>> earnings coming in is another data point that people have to absorb to try to understand this narrative. >> source of the negative surprises this quarter has been weaker margins than was anticipated. >> the market is consistently underestimating the level of inflation, by anywhere from 50 two 100 basis points. >> the fed has been leaving the push higher in global rates. >> you better be careful you get what you wish for in a liver system. >> this is -- in a leveraged system. >> this is bloomberg surveillance.

jonathan: tom keene took the day off. live from new york city this morning, good morning to you. cpi in europe coming in really hot. 10 point 7% on cpi in the eurozone this morning. lisa: third quarter gdp grew more than expected at 0.2%. how much are we looking at the idea of consumer prices rising faster than expected but the economy is still hanging in, prodding the central banks to raise rates. jonathan: 75 basis point interest rate hike in europe and it doesn't look good for these banks to maintain financial stability.

lisa: people might be getting it wrong this time. they say inflation will drop. how much the fed will start to confirm that believe and what does the market do? to the understand this means slower growth, slower bleed, slower margins than some companies we see? jonathan: and how does the fed communicates some sort of step down? without triggering easing of financial conditions. lisa: how did they communicate that there is pain and how does it get confirmed by earnings that have not capitulated? people don't they have expressed the full pain that will be coming next year. it will be hard for the fed to sell that without causing a

rally in the market. jonathan: last week was impressive to see the computer companies hammered. lisa: when does it not become good news for the fed to cause or do a step down? when does it become bad news for rates to not go higher because the economy is not doing well? the rest of the market treated the softer earnings as a good thing for this federal reserve looking for more pain. at one point will it just be a bad thing? jonathan: futures are negative right now. 12 consecutive weeks of yields climbing on the bonds until last week. the yields were much lower at last week.

euro-dollar down by one third of 1%. we got this off of the back of the german inflation numbers. euro dollar right now is 99.37. lisa: it's a pretty shocking number considering the no-place in an environment we have had. a number of the bank decisions this week with the fed decision being i had of them all but the reserve bank of australia tomorrow gives their policy decision to stop the fomc rate decision will be wednesday. where is the optimism about the comey and the bank of england decision thursday will be interesting as well as two year yields around the world continue to climb and hover near the highest levels since the financial crisis. we also get a slew of economic

data. the jolt data comes tomorrow. i'm interested how long jobs will plummet. they are trying to look for a way to pair back without cutting jobs. jonathan: freezing is the new firing. that's been the story of the last 12 months. it will be interesting to see if we do damage to the labor market on the unemployment for. have we seen that in the official data? jonathan: not when it comes to jobless claims in the jolt data, yes. one third of the s&p 500, 160 companies will be reporting this week gloating pfizer, uber and a

whole host of them at a time when the consumer is in question. how long can they hang in there but also the inflation that is being felt reducing their buying power? jonathan: we talked to the head of global management at morgan stanley. what is your team looking for? >> it's going to be an interesting day. the fed has raised rates 75 basis points getting up to this 4% level. they have to slow down and the markets want to like it but then they have to use other mathematical tools at their disposal to remind them that the slow down has not happened yet most i think the fed is going to have to step down to a lower pace. at the same time, they have to

remind people that they did a lot of work and have more to do. lisa: does that mean the endpoint will be lower? will it cause to the market to break in short order? >> it means it could be higher. they are trying to avoid going 75 for the next three manning's dish three meetings and then easing again next year. they don't want to break anything the fed wants to see what their actions have done. cpi is one of the worst lags but they want to see if end-user demand is slowing and we are starting to see that in earnings in and asked oats so they are buying time so they can raise more or do it more slowly. lisa: how much have you increase your expectation for the endpoint over the past few months and where do you see a potentially going if they do this step down and it allows the

economy to keep going without a sudden stop? >> the inflation numbers continue to surprise to the upside despite the idea dia that there is a quick slow down. we've been steadfast in the 4.5% and the 5% range. we believe inflation will start to slow down and it is lagging. i've been a big believer that any time you get these numbers, i think the flat curve is telling you they don't have to go that much higher. lisa: is one of your biggest conviction calls to go into 10 year treasuries whether it's ig or treasuries and hang on? >> i don't think you will wake up one day at 2%. putting the income and high quality assets is the way to go.

high-grade municipals and treasuries are good as well most you can wake up one day wanting to own that stuff and it might be back to being more. we do like those may continue to add as rates go higher. lisa: less than two weeks to the u.s. election and people are watching with respect to the economic policy of d.c. but also the political pressure on the federal reserve. how does that factor into your bullish call on treasuries? how much would you move away from that call if there was political pressure on jay powell to stop hiking rates. >> the central banks have been under pressure. you see a government that wants

to go after the fed most it does change things and could risk higher inflation rates and to -- and could risk losing control of the dollar as reserve currency. it's easy to talk about going after the fed but it's more difficult to do it. they've made their mistakes but i think they've corrected by raising rates and we are watching it but not terribly concerned at the moment. jonathan: great to catch up as always. over the last couple of days not just talk to step down but maybe a stretch. you are adding an extra 25 basis point hike and we have seen that from evercore and goldman sachs. we throw another rate hike in there because we will state tighter for longer. lisa: could they potentially talk about a step down and still communicate a hawkish message to the u.s. markets?

how did they say you will like this step down but not what comes after? jonathan: is this going to be this step down show for the next week? russia suspended the ukraine grain deal and the vessels are still leaving, loaded up with crops but this is something to watch. lisa: this is painful. this is grain that supplies a significant portion of east africa. there are entire nations that could go hungry. how much does this signal a break down with respect to russia from the world how much they are willing to comply with aggravating world hunger to get more leverage? jonathan: in the next hour, the investment director will join us on the federal reserve step down

in the bank of england and all that good stuff later this week. life from new york, this is bloomberg. ♪ lisa: of in brazil, is a dramatic comeback for former president lula. he has won the presidential election narrowly defeating the incumbent. three years ago, he was in a jail cell on corruption charges and bolsonaro has not conceded the race or commented on the results in his reaction will be closely watched by investors. in ukraine, the government says russia launched a massive wave of missile strikes across the country. part of the capital was left without power and electricity after the strike in the attacks came after russia pulled out of a deal that allowed millions of tons of ukrainian grain to be

exported. russia accused ukraine of attacking its warships. the government of south korea open investigation into one of the countries deadliest incidents in years. at least 154 people were killed when a crowd squeezed into a narrow alley during halloween festivities. some people fell and tumbled. in western india, at least 130 people work killed when a suspension bridge collapsed. disaster happened in the prime ministers home state. the colonial bridge had been reopened last week after renovations. economist at goldman sachs now see the federal reserve raising interest rates to 5% in march. that's higher than the previous estimate and the new forecast includes another 75 basis point hike when fed policy makers meet this week. 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. ♪

>> i think they will get a rude awakening on november 8 with high inflation, high crime, open

borders is not with the american people want. >> don't punish the people who are fixing your problems and the word -- and reward those were trying to exploit the problems. that's did difference now. we are engaged in the hard work of bringing the country forward. jonathan: one week to go, from new york city this morning, good morning. equity futures look like this -- yields are higher by four or five basis points. euro-dollar is negative one third of 1%. cpi this morning out of the euro design -- out of the eurozone had an upside surprise. the median estimate survey on

the ecb last week was flip-flopping. lisa: that's not really helpful. there is a question of how much they have their hands around inflation. not just for the ecb but the federal reserve step how much credibility do they have? jonathan: close to 11% on inflation in the euro zone. annmarie hordern is in washington, d.c.. what's been happening? russia is suspending its involvement in the grain deal? is that deal still operational? anne-marie: it's critical as you heard from the u.n. and turkey and the united states in terms

of quelling the inflation. the president of the united states says this will create more starvation in the most vulnerable communities around the world. russia says they are coming out of this deal. you saw we prices jumped on the news. you see some shipments going but the fact of the matter is, because this takes a while to unwind, russia says they will pull back but there was already a lot of concern in the marketplace because that deal was scheduled to end november 19. now you have the u.n. and turkey running this offense it with moscow to say please stay in this deal and rushes saying there was a strike from one of the black sea grain shipments and they said the u.k. was involved without offering evidence and that's why they are pulling back. the number of countries are trying to put pressure on russia

to stay in this deal because of the harm it can do especially going into the winter months. lisa: at a time when inflation is one of the top voting issues, how much is their pushback in terms of holding the line and remaining hard with russia and keeping some of the tension up at a time when it's causing prices to go up and potentially threatening the food supply? anne-marie: i think the debate and the tension was on display last week when these progressive democrats released a letter that they worked up over the summer and they had to take it back and retract that letter that said we are going to continue sending billions of dollars in military or financial aid to ukraine, that there should be some sort of diplomatic out come or at least a path rate goal to have diplomacy and that was quickly torn down by their own party and

they had a ton of backlash. i think there is that question floating around whether is the progressives on the left or you potentially have the next speaker kevin mccarthy potentially talking about when the house is taken over by the republicans next week that they say there will not be a blank check for ukraine and that comes down to the fact that there is a lot of pressure on lawmakers to quell rising inflation, whether it's grocery bills work rent, you see that poll after poll. that will get out and wanting to vote in this election. lisa: how much economic pain are you willing to tolerate for international and national security and not just oil and green deals with russia but it's also with respect to germany and china. they are sending a coalition over to china thursday from

germany to possibly shore up the ties there. how much is their unity among the western allies heading into contentious midterm elections to push that through even though it does cause economic hardship? anne-marie: when you talk about china specifically, there is bipartisan support and china is in easy scapegoat to get voters rallied. it's used by many lawmakers but when it comes to germany and their ties with china, germany outsourced their energy to russia and their economy to china and at this moment, the biden administration has export controls on china with a call overnight about this with china pushing back on these export controls and saying the united states is trying to suppress their economic growth in the future. what you see in the biden administration want this multi-lateral approach meaning

united states, western europe and other allies on board with making sure they are competitive and tough on china but at the same time, you see the likes of germany sending over a delegation. we also have the g20 coming up after the midterm elections with president biden potentially sitting down with jeezy and ping - xi jinping. jonathan: that's the rhetoric coming from the white house over the weekend. lisa: taking a hard tone and i don't know what else he will do. at this point, how much does this hold any sway versus campaign rhetoric?

jonathan: the excess profits are going back to the shareholders instead of going to lower prices so how much of the prophets what they like to go to shareholders and how much to go to lowering prices? lisa: part of me ignores it because its campaign rhetoric and then they came out with the civic numbers. -- with specific numbers. jonathan: tom and i went to d.c. and talked about central planning and asked about the number. futures right now down i have a percent on the s&p 500. from new york, this is bloomberg. ♪

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jonathan: live from new york city this monday morning, here is the price action on the s&p 500. futures this morning are negative half of 1% and the nasdaq is down about 7/10 of 1%.

more data is this the fed decision wednesday we will talk about eurozone cpi step early this morning, it came in close to an 11 handle after breaking three double digits in the last month or so. we look -- we were looking for close to 10% of the actual number 10.7 on euro-dollar. the euro-dollar is 99 point 36. lisa: how much of this is because of the weaker euro and how much are they importing inflation? we didn't really hear that last week but they have to address that. jonathan: how can we talk about it down shift policy with numbers like that and inflation

still coming out of europe and the united states? lisa: unless you start to address your target for where inflation ends up. this is what people are thinking may happen. they say if we do that it will be a disaster and it will erode credibility stuff jonathan: i think it would make it difficult to achieve that target. i wouldn't believe them. lisa: this is the reason why people say there will be a steep downturn in europe and beyond because there is no other option. things are still climbing and the economy is chugging along, how much do they have to do to stop that? jonathan: futures are down right now. the chief u.s. economist at citigroup will join us now. congrats to you and the whole team. when you came out with the coals

for 50 basis points at every meeting and 75 -- with those calls for 50 basis points in every meeting and then 75, you were correct. >> thanks for having me on. our base case is that the fed might end somewhere below 5% policy race but we would not be surprised by levels above 5%. anything up to 5.5% would not be too surprising. we think all the way back in terms of why this fed has been more hawkish. we have inflation data that continues to surprise to the upside and continues to push policy rates higher. jonathan: how do you think the chairman navigates this given that they don't have the forecast? >> it's difficult.

in december, you have more variables you can use to try to guide toward a step down in the pace of policy rate increases but at the same time not trigger a loosening of financial conditions. we saw a little of that last week as the market got excited i the fed slowing the pace from 75 basis point hike to 50 basis points in december and we think that will happen and that's not necessarily a dovish out come. hiking 50 basis points is a bigger than usual hike. there is nothing inherently dovish about hiking at a slower pace but the fed needs to communicate that they can show higher dots in december. it's going to come down to communication at the press conference at wednesday's

meeting. can jay powell talk about slowing down the rates but still talk about progress? lisa: what's more important? >> what would be damaging for the kind of me and fed officials have recognize this is to allow inflation to persist at levels that are well above target. we were joking about the idea of getting a three or four or 5% inflation target. implicitly, that's what happens if the fed continues to miss on their inflation mandate. if you continue to miss to the upside on inflation, you embed a higher rate of inflation and i think we are seeing some of the concern associated with not knowing how much wages or prices will be going up. that's the real risk for fed officials and that's why stopping to early is a risk and

could imply hiking further at a later date. you have an upside and downside risk. the primary risk right now is the risk that inflation remains too high. lisa: they are basically communicating that inflation will remain higher than their target. how much do you think they have already done that by not indicating some sort of downturn or something that is more realistic? >> i think it would be helpful if fed officials concentrated more on the fact that labor markets likely need to loosen significantly to break down inflation. it's an unfortunate reality that nobody wants to be dealing with. to bring inflation down from

levels we are seeing in the you were -- in the u.s. and europe involves a significant loosening of the labor market and that's almost a euphemism for saying the on appointment rate rises, millions of people who currently have jobs no longer have them. it's a horrible outcome for the economy. that is the cost of inflation that's too high and the issue now is minimizing the further cost of that. i think there should be more direct communication about the pain associated with raking down inflation. jonathan: i think they still got to do a better job of community -- of communicating. how do they tell us that higher unemployment is the price to pay? >> it's a hard message to deliver. the answer i think is to be clear before -- before threat

and talk about the historical evidence and the theory. when you look at the employment index last week, up 1.2%, this is well above the pace of wage increase that would be consistent with 2% inflation. i think it's one in the cajun of a tight labor market that will drive inflationary pressure. there is a strong theoretical and empirical reason to think that doesn't change without a loosening of the labor market. i think we need to be clear and forthright about that. it is an unfortunate reality and i think that means fed officials and others have been reluctant to comment. jonathan: we get unemployment date of friday and i'm looking at payrolls in the estimate will be 190. have you sensed that the unemployment rate needs to go higher than you thought it did at the start of the year?

>> i think there is a sense that may be the unemployment rate doesn't need to go higher but the amount of restriction needed in the economy needs to be more to get to a higher unemployment rate stepped we think the rate needs to get to 5.5% to bring down inflation which would be higher than 3.5% where we are now. it wouldn't be as high as some other recessions. the labor market data continues to be resilient, 190,000 new jobs in a month is going to be strong enough to continue to put downward pressure on the unemployment rate so we have a tight labor market generating wage pressure that's too high in the labor market looks like it may be tightening further. the only of to the con -- to the contrary is job openings which have started to come down. we get a new reading on that we can that will be important step

low initial jobless claims, a lot of evidence this is a labor market that has not slowed sufficiently to bring down the wage pressure. jonathan: the ism and then onto the fed friday. thank you as always. as we were speaking, i got this message from bank of america. this captures the conversation perfectly. the fed faces a dilemma this week. lisa: people are wondering how they can signal a cause and make it hawkish? how can they offset the potential rally with easing of financial conditions? jonathan: you get the sense this

is shaped by the politics at the moment and even on wall street, economies are talking about what the fed will do. the fed is doing exactly what senator sanders is worried about, trying to get unemployment up to get inflation down. i think it's something that's very difficult to communicate. lisa: has the possibility of a soft landing going off the table? mohamed el-erian said there is a small chance. can we get a situation where participation rates pick up and suddenly you compensate for the cap and you get some sort of natural easing of the pressures in the labor market? i think people are not willing to say that now. jonathan: we were hoping for a positive supply-side 12 months ago.

it never kicked back in. the director of research, we will catch up with her shortly and futures are down about half a percentage point. live from new york, this is bloomberg. ♪ lisa: keeping you up-to-date with news around the world with the first word, in brazil, the results of the presidential election signal a change in direction for latin's largest economy. lula was elected in a dramatic comeback. three years ago, he was in a jail cell on corruption charges. he narrowly defeated the incumbent who has neither conceded nor commented on the results. his reaction will be watched by investors. there is a show down at the u.s. supreme court over affirmative action. justices will your arguments on admission policies at harvard and the university of north carolina. the schools are battling an interest group that wants to overturn presidents that let

colleges consider race when they choose students. the ceo says barclays'investment operation is tickled to its success >> the investment bank has been what has kept barclays flourishing and quite apart from many of our competitors. the fact that we performed extremely well during covid and were able to have a more diversified business model. lisa: credit suisse confirmed is looking to downsize after multiple losses. the economy in the u.k. is shuttering to a halt under the weight of the biggest increases in early cost of more than three decades and there is concern the rates will go higher. economists and investors expect on thursday, the bank of england will raise its benchmark lending rate by three quarters of a percentage point to 3%.

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 extraordinary investment by the united states and extorted her investments we just heard from the united arab emirates and others is just not enough. this is a global crisis and therefore requires global solutions. regardless of where you are on the energy spectrum, we must all invest and innovate toward achieving a more de-carbonized net zero world. jonathan: u.s. special envoy there for energy, live from new york, this is the price action. it's federal reserve week with

futures down a half a percent. yields are up four or five basis points. euro dollar is down about 4/10 of 1%. the previous number was 10 and the ecb has a problem. crude is 8641. i so this quotation all over twitter and lots of people message me and said talk about this. people are depleting their energy stocks, emergency stocks and had to lead to did and used it as a mechanism to mean appealing markets while is profound purpose was to mitigate

shortages. the final line is worth our time. the profound purpose of some of these stockpiles is to mitigate a shortage of supply. do we have a supply emergency in the energy market that has required the kind of spr release we have seen from this administration over the last nine months? lisa: republicans are investigating this and many would debate this. their objective was to lower prices so at what point does this become an economic argument that's feasible? what is clear is that the politics or clouding the fundamentals at a time when china is declining in terms of momentum and how much will that be the driver one way or another? jonathan: we got to talk about

how it sets us up for next year in the oil market. lisa: how vulnerable is the united states if there is a shock and a shortage of oil production and that's relevant. jonathan: the director of research, can we talk about the near term story? how vulnerable is the united states now with the spr at a forward decade low. >> it's a great question. we have calculated this. we highlighted the fact that the spr is actually being used to pretty much influence prices were its objective was very much for supply mitigation. the spr also has legislative releases back in 2017 which is another 100 million barrels that will come out. deduct another 100 over the next

three years and it doesn't leave the administration with much more than 60 million barrels without running into issues with the requirement to have at least 90 days of net import covered step you can continue to run below that number but i will say this that this is a time of energy security and running down spr influences prices is not the most prudent strategy. jonathan: does it leave america more exposed next year? >> if you -- if you were using spr to offset supply disruptions, that's different but if you are using spr to keep a cap on prices, absolutely. if you're going to use the spr to combat opec, it's like turning up to a gunfight with a knife.

the spr is ultimately a finite volume which will need to be replenished. lisa: given the fact there is no relief valve of the spr that could be tapped and a major way next year and given the facts that opec has that+ leverage over the u.s. and other nations, will we ever see $72 per barrel price levels where this administration said they would like to refill the spr? >> we don't think so. if anything, december 5, we -- when they have an embargo on russian oil, that's where you will see the shortages really happen. we will start to see some russian production and that will get worse next year. we do not see how we get down to the 70's unless the economy really collapses and china doesn't start to get better

which should start to happen from april next year. lisa: based on the supply disruptions into the winter, there are reports there could be a colder winter than usual. where could you see oil prices going? >> we are expecting prices to go towards $100 into year end and trade into the 110 and 120 for most of next year and the biggest upside is the winter. weather will always be a factor so nobody can predict that. otherwise, stocks are very low. you ask about gasoline. gasoline prices have continued to rise because there are so many refineries still down. let's not forget the french strikes still going on. i would highlight it diesel we

need to be concerned about stuff diesel prices are at record lows. that's what we tend to use in winter if it gets cold. that's a much bigger concern for the administration now. we are expecting some form of intervention by the administration to maybe say you have to have x x amount of diesel stocks before you have to export? . jonathan: we've been talking about this for nine months. have you seen any effort from your or the united states to build out refining capacity in a material way? >> no, quite the opposite step europe is talking about windfall taxes on refining and this will be the biggest bottleneck. we have a few middle eastern refineries starting up and after that, we don't have enough refining capacity to meet oil demand. jonathan: and that right there is the problem.

we talked a number of weeks ago about how we should have a meteorologist on the show instead of an fx strategist. have you ever seen the fx market move as much on the weather? lisa: that's what you see happen because when you get a colder winter in the u.k., that will affect oil prices. jonathan: we will catch up on the weather in london coming up. futures on the s&p 500 down about 6/10 of 1% stop live from new york, this is bloomberg. ♪

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>> the negative surprises has been weaker margins then wasn't dissipated. >> the market is underestimating the level of inflation by 50 to 150 basis points. >> the fed has been leading the push higher in global rates. >> be careful that you get what you wish for.

>> this is bloomberg surveillance. lisa: coming off the back of an impressive week of gains, live from new york city, good morning good morning. this is bloomberg surveillance on tv and radio. tk is taking the day off for halloween. futures are -0.4%. amazon got hammered. microsoft and alphabet not a lot better. lisa: this idea that the fed could reduce the pace of the increases of their rate hikes did -- hikes. this is going to be the reducing the rate hikes show. how much are they going to provide communication of that fact, even if you get earnings the come in weaker than expected. jonathan: how do you achieve

that? lisa: sort of. we didn't really see any bold moves. yields are still around the same level. you are a 5% rate next year. they communicated they were going to hold rates and go slower so they can hold rates higher for longer, given how much people need to whittle down some of the savings they have, that would cause more weakness than just getting up to a higher point sooner. at what point do people understand that? jonathan: not just in america, in europe. at about 60 minutes ago, we had the eurozone cpi at 11 point -- 11%. that's up from 10. lisa: how much of this is because of the disruptions going on in china? how much is this because of the savings over what they would've had that consumers have

stockpiled in the bank as a result of the programs of the pandemic? how much is that feed into this higher than expected inflation that continues around the world. jonathan: downside surprise, we will pick up that. futures are recovering, the euro is shaping up as follows. it's higher by two or three basis points. the fx market, the euro-dollar look something like this. we are negative about one third of a percent. a softer euro story, we want to talk about crude briefly. lisa: she's easy-going going to one because of the supply chain constraints that could be colder. we're looking at a whole host of rate decision starting with the reserve bank of australia. the decision on wednesday is the key win. how are they going to communicate that they will

eventually be reducing the pace of rate hikes? where is the endpoint? do they communicate the amount of pain the economy is going to have to feel. the bank of england has a difficult decision. we get a slew of data. tomorrow, the report for september might hold more clues and how much softening you're getting. these are the job openings. that could indicate a bit of a loosening in this labor market. the earnings really are important. earnings may be important because they focused in retail and health care. almost one third of the s&p 500 companies are on deck to report. i'm looking at uber in particular. i'm just wondering. jonathan: was that on your mind

over the weekend? lisa: how much are people going to start to push back? jonathan: we talked about how much investment had gone into food delivery and how insufficient it had gone into taking energy out of the ground and building refinery capacity. i saw a quote about investing in real things again. you've talked about that over the last nine months. lisa: you say that in the earnings. have we witnessed a massive tech bubble? you see the money come out, what's left of how much does that lead to bigger economic deterioration versus a pothole. jonathan: the politics and the difference between politics and making policy, to hear these complaints about getting energy prices down. the europeans or the american spend material time trying to build out refining capacity?

they are multiyear projects. you haven't seen it in a profound way. that is deeply frustrating. what do you expect to happen if you don't old out refining capacity? lisa: they could've been saying to their consumers, oil prices are going to be higher. we have to invest in other energies to get to a new reality. it's going to become a tenuous moment where you don't invest in what you need. jonathan: they wanted opec to provide the bridge to the next election. lisa: you have a faith in politics. you have this sense of lack of cynicism. jonathan: i have a deep frustration with politicians regardless of policy. james joins us. serious question. how important is the weather going to be for the market over

the next three or four months? james: we love to talk about the weather. it features heavily in all of our investment abates. obviously, putting aside my attempt to be facetious there, there is a link between some of these government programs and the weather, the extent to which we need a lot of gas or not much gas will depend on if we could be more frugal about using it and how cold it is. it is important, it is difficult to factor that into an investment strategy. it's a risk one has to be aware of. lisa: how does the bank of england respond to the weather report? james: it's been near impossible to fathom on a month by month

basis. i'm not going to attempt to link policy to the weather. i'm sure they will feel better today than they did six weeks ago in terms of the stability of markets and government policy. the problem facing hasn't changed much from prior the budget. their strategy is to hope the recession clears the decks. lisa: you've been talking about tighter central bank policy and the potential for losses, are you starting to get more bullish? are you starting to see more opportunity? james: yes and no. when things get cheaper there more attractive than when they were cheaper. it's not valuation as much as it is fundamentals. the earnings expectations are baked into stock prices.

if we are talking about just a u.s. recession, we are talking about a global recession and china in the immediate future coming out of zero covid looking much more healthy in terms of its growth outlook. i just see this huge quantity of global headwinds and u.s. market still discounting 10% eps growth. that looks way too high. i think the earnings picture needs to come down a lot. that would be a double whammy if inflation comes down. jonathan: what does capitulation look like? james: we have to have nobody talking about trade or bear market rallies throughout this fair market. we have had a number of commentators talking about

opportunities to buy this market. the fundamentals are still ok. we can get back to growth when the fed gets out of the way. when you see capitulation, it's different to the extent that his already been extreme bearishness among these disciplines. i don't think it's played out in positioning. a shift and underline allocations toward equities or away from it. the relative valuations are as attractive as it's been in quite some time. jonathan: it's good to catch up with you. futures are down 0.4%. i want to pick up on something james has said. the belief that we were doing

re-pandemic, back to the old regime in the market, that still exist. i hear that a lot. >> you've got people pushing back insane you got the lost decade. this guy is falling for those people. at some point, you have to get an understanding of where we are. the fed could be instrumental in that. they come out and say we still think a soft landing is possible. does that signify the opposite? they are going to underplay where inflation is that? jonathan: i don't think it's controversial to say there might be a lost decade within an asset class. you look at tech, you look at japan several decades ago. it's controversial to say it. we had a good chat last friday.

he's a deep thinker. he was tracking it down a little bit. that was just my thoughts, futures are down by 0.3%. this is bloomberg. ♪ in brazil, it's a dramatic comeback for lulu. the left-wing politician has won the presidential election, beating incumbent bolsonaro. three years ago, he was in a jail cell and corruption charges. bolsonaro has neither conceded nor commented on the results. his reaction will be watched by investors. the government says russia launched a massive wave of missile strikes across ukraine. part of the capital was left without water and electricity. the attacks came after russia

pulled out of a deal that allowed millions of tons of grain it to be exported. russia withdrew after accusing ukraine of attacking its warships. the government has opened an investigation into one of the deadliest incidents in years. at least one had a 54 people were killed when a crowd of squeezed into a narrow alley during halloween festivities. some people get into fall, causing others to tumble. at least 130 people were killed in india after a suspension bridge collapsed. it happened in the prime minister's home state. it had been reopened last week after renovations. inflation in the euro zone has surged to an all-time high. that is much higher than the median estimate. gdp rose 0.2% in the third quarter.

that was much less than the 0.8% gained in the second quarter. global news 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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counterproductive strategy from the point of view of those who launch. the fed doesn't listen.

it feels more pressure to prove its independence. they don't influence short-term rates and let the fed. jonathan: when a tightening cycle we have seen and we are getting another 75 this week. that was larry summers over the weekend. futures look like this, down 0.3%. a little bit earlier this morning, upside surprise on eurozone at cpi. inflation is getting hot, then .7%. the previous rate was 10%. that is the euro zone inflation story. over the weekend, russia exited a great deal with ukraine. this is what they have had to say. this is from the kremlin spokesperson.

the black sea grain deal can hardly continue without russia. without russia, the shipping grain under the deal would be much riskier. they are in talks with turkey and the u.n. over the grain deal. they fundamentally struck the steel over the summer. at the moment, russia suspended their involvement in it. we know that vessels have continued leaving with grain. whether that continues without russia's purchase a remains to be seen. lisa: if you're going to be operating a ship, you don't know if you're going to get bombed if you're not part of this safe agreement. that is the issue. how do you guarantee safe passage of essential food for many places in the world? jonathan: you can't and that's the problem. hms has been all over the story. go through it piece by piece and tell us what you have heard from the white house.

>> the white house and you now -- u.n. want to see this deal continue because of the issues regarding inflation and ukraine has this outsized proportion in the world when it comes to grains, especially to these communities in africa and the middle east. they want this to continue. the russian defense ministry talked about there was a drone strike. they think it came from one of these waxy grain ships. they said the u.k. was involved. they gave no evidence of any of this. many would say this was always going to be a potential because they had that november 19 deadline to renew the agreement. some people thought the way vladimir putin has played politics with gas and oil, he may play politics with grain. he knows how critical this is to the global economy and the crop market and global inflation,

which is hurting the west tremendously. we do see some of the ships leaving port. will it continue? you're going to see a lot of background negotiations between the u.n. and turkey, they are on the forefront of trying to salvage the open. lisa: what does this mean for exporting additional grain? >> there is potential of that. the hope to step in and help, especially comes to fertilizer in latin america, that has pushed up prices. at the same time, every country is facing a similar issue. you can see others wanting to hoard all of the grain or fertilizer. they can lower their own inflation numbers. lisa: what's in it for them? are they thinking about

terrorizing the ships? is this a negotiation tactic? >> because of this strike that they are pulling out of the deal. that could be them using this as leverage or creating more problems for the west, which has very harsh sanctions on russia. export controls, they are starting to be seen. you see airlines in russia that are flying routes domestically. they cannot get the parts they need because export controls. we are going into the winter and vladimir putin knows what is top of mind for every single western leader is inflation. look at the european numbers, exceeding expectations. the number one issue you have is individuals coming out. democrats are likely going to

lose the house. it's inflation. he has the world where he needs them, the put more pressure on these basic commodities like grain and natural gas and oil. jonathan: one week to go to the midterms. >> this will be part of the story. if you do see number starting to tick up even more in the united states because of what is going on, you may see more pushback like we heard from kevin mccarthy that there's not going to be a blank check for you train -- ukraine. if we are going to spend these dollars, there needs to be a diplomatic pathway. what you will see over the next couple of months is some disagreement on the fringes. the most majority of united states politicians want to have a bipartisan front when it comes to making sure there and plummeting punishments on

russia. the blowback is going to be difficult if it starts to hit their constituents. jonathan: it's been a lead story over the next few days. the health of the speakers husband, i was he doing out? >> he is recovering and doing better. the speaker put out a letter over the weekend that her family, their grandparents, this was so traumatic. it took center stage on the sunday shows yesterday. you saw the republicans come out and attack what went on, saying there is no place for this type of violence and politics. we heard from the national committee chair, saying that crime is going up and this criminal could be back on the street. that is one web being spun.

from the democrats, you heard that they are linking this attack to political rhetoric from the right. this will be a key part of the midterms next week. jonathan: futures right now are down 0.3%. we will catch up with michael in just a moment. we will push forward to a federal reserve decision and tons of economic data as well. futures are down and yields are higher. this is bloomberg. ♪

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it, we are going to talk about it all week. down 0.2% on the s&p. down 0.4% on the nasdaq. a really tremendous -- a truly impressive week of games -- gains on the s&p.

they were hammered after earnings. the equity market still posted. a decent week on the s&p and nasdaq. think about where we've been a couple of fridays ago on a 10 year. very close to 434. we were at 460 on the two-year. we've got to talk about the euro as well. opening the door to step down of the ecb and getting hammered by cpi. euro-dollar is down. inflation this morning, 10.7% in the euro zone. lisa: what point is that going to be a problem?

analyst keep missing how quickly inflation is accelerating. jonathan: we knew we would get upside to price going to get the numbers from italy. your point on that is tremendously important, to see germany and the inflation numbers runaway is just remarkable at this time of year. lisa: how much of a handle do the central bankers have on it? they say it claim -- came out of nowhere. jonathan: they sound like politicians. inflation came out of nowhere. lisa: the cynicism is warranted. let's get some movers that are safer. i'm looking at advanced micro devices. they are following today as a result of what's going on over in china. that's why i paired this with alibaba and baidu. covid related shutdowns keep happening. now they are targeting foxconn group.

the cracked dense of led to these protests with people fleeing the factory. now you have the possibility of iphone manufacturing going to other places in china. it highlights the data. china is still very much in a pandemic. the rest of the world seems to have moved on. jonathan: this came out overnight. 48 point seven on nonmanufacturing. not just china, but europe and the 40's. we think about the three ligand school -- tools -- three ligand stool that is the economy. you've got the euro zone in the 40's. things aren't looking great. lisa: china cannot be the engine of growth that it once was because of these disruptions. what does the world look like with a china of sub 5% growth? this is something factored into

the long-term view. i'm looking at some of the commodity spaces. bp will have earnings this week. because of those china numbers, that's a big thing. did you know that gold is poised for its longest losing streak going back to the 1960's?

this is fascinating. to me, it's just striking at a time when you talk about inflation. it's been an inflation hedge. it has not worked. jonathan: this is operation kill inflation. why have we not gotten gold rallying? taking down inflation. that's but the market is position four. it's not my opinion. it's what the markets have been priced for. lisa: people went to gold. they didn't say what's going to happen with breakevens? it's notable that there has been a long losing streak care. jonathan: hugh said gold did not perform the way he thought it would. that was the point he made. lisa: when you financial eyes a shiny metal, it does weird things. jonathan: we will get to mike wilson. lisa mentioned the divide. this was mike wilson on the short-term story. this is a select quote. it's not construction -- constructive on the future. you get to a situation where the earnings story doesn't look great in the market starts to roll over again. he's leaning into the short-term near-term optimistic story. he said the following. the s&p 500 and the nasdaq 100

at 4% and 2%. he said it's around 4000. we are lean toward the upper bound of that. we want to get to the chief market strategist. what do you make of that? the short-term story that we can squeeze out a little bit further. >> i think mike has a valid point. he's had a great call. what we are seeing is an environment where the s&p 500 was up 4% next week amid terrible earnings with the key players. that's on top of 5% gained the week before. you are seeing short-term trading activity that is more technical and dynamic. i think it has become expected throughout the first three quarters of the year. everyone knew it was dead.

everyone was very patient. as q4 starts, people one of put money to work. jonathan: is that away view want to keep surfing? the small caps, they are up 6% last week. >> i definitely do not. i would bring on this to scare people on halloween. the environment is much different. it's much different than we've had the last couple of decades where it's been this non-inflation environment that allowed banks to have this easy monetary policy. we are going to have the fed funds rate this week. we are looking at a 4% fund fed rate with more hikes to come. the average over the past few decades is 1.28%. it's an environment investors

are not accustomed to. that's going to be more challenging. this aligns with what mike wilson is saying. it's not going to be is great for companies. lisa: short-term, you can see what you want to see in terms of the bear market rally. what does this mean over the next three years with respect to stock market returns? where do you differ from the others in the market that cs going back to a low rate regime? >> ever since the financial crisis, we've had a negative real fund rate environment. i think with the fed is trying to get to is a positive real fed funds rate using core inflation. we are 200 basis points away from there. we need to do that through rate hikes and this issue coming down, which is going to happen.

it's the type of situation where it's going to take time. that's why we have this mantra. i think the time horizon between the markets and the fed and the policy adjustments have hit crosscurrents. everyone has been negative on the markets. the fed only started tightening six months ago. those measures are only starting to take effect now as we noticed in earnings last week. we still have this over time. investors are saying we've been disciplined all year. maybe it's time to buy stocks. people just decided to buy the dip. we are hoping for a rally at the year end. what we are going to see is the rally run its course. there are some high-profile companies that had very

disappointing earnings. you're not going to see new money flowing to those needs. jonathan: this wasn't as scary. happy halloween. thank you. we are used to it after nine months of it now. lisa: we didn't get into the really scary stuff. it's what happens after that. the last decade. jonathan: we've talked about pricing the bulk of the tightening cycle. we need to discuss the consequences and how much we've done in such a short amount of time. bring up the fed funds. this was to hunt into any five basis points in three years. we've done 300 in six months. lisa: it shocks me how immunized this market is. if you look at corporate debt and how long they pushed out some of their debt, how much

consumers haven't taken on as much debt that is floating. they are going to have to adjust to it. so many things make it an economy that is not going to respond very quickly. this is why i keep going back to this idea of how long will fed hold those rates? that's where it's going to bite more. jonathan: that's the most important point. i've spoken to the team at morgan stanley about this. they are suggesting it's out there in the future. the longer you keep rates here, the more problematic that starts to become. this year, you've seen supply fall off a cliff when it comes to high-yield. we've talked about the quality index improving. this speaks to why spreads are wider than people thought they would be. the further you go with rates and the longer you keep them there, you start to have a

conversation about maturity on the horizon. that could be the story for 2023. lisa: especially when that cycle becomes a problem politically for the innate states. jonathan: from new york city, this is bloomberg. ♪ >> keeping you up-to-date with the first word. in brazil, the results of the election signal a change in direction for the largest economy in latin america. lula was elected in a dramatic comeback. three years ago, he was in jail on corruption charges. he defeated the incumbent bolsonaro, who has neither conceded nor commented on the results. his reaction will be watched by investors. there is a showdown at the supreme court over affirmative-action. justices will hear arguments about admission policies.

the schools are battling an interest group that wants to overturn precedents that let colleges consider race when they choose students. the ceo of berkeley said the lenders investment banking operation is critical to its success. >> the investment bank has been what is kept barclays flourishing and quite apart from many competitors. we are interested in a more diversified business model. >> multiple losses, private equity firm like stone has agreed to buy control of emerson electric's climate technology. the business is valued at $14 billion. the business sells products like compressors that are used in heating and cooling equipment. emerson will keep a minority

stake. global news 24 hours a day, on air and on bloomberg quicktake, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

>> we are expecting prices to go toward $100 and trade into the hundred 20's for most of next year. the biggest is the winner. the weather is going to be a part. jonathan: energy aspects, brent crude this morning is down by 1.1%. my good friend manus cranny is standing by with a tremendous interview. manus: good morning to you.

that's a punchy call, the 120 bucks for the winter. let's see whether russell hardy agrees with me. it's good to have you with me. i'm looking at oil at $94. it's up 10% in a month. talk me -- me about the real demand. >> good afternoon. there is plenty of people to talk about the oil market. i will give you a few thoughts. the supply side has been constrained a little bit by opec. the supply side may be constrained i the russian sanctions. the supply side is clearly at or close to its max. there is not a huge amount of

spare capacity. that creates some supply-side tension and makes people a little bit worried. if we were doing this interview in january, i would've told you we expected demand to be 2 million barrels per day higher than it is. that is the war, that is inflation. all of that involves the chinese lockdown situation. you do see significantly lower demand. that is keeping the price and balance. >> is that lower now? we've got a flake and attempts. is it getting lower? >> i think a lot of economies saw the highest prices.

we've seen a little bit of restocking in september. it became -- remains painful for many countries. we are still going to continue to see that demand instruction for another few months. >> let me flip it to the other side. there have been tiny moments in the quarantine. if there is a structural shift in china's reopening narrative, what does that do to demand structure and price? for oil? everybody expect some improvement in movement in china. it's probably more likely the second half of 2023 compared to the second half. the chinese economy is feeling

the other side of the coin. consumer spending is reduced. we expect a resurgence in demand. we expect resurgence in aviation demand. all of that is probably more likely in the second half of 23. in the short-term, we are dealing with the reduced growth in interest rates. >> the other dynamic is another set of sanctions. this will flow away from the oil market. that impact of that flow of supply into this, does that just go to india and china? >> it's difficult to say. it's likely to go east rather than west.

there are some markets in the west that may be suitable for russian products. most of this will follow the path of the existing crude to asia. >> you are still shipping russian crude. you're not? my apologies. >> we announced in april that we ceased shipping crude oil. we do a little bit of product business. it's not a significant volume or contribution. >> what shifts the dial in this market? strong dollar? what is it that shifts the narrative in the oil market? >> i think the biggest risk is the one you just highlighted. this makes its way to market.

there is a risk that russian oil production gets shuttered and russia. issues around the european sanctions, i think that's the biggest short-term risk, lots of commentators have a different view on it. this is the result of the difficulty in getting the product from a two b. >> we've got a lot of speculation about a price cap on gas. is the politically poisonous truth that in europe you need demand destruction and not price caps on gas to settle the market? >> i don't think the expectation was the price cap would be at a moderate level. i think it's more about dealing with some of these runaway type

prices we had in august. industry can't afford it. customers can afford it. the eu is thinking about how they can have that stress and strain occurring in the wholesale market. >> where you see the price of oil? >> it's going to be volatile. one would expect -- i feel it's a little bit softer at the moment. a recovery is due next summer. >> thank you very much for being with me. i've got the penthouse court suite here. jonathan: the applause as always for you. manus cranny for us with russell

hardy. they have a fantastic byline into what's happening in the oh market. demand destruction was a theme that came up number of times. lisa: that's what people are trying for. how do you encourage demand destruction when you have limited supply? jonathan: do you think his view is in line with what we heard from opec? lisa: i would guess so. they are pretty much an alliance. jonathan: futures are down 0.4%. the s&p is a little bit softer. from new york, this is bloomberg. ♪

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♪ >> our expectations right now are basically plus 3% earnings growth read >> we do expect the fed to maintain this aggressive

pace into the end of the year. >> as monetary policy goes deeper into restrictive space, each incremental height is going to be more justified. >> one thing the fed cannot afford to have anyone say is they are not credible. >> frankly, no one knows what the market is or should do given the environment we are in. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: a bear market today in a spooky voice while holding a flashlight under her chin. surely today is the opportunity. let's talk about how bad everything is right now. lisa: have you brought a flashlight or a torch? jonathan: i'm sorry. lisa: than i can't do it. jonathan: you call it a torch? lisa: i call it a flashlight. jonathan: i will do it if you want. good morning, good morning.

after the tremendous rally last week, i have to say i've come away last week thinking how tremendous this equity market was in the face of some terrible earnings we got from walk-through major tech players. tom: lisa: i feel like a broken record and i hate going back to this, people believe that if the fed starts to slow the rate of increase of their rate hikes and that we are reaching peak inflation, that is going to give a lift market. will it? it all goes down to some of the earnings we've seen and whether they continue to deteriorate. jonathan: and when the fed goes beyond november, november was always going to be about december. how many times have we got into a fed meeting, expected a step down, looked at 75, 75, 75. and for whatever happens on wednesday, in the following week, we get cpi in america. i would say let's go to the ecb for a playbook. look what the ecb did.

open the door to a step down. two day slater, cpi data. monday for the euro zone close to 11%. lisa: which is the reason why i suspect that the likes of bill dudley are going to get even more voice. he has been right, and how much can you start to see those and rates climb even higher -- end rates? the economy is not responding as quickly to these rate hikes. at what point can you imagine, ok, slower pace? jonathan: slow stretch and raise, that is the approach they are looking for. do you think that is going to be the one that people go with? lisa: it sounds like what we should do on monday mornings. jonathan: if you do step down, throw another 25 point basis hike in there just to communicate that you are not giving up anytime soon. does that make sense? lisa: maybe that will give some

sort of hawkish feeling, but people don't believe this fed has conviction. are the projections realistic? do they have to say we're going to see unemployment rise? we don't like this but it is a necessary condition in order to let inflation come down a bit more. if they say that and then they say ok, we will have a higher endpoint, maybe people will believe that. jonathan: jackson hole, wyoming. chairman pal talk about pain repeatedly. i keep coming back to that speech to reflect on it. you have the same thing from the ecb who talk about a hike in interest rates even into recession if that is what materializes. that is the playbook for these guys. lisa: but the projections haven't shown that, and that is a big deal. when we actually start to get the people getting laid off, you start to get the political pressure, the stories of people

who cannot afford the day today costs. jonathan: isn't that the whole point, but they were meant not to be touched by the political cycle, to make these hard calls? why is the bank of england the only one that is saying i think we are going to have a recession? lisa: they are going to be political any way they cut it. they are going to basically succumb to the political pressure of the incumbent party. either way, they are in a terrible spot. the fiscal site has been really derelict with their duty to invest in the economy, like you've been saying. lisa: spooky voice. jonathan: futures down just a touch. call the three basis points higher. we talked a lot about that. the euro-dollar, negative one third of 1%. you've talked about it a few

times this morning. that data out of china, pmi's in the 40's. lisa: and how much it really is china the story behind crude and how much does that lead to the end acuity of what happens next year when so much of this is driven by zero covid? jonathan: we've heard from china months ago, seeing demand rebound in the second half of 2023. is that good or bad in the united states right now? lisa: it is good not necessarily leading to an oil price strike. it is bad with some supply disruptions that have allowed prices to remain high in other areas of the economy because it is hard to see how these ease up. jonathan: a flashlight right now. lisa: if you give me one, i will do it. jonathan: all this chat about a step down. what are you and the team thinking about going into this

november meeting? >> i don't see any reason for them to commit to downshifting on wednesday. i think that they will let us know that they are considering it, but as you said, we have two cpi prints between wednesday and the december meeting. so what is the point in saying here is what we are going to do? i think they are going to say if we see inflation moderating, we are open to it. it is going to take some time to this tighter policy to actually have an effect. but as you said, central banks have been wrong before and they said they are going to back off a bit and then they end up going full throttle. i just don't see why they can't commit yet. they don't have much to point to in the way of inflation moderating. lisa: people are trying to get a better sense of long-term to short-term. morgan stanley earlier this

morning saying that he likes long dated treasuries because regardless of what they are going to do, it has been a slow growth and slow inflation. do you agree? >> i think there is a lot of merit to that. if you are a long-term investor now, certainly with you have a better entry point? probably. but again, it depends on your time horizon on this. jonathan:jonathan: the wall street journal had about five or six investors being interviewed. he said i am more excited about 2023 than i've been in a really long time. you hear that a lot from the fixed income team, don't you? lisa: a lot. i hear that also because i lived through the era of people railing against rates, plane. now they are getting 9% average yield on things that actually look better because these

companies have preserve cash. jonathan: those people have been complaining about low rates. i haven't had enough of that. we're going to take some opportunities here. does that resonate with you, what was said over the weekend and that i more excited about 2023 than i've been in a really long time? >> absolutely. you don't even need to go to high yields to get interesting yield. north of 7%, it is a four-year piece of paper. i think you're going to be well-compensated for that. again, time horizon matters. 28% return. that is going to be a good investment. jonathan: how has business changed? can you walk us through that? do you get a sense that people see the world the way you see the world?

>> i absolutely do. i presented at a few conferences and the interest in fixed income is much, much higher. people are excited about it. the thing is, it is still a little bit of nerves. we want to allocate, but not quite yet, so i do feel there is the risk. we get a bit of a rally and then all of a sudden, everybody realizes this is it, we need to get in. it has been false starts, but i think that can be the template. everybody is sort of waiting, sitting on their hands a bit, they want to get invested, but we are not quite there yet. i think there's a lot of interest when you compare fixed income to private markets, other public markets.

my favorite stat right now is credit of deutsche bank. they basically had the treasury going back to 1788, the worst return since then. it just gives you some context. we use the word unprecedented a lot in markets but that is truly unprecedented jonathan: it truly is, thank you. i have for that so many times. so many times when it comes to fixed income. lisa: to put these numbers back to what she is talking about, i looked at the bloomberg total return index, down more than 19% this year. that is the worst year on record if it continues at this level going back to 1973. to give you a sense of just how much pain has been absorbed into this market, people are now saying it has taken a lot.

jonathan: all of a sudden there is this judgment about what we can achieve or where we are going. the good news, we can actually settle down. i just think it is complete in a positive way. this is what people have been complaining about for a decade. >> i don't know, good question. i've looked more constructive, this is the reason why. jonathan: greg is going to join us shortly. lisa: hopefully. jonathan: this is bloomberg. >> keeping up-to-date with news from around the world, a dramatic comeback for former president luis nacional silva.

he has won the election come in defeating bolsonaro. there years ago he was in a jail cell on corruption charges. bolsonaro has neither conceded the race or commented on the results. ships loaded with grain are sailing from ukraine. despite russia's announcement that it was withdrawing from an agreement to keep experts flowing. -- experts flowing. both the united nations and turkey are working to salvage the deal. meanwhile, russia launched a massive wave of missile attacks across ukraine. the capitol was one of the cities that was hit. and south korea, the government has opened an investigation into one of the country's deadliest incidents in years. at least 154 people were killed when a crowd squeezed into a narrow alley during halloween festivities. reports are that some people begin to fall, causing others to

tumble and pylon to one another. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

>> right now in the senate, in the house, democrats have a very

small majority. the vote right here in this district could determine which party controls the house of representatives. >> this is serious stuff, of course, a week away from the midterms. in the back of the studio it is all dark, there is not much lighting. all i can see is the floor manager in a skeleton onesie. lisa: let's see if we can see. can we do this? that is fantastic. jonathan: we can't even see your head, just see the outline of a skeleton onesie. lisa: happy halloween. jonathan: did you find that flashlight, that torch? lisa: i didn't come and you didn't bring the one. jonathan: that could work on digital, weekly moments with you in a dark room with a torch. telling people how bad things are going to be. lisa: really, are we doing this? let's do the market. jonathan: is happy halloween a

thing? do you say that you people? lisa: yes, that is what you say. jonathan: i'm still trying to work this out. up two basis points, just north of 4%. i just think bonfire night in the u.k.'s more controversial that we teach kids that it is ok to burn historical things on the s take. that is bizarre, i find that really bizarre. i find that just ridiculous. lisa: i couldn't disagree. in the u.s., you just dress up like them. jonathan: skeletons and whatever you want. lisa: puppet figures. jonathan: do you see at spirit halloween you can get federal reserve figures. lisa: you want to do that? jonathan: i don't know if you can actually do that or not. chief u.s. policy strategist,

let's talk about energy. a big problem for this white house through this year. how is that playing through the midterms in the minds of so many people? greg: i think it is playing really poorly. a great editorial talking about how dysfunctional this energy policy has been. joe is complaining about prices but in reality, one of the reasons prices have gone up is because of his policies. lisa: can you elaborate? a lot of people think that his policies have been to unleash the spr on the energy market, the gasoline market, and that has brought down prices. greg: the other side is how adversarial the white house has been starting within days of his inauguration when he killed the keystone pipeline. andy has gone from there to really beating on fossil fuels, saying that renewables is the

way to go. i think renewables will play a major role for this decade but right now, we need fossil fuels. lisa:lisa: so that is the case. at the same time, perhaps it is just the coherence in the message from this administration because they have actually confirmed that point of view and said we need to encourage investment by some of the oil majors. where could they be more consistent? what could be the message that could read through better than perhaps the republicans are giving, in your view? greg: probably regulatory policy which has been quite restrictive. i think the industry and census with regulatory policy is quite harsh and therefore the industry is not doing much growing more refining or shipping. jonathan: if they can't keep hold of the house and the senate, what do you expect to happen? greg: it is a good question.

because both sides are so bitterly divided, we have to lower the expectations. but i do think there is a chance they will talk about immigration. everywhere i go in the country i hear the same refrain. we don't have enough cooks, waiters, waitresses, whatever. and i do think more legal immigration would be very beneficial, and i think both parties might agree on that. lisa: in the meantime, a lot of people are thinking it is going to be good luck, and markets like good luck. is this going to be gridlock that is good for markets? greg: i think so. i think there is not going to be anything radical, certainly nothing new on taxes, capital gains, the estate tax. i think all of that stuff gets frozen for at least two years and that kind of predictability is a good story for the markets. lisa: what does that due to our alliances with other nations? i think about some of the potential for restrictive exports of natural gas, of diesel especially in light of some of the increases in price

we've seen recently in both of those categories. how much could that really create some long-standing fissures in classic alliances? greg: it could, you can't rule it out. i would say that the biggest fear that i would have his ukrainian policy. we are starting to see a lot of ads on tv over the last couple of weeks talking about why are we spending this kind of money on ukraine? we got problems right here. if there starts to become a perception that the u.s. is losing some of it resolve on ukraine, that is a big deal in a very negative story. jonathan: the prospect of any kind of trade restrictions on energy products out of the united states would only exacerbate that in places like europe. greg, that has been floated a few times this year. they haven't gone forward with it. is that what is holding them back? what would make them go through with a policy like that? greg: first and foremost, the

u.s. economy is starting to weaken sharply. if at some point next year the u.s. economy is starting to slump, i think there will be a serious debate over how much we're doing for ukraine and the republicans may lead a fight to use that a lot less. jonathan: appreciate your time. no doubt we will catch up before next week. brammo, can you imagine how controversial that would be? lisa: it would be massive. can you imagine any kind of trust between the united kingdom, the european union and the united states? at the united states as are facing pretty high prices, so we are not going to export to you, that is not going to fly. but keep the ukrainian policy as it is. that is why i wonder if vladimir putin and the western nations are in a race right now for how quickly the pain could hurt the

other more than themselves to get some sort of a win. jonathan: speaking from the same script. every single country across europe doing the same thing with the exception of maybe places like hungary. for the most part, they've done a pretty good job of doing that. i just think that changes everything, doesn't it? lisa: it would be a game changer not just with russia, but also the china. because what kind of alliance do you have if you don't add allies from economic perspective? he is telling us to be quiet. jonathan: corner of my eye, hit the brakes. this is bloomberg.

♪ jonathan: 60 minutes away from the opening bell, after a really decent week of gains on the s&p 500 despite the fact we had some pretty terrible earnings from some of the major players in tech. futures down by half of 1%. 4.05% if you like.

we are negative for tens of 1%. ugly stuff. $86.13. out of china coming this week in the 40's. the ism comes out tomorrow. you wonder whether i confirm some of the doom and gloom you see in europe and china as well? lisa a: if you don't see that, how much is that going to become a problem? i'm a little distracted right now looking at some of these headlines regarding opec's latest report. this is the thing, demand is going to keep increasing. this is the cudgel with some of the transition that people are talking about. how do you offset the need for oil now and in the next five

years when you don't have oil majors willing to really invest, or policy that want to support that. jonathan: the position -- transition away from oil is "potentially dangerous." that is there line. lisa a: how much is this revenge of the real economy, and how much is this that we have to bridge the gap between now and then and that is a little further off than some people thought of a future where you can rely much more on renewable energies? jonathan: the irony, when a read this quote, won't be lost on any of you. people like a pleading their emergency stocks. used it as a mechanism to manipulate market as well as profound purpose was to mitigate shortage of supply. one, i'm manipulating markets.

a second point, the purpose of some of these inventories, the purpose was to mitigate a shortage of supply. i remember asking this question a number of weeks ago. no, we haven't had a crisis in the oil market yet and if we do have one next year, we are a whole lot more vulnerable because of what we've done this year. lisa a: i think that everyone is pretty much in agreement here that this was for the express purpose of bringing down prices and not because there was an actual shortage of people not being able to get gasoline into their cars. it is a little rich. jonathan: vincent, fantastic to catch up with you. federal reserve position on wednesday. i'm sure you are frustrated by the conversation at the moment, but the conversation of the moment is about this step down in interest hikes. how do you expect the chairman to navigate these conversations?

vincent: they will deliver 75 basis points because that is what they said and they haven't said anything different. with regard to the hard part, december and 2023, they don't have a summary of economic projections dot plot. the last one said they would be a cumulative tightening over the last two meetings of the year. if they do 75 basis points on wednesday, everybody will do the math, and that says 50 basis in december. that is the step down. and even the state consistent with an outsized move, 50 is bigger than 25. the safest bet is to keep it pretty low key. stay on course because off course is 75, then 50, then talk

about 2023. jonathan: stocks are up almost 9% on the s&p in october. vincent, do you think we've seen as efficient easing of financial conditions that require some kind of direct response from this chairman to lead back into that? vincent: this is a mini replay of july were equity investors who particularly got ahead of themselves, it would be a virtuous decline in inflation. if there was a recession, it would be painless and the fed wouldn't raise rates very much and turn them around really quickly. jackson hole disabused the market participants of that notion. i think jay powell will have to know a little bit of that, but really it will be in december

with a new summary of economic projections. i think the message for them today is the same in jackson hole and the same they've been repeating. they are going to raise the funding rate. they understand it involves pain, and they are going to keep it there for a while. it is the plateauing that really will delay the important message. they've got to get it into an area where they are confident it involves policy restraint, and then it is a matter of holding for prolonged enough. when investors get that method, you won't see the easing of financial conditions in the last week. lisa a: in the meantime, you have this point in your notes that is really scary to me. tightening of the monetary stands abroad and the weakening global economic outlook is why we think the frmc will stop short of firming enough to return inflation to the goal within the next two years. are you basically saying that we are bound to be stuck with much

higher inflation for longer because the fed is worried about breaking something not just in the west, globally? vincent: i think that is a discussion for late 20232024. my basic concern is everybody knows what to do about monetary policy when inflation is so high. that is why there is not a lot of doubt about what the ecb will do later in the week. two digits on your inflation rate is a bad look. when inflation is this high, when you are that far above, next year inflation will be lower, the unemployment rate will be higher. major trading partners will be in recession and the federal reserve officials will have a much harder time balancing across the dual objectives. maximum appointment and stable

prices, and the temptation to reverse course will be pretty compelling. and besides, if inflation is falling and they have a forecast that more plausibly implies inflation getting down to around gold in a year or two or three, that might be not stopped short. paul volcker stopped short of 2%. the second time around. lisa a: but does this mean that we are going to be doomed to that stop-start-stop-start that is going to leave us with a decade of inflation that will make it back down to 2%? vincent: two points, one, we've got an old look from monetary policy now. the fed is talking about policy, they are responding to events, not applying to leave them.

that sounds 1970's already. the second part is, yeah, i think inflation will prevail above fed gold. i don't think that far above gold. we are not talking about 5% were 6% or 7% inflation. it is that it is something in the low threes or the high two's, something that the fed could plausibly say, well, we are only one recession away, let's opportunistically wait for disinflation down the road. bad for fixed income investors, bad for markets. if 2% is your goal, you should get there. they are just going to say let's take our time getting there. jonathan: you make it sound very simple when you put it like that. just one recession away.

vincent: it is also painful because there are people involved in those, by the way. jonathan: in a massive way. vincent, thank you. absolutely brilliant. we've gone back and forth on this through the morning and many times over the last couple of months i still think this is the major change in this conference. you are doing this within a week of the midterms and you got the democrats pushing back so many points they are making are spot on. we haven't seen a sufficient explanation from this particular institution to suggest as to why higher unemployment is a price worth paying to get inflation down. i think they've acknowledged it in the forecast that unemployment needs to go up to get ration back down. they haven't communicated why that is a price worth paying. lisa a: except that you are seeing wage gains, and we saw that on friday and you keep seeing that and saying how do we get wages to stop rising so quickly, which also is a difficult thing to really pass through if you think about the fact that the wages are not

keeping pace with the cost of living. this is a difficult moment, relying on history at a time when history is perhaps not the best guide for a new inflationary environment in the face of global conflict and deglobalization. this is new. jonathan: are you coming to my halloween party later? decorating the living room at our place. lisa a: your place that you share together? that sounds very close to "cheers." jonathan: what is your favorite kind of candy? do i eat candy? lisa a: sounds like a great halloween party, that is all i can say. jonathan: egg white omelettes. lisa a: the kids are coming to your door. jonathan: do you see me celebrate halloween? lisa a: not in the slightest. are you a bad person? jonathan: yes. lisa a: when people knock i your door, do you hand them in apple? jonathan: slices of fruit.

lisa a: you are going to get hate mail. jonathan: this is bloomberg. ♪ lisa mateo: keeping you up-to-date with news from around the world with the first word, in brazil, the result of the presidential election signal a change in direction for latin america's largest economy. a dramatic comeback for the left-wing politician. there years ago he was in a jail cell on corruption charges. he narrowly defeated bolsonaro who has neither conceded nor commented on the results. his reaction will be closely watched by investors. today, there is a showdown of a u.s. supreme court over affirmative-action. justices will hear ongoing admissions policies at harvard and the university of north carolina. the schools are battling an interest group that wants to overturn precedents that colleges consider race when they choose students. the ceo of berkeley says the

investment banking operations critical to its success. they spoke with bloomberg in the first television interview since taking the job a year ago. >> the investment bank has been what has kept berkeley's flourishing and quite apart from many of our competitors and the fact that we perform extremely well during covid, we were able to have a more diversified business model. lisa mateo: last week, credit suisse confirmed it is looking to downsize its own bank after multiple losses. and more headwinds for the economy in the u.k. british consumers and businesses have cut back on borrowing after a jump in interest rates. new mortgage approvals fell 10% last month, the sharpest paste since february, 2021. credit card borrowing and loans taken out by businesses also 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. this is bloomberg.

>> what we're seeing in terms of the dollar is an unprecedented run and scarcity becomes problematic when we think about what is going on in europe, in japan. i think that is going to be a big story. lisa a: the head of u.s. rates strategy. we are talking about halloween today and a viewer had this comment, inflation on a day of halloween, suggesting that i dress up as transitory inflation, arrived at the party and leave early or simply stay and refuse to go. we are looking at markets that are a little bit off after last week's gains, although nothing pretty dramatic considering the

declines that we saw with respect to big tech. the s&p down about 15 to 1%. i do think it is interesting to see the upside. what happens to the euro if you do get an ecb that continues to tighten rates? right now, this is very much politics not only in the united states, but around the world. elections going on globally including in brazil, a pivotal election at a time of a populist bolsonaro with a revival informer head of the country who actually did come to power. he has been in send paolo covering all of this. all things emerging markets here with us as well. i want to start with you, to talk about the motion, the importance of the victory. and how controversial it has been given how close the victory was. >> it has really been a historic

comeback for this two-term president, now back in power, incoming president. we have yet to hear from income in president bolsonaro and of course, this was the narrowest margin of victory in the presidential election in brazil in 40 years, since brazil's return to democracy. so we are expecting to hear from bolsonaro at some point. we heard that his presidential convoy left his presidential palace in brasilia earlier today but he refused to make any comments. the question right now for everyone including investors, of course, will he concede defeat? several times in the past he has cast doubt on electoral authorities and there were fears that he might not go quietly. vincent: lisa a: how much social disruption has there been on the heels of this considering bolsonaro was talking about he would either win, die, or get

jailed, and those were basically the only options in the post-election aftermath? >> we have seen, of course, what has been -- i haven't heard your question very well but i'm assuming you are talking about the post-election results, what happens next? this is what we are gathering right now. perhaps not a lot of violence out there. we saw a little bit of violent incidents during the campaign, especially from bolsonaro allies. that actually hurt his chances, his polling was actually down this week when we saw more of those incidents, but perhaps there is a bit more optimism and belief in the market as well, given that we haven't seen any big instances of violence during the election count. last night, it was a lot of joy and excitement by supporters expecting a new hope, a new optimism for the country. markets still down.

stock futures are also down. still, not a huge negative reaction. in fact, assets in asia traded in the positive. vincent: thank you so much. -- lisa a: thank you so much. i'm curious from your perspective, the importance of this both from the market perspective, the most of any currency so far this year, but also from a larger political takeaway for the emerging-market complex. >> it is one of only three major emerging and developed market currencies up against the dollar this year. what that means is they have had a fantastic year. the only other emerging markets that is up year to date is that of turkey, so that tells you everything you need to know. the fact that the prosecutor

general and the president and the senate have already come out to vow the win as well as united states, canada, and norway. we are waiting to see his cabinet selections, whether the former governor is the pic that most are expecting to begin for markets. lisa a: a lot of people are looking to this as something of stability, as going back to the complex of a world order. sort of a throwback. not the populist "let's go it alone and prioritize the economy of the rain forest." i'm curious, is the tighter interest-rate sensitive market pushing people away from the more populist view that were fueled by fear or money? >> the brasilia presidential executive judicial system right now, just the fact that it is a divided congress.

lulu's running mate lost in the election. he is right down the center and is going to have to govern from the center to bring the country together, the economy together. it is basically the north against the south. the whole northeast has voted in favor of the party in favor, so it is a very divided country and even will be very difficult to govern and impose some of his policies on climate deforestation, on the amazon, on women's rights, lgbtq rights. to kind of go back after 700,000 deaths during the virus, that is basically what happened, just a massive amount and handling by bolsonaro of the virus is something that is on a lot of peoples' minds. lisa a: we talked a little bit about the fears of social unrest, some of the potential violence. how do you look toward some of the social unrest that we've

seen and parlay that into a market view? into understanding the impact that it will have on the economy? >> you obviously could go more in the direction of what brazil has been doing right now, electing a populist president in power, but they haven't really been able to govern from that perspective yet because of everything you are saying, the world, the structure of what is going on in each country. i think brazil is going to be in conflict with much the same thing. the fed, the united states government, what happens here in terms of inflation and abroad. rates are a bit wider to account for the increase risk but by and large, the market is expecting some really significant rate cuts as you move forward along with chile and the rest of the world because things are getting tight and economic activity is accelerating pretty quickly.

lisa a: a far cry from the three had changed. thank you so much, as always, for the context at a pivotal moment brazil. people are taking some large messages from this. as we heard, there are a host of other elections as well. coming up, the strategic partner of 32 advisors and former chair of the council. looking at the markets, you are seeing yields slightly higher. you are seeing stocks slightly lower. it could all change. this is bloomberg. ♪

jonathan: down on the session, on the month. live from new york city this morning, the countdown to the open starts now. >> everything you need to get set for the start of u.s. trading, this is a bloomberg: the open with jonathan ferro. jonathan: live from new york city, we begin. >> they step down. >> a step down. >>