♪ >> the volatility, the fear, the capitulation is not been there yet. >> we have a recession penciled in but i suspect it may not be as bad as some of the more extreme forecasts out there. >> we are all talking about the risk of recession but markets still to me do not have it priced in. >> i think it's hard to see something that will be landing in any way. >> it will be more severe because the fed is leaning toward 5%. >> this is bloomberg surveillance. jonathan: live from new york city for audience world wide, good morning, this is number

surveillance on tv and radio. tk is back tomorrow. negative on the s&p 500 after three days of gains. lisa: is bad news good news? that seems to be what the narrative shift has been and we saw cooling data in the housing market and the tech space, bad news was bad news so when does the narrative takes some steam. the fed pivot should move the needle. jonathan: i.t. budgets at microsoft and industry for texas instruments which is a broad chipmaker. those concerns, are we starting to see the pain come through? lisa: it was fraud based. the microsoft ceo said they expect $800 million of extra charges for energy charges in europe and beyond step how much are we seeing the global pressures take aim at some of

the behemoths of this corporate world? at what point is this enough to undermine what people are hoping is more than a bear market rally? jonathan: equity futures are down as well. yields are lower by four basis points. tons of dollar weakness but something stands out on my screen, the rally in treasuries, selloff in gilts. the two-year in the gilt market is up 11 basis points. the median term fiscal plan will be delayed until november 17 and we will get the whole autumn statement from the british government but the sequencing is the rubble because the bank of england makes a decision on november 3. there were hopes we would get the fiscal plan first and the bank of decision after that stop lisa: is this the market saying this will force the bank of england to move much faster?

they need to go hard at inflation and that might be on warranted. jonathan: that's the assumption and it makes it problematic for governor bailey next week. november 17 feels like a long time away. lisa: it's ridiculous. this year -- it's been too long. i would like it to move it faster and not be as volatile. jonathan: this is what you talk about for 10 years. lisa: a roller coaster to know where? that's what it feels like sometimes. jonathan: on the s&p 500, negative, down by 9/10 of 1%. yields are lower on bonds by

three or four basis points. we are also talking about the dollar weakness with euro-dollar attaining parity. lisa: that's notable. the euro is so strong at parity. six months ago, we were talking about this. do you kate prime minister will take his firstpmq's at around 7:00 a.m. why are they delaying this fiscal plan until november 17? have they not already crafted something? is it because they want to give the bank of england the room to hike more? i'm curious. 10:00 a.m., the bank of canada rate decision and will there be a step down? canada has been a front runner when it comes to setting the tone. the highest levels going back

decades at 4.2%. after the bell, meta-earnings come out. it's facebook but this follows what you were talking about with google and microsoft. i am curious about how much meta-will confirm the advertising slow down. the twitter deal is getting done and that's interesting. jonathan: i wonder how the banks feel about that. lisa: resigned. it will be about a $500 million charge offer them and it seems like they are not pushing back stop jonathan: if they realize the losses, will they sit on this for a long time? lisa: elon musk was participating. jonathan: we will see how this turns out. the portfolio manager for the black rock fund joins us now. we've had some bad news for a

couple of days and treasuries are rallying. what is your understanding from the data and the way the market is responding? >> good morning, you have had soft economic data and yesterday was another example. the economy is slowing which is obviously what the fed wanted. we are also getting to a point where you are starting to have a narrative congeal around the fed getting close to 5% and pausing. that is providing a little bit of relief for interest rates and relief for the bond market. it doesn't mean rates will go higher but there is a light at the end of the tunnel over the next 3-6 months. the bond market will get its footing temporarily. lisa: are you buying into this? >> we are focused on the short end of the curve. first of all, that's where you probably have done the most work

in terms of discounting what the fed will wind up with. if you combine the short-term rates with spreads, for example buying short-term ig, we are getting a pretty healthy yield at five or 6%. equities are likely to chop around for a while, there is still a lot of risk to buy and you can get good carry in the front end of the curve and we can help the portfolio. lisa: you said if the equity markets are going to be choppy, i don't understand whether we are pricing in recession. some say yes including citigroup but goldman sachs says no. what is your view, given that the matches were misses in earnings are not really treated with particular success in the aftermath? >> you are starting to price in a mild recession but not pricing in something severe.

it's tricky in the stock market. you had an entire year of multiple compressions. valuations could go lower and they trended lower back in 2018 but most of that adjustment has already occurred. the problem is we still don't know about the earnings side. this is where gets tricky because the recession might look different in the sense that inflation may well be higher. it means that nominal gdp will be higher. it would be rare to see a big collapse in earnings in an environment which nominal gdp, real growth and less inflation is still possible. if you take the view that there was one or 2% contraction next year and inflation is still running at 3%, that's an environment where earnings probably don't collapse. however, if we see a more severe downturn in the economy, then yes, i don't think stocks have price that in and that's probably would -- where you have

more downside for equities. jonathan: the british government is delaying the fiscal statement until november 17 and it should be accompanied by a full forecast from the office of budget responsibility. mohammed on larry and this -- mohamed el-erian said this would provide more time to design the measures and be risky, complicating the bank of the -- the bank of england task. this is interesting this morning, what does this all mean? >> i think the bond vigilantes are back. we have seen that in the last few months in the u.k.. it's a very different environment and this goes to a rudder point. you had this -- broader point. you can afford to be a little complacent. in this environment, investors

will pay attention to the fiscal situation and start to think about having a country where you have to worry about funding, what did those funding needs look like? it's a long time since we've had those issues in developed markets and the u.s. still benefits from the fact that you have the reserve currency, this is the safe haven asset for investors so we haven't always had the same level in terms of our fiscal stance. jonathan: do you think we might? >> that's a good question, i've been waiting for that for a long time. it doesn't seem to be what's driving markets these days. you had some pretty aggressive fiscal action over the last few years and rates have backed up. that's because of the unexpected inflation. whether or not we get to a point where investors start to pay attention to the u.s. fiscal position, i don't think that's the main driver in the bond market. i think we are still living day

to day on inflation numbers, on the economic numbers and every eyed and's out of the fed. jonathan: thank you as always. if you are tuning in, some confirmation from the british government, they will delay the fiscal statement until november 17. it will be accompanied by a full forecast from the office of budget responsibility. we thought this could take place at the end of the month. would take place before the bank of england meeting which is next week but it has been delayed. i think the prime minister has an opportunity to walk us through why it's being delayed and explain what we can expect in about a month. lisa: and explain why it's important to come up with a conservative estimate and what it does to the budget rather than have something half baked. he has signaled more than that. jonathan: these are major moves,

the guilt up 11 or 12%. live from new york this morning, we will talk about tech earnings with facebook after the close. this is bloomberg. ♪ lisa: elon musk is promising to close the acquisition of twitter by friday. he made the pledge and a video conference call with bankers investing in the deal. they are providing $13 million in debt financing. the pickup in chinese business activity did not change the country's grim economic outlook. care economy slowed in october. china's global trade and business confidence detract -- retracted. . the european union's executive arm lay out plans to drastically cut pollution levels across the

pond could potentially eliminate more than 70% of the 300,000 premature deaths annually for the next decade. overhauling air pollution will bring the eu closer to guidelines laid out by the world health organization. deutsche bank is signaling it may exceed its full year revenue target as german bank traders take business from rivals and rising interest rates fuel income. they saw fixed income trading jump 38% in the third quarter, beating most of the big u.s. investment banks. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo this is , bloomberg. ♪

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>> i think the u.k. is the canary in the coal mine. you don't want to do a u.k. when

it comes to budgetary constraints. jonathan: things you never want to have to say as futures on the s&p are negative 3/4 of 1%. yields are lower on treasuries. your two year in the u.k.'s up 11 basis points. the u.k. government will delay the fiscal statement in the new date is november 17. lisa: the implication is that the bank of england doesn't have any space to pull they just a pullback. that is going to bleed into this

rate structure higher. it's not clear why they are doing this. why not met with some framework and say this is what it is. jonathan: i think the chancellor is trying to do something right now. the chancellor spoke moments ago and what did he have to say? >> he is trying to reassure us after mohamed el-erian has said this delay could reawaken the bond vigilantes. he says there will be a full forecast from the office of budget responsibility and has spoken to the boe governor andrew bailey and the priorities to restore economic stability and debt will fall in the medium-term and they are willing to make embarrassing choices. this is what we've heard from the chancellor jeremy hunt. he ultimately wanted to press ahead with the original halloween date. what we have heard behind the scenes is that rishi sunak wants

the delay. he used to be the chancellor and wants to delve into these books. these are difficult decisions that need to be made but the former boe official has said he expects a fiscal black hole may have shrunk him 40 million pounds to 30 but they will want to look closely at this. jonathan: november 17 feels like a lifetime away. can you walk us through what the next decision will look like? >> you have to take into account we are now into double-digit inflation back in july. given that we are not in the space of truss-enomics, you

still got the hawks on the committee worried about this getting out of control and it wouldn't have taken many more to join them to push them toward a bigger hike. will they want to front load? we seem to have someone who is desperate to reassure us that got their hands on the siller -- on the tiller. jeremy hunt to saying they will balance the books in the medium-term. you have to wonder if the gop will be reassured by this message from jeremy hunt. lisa: there is pushback in the u.s. against the federal reserve. it's a similar feeling in the united kingdom with politicians accusing the bank of england from moving too quickly given the deteriorating growth prospects. >> a swing of the pendulum would

be after the summer and andrew bailey took flack for not acting fast enough on inflation. the boe he was threatened with mandate review but that went to the side. there may be criticism because this is hurting ordinary britons. one of the big criticisms of rishi sunak is that he is so personally wealthy that he can't understand the plight of ordinary britons. then the bank of england makes it even harder with a massive rate hike. i'm sure there are many people who don't want that step you seen the mortgage costs coming down because markets have been reassured by rishi sunak taking over. i'm sure many people have their views on the bank of england but at the moment, they seem to be

leaning toward 75 basis points. lisa: does rishi sunak have popular support? >> he's got a huge mountain to climb here. the latest polling shows having 2/3 of people who thought he was out of touch and he is going to have to make an effort to convince people he is genuinely empathetic to their cause. he said a lot in front of downing street yesterday about how he is fixing the mistakes of his two predecessors. if you look at his selection for cabinet, he has reappointed the biggest names of thetruss cabinet. they supported this policy of shifting asylum off to rwanda. does that look like the

compassion he was promising? i'm sure the opposition leader will be asking in the prime minister's questions today. rishi sunak had to do a deal with the tory right to get into office, a complaint that the labor leader has been making. there is hope that this is the new era of boring versus boring and a calmer time but getting into office is probably the easiest bit for richie sunak. jonathan: i'm sure we would all like it to get boring in the u.k. in normal times, this is pretty straightforward coming to prime minister and he wants to go through and make sure the fiscal plan is good and he is on board with it so you wait. i think this makes it very complicated for the bank of england. there is an opportunity for the chancellor and the prime minister lay out what they plan

to do on november 17 and at the plans don't spook market, maybe you can get back to business as usual. lisa: if they pull another liz truss and came out with a plan that did not actually become feasible, that would be so damaging. that is my one pushback. it seems like maybe it's in their best interest to wait longer. jonathan: the guilt is nine years at the front end and the 30 year is up 10 basis points and the market has been a bit of a mess over the last month. from new york, this is bloomberg. ♪

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jonathan: three days of big gains on the s&p 500 with negative news after the close yesterday. now is down 7/10 of 1%. the nasdaq 100 futures are down 1.6% in a rally in the treasury market. yields are much lower in the

united states by three or four bases went on the 10 year. we had a look at 460 in friday's session and we had backed away from those levels in a big way including the session on friday step a much weaker dollar this morning and that pound strength sticks at 150-160. at the end of september, 103 .50 on cable. now we are back. lisa: some people might say it's a great britain story. the new prime minister rishi sunak supposedly is coming up with a more conservative plan and this could be a dollar story. there are reports that china is selling its dollar holdings to support the u.n. and we see that intervention in japan.

how much is that a big piece of what's going on more broadly stop jonathan: that's what the world wants to see. lisa: this makes it easier for them to not import inflation to a large degree. at the same time, how sustainable is it if it's a matter of selling fx reserves? there is no structural change. jonathan: if you like the update on the united kingdom, it looked like this -- at the end of october, were set to get a fiscal statement from the chancellor and the british government and on november 3, a bank of england rate decision and the boe and mpc could sit around the table and make a monetary policy decision. that plan is going to be delayed one outcome on november 17. i guess we will have a decent idea when they make those plans

because we will hear from the prime minister in 30 minutes time. lisa: the market moves now. it will not wait to move so how much will they adjust their plan depending where the market is? this is the issue when you have a vigilante market and how much to the pressure rishi sunak to deliver? it shows tricky bond right now. jonathan: relative to the moves in the gilt market, seven or eight basis points on the front and is not a major move. we talked about the several weeks ago. lisa: what happens at the bank of england says we have to go to 100 basis points? does that change the equation on november 17? the moves are not that major right now but rishi sunak seems to be the kind of controlling

status quo and bringing things around but how long can that last? jonathan: how long does that stick? we will get the first question -- test in about 27 minutes time. joining us now is the global head of fx strategy. i would love your reaction to what we hear from the british government with cable at 160.20. >> as you said, a lot of this is dollar weakness but on the u.k. side, i think richie sunak can delay that statement. the tabloid writers would've had a field day with the halloween headlines. it makes the decision harder on november 3 but what rishi sunak is hoping that if the current momentum continues, they will

see bond yields coming down everywhere. jonathan: i have no idea why it was ever october 31. lisa: i wanted to be then so we could see those halloween headlines. jonathan: thinking about the incompetence of the former leader, the timing was ridiculous. we have a meeting at the bank of england and the decision will come november 3, does it complicate things for them? >> for this meeting, probably 75 and wait and see and further out the curve, there is more action in the price maybe it will rally a little bit. they don't need to make these decisions and do forward guidance. they are not in an easy position but i think that position is easier now than it was a few

weeks ago. lisa: also this is very much a dollar weakness story so how sustainable is that? >> that's a critical question. on friday, we had the apparent shift in rhetoric from the fed right before the blackout, than over the weekend, develops in china made markets risk-averse. we've seen euro dollar break some pretty big numbers, the downtrend we started in january. if we see a combination of lower yields and slightly higher equities, i think the dollar will be in a little bit of trouble in the next month step it doesn't change anything fundamentally but for now, i think there is some profit taking. lisa: on friday we got hints of something different from the federal reserve. is that really what people are hinging this on? jonathan: i think mary bailey

said it herself. this idea of the step down, can you have a step down without the cpi confirming a decent rate? we can identify falling prices and will have pushback but it's not about what i think the fed should do, it's what they will tell us what they will do and they are saying they need to convince several months of court data that they are on a trajectory back to a low core inflation target. lisa: if they have a step that i keep rates at 4% for a long time, is that going to mean the dollar will be weaker or does that mean it will be stronger because it will be a more persistent higher yield and it means the rest of the world is not catching up at the same pace? >> to your point, if they are going to keep rates at 4.5%,

other banks are beginning to slow down on the dollar will maintain the yielded vantage and be one of the highest carry currencies in the g10. you've got to distinguish short-term tactical repositioning from the long-term structural news. we have not yet seen that turnaround u.s. inflation that will get the fed to cut rates rather than pause hikes. lisa: how much is the u.k. getting every free from what japan and china are doing to sue their currencies? >> it's often been said that politics is about timing and you cannot expect to feel sorry for liz truss but you can look at the developments and feel like had she not had such terrible timing, there is a bit of a reprieve for the u.k.. suddenly, they have their work cut out for them.

it will not be straightforward sailing. jonathan: remember when everyone got excited about the step down? we had cpi data out of australia overnight for the quarter and it was a surprise big-time to the upside. i know this is a lagging indicator but is that a warning shot to this federal reserve? >> in part but it will be interesting to see how the rank of canada goes today. they hiked in march, couple of weeks ahead of the fed and at the time, they were seen as needing forward guidance so let's see what they will do to day. i think a lot of people will be looking at that as a sign of things to come. jonathan: wonderful to hear from you as always, thank you very

much. the headlines from the u.k. chancellor, we are willing to make politically embarrassing choices and many changes affect our forecast even in the last 24 hours. i think the sequencing is problematic for many of you most the chancellor said he discussed the new timetable with the bank of england governor so he has had that conversation with governor bailey. lisa: how does he handle this given that inflation is still there and there will be a likelihood of austerity plan? do they raised by 100 basis points? the bank of england is underwhelmed with respect to rate hikes. how much do they need to regain the credibility on that side to say that we see that in elation is the foremost problem and we

will not get involved in political games? jonathan: i will love to see what they will do with qt. the ecb had to come up with its own mechanism which is not put in force yet. the be had to intervene in the affects market and the federal reserve is doing qt. do you think that will make it to 2023? we've had financial stability concerns and the likes of the u.k. and europe before they got going and we've had japan stepping back in. we caught up with mohamed el-erian yesterday and if he said the fed backs away, it will be because of financial stability reasons. he thinks they will get stuck in a stagflation. the outlook is really bullish in the short term but maybe not for

the wrong reasons. lisa: we heard yesterday that it's not clear in 10 year treasuries are not screaming by because of that fear. jonathan: futures are now down 7/10 of 1% on the s&p 500. from new york, this is bloomberg. lisa: keeping you up to date with the first word, new british prime minister rishi sunak has delayed an economic plan that was due to be delivered monday. it will now be released november 17. he wants more time to be able to make the right decisions on managing the british economy. >> our priority is economic stability and restoring confidence that the united kingdom is a country that pays its way. lisa: the government wants to close a fiscal cap that could be as much is 46 billion pounds.

the european block cannot agree on christ cap for pollution. there is a sense of urgency that's fading. new york is still the most expensive rental market in the u.s. but often has no past san francisco for second place on the list. the median one-bedroom rent in new york is $3800. boston rose 6% this month well san francisco is $40 less. alphabetic peers to be preparing for tough times as the economy slows. the company reported earnings that missed expectations and advertising sales were less than expected step alphabet said it would slow hiring and control expenses. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries.

i am lisa mateo this is , bloomberg. ♪

>> the risk of a u.s. recession is uncomfortably high. i don't think it's a done deal, the labor market is still strong but it requires a fed that has a lot more skill and a lot more [indiscernible] because it no longer has time. jonathan: if you are just tuning in, futures are down on the equity market. the underperformance on the nasdaq where the big weightings are taken by dig tech which disappointed after the close yesterday.

the 10 year is just north of 4% and the euro dollar is just above parity. going into the ecb tomorrow, i never thought we would see a week where the pmi's were in the 40's but ecb hiking 75 basis points. lisa: you've got hands of politicians poking back in a meaningful way step how much will they start pushing back and saying maybe you don't need to do this. jonathan: i think you are being kind. the senate banking committee chair has written a letter to chairman powell that says we must avoid having a short-term advance in the labor market because of aggressive monetary actions especially when the fed's actions do not address its main drivers. chairman powell in jackson hole

talked about the amount of pain we would have to go through because the greater pain was not dealing with it stuck we are about to see that pain potentially in the labor market and the pushback is starting to build up in washington. lisa: we heard that from sherrod brown but how much is this becoming a mainstream? is this ahead of the midterms to shift the blame or is this sincere? do people think the fed is going too fast? i'm not sure about that yet. jonathan: it's definitely politics but i imagine it's a bit of both. we need to talk about tech earnings. we get facebook after the close. snap disappointed over at google. what are you learning about the ad spending at these big tech companies? >> i think alphabet results show

that not everything was priced in. we talk about negative visions and how we have seen snap being revised to 30% for next year. in the case of alphabet, the estimates had come down by 10% but they came out with a disappointing reading so the guidance doesn't seem to be optimistic so there is a combination of slowing topline growth and the part that was most disappointing was on the margin side. the cost structure continues to go out of control and they talked about lowering the headcount for the next quarter by 50% but still, the fixed costs continue to rise and that is what is showing up alphabets margins which were down almost 300 basis points and below market expectations. lisa: we've heard tech layoffs because and there's talk about how much they need to go. do there need to be deep cuts to the google step to become more

efficient? >> i think it's more about why are they growing headcount by 25% when they can see that the top line was consolidating? there was some forward guidance last year. they grew 41% in the last -- at the same time last your but you can see the trend line in terms of the advertisers pausing and slowing down. why did they have to grow the headcount by 25% and that is baffling in terms of how they manage the cost structure. this is not the down -- first downturn they are going through so some answers around what will be the next leg of growth. people talk about the cloud and how that is the next leg of growth. in the case of youtube, there was a marked deceleration. the headcount growth is concerning when it comes to alphabet.

lisa: we also got microsoft and those shares are following because of the disappointing forecast for the cloud computing unit. how much does this indicate a broader pullback in the services people thought as essential in a structural shift tire that will lead to further and deeper cuts among the big tech companies? >> in the case of cloud, we saw above trend growth when it comes to digital transformation and i.t. spending over also you will see a pause. in terms of secular growth in the cloud, nothing is changing. we still think the cloud will grow and it's a pretty addressable market. in the case of microsoft especially on the cloud side, it will be more like a quarter or two growth normalization. you really have to think about

whether the market is saturated as far is advertising growth. the real concern is around the search cash cow and how much room google has to grow. jonathan: they are down hard in the premarket. microsoft a similar move lower. later we get met. i can't get used to this, it's facebook. we have talked a lot about how they have different clients when it comes to ad spend. the price story has been battered so what do you expect for facebook later? >> more pain, more estimate cuts and in the case of facebook, you will see add pricing compression. they are clearly the worst hit when it comes to the apple privacy changes in the fact that

they are not diversified, at alphabet, you've got top line diversity -- diversification. for facebook, this is 98% advertising revenue and people are complaining about their oculus reality and how it's a big dragon precast flow. these companies have to think about capital return and even at alphabet, they didn't mention a word about it. why would a shareholder be in these companies if they are not getting that return because the share count is not going down in the margins are going well -- are going down. clearly, there will be a lot of topline pressure. jonathan: let's catch up tomorrow after we look at facebook after the close little later. method is down about 4% in early trading. it's a broad sweep of things in

earnings. was digital spend, machinery, industry, automobiles with concerns all over the place. after the close yesterday lisa: there is differentiation within the tech complex and they got a dose of cold water. how much is this going to lead to further job cuts in the tech world and that will be the name rudy's earnings. -- and this will be the theme with earnings. jonathan: treasury yields are lower but are basis once in the dollar is a whole lot weaker. from new york city, this is bloomberg. ♪

♪ >> volatility, the fear, the capitulation has not been there yet. >> we have a recession penciled in but it may not be as bad as some of the more extreme forecasts out there. >> we are all talking about the risk of recession but markets still don't have it priced in. >> i think it's hard to see something that will be a smooth landing in any way. >> the financial strains will become more severe because the is on the way to go from 3%-5%. >> this is bloomberg

surveillance. jonathan: three days of gains colliding with negative news after the close yesterday, live from new york, good morning. this is bloomberg surveillance on tv and radio. equity futures are down 6/10 of 1% on the s&p 500. lisa: this is in the big tech world and there have been such be enough expectations considering they failed to meet the bar which raises concerns about tech companies after the close today. jonathan: do we have a decent picture of the fourth quarter? lisa: it's not good. we don't talk about texas instruments as much but this is a broader swath of the text -- texts fear, not just

electronics, it's a broad industrial complex. how can this be positive especially when it's brought faced. it's not only ad spend but it also relates to the investment cloud. jonathan: it's machinery and industry and let's talk about house price growth. 30 minutes away from the opening well, the data comes out and for years, it was ignored and now it moves the bond market and moves equities. lisa: you saw the fastest deceleration year-over-year in home prices ever. we are seeing the 30 year fixed mortgage rates are topping 6% for the first time in years. high mortgage rates are putting a huge chill on housing step how much does this bleed into the cpi. people are excited to see this because they means inflation will slow down but other people say prices are still rising and it will take a long time and

wages may increasing at a faster pace we will find out about that. jonathan: that's coming up next week but the ecb is tomorrow. equity futures on the s&p are down 6of 1%. /10 disappointing tech numbers and more tech after the close. yields are lower on the bond market by four basis points. big moves in the affects market with dollar weakness against the euro. i'm struggling to get used to parity but we are back above parity on euro-dollar. lisa: is this dollar weakness a story that is more pervasive or is this an issue of perhaps intervention by major banks? in a moment, we will hear from the u.k. prime minister rishi sunak who is taking his first prime minister questions.

they want to get a full assessment of announcing their plans on november 17. it puts the bank of england and a little bit of a difficult situation. at 10:00 a.m., this may be the moment of the day, the canada rate decision step if they decelerate the pace of the rate hikes, how much does that set the tone for a step down at the federal reserve? i think that's actually feasible, they have set the tone. jonathan: i find this ridiculous. we've had this conversation for a month or longer. maybe two months. lisa: people are getting hopeful that maybe we are getting to the point of market disruption. facebook after the bell command much do they confirm the decelerating and how much do they add to the gloom and at

what point does it lead to layoffs. how much will facebook cut its staff and how much is this setting the tone for others? jonathan: how much will twitter cut its staff when elon musk gets a hold of it? lisa: he will close on friday, you are skeptical? jonathan: i remain open-minded. what would we talk about? lisa: how beautiful the world is? jonathan: we've had a big rally in the last three days but how do you know the difference between the bear market rally and something more durable? >> you really don't until is well behind you. here are a few things we do know. we know that investors are skittish as the fed pulls away

the punch bowl of easy money and that will lead to a lot of uncertainty. in these situations historically, you have seen that when we are the worst, the biggest gains of the next leg of the cycle usually come in the first third of the cycle when the fundamentals are still deteriorating and sentiment is still negative. whether this is a bear market rally, you don't want to be sitting it out until someone blows the all clear whistle. we are still judiciously bullish on equities. there is a lot of long-term forces to be excited about. equities ultimately are read on human progress and there many forces pushing gdp higher over the next few years that we believe that new technology, aging and restructuring these forces will continue to drive

equities long-term. lisa: do i want to buy into human progress? i'm curious whether the recent earnings because you any questions or a pause about what kind of human progress we have at this point? >> the one trait -- -- trade that is never worked is to be short on human progress. jeff they says says human beings have immense capability to innovate themselves out of a hole. it's not positive out there and is not a short thing but we are not having any data points that suggest the bottom is falling out. there is a slow down and just and we are seeing more scrutiny decisions being pushed out.

it's like turbulence on an airplane. lisa: are you buying big tech? >> we buy any stream of cash flow where the net present value is higher than the stock price. with big tech, the larger case for tech in these stocks is positive. these stocks are a thing of beauty. they are low capital intensity, high returns on equity and investors would be on rise to ignore big tech. in light of this environment, you want to be judicious and in places that have a strong position on the value chain and have some kind of pricing power and margin sustainability and copious amounts of free cash flow. jonathan: everything you said we could have said at the beginning of the year. everything you said is true but we are down by more than 20% on

the nasdaq. dude -- do we have to approach the multiples with the central banks in control. is that the challenge to work out the right desk the price of the risk-free asset and the price of risk? isn't that an ongoing process? >> the one difference between the beginning of the year's values are significantly different so that changes the calculus. at some point, when things get priced in, on a case-by-case basis, some of these look attractive. part of that that gave us a sobering moment is the stories about taking in free money and going like gangbusters and having indeterminate business model manifest, that story is

going out the window. jonathan: wonderful to catch up with you. a tough day for equities after three days of gains on the s&p 500. we are a bit lower on the nasdaq in the s&p 500. just last week, this man said you can get it short-term technical rally and guess what you got? we got a big week of gains. lisa: did he say we could get up to 4300? we are getting there. the issue right now of how much we have to price in a new valuation structure is the question and it's unknown because people don't understand what the inflationary regime is and it's important that

underpins a lot of volatility. jonathan: trying to figure out what happens in the u.k. as well but we will get a fiscal statement on november 7. -- november 17. they are looking to plug a 30 billion dollar hole by november 17. this is going to be painful at a time where we have high prices and a cost-of-living crisis and will see some austerity for the british government. lisa: how much is rishi sunak target some of the businesses with taxes and things that liz truss tried to move away from? jonathan: tk took the day off to watch pmq's. lisa: i think he's practicing

his role-playing with jury duty. jonathan: i've got no idea what he's up to. futures are down on the s&p 500 710 of 1%. this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world, the new british prime minister has delayed an economic strategy announcement that was due to be delivered monday. it will now be released november 17. he wants more time to make the right decisions on managing the british economy. >> our number one priority is economic stability and restoring confidence that the united kingdom is a country that pays its way. lisa: the government wants to close a fiscal gap of more than 40 billion pounds. elon musk is promising to close the acquisition of twitter

friday. he made the pledge and a video conference call with bankers helping fund the deal. $13 billion in debt financing. the european union's executive arm will lay out plans to drastically cut pollution levels which could potentially eliminate more than 70% of the 300,000 premature deaths annually over the next decade. overhauling air pollution will bring the eu closer to guidelines laid out by the world health organization. deutsche bank is signaling it may see his full revenue target as they cap take business from rivals. deutsche bank so i fixed income trading jumped 38% in the third quarter, beating most of the u.s. investment banks. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo this is , bloomberg. ♪

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>> the prime minister and i have decided it's prudent to make

that statement on the 17th of november when it would be upgraded to a full autumn statement. we discussed this last night with the governor of the bank of england who understands the reasons for doing that and we will continue to work closely with him. jonathan: the bank of england decision next thursday delayed. the prime minister, rishi sunak, declining to save benefits will rise with inflation. are we going to find out what these plans look like in a month or so? lisa: the likelihood is they will probably strip back benefits and will probably not spend as much which is probably what needs to happen. i wonder how much the bank of england is in the hot seat stop the former fed official came out and said it was the bank of england did not flood big gap in

the regulatory whole that was some of these pension schemes. how much will this be a political issue for andrew bailey to do the least damage at this next meeting? jonathan: i know is popular to bash central banks and am happy to participate. just a little dose of sympathy for the bank of england and i think they were concerned about contributing to perceived physical dominance. that they had done so, we would have had a much bigger problem in the united kingdom. having said that, they have responsibility to make sure the financial instability does not make things worse and there was clearly a financial stability concern in the u.k. lisa: it's getting less and less clear how bankers remove themselves from the political discussion.

at this moment, there policies are directly moving in tandem with what's going on fiscally. jonathan: if you try to avoid the politics, you become a part of the politics anyway. lisa: that's what we are seeing and -- and at what point does andrew bailey try to stay out of these politics? jonathan: we've talked about operational independence but look at what is happening in the united states. we've got the senate banking committee chair writing a letter to chairman powell just yesterday, complaining about rate hikes. we will see so much more of this in the people in power, did you hear complaints about zero rates from the federal reserve when those people were in power? this is the other edge of that

sort. lisa: where is the political responsibility when you need to come up with long-term plans and you have short-term election cycles? jonathan: you've got problems worldwide right now so let's talk with lizzie burton in the u.k. with the prime minister speaking in the last 15 minutes, what did you hear? lizzie: if you thought the grown-ups were back in the room, think again step it sounded a lot like the responses we heard from his predecessor. they were using the same attack lines we thought. richey sunak was accused of making a bed deal. he means he's had to negotiate with the tory right to get back

into office. then rishi sunak was attacked or his wife's tax status. he referred to a video that showed rishi sunak saying that rich constituencies will get more funding. they are trying to show that rishi sunak is out of touch in a cost-of-living crisis and rishi sunak referred to jeremy corbyn again to talk about living in north london. rishi sunak, two thirds of people think he's out of touch with the british people so it's an image he needs to turn around. the appointment of the pension secretary is telling even though there is no confirmation that

benefits will rise with inflation. that could indicate that it may rise and on the bank of england, perhaps with needs to happen is what the former policy makers say is more oversight and financial stability measures and perhaps that's the treasury select committee will do. lisa: are you surprised that the other members of parliament did not come in hot on what the new plan was and what the contours of the november 17 issue will be? lizzie: they are still going so i cannot tell you exactly if anyone has acted on that yet. the overwhelming message from the government is that it wants to consider these plans by

promising to balance the books in the medium-term. they are saying they are in touch with the bank of england and the office of budget responsibility closely. there isn't going to be a huge surprise as there was with liz truss and the many budget stuff they are trying to say they've learned their lessons in the bond vigilantes don't need to come out. in terms of what it means for the bank of england, it hasn't really changed the rate expectations for the november meeting. you might see a debate between 50 and 75 basis points and given the remarks recently, there may be words about a lower set of hikes down the line stop they said market pricing is too jonathan: high right now. jonathan:thank you, great to catch up. futures right now down about a half of 1%. it's a new world. the prime minister in the u.k.

saying inflation is the enemy and inflation right now is the enemy. lisa: so how do you counter that? how much of the politicians willing to do that. will it be austerity or some kind of investment that they can't pay for right now. they need to cut back pretty dramatically. jonathan: every single economic downturn for this -- for the last few decades has been met with a countercyclical market breaker. it's a challenge for the economy in this market with futures lower by have a percent. from new york, this is bloomberg. ♪

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jonathan: two hours away from the opening valve. equity is down 5.5 --0.5%. alphabet, microsoft disappoints on guidance. in the bond market, twos, tens,

30's . yields lower again. the house price data out of the united states, softer, yields lower by five basis points today. the 10-year d just north of 4%. a ton of focus on the u.k. right now. we also have to focus on the others' line of the story, a much weaker dollar. pound sterling, 1.1581. cable earlier was through 1.16. up 1% on the session today. quite the range on a major currency pair over the last month or so. lisa: how many people have you talked to who say they are all in? they are buying the pound? jonathan: you think i speak to anyone with conviction? lisa: this is one area that is

trading like an emerging market. how do you deal with that? jonathan: tremendously difficult. for the governor of the bank of england, even more so now that they have change the sequencing. lisa: it is unclear what the narrative is, how much was baked in. we already see a decline of 28% in the nasdaq year to date. yet, some of these disappointment were met with pretty severe downturns in some of the shares. google shares down nearly 6%. microsoft down 6.5%. google came out, talked about shrinking some of their workforce, trying to cram some of the costs they are seeing with the margin compression. that is not as surprising as micro soft, downgrade to what they expect for azure, cloud computing unit. how much does this speak to the slowdown more broadly within tech?

texas instruments also speak to that, down 5.4%. jonathan: it is the breadth of the story. the disappointment with alphabet. disappointment for corporate i.t. budgets, cloud at microsoft. texas instruments, we have talked about ships, smartphones, computers. now we are talking about something more broader than that, industrial machinery. it is the breadth of the story overnight that is concerning people. lisa: which is why meda will be so closely watched today, amazon and apple tomorrow. 3.9% decline over at facebook. amazon will be interesting because that is even broader. apple, shares actually are performing, down only 0.4%. how much are they coming under pressure from their peers? how much does this unite the big

tech names? jonathan: if there is a name that can divide and earnings season, it is apple. we have been lowering the bar over the last couple of weeks, bloomberg talking about how disappointing iphone sales may have been. we will find out. i find myself talking about that so many different times. i feel like i've been part of this movie before, and it ends the same way, they knock it out of the park. i think it will still have that element of surprise even though we have lowered the bar. people are used to lowering the bar and then knocking it out of the park. lisa: how much is that the reason that apple has outperformed? people don't believe that they could be a victim of the slowdown, so what happens when they are? jonathan: has your iphone slowed down? lisa: i don't really want to talk about it. jonathan: not part of the

conspiracy. just saying that it always happens. maybe they target ashok batia, deputy cio at neuberger berman. we have had some bad news in house growth data yesterday, treasuries rallied. typically treasuries are part of the bad news and do not really at all baby can you take any signal from that or is it too early? ashok: our biggest view, the thing that is coming for the bond market is a period of less volatility. the bond market is price for 4.75 to a 5% terminal funds rate. the fed is signaling they want to start thinking about that pause that has been anticipated all year. once that happens, you are going to pin the front end of these

bond markets to two-year yields. then the 10-year yield will start to move on expectations of growth, whether or not the fed will ease in 2023, 2024. when that happens, the 10-year gets bounded by how quickly the fed could ease, how strong the remaining inflation data can be. that is transitioning the bond market from where we have been driven exclusively by inflation and the central bank reaction function, to an environment more driven by growth and the amount of slowdown, how that ultimately impacts inflation. maybe near term we get back to 3.75 or something like that, but as long as that is generally correct, that we will get more of the growth centric bond market, putting two of less volatility, it should open up a lot of capital to come to fixed income.

lisa: how concerned are you? we have been talking about political risk, pushback from the central banks, crimping growth at a time of great political risk for people in charge of the fiscal budget. how concerned are you that the pressure will push central bankers away from being as aggressive as they have to be, crimping inflation, leading to a higher inflation environment for longer pressures yields for longer? ashok: that risk is definitely rising, something that will play out for the next couple of years. but it will be a couple of dimensions. the big thing for this big u.k. news, retracement, this has generally been an environment where fiscal policy and stimulus were actually declining, central banks were hiking, both authorities were going in the same direction. then the u.k. comes around and we suddenly have expansive fiscal policy with tightening monetary policy.

it is just sort of inconsistent. the two things in the coming periods are what you said, whether there is pushback on the central banks. i think we are at a point where central banks were not be very responsive to that, they will stick with tightening for at least the fed. the other issue that is coming is whether or not, just as the u.k. is course correcting to tighter fiscal policy, that becomes more of a broader theme. balanced budgets, tighter fiscal policy happens over the coming 12, 18 months and other areas, could accelerate any growth slowdowns. both of those risks are developing. lisa: what does that mean for a credit cycle that a lot of people think is still resilient, as far as what is being priced in? then you have some people who say people are missing the forest from the trees here. there is something more significant going on. ashok: we are in the camp the

next 12 to 18 months to be a pretty benign fundamental environment for credit. i do think the market shares that view. even when equities were making new lows for the year, high yield spreads, 50 to 100 basis points off the widest spreads we saw. credit has been generally holding in better. the main thing we are thinking about for credit investing, the whole world will have to adjust to this higher rate structure. issuers that have a lot of floating-rate debt in their capital structure, they will be adjusted first. they will see the declining leverage, higher expense, declining ebitda coverage. our sense is that is more of a risk of downgrade, how we see credit markets. fixed rate capital structures have a little bit more optionality to see how the rates picture develops. i would characterize us as a bit

more concerned about what the interest rate environment means for leverage statistics rather than expecting a default wave over the coming 12, 18 months. jonathan: on the high yield index, can you speak to how much the quality of that index has improved over the last five years? a decent idea of how much signal we can expect from that index when it tells us to how weak this economy is getting, how quickly? ashok: the appreciation of what you said is rising. the high-yield market has gone from roughly a third bb to over 50% bb issuance. it is increasingly more of a capital structure for companies there in a speculative type of capital structure. there are certainly single b, ccc issuers, but the overall composition of the index in terms of reading is the highest it's ever been. the other element of it, it is a

shrinking market. net supply in the capital markets are in the more speculative capital, increasingly going into the loan market, private debt markets. it is leaving the high-yield market in a position that is not the high-yield market of 10 or 20 years ago. as you said, reading too much of a macro view into high yield spreads is getting, i think, harder to draw that conclusion. jonathan: always appreciate your time, ashok batia. final point, tremendously important to his point, people are starting to appreciate it, but how many people look at spreads and think they're ok? you need to look elsewhere. lisa: they did traditionally use this as the red flag. it is not anymore. although what does this mean about private credit? that is the bigger question. jonathan: how much insight do we

get into what is happening there? neil dutta will catch up with us from reticence macro. you two are friends again. lisa: he believes in human progress. i do, too. jonathan: neil is coming up later. this is bloomberg. ♪ lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. new british prime minister rishi sunak has delayed an economic strategy announcement that was due to be delivered on monday. it will not be released on november 17. he is seeking more time to get the right decisions on managing the bricks economy. europe is running out of time to act on natural gas before winter. the block still cannot agree on what a price cap should mean. policy have gotten a break. there is a surplus thanks to warm weather, but that has because the sense of urgency to fade. a report from the united nations

paints a grim picture of global warming. it says this on track to more by more than two degrees celsius by the end of the century despite plants to cut greenhouse emissions. u.n. says the good news is projection show emissions manatt increase after 2030. higher prices have pushed consumers to tap the brakes is on how much they charge up. visa saw the slowest growth in a year. a decrease from the 12% growth aborted in the previous three months. profit still exceeded analyst expectations. new york is still the most expensive rental market in the u.s., but boston has now passed san francisco for second place. the medium one-bedroom rent in new york is now 300 $860. boston rose almost 6% this month to $3060. san francisco is $40 less. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than

2700 journalists and analysts in more than 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> the crack in the inflation landscape will take a while to get into the index. i can make a compelling case that we are moving in the right direction, that the opposition wants to take us in the wrong direction, but yes, it will take some time before it works its way into the index and people feel it more noticeably. jonathan: that my jared bernstein from the white house council of economic advisors payment good morning. negative on the s&p 500. down .7% on the back of disappointing ad numbers out of google.

cloud spend down at my croissant. disappointing numbers down at texas instruments. a little bit later after the close, meta. rally in the bond market continues this morning. this morning, down by four or five basis points. we talked about this rally in the bond market, weakness you are seeing on the back of it in foreign-exchange. 1.0023 euro-dollar. looking for potentially 75 basis point hike. news out of russia in the last 60 minutes. vladimir putin and others speaking. i want to get maria tadeo to get us up to speed. what have we heard from vladimir putin? maria: you have to pay attention to what vladimir putin says and what russia is doing, whether you believe what they say, whether they need what they say

-- remember, we are in a propaganda war. but we have pictures on russian tv, vladimir putin overseeing nuclear drills. they say everything was on target, the training went as expected. there are number of things to keep in mind. there have been a flurries of calls from the russians about this dirty bomb, explosives wrapped up in radioactive material. they say ukraine is planning to do this. ukraine denies this. they are asking the atomic agency to come and check it. nonetheless, the russians are holding a drill. the way some interpret it, either russia is trying to reach out to the west to get diplomatic channels going on or this is a false flag for what could be a serious escalation in the war. also put this in context.

we are now entering the winter, this is very complicated. to move people, armies, weapons in the winter. russia is in a position where they are not advancing, they have to stay in positions, defending targets. ukraine encounter operations continue. so the pressure for vladimir putin increases domestically. the russian army, the pride of the nation, technically underground. you have to read the signals here. i am told this is either a false flag in the making, or russia, given the desperate situation on the ground, is trying to make a communication channel, reaching out to the west under the pretext of this dirty bomb. jonathan: it is concerning. thank you for running us through all of that. we heard from joe biden in the last 24 hours on this topic. he said russia would be making an incredibly serious mistake.

you were in the room yesterday when the president got his booster shot. walk me through what is going on with this administration. we had this chain of events yesterday where 30 democratic progressives wrote a letter about pushing the administration to go toward some sort of diplomatic solution. then retracting it and walking it back. what is going on? annmarie: let state clearly, the white house says nothing has changed in their approach to ukraine, they are not in a moment to negotiate with russia at this time. and then you have what is happening, quite confusing, a lot of people shaking their heads, unsure where this is coming from. these 30 progressives release this letter saying maybe now is the time as we pair this economic assistance with diplomacy, even potentially sitting down with russia. there was a ton of blowback on this letter from the progressive

wing of the democratic party. then they retracted the letter. then you had the caucus chair come out and say it was a staffing issue, they did not vet it. at the same time, said, as the chair, i take responsibility for this getting out. the issue is, and i'm hearing from representatives saying i cited in june and it was a different scenario. yes, there was not talk of a dirty bomb every day making headlines, but you did have president putin installing authorities in occupied territories. that led to the illegal annexation of these territories in october. there was still fighting on the ground. lisa: that is a political back-and-forth, we can get into that, but there is a broader issue. both parties are grappling with economic blowback of this conflict, some of the sanctions.

is there a cohesive message we are getting, especially after we heard from sherrod brown yesterday, concerned about the fed's actions with inflation, in terms of what they want to see put in place that could crimp inflation more significantly? annmarie: what is interesting about this letter, it was 15 days before the midterm election. a number one issue is the economy and right behind it is inflation. you have this pressure on lawmakers across the board about how to deal with rising consumer prices. this is why people may go out and vote. people are saying there could be this red wave. at the same time, you ask about this cohesive message. i don't think it is cohesive about how the democrats are approaching the economy ahead of the midterm elections. sherrod brown is the one that has to overlook what the fed is doing. writing this letter to the fed

on the heels of senator bernie sanders, senator warren talking about the fed, are they going to fast? they had to in mind unemployment. but are the democrats using the fed as a scapegoat? not yet. jonathan: thank you. we have to talk about two things regards to this letter from the senate banking committee chair. the optics and the content. the content, many will believe that he has a point, including the wall street economists that have flagged exactly what he is saying. fed's action do not address some of the main drivers of inflation. then you have the optics. for all the complaints about how the former administration. with this federal reserve, if this continues with the other party, they are playing the same game. this federal reserve is any sticky spot. the first thing i thought of today were the comments of chairman powell in jackson hole. the chairman effectively tells

everyone, but we are going to do is cause some pain. if we don't, there is greater pain for not dealing with it. it is in their projections. the objective is to get unemployment up. that is part of the goal to get inflation down. we have said repeatedly, it will be difficult to convince people in washington and across the country that higher unemployment is a price worth paying to get inflation down. lisa: this will be a difficult thing. how does jay powell continue to reinforce that message when the political blowback starts to get more intense? jonathan: it gets more intense especially nest week, when this fat is set to go another 75 basis points potentially. mike wilson of morgan stanley is next.

>> right now, all central banks are acting tough and talking tough. >> i think the fed is highly

aware of what they've done to financial markets. >> we will see a significant slowdown in activity. >> recession risks we are seeing is by no means uniform. >> everyone is waiting for the fed meeting next week. i think the messages we will still stay hawkish anna dally will rally into christmas. jonathan: no fed speak week. it has been wonderful. live from new york city this morning, good morning. this is bloomberg surveillance. alongside lisa a bomb of its featured john .3% on the s&p. we have had three big days of gains, and then the earnings hit us on the head. lisa: you really think it has been blissful the last couple of days? jonathan: i love the quiet period. lisa: definitely creates more focus on the actual data. it has been softening on the

macro level. bad news was good news, and then you got the earnings which changed the scenario, raise the specter of how much is priced in? and he misses were heavily punished in the aftermarket hours. jonathan: if you are pricing in a 5% terminal rate, you can make the argument better now than you could three months ago. have we priced in the consequences of that rate hiking cycle? most would say we have it. it was as spent at google, i.t., budgets, corporate i.t. budgets in the microsoft projection that got people's attention. texas, as well. not just about smartphones and computers. this slowdown may go beyond that. lisa: and we have not priced in the ramifications of higher rates for longer. we don't know the ramifications of higher inflation on the consumer. we don't know where the economy

will be in a broader sense. the issue is, if you get an economic slowdown sufficient for a slowdown in the pace of rate hikes, is that good news or bad news? right now, at least treated by their earnings, the way they have been treated in market -- aftermarket hours, it is bad news. jonathan: it depends on why they are doing it. if you are going from 75 to 50 to 25 because the economy is slowing down, that is not great news. but if you are getting this positive supply-side response, that is bullish. you have the supply-side solution to the inflation problem. but if they have destroyed demand problems, financial instability, big issues. lisa: this was highlighted by google earnings yesterday. you heard the cfo come out and say it takes time to move the ship, they are try to pair back some of the expenses in order to have bigger margins, but it takes time.

they have to get those plans in place. if the fed turns around and stopped raising rates as much, how much of an effect does it have on an economy that is turning around, that will lead to higher unemployment? we listen to nouriel roubini, he made some good points. jonathan: i said to mohammed, it is good that nouriel came before you come he set the bar so low, you were constructed comparatively. lisa: not a done deal that we would get recession. jonathan: since when is it optimistic to say it is not a done deal that we will get recession? that tells you a lot about sentiment. lisa: also about following nouriel roubini. jonathan: i started the book last night. if i come in day after day increasingly bearish. lisa: you will come in looking haggard. jonathan: i messaged him yesterday saying i started the

book. you can tell me what i sound like in the next few months. future down .75% on the s&p. just above 4% on the 10 year. interesting to see some dollar weakness out there as well. euro-dollar backup of a one handle. euro-dollar positive half of 1%. that rally in the bond market is curious on the back of that news. we are seeing the risk mitigation characteristics return in response to the bond market, specifically on the back of that housing growth data in the u.s.. lisa: and will it all be killed by the cpi report? people think that, yes, housing prices are increasing at a slower pace. retailers discounting certain items. used car prices come down. how much will that bleed into broader, lower inflation, versus

simply? kicking the jonathan: there is a man with a crystal ball on wall street. he joins us now, mike wilson, from morgan stanley. you came out last week talking about this short-term tactical call of a market that will mlet up a little bit. here we are, massive week of gains last week, first couple of days this week. what is it about the short-term? what is it about now and the start of next year where you start to become more constructive? mike: making predictions is a tough job, especially about the future, but that is a life we have chosen. we have to make these tactical calls and we think they are actually tradable. we think we got to a point a couple weeks ago mainly for technical reasons but there are some fundamental things changing, too. this summer, we didn't have all of the elements.

let's talk about them. sentiment positioning is extremely bearish, as bearish as june, the last time we had a tactical rally. the 200 day moving average, something we didn't achieve in june. that is an important level that people don't talk about. it is your long-term support level. to break that level, you typically need a recession. because of recession are very high, but we have not seen the whites of the eyes of that recession yet. until you get that, you can usually hold that 200 week moving average. the other important factor, we think rates are topping. rates are looking very toppy. our rate strategists have gotten more neutral. they are now calling for no longer bear flanders but steepeners. that will be mostly on the front end. the back and has to come down,

to, as the market things about the fed pivoting. as you have been focused, we are more bearish on the outlook for next year. we have earnings this quarter. we just don't think we will get the full capitulation from companies on 2023. we think it will take longer. you know how we are thinking, we are still bearish in the midterm, but we think this tactical rally will be big enough to pivot and trade it. for those that can do that. lisa: how far along are we in this tactical rally? mike: all rallies and downturns are about timing and price. in terms of price, 200 day moving average is an achievable level. 4150, but it is coming down. depending on where you get there will determine the level. i think into the holiday period, maybe thanksgiving. then we get the black monday results from the holiday shopping season.

we will see if it will be a black monday or red monday. we are pretty discouraged in terms of what we think we will get on holiday sellthrough mainly because of what you mentioned, a lot of discounting moving the extra inventory. that is when we will get the next chance to perhaps see fundamentals overtake the technicals on the downside. then ultimately the bear market will be over sometime in the first quarter. all of this is subject to revision. i want to make clear, if the market start trading off again, the s&p blows through 3650 the downside, we will be bearish again. we like the price action the last couple weeks notwithstanding some negative earnings report last night. we think the market will hold up and that will be another positive catalyst. if the market has bad news and fundamentals, what do you have? jonathan: you talk about

technical and fundamental factors. what is the way of paying off that rally? through the index, s&p, somewhere else? mike: first of all, the call is to really help our clients. the main call was to just get out of the way. when you get these rallies, the shorts go up the most. that is what has happened so far. low-quality rally so far, the shorts rally the most, expensive growth stocks, low-quality cyclical stocks. that will probably persist. then i think ultimately it will morph into probably nasdaq leading. rates will come down. part of the call is rates have to come down. if we don't go below 4% in a meaningful way, the rally will peter out at these levels. if that happens, if rates come in, you'll see these growth stocks have a meaningful move

despite the fact that we are getting some bad earnings reports. jonathan: we will talk about the fundamental stuff in a moment, but if you can tease 2023, q4, guidance for the rest of the year. you said we have not had that overwhelming negative guide from corporate, management, all the rest of it. how do you know what that looks like? how will you know when you see it? mike: well, those are trade secrets. lisa: [laughter] mike: we will know it when we see the forward estimates coming down. so far -- let's just talk about numbers. it makes it easier to follow what we are looking at. we think markets trade on next 12 month cps -- eps. in the s&p 500 case, we are down to 234, only about 2% off of the highs. that ultimately can go to 195.

when we see that forward estimates go down 50%, in the way to its ultimate destination, then we will feel like it is there. we will not wait for 195. 233, 234, that is not anywhere where we need to be. 225 is what we are looking for. jonathan: they are playing the music, they want us to go. we will continue the conversation in a moment. equity futures down point 7% on the s&p. this is bloomberg. ♪ lisa: got to love that music. keeping you up to date with news from around the world, with the first word, i'm lisa mateo. british prime minister rishi sunak had delayed an economic strategy announcement that we due to be delivered on monday. it will not be released on november 17. he is seeking more time to make

what his office because the right decisions on managing the british economy. the government is seeking to pluck a fiscal hole of more than 40 billion. former treasury secretary steven mnuchin says the federal reserve's fight against inflation will show results soon. he spoke at the saudi arabian future initiative investment. >> it will probably be a two-year period, but you will begin to see that relatively quickly. i think people are overestimating the federal reserve's actions, just as they underestimated it. lisa: he also said china faces a significant slowdown that will have an impact on the world economy. bloomberg has learned elon musk promising to close the acquisition of twitter by friday. he made the pledge in a videoconference call with bankers helping to fund the deal. they are providing $13 billion in debt financing. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than

2700 journalists and analysts in more than 120 countries. i'm lisa mateo. this is bloomberg. ♪

>> right now, all central banks are talking tough and acting tough.

if they tried to get to percent to cause a recession, this will not be short and shallow, it will not be garden-variety. it will not be two quarters of negative growth and they can ease again. jonathan: nouriel roubini out with a new book in the last week or so. pretty depressing stuff. on the short and shallow stuff, think about how the consensus has shifted. never going to see a 50 basis point height, and then never a 75, never 275. five handle? absolutely no chance. now it is all recession short and shallow, the overwhelming consensus. lisa: i asked nouriel roubini, do you get a lot of pushback? you are always bearish, why should anyone listen? he said for people in the know -- you are laughing at me. jonathan: i feel like you're asking a friend.

were you asking for yourself? lisa: do we have a guest? he said people agree with him, which is interesting. jonathan: i am getting to micah right now. you were just ranked the best portfolio strategist on the latest investor survey. i know that you would share that prize with the whole of your team. what has given your team the edge of this year as you have worked through a fast-moving economy, tremendously difficult market? mike: appreciate that, and you are right. it is a team effort. a lot of effort goes into this ranking, a lot of it has to do with client service, our calls have been right. what clients really want from us is critical thinking, holding their feet to the fire on what is happening. i think what has allowed us to get ahead of the curve a little bit, i will go back to three years ago.

we first started talking about the recession itself, it would be really nasty, and then the v-shaped recovery, the next cycle would be hotter but shorter. we are cycle analysts, a little bit different from psychoanalysts, but it helps us to understand what does this period look like? they are never the same exactly. but having that historical context -- we spent an enormous amount of time on that, i'm older, so some of it i lived through. that helps us to stay ahead of the pack. not always, but in this year in particular, early on we saw a shorter cycle, the fed would have to move faster than expected, that would curtail expectations on profits ultimately. just being willing to get in front of the pack is helping us not just this year but in years past.

when you do that, you run the risk of being wrong. we are wrong occasionally, not always right, but you happy willing to go there. take a shot and get away from the consensus. lisa: given the historical perspective you bring to this, where are we in terms of the ice, short and shallow. if it is deeper, how long will it last, how long can inflation remain prolonged? when you look at when you see optimism in the markets, perhaps next year, is that predicated on the idea that we will not be in some high inflation environment for a very long time? mike: here is a great example of, we have a view that is not consensus. we have more conviction in it. we have been thinking about it for for five years. we think we are entering the end of financial repression, the end of secular stagnation, and the pandemic was the catalyst to break us out.

we are experiencing this first wave of inflation which was spectacular, more than people expected. but we think we are into what we think is a boom and bust environment, similar to the 1940's and 1950's, where we had more frequent recessions and inflation was volatile. it was not higher and then stated there, it was high, low, high, low. the trend is up. we had no naive belief that we are going back to we the world was, lower for longer, the fed could keep rates at 04 longer. we are not going back to that. but we also don't think it is a 1970's where we have this cause to push inflation. it is a demand-pull inflation, and that demand is waiting now. that will create the ebbs and flows. a volatile economic outcome which includes inflation, nominal gdp, all of the factors,

and just a lot more volatile. if you understand that, it can be quite profitable, if you understand how to trade on both sides. jonathan: does that tell you anything at this point, how does that influence your thinking about future leadership in this market after a decade of growth dominance on the s&p? mike: we are not in the camp that it will be one or the other. we think it will be a broader market where you get broader participation, kind of like 2020. small caps led, growth and value working together. the days of ridiculously priced growth stocks is over. that was dumb to begin with. that is good, take that out. that doesn't mean that all growth stocks are doomed. it just means that you cannot overpay for it the way you did when rates were negative. you have to focus on companies that can actually operate

efficiently in this volatile environment, deliver the goods on earnings. back to basics, the way it was when i first started in the business. get the training wheels off the bike and learn how to ride again. jonathan: wonderful to catch up, and send our best to the team. mike wilson of morgan stanley. the best portfolio strategist in the latest investor survey, tremendous calls. lisa: he didn't show us his crystal ball. but you got the sense. the glow right next to him. he has gotten it right. the really interesting thing is he is not afraid to talk about a tactical rally, to embrace something that is going to happen, even if it does not cohere with a neat narrative. it is easy to get caught up in a narrative, but sometimes positioning can rip against people. right now we are in a period where a lot has been baked in. short positions, as he said, is

what could potentially hurt people. essentially get out of the way. jonathan: i have said it a million times, it is not about being right or wrong, but working through the process, understanding the framework of the individuals that have success. the source of their success is the framework, which is a deep understanding of how this cycle would materialize, through the pandemic and out the other side. lisa: there is also self questioning, ongoing, really, really? i am just suggesting. jonathan: your friend is coming up, neil dutta. this is bloomberg. ♪

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jonathan: we will spend more time looking at housing data. we will do that in about 10 seconds time. the equity market looks like this going into that data. on the s&p 500, negative 0.8%. meta coming up after the close later.

michael mckee is here with that data. mike: we have some interesting news for the markets and for economists to figure out how this fits into third-quarter growth. september advance goods trading balance. a lot worse than anticipated. $92.2 billion. i guess you could call that down, wider than the $87.3 billion in august. retail inventories coming up .4%. wholesale inventories, 0.8%. both are lower than the prior month but still a gain. when you look at retail and wholesale inventories, they are running way ahead of where they were in pre-pandemic years. that does suggest we will have some more growth added to the third-quarter numbers. it also takes away from the future. it may give us some break on

inflation if we see retailers cutting prices as they have been to get rid of their stocks. housing, the mortgage bankers association, mortgage application index falls 1.7% in the last week. that is down from the 4.5% drop the week before. when you look at the overall index, it is now the lowest since 1997. people are really bailing out of the housing market. hard to say that this is comparable to that period, because we saw a rates higher in those days than they are now and people were still buying houses, but it looks like the housing market is falling off a cliff here when you look at sales to the mortgage rate. we will get new home sales later this morning. jonathan: let's talk about that data in 90 minutes, new home sales. can you frame how bad it is in u.s. housing at the moment? mike: consensus is we will see

them drop, but we have seen housing starts hold generally well, building permits actually rise. builders have backlogs. new home sales are based on basically when you sign contracts. contracts will be canceled in some cases as mortgage rates go up, people decide they cannot afford them. it is the existing home sales numbers that will give you an idea of where housing is. those are based on closings. that was mortgage rates are couple months ago, so we should probably see further declines ahead. jonathan: you are going to stick around? mike: you have a guess that i have not seen in a long time. anxious to see him. jonathan: neil dutta joins us around the table. i was told to ask you about your sterling target. what is joe talking about? neil: i don't have a sterling

target, but my kids have convinced me to go as the private is to u.k. for halloween. jonathan: you are going as rishi sunak. does he come with good things? neil: as i was joking with joe, i told him clearly, i have a habit of betting on indian. as a result, it is time to go along sterling. jonathan: he has the credibility back in the market. that is more than a joke, for some people. wonderful to have you at the table. politicians are pushing back. the usual suspects, warren, sanders, but also the senate banking committee chair. how did you and the team respond to that? neil: it is amusing. if the prediction markets are right, they better get in their jabs right now, because the likelihood is the republicans will sweep the house and the senate. i can tell you right now, if the

republicans are playing this right, they will not have any political interest to tell the fed to back off from hiking. threats to the fed's independents from higher interest rate will be coming down once the republicans take over the congress. they want the fed to keep hiking to slow the economy down, to improve their own political fortune going into the 2024 elections. lisa: it also suggests an unwillingness on the fiscal side, heading into a downturn, does this mean that any physical impulse from washington, d.c., based on the outcome you say is more likely, will be that much less of a countercyclical balance to what is coming? neil: i think that is the case going forward. the next time we have an economic slump, given where interest rates are, given the recent experience with inflation, it is highly likely we have less countercyclical policy, not only from the

monetary side, because the fed will not be going as aggressively, but from the fiscal side. interest rates are higher, the government is paying more on interest expense, which will limit their ability to backstop the economy. mike: growing issue coming out of the election if republicans take control is the presumptive speaker of the house kevin mccarthy saying they will hold the debt ceiling, which would come up theoretically in the first half of the year. they are basically willing to go up to the line and see the u.s. downgraded or default. how much of a risk you think that is? neil: i think it is a risk. i don't know if it is more than previous years. we have had this happen with democratic president. in 2011, republicans just got into the power. what happened with interest rates? they declined at the time. maybe this time will be different.

but i have a feeling they will push up to the last moment. if it was not for the last minute, nothing would be done. jonathan: i share your fears that we might be pretty soon, as well. the pushback that we happen get what we about runaway inflation, look beyond the data. look at freight rates, supply chains, what is happening with house price data, rents in certain cities. when does that start to show up? neil: is there a statute of limitations on those arguments? we have been talking about those issues for the last six months. not to say those things are not happening, but during that time core inflation has accelerated. i think there is a statute of limitations on those arguments. ultimately, what we are talking about is relative price shifting. let's say people are getting paid, they have their job, wages are growing at 5%. now the rent burning -- burden

is becoming too onerous, and now everyone who decided to live on their own decide to get a roommate. you just gave yourself a tax cut. you are not paying as much on rent. that frees up dollars to spend elsewhere, driving up the prices for those other goods and services. i don't know where the money will go. absent a spontaneous increase in the savings rate, it is highly unlikely -- all they are talking about is relative price shifting. i don't think that is the way the fed is thinking about inflation. for whatever reason -- and my job is not to tell people whether they are right or wrong, but to tell people what i think will happen. rightly or wrongly, the fed views the labor market as the conduit to achieve their inflation objectives. that means you need to see higher unemployment. if that is the goal, they are failing miserably. we just learned, despite all of the chatter about tech layoffs,

google is still hiring, these tech companies are hiring, consumers feel confident about the jobs market, claims are still low. even if you look at regional manufacturing indicators, employment components within them remain relatively strong. jonathan: i want to ask you about big tech. we have not seen the job cuts yet but perhaps they are coming based on the rhetoric from google, based on what we have heard from facebook, based on the rhetoric we have heard from across the board. seagate technology holdings says it will cut 3000 jobs. we keep hearing anecdotally this is happening. is it too soon to say that we will not see those broad-based tech cutbacks? neil: i think you are seeing those cutbacks but there is also lots of job openings. those people are transitioning relatively ugly -- quickly to new implement opportunities. the median spell for

unemployment is very low. maybe less than 10 weeks. i think a lot of those people may be getting layoffs. not to say the news is fake, but the fact that continuing claims remains low, tells you that those people are transitioning into new jobs pretty quickly. jonathan: what do you make of this step down argument? 75, 50, 25? neil: i think that is implicit in the fed's dot plot. every time they hint at a mini pivot, the market rips, breakeven rates go up 10 points. that's a problem and makes the pivot less likely. i do think the risk is that they end up doing more than what they have already signaled in the dot plot. i wouldn't be surprised to see a fed funds rate well north of 5%. i think we are on a glide path to that. to me, the most notable thing that chair powell has said was at the september meeting, when

he had that moment where he said i don't know what the path will be. i can just tell you it will be enough. that tells me, relative to what they put in their dot plot, it will likely be higher than that. jonathan: they want to put marks on the financial position. lisa: on a glide path to north of 5%. they have to get there because they could not signal anything close to a pivot unless things are so bad. neil: there is room to improve between now and years and. that is the interesting thing. i don't follow europe closely, but i was in london not long ago. people are feeling a little bit better about the european energy situation. we have talked about the rishi sunak rally. that is going to take pressure off the u.s. dollar exchange rate, which will breathe, like industrials, who have been outperforming. jonathan: if you're going to see

rishi, you need one of these, skinny ties. neil: i think i need to buy the prada shoes first. jonathan: neil dutta. absolutely awesome. thank you. coming up, bringing you the opening bell. priya misra and troy guy askey of fs investments. lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. for the first time in two decades, mortgage rates in the u.s. have gone above 7%. the survey found the contract rate on a 30 year loan rose to almost 7.2% last week. that extends a string of steep increases that have really cool the housing market. president biden congratulated new british prime minister rishi sunak in a phone call. the two discuss the russian

invasion of ukraine and challenges arising from china. they also talked about the unresolved issue of the irish border after brexit. a new report from the united nations paints a grim picture of global warming. it says the earth is on track to warm by more than two degrees celsius by the end of the century, despite plans to cut greenhouse emissions. the you and says the good news is projection show in missions will not increase after 2030. south africa has set more ambitious targets to stabilize public finances without having to raise taxes. it has also revealed the broad outline of a plan to tackle the states power utilities unsustainable debt. the utility holding has more than $22 billion in debt. harley davidson posted third-quarter profit that beat estimates. the motorcycle maker saw sales rebound from a temporary production shutdown. they were able to raise prices enough to offset higher inflation. that patted profit even as sales in the core u.s. market

declined. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm lisa mateo. this is bloomberg. ♪

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>> i think it is very hard to see something that will be smooth landing in any way. that is true for the economy, financial markets. it is going to be very rocky. lisa: the investment head institute at black rock coming up with a gloomy view, although not seeing treasuries as a haven. today, you are seeing yields lower. amazing round-trip we have done over the last week. 10-year yield right around 4% after having reached up to 4.5%.

a shift downward, how long this can last, and whether this can give fuel to stocks. the nasdaq underperforming, down nearly 2% on the heels of those tech earnings. microsoft down nearly 7% ahead of the opening bell. joining us now is someone who have been bullish tactically, bearish long-term, peter scheer, macro strategist at academy securities. i wonder if you think we will continue to see a rally in the short term even though they have been somewhat disappointing? peter: we have to make it through this earnings. overnight we are not reacting well to this, but the attention on stock buybacks are real. for me, more importantly, this treasury rally continues. i think we get to 3.70 on the 10 year and that could push equities higher. a little bit short term, technicals at work.

this is my first real sign for my fear of a hard landing. people will not fire employees, they will pull back on their services and disruptive companies have to pull back on services, technologies they are buying, and that is what we could see leaking through earnings. lisa: i want to start with your call on treasuries because that is noteworthy, back down to 3.6% on the 10 year treasury given where we have been recently. what gets us there? peter: on friday, so much was lost in the news, but daley backed off a little bit. markets reacted very well to that. geopolitical pressure is being placed on us by japan and the u.k., ecb saying we need you to stop this currency devaluation we are going through. a lot of reason to expect that. now with a quiet period, we can look at the data, and we may see it come in weaker. easy comps.

i think the inflation fear is way overdone. with the fed being quiet, we can respond to that. lisa: you think the fed will respond to what is going on with the japanese yen, yuan in china, what is happening in the united kingdom, and address the dollar strength? peter: i think some of that will come from the treasury department because it is their responsibility. it will not beovert because we cannot do that, but they will say, we have already done a lot. we are getting to our plan, it is time to watch and wait. we have followed what we said we would do. don't consider this a pivot. this was a part of the original program, to stop at some point and see how it plays out. i think that is the messaging we will see as soon as the fed starts talking again. lisa: to your other point about cutting ad service, other issues, not necessarily the core of a personal of a company.

do you think big tech earnings are not as well of a bellwether signal for the rest of the economy like some are making out? peter: i think that is probably true. there are other areas of the economy doing well. does, other places doing reasonably well. this is a unique factor, a part of this pullback. if the fed keeps pushing on companies and they have to lay off, that is even worse for tech, and that gets us to a hard landing. but for now, we can make it through this and start bouncing back up. a lot of these companies are down 30%, 50% year to date. even with the weaker earnings, there is upside. lisa: i was struggling with this with mike wilson, i could tell that he was, too. how do you communicate to people short-term technical rally but i'm actually not optimistic about anything and we will crash later on. how do you understand the pivot point in markets, when bad news becomes bad news, when we understand a hard landing

divorce from the fed's response mechanism? peter: great question. personally, i like to think about the next 20 bps on the 10 year treasury. unfortunately that means i'm almost a day trader because it moves so quickly. explaining this is short-term tactical, this is medium-term markets, and this is what you have to do for your firm's long-term, like exiting china, etc. it is a big struggle to figure this out. you have to be smart and have conviction. if we get any sort of rally, i think that can feed on itself easier than a solid ken right now. lisa: because hedge funds have pullback back on leverage and people have retrenched without bearish position we have been talking about. when you talk about the hard landing going forward, always interesting to hear people's worldviews, where that we are in a structurally higher inflation regime. you think the story is overblown.

how do we get back to a low-inflation, 2% type club level, because you are telling companies to get out of china, because of the geopolitical concerns? those things that your company talks about all the time. peter: we have to step back and think about the starting position. people were buying two of everything. they were worried about the supply chain issues, they bought everything. companies themselves were ordering everything on their supply chains. the supply chain issues are dissipating. the consumers overspent. they are slowing down. autos, a year ago, every email was somebody looking for a used car. now there are use cars again. this thing has shifted rapidly, prices are declining. people are responding to the wrong metrics of inflation. the fed kept on talking about transitory. they got it wrong to some degree but some of these things are going away. all the fears for european energy prices, coming down.

there is a real problem in the economy, and that is what slows us down, and that is why i'm so bearish about a hard landing. we have done so much and we have set a chain reaction that will lead us to later problems in the winter. lisa: you don't think there is a wage price spiral in any capacity? peter: you see some great headlines, companies have been reluctant to hire. your last guesstimate a great point. tech is letting go, but they can find jobs. as the services cuts come through, if that is what we see, the next step is cutting employees, and that is a real risk. we cannot get through the inventory hangovers we have. people are thinking about the wrong problems. they are thinking about the situation we face last year. the idea of starting conditions matter. supply chain is done. january can be a little bit bleak. lisa: do you see 0% fed funds

rate in the next five years? peter: i don't think i see that. they will be reluctant to pullback. they also realized qe is a nuclear option and we treated it like ap shooter. we have to execute -- i don't think we will go back to easy money. behind the scenes they will admit. we will see easier policy over time. lisa: peter tchir, thank you. coming up, we are speaking with sam zell, founder and chairman of equity groups investments. you are seeing a bit of markets after disappointments in big tech. this is bloomberg. ♪

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jonathan: live from new york city this morning, good morning with three days of gains but the s&p 500 is lower this morning. the countdown to the open starts now. >> everything you need to get ready for the start of u.s. trading. this is bloomberg, the open with jonathan ferro. ♪ jonathan: live from new york city, we begin with the big issue, here comes the pain.