>> i'm john with the first word news. president biden will reportedly flood the possibility of a windfall tax on energy companies. that is according to the associated press. the white house as the president will respond to major oil companies hosting record-setting profits per he is try to pressure them into lowering gasoline prices for consumers. at the u.s. up in court today, justices engaged in heated exchanges over affirmative action. they are hearing arguments on abolishing race i should that race-conscious admissions into harvard and the university of north carolina. ships loaded with grain are sailing from ukraine, despite

russia's announcement that it was withdrawing from an agreement to keep seaborne exports flowing. both the united nations and turkey are working to salvage the deal. ukraine is one of the world's biggest supplier of wheat, corn, and vegetable oil. meanwhile, russia launched a massive wave of missile attacks across ukraine. the capital of kievan was one of the cities hit. consumer prices jumping by 10.7% from a year ago this october. that number is outpacing the median estimate in the bloomberg survey of economists. the law, gdp of the euro zone roasts. it was much less than your .8% gain in the second quarter. global news 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am john hyland. this is bloomberg. ♪ >> welcome to bloomberg markets.

scarlet: great to be reunited again. it's get a quick check on the markets right now. we look at the equity market. it is down. it is a big week in terms of earnings and the fed, and of course in terms of the jobs report. we're going to talk about all of that with lisa shalett of morgan stanley. last week's big moves now selling around 4% as the fomc plans to meet tomorrow and come out with the decision on wednesday. the bloomberg index higher for a third day. it is strong against all major currencies except the brazil royale. stocks up 1.4%. the former president is now the new president. does that matter at all or do investors only care about a peaceful transfer of power? we're going to check in at sao paulo for more. jon: looking forward to that. in terms of individual stock

performers today, certainly the technology group has been lagging. within that group, some commentary on semiconductors off about 7% right now. a somewhat mixed outlook. that was the market reaction. we just got that update the ap report about a possible windfall tax on energy producers. there has been so much for the energy investor to digest on this monday, including the price of oil itself. we have seen some choppy trading in the names like phillips 66. it is one of the names we will be watching on earnings front this week. another company acquiring 6%. to the downside, barclays with a bearish view. that stock off in the neighborhood of 7%. scarlet: we will talk more about earnings and what it means for specific equities. as we look toward wednesday's fed decision, it really had us wondering if fed chairman jay powell or a track and field

athlete, what event what he compete in? according to a survey, he would be running a very long race. >> is jay powell running in what would be a very long race? it will probably take a federal reserve journey that tracks on and on. that is the rate from a group of professional and retail investors polled by bloomberg. most said he is competing in a marathon, in part because of the delay between the fed's action of raising costs and the reaction in the economy of prices coming down. former treasury secretary larry summers agrees. he said it doesn't tend to fade quickly. meanwhile, almost one third compared jay powell to a pull vaulter, over concern about how he will go in raising interest rates. whatever his event, endurance will be a big theme, as they need to decide on the next step. the fed is waiting to see evidence that its series of

hikes since march 2022 will weaken demand, reducing spending, in order to slow down price increases. for now, most investors are choosing not to make any big bets in stocks or treasuries. even as they see the dollar trading higher, in anticipation that jay powell be running laps for a while. jon: let's get some more insight on where the markets could go from here, as u.s. stocks have been trimming some of those october gains ahead of this week's fed decision. joining us now is lisa shalett, chief investment officer for morgan stanley wealth management. you have a view on what kind of track performer jay powell would be if you were to get onto the track and field sphere? >> i think jay powell is running from behind, as we all know. his job is just not done. markets have tried to be kind and anticipate not only the fed being done, but success quite

frankly. we see some extraordinarily benign expectations. i think from where we are sitting, it is very important for the fed to be clear about what data they are looking at to guide their policy. they cannot keep doing what they did over the last six months to nine months, which is change their data, their favored data point of choice to meet the narrative. they have to be very clear in signaling to markets what is the data that matters, is it employment, is it headline inflation? is it inflation expectations? and how they believe what the path to their success is going to be. scarlet: that makes perfect sense. the big question is how long he will be running this marathon for. as investors look at the market and try to suss out who comes

out ahead, pricing power is top of mind in this inflationary environment. what sectors or kinds of companies are most vulnerable right now when it comes to pricing power, that don't have the ability to keep raising prices? >> i think you articulated your question and aimed it at the answer, which is those companies that don't have an extraordinarily strong brand or unique position in the marketplace are going to struggle. any businesses that are being commoditized, so the advertising space is a place that we have already seen the loss of demand and the loss of pricing power from some of the large tech giants. a very different story than perhaps what we heard from apple that continues to command some pricing power. for example, in some other subscription-oriented services, which are unique. i think were pricing power is

going to hold up longer is in those areas where there is true brand power and real market uniqueness. jon: on the earnings front itself, and obviously there's a range of companies that will be more successful than others, based on what you're going to be watching for, but generally speaking, as we have been navigating through earnings season, the market has felt relatively good. but as you look ahead, are you anticipating or erosion in the profit picture? >> absolutely. i think what investors have really misunderstood is the degree to which 2020 and 2021 profits, and i would even go so far as to say a portion of 2022 profits, have been flattered not only by a pull forward of stimulus-induced demand, but also by pricing power. you cannot have it both ways in an economy.

you cannot win the fight and win the war on inflation and yet all the major companies still have pricing power. it doesn't work that way. so, as we defeat inflation in the economy, companies are going to lose pricing power at exactly the same time they are losing volume from demand. that, in our parlance, is negative operating leverage, which means your revenues are going down for more quickly than costs. scarlet: another big theme is a strong u.s. dollar. you mention a few ceos and cfos are willing to acknowledge and discuss the risks of a strong dollar, for instance declining global sales or losing market share. why is that? why does everyone seem to think they can manage through this? >> it has been an interesting earnings season to sit and listen, where everyone thinks that there are macro problems,

but in their company, they are going to be able to tackle things. in our experience, it is just that it doesn't work this way. there's the short-term effect of currency, which shows up in terms of currency translation creating headwinds. but then there is the longer-term effects. you are talking about the u.s. dollar not just strengthening emerging market currencies, but this time the u.s. dollar has strengthened against some of our most formidable trade partners and even countries where some of our competitors reside. you are talking about over the past two years, a 40% discount for companies that are competing with some japanese competitors, a 20% discount for those competing with european-based competitors. in the u.k., you're talking about 35%. these are real competitive discounts for multinational

companies. jon: great to get your insight, as always. much appreciated. lisa shalett, chief investment officer for morgan stanley wealth management. she mentioned the u.k.. we actually have some headlines coming out of the right now. all britons will have to pay more in tax in the coming years to fix the fiscal black hole. that is according to the u.k. government, specifically coming after a meeting between prime minister rishi sunak and jeremy hunt. it is "inevitable" that people would need to contribute more to fix the eye watering gap in finances. the treasury saying in an email readout of the reading between the two leaders, the prime minister and chancellor agreed that tough decisions are needed on tax rises, as well as spending. we will continue to track those headlines. we are also tracking the selection results out of brazil. a narrow victory for lula in the presidential election. we will tell you what's at stake for the most populous country in latin america, next.

this is bloomberg. ♪

scarlet: this is bloomberg markets. kriti gupta is off for the day.

let's turn to overseas develop and. victory in a tight election for the presidency, showing signs of a drastic change in direction for latin america's biggest economy. our shery ahn is in sao paulo, along with bloomberg capital and founder sylvio castro. >> given as narrow a margin of victory in 40 years, it is not really surprising we have seen of volatility in brazilian assets. we still haven't heard from the president himself. is it really understandable that we are seeing investments going down, up, down again? >> i would say it's very hard to make a final prediction on the direction of the markets. it all boils down to the decision that president lula will have to make about his finance minister. as long as he sticks to a liberal economist, we will probably have the benefit of the doubt and markets will continue

to behave reasonably well. but if lula decides to stick to his previous guns and bring someone from a more political side and they left-wing arena, i would definitely be more cautious about the brazilian stocks and interest rates. reporter: which is why we are seeing pressure on the state run companies as well. but i have to ask, is all has been such a heartrate in the emerging-market so far. has most of the good stuff already been priced in, or do we already -- or do we still have more leeway from -- for gains? >> i would definitely say that brazil is still on the cheap side. there is still more room to grow. it all boils down to the decision of who is going to run our ministry of finance. in the end, it would define our fiscal policies, it would define our cost of capital. in the end, it would define the value of the assets in brazil. reporter: we are seeing the brazilian royale strengthen, but

bouncing around a little bit. what is your confidence that there will be a peaceful transfer of power? if there isn't, what is the risk to these assets? >> i will talk from both the positive in the negative side. on the positive side, i would definitely say that we will probably receive better attention from investors in brazil. lula has been talking about these during his campaign, that we bring back some cheap financing. on the other hand, state owned enterprises in brazil will probably reduce some of the premium related to this possibility. i don't see that coming anymore. jon: just in terms of where the economy goes from here, because right now we are talking about a global cool down, but brazil, in many ways, is an economy that

has not yet fully recovered from the pandemic itself. how closely are you going to be monitoring where the economy goes from here? >> really closely, to be honest. brazil is one of the few economies in the world where you have seen an acceleration. as long as we can continue to surprise markets on the upside, brazilian assets will be good. if, and only if, we don't see fiscal policy being prudent, that will definitely reverse course, as we saw in the u.k.. we may have our liz truss moment in brazil if we have the wrong choice for the minister of finance. reporter: what if the central bank does not cut? we've seen so much tightening and holding, and now investors seem to be getting a step ahead and wanting that cut to come from the central bank. >> i think that the central bank is closer to starting this cutting process, probably in the

second half of next year. real interest rates in brazil are now really high. you have to bear in mind that fiscal policy in brazil has been receiving a lot less discipline than it has in the past. on the one hand, he had the central bank pushing on the break. on the other hand, you have the minister of finance in brazil who really put on the gas. reporter: just a follow-up on scarlett's question, is brazil resilient enough to endure the turmoil if the current president does not concede? >> my take is that he will end up conceding. host of the other powers already took that decision and expressed congratulations to the new president. i tend to believe that he will end up conceding. even if he doesn't, i think institutions in brazil are strong enough to hold up against this turbulence. you'll probably see a bit of turmoil here and there in brazil, but i don't see that really sticking around for long. jon: really helpful context.

thank you so much. and of course our thanks to shery ahn, as we continue to cover the market reaction. coming up, canadian saying finances have weakened over the last year as they cope with rising prices. more on that, next. this is bloomberg. ♪

jon: this is bloomberg markets. time for today's "for what it's worth." today's data point is 47%. that is the percentage of canadians who say their finances have worsened in the past year. by comparison, just 13% said their finances have improved. that is the latest canadian confidence paul. this is the high since the survey began back in 2008. let's get more perspective now

from our reporter who covers the canadians. >> it illustrates two things. number one, there is no escape from the current cocktail of terrible economic circumstances. you have high inflation, high interest rates, and falling home prices. there is no escape from this. the second thing it illustrates is that economists have been warning the canadian economy is particularly interest rate sensitive. pain and household are carrying a lot of debt. they are among the most indebted households anywhere. this may be just affirming the fact that canadians may not be able to cope with higher interest rates, certainly not as much as americans, where they have lower indebted household

levels than canadians do. this may be one reason why the bank of canada is rethinking its rate hiking strategy. scarlet: a saying among economists is that you watch what people do, not what they say. people might be talking about how bad they feel when it comes to finances. another likely to do and how much does it drive the consumer economy? >> just like anywhere else, consumer spending is the main part of gdp, well over 50%. you are right, we are not there yet in terms of numbers. we are still seeing moderate growth in canada. still some spending, not as much as we saw earlier this year. it has not gone to zero or gone negative. but economists are looking at these numbers. what they are doing is forecasting forward in seeing what may be a real slowdown in economic spending, household spending. that's one of the reasons why many economists, if not most,

are predicting at least a small recession early next year. they anticipate the higher interest rates will eventually prompt consumers to hold back. thank you so much for joining us. you look at canada and it does have a windfall, particularly oil. jon: that certainly is a help for the economy and alberta's economy. it's interesting when you about the housing market at the center of the financial crisis in 2008 canada's economy navigated relatively well through that. you know what canadians did because it was low interest rate environment? they took on a lot of debt and kept doing it. now we are at this point, or theo was talking about, the higher rates go right now, there are some big questions are where -- on where the economy goes from here. scarlet: and no one is in a position to -- jon: we will continue to watch the market mood. today, a little bit of weakness

for stocks heading into that fed decision, which we're obviously going to be all over as we move to the midpoint of the week. the s&p 500 off .1 points at this hour. this is bloomberg. ♪

>> keeping up-to-date with news from around the world. in the surge of revelers killed citizens from at least 15 nations. confirm that from the government were also among the fatalities. countermeasures say that the majority of those killed were in their 20's and 30's. in brazil, the results of the presidential election signal a change in direction. they were elected in a dramatic comeback.