>> the global economy is clearly slowing and that is the backdrop. >> it is the labor market that is holding up still. >> it has been the resilience of the labor market. >> we have had a really steady pace in terms of overall spending. >> there is a chance of a replay of headline inflation volatility next year. >> this is bloomberg surveillance with jonathan ferro, tom keene, and lisa abramowicz. jonathan: good morning.

this is bloomberg surveillance. alongside lisa abramowicz, i'm jonathan ferro. t.k. is taking a long weekend. the final stretch of 2022. lisa: it is getting gloomier. it is interesting we are not seeing the gloom translate into higher yields. it is a lower yield, lower stocks kind of morning. jonathan: december 2 payrolls this friday, then cpi the day after the federal reserve. we hear from chair powell on wednesday. show me what the fed is going to do and tell me what china is going to do. the china question guess a little more complicated after the events of the weekend. lisa: how much gets rid that -- ripped up? xi jinping is trying to tamp

down protests in no way people are saying they have not seen since potentially tiananmen square. jonathan: crude in the 70's and low 70's off the back of this. what are your thoughts on the price action? lisa: i reject it. i don't understand why what is going on in china means lower crude. how does xi jinping deal with this? this is social unrest and economic pain at a time when they have to move away from zero covid. if they move away from, this sooner doesn't that mean crude goes up? but if they don't, how do they sustain this? do they put iron doors on all of the apartment buildings? how do they tamp down on this a must the protests aren't -- unless the protests aren't real?

jonathan: crude has gone from the low to the low 70's. negative and down a tenths of 1% on the s&p 100 -- 8/10 of 1% on the s&p 500. i will talk about the ecb speak coming up. and move out of more than 3% lower on a session. lisa: we look forward to them coming on and doing that today. kristi lagarde is addressing european parliament at 9:00 a.m. -- kristi lagarde is addressing parliament at 9:00 a.m.. european ecb said that the idea

of us being over restrictive at this point is a bit of a joke to give you a sense of where others are. williams is speaking at the economic club of new york. how much does he push back against the recent lift in stocks? it is weaker than it was during some of the weaker points in october and even earlier in 2018 and 2017. it is cyber monday. are you buying anything? are people doing less of it because they are preloading, back loading, and it is not any different than any other day? today on this big day of shopping, they are still down. i agree with you. jonathan: we are on the same page.

good. apple is down in the premarket. turmoil at apple likely to result in a production shortfall of close to 6 million iphone units this year. that is according. to our reporting this morning -- that is according to our reporting this morning. lisa: will this change that narrative? jonathan: joining us now is bram weinstein. i want to start with the unrest in china. walk me through how you and the team are thinking about it this morning. >> it is part of the broader story of more economic turmoil. it is possible that zero covid ends early and that will be a game changer. it is just as likely that it

causes more economic slowdown out there. for now this -- zero covid seems to be here. economic growth is falling around the world. lisa: whether they keep zero covid or release it, either way it is inflationary, no? brian: it does seem so. if you look at where we price inflation it is very optimistic. there are a lot of reasons to believe that inflation will remain stickier. it is hard to see installation pressures using. lisa: the move in 10 year yields has been dramatic. this has been the one consensus trade, and perhaps people getting ahead of the first half of next year. have they gotten over their

skis? brian: maybe. i have been impressed with how far we have come. we went from a period where it seemed like no one would want duration ever again. you could have another like to this rally, get that curve really inverted. long-term, door think we are having a big fixed income rally? no. i think you could have another leg here. jonathan: do you think may be risk has overdone it here, brian? brian: i think that is the trade here. this rally duration did better, but risk assets did well to. if we rally again, it is because we accept next year earnings will be worse than we think. lisa: i'm looking right now at

high-yield bond spreads. they are the lowest going back to august. we talk about the rally we have seen as people pour into risk, even though the lower leg in yields has to do with weakness. could we see a s -- material pickup in defaults? brian: defaults are coming. i'm not sure we will see that in the next 2 or 3 months. we have not seen people have to refinance a lot of dead yet. i think it is more technical -- debt yet. i think it is more technical. i think the default story is out there, but it has been more technical in the last couple of months. we have to reset. lisa: you said defaults are coming, but how much?

are we going back to a high default cycle or is it the consensus that it will be a low level of default for a longer period of time? brian: i think balance sheets r.o.k.. there are buckets -- sheets are ok. there are buckets of consumers that are doing ok. it may be a longer, drawnout default cycle, but i don't think we have massive default spikes. jonathan: i'm going to put you on the spot for 23. is your working assumption zero covid in china for 2023. brian: they definitely one to stick with it. -- definitely want to to stick with it. jonathan: if you are sitting around the table, thinking of

whether to hit send, may be wait a week. lisa:, in a weeks time especially after we get the next inflation report you will be saying that again. at what point does he have to rewrite it every 10 days? jonathan: just wait until december 15. does it really make sense until then? lisa: if they waited until after december 15, we would all be mocking them. we would be saying, " oh, they're waiting until the last second." jonathan: no criticism whatsoever. lisa: there are so many key pieces that will be determined heading into the year end when there is typically then look at it he. i wonder how much that could set up for an interesting,

combustible mix. jonathan:we found a 20% moves on the euro stoxx 50. lisa: how much of that is because of a winter not as cold as people thought, and did you see the dollar? the dollar is the weakest going back months. how much can you get this ongoing rally, or is this it in terms of a repositioning? jonathan: the dollar topped 2 days before the 29th. the european story, how closely is it tied to china? this is why china is such a pivotal piece. how much does a reopening of china help europe versus hurt europe by taking natural oil gas demand away? jonathan: how was the world cup banter?

lisa: tom did his best. i watched to the world cup all weekend. it was great! did you hear about that, the u.s. versus england? jonathan: that's fine. i'm not going to do this. lisa: what are you, a diplomat? jonathan: i'm diplomatic. futures on the s&p down three quarters of 1%. in the next hour, michael purves, looking forward to that conversation. next on this program, we catch up on the latest in china. from new york, this is bloomberg. ♪ >> keeping you up-to-date on news from around the world, i'm lisa mateo. protests over covid-19 are expanding in china. huge crowds gathered in shanghai where some called on president

xi jinping to step down. that is a level of defiance unheard of since xi took power a decade ago. protests in china clouded the outlook for energy demand. west texas intermediate fell following several weeks of losses. it made raw materials less attractive. retailers saw modest growth over the black friday weekend. in-store traffic picked up 2.9% at brick and mortar retailers over 2021. deep discounts lord in shoppers. turmoil add to apple's key manufacturing hub in china will be costly. it will cost a production shortfall of near 6 million units this year. foxconn is trying to get workers

back to assembly lines after violent protests against covid restrictions. powered by more than 2700 journalists and analysts in over 120 countries, i'm lisa mateo. this is bloomberg. ♪ what if we wanted to electrify all of this... 100% carbon free... is it possible? ♪♪ aes has been leading energy transitions for decades... and is partnering with the worlds leading companies to decarbonize industries...

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>> it is clear to me that xi cannot tolerate any protests, so there will be a very tough crackdown on any protesters. more people will be arrested, and they will probably go further in terms of control. jonathan: we are waiting to see what the response will be. that was mark mobius a little earlier on. equities are lower on the s&p 500 following the unrest in china. the euro is stronger, we are

positive by 9/10 of 1%, creeping closer and closer to 1.05. it is payrolls on friday and then on wednesday you hear from chairman powell. the weekend was dominated by fears of her unrest in china. cctv in china appears to be cutting footage of football fans in qatar, cutting away from the scenes of massless fans at the world cup. lisa: how much of that is showing -- this is actually getting out there. the politicians have to respond. jonathan: bloomberg's chief correspondent joins us now. what marks the difference between what we have seen over the weekend and what we have seen in years gone by? >> these are unprecedented because of the numbers of cities

this is happening in at the same time and about fact that this is a uniform protest against government policy. sporadic protests in china have not been unusual. these protests come and go, but these are unusual because we talk about the far west of china, beijing, shanghai, all of these over the weekend half had protest -- have had protests. it speaks to the level of frustration and fatigue on the ground. we often talk on your program about how do we know what china is like? we are getting heaps via social media. enough is leaking out to let the world know there is a letter fatigue in china right now. lisa: i think about those blank

sheets of paper they hold up to signify that they are being censored, some having the circle with an exclamation point in it. how is it unusual that this is getting out in the way that it is? what it the communist party crackdown were significantly normally -- normally what into the communist party crackdown more significantly? >> the government are allowing these protests to some extent. they are allowing people to vent by allowing these gatherings of hundreds or thousands. social media is being heavily controlled. the fact that so much is leaking through speaks to the volume of protests and the volume of discontent so clearly the government is struggling to keep the lid on what is leaking out. what will be response be going

forward? a lot of experts are saying of course there will be government response through the typical response of mass arrests, and will that be enough to keep a lid on it? that is a big question going forward. there is a view that this will accelerate the path china is on to get out of this position they are in. it is a complicated and damaging path for the economy in china. lisa: what is the main point for china not to say goodbye to the zero covid policy? enda: there have been some political bragging rights. the point, " look how we have handled covid compared to the western world." several experts made the point that china's hospital network is not up to what is needed to

handle a massive outbreak of omicron. then you have the achilles' heel, which is the vaccine coverage of the elderly. china's homegrown vaccine have been shown to be perfectly effective and safe. the problem is the coverage of the elderly in terms of getting error vaccine and booster shots. this is a key vulnerability for the chinese -- getting they are vaccine and booster shots -- getting their the and booster shots. this is a key vulnerability for the chinese workforce. with the political control china has in place, why have they not targeted the elderly? if you live in a country that

does not have covid, why would you get vaccinated? covid zero is unsustainable. hong kong is an example of that. we had two years without covid, we had an elderly population that was not vaccinated. the disease did arrive, it spread rapidly this year and we had a serious fatality rate among the elderly. many reported that hong kong is a warning. jonathan: many people think it is absolutely bizarre. lisa: if the public health concern is the main concern for why you will not end covid zero, why not expedite some vaccination progress in the weakest links? jonathan: it is not for me to say what they should do. it is strange that we saw

stronger push for vaccine mandates in the west than what we. that is odd -- in the west to than what we see in china. it is odd. lisa: the consistency of the public health concerns with covid zero our underpinning some of these protests, especially a lot of the footage of fires and firefighters not able to get in because of the iron gates. i is a question of public health. --it is a question of public health. jonathan: when u.s. official outspoken on all of this over the weekend, the president's response coordinator for the pandemic, speaking on sunday. " it will be very difficult for china to contain this through their zero covid strategy.

that is the path -- vaccination is the path out of the virus." lisa: that is kind of true. it has been proven to be true. it is difficult to sustain. they continue to play whack-a-mole with. different outcroppings of covid i wonder how much we will end up with a situation that is positive or negative for the inflationary shock. jonathan: we catch up with the founder and ceo of micro risk advisors -- macro risk advisors. this is bloomberg. ♪ that's why at chevron, we're increasing production in the permian basin by 15%. and we're projected to reach 1 million barrels of oil per day by 2025.

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jonathan: i love the feedback i get on this program. "jonny boy, you need to rock a y white suit." lisa: it would have to be attend

paisley, which i kid not imagine you -- i could not imagine you ever wearing. jonathan: we are down about 8/10 of 1% on the s&p 500. apple stock is down 8.1%. i reporting this morning is the turmoil at apple's key meaning fracturing hub in china likely -- manufacturing hub in china, likely to result in a shortfall of 6 million units next year. 4.46 on the two-year. the 10 year basically unchanged at 3.6812. euro-dollar the standout.

we are talking about the fed today. bramo mentioned the fed. many people do not think it is a joke. they think it is a real conversation based on where the backdrop will be in europe. lisa: the reason i think a lot of people do not view it as a joke is what apollo put out. we were talking about recent reports putting only a third of the inflation we are seeing due to demand side issues. the rest are supply-side issues. if you click demand, that does not even necessarily affect -- if you tighten all you want, it could affect a third of the inflationary picture. it is not the main input. you are using a blunt instrument to for a very different problem this time around. jonathan: what is interesting

though, even though he came to the same conclusion, he thinks that it is a risk to inflation expectation. over the last few weeks, he has made an important point comparing europe to the united states, and it is the sequencing of the downturn. in europe you are getting a downturn in the economy before you get a peek in inflation -- peak in inflation. in the u.s. you are getting a peak in inflation before you see the economy turned out. lisa: they do not have the tools to respond to a supply driven crisis. there is bad as well coming from the u.s..

i do not know how they get themselves out of us. i want to hear from christine lagarde. jonathan: we would hear from the ecb president every single week. we not hear from chair powell that often? we will hear from him later. you have been diplomatic this morning. lisa: anytime. jonathan: dean, thanks for being with us. what do you make of the rally we have seen over the last few months. we heard from brian at morgan stanley a few minutes ago. he said we have overdone it. do you agree? >> i would probably agree. if you just look at the import of that day and all of the cross asset indicators whether it is the decline in rates the decline

in volatility, the significant decline in the, the good news from that day -- the significant decline in the dollar, the good news from that day is we have moved away. the last 10 days on the snp have been super quiet and we are in this holding pattern now. we are waiting for powell on wednesday and then we have this twin how are events especially if you are short volatility. i cannot remember the last time the s&p and fo mp were on top of each other like this. the vix is down near 28. we are close to a floor. i'm not sure it will spike tomorrow, but we have settled into a level where the folks being asked to sell volatility

will have a. sell volatility -- sell volatility will have a hard time letting it go. lisa: are we there yet when it comes to rolling over inflation? even if we see some spike up in volatility, it is not going to cost some meltdown because we are starting to roll over. dean: at least recently the data has been cooperative in a way, you may start -- you can see the path from here. there is more of a conversation around december is 50. we are locked in on that. that is a deceleration from 75. that is a big deal. just to get the fed to 50 and then maybe they do some 25's. you can see forward here. you will not hear this from the

republicans because they will be stuck on year-to-year, but over the last three months your inflation is in utilizing 3%. you're getting closer. this is why it will take so long -- if you are in the 3.5% zone, are you really committed to getting to 2%? is higher rates are your instrument to get you to 2% and getting to 2% is more about supply, then you might be putting downward pressure on risk assets. it will be a long period of time here. you're supposed to watch the yield curve, inverted by -- take your pick -- 75. you could invert out to march by 125 basis points.

that is pretty deeply inverted. the fed may be vulnerable to going too far here. lisa: brian weinstein agrees with you. he sees the potential for 10-year treasury yields to go to 3.75%. are we at a point where bad news is bad news? dean: that is the narrative that is applicable here. these taper tantrum episodes where rates are the impetus for stocks falling, that is a correlation. we are not used to -- that is a correlation we are not used to. i personally think that is ultimately where we are going. it is very difficult for the fed to land the plane here

successfully for risk assets to do fine from here without over tightening. there is a potential you see more of this classic stock is down, rate is down scenario. we are supposed to try to find portfolio additions that are less correlated. the bond market and stock market have had a record positive correlation. that correlation has been incredibly strong in a way that does not lead to favorable diversification. one of the areas you are supposed to look at, especially as digital gold has blown up, bitcoin has blown up, is to look at gold itself. they are recently very correlated because they are both negatively correlated to the dollars. there is an opportunity here as

you build your portfolio out and you try to find those correlated items in the portfolio, i think gold has the potential to do well in a classic risk off, rates down. the upside on gold is quite cheap. that is a conversation we are having at finance right now. jonathan: dean of macro risk advisors. summer of '21, what a call by him. lisa: what to do now given that you expect it to rollover by next year? all of a sudden we are in a new inflection point. we were talking about how there is not a clear trend the way there was for the past few

months, because we are entering something new. jonathan: negative 78. that is crazy to see that number on the screen. lisa: it is even crazier to think that we are going to negative 125. i do not see another out because if you look at a rally in 10 years, which is a reason people say this is a safe haven, it makes sense. jonathan: we solve the white suit die limit. jerry -- white suit dilemma. jerry on twitter, thank you. lisa: i did some research. jonathan: what does mobius do? lisa: he does a yellow tight and a light blue tie -- yellow tie and a light blue tie. there are ones where he does not wear a tie. i think you could rock that

look. jonathan: i won't go anywhere near a white suit. lisa: [laughter] jonathan: it is a hard pass from me. that is not me taking it out on mobius. his suits are great. from new york, this is bloomberg. ♪ >> with the first word i'm lisa mateo. uncertainty sweeping through chinese markets as protests against the government complicates its path to reopening. demonstrations across various cities and universities in china were fueled by a deadly high-rise apartment fire in urm chi. -- urumchi.

republicans say they will demand more oversight over aid to ukraine when they take over. they support sending ukraine long-range weapons to defend against russia. jerome powell is expected to set the stage for slowing interest rate hikes. he will remind americans that they fight against inflation will run into 2023. powell will make a speech on wednesday. after cutting thousands of jobs, twitter now hiring. that is according to slides from a company talk tweeted by elon musk. the first slide had the words, " we are recruiting!" with no other details. global news, 24 hours a day on air and on bloomberg quicktake, powered by more than 2700

journalists and analysts in 120 countries. this is bloomberg. ♪

>> this full reopening, as i mentioned, in the near term if it seems to be more of a drag on oil than anything. jonathan: live from new york city this morning, good morning. what a trip it has been through the month of november for crude. on november 7, we came close to 94. from the low to the low 70's in three weeks. lisa: and why? the real question is the why.

people are saying the economy will slow down to such an extent that it will reduce demand. more people are speculating that more oil will come on. i do not understand the why. jonathan: let's go to the story of the weekend. we understand the biden administration has granted chevron a license to resume drilling in argentina. how much of a chait -- drilling in venezuela. , much of a changes this? lisa: lisa: lisa: a lot of western nations -- lisa: a lot of the western nations are deciding where to source their gas and power lines are getting redrawn. how do they shake out? jonathan: joining us now is fellow of the city council. what are your thoughts on that?

>> i think we are short on detail here in terms of the chevron story. is this oil that is already on the market, just on the black market or is production actually going to increase in venezuela? that could be meaningful for the market, but it will take quite a long time to actually get going because their oil facilities has been in incredible disrepair. this has been a very long problem for them. the interesting thing is, they're looking for oil producers that are less bad. there are a lot of less bad oil producers in the united states that have the ability to produce more, just a they are not producing more because they do not think the atmosphere is conducive to it, and they are facing a lot of headwinds from inflation and getting parts,

labor, and equipment, and costs are very high. there are things the biden administration could do to encourage less bad oil producersin our own country. lisa: why are oil prices so low? is it just of the imagination of a demand-side story that has yet to play out? ellen: it is an imagination of a demand-side story. you have a situation where futures trading is impacting the prices now. the future of oil is very hazy right now. what is interesting is prices are low now. it could spur more european utilities to switch from natural gas to oil, and that could later said a bump into oil -- set a bump into oil prices.

we should not expect that that will necessarily continue. there is a tendency to think that what is happening now will happen for the rest of the winter. what we have seen in the past with the incredible volatility here is we cannot underestimate the effect, and we could see a very quick rebound, if we are not careful and paying attention. lisa: the big news over the weekend was the social unrest in china, the possibility of a quicker exit 20 covid on the heels of protests around the nation -- quicker exit to zero covid on the heels of protests around the nation. would you expect that to send oil prices higher because what that would mean 40 covid -- for zero covid? lisa: -- ellen: that definitely helped

send oil prices lower. the question is what do these protests mean? i am not a china expert, if you look at china's history, the regime has not been particularly responsive to protests. they have a problem with that lots of people dying in pursuit of their policies. i think we should pay attention to it, but i would not put my money on it having a big change order shift in the chinese regime's policy. jonathan: you are an opec expert, so let's build on some of that knowledge, if we can. it is opec looking at a 2023 where zero covid is still implemented by china? ellen: i think if anyone is going to know first, it will probably be saudi arabia because

they have a very close relationship with the chinese government. they have lots of oil investments there. they have long-term contracts for crude, and if anyone will have a sense on when china will need more crude oil, i think it would be saudi arabia. if saudi arabia is sending signals that they do not think oil demand will increase over the course of the winter, that could be an indication of china's covid policy. jonathan: on the latest in the crude market from venezuela to china, think of the moment. people have more confidence on what the fed will or won't do than they do on what china will do with covid policy. lisa: the fact that saudi arabia would know first potentially because they will have to ramp up production is really telling. it perhaps puts more importance

on the opec decision on whether to ramp up reduction. jonathan: the outlook changes overnight if that happens. we are talking about millions of unit shortfall from apple, iphones going into year-end on the back of those shutdowns. lisa: what does that mean in terms of how much prices go up or demand softens enough and keeps things a little more even if people are not buying the iphone. jonathan: permeable some people might say on apple. is this profit in revenue deferred or profit in revenue lost? do i delay that until the next quarter at the start of '23 or do i get a different phone? lisa:, by the time you delight they have a new edition out and it is loss opportunity, it is

not simply deferred and delayed. if the lockdowns continue and people have lower disposable incomes in china that also crimps their demand over there. apple is in a tough spot with their reliance on china. jonathan: have you seen the new operating system? if anyone out there knows how to make the digits smaller on the clock, i would love to know. i do not like it. lisa: i have not downloaded it. jonathan: now they are big numbers. the small things, bramo. from new york, this is bloomberg. ♪

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>> the global economy is clearly slowing and that's the backdrop. >> it's the global labor market that's really holding up. >> it's been the resilience of the labor market this year. >> we've had a steady pace in terms of overall spending in the labor market is great. >> there's definitely a chance of a reply of headline inflation -- a replay of headline inflation next year. >> this is bloomberg surveillance.

jonathan: the christmas tree is up and the lights are on and it's a beautiful thing. tom is not with us because he's watching cameroon-serbia and i'm not joking. this is bloomberg surveillance. kicking off a trading we can closing out the month of november on a bit of a down note. the last couple of days, it's been good. lisa: there is social unrest on the heels of the covid zero policies getting onerous and social images coming out and even fires have been lethal because firefighters could not get into the homes because of iron gates in china. jonathan: we are waiting for the response from xi jinping.

will they double down on covid zero? lisa: can they do that based on the lack of immunization and the older popularization? -- population? jonathan: you mentioned crude oil and we've gone from the low 90's to the low 70's in a couple of weeks. lisa: if the administration in china accelerates a removal of covid zero, that should be positive for oil because that would replace the demand so this is a bet that this will be increased turmoil and a prolonging of zero covid which is what the decline in oil prices seems to indicate. jonathan: it's amazing how important this is for the outlook for next year. you can't get a straight answer from anyone. you ask a straight question about china and covid zero year. do they remove restrictions? they don't know.

lisa: this is one consensus you can get, it will be inflationary either way. that will prolong supply chain disruptions and if they release covid zero, that will be more demand for oil prices but either way, you will have inflationary pressure coming in that will keep the central banks raising rates and keeping them at that level which is the reason why we are at an inflection point where bad news is bad news and yields can go down and stocks can go down. jonathan: you thought i was joking about cameroon-serbia. lisa: i watched all weekend. it's really good. jonathan: how nice it is to see your face light up like that. lisa: these are incredible athletes. the games are riveting. the goals have been tremendous. i watched all weekend and it was genuinely exciting. jonathan: futures are down about

0.75 percent. you're making me really happy. lisa: when they spin on those balls and make those quarter kicks, woof. jonathan: euro-dollar is $1.04 .69. the dutch central bank government is turning around and saying any talk of over timing at this point is a bit of a joke. is it? lisa: let's hear what christine lagarde has to say. if it's not a joke, then they have more to go and they will be restricted into a recession that could already be here. i was sincere about my enjoyment of the world cup games over the weekend. christine lagarde will be addressing the public at 9:00 a.m.

she will talk about the euro zone commitment to getting inflation down even that -- even if that means being restrictive. we will also hear from the new york fed president who will be speaking at the economic club of new york and i'm curious as to how much he pushes back against the recent rally from the last few weeks in u.s. stocks and risk assets more broadly. is that not what they want to see? where's the cap with how tight financial conditions are? it's also cyber monday, your thoughts? jonathan: that was so abrupt. what are my thoughts? lisa: you raised the question, what's the big deal about cyber monday. every day is a shopping day. you haven't necessarily seen

some of the crowd out there but it's down more than 40 percent this year with amazon shares lower, can we gender -- can we generate volume when people are buying all the time? why are you laughing? jonathan: let's get some thoughts on what is happening in china over the weekend most of we haven't witnessed this for a long time. the outlook for next year hinges on not just what the fed will do but what the chinese government will do? >> you said it earlier, there's a wide spectrum on china because we just don't know. from june, we been waiting for them to accelerate the economy and that didn't happen and after that, maybe we will get some aggressive shift back toward the strong gdp trajectory that

defined china for the last 20 years. we have not yet gotten that and apartment houses are literally locked down. we are entering next year with so many unanswerable questions. china has been a pillar of global growth for the last 20 years but we don't know where this is going. i think that will create -- increase the risk premium across asset classes in many respects. lisa was talking about the call option on crude oil from chinese growth that we should get and maybe this is the catalyst. call options are declining in value. i think we may see this as the catalyst to get us a little more growth but we are dealing with leadership in china that is very

unclear and has not articulated anything the world markets have become accustomed to? lisa: what is your baseline on china with covid zero? >> i think we will get more of the same and we will see how these protests roll out. the news flow over the weekend was disconcerting. for u.s. markets, if you look at things like implied volatility on the yuan which takes on the china risk, those have been trading just as the vix rolled over nicely the last six or seven weeks. there is a little bit of complacency within the asia em currency spectrum. we may see that drive a bit of risk off over there and perhaps a stronger dollar with the risk

off condition over here. lisa: have we price and the potential for supply chain disruptions to continue and potentially higher energy prices enough to get to a place where people have priced that in but yields can go lower on the long and even as risk assets continue to sell off in the face of this uncertainty? >> it wouldn't be my base case but i think the supply chain issues will be case specific. one of the broader trends we have been dealing with over the last couple of years that will define the next couple of years is localization. you are still making a lot of iphones in china so we are still in the middle of this branch of transition which will create very company specific earnings stories. jonathan: for apple, it's more complex, not just the expense

involved in the supply chain but the blowback you might get from the consumer base? >> it's a huge market for china and that goes back to one of these things where i don't have a crystal ball. i don't know how the supply chain and china as a customer will play out but i know it's creating questions that are not answerable and at that is the case, that will put more stress on apple's investor relations department and increase the risk premium for owning apple shares. jonathan: is it single names or the whole index? >> some companies are very levered to china. that's from a manufacturing and demand side and you will start seeing that filter into the index level step the index

stories more muted because the complexion of the index will be very different. we have seen a lot of transitions this year with interest rates and inflation and valuations at the index level but one of the other stories is the quality and quantity of big tech earnings over the past eight years or so has been fantastic. that level of fantasticness is starting to be question not just on the micro level of facebook and amazon but also simply the fact that how often have you heard google complain about advertising? you are starting to see that. you can't grow forever so at some point, you pick up gdp sensitivity and i think you are starting to see that and that will combine with the micro issues rolling into the index. jonathan: is the christmas tree up? >> not yet, two weeks.

jonathan: why two weeks? >> because you want to time it to the 25th. jonathan: there we go. lisa: some people like the smell of it. jonathan: i like the smell of it, too. great to catch up as always and equity futures are down by 7/10 of 1%. this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world. protest against covid restrictions in china are spreading.

students vented their frustrations on the communist party and local officials and crowds gathered in shanghai where they asked the president to -- to step down. the price of oil has fallen to its lowest level in almost a year. the protests in china cloud the outlook for energy demand and west texas intermediate fell below $74 per barrel. the unrest help the dollar as a haven which made raw materials less attractive. retailers in the u.s. modest growth over the black friday weekend. in-store traffic ticked up two point 9% at brick-and-mortar retailers. deep discounts and shoppers seeking a break from inflation. turmoil at apples key manufacturing hub in china will likely produce a short fall of 6 million iphone units in the

company that operates the facility, foxconn, is trying to get workers back to assembly lines after violent protests against covid restrictions. global news, 24 hours a day and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪

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>> the fed needs to back off. it has become clear over time that a lot of inflation is coming from disruptions on the supply side. we have seen a lot of encouraging signs even in the last consumer price index, numbers that things are turning over. we are seeing things work themselves out. jonathan: a lot of people on that page and the fed meeting as a couple of weeks away. equities are up on the month and

down on the session. yields are up on the s&p and yields are up on the 10 year. it's amazing to see the curve as inverted as it is. almost -80 basis points this morning. lisa: this used to be the key indicator and it has been -- is the most deeply inverted going back to 1981. going beyond -100 basis points, does this give an indication as to the duration or depth of the recession or simply signaling we are due for a downturn? jonathan: i wonder where just whether we see more division in this federal reserve in the outlook. how wide are the projections into next year? jonathan: or is it lael reynard if no one else?

jonathan: you kind of say both. lisa: the key is when we get down to three point 5%. does this federal reserve have the commitment to keep going and many say no that they will loosen up and perhaps respond more to the economic picture. what does that mean for longer-term inflation in terms of the resolve of this federal reserve to have the inflation mandate. jonathan: the federal reserve decision will come on december 14. the end of 2022 is just around the corner. you get payrolls this friday and the 13th cpi in the 14th, fed decision and this week, senate lawmakers returned to washington, d.c.. what's top of mind as congress gets back to business? >> just like with you all, inflation is still top of mind

and it will be a huge focus with roughly two trillion dollars worth of legislation in the next few weeks. you've got a defense authorization bill and government funding bill and $300 billion worth of tax credits and at the inflation argument is that it's supply chain driven, they will consider extending the tax credit. that will see corporations, $86 billion between the two of them and tack on child tax credit spansion and those are the main drivers of the senate for the next two weeks, heavily hinged on inflation. lisa: this doesn't compute. they are worried about inflation on one hand but they are on the brink of passing potentially at $300 billion stimulation bill that helps corporations and

helps households across the country. how do these two things go together? >> it's an interesting dynamic where the problem is that the tax credit expired at the end of last year. if you speak with investors and lawmakers and corporations, it's not technically stimulus on the business side, just an extension of the status quo. i doubt the markets will see this as an inflation or government funded package, it's mostly an extension of what we have had for the last seven years. they are just expanding it instead of driving us into a situation where corporations will have to pay more taxes. on the child tax credit side, that is the inflationary piece because more of its a mystic stimulus for individuals which is a larger basket. you will hear from republicans that they don't think it should be extended now. lisa: when you say the covid side that the u.s. is trying to deal with what potential fallout

will be, can we expect a response and whether there is a response or preparation from supply chains to remain constrained or sudden increase in demands? >> i think a good leading indicator of how congress will respond will come later this week, as early as thursday, when they start debating the national defense authorization act step several amendments of already about national security threats and tiktok and whether they can be on federal government employee computers and devices. you will see a precursor to that argument before they get into it in earnest in the weeks ahead starting thursday. i would watch for that stuff jonathan: thank you for being with us. trying to work out the consequences of the

demonstrations over the weekend in china. lisa: this is the most important news over the weekend and potentially of this year. covid zero and how long it can continue because that has completely suppressed growth and we have expectations at deutsche bank for 2% growth globally next year which is in line with recessionary global forecasts in the past. how much does this hinge on china remaining shut down? jonathan: what goldman said was interesting, they said the central government may need to choose between more lockdowns and more covid outbreaks. they have 30% subjective probability of shutting down next year. that last piece is not what i thought about in the events we saw play out. a forced and disorderly exit of covid zero, what does that look

like? lisa: i cannot pretend to be a china expert but i can say as i was reading through different pieces of what that could mean, they were talk about more protests, more outbreaks and if you can control the outbreaks and people are bursting out, all of a sudden you have to allow things to unwind themselves. if you get locked down with more protests and more out rakes, this is messy step you might get them out faster longer-term. jonathan: vaccine efficacy is one point in the second point is coverage. it's amazing that in the west come we have this conversation about vaccine mandates and in some places we saw it in certain forms and we have not seen that in china, and autocratic, authoritarian country is not going forward with the same decisions made in the west over the last couple of years?

lisa: if the majority of an elderly population, the most vulnerable, is not vaccinated and of doctors were recommending against the vaccine initially in the cycle, why hasn't this administration of china come in and said you have to get the inoculation because we have to have something of a productive measure ahead of opening up. jonathan: it brings up the subject of a forced and disorderly exit from covid zero. coming up, the chief u.s. economist looking at futures down about 7/10 of 1% on the s&p 500. this is bloomberg. ♪

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jonathan: two minutes away from the opening bell and negative across the board on the s&p 500 and the nasdaq, down about 0.75%. the spread between twos intends in the bond market is -80,

unreal. the two year up almost one basis point and the fx market, the dollar is weaker and euro-dollar is $104. it is not the talk -- time to talk about over tightening. lisa: i don't think christine lagarde will take the same kind of roach and it highlights how some people see it. what do you think of that? jonathan: i think it's kind of bizarre. it's not a joke to talk about it going into recession as the weather you should continue hiking interest rates. we should have that conversation but to dismiss it outright is having a little bit of a laugh.

lisa: especially because it lacks humility when we'd gotten it wrong again and again. it's hard to be overly dismissive about any potential outcome. jonathan: december 15 is the decision from the ecb. lisa: it will be interesting to see if they see this as a joke. protests are disrupting the production at foxconn. iphones are being produced in that factory. apple has been immune from the deepest pain in the tech sector this year. they are only down about 16% year to date so does that change on the heels of what we are

seeing in china? jonathan: i couldn't agree more and i think it's complicated. michael purves this morning talked about the risks associated with these supply chains. if you shift your hub of production out of china, what's the blowback look like on the demand side? you get that rising nationalism against apple products? that's the risk they would run, not just the increased cost of moving the supply chain to i don't know where. there is also a risk of the blowback. lisa: that's way some people think apple has not moved as quickly. amazon shares are up but shopify is up more than 6%.

they expect a better than expected shopping season and the shares are down year to date so are we seeing bottom picking. jonathan: we were talking about cyber monday. did you buy anything? lisa: i bought something on black friday. jonathan: what did you get? you seem so ashamed. lisa: i've what chargers are the phones and hats for the kids. jonathan: i did that with some nike sneakers. they are the ones that make you run faster. i can feel myself walking quicker. it really made a difference. lisa: you are the only person

with indoor shoes. jonathan: just for the gym. lisa: i walk outside. jonathan: a good friend went to a party and got the note about no shoes at the already and then left. i got a problem with those people. lisa: you actually cared about it. i think it's a sign of respect. jonathan: i would offer but i think it's strange to insist. lisa: it's strange if somebody doesn't take their shoes off if it's clear that's what's wanted.

i think it's odd for a guest to nazi all the shoes at the front door and not take their own off. jonathan: it's a bizarre moment in these equity market because we seem to be pricing in recovery to a recession we haven't seen yet. >> markets are so forward-looking and they've gotten over it in terms of seeing this reduction in the pace of fed rate hikes in automatically assuming there is light at the end of the tunnel and easing is on the near term horizon. i one -- i look at what's happening in the bond market and that clear probability of recession the bond market is pricing in an forward earnings estimates on the equity side are higher for next year. when we have a recession, we usually get a drop of 10-20% and

that's been historical so we are seeing a divergence in inflation expectations. lisa: you also think it's potentially not right that inflation will fall significantly next year. can you explain? >> i think inflation has seen its peak in june of this year. i expect inflation to fall but i am an outlier in that i don't think we will see inflation neatly slipping back into 2% anytime soon. i think we will need to differentiate between inflation coming down and oil is off significantly this morning. some of these bass effects will drag headline inflation lower but there's a difference between that and the world where inflation is reliably and persistently low. that is the backdrop against which we have the fed keep

interest rates at zero lower bound, cut interest rates aggressively over 500 basis points if the economy slows. i think we are in a world network we cannot just assume we are going to revert back to what we've had for 20 years before the pandemic. look at china right now. we need to resist the urge that our quantitative models are telling us to revert but that's the biggest concern going into next year. lisa: people would stay we still have an older population and a lot of debt and all the ingredients of low inflation and in five years time, this federal reserve will -- will be trying to get inflation up and keep it on 2% so why do you push back against that? >> what we are seeing right now, look at the 10 year treasury- if i told you that we would have inflation at 7% on a 10 year treasury that was still only

3.70 5%, that's world were demographic pressure is keeping it lower. we have quantitative tightening and the fed selling treasuries or at least not bind them and we still have really high inflation and the 10 year is still well below where inflation is. i think it is a world where we see demographic pressure applied to the long and but i think but it's still world where we look at food prices and the expectation that supply chain disruptions will magically evaporate is being disproven this morning. we are seeing the echo chamber of covid disruption and the genie is out of the bottle when it comes to inflation. durable goods price deflation is a necessary portion of seeing u.s. inflation at 2% and we just are not going to go back to that world next year. jonathan: they say the jobs

numbers may serve to emphasize the hawkish attitude from the fed. >> this is critical. wage growth at 4% is inherently inconsistent with inflation of 2%. we've had a lot of different recessions where we see very little change in output but a massive decline in employment. this time around, you could get the other story. you can get companies actually holding onto labor. that's part of the demographic story and i think it's the reason why wage and asian will be much stickier on the decline. we've seen companies now continue to compete for workers and i think that also will be a story for 2023. the wage numbers may become more important than cpi numbers especially in the beginning of next year. jonathan: up like a rocket, down

like a feather. thank you. those of you interested in the comments from citibank, our base case would have powell guiding a slow down to a 50 basis point hike, but remaining hawkish by downplaying one month of softer inflation data. this may serve to emphasize the hawkish focus on a tight labor market. lisa: all the rhetoric from fed officials says a step down make sense but it doesn't mean we will have a lower terminal point . if you look at fed funds futures and what they're pricing out, it's less than 5% stop how do they get that back up? what we heard was interesting the wage numbers may be more important than cpi so how much does that get traction. jonathan: the payrolls are friday.

it's normal to take your shoes off. risk off, it depends on the shoes and the flooring stuff high heels on wooden floors are not so nice the next morning. or you could have a sign on the front door. lisa: doesn't it just make sense? it's a sign of that person. jonathan: i take mina but i don't insist you take off yours. -- i take mine off but i don't insist you take off yours. futures are down 7/10, this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world with the first word -- a sense of uncertainty is in china's markets as protest against the government and's

covid zero strategy complicate the reopening. goldman sachs he, they see a chance of a disorderly covid zero exit and demonstrations across cities and universities in china were fueled by a deadly high-rise apartment fire. some blame virus restrictions for hampering rescue efforts. the ukrainian president is warning people to brace for more russian missile attacks. in his nightly video dress, he called it part of moscow's effort to use cold winter weather is a weapon and there's been a barrage of russian missiles that struck power plants last week. jerome powell is expected to set the stage for slowing interest rate hikes. he will also remind americans that the fight against inflation will run into next year and he will make a speech on wednesday, one of the last from policymakers before the fed meeting december 13 and 14. global news, 24 hours a day and on bloomberg quicktake, powered

by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ ♪ we all have a purpose in life - a “why.” maybe it's perfecting that special place that you want to keep in the family or passing down the family business or giving back to the places that inspire you.

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>> if the frame is a mild downturn, we would say open yourself up to the possibility that no downturn is something we have to fully pricing in something that is not fully in the price. jonathan: live from new york, good morning, we are negative on the s&p 500 and the nasdaq as well. the unrest in china is triggering some concerns. we will ask those questions in a moment stop in the bond market -- it's basically -80 basis

whines on the yield curve, the two-year versus the 10 year. lisa: the most negative going back to 1981. what does this mean in terms of the depth of this recession? jonathan: morgan stanley is talking about that number and that's unreal. lisa: and talking about a 3.25% drop. jonathan: the turmoil apple's key manufacturing hub in china is likely to result in a production short fall of up to 6 million iphone units this year. do you see that as profit revenue lost or just deferred to the next quarter? >> it's been a good punch to me. the most important time going

into the holidays, they are doing demand now and should be supplied t threeo 1 finally apple is seeing the hurt in terms of production and we think it could be 6-8,000,000 unit drops. lisa: what is this mean is -- in terms of share price for apple? >> in the near-term, though streets factor in and you will see misses on iphone production and deliveries. even going into black friday, we have 30% shortages and apple stores and at that continues, this could indicate darker days ahead going into the holidays. the street is starting to factor that in but it's the grinch for

apple and it's been a frustrating time for cupertino. lisa: is this a surprise? this is the apple china problem. it ties their hands to policy that is highly unpredictable. how much is there push internally to move away from production in china to increase demand and production elsewhere? >> in terms of the last 1.5 years, apple can navigate this better than any other company but now, between the protests and the policies, it's been a train wreck. apple could talk about diversifying the realistically, probably they can move 7% of production out of china by 2024 but their hands are tied. it's a frustrating situation because they are at the mercer he just the mercy of the zero

covid policy in china. jonathan: is it profit or revenue lost were just deferred to another quarter? underlying that assumption is that these difficulties in production go away over the next three months. i've asked whether we get rid of covid zero or whether we are stuck with it and i cannot get a definitive answer on it from anyone. where does your confidence come from that the issues these companies are experiencing this quarter are temporary in nature and won't spill into next year? >> great question. our view is that especially from foxconn's perspective, they will be able to ramp up production in the next month or two and this will start to be more temporary but it's really something that came to roost for apple at the worst time possible. right now, the street will

assume it's temporary and transition every but ultimately, if this continues next year, it would start to change the near-term piece. jonathan: how will i know if i'm wrong? you seem to have put a date on it. is this your line of this continues for another month or so? >> if this continues for four to six weeks,, then even iphone 15 in terms of reduction, that's where it cascades further. right now it's contained in its reflected in the stock but no doubt, this is starting to turn into a nightmare on elm street for apple. lisa: it's contained in yet we have heard about apple potentially giving discounts to businesses, doing things they have not done before because there has been a willingness to spend $1000 on a phone and

people are lining up around the block. is apple seeing this issue on the supply side the same time demand is taking a hit in a way they are starting to acknowledge on the edges? >> you saw that in the iphone 14+ which struck out in terms of them overall delivery. if i look at iphone pro, it's 3 to 1 supply over demand. demand is strong but they cannot produce it and that's what they are trying to figure out and i think this is the key 7-10 days ahead of what's coming out of foxconn. jonathan: if you are hosting a holiday party, would you insist people take their shoes off? >> it changes the whole dynamic. lisa: are you sending a message? >> saturday night, a good friend

had to take her shoes off and it was awkward for 15 seconds and it continued. it changes the dynamic. jonathan: at least that is honesty. is another man's floor. lisa: i grew up in an apartment so i take my shoes off when i walk in step jonathan: i might wear heels at home. lisa: i'm not going to go there. i think there is an issue with noise.

with the kids, it's tricky with noise. it's a hot button issue but does it change the dynamic? jonathan: i think it does. lisa: how much do you tolerate someone else's quirks in your home and think this is temporary? jonathan: i am a holly -- i am a highly tolerant person as you know. lisa: [laughter] jonathan: i'm tolerant, what are you talking about? lisa: about what? jonathan: you don't want them to get too comfortable. from new york, this is bloomberg. ♪

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>> as the economy is resilient

people have to keep pushing back the timing of whatever recession or whatever fed you get. >> if the fed does too much they are going to undo their relief. >> we don't think we are going to get a recession in the united states until 2024. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa abramowicz. jon: live from new york city to our audience. good morning. along with lisa abramowicz, i am jonathan ferro. the main event over the weekend and the concerned bills -- the concern spills into monday. lisa: how much this is end up leaving china in a different situation than before. china having to capitulate to the groundswell of covert protests.

saying we have to choose between more lock downs or outbreaks and choosing lockdown. jon: it is difficult to contain the virus through zero covid. an official went on to say the united states says everyone has the right to protest, including the chinese people. lisa: that is a bit of a drumbeat on the whole, this is not a democracy. how much is this trying to message this is the one consensus of washington? the u.s. needs china to open up for supply chains to get work through to help the inflation picture. also with respect to global growth and how that could help bring up the rest of the world out of recession. jon: this is a major issue for next year. all the outlooks have been published, having yet been published for 2023, i don't know if you have any kind of outlook if china sticks with covid zero or moves away from it. lisa: we heard from brian

weinstein who said our base assumption was that it lasted and we might have to reconsider after the events. jon: we said over a few weeks ago, -- one that includes covid zero and one that doesn't. no one can answer where the economy is going to go. lisa: whether there is going to be a cold winter or whether the covid zero policies remain in china. how many outlooks do you need for such an uncertain backdrop with so many macro drivers that could really swing the difference one way or another? jon: we are trying to get some clarity on the labor market. the fed and the outlook we get the summary economic projections december 14. that is the final schedule to run in for 2022. tom: lisa: wednesday the most important data pouring, job openings. we talked about that with lara rey. she said she is looking for it.

in response to your question, she is looking for a greater importance on wage data even more than the cpi. jon: a hawkish focus on the cpi. do we see cpi and ppi as well? lisa: tech companies only account for 20% of the labor force in the u.s.. we are seeing companies hang onto their work worse because they have already been burned by not being able to bring people back. if that is the contour of this economy is that a good thing or a bad thing? a good thing because people keep their jobs or a bad thing because the fed can keep rates higher and raised them higher than people expected? jon: we discussed amazon doubling their workforce. meta-as well as well is doing the same thing.

lisa: this is an idiosyncratic kind of sector. you cannot take as a broader reflection of the sector. they did hire over some analysts expectations and assessments. they are going back to where they were before. it is hard to view that in terms this is a huge weakening in the labor force. jon: we are negative. euro-dollar positive about .8%. yields unchanged at 36756. the spread between twos and tens, -80 basis points rate matthew diczok of american private bank. what are the limits to that trade? how far do we push that? matthew: that is right. -80 basis points, we have not seen that in 40 plus years. last time we were this negative,

-- were at the top of the charts in iran. we stay away from exactly predicting how it is going to get. lisa was making some very good points up there. we have to mine the gap. the yield curves, risk assets are very different at the moment. lisa: which one do you believe? matthew: i am trying to find a narrative that explains all of this. the best way to think of this, the yield curve is telling you a recession is coming. it is not here yet but this check is in the mail. fred tensed down with further hikes coming. that tells you a recession is probably a lock. the labor force is very strong. even though there is anecdotal evidence layoffs, you are not seeing a lot of jobless claims

in the unemployment ticking up. you look at credit markets you see around 130, high yield around 150. away from recessionary levels. it tells you the recession is delayed but not denied. it might be coming later. the more difficult the macro picture gets, to your point earlier lisa, in some ways the easier the outlook becomes. lisa: if it is a lock, there are some kind of downturn and you can go to the normal recessionary playbook where risk will do well than safer assets. is that what you are saying? the end of financial pressure will leave us on a yield? but will leave us on a path where it is rocky but we are getting closer? matthew: our chief and vice -- our chief investment officer was asking us what are we thankful

for. at the end of the year we are thankful for financial suppression. people saving for college, retirement. any american of any strength at any part of their lifecycle can now get savings above the inflation rate. we have not seen that in 15 years. that is a great thing for people across the country. we are very thankful for that. the futures are always uncertain. now it is particularly uncertain with the labor market, the yield curve, what is going on globally. we think you should be close to fully invested. we are making sure to be overweight income. don't be too overweight value, to overweight spread. all you have to do is be relatively close to your strategic target across your assets, close to fully invested

not to short duration and a 60/40 portfolio over the medium to long-term. you should do quite well. jon: how painful is it being fully invested into what you anticipate will be a recession? matthew: it is very difficult. one of the most difficult points is the fixed income market. the highest yield is the one year sector. highest point on the yield curve right now. we see lots of clients, i have talked to lots of clients who are allocating money there. they are saying, this is easy. i can get more yields and no interest rate risk by being on the short end of the curve. why would i ever go out longer? we try to explain it. the conservation of math, it is the same thing with risk. risk is never created or destroyed, it just takes different forms. for clients who abandoned long-term fixed income, look at

their cash, they are abandoning interest risk, but they are creating investment risk. that one year rate looks good right now, investing in the long term, in a year to two years it might drop. you're creating investment risk on the short end. we are trying to convince clients by abandoning long-term, staying short, they are reducing interest risk but they are talking -- they are taking investment risk. it makes more sense in your pro folio to be neutral going longer. when the curve gets this inverted that is general at sign you should be longer. that attractive short-term right tries to trick you to do the wrong thing in our opinion. jon: thank you for your opinion. matthew diczok. lisa: you're going to want the

yield even if it is lower than the short end. jon: the real-time is down to what you just heard. lisa: i am working out in real time what it means rate in a years time of the reinvestment, especially if you're in recession and stocks are pricing in recession, there could be other entry points, perhaps not fixed income. i am thinking out loud. i am going to move on. i do think it is a hard sell but you are seeing people do it. jon: we want more. you disagree? lisa: in a years time, we could be pricing in the end of recession in stocks. my side of deutsche bank, wouldn't that be a better entry point for some of that cash coming off? what do you think? jon: you make good arguments. equity research has got a lot of

things to say about retail. lisa is very excited for cyber monday. it is a big event. this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world with the "first word" i am lisa mateo. china protest against covert restrictions are spreading. citizens took that the streets and university campuses and vented their frustrations on local officials and the communist party. huge crowds gathered in shanghai where some called on president xi jinping to step down. a level of defiance unheard of since he took power a decade ago. at the price of oil has fallen to its lowest level in almost a year. protests in china clouded the outlook for energy demand.

it fell below three cents a barrel. it nejra material less attractive. retailers in the u.s. saw modest growth over the black friday weekend. according to data compiled by central solutions, in-store traffic ticked up 2% in mortar -- in brick-and-mortar retailers. turmoil at apple's key manufacturing hub in china will be costly. bloomberg has learned the unrest is a result and production shortfall a coasting 6 million iphone units this year. it is trying to get workers back to assembly lines after violent protests against covert restrictions. shares of credit suisse hit another record low today and they are on track for their longest losing streak since 2011. the swiss bank has fallen for 10 straight days losing as much as 27%. last week credit suisse warned about massive outflows at the

credit business. 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 am lisa mateo. this is bloomberg. ♪ even if you got ppp and it only takes eight minutes to qualify. i went on their website, uploaded everything, and i was blown away by what they could do. getrefunds.com has helped businesses get over a billion dollars and we can help your business too. qualify your business for a big refund in eight minutes. go to getrefunds.com to get started. powered by innovation refunds.

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>> there is a slowdown coming through. the fed is acknowledging that and that is part of the reason it is talking about the pace of hikes relatively soon. jon: chairman jay powell speaking wednesday for payrolls coming up on friday. the federal reserve decision coming up summer 14th just after cpi friday. going into the opening bell, looking to climb through november for another month of gains on the s&p. the gains we saw in october and take a chunk of losses seeing

through 2023. lisa: this is -- cristobal. even deutsche bank says we are going to potentially rally more and we are going to come off. it is a technical end of the year. jon: if charlie gets 40 750, iona him a massive apology. lisa: all you have to do is wear a fat tie that day. it will be the real acknowledgment. jon: what do you define as fat? lisa: your style is the biggest capitulation would be to where -- jon: what does he wear for 4750? oliver chen joins us now.

lisa has been joking about black friday, cyber monday. i don't understand whether black friday started on friday or back in may. oliver: black friday has been going longer. particularly with amazon and amazon prime. shoppers are coming back to pre-pandemic habits and they are shopping later. we will see later shopping, people going into stores closer to eve. we are at those yesterday of what we saw in stores friday. we are positive on cyber monday. we are looking for holiday sales overall plus 5% to 7%. black friday changed. not as many doorbusters. a little more relaxed and convenient. but it is still very important. lisa: nobody wants to wake up at 4:00 a.m. to go to the stores. that is part of the reason

people are giving a sigh of relief doorbusters are fading into the past. you talked about foot traffic being good, yes. however discounts were also very good. how much are you going to see this bleed into massive market compression because people are looking for those discounts? oliver: gross margins as we model them down anywhere from 50 to 100 basis points in the fourth quarter. in the guidance a lot of retailers have out there, there is merchandise margin pressure. there is a lot of promotions in the marketplace. 20% to 40% or more. the big problem is inventory levels are too high. 10 points or more too high. there is billions of more excess inventory. retailers are working through that. that should be very good for the consumer. 30 percent plus. not all inventory is on sale. there are pockets of great strength. that feeds into the consumer being bifurcated.

luxury, premium, that has been a stronger market generally. inflation is a huge deal for the middle and low income consumer. jon: talk to me about luxury and how it is holding up. at one transformation we have seen over the last five years or so is how much access to very high-end brands has increased over the back -- over the back of by now, pay later. what might be happening with these luxury brands down the road? oliver: we are watching that. the savings rate has declined to 3.1 percent versus a seven to eight day average. the dollars on the sidelines, there are still over $500 billion on the sidelines and it is declining. that is something we are watching. what we see in luxury is the access luxury points such as the belts and foot where -- footwear. when we think about super premium brands, those trends have been very strong. the u.s. has been very strong.

u.s. tourists going to europe. european numbers have been strong luxury goods. it has been a resilient market april two -- a resilient market able to attribute -- able to achieve pricing. it is suiting. we are talking about ties. going back to work is a new wardrobe refresh. it is not about lounge anymore. it is about this dress-up and suiting. in terms of what we are thinking is happening now. jon: where should we go and get a suit from? whenever i look for suits, if you go down to who go boss in broadway, the suits are not in the window anymore, they are cushioned to the back. who is making suits now, who is sticking with it? oliver: back to the future, back to the 90's. it is a heritage brand. i like what they are doing.

norstrom has a very competitive men's offering is well. you call it hugo bossing. it is an interesting question. men's clothing, men's and suiting, the versatility of looking for comfort, it is about mix and match. it is at leisure plus a tailored top, that is happening to. they returned to formalities. lots of different trends happening simultaneously. jon: i am waiting for lulu to make a suit. oliver: i have a lulu buddies are -- a lulu blazer. comfort matters as well. jon: patagonian vest and lululemon blazer. lisa: people want to be comfortable but look like they are not. they want to look like they are

dressing up and going to the office but they still like the lounge. jon: be comfortable but look like they are not? lisa: look like they are dressing up. i was speaking of -- i was speaking to one of the heads of a major coaling -- a major clothing company where they are shifting from loungewear to office wear. there are no charts. the trends just shifted. suddenly people wanted to go back to the office, no out. how do you prove it? how do we prove people are getting sick of dressing up? how do you prove these trends? jon: oliver, thank you. always good to catch up with you in the shopping season going into christmas. suits, i am struggling. lisa: i thought you had one brand you always go to. jon: i have a few brands. the brands i like don't have things in stock. it is very difficult. lisa: that is the key.

it luxury brands tend to have smaller inventory and bigger demand because people are still clamoring for those products. jon: when you think of by now, pay later and all that stuff -- what do you think of by now, pay later and all that stuff? gucci became very accessible to a lot of people. it became a monthly payment instead of a lump sum. lisa: which also bid up prices. look at the savings rate, still pretty massive. jon: not everyone who had money shopped at those stores over the last four years. it will be interesting to see what happened. from new york, good morning. this is bloomberg. ♪ ♪

♪ there's a great deal of uncertainty in the u.s. economy. one of the challenges for businesses is how to skillfully navigate these difficult times. for more on this, let's go to michael fox, ey financial services account's managing partner. how should companies plan for what's ahead? so through our conversations with the c-suite, we definitely feel there's a lot of uncertainty from senior leadership, and they are thinking about scenario planning, cost transformation, balance sheet management, and then really, we're looking at where can they invest in their most important strategic priorities. we also are telling our clients that they should not overreact. this isn't a time for short sightedness. they need to keep a long view lens on how investing today

in the most strategic initiatives can create and set you up for a competitive advantage when the economy returns. ♪

jon: 60 minutes away from the opening bell. futures down 4%. federal chair jay powell speaking wednesday. cpi december 13 and the federal reserve decision on december 14. equities lower by .75%.

trying to work out what is going on with crude. down by 2.8%. the move we see on wpi later in a couple of weeks. lisa: what we saw over the weekend, does that give people conviction china can stay with covid zero? is that what lower oil prices implies or that more lowell -- that more volatility --? jon: the events over the weekend, i have no idea what the consequences will be. lisa: what explains the dollar? why is the dollar so much weaker? normally when it is a risk feel, the dollar strengthens. the dollar has steadily weekend going back to august. jon: the turnaround we have seen for things like sterling,

euro-dollar from 95.95 to 104 right now. lisa: the yen is massively rallied versus the dollar. they haven't changed their yield curve control policy. jon: they are hoping -- 138. they are hoping and praying. lisa: it makes you wonder if this is all positioning squeeze and changing heading into year in. jon: it is something you cannot explain as positioning. ray farris joins us now. fantastic to catch up with you. let's start with the chairman on wednesday. what are you looking for from chairman powell this wednesday? ray: he is going to find a way to slow to 50 basis points and still be hawkish. jon: how does he do that? ray: the way he does it is similar in nation -- is similar in nature to how he did it the less -- the last meeting.

he might suggest they don't stop at five. they may have to go to 5.25%. and they stay there for longer. they will continue to point the labor market being strong to justify all that. the messaging out of the fed is they are not wild about this rally in treasuries, rally in markets, easing the financial conditions that has come with that. it is still, hate market prices. lisa: they have already said stop it. we are not going to cut. they said this again and again and the market has still moved against them. what else can jay powell say other than we are not going to stop at 3.5% inflation, we are going to keep going? how do they signal we are going to have some sort of cold. we are going to have some sort of caps on how far you guys can go. ray: he is going to point to a

higher terminal rate as a real possibility for the fed. keep open the idea that 5.25% can be there. there is only so much negative turn markets can take. we are not going to disembark the curve. it is not going to happen. it doesn't happen unless something really fantastic happens in europe that creates an outlook for europe to come out of recession. the more you drag the front end higher, the more the backend of the curve is going to have to creep up as well. lisa: a lot of this has to do with the actual economy and data. a lot of people keep watching the data because they say the fed doesn't know better than anybody else. we heard this morning it is always about the labor market. more important than the cpi given there is the stickiness, the strength in the labor market that puts a lot of pressure on the fed. ray: the labor market justifies with the fed is doing. the cpi is the objective. if the fed can get inflation down to close to its targets

with a labor market that remains pretty healthy, remember in 2019 the labor market was pretty strong and inflation was where the fed wanted it. one of the things we have been pointing out is the idea that unemployment has to go back to 5.5% or the outward -- the average hourly earnings growth has defaulted 3% to be consistent with the fed's objectives, history doesn't support that. if the fed can achieve disinflation with a labor market that is only modestly weaker than it is now, it will take it. inflation is what the fed is going to focus on. jon: how much does that change between the pre-pandemic labor market and the labor market we have today? how much has changed? ray: the key thing that has changed, and a labor market that has already lost a lot of potential workers because of

immigration changes, reduced immigration since 2016, we have taken a lot of workers out of the labor force. labor force participation rates have fallen. specifically among older workers 55 and above. while it is creeping back up, it is going to take a lot of time for it to fully recover. from the fed's perspective what that means is you have a permanent shift lower in labor supply. that is part of its problem. look at the inflation data. goods prices are beginning to do what they are supposed to do with a strong dollar falling for prices, softening consumer demand. discounts this thanksgiving day this black friday were not epic, there were definitely discounts rated one of the big fears we had, read -- one of the big fears we had, retailers saying we want to protect markets, that didn't really happen.

in the housing market, it is one of the things most for castable. rentals are coming off. you look at the data in september and october, rentals fill. house prices are coming down. it is coming down to non-housing services. that is still running a bit hot. the labor market looks like it is beginning to soften. services growth, nonhousing services will continue to grow but will continue to soften in 2020 three and that will start to come down. it is going to take until the end of next year. it is not going to be first quarter or second quarter. the fed has a reasonable chance of getting disinflation that doesn't require 5.5% unemployment. jon: the fed is going to keep hiking until they see 2%. they are going to keep hiking. what does that look like? how do you know? ray: that is the million-dollar

question the fed has right now. the slowing is about the fact the fed knows it is now restrict. it knows that because it can see it in housing. it can see it in other areas. some major company layoffs. but it doesn't know how restrictive it has to be because it cannot trust its models. the message from senior fed officials, the models didn't forecast inflation on the upside. why should we trust them on the downside? we have to look at the heart data. we have to be backward looking. if you are not backward looking you run a much higher risk of overdoing it. how do you do that? you gradually slow down the pace of hikes while remaining hawkish until we have got mission accomplished. we think they will do 50 in december. they will do another two, 25's next year. lisa: how big is your outlook of whether china exits covid zero or not?

ray: it outlines the risk. that is a key question. the risk that emerges from china exiting covid zero and particularly sooner than expected risk is all about energy. one of the biggest vulnerabilities from an inflation perspective from 2020 three is energy. u.s. inventories have gone from 1.2 trillion dollars and falling. we are about to get a regime that is going to take some russian oil off the market. russia has been supplying the market pretty much at the rates it was supplying the market before the invasion. oil prices have fallen but they are still above 2019 pre-pandemic levels. if china comes back in and adds back demand to a million and a half barrels a day, that will be

particularly unhelpful. jon: that is the problem. is it bullish or bearish if china reopens? lisa: nobody has a straight answer. i am sure it will be bullish with respect to global glut -- global growth. ray: it didn't really do much for the u.s. economy. it will contribute a little bit to some corporate earnings. it focuses much more of an investment perspective on china itself and asian assets. asia has a much bigger gearing to chinese reopening and a greater degree of activity in china. especially chinese travel. that is going to benefit tylan, the philippines, southeast asia much more than the united states. jon: some of the luxury names in europe. european equities off the lows since september have been phenomenal. ray farris of credit suisse.

coming up, global investments looking forward to that. just a few events to go before the end of 2022. lisa: it feels we have two more weeks and we are done. it feels people are kind of jittery heading into year-end. a lot of big events and there is a lot of conviction. you feel conviction? jon: the year-end is december 14. do you skip the ecb meeting? lisa: pretty much. jon: tell us how you really feel about that european central bank. lisa: i don't think they are going to have class knots kind of view. that is a little bit to flip it for the ecb. i am interested to hear what they have to say. you think it is an important meeting? jon: it is always an important meeting. lisa: it is brutal. do you think they are going to say it is a recession?

jon: that will be interesting. when is tom back? lisa: tom is back wednesday. jon: good for him. this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world with the first word i am lisa mateo. since of uncertainty sweeping their chinese markets as protests against the government and its covid zero strategy, kate's path to economic reopening. goldman sachs economists say they see a chance of disorderly covid zero exit. demonstrations across various cities and universities in china were fueled by a deadly high-rise apartment fire. some blame virus restrictions for hampering those rescue efforts. ukraine's president volodymyr zelenskyy is warning people to brace for more russian missile attacks. in his nightly video address zelenskyy called in part

moscow's effort to use cold winter weather as a weapon. repairs are ongoing after a barrage of russian missiles struck ukrainian powerplant last week. in houston schools are closed today and residents have been warned not to drink tap water without boiling it first. power outages have shut water treatment plants. office towers have told tenants the problem will not affect fire suppression and air conditioning systems. after ending thousands of jobs, twitter is now hiring. that is according to a tweet from owner elon musk. the slides said you user -- are at all-time highs averaging 2 million a day, the second week in november. 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 am lisa mateo. this is bloomberg. ♪

>> slowing economy across europe and these cheap prices to buy things when you learn about energy costs, learned about mortgage payments and so on, the global economy is slowing. that is the backdrop. lisa: cheap expert strategist on cyber monday with a look at going out and buying things on discount. we have been talking about that threat the morning. underpinning a lot of the angst this morning. we are seeing equities lower. a bond tire, yields lower. traditional off with the dollar.

how much we are seeing in china with ongoing and spiraling protests that are causing some to draw analysis to 1989. joining us now is tom mackenzie with bloomberg. tom: very rarely did you hear criticism of the central government and the president, in this case xi jinping. this time it is different. i can think of no other event other than 1989 that is comparable. it is not hyperbolic in this interest -- in this instance. you have multiple protests in multiple cities happening at the same time around a similar set of shared interests and concern.

that we have not seen since 1999. you are going to have officials in beijing deeply concerned. the response from them, we are all watching next. lisa: we are hearing reports of chinese tv cutting away from images of the world cup. people enjoying without masks. there is a clampdown of information. how is that how surprising is it that these images are getting out? tom: this is the dual world people of china are leaving in now. they have faced three years of these kind of restrictions. the restrictions we have seen in the last few months the tightest they have been within that period. there is a huge fan base when it comes to soccer or football in china. we have been watching it on cctv. the state network has the rights to it. they have been trying to make sure they did not see thousands of fans in their stadiums without masks. that is the reality of most people outside china's borders.

that is proving another friction point for people stuck at home as they watch. this is a chinese leadership that has squandered its own success in the early 20 20's. when it clamped down on what happened with covid. the death rate in china was very low, infection rate was very low. nowhere near the death rate we got in the u.k., in the u.s.. but they squandered that time to build out the health care system to ensure vaccination rates were higher for the elderly and to put in place in ra vaccine. they still do not have access to in china. lisa: why haven't they taken a stricter line of vaccinating older individuals? why haven't they come up with vaccine distribution methodologies? tom: on the top line it looks quite good. 90% of china's back -- 90% of china's population have been double vacs.

when you lift the lids on those numbers you realize above the age of 80, the vulnerability is there with that age group, the vaccination rate is closer to 70% compared to 90% in japan or germany. lower than the vaccination rate of those age groups in the united states. they have the manpower to be able to do that. they haven't done it. there is a deep reluctance to the elderly population getting these vaccines. and breaking down that reluctance and that concern is something they struggled to do. why haven't they approved mrna vaccines? in 2020, in china they said we are getting the rights to the mrna vaccine in china. that never happened. that appears to be a nationalistic decision in beijing. lisa: it is folly to try to

predict what xi jinping is going to do. it makes a big difference in terms of outlook for next year with some people including goldman sachs saying this includes -- this increases the chance of a messy exit of covid zero. tom: a messy exit may be implementation of these restrictions at a slightly softer level. they put in place this 22 point plan they published a couple of weeks ago. the challenge for local officials on the ground is trying to implement those, having spent the last few years fearing being punished for not curbing the rate of infections. the two things colliding together. a local efficient in that jurisdiction, it is very hard to implement given you have spent the last few years with that fear in terms of what the central authorities are looking at. this will be a mixed approach of easing some of these restrictions, trying to ramp up the health care facilities to ensure they can absorb the

increase in infections and possibly sadly the death rate as well. that will be the messy outlook. the history of xi jinping is that he has stated he has studied the -- collapse. he says they were not brave enough to confront that. this is the man who saw the fall of the soviet union. lisa: what does that mean? does that mean throwing everybody in jail, is there going to be a new clampdown, is covid zero going to be more intense? tom: it may be a combination of all those things. you may see security starting to target who they considered who were the lingering -- the ringleaders. a lot of videos shared online, that is surprising they haven't been able to maintain that yet. those will be coming for the protesters involved.

and then at a later stage they may start to ease some of these covert restrictions. they won't do it now. they won't want to apologize because that will be a loss of face for the leadership. in the months ahead will be surprising to see they don't walk back some of these restrictions and try to walk this fine line to the end of covid zero. whether that is before -- or before 2023. lisa: tom mackenzie of bloomberg. we appreciate your insight. people holding up blank sheets of paper to indicate the censoring they are experiencing on social media and beyond and saying we want to be heard. very unusual type of development in a nation known for cracking down on protests. leaving a lot of people drawing comparisons to the gym and -- to the tenement crisis in 1989. the fact you're seeing stocks selloff and bonds gain, yields

lower, this inverse correlation, 60/40 reasserting itself. s&p lower by .7%. dollar weakness is the one outlier. why is the dollar the weakest compared to its peers? going back to august we are seeing euro-dollar go to 10462. 10-year is lower. they have shifted higher. they started the day lower, they have shifted suddenly higher. we have seen oil prices lower as we talk about the potential for more disruption. coming up on past balance of power number tv and radio, and ashton, your china group. this is bloomberg. ♪

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equity futures down 0.8%. the countdown to the open starts right now. >> everything need to get set for the start of u.s. trading. this is bloomberg: the open, with jonathan ferro. jonathan: entering the final stretch of 2022. >> there's going to be af