>> a divided government means you will not get very strong action in terms of things like fiscal policy. >> we like gridlock because it gives us certainty in a sense. > i think the midterm elections will be a small blip than what we see in markets. >> in the background, you have quantitative tightening.

>> underlying growth in chinese growth, these things have gotten worse. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jonathan: the red wave that never was, live for the nations capital, good morning, this is bloomberg surveillance on tv and radio. in many places, still too close to call. tom: we just heard this and maybe this is the most interesting midterm election of the modern age. jonathan: we still can't call the house and that is something. tom: the senate we can't call either but the house, i'm looking to california to get out front. there are many uncontested elections. there was next number of races where -- there was x number of

races where you go to three decimal points. jonathan: i think we've still got for contested races. lisa: you so such resilience for the democrats and house races has people wondering if this is because of democratic policy or is it a referendum of donald trump? the donald trump backed candidates were not overwhelming winners the weight it was expected so the messages are not clear. nuance played in this particular election. jonathan: let's talk about the big loss for the president in pennsylvania. test the former president. it could've been mccormick versus federman but it wasn't. dr. oz lost so you have that loss for the former president. the governor of florida had a massive win. tom: completely separate from

every other discussion. jonathan: if you think about winners in the race for 2024, governor desantis has to be right up there this morning. tom: i'm sure he's got a beautiful house where he can look at and a beautiful ocean and he can take every single phone call from every single republican this morning. it's a different conversation than it was 24 hours ago. jonathan: the discussion for the current president is different. tom: what is the timing here? inflation tomorrow and that matters but what is the date calendar to get your mr. trump november 15? we don't know. jonathan: henrietta said she still doesn't think he's going to make a run for this but if he does on november 15, that will be the trigger for the current president to make a run himself for a second term. tom: i'm not going to speculate

on this one. there are many other candidates out there on both sides and one thing we learned yesterday is will we have debates in two years? i guess that's what we will have. jonathan: i think we've been trying to work out that if you get donald trump making a run for it, does anyone compete against him? we can push that conversation to one side and joe biden runs for a second term, does anybody run against him? we don't know the answer to that yet stuff lisa: what happens if trump runs, then biden will run. what if trump doesn't win the primaries? what if we see a ron desantis when and biden isn't contested, what do you get? tom: what did we learn about our geriatric politics last night? chuck grassley did win in iowa.

he barely w ando you look at his age and trumpn after the horrific news of her family. these people are older. jonathan: i'm not in a position to discuss geriatric politics. tom: are you discussing it in the united kingdom? jonathan: our prime minister is in his 40's. tom: it's a bizarre american thing. jonathan: that was your phrase. equity futures on the s&p 500 are negative. waking up to the news i think many people in this market weren't looking for, moving on to cpi tomorrow. the yields are basically unchanged and the euro-dollar is around parity.

back in the 80's on crude. lisa: we are focused on tomorrow's cpi prints and we get a bunch of fed speak ahead of that. at 1 p.m., we get the tenure auction from the u.s. treasury department, about 30 $5 billion in 10 year notes. how much do people price and a deceleration of fed funds rate after the hawkish rhetoric it's common the markets. the earnings continues. we get a bunch of them after the market but many are focused on the 11,000 job cuts we are expecting from meta to be unveiled throughout the day, 13% of the entire workforce. i wonder whether this is a meta-story or a predecessor of what's to come. jonathan: we have seen quite an amount of spending in the

metaverse and how it failed to bring them traction with investors. tom: you know how i feel on this. i don't like to bundle all of big tech together. jonathan: when you look across tech, you can see where the investment has been over the last decade or so. tom: i don't see it in netflix. where is the profit in facebook? jonathan: we don't see it in the metaverse for sure. credit suisse joins us now. your thoughts on the results overnight? >> i think it was what the market was expecting. the results are pretty tight and expectation of a red wave won't play out stuff my view is the catalyst for the market and what everyone is positioning for is the cpi report tomorrow.

it doesn't change the near term picture and the near-term risk is about the fed and inflation. if you look at what is being priced into the markets, tomorrow is a big event. tom: let's dovetail your derivatives study into the election results. it's about a gallon of gas and you bring -- brilliantly link oil with china and with this q moments you see within the bet on what will will do. does oil signal over $100 per barrel? >> we notice there has been a clear sentiment shift in both chinese stocks as well as china sensitive assets such as commodities. this came about over the past week was speculation building that china may reopen its economy.

over the past week, we have seen a surgeon upside call buying. within commodities, a broad rally across the board but with oil specifically for the first time since april, we are seeing traders price in more upside risk to oil than downside risk. that's notable that what is driving the price of oil is china, not russia-ukraine, it's coming from the demand side. lisa: do you think the positioning has the market over pricing based on the fact that authorities have come out and said no way that china reopens and case numbers are surging? >> my view is that it is premature. what i'm looking for is that china will eventually reopen.

it is premature so what we have been recommending is if you are looking for upside exposure in china, given the repricing higher, you have to dig deeper into the micro so look at the stock levels. while all the macro assets have repriced significantly over the past week, driving up the volatility in those assets and single stock levels, we are not seeing that reaction yet stop look for stocks with high china revenue exposure were volatilities have fallen over the past week. if you are looking for that exposure, that's a more effective way of gaining that exposure and at a macro level, i like fx i and energy given the bid to the upside we have seen. lisa: i'm not understanding the

narratives people are buying into even that we have heard from jay powell and talking about a higher fed funds rate. how much of what we are seeing is simply investors being well behind their benchmarks and not wanting to miss things and that's where the conviction is coming from but nothing fundamental. >> there is a part of that. the strongest dislocation in the u.s. market is in the nasdaq where we are seeing the demand for the upside. that's where tech has been the most impacted sector from higher interest rates this year. that's where people will play a rebound. on the call side, that is at a five year high where as the s&p 500, you haven't seen that similar bid to the upside. there could be a little bit of a year and squeeze.

right now, it will come down to tomorrow's cpi number. we were not in this position back in july when they were pricing 50 and 25 basis points and we got a couple of high cpi prints and here we are. i think it will come down to tomorrow in terms of what the fed wants to do. want to be more dovish but will inflation let them make that shift? i don't know. jonathan: as always, thank you very much. looking ahead to cpi tomorrow, we will be focused on the front page of the newspaper and the headline inflation. wall street is focused on the month over month core. still looking to come in at 0.5%

on month over month core. will we come inside 8%? lisa: what counts as softer cpi inflation print given we have seen such fraud based inflationary impulses. if we see an ongoing spreading out of where inflation is coming from and even if the headline number drops below 8%, does it matter for the federal reserve? jonathan: they say this fed is being emboldened by lagging indicators which is troublesome into next year. their approach was guarantees they over tighten and that's what they are communicating as well because they are telling you we still think the risk of doing too little outweighs the risk of doing too much. tom: the bottom line here is it's all x post in this is a central bank like bank of

england, they've got to be after the fact. as you said earlier,2 inflation reports before a december meeting. jonathan: and projections from the federal reserve. coming up, live from washington, d.c., this is bloomberg. ♪

>> i never expected we would turn these red counties lou but we did what we needed to do and we had that conversation across every one of those counties and tonight, that's why i will be the next u.s. senator from pennsylvania. jonathan: what hotly contested race that was, senator elect john that hermann, democrat from pennsylvania. live from washington, d.c. come your price action looks like this on the s&p 500, slightly negative. still waiting for these results to roll in. tom: we are following it as best week can and we will bring you those numbers at 7:18 a.m. right now. i would suspect about 10:00 a.m.? jonathan: maybe four more weeks in places like georgia. tom: annmarie joins us right

now. there is a thing called a proportional map. on our map, texas is oversized and calendar -- and florida. the undecided in this of california is stunning, the number of seats that seem to be close, what is the character of the politics of california as we try to figure out what the house will do? anne-marie: you look at the mayor of los angeles and you would think that goes democrat but that was a very tough race. california is behind this in the time zone so a lot of this takes a long time to trickle through especially in close races. there are big national issues for california. gasoline on average across the nation this morning's three dollars 80 cents in california is north of five dollars.

when everyone in the nation was dealing with this in june and joe biden's approval rating went down, california is still dealing with five dollars per gallon. the second issue is crime, homeland this and the democrats have not been able to get that under control. tom: i was surprised that immigration was equal to the inflation debate. is a gallon of gas tilde front running topic in 2023? anne-marie: it is and they heavily taxed at and the constituents are saying no more. this transition of places in california where you see people lined up with tesla's and only being able to charge and a tesla machine, these are the elite that have the money for this kind of transition. i think energy will be a huge

conversation into 2024 because we are still dealing with a war in ukraine. right now, we are waiting on what happens to these russian barrels in december and what happens when china opens up? the china lockdown story has saved the democrats this year. china is not using the amount of energy they normally would use because they continuously locked down cities. lisa: this speaks to the question of china reopening, is that it good or bad thing for the economy? is the predominant feeling in washington that it's a bad thing because what does to gasoline? anne-marie: it's a bad thing in the energy space but china is a growth engine for the entire global economy. maybe if there is a recessionary fears, china could help in terms of energy, they've been hoarding energy and they are not even open. lisa: we've talked about florida and california and new york was

an interesting race. the first elected woman governor in new york but it was one of the narrowest margins going back decades. is there some takeaway as to why? anne-marie: i think there will be a huge postmortem on kathy hogle. why wasn't she out campaigning more weeks ago and had to wait to be pushed? the story from new york is crime. another interesting race which i don't believe was called yet in the house looks like it will go for the republican is the 17th district, hudson valley and maloney will likely lose seats and these are big flips. this is deep blue new york. jonathan: what about kari lake

in arizona, how much attention did that get? anne-marie: the votes are not in yet. mail in valid's need to become -- mail-in ballots need to be counted but right now, she is trailing and what is she doing? she is trying to say that there was some nefarious actions going on for this election and if she is losing, that means the former president is losing because he backed her time. jonathan: that was a trump-endorsed candidate and a lot of people thought she would be the future vp. tom: that is not a small item. i understand this is for 2024 but the jumble of this morning makes that incredibly cloudy. i don't think we get to a future presidential candidate. lisa: is there a message that the moderates actually won in

some capacity? if you look across the different locales, more moderate candidates are the ones who surged to the forefront with some exceptions and the more extremist ones did not. tom: i think the extremists were pushed aside stuff is 1600 pennsylvania ecstatic this morning? anne-marie: for joe biden, this is the best outcome for a president in terms of midterm elections since bush after 9/11. that speaks volumes for him. look at 1994 with clinton, that flipped, the obama years, it was the tea party sweep and the trump years, many women came out. yet, this president acknowledging this week that it would be difficult in the house and there are still concerns about the senate, they were able to keep what is likely divided

government but it was not the wave or tsunami that some were predicting. jonathan: with inflation at a 40 year high annan approval rating in the 40's, you could call this a win for the sitting president. you may get inflation but relative to his approval ratings, this is a phenomenal turn. anne-marie: people still have jobs. that is one thing to remember. look at the unemployment rate. jonathan: great to have you with us in the studio. amh in washington, from washington, d.c., this is bloomberg. ♪

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jon: two hours away from the opening bell. 24 hours away from the cpi report in america. equities down by a third of a percent on the s&p. s&p, three day winning streak into wednesday, monday, tuesday.

can we get some gains today? in the bond market, 2's still hanging out around some multiyear highs. 4.6656, update basis point. highs of the years came after the payrolls report, pushing 4.80. tom: how is the investment debate, and dovetail that into these political results, shift into a percent to-year? jon: some may call the old normal fed funds. tom: jim jordan, western ohio, maybe we'll take out mccarthy to run the republican party in the house. his constituents get a cd return

they have not had in generations. maybe the market solves it. but what is a 5% two-year mean for republicans and democrats? jon: fantastic if you have the savings. but this is not controversial to say. that number, we have not seen the economic consequences of that number yet. maybe we are starting to. you can say that we have priced in the rate hiking cycle. lisa, you have made the point that we are pricing in 5% fed funds. can you make the argument that we have fully realized the economic consequences of that rate hiking cycle? i don't think so. tom: two inflation report will give us some information. jon: and how quickly things have moved. eight months, 300 basis points. lisa: 12 months ago, to year

yield, 40 basis points, now pushing 5%. ann marie was saying that the reason people were not as concerned about the economy and the election, they still have jobs. taking a look at specific names, whether people will continue to have jobs, meta is cutting about 11,000 jobs today, about 13% of the workforce. shares down by almost 50%. up 4% right now. how much of this is specific to meta, how much are there broader implications? tesla shares are interesting because we heard elon musk selling another $4 billion of shares. that stock is up 1.4% in premarket trading, in part, because people think maybe we have seen the worst of it in terms of how much he has to sell. disney.

they released really disappointing earnings. they are looking for meaningful efficiencies, that is a direct quote, after reporting results short of expectations. shares lower by 7.5%. the losses are accelerating in the disney plus offering. it raises questions. that will mean job cuts at disney, re-think of content is king as the predominant theme. we have been seeing this from netflix. how much is this the next wave of potential cuts? jon: paul sweeney has been brilliant on this. tom: bloomberg surveillance with a real understanding of the streaming battle. and the answer is where are the prophets? lisa: jon, to your point, is this just the past two years of excess, or 10 years? they years of excess built up post-pandemic, the content that people consumed at home, versus something bigger, free money and

how much people can play with it. jon: think about how much they have changed industries with that content model. throwing serious money at content. and the whole business has totally recalibrated around it. it is not just two years. it's a long time we been seeing this happen. lisa: if you have all of these secular trends that are being rethought, what kind of cuts do we see accelerate that we are now seeing in the tech industry? tom: warner bros., discovery. they are not disney but the solution is simple. they do a meta. jon: they did not get a cyclical test during the pandemic. they got massive fiscal transfers. for some business models it was an accelerator. i am thinking of the stay-at-home, watch whatever you want. this business model has not had a cyclical test. when we go into an economic

downturn, we will see how well they do. tom: totally agree on the fact that they missed it with the pandemic. we are in washington to pick up the pieces of an election. there are many to pick up, and they fall back into the litmus paper of economics, finance, investment, the foreign exchange markets. erik nelson joins us from wells fargo, their currency strategist. your note was wonderful drawing out the economics into 2023. we got a dose of that in washington politically this morning. what is the key determinant for dollar strength or weakness? what is the mystery into 2023? erik: the politics certainly matter to some extent some ramifications for markets, bond market, fx market, but as we

think about the outlook for 2023, it is less about politics and more about central banks. central banks are still in the driver seat here. we are focused on the fed, everyone waiting for that that pivot. thinking about the dollar outlook next year, markets have not adjusted to this new fed. they are still picking about the 2018 context, when will they pivot? the fed is telling you time and again we don't want financial conditions to ease. there are many axioms out there. you never want to fight the fed. they want tighter conditions, stronger dollar, lower asset values, and that will continue to be the trend heading into next year. tom: i don't want you to be and equities strategist, but why not? will the fed pivot tomorrow and should i get out of cash? erik: you and john and lisa were having a great discussion about

the risk-free rate, the real risk-free rate. we are looking at maybe 2% depending on where you look at the curve. that is a very enticing opportunity relative to where we've been the past few years. certainly seeing that reflected and relative performance and absolute performance of assets. i would say very concerned about year-end, particularly from a funding perspective, thinking about the moves we have seen in the market this year. that could be what drives in the short-term a reversal of some of this dollar weakness we have seen. lisa: what are you seeing in particular, that a shortage of dollars in developing markets will cause a surgeon the dollar? are you talking in general around the world that you are seeing mismatches with qt starting to accelerate? erik: what is so different about this cycle relative to 2018,

2019, u.s. central banks across the globe by tightening policy through short-term rates and balance reduction. liquidity is being sucked up by two key forms here. the fed still has qt on autopilot. while we have seen some central banks pivot on short-term rates, the ecb, bank of england, or continuing to press ahead -- in the case of bank of england, outright asset sales. there is not enough attention on the flows here. tom, i know the word flows is something that you like to talk about event. the reduction in liquidity is so substantial, we are in the early innings of seeing the implications. that is a really important factor for dollar strength heading into the new year. lisa: just to give a sense of the significance of how much you see strengthening, people have been talking about the potential for a financial markets accident. some people pointing to the dollar as a potential source of that. do you see this being so extreme

so as to disrupt functioning in a more significant way? erik: certainly depends on the extent of inflation over the next two or three months, are crucial. if the fed sees another .6 encore cpi tomorrow, they will continue to push terminal rate market pricing rate higher. qt will continue at a steady pace. what concerns me is, you think about the dollar strength we have had year-to-date, it has been mostly macro driven. central bank divergence, growth divergence. dollar strength we have seen has not been safe haven driven the way it was in 2020, 2008. if we were to see something of that nature that we see stress in the dollar for a lengthy period, that can ba.5 percent, 10% move higher in the dollar, that i don't think enough attention is being placed on

right now. jon: always great to hear from you, erik nelson. if you are interested in how the fed will respond to the cpi print tomorrow, take a look at fed speak. they will all speak tomorrow. you will find out pretty quickly what they think about that cpi print. tom: what do they say? the press conference shock to me, shocked a lot of other people. these poor souls have to follow on? lisa: the market is doing exactly what they wanted to do, take the message in stride and be calm about it. although they would like to see more tightening and more of a selloff, not the rally we have seen the last couple days. why would they come up with anything other than a hawkish message, anything other than reaffirming this belief that rates could go higher than people expect? tom: bloomberg financial

conditions index has moved more accommodative. jon: the fed speak always comes down to emphasis. on the one hand, this, on the other hand, this. though the emphasis on the fed speak be on the kuebler tip tightening they have already delivered, or what the fed chair talked about in the news conference which is ultimately the terminal rate needs to go higher. lisa: or wherever the market is and trying to jawbone it into another place. jon: futures negative. from d.c., this is bloomberg. ♪ lisa: keeping you up to date with news from around the world, with the first word, i'm lisa mateo. there was no right away for republicans in the midterm elections. a gop hope to capitalize on president biden's low approval ratings and swamp the democrats in congress. republicans appear to have the house but with a very narrow majority. and the senate is still up for grabs.

democrats scored a big win in pennsylvania where john fetterman was elected to the u.s. senate over tv celebrity minute's. in one of the more highly contested races, j.d. vance turned back tim ryan to keep ohio senate seat republican. the georgia senate race is too close to call. raphael warnock and show walker maybe headed toward a runoff that could decide the fate of the senate. in israel, benjamin netanyahu was confirmed as the winner in the national elections. that puts the former prime minister on track to form a right-wing coalition government that could complicate foreign relations. israel's president is expected to ask netanyahu to form a government in the next four weeks. cryptocurrencies extended declines as dots grow over by finance's -- binax's reported takeover.

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

>> i have fought the good fight. i have finished the race in this first term. and i have kept the faith. >> we have accomplish more than anyone thought four years ago but we have so much more to do, and i have only begun to fight. jon: you heard the chants in florida for ron desantis, two more years, not four. lisa: basically he is the shoe

in the presidential election, for him to be the main candidate. tom: you think so? lisa: that was the location of that or his supporters to say that, when he is ostensibly to serve for four years. that is the only constructive thing that you can take from it. jon: for the people of florida, he is a shoo-in. for the remainder of the country -- tom: there is a lot of uncertainty out there. there was no uncertainty about florida. let's get to it with someone who has given us phenomenal support over the years. greg valliere of new hampshire is a student of american politics, chief u.s. policy strategist at agf investments. what was the biggest shock? greg: i think there are several

in several states. the big shot, after everyone said abortion wasn't going to be a big issue, it was a big issue. tom: let's move forward the best we can. part of it is within the lame-duck structure of american politics, business still has to get done. given the lack of republican wave, democrat strength, went to the next three months look like? greg: good question. i think they had to tackle very big budget bills. can you hear me? tom: we have some technical difficulties. we are going to see if we can reconnect. this goes to the lame-duck nature -- is there a lame-duck in british politics? jon: can i just say, what a classy guy greg is to say

"shoot" when he thinks he is not on-air. that is not the word that i would have used. tom: is there a lame-duck in british politics? when you lose, you are out. jon: removal van arrives, they take our stuff, and you are gone. tom: as greg mentioned before, it will be a stunning november, december. jon: we have all seen the same charts about divided government, performance in year three of a presidency. the equity market rips. this morning, -- can be easily explained. if so, please let me know asap. lisa: much can you look at

seasonality at a time of such stark differences when it comes to the backdrop? that is what people are asking. hard to know how people are reading the politics. every person that has come on the show says it is not about politics, it's about inflation, the federal reserve, what is happening internationally with china reopening or not. that is front and center with gridlock in d.c.. tom: this is the greatly between the haves and have-nots in america. they are focused on inflation maybe for different reasons, but this report that we see tomorrow is an american report for all americans. jon: the question we are asking, is so-called midterm seasonality relative to this market if we are staring down the barrel of 5% fed funds, recession in america, who knows what will happen in china? the outcome there will divide 2023, not just the fact that we happen to be in year three of a presidency, what it means for

this equity market. lisa: if we are not looking at the same parameters, do these models even matter? i will point out, and you will groan, the debt ceiling debate, how do we deal with that with the gridlock? do you get more noise coming into the picture in a negative way? jon: i think we are all sick of doing this. lisa: it is obnoxious to talk about but people are already starting to talk about it. opinion pieces from economists talking about how this will be another issue. jon: recycling the notes from the last time. tom: i think this is very different. the economic and market mix i think is very original. there was one thing. in the exit polls, the divide between democrats and republicans over a simple question. do you feel confident you can get a job now?

republicans, as you mentioned, they have a stagflation, stagnation recession field out there that is not built by democratic elites. there is a real divide on that matter. jon: i want to get to greg valliere, who has jumped on the phone. we are talking about this debt ceiling debate. tom is asking whether it is different this time, if we have this conversation 12 months again, is it different? greg: it is different for one major reason, ukraine. but i didn't want to spend more on ukraine, republicans don't. if he doesn't get it before january, it will be tougher to get later in the year. tom: what will the president do? there has to be jubilation at the white house but he still has a next two years decision to make. greg: i think an awful lot of democrats won last night despite

of the heightened, not because of him. i continue to think that, during the holidays, there will be tremendous speculation on biden not running again. i think the odds still favor that. tom: tell us about the republican side. the desantis shock in florida. do you anoint him or will there be a path, a debate for the gop? greg: i don't think trump understands how upset republicans are at him. using the stupid nicknames for desantis, but stepping on their message, and the last 48 hours of the campaign, it was all about trump. a lot of republicans resented it. jon: thank you and sorry about the technical connection. that is the second guest in the last hour who have both said

they don't think president biden makes a second round. tom: i am watching the publications come out here. it is early for washington. we are seeing a stream legitimate experts trying to frame out how we get to the end of the year. part of that is front and center this presidential uncertainty which we knew would happen. jon: she basically puts it down to what happens on november 15, whether former president trump says he is ready to go. lisa: perhaps people say that and the rest of the party will say, really? jon: that is the conversation this morning. jim paulsen from the leuthold group will join us shortly. from washington, d.c., this is bloomberg. ♪

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