xi jinping

grabbing more power. at the conclusion of the communist party communist -- congress, it paved the way it for a third five-year term. nato increasingly concerned that russia's desperation over batter field failures in ukraine may lead to the kremlin to escalate the war. that could involve a massive attack on a target like a dam or a weapon of mass destruction. nato said there is no sign moscow is preparing for such an attack. whatsapp said it is -- has fixed an issue that caused a widespread outage. tens of thousands of users reported outages and not being able to connect to the server. whatsapp is owned by meta. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo.

this is bloomberg. ♪

>> i can't think of a more consequential election that i've been involved in and we've been involved in. whether we maintain control of

the senate and house is a big deal, and so far we are running against the tide and we are beating the tide. jonathan: the president of the united states. here is the price action. equity markers slightly negative on the s&p 500 off of the back of the gains. we are down a half of 1%. euro-dollar negative at .90 867 -- .9867. tom: what is your take on this moment? three prime ministers in three cups of coffee. jonathan: difficult to implement austerity in many places around the world. tom: lizzy burden is at 10

downing street. we will catch up with annmarie hordern in washington, two weeks away from an election. 18 ways to go as the political elites go back and forth. what i sense is a measure of apathy. give us your summary of what turnout looks like and the character of apathy in both parties. annmarie: looking at the polls, you can see more than 50% say they intend to go out and vote and want to vote. when you think about apathy voters feel frustration when it comes to the economy and that continues to show up in every single pole across the board, -- poll across the board. there is not a lot the government can do to fix that right away.

democrats say it is a global issue and try to back away from legislative measures they took that maybe republicans say added to inflation but overall, the world is dealing with inflation and this is something that is difficult for the current administration to defend. when you think of apathy, that is where it is coming from, how can the government impact my life and across-the-board it is gas prices, grocery bills and paying for housing and rent. tom: do the candidates and political experts trust polls? annmarie: a lot of people say you cannot trust the polls. president biden speaking at the dnc headquarters saying you cannot trust the polls because they have been wrong before. you're are just talking about rishi sunak, the polls were wrong with brexit and have been wrong here in the united states. what you are seeing is typical for midterm elections is that the polls are getting closer and

more narrow as we head into the final 14 days. we should also note that a lot of people have already voted. it has been early voting for weeks in the country. lisa: it has been called to balance the domestic and international but the international has been over the domestic. what are you giving that pressure for president biden to speak to president putin? annmarie: last week, kevin mccarthy, the leader of the house likely the leader of the house next if there will be a red wave, talking about their will not to be a blank check for ukraine. there will not be this constant funding for ukraine while people are dealing with kitchen table issues everyday and potentially going into a recession.

now you have progresses saying maybe we should start negotiating with russia to make sure there is a difficult -- didn't -- democratic path forward. the white house said there will not be any discussions with russia unless that is what ukraine says. the progressives did, and say we are not aghast with the biden administration is doing that what this path forward in terms of diplomacy with a number of issues mounting on. i am looking forward to december, where potentially needs to be more spending and more humanitarian aid that the biden administration will push for ukraine, will there be pushback, not from republicans but within their own party. lisa: how much is driven by the inflationary outlook and what will head -- happen with gas prices? annmarie: what is coming up december 5 is when the eu sanctions are going to bite and

it will be incredibly challenging, even if you want to accept russian crude on the oil market, you can't, because maybe the shipper or insurance company comes from the european and they are dominating. it will be challenging to get the crude around, which is why you saw at the last g7 they discussed a price cap. that is a contentious issue because if they cannot allow the russian crude to flow, it will likely only stay in russia. that will elevate the price at a very difficult time. jonathan said it yesterday, what they have going for them in europe and the united states is potentially a warm winter. jonathan: let's pick it up there. gas prices in europe down more than 70% from the august peak and today it down by a couple

tenths of 1%. tom: they have supplied. it is the weather. jonathan: it is the weather and the supply and they have the storage up. they met storage ahead of schedule. then we started to hit warmer weather. tom: it is october we have barely started. jonathan: bear in mind it can get cold in europe in october. that has contributed to a lower gas price. tom: you mention rosenberg earlier and there is a school of thought gaming out sustained inflation, whatever the level and country is. there are a lot of people saying the microeconomics of the system clicks in. jonathan: about a month ago, we were tremendously concerned about industry getting rolling shutdowns and blackouts through europe.

maybe you can park that for a moment. still, we need to have a conversation about next winter and winter after that and whether they can repeat the trick of getting that storage up to capacity with a want it to be in 12 months. lisa: i have been reading about how there is almost a glut of natural gas in storage unit. at what point do we talk that this is into euro prices. tom: ge earnings are not that good. we will talk about that. ♪

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jonathan: three hours away from the opening bell. your tuesday morning price action on the s&p 500, negative one third of 1% big gains yesterday. on the nasdaq, down .2%. on friday, we had a look at 4.60. we are down to basis points. to the other side of the pond, to the u.k., two year bond yield

in the u.k. yesterday down 37 basis points. the biggest move in 30 years. rishi sunak about to speak in four minutes time. the switch to the budget and the bank of england in a week. tom: i will go from what we have done with draghi at davos, is there something different here in the political equation? jonathan: what is interesting to me is whether the chancellor is jeremy hunt and we get the budget in the way we thought we would have at the end of the month and what that looks like. do they go further when it comes to spending cuts? tom: further austerity. who is michael gove and where does he fit in? jonathan: probably a question for lizzy burden and rishi sunak.

eps at 189. tom: let's do this right now. we need to go to 10 downing street. lizzy burden is here for this historic moment. what will be the distinction today as he walks from the door to the podium versus when an optimistic liz truss walked to the podium weeks ago? what is the key distinction this morning? lizzie: -- lizzy: key as a pragmatist and is accused of being a socialist for his support programs. he raised taxes to pay for health care, even though fundamentally he says he is a tax cutter. european leaders will be hoping that pragmatism goes for brexit

as well. rishi sunak will have to keep that if he wants to keep the tory on his side and the other mps who have put him in power, not the party membership and not the public and so that coalition will be fragile and crucial. jonathan: a lot of people on the side of the atlantic just want to stop talking about british politics here do we get a budget at the end of the month and with the bank of england meets, will they have a deeper understanding of how much spending cuts will get from this prime minister? lizzy: we have heard from deputies and they have already been talking even though the rishi sunak spokesman will not confirm the chancellor will be jeremy hunt, although it looks increasingly likely, or whether the day will be october 31. rishi sunak, more than a prime

minister, would be aware of the effects of surprising the markets, so you can probably expect he will confirm who the chancellor will be later this afternoon. lisa: how difficult is it for rishi sunak to cut spending given the fact that he is very wealthy and doesn't necessarily represent the mainstream in any kind of populist way? lizzy: it was difficult to hear you but the difficult job that lies ahead even though he has had two runs at being prime minister and the characterization is that the easy part is over, now the difficult decisions begin but the labour is already labeling it very difficult. the good news for rishi sunak's

he has always said it is going to be difficult and that he will be honest with the public and resisted the temptation to say i told you so when it was imploding. he laid the foundations to deliver difficult decisions. he will have a cabinet full of ministers who will want to bring back money to spend on their pet projects and when he has two this coalition together, he is not going to just disappoint anyone. jonathan: it is his first appearance as prime minister to directly address the public. will you be one of the prime ministers who are late? tom: he will build -- he will be a bill clinton. we call that a bill clinton. do you have a sense as we await rishi sunak that this is a finally stability or will this

be in the next two to three weeks the same chaos truss ian-like. jonathan: i think there is hope that after today we can stop talking about the u.k. we still need to work out who the chancellor is. we assume it will be jeremy hunt. we need a deep understanding of what the approach will be. then we hope we can get back to where we were and move on quickly. but the british people will not move on quickly because the cost of living crisis is dominating the united kingdom as well. interest rates are higher, mortgage costs higher and the cost of living is going in the wrong election. tom: real rates are moving up. and what we heard from jordan rochester is the u.k. is ahead of other nations in the struggle.

we are starting off on the starboard side as mr. sunak with lawrence the cat and will he live there? jonathan: can i just come to you quickly before the prime minister comes out, what does the governor of the bank of england want to hear today? lizzy: he wants the stability he has been promised and want to know who the chancellor is and when this budget is going to be and if he can confirm it is jeremy hunt and it is october 31 as expected, the markets and the governor will be happy. he wants cooperation between the economic institutions and we heard from the chief economist

taking a thinly veiled swipe at the trusts administration -- truss administration for undermining the bank of england any we hope this will end. tom: features negative under 12 and earnings coming out. i want to sneak this in if i can and importantly jon will go to an on-time prime minister. the tour the country, like king charles after the funeral, will he go to wales and those cities that were labour and became conservative, will he go to scotland? what does he do? lizzy: i am sure he will. his constituency was up in yorkshire you might be the first prime minister from a yorkshire area.

he is going to need to strengthen the union, because this chaos in the tory party has only given the leader of the scottish national party confidence and he is also going to have to charm the redwall seats that put boris johnson into office with such a landslide. it looks like the tories would be marked -- wiped off of the map in an election. his message has been unite or die. he will have to unite the party as well as the country. tom: he is a lad, 40 something years old, the youngest prime minister from 1812. jonathan: that is an impressive stat. only a few years younger than tony blair. tom: but you look at american politics, and 42, it is like in finland and estonia. jonathan: could be speaker

pelosi' us child. tom: is that -- lucy's child -- speaker pelosi's child. tom: is that where we are going? jonathan: lizzy, this he their guy. lizzy: it could have ended up being so divisive. rishi sunak do not have to go to the membership but i do not think it is wise to say he would have lost because perhaps the membership would have had buyer's remorse after putting truss into number 10. i am sure the party is grateful we didn't have to go through the psychodrama of a leadership vote yet again. i stood here seven weeks ago and

you will forgive me if i have a bit of deja vu. jonathan: it is incredible we have been doing this the way we have. we have a system to deal with it and this is how we deal with it. i am wondering if certain aspects from jeremy hunt may have to be revisited, the idea that you only offer support for the economic pain through year and i wonder if they will have to is it that early on. tom: it is this word that has popped up, sunday, maybe saturday, austerity and the new definition of austerity and the fundamental thing is, it is austerity within a higher nominal rate regime. people at home don't care about fancy bowtie real rate stuff, they are looking at higher nominal rates across everything they do.

jonathan: the former leader, liz truss, tried to do something different and it failed. i wonder what the options are available for any government right now facing a cost-of-living crisis, high inflation in places like the u.k., what they can do. how much physical space is there to help out people in the united kingdom? i believe we have lost lizzy burden. tom: let's go to lawrence the cat. jonathan: do you think larry has something to say on that? tom: she said it is deja vu for her, can you imagine what it is for the cat right now. jonathan: we are waiting for rishi sunak to come out and and when he does he will be the leader of the u.k.

i will say adidas has been silent for weeks on the relationship with kanye west and finally this morning they came out and tell us they are terminating the partnership with kanye west after the anti-semitic comments from him over the last couple of weeks. any people are very disappointed it has taken this company this long. lisa: was the responsible for 8% of their sales. it will take a hit to net income in the current fiscal year. it took them a long time, because he is pivotal to their sales. at what point does this become a dealbreaker? jonathan: isn't that disappointing for companies that preach all of stuff about diversity and inclusion and they get comments like that and they go silent for weeks because he is key to their sales? think about how companies have

distanced themselves from certain people, whether it be drugs or performance-enhancing drugs and they stepped away and then you get anti-semitic comments for someone at your company and they say nothing about it. lisa: this was a discussion at the dinner table because there were certain members of the family that like his music and can they continue listening to it. you say you either have ethics to follow or you don't and that is the bottom line. jonathan: that stock is down 4%. the stock about general motors third-quarter adjusted aps at 189, revenue lighter. nothing overly concerning. when the leader of gm, later in the next hour, should be sitting down with matt miller. tom: it is a beast of its own. a shout out at citigroup who was on this, the x salute mediocrity

-- the absolute mediocrity and a rollover to revisit the mediocrity of 2018, the 10 year annual return that had to be challenged by is 5.06%, 5% a year shareholder return. can you rationalize that given an auto company, granted pandemic, national issues, technology issues and the rest? you wonder when they get germanic and start developing free cash flow. it is like mercedes or bmw and the rest. i don't know. there is always a spin and something new they are mentioning. electric vehicles they are going to increase production but where is the shareholder return? i am looking for it at 5% a year. jonathan: the new excuse right

now is 3m, fully adjusted to $10.35. what are they blaming, the uncertain macroenvironment. and the u.s. dollar. lisa: that will be the catchall. there is some truth to this. how much our international companies from the u.s. going to suffer as a result? this is the second downgrade to the outlook so far this year for 3m. hominy multinationals have to do that before there is a bigger sense and how much visibility do we have about how this will continue and how much it has to do with the dollar? i can tell you are skeptical whether this is an excuse for something else. what could it be? jonathan: i am just saying i am not surprised. we will keep an eye on the earnings. when we had the rishi sunak address, we will get that to

you. tom: this is the new king and i am not privy to the short meetings of an ancient queen, but you wonder if this is the new style of king charles, whether it is a substantial conversation, i don't know. jonathan: i believe they are following the car from vietnam palace. lisa: we are not doing this. this is not acceptable. i don't want to do this. who is going to pick him up? jonathan: in just a moment, they will go past the parade. lisa: i can't handle this. tom: there is a ceremony to it. jonathan: i have been living for this moment, lisa, for 20 years. lisa: have you? jonathan: everything has been building up from this to follow the car from the palace. tom: i know he married into a

lot of money, but how did he make his money? was he a classic baker? jonathan: like goldman. tom: was a chief economist, let's be clear, he was a dealmaker. lisa: it will be difficult for him to make severe cuts in spending at a time of austerity. i wonder how this will play into this. tom: we have had huge, filthy rich people back centuries that have run things. granted there are levels of loaded, but is it a so what that he is that wealthy and his family is wealthy? jonathan: it looks like they just went past trafalgar square? tom: are we going to stop at greg's? jonathan: would like to carry on following the car? tom: i don't think we have a choice maybe. the buses are stopping.

they promenade act to 10 down the street where lizzy burden is . i want to get back to earnings and say tech earnings, and lisa, you mentioned this, google is the real first look at the future of digital advertising, which is a growing part of amazon's business. there are others out there my problem is we conflate google with snap and facebook, and i think that is off the mark. jonathan: and a little look at microsoft after the close. tom: very important. jonathan: thursday is huge. did you see the tech names in china yesterday, absolutely hammered. at one point yesterday they were all down 20%. tom: i did a fancy chart of alibaba and the plunge is the right word, but back to a long-term support line of where they have been for years. did they go through a crisis low, no, but certainly back to a

support that speaks ill of the equity markets and the new regime. jonathan: the bloomberg chief a ship chief -- chief asian correspondent. it continues. enda: the selloff was delayed. we are seeing it go back to levels we haven't seen in some cases at all in fact. that does reflect a strong dollar and what is going on in china sentiment is negative and turning more negative. no sign of pivot on code -- covid zero. jonathan: i have to jump in. rishi sunak, the prime minister, addressing the people. p.m. sunak: i have just been to

buckingham palace and have accepted the king's -- it is right to explain why i am standing here is your new prime minister. right now, our country is facing a profound economic crisis. the aftermath of covid still lingers. putin's war in ukraine has destabilized energy markets and supply chains the world over. i want to pay tribute to my predecessor, liz truss. she was not wrong to want to improve growth in this country. it is a noble aim, and i admired her restlessness to create change. but some mistakes were made.

not born of ill will or bad intentions, quite the opposite, in fact, but mistakes, nonetheless,. and i have been elected as leader of my party and your prime minister, in part to fix them, and that work begins immediately. i will place economic stability and confidence at the heart of this government's agenda. this will mean difficult decisions to come. but you saw me during covid doing everything i could to protect people and businesses with schemes like furlough. there are always limits, now more than ever, but i promise you this, i will bring that same

compassion to the challenges we face today. the government i lead will not leave the next generation, your children and grandchildren, with a debt to settle that we were too weak to pay ourselves. i will unite our country, not with words, but with action. i will work day in and day out to deliver for you. this government will have integrity, factionalism, and accountability -- professionalism, and accountability at every level. trust is earned and i will earn yours. i will always be grateful to boris johnson for his incredible achievements as prime minister,

and i treasure his warmth and generosity of spirit. and i know he would agree that the mandate my party earned in 2019 is not the sole property of anyone individual. it is a mandate that belongs to and unites all of us, and the heart of that mandate is our manifesto. i will deliver on his promise a stronger nhs, better schools, safer streets, control of our borders, protecting our environment, supporting our armed forces, leveling up and building an economy that embraces the opportunities of

brexit where businesses invest, innovate, and create jobs. i understand how difficult this moment is, after the billions of pounds it cost us to combat covid after all the dislocation that caused in the midst of a terrible war that must be seen successfully to its conclusions, i fully appreciate how hard things are. i understand i have work to do to restore trust after all that has happened. all i can say is that i am not daunted. i know the high office i have accepted and i hope to live up to its demands, when the

opportunity to serve comes along, you cannot question a moment, only your willingness. so i stand here before you ready to lead our country into the future, to put your needs about politics, to reach out and build a government that represents the very best traditions of my party . together, we can achieve incredible things. we will create a future where the of the sacrifices so many have made and phil tomorrow and every day thereafter -- and fiil tomorrow and every day after with hope. jonathan: rishi sunak, the prime minister, difficult decisions to

come from the u.k. economy, the stakes have been made, i am here to -- mistakes have been made, i am here to fix them. pretty blunt and to the point. tom: carefully worded, i thought, moving from the past to the recent. i think for many people, this is the first time i have heard the prime minister speak. jonathan: working to distort -- restore trust after everything has happened. lisa: working on the test to build in the covid era and they did extend aid to individuals, including the furlough program. how far does that get this administration at a time of potential austerity in the face of higher eating bills and all in higher costs. jonathan: it is there in the message, we will not leave it in the next generation with debt to settle. ultimately, they will go hard. lisa: how do you affect the

economy and optimism at a time when it will mean serious declines in economic output of this nation? this is the world six biggest economy, for now. we have heard from economists, how do you inject hope into the future. jonathan: lizzy burden followed the address by the prime minister. talk about the reaction in the u.k. so far. lizzy: the reaction behind the black door, rishi sunak was trying to push hard on the reset button. he did pay tribute to boris johnson and liz truss, but very clearly he said that under truss mistakes were made and took a swipe at boris johnson saying now is the time for professionalism, accountability, and integrity, but he is writing

on johnson's mandate -- riding on johnson's mandate and he was referring to breads that -- to brexit, the national health service and every thing he has to expand on if he hopes to win reelection. it is a realistic message and the message he was trying to deliver throughout his leadership campaign in the summer and was his moment to say, i told you so. he resisted the temptation until he stood in front of the black door. he will have to make some hard decisions because of the damage truss bequeathed him. lisa: in two years time, to actually see programs through after tomball -- tumult and three prime ministers this year.

lizzy: he has a big job on his hands. yesterday -- he has to unite the party and the country. as you say, he is going to have to choose between tax rises and spending cuts and if he goes to far on the tax rises, he will alienate the tory right and they put him into number 10. it is difficult and he will have to appear and convince the public he is genuinely empathetic of their situation, when the word that is overwhelmingly associated with richie sue not is not that he is -- rishi sunak is not that he is the first british asian and office, it is the fact that he is rich. when you contrast that with american politics, where that seemed to serve donald trump well, almost inning him credit

ability. jonathan: wonderful to hear from you, minutes after hearing from the british prime minister. difficult decisions to come. the price action on the s&p 500, down .25% with the big day of earnings. features negative a little bit. yields are lower by seven basis points. 4.1732. coca-cola out raising the full year guidance, organic revenue, yet plus 14% to plus 15%. it had been positive 13.4%. tom: this has to do with price inconsistently. can you rice -- raise prices? here is coke, leading the way. jonathan: organic revenue beat come up 16% or the estimate

9.81. lisa: including a currency headwind. it is one thing to blame the fx issue and it is another to say, that is the reason for the disappointment. jonathan: reaffirming your outlook. gm did that 15 to 20 minutes ago. lisa: that is one of the things we will watch. we get a slew of economic data, including august the house index and court logix. how much you see the prices roll over and what is the bleed time into the core? it looks attractive for some but others say perhaps it has to go higher if we are looking at a 5% fund rate. the earnings continue after the bell and we are drum beating to microsoft and alphabet, given those account for such a huge

proportion of the overall index. microsoft expected to come in with the lowest sales increase owing back to 2017. how much does that give a guide for where we are? jonathan: a couple of guys will have something to say about foreign exchange. tom: i think it is 2% or 3% that is the average model and we are up above that, for percent or 6% and a few that are 7% or 8%. jonathan: jean boivin , fantastic to catch up if you. i read the note that came out yesterday. you talked about the significance of the midterms and you don't think they are that significant, why. jean: we think the usual playbook for the midterm is that if you have divided government or houses that it tends to be

boosts for markets. the usual playbooks do not apply. the main story is the foretold recession we will have in the next year and as a result, we think this is the second sideshow, important for the future of the country but in terms of targets we don't think it is an important driver. tom: a major discussion at meetings in washington, give us blackrock's estimate of how countries will have to go to the fed given a global dollar shortage, via liquidity's. jean: the important thing is we are seeing a rapid tightening financial condition in a very long time. we have not seen the cracks in the system. it is remarkable to see the strengthening of the u.s. dollar. i think that creates insight and

was clear at the imf and conversation about how we shore up the system. i think so far what is surprising is that it has been very stable despite -- tom: in your work with the bank of canada, if we believe it is nonlinear as we diss inflate, the think we succeeded that with stability or will there be instability. we looked at a columbia piece going from 98 down to 63. that is a crack. jean: it is very hard to see something that will be a smooth landing in any way, true for the economy and financial markets in this context. it is going to be very rocky we are on the way to equities with broad risk.

that will change but the reason is because the tightening could be nonlinear and we haven't seen that. and the u.k. we have seen over the last month is an accelerated peek into the future and that is where we need to guard against. lisa: if you believe in a hard landing, why not buy treasuries here? jean: that is a great question and the typical playbook might not be applying and we don't think it will apply. we will see a recession but inflation is foretold and the recession caused by monetary policy in which inflation will get under control. when you get to the recession you will see the typical reaction of yields falling and bonds playing the safety role. the typical playbook in this recession will apply. lisa: is this part of the reason

why the stability you talked about, surprising resilience of markets is almost a headwind because it won't necessarily stop the rising rate environment or change where we are in a wholesale value? how high can yield go and state for a prolonged period of time before something breaks in the financial system? jean: if we go to 5% for next year, this is a world where we will see a very significant slowdown in activity, 2% as a minimum of gdp, 3 million jobs will need to be lost in that context and 5% to sustain. the financial system leveraged as it is will start to see some response. 5% is where we are heading we don't we can go much further than that. that is why next year we will see central banks forced into some pause before they can go

further. jonathan: you said recession foretold. you have also talked about the appropriate time horizon to bring inflation back to target and i think you conveyed your disappointment that central banks are not having that discussion more. does it have to be this way? jean: what is very interesting and we have written about this is the fact that they used to be two sides to any decision in central banking. it is not obvious what you have to do. this environment is as tricky as it has ever been. i don't think there is any trade-off we have to deal with and we have to go back to the 1970's and that was a different situation. the lack of two-sided debate on what will happen is troubling. that is why we think we will get over tightening. that is the outcome that had to be what i think it is happening. the pressure will be strong and

guessing that in the u.k. you go in one direction, markets will put pressure and i think we will see some forced cause. -- forced pause. there are some nuances we might need to deal with, but this is not a situation but we will be forced into a wake-up call and a pause, one that was forced as supposed -- as opposed to being planned. tom: there was a guy named bernanke who emailed you when you are a kid and did you want to try princeton. what did he and anna schwartz and milton friedman do so we didn't repeat a depression? jean: i think the key lesson of the great depression that schwartz and friedman from an

anecdotal view that if you tighten monetary policy as the economy is going down, you create this financial accelerator dynamic. tom: is that what we are doing right now? jean: i think that was very much in his mind. it was interesting in the speech he gave in 2002, he said we heard you and we won't do it again. he was a governor but became chairman afterwards. this time, i don't think this is the playbook for the current situation. this is not a demand driven financial crisis, bank run story. this is a massive supply shock we are dealing through. i am not sure those lessons apply.

jonathan: fantastic to have you with us in the studio. we are still trying to unwind the policies from the bernanke years. the ecb came out and had to come up with a new tool, cpi and the bank of england had to step in and the boj had to intervene. south korea earlier this week had to do something on the credit side. the government made an announcement there. how many more times central banks will have to step back in? tom: you go from damian sassower to today and it is extremely fluid. i think the original theories don't work here. it is a supply truck. jonathan: would you like to be a central banker again? do you fancy that? jean: not really. i will leave that to others. jonathan: coming up, the

chairman and ceo of general motors. matt miller will catch up with her in about an hour. from new york this morning, good morning. this is bloomberg. ♪ lisa: with the first word, i'm lisa mateo. rishi sunak has formally become prime minister in the u.k. he addressed the nation after meeting with king charles iii. he said mistakes were made by liz truss and he promised stability in his agenda. the u.s. will not change it stance against china after xi jinping grabs more power. at the conclusion of the comet's party congress, she jean p paved the way -- xi jinping paved away for a third term. nato worries about battlefield pressures may lead ukraine to escalate the war which could

involve a massive attack with a weapon of mass destruction. nato said there is no way moscow is preparing for such an attack. adidas has ended its partnership with kanye west. he has made kind of virtual statements, including anti-semitic posts on social media. that has turned his line of sneakers into a lightning rod for criticism. adidas said it will be a negative impact of close to $250 million in net income. ups said is on track to meet financial targets for the full year. the courier is trying to manage through a slump in peak season demand but has rattled the shipping market. third quarter earnings beat estimates. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

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>> they will take a pause at one point. any three months doesn't matter that much, but american consumers the excess money they have will help and that will happen sometime mid next year

and we will know more about what is going on with oil and gas races. jonathan: jamie dimon there. equity futures negative through much of the morning. down one third of 1%. yields down seven basis points on a 10 year. 4.1732. i can tell you, the italian prime minister used her first speech this morning in italy to absolutely slam the ecb. how much of this are we are going to see across europe and the united states? tom: we don't know. jonathan: we have seen from senator sanders and senator warren and we will see it more if the economy rolls over. tom: and with the elections. jonathan: she said it is considered to be a choice which runs the risk of banking credit.

she went on and on. lisa:, which is driven by the anger that austerity and italy was placed on reese and by nations by the ecb -- on greece and other nations by the ecb? how much of that is feeling the anger toward these policies? jonathan: we are going to see more of this. tom: might measurement -- the measurement of the financial conditions in europe is an outlier. i can't say enough how restrictive their stance is giving mathematics. jonathan: here is a quote, that is compounded by the decision already made by the central bank to stop the program which creates further problems for member states that elevated public debt. tom: thursday ecb. an easy 75 but then what after

that? after that is after the midterm elections. annmarie hordern joins us. at the white house, the basic idea is the president giving pep talks. what does the president of the united states do in the next two weeks? annmarie: he is going to his best to try to rally democrats to get out and vote and try to rally independents to make sure they are reaching out to the youth vote which was critical in the presidential election. you also think he will only campaign if those candidates want him alongside of them are you have different views from the candidates in the tight critical races like john fetterman in pennsylvania has embraced resident biden. you have the democratic candidate in ohio that has wanted to keep a wide distance from the president, looking at outreach to other members of his

party, like senator manchin. he said a few times yesterday that the democrats are scully responsible and he said -- are fiscally responsible. tom: mr. trump. more votes than he got the last time around but nevertheless there was a huge turnout for president biden. do you expect the same dynamics again? annmarie: midterms have less of a turnover presidential elections, but at the same time, you have important issues coming up on every single pole that may force people -- poll that may force people to get out and vote and that will be the economy.

you made the point, do people trust the polls? you so that with former donald and candidate hillary clinton at the polls got it wrong. this has to do with the fact that potentially there is a bias that more democrats are honest in the polls and republicans shy away. there should be a robust turnout. a lot of that pence on the state of -- a lot of that depends on the state of play and whether people will go out and vote. lisa: how much is the federal reserve becoming part of the conversation in terms of them going too fast, too far, and torpedoing the economy? annmarie: as in the financial markets and individuals we talked to, it is incredibly important. for everyday americans it is not so much the fed but what the fed is doing is impacting their everyday lives. what does this mean for the

mortgage rates and is it taming inflation and having an impact on energy prices and potentially other prices going up like groceries and rent but also the fact that does this mean if they are going too fast, are they going to be blaming the fed or blame the current administration if we do end up in a recession? if you look at the bloomberg economic projections, it is 100%, basically we will be in a recession effectively at some point in the next 12 months. jonathan: we basically heard that from jean boivin from blackrock and basically said the same thing that it is already baked in. tom: for at least a slowdown. i have always been in the camp that if you have 1% gdp, that is not good enough for a huge body of americans. what i have here is he mentioned

a massively restrictive set of central banks guessing and doing an economic slowdown. jonathan: this is the goal to engineer the slowdown? isn't that the problem, literally speaking? tom: i am looking at the 10 year united kingdom piece and it is basically back 13 years. it is a whole new world. jonathan: big losses in the market to pick up on the disney and fairytales, it has been alice in wonderland in the markets and we are trying to step back from that. lisa: there is so much pain in the bond market and yet jean boivin is not buying yet. andrew hound horse at citigroup said you see a decline in housing prices but the wage data we get friday could show upward

pressure. this is the sort of push-pole where we are in -- push-pull we are seeing right now. jonathan: can you make the argument that we are pricing in the consequences of the rate hikes? i don't think anyone is making that argument. tom: where else are you going to get that analysis? seven standard deviation on u.k. yield. jonathan: you just ignore your colleagues. tom: i do. rishi sunak has a six standard deviation. jonathan: have you told him that? tom: i told him that. ♪

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♪ jonathan: live from new york city, good morning to you. futures negative a little more than 1/10 of 1%. the nasdaq, almost a change positive. about 18% of the nasdaq 100 reporting. microsoft, alphabet. in the bond market, i'm calling a google, too.

i've no idea why i just called it out of that. your yield, back on friday. we had a little look at 4.60 and then we backed away on some of the fed speed, the idea that we would get a step down. looking for 75 basis points from the federal reserve. one other thing they had to say was at the moment, certain currency pairs are getting a little bit boring, and boring is welcome when you're talking about sterling. tom, i think we are all hoping we get boring quickly in the guild market after he saw a move of more than 30 basis points lower at the front end of the curve yesterday, the biggest one-day move lower in about 30 years. tom: for governor bailey, it has improved, but the needle has barely moved.

the prime minister and his team understand. we've got to be sure that the prime minister has a bloomberg terminal at 10 downing street. what he's got his 5, 6, even seven standard deviation moves. that is untenable. jonathan: they've got to work out with the budget looks like and for governor bailey, the bank of england, does he need to do a whole lot more than last time they met? a lot has changed for the u.k. in the last several weeks, that is for sure. let's get you some single names. we can do that with lisa. lisa: the new beating estimates, we've got eps, general motors both affirming for your guidance. how much have analysts, have

traders downgraded? basically affirming or just making estimates is basically akin to beating in an environment we are currently in. tom: these are challenging stories. ups, i'm not going to conflate that, but they are managing the message every 90 days and what our viewers and listeners do is they look at shareholder return, which has been a challenge. lisa: although ups, different than fedex, has provided much more negative guidance. 3m, the second downgraded in terms of forecasts based on the fx headwinds. second downgraded this year that is not being received really well in the market. this really speaks to what we have seen more generally, which is that misses are punished. beats are not being rewarded if they don't have any visibility. tom: right now we got busy and

of the on foreign exchange. global head of fx research, i'm going to pivot on you. there are six ways to go. what will president lagarde do to the euro off of her decision to lift a presumed 75 beeps? >> i think the answer is probably not much. the 75 basis point hike is widely discounted as you've expected but if you look at what has been going on this year, currencies have not really been very correlated to interest rate differentials. it is being a lot more about the safe haven, risk premium, some of the very large geopolitical risks. i would really expect the ecb to have a sustained impact on the euro, something has struggled to have. jonathan: just how bad do you

and the team expect things to get in europe and how quickly? george: if you look at the euro, it really behaves like a local currency. for the euro to be strengthening any growth expectations to be bottoming out and then recovering. i don't think we are in that stage yet. i suspect it may not be as bad as some of the more extreme forecasts because so far the weather has been quite favorable. if you're looking at the natural gas situation, the tension seems to be easing. but no doubt drip is going through a sharp slowdown. jonathan: given the developing trade dynamics, the structural shift in the way energy is supplied, do you see some kind of structurally weaker euro in

the years to come? george: i think you can make that argument. it is impossible to fully understand where the levels are. if you take natural gases, we were three times as high. if you plug in the energy crisis at the moment, the deficit is going to be half of where it was. i think there is still huge uncertainty in terms of oil and more importantly, natural gas prices. but if they stay as elevated or go back to where they were during the early september period, we would be talking that a structurally weaker euro for sure. lisa: we've seen a lot of turmoil in china as well and china has a play on the german economy, the biggest in the euro region. we are seeing foreign flows just flood out of that nation at a record pace. how much does that feed into this feeling that structurally, the euro will be weaker and this will lead to weaker growth in the euro region now and three

years from now? george: it is interesting that you mention china because if you look at the euro over the course of the year, this is without facing a war, so to speak. the main point i would make on the change rates is that dominant driver is very much moving the dollar which has pushed currencies weaker relatively symmetrically. but i would say the combination of china's weakness plus the commodity price issues in europe do definitely point to more structural headwinds as far as european growth goes for the next few years. tom: you put a note overnight but i thought was fascinating, basically saying it is broken, talking about the whole plan, that japan is trying to stick to. does this mean that you think we might not see some sort of massive breach, some sort of dramatic shift in policy that is

going to be a slow burn as expressed in an ongoing beginning yeah and, not necessarily leading to disruption on a global level that some people were afraid of? george: it is a very interesting dynamic in japan. in some senses, the biggest monetary experiment in history taking place. but there are a couple things that are worth noting. the first one is apart from those, everything else essentially decoupled. we are no longer any yield curve control framework, we are just any specific bond cap remark. everything else, if you look at levels in terms of swap spreads and swap yields, everything has already started to adjust. the bank of japan now effectively owns the entirety or near entirety of the specific bond they are targeting. the only institution that will face losses on those bonds is the bank of japan itself.

i do think it will be disruptive, but the way it is being managed, it may mean it is less disruptive than some of the more extreme scenario that people are putting out. tom: there have been five including this one manufactured surges in a of inflation. they've been manufacturing inflation, up we go to 3% inflation. is that inflation manufactured and is it a fiction? george: so far is being put in as inflation. the very weak yen has helped. this is the first genuine attempt to shift the entire inflation regime higher, trying to make that feed into wages, into wages, intercourse services. if you look at the data, it is slowly starting to work. core services, core goods is starting move wider.

maybe it will go down in history as the first japanese central bank to move japan out of this low-inflation equilibrium and if that happens, i think he would be a very, very globally significant event in the sense that the last bastion of disinflation, so to speak, is remembered. jonathan: a stupid question. what happens when a central bank loses money? george: that is a very interesting and important question. i think the answer is fairly straightforward, at least from my perspective. not much. we are already running negative equity with the price of those bonds going down. the fed is essentially also losing money on his portfolio. but when we look at the balance sheet of the central bank, we have to remember it is very different from any sort of private sector institution because the central bank prints its own money. so yes, there are discussion

around loss of potential credibility, that central banks need to be recapitalized, but at the end of the day, these technical questions, i think in practice, it doesn't really mean anything. jonathan: wonderful to hear from you as always. is that a hedge fund manager three, tk? what happens when you lose money? not much at all. tom: that is the size of the institution. they are just that being that if they lose money, it is one big "so what?" a superb article today, worldwide on the challenges that central banks have. i think it is critical. again, the depth price movements i'm seeing are not normal. jonathan: i fully respected japan there. i've often criticized the boj.

they've got their head in the sand, operation ostrich. it is the one they lifetime opportunity to reset inflation expectations higher. and good luck to them. let's see if this works out. equity futures right now negative on the s&p. live from new york, this is bloomberg. >> keeping you up-to-date with news from around the world, i'm lisa mateo. sunak has formally taken over as prime minister of the k he promised to fix the mistakes made buys -- make eyes predecessor. he said the u.k. faces a profound economic crisis that will make difficult decisions to come. a group of progressive house democrats urged president biden to seek peace talks with russia to bring in at an end to the war in ukraine. but within hours, lawmakers backpedal and issue the state is in the white house policy. the biden administration has rejected the idea of negotiating with russia without ukrainian

laurens republican governor ron desantis has declined to say whether he will run for president in 2024. any today, charlie crist accused him of being too distracted by a bid for the white house. polls show desantis leads crist. rising interest rates have not in general motors. the third quarter profit beat estimates on record revenue. gm also reaffirmed its guidance for the year. u.s. auto sales soared 24% during the three-month perio. a target despite strong performance in the third quarter. high cost, struggling wind operations added to the challenges. these renewable energy divisions are operating with losses below $934 million in the last quarter. 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. this is bloomberg.

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♪ >> i think the thing people really need to focus on the most is how long does the fed keep that funds rate really high? up to 5%, we think it is going to be a long time, maybe a year. that is going to hurt equities, we think. jonathan: fantastic to catch up with him. numbers from alphabet, and numbers from microsoft after the close. about one hour 42 minutes away, equity futures down to tens of 1% on the s&p you know what is headed much, much lower now, the yield on the 10 year. tom: thank you for the huge response yesterday when i was going mental about price matters.

someone who knows that is robert tift, chief investment strategist with a really exceptional record of trying to find total return. robert, i look at the corporate return, the bloomberg corporate total return index and it is something in the vicinity of a drawdown of a -21% on price. do you just assume with fed action that we enjoyed bond prices lower and yields higher? robert: i think the fed is giving us a gift here. i think we are having a regime shift and i think the fed, the one that has really been in the lead in the cycle is bullard. i'm sure you remember his paper in 2016 about regime shifts. these markets, we don't slowly go from this environment to that one. it is a little bit different than six months ago. actually, we could be jumping

back to an equilibrium that is much more normal. right now, everyone is convinced there is going to be a hard landing. if they see how things are going, there is a lot of yield out there in long, corporate bonds. it is a real horse race as to whether those yields are peaking, those returns are bottoming out. tom: they are enjoying a 4.1% piece on 10 years. make it nine years. they've also enjoyed 30% drop in price, robert. tell our listeners and viewers how they handle duration if they've enjoyed double-digit losses in bonds? do you come in a short duration or do you go out long duration

to pick out coupon? robert: i think we've normalized here. this is an environment where people are supposed to be in some kind of a strategic average position in terms of their location and that includes duration. we've been in eight period driven by central banks targeting unnaturally high inflation rates. it wasn't that long ago chair powell was talking about 25 years of failure to get inflation up to 2%. with covid, one positive is they are resetting interest rates higher. and so i think that 5, 10 years from now when we look back, inflation will be lower than it is now. growth will probably be lower than it has been certainly the last couple years, and this will have been a reset.

so whether exactly 4%, 4.5 percent, 5%, i don't know. but i think we are in the zone of that peak in terms of interest rates. unless something unforeseen happens, this is a set of kind of like 1994, 1995. rates go up and stabilize and then ends up twisting bond returns for the long run. lisa: the bond returns in investment grade corporate scum as you were talking about. what about in investment-gray treasuries when people are talking about normalizing and higher yields? robert: i think long-duration, high-quality. it is more balanced. i think if the fed funding rate ends up going up to 4.5, in the fed at that point is saying "yeah, we are kind of indifferent here, but we need inflation to come down, and so anything, that means we are probably hiking again."

if that is the case, i think you are going to have a little bit of a burn on the yield curve where the lawn yields are going to be under pressure to move higher, to pay people compensation to take that duration risk because of the uncertainty. lisa: to tom's point about price down in some of these corporate bonds that have coupons at 4% that were sold a year or two ago, and now have all in yields of something like 8%, 9%, 10%, how much does that become a credit problem for these companies in a year when they have to start refinancing? robert: i think the whole dollar price, the big dollar price change is it creates mental problems for investors in terms of figuring out the right things to do. and in terms of issuers, it creates less of a problem in the immediate future than you would imagine. on the issuer side to your question, it takes a long time for corporate debt structures,

cost and capital to change. the bonds mature very slowly and they issue and it is incremental, and if you are in a world that is going to support a 4% treasury for the long run here, that is probably a pretty high novel growth economy. it is going to be a negative, a very slow burn. that thing for investors, it is shocking. we have a reset from very high yields, a one-time jump in dollar prices where your bond future may be closer to 200 than 100. it doesn't delay have any bearing necessarily on where things are going to go, and i think that is the case with a lot of responses at very deep discounts. if we are roughly in the yield so that we are going to be in, that will very slowly take time moving back.

but i think that shouldn't distract you from the real valuation, which is does the yield rise or not? jonathan: rob, nice to hear from you. bonds today, firmer, looking pretty solid. yields lower by eight basis points. we need to talk about the earnings. what we had was a raise, a hold, and a cut. very mixed so far today. tom: i thought she was stunning when she talked about one in five companies maybe have the glory of decent cash flow, decent margins, decent revenue. that is coca-cola. that is coca-cola. i would suggest it is not even one in five, it is more narrow

than that. jonathan: i can see in the corner of my loitering in the distance, matt miller is going to catch up in the studio. >> the depth, the knowledge of crypto here. tom: matt levine out with a great -- jonathan: i saw that, very cool. tom: a massive take on bitcoin. i will read it. jonathan: haven't i seen that on camera, too? that is great. how much are we paying them? tons, times to finally get on camera.

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♪ >> it is really disturbing for a lot of investors. >> this type of volatility is something we think you will see still for the next couple of quarters. >> i think there is more work to do here before the fed really

believes that short rates are a positive real yield. >> i think the thinking we are going to focus on the most is how long does the dead keep that funding ratably high? >> i think the time has come for them to take a slower pace of hikes and wait and see what kind of shape the economy is in. announcer: this is bloomberg surveillance with tom, jonathan ferro and lisa abramowicz. tom: good morning everyone, this is "bloomberg surveillance." a common theme of the earnings season from industrial america this morning, john, right over to where we are with tech this afternoon is dollar ramifications. jonathan: microsoft coming up a little bit later. 3m is taking that opportunity to blame fx. the dollar is a whole lot stronger and if you are an international company this year, it makes a difference if you are based here in the united states. tom: a great chart showing that

domestic company outperforming versus multi national and international as well. the conversation, jordan rochester, just simply not about the yen, it is about a holistic thingy, the developing economy, and there's real dynamics out there. the question, the step down. tom: the blink down. jonathan: they are not looking for that. tom: but then what? do we all agree 75? then what? lisa: at what point, if they do pause and -4.5%, what happens then? jonathan: i didn't say anything. lisa: if they don't do anything further, is the further path going to be another rate hike as we heard from robert because of the inflation? jonathan: any call on the fed is at the mercy of the data and we

get another cpi print and a couple weeks. tom: is a huge variance as well. as john said earlier, with inflation tied to the yield right now, 4.16%, that comes back down to 158. everything lend together off that key inflation report. jonathan: this year and maybe beyond to 2023. let's work through the price action for you briefly. no drama. yields on a 10 year, bloomberg, negative, down eight basis points. in the fx market, the softer euro here, just a little bit weaker. tom: if you are a student of the midwest and you have parents that were industrial, on your college list with the westpoint of manufacturing and

engineering. it was called general motors institute. and never did they know that one of their students would come out to provide leadership for general motors. matt miller brings us to her today, the engineer from the general motors institute. >> thanks so much for joining us, i really appreciate it. let's pick up where these guys left off and ask you about the stronger dollar. obviously, the lions share of your revenue comes here in the u.s., but you still purchased a lot of parts for your supply chain from outside of the country. is a stronger dollar a tailwind for you? >> there's a lot of pressures right now when you look at commodity cost, transportation. is just one of the elements that we are facing. it is not as significant as it is for other companies just based on our strong position in north america, but we continue

to monitor and be impacted by each of these factors. >> rates, obviously a huge factor as well. we've seen in impacting other lenders. i'm wondering how it is impacting gm financial. >> we are seeing gm financial get back to, i would say, a historically strong performance that we had. overall, gmf is performing very well. >> the ceos of jp morgan and goldman sachs said they see --. what does the economy look like to you, how is it unfolding? >> i'm going to let calling a recession to the economist. not my expertise. but i will tell you what we are seeing.

they are seeing very strong demand for our products. we are seeing strong average transaction pricing that we continue to be able to build on, so we are starting to see inventory built a little bit, but well below levels that were in the past. overall, still seeing a very strong consumer for our products and we are watching carefully. right now, it is still very strong. >> but what about inflation in the pressure on margins? does the stronger dollar balance that out? are you seeing a big inflation, a rise in the cost that you need to pay out for parts, and is that squeezing your margins here? >> we have seen commodities, logistics. we work with our suppliers to make sure that we have a very healthy supplier base. all those factors, we predicted the share would be about a $5 billion impact.

we are seeing that, but we have worked effectively to, and that is part of our overall equation for this year, which is allowing us to still maintain guidance. >> one think booth is going to be the inflation reduction act. they say they see the ira is very generous. it has the potential to make the u.s. a global battery hub. how do you see the inflation reduction act for gm? >> general motors was already investing in north america or in the united states, or instance. we have a battery plant in ohio right now. we have two others, one in michigan and one in tennessee. we were making the investment because we want to make sure we had a resilient supply after we lived through so much disruption. at the ira was passed and looking out for treasury to set the rules, we think we are very, very well-positioned and we do believe that the benefits of ira

will drive stronger adaption with the american consumer. we think it is going to do exactly what it was intended to do and we are well-positioned to benefit and work with our consumers to make sure they have an ev that is affordable, that they can really enjoy the benefits of. >> urc -- are you still on track to sell one million in 2025 and beyond? >> we absolutely are. when you look at the lineup that we have, we just last week launched the sierra along with the chevrolet blazer and the equinox. i think we are going to be well-position, covering the important segments in the port leo to reach that one million unit level by 2025. >> you do get a huge boost also from big truck margins and i imagine that helps you to fund the business and get toward that target. if we have a recession and you

see sales of those big trucks drop, can you continue to fund the boost? >> we very much believe we have a strong enough balance sheet in the strength of the business. we have truck leadership, we had it since 2020. we just did a major refresh to our light-duty full-size trucks. we have strong suv's as well, and the heavy duties, just revealed for next year. we think our product portfolio is going to position us well in the truck market. i would also say midsized crossovers are very strong as well. the full-size truck consumer, they generally don't shop as many segments as may be other customers of other segments do. obviously, we will moderate based on what happens from a consumer buying perspective. >> earlier this year people were asking if we were going to get back to 17 million. now, hearing people ask if we

are going to go down to a 12 million. what do you expect for car sales next year? >> because of all of the economic conditions around the globe, we are looking and planning for a more modest level. we are still going to project for the upside, but we are at really different levels right now because of all the semiconductor shortages and other supply chain issues. we think there is an opportunity to go up ever so slightly next year, but we are going to be very conservative, but ready to take advantage if there is upside. there are still a lot of unknowns. we will provide more information on the 2023 early next year. >> thanks so much for joining us, real pleasure talking to you on earnings day. general motors chief executive officer. jonathan: just awesome as always. tell me this. i've been meaning to ask this question of you for ages. how green is a 9000 pound hummer ev? >> in what sense do you mean?

there are zero tailpipe emissions. jonathan: so super green, right. tell me about how much damage that does to the roads. tell me about the tire wear as well, how much rubber we will need to put on these cars. just how great are these vehicles when you have the life of the vehicle, the damage it does to the road. >> electricity is generated by coal, that is a problem as well. but people like mary, across the industry are looking for solutions to the kind of crazy that we face. yes, there are problems. you could make the argument that it is not much more green than a silverado. it is even bigger, even heavier, but at least they are making some headway in that direction. jonathan: wouldn't i be better off buying a smaller gas-auto? >> seems dangerous.

jonathan: this is the ridiculous part of this conversation. is this just a fad that doesn't really address what we need to address? you can get the credits from the government. isn't that the elephant in the room here? lisa: oh, come on. jonathan: i'm not saying you shouldn't drive big trucks, i'm just saying this green branding of them seems to miss the mark a little bit. lisa: i don't disagree. >> i don't either. tom: it cost $110,000. people can't afford it. jonathan: from new york, this is bloomberg. >> and i love my honda civic for that. with the first word, i'm lisa mateo. sunak has formally taken over as

prime minister of the u.k., standing outside number 10 downing street, promising to fix the mistakes made by his predecessor. he said the u.k. faces a profound economic crisis and now will have difficult decisions to come. nato is increasingly concerned that russia's desperation over battlefield failures may leave the kremlin task lead the war. that could involve a massive attack on a target like a dam or even a weapon of mass destruction. for now, there is no sign moscow was actually preparing for such an attack. adidas has ended its partnership with ye. in recent weeks, he has made controversial statements including anti-semitic posts on social media. that has turned his line of sneakers into a lightning rod for criticism. adidas said that ending the deal will mean a negative impact of close to $250 million in net income. 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.

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>> what people say they are doing with their money and what they are actually doing with their money, i still think the gap is quite wide here. the flows, for example, are

still pretty aggressive into both equities and bonds. jonathan: can i just say you gave a tip on a curve inversion. i think that is that call from chris on dollar-yen. tom: was way out front. jonathan: mike wilson in morgan stanley, this has materialize this year, rank the best portfolio strategist and the latest institutional investor survey. i'm not sure if that warrants -- tom: someone said how do handle leverage? what we are going to see this week from boj and bank of england, and of course, ecb. stay with us through the week on earnings and we will be talking about the afternoon earnings as well such as microsoft and

google today. right now, you readjust on the equity markets. the chief investment strategist at cfra. julian emanuel keeps score on a daily basis of what we see, and what he sees is a mottled 8.8% revenue growth. how do you come up with all your experience, your star system, at cfra, what does 8.8 revenue growth or whatever the number is going to be, how does that distill down through the income statement to free cash flow and then onto share price? >> good morning, tom, thank you for the easy question. basically what we're looking for this year, or at least in the third quarter is a 10% gain in revenues for the s&p 500, and that compares with 2% earnings growth. profit margins likely to slim a bit, about 7.5%. but when you look pretty for

service, in a sense, the 10% growth really is driven by the energy sector as well as the communication services consumer discretionary categories. tech is really expected to show only about a 5% gain in revenues. tom: we are seeing a theme of alpha, individual stock selection. is this a time, an era of individual stock selection, sector selection, or "get out of the market" selection? sam: one could say that we are getting to the point where we might be looking for the market and sectors because, as you probably are well aware, november through april, the best six months of the year. my seasonal rotation strategy will shift from the defensive staples on health care to the cyclical discretionary industrial materials and tech at

the end of october. historically, we are in the best time, the sweet spot for the market. october of midterm election year through october of the year after have posted an average total return of 21% since world war ii, and has risen 100% over time. lisa: what is the distinction for you between a bear market rally in the beginning of more sustainable in make market cycle? sam: i would tend to say that you've got to see some factors that really can the move higher to make it something that is more like the beginning of a new bull market than simply a bear market rally. one of the things we have not seen as a sharp capitulation. the increase in volatility. i look at a rolling 50 day average between percentage of high and low for the s&p 500. normally, we peaked at a bear market environment above two standard deviations.

right now, we are pretty much hugging. the fear, the capitulation has really not been big and i think we probably need to see that before we can say this bear market is over. lisa: how do you view the whole step down, the idea that the fed could decelerate its rate hikes? do you buy into that, that if the fed is compelled to slow the pace of rate hikes, that is a positive for stocks? >> if they are compelled, it could be for reasons that are more ominous. we have seen since world war ii that whenever we have had a change in exceeding 6.5% -- remember, we hit 9.1% in june -- we have had it not only a bear market, but also a recession, and they fell further and lasted longer. i would tend to see the real concern is when we do

acknowledge that we are in a recession, how deep will it be, and therefore, it was an earlier low in october. the low for simply a low? i would tend to say it is a low because i'm looking for something closer to 3200. jonathan: thank you. sounds like this could go on for another 6, 9 months, something like that. lisa: at least the rally could. the idea that it is a bear market rally. how many people are basically saying that because they are concerned that they did beat not by being too bearish in the near term? jonathan: chris had a right of first time. i tell you what, this game is tough. chris was talking about the weakness in earnings in the first half of 2023.

brought that forward and now it feels like people are pushing it back down. this cycle has moved at such a speed that is so hard to keep up with. jonathan: it is completely away from any demand structure. that tells me it is not a cycle, it is original. tom: i've heard we haven't had the time to build up excess. it depends on the starting point. do you think this thing started after the pandemic, or did you include the 10 years before the pendant as well? lisa: they are the same people saying this to be a slow burn. basically saying they will not be financial stability at 4.5% and if we could stay there for longer, that will reset the concept of corporate valuations. tom: what i'm doing is just

going back and comparing where we are now to 2019. lisa: you look skeptical. jonathan: we are already seeing the intervention. the idea that is going to be this slow bleed, the doj has had to intervene in the market. the ecb has had to come up with this transmission protection instrument has not been tested yet. smaller story, but they have had to step back and do something. i just wonder who is next. tom: -- just quit.

jonathan: 60 minutes away from the opening bell. good morning to you. the price action shaping up as follows. equity futures slightly negative on the s&p. we are down 14 points. a ton of earnings this morning. as for the guidance, a holder reaffirming from gm and a cut from 3m after the close a little bit later. you will hear from alphabet and microsoft. going into all that, down eight basis points.

tom: right now, let us look at possibly your book of the year. for the first time ever i did it so early in the year. i am shocked at the war in vladimir putin and what we saw. putin's world is my book of the year, but look at this. short, readable, mega threads. mega threads. crisis economics coming up. now this, shockingly readable. i'm going to go back, i'm going to give people a little vignette of yours and my relationship. we are sitting at a woodpaneled are in a very famous secretary of treasury sitting somewhat near us. and you and i walk through the excesses and you nailed 2008. are we there again? >> yes, we are here again, but

in addition to the economic, monetary, and financial risks, there are new ones. now we are going toward stagflation like the 60's and 70's. in the book i mention a geopolitical risk like we are on a confrontation with china, russia, iran, north korea. that is going to lead potentially to conflict. there are environmental risks that are very severe. there are health risks coming from the pandemic. there are technological risks coming from ai, machine learning, robot automation. there is political risk with polarization, the extreme right and extreme left coming to power. and on top of that, we had an out of debt like we have never seen before.

so it is the conference of all of these mega threats. tom: -- was heated about the debt buildup. you've got a guy from harvard, cambridge, always wonderful. and at the very top, the quote of the season, the gravity has returned to the physics. we've got a higher real yield now, a risk-free rate now. what are the ramifications of economic system that the gravity has returned to her physics? >> there are many public and private data. from 200% to $350. the u.s. is now higher than after the great depression and after world war ii and we are not out of the great depression or a major war. and until now, households, corporate, banks, shadow banks, countries.

the global financial crisis, policy rates, negative contributions, and even during the covid crisis, we did that again. doing even more of the same. this time around is different because we have so much debt and central -- central banks are increasing to fight inflation. those zombie institutions are going to go bankrupt. that is why we are not only could have inflation and stagflation, but in the 70's, we had negative supply shops. very low debt ratios. we didn't have a debt crisis. argentina, mexico, interest rate 20% went bankrupt. after that, we had the debt problem. mortgage debt, housing debt, making debt. therefore, we had deflation. today, we have the worst of the 70's, the massive amount of

stagflationary negative supply shop. and at the same time, we have a debt ratio like we have never seen before. tom: don't give us 11 things or we will be here all day. jonathan: use this phrase. i'm not going to give you the time. you said zombie institutions. where are they? are you talking about countries now. are you talking about countries, sovereigns? nouriel: the point of sovereign is they are in trouble in emerging markets. what is happening in zambia, sri lanka. there is about 40 of them in the world banks on the verge of having a debt crisis. severe debt crisis because of what is happening. look what happened to the united kingdom. it is starting to be priced like an emerging market, forcing the bank of england to do monetize it. then the currency following, going much higher.

it is happening in the u.k., he could happen in italy. of course, a large number of not only emerging markets, but also advanced economies. jonathan: over the last 10 years, we had a series of circuit breaks. fiscal have the capacity to do that. central banks have the capacity to do that. institutions, central banks, sovereigns. you offer solutions in this book, too. what are they? nouriel: for every one of these mega threats, there is a solution. a dystopian future where all of these threats materialize and feed on each other, and it is not just the end of the world economy, and there is a less dystopian future in chapter 12 where we have the policies nationally and internationally with a better outcome. the problem is that both domestic political strengths and geopolitical strengths achieve the best solution. i will give you an example of climate change.

domestically, half of the country doesn't get into it. there is a conflict between generation. the young people care about the future, the elderly care less. an international level, if you cut to zero, no we else does it. now because of geopolitics, should cut their admission to zero in 20 years, but we created this problem in the last 200 years. 90% of emissions came from advanced economies. the flow of new emissions coming mostly from china and india. there are quite for elements of conflict, two international. there's lots of greenwashing, a lot of it is just talk and no action. lisa: which goes to your point about electric vehicles in the united states, because they are

green. there is an issue going forward with the central banks and when were a lot of your thesis is predicated on the inability to go through with what they need to do to get inflation down. is that your base case? is that the most likely outcome? nouriel: right now central banks are playing tough and acting tough because they have the problem of credibility. in my view, there are two problems. one problem is if they tried to get to 2% inflation because of recession, it is not going to be two quarters of negative growth. in the book i explain all the reasons why it is going to be a severe recession, because of the debt ratio, because of fiscal and monetary tightening. at the same time, we are going to have almost a fiscal crash. we are not only in this fiscal dominance, but with the folks of the bank of international sentiment call a debt track. so much private and public debt

that the central banks try to fight the inflation because a crash of financial markets, and the stock market, that is the least important. credit markets, bond markets, a debt crash feed on an economic crash, and vice versa. the first one of the bank of england. lisa: have you been surprised that we haven't seen some sort of catalyst, some sort of financial stress so far given how quickly the fed has already-rates? >> we are not yet seeing it with some major financial decisions -- institutions in the u.s. right now, the fed is on the way to 5%. you already have a stock market down to 5%, nasdaq even more. you have the crash of the crypto bubble, private equity, venture capital. everything is down. credit is down. the only thing that used to be

safe, the government bond, now the price is correlated to positive equities. when inflation is race-based -- rising, you lose one on the equity side. the price action has been worse than equities. any part of the portfolio lost money on both ends. a negative inter -- return because of inflation. jonathan: you are a man of high conviction, we know that. you've also got some very smart friends. do you have any pushback to this book that has made you rethink how bad things might be, possibly made you think that possibly they could turn out better than you think? nouriel: honestly, everyone said the threats were talking about, they are all too real. of course, there may be a solution to them and i discussed them chapter by chapter. but think of it this way. i have gray hair, i grew up in

the 60's in italy. at that time, did i ever hear about climate change? it wasn't a concept. did i ever worry about a nuclear war? there was nothing. did i ever worry about ai destroying most jobs? we had a stable democracy. we had low debt ratios. low intrinsic debt because there was no aging population. there were no major financial economic crisis. this is a quantum shift. there was a time in 1945, in the mid-80's that something of a stable time of local posterity, welfare, peace, and so on. today, these are threats that did not exist. those threats are more similar to 1918. war one, world war ii, the trade war, financial crises, inflation, hyper inflation, deflation. fascists in germany and italy. spain. and with world war ii, the

holocaust, and the korean war. jonathan: can we be clear, that wasn't a comment, that was a book on bloomberg opinion. can you tell me the columns are short? nouriel: he is speaking about the fact of a meaningful chance of conflict. my own book, there is a chapter about the new cold war. it could end up --. it is a significant risk. jonathan: fantastic as always. i've got to go and get a drink after that. tom: i haven't read it cover to cover because that is carefully written.

jonathan: our names are in it. nouriel: acknowledgments your name. but the last two lines of the book is about the threat. jonathan: there we go. stay here on bloomberg. >> keeping you up-to-date with news from around the world, shares of ubs are rising. the swiss bank posted quarterly profit that beat estimates and cost control that will enable them to confirm a plan to return about 5.5 billion dollars to investors this year. >> also the liquidity in the market, much of what we can do year to date. last friday we were at 4.6. we will continue. we should be getting certainly toward 5.5. >> leading the effort to boost automation and expand the presence in the u.s.

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. this is bloomberg.

>> we likely, likely has a recession of the u.s., going to have most likely a recession in europe. and so until you get to that point, you see a change whether it is in labor, the demand side. you're going to see central banks continue to move on that trajectory. tom cole and the chief executive officer talking on a recession. good advice, which helps as well. we celebrate and continue with nouriel. his new book, "mega threats."

it really is timely, whether you agree with his caution and as he says very clearly, the final chapter of the book is how we get to an optimistic future. i want to go to the past and i was so pleased that you mentioned on page 37 your colleague alberto ella sena. i still can't believe we lost and that such a young age. you to look at the politics of our economic system. i want to bring him forward to where we are now, which is a massive dollar shortage, but they are going to be overrun by a global dollar shortage and frankly, in developing economies as well. is there a dollar shortage now, and is that the catalyst for central banks to blink? nouriel: it is going to be one of the catalysts. there is a dollar shortage. it is picked -- particularly dramatic for the yen.

importing commodities, rising interest rates because of what the fed does, and domestic inflation. and the courtesy that increases the low-cost currency of the debt. for them, it is a perfect storm. some of them have reserves, some of them don't have reserves. but there is right now a strengthening of the dollar, the further tightening of financial conditions in the rest of the world. i think that eventually, the dollar is going to have to fall very sharply because there are between deficits. now we are essentially using the dollar as a tool of national security and foreign policy, weaponizing it, and rightly so. sanctions against russia, iran, north korea, china. we are starting a war with china, in economic war. tom: how do we get there? nouriel: it is going to be

essentially the fed wimping out. tom: what does that mean, blinking, right? nouriel: >> exactly. that is going to happen. and the fed is going to essentially prevent an economic dashboard tried to prevent it, even inflation is too high, then the dollar is going to start sharply weakening. what is raising the dollar is the type target -- market policy. lisa: it seems pretty bleak out there. the you just stuff it into a mattress? >> know, because then even cash loses because of inflation. the solution is to the problems of inflation, the currency, political and geopolitical risk, and mental risk. solution number one is to have very, very short treasuries and

onto the price action of long bonds. secondly, even if tips have not yet done well, i think you want to go into gold and precious metal. again, gold has not done very well because you have tight markets, but a central banks are going to blink, gold has rising value. the rising value is because the enemies of the u.s. are subject to sanctions. they have to move to other things. the only thing they cannot be seized is gold. finally, realistic compared to equities does well because you have more pressing power, and so on. this provides you in an optimized way a hedge against some of these risks. lisa: on the flipside, you've

always been brilliant on credit and we've heard from one manager after another that there was resilience in this corporate credit sector, even with the debt that they have, even with the low coupon they are currently paying. do you disagree? do you think that people are overly sanguine about the upcoming credit cycle? nouriel: right before the crisis, the fed was writing reports or financial stability, pointing at the leverage of the corporate sector. of course, high-heeled and fallen angels. they were built out. we bought even high-yield debt. commercial debt, so the zombies were built out, and the excess of having leverage loans got even worse, and people got even more indented. this time around, that is over. the fed, for now, we have to raise rates. you get the double whammy for those corporate. you get a p&l because income is going to fall because of recession and you get a debt

problem and therefore the corporate debt crisis, one way around it. markets are shutting down right now. tom: i want to get to chapter 12, the talk about a more optimistic future. you started by quoting the economist yogi berra. you go right in there about predictions and all that. how do you get from yogi berra to a more optimistic future? nouriel: a more optimistic future start with technological innovations. if fusion happens, you can have an unlimited amount of energy and she costs with no greenhouse gas emissions. we look like we're only 15-20 years away from fusion becoming a reality. if it is faster, we can increase the economic pipe, reduce the cost of energy, we can grow more. tom: what about our fractured

political system whether it is italy, or what we see in the elections coming up in two weeks? how do we get beyond this fractured political system? nouriel: for now we are going to have a world that is even more divided, and it is happening. you have regimes in power, you have putin in russia, you have turkey, you have poland. you have hungary, italy. the democrats in sweden. you have the frexit phenomenon, the trump phenomenon. latin america used to the only venezuela on the left. chile, ecuador, peru, colombia. tom: 10 seconds. nouriel: unfortunately, it is a world that is not liberal democracy. tom: have you sold the movie rights yet? nouriel: no. tom: the book is negative threats.

10 dangerous truths that imperil our future and how to survive them. did we see one today? lisa: it is 8:55 a.m. so in new york city, we survived today. we could say that. alas richard when he comes on later. you read the book and gave it a huge endorsement. he will be on later today. he is, of course, president of the council on foreign relations. tom: good morning.

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jonathan klein good morning. for our audience well lied --the countdown to the open starts right now. >> everything you need to get set for the start of u.s. training. this is bloomberg the open with jonathan farrow. ♪ jonathan: same movie, different title. >> the pivot trade -- >> there is moderation in the fed talk. >> we have seen them before this year. >> we just did that back in june.