>> we've never seen a recession so anticipated. >> first half of the year we see all sense of recession and the second half of 2023 will be the market looking to 2020 for. >> it will push the dollar stronger again. >> could trade off the fed has to deal with, they will settle for a higher rate of inflation. >> fed story is over, they are getting out of bounds. jonathan: from new york city, for our audience worldwide, good

morning, good morning. this is "bloomberg surveillance, live on tv and radio. tk has been shadow band. we will talk about that later. features up by .4%. looking ahead to next week, the federal reserve. lisa: perhaps some indication of what we are looking for. the first of a couple of last key data points before the meeting. the market has been meandering. jonathan: michael han looking at the next three meetings, he wrote question goals as the fed goes 50, 25 and then stops hiking. he said housing says 50, 25, 25 and solid credit market says 50, 50, 25 hot labor market says they go 50 three more times. what is the fed focusing more on, the earlier story credit and

what's happening with financial conditions and crude or the hot labor market? lisa: you can put a little snark in that they have fit different narrative when it is convenient. they have been pretty persistent looking at the labor market and yesterday we got the atlanta fed wage tracker data that showed wages ticked up in recent meetings and not what the fed wants to see. 50 basis point seems to be the consensus. jonathan: most important cpi. crude is negative on the year and energy stocks are up 50%. jp morgan yesterday, we believe there is a tactical trade to sell energy stocks. ultimately, he says the following, an enormous gap has

opened between energy stocks and energy commodities and said it is a tactical cell. lisa: interesting that he focuses on equities being too high and oil prices being too low. i think about that, especially with china reopening. why have we not seen a bigger move as many analysts had said china's story has changed the overall expectation and how quickly they will open. it seems that they are committed and laying the groundwork. jonathan: latest reporting around tesla coming in, according to people familiar with the area, tesla will suspend output in stages at a shanghai car factory in the end to the month into early january. it is slowing consumer and upgrades. the stock is up by .4%. lisa: maybe be the founder of tesla is distracted by other

things. jonathan: i want to hear from the company to find out what is actually going up. we will check in with the ceo. lisa: and also with demand in china and how much they are feeling pressure from western nations to move away from chinese production and sales. jonathan: matt miller will join us as well. tuning in this morning, futures up by .4% on the s&p 500, nasdaq futures up i .5%, and the euro-dollar not doing much 1.0561. lisa: 8:30 a.m. is what i am watching and it is the most important cpi report we will get from the last one until the next

one. the producer price index, do we see ongoing deceleration and do we get a sense we have seen peak core invention -- inflation. there isn't enough conversation about what the trajectory is from there. it is a fast deflationary or a slow grind with a boomerang effect underlying the index? xi jinping will have a conference today. how much are we looking at laying the groundwork for a reopening? hang seng index saw a 29% rally in the month of november, the biggest going back to 2003. the world is expecting them to reopen how are they playing an -- playing a groundwork? i know you race issue with this with the michigan consumer

sentiment but attracts inversely the gasoline prices and gasoline prices have come down dramatically to the lows lovers -- lovers going back to january so will we get a boom of discretionary spending and how does that play out? jonathan: if you call 600 people on the phone -- lisa: 800 -- jonathan: if called him up in america the view on inflation looking out five years is probably shaped by what is happening in front of them and crude and gas prices are at the epicenter. lisa: you mention what happens five to 10 years out and you have seen some consistency. does this give the fed confidence that the expectations are in? jonathan: that is not up to me. that happens up at 10:00. jose rasco joins us from hsbc

bank. i was going through notes, underweight, until, what would make you shift from underweight to adding more equity risk? jose: we expect a lot of volatility as we replace earnings. the economy is going to slow and we will continue to see disinflation. markets will get down and when we see the re-rating of earnings from 6% to 7% towards zero, that is the point we would be adjusted in looking at u.s. equities. lisa: what is the biggest, we go into recession earlier or later than people expect? jose: i would say later, because we want to get it over with and look at the growth prospects for 2024. we have continued disinflation and the potential that the fed could lower rates in 2024.

we want to get it over with and start looking towards better growth and earnings in 2024. that is our hope. lisa: it is hard to understand how to trade data points as they come out. we have seen a softening in inflation and people believe in a soft landing once again. his answer to buy risk assets or the more we prolong the sense of a recession part of the fed has to go in the harder the landing? jose: i would argue, everybody is focused on the cpi. it is a bit of a red herring are you should be looking at wages. wages are growing in excess of 5% and the last cycle they grew 2.4%. that is the sticky number that needs to go down. look at the railway deal with the government. we are seeing price hikes in the labor markets and the only thing that will get that down is higher unemployment. jonathan: how much upside risk is there around the terminal rate relative to what is already

priced? jose: you them going 50 in december, 50 in february in another 25 in march and we think that is it at that point they can take a pause and not a pivot. and then they will look at what they have done and we reassess. you will see a slower economy in 2024. jonathan: if we get a recession, based on your understanding, do you believe they won't cut interest rates? do you believe they will not cut interest rates in the face of a recession in america? jose: it will depend on the inflation data heavily led by wages and i think you will see softening in wages through the earlier parts of next year. this year, we had 27 to 30 states raise the minimum wage in january, the highest dollar amount and percentage increase we have ever seen.

that was a big push up in raises , -- wages. lisa: we read the stephen major note recently about how 10-year gilts will go back down to 2.5% i the end of next year and going back to the same -- by the end of the next year and going back to the same rates we have been used to. do you load the boat with bonds in anticipation of the rally? jose: we like bonds and the short end of the curve. if you look at the long and, any yields we are seeing globally, we have weakness in the europe and struggling growth in parts of asia, so u.s. treasuries will remain well bid. 2.5% is more important directionally than the data point and the long end of the curve remains well because of those actors and the strong dollar.

that does make sense directionally. jonathan: wonderful to get your thoughts. jose: one final thing if i could. jonathan: 20 seconds. jose: keep an eye on the near shoring theme is that is something that will propel economic activity in 2023 and beyond and a major shift in what is going on in asia, a theme we could investigate the next time i come on but happening quicker than people thought. jonathan: that is the tees for the next appearance. looking forward to the conversation. lisa: so generous. jonathan: interesting thing, the shoring. politico said kyrsten sinema is changing from democrat to independent peerages that i don't think anything would change in terms of the senate. lisa: the big takeaway and 2022

was the shift to center and we see it with a lot of who is winning and which type of candidates and how much will that and kate who the candidates will be in 2024. jonathan: she is not talking about whether she is running for election in 2024 which is an important line. lisa: if you are running again, does that make you easier to move away from the party's structure. jonathan: later, on the futures market. in the bond market, yields basically unchanged. from new york, this is bloomberg. ♪ lisa: with the first word, i'm lisa mateo. producer price index released to

see whether federal reserve will do next. the numbers come out at 830 -- 8:30. inflation at the factory level fell over the previous 12 months and policy makers meet on interest rates next week. the u.s. is preparing more sanctions on russia and china for what it calls human rights abuses. the sanctions against russia will focus on pepper -- efforts to get weapons from iran, especially drones. it will center on the fishing industry. china faces a taunting -- daunting task after giving up on covid zero. cases expected to soar and that's expected to rise to 2 million. china is likely to see a wave of infections hit the country all at once. the international monetary fund, world bank and others sounding the alarm about a worsening

global outlook. speaking in china, the managing director says indicator show further downgrades to global growth are likely. she is hopeful china's reopening will help the global economy. elon musk says twitter is working on a software update to let you know if your posts have been suppressed on the platform. reason why and how to appeal. it follows a threat by a journalist with access to company documents who said that conservative commentators had tweets downplayed by employees or shadowland. -- shadow band. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. ♪ and the effects are being felt everywhere. 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.

all while staying on track to reduce our carbon emissions intensity in the area. because it's only human to tackle the challenges of today to help ensure a brighter tomorrow. from one company committed to building a world that works, to three that will focus on a future that does too. this is ge healthcare, creating a world where healthcare has no limits. this is ge vernova, helping generate and move the energy that our world needs. this is ge aerospace, advancing flight for future generations. this is the next generation of ge.

>> mr. putin has proven he is not willing to negotiate an end to the war. president zelenskyy said he wants eventually to get to eight negotiated settlement, now is not the time -- get to a negotiated settlement, now is not the time. we are going tuesday focused on ukraine's defending themselves against threats. jonathan: joe kirby, the national security council in the last 24 hours. here is the price action going

into a little bit of data later on this morning. we get the ppi data. futures up by one third. the latest reporting from senator cinema saying she is switching from democrat to independent. she says she is switching party affiliation but won't caucus with the republicans. lisa: unclear what this means in terms of the balance of the votes and will she run for reelection. do you need the party system to back you if you hope to get elected or can you run effectively as an independent and win. jonathan: in your city, -- in a new york city, and maria stopping by.

-- anne-marie is stopping by. annmarie: the reason why we don't have the interest closing the loophole was because of senator cinema. political reporting called it neat and tidy but it doesn't look like she will change how she conducts business on the floor. we have an independent when it comes to senator sanders and always votes with the democrats but it is a little bit of a blow but they thought they gain this ecstasy and now she is saying potentially this means she may lean into more of the republican caucus. lisa: emma getting carried away saying there has been a huge shift to the center and the way we haven't seen for years with the midterm elections and with respect to a kinda bipartisan work has gotten done? annmarie: you can point to that depending on the issue. what we have going to the desk, the same-sex marriage bill, within two dozen republicans

voted for that in the house. then we have the defense spending bill. democrats had to say we will give it to the republicans and what they want is the fact that the military has this coronavirus mandate for troops. democrats didn't want to do it but they had to do it to get spending the defense bill. you had a number of times they had to come to the middle and republicans realize it because it wasn't the red wave and the democrats still have control of the house into next year may have legislative agenda they want. lisa: can someone when a major election without the major political party behind them? annmarie: you mean an independent winning president? hoeven independence -- there have been independents running. how do you have the money to go to a third party? jonathan: can you imagine if the

former president made a run as an independent. that would, ok thanks for the republicans. annmarie: i look at the money factory -- that would be problematic for the republicans. annmarie: i would look at the money factory. you won't have a wall street pundits behind him. jonathan: senator of arizona said she is switching to independent. a controversial prisoner swap. annmarie: brittney griner looks like she is back in the united states. what i would say is this has been welcomed in washington. everyone wanted her home but it hasn't come without questions of why paul whelan is still left behind, and that is how he feels . it is the republicans but also democrats. a quick quote from bob menendez, a democrat and chairman, should

be a moment of deep reflection for the us government to recognize we have a serious i'm with hostagetaking and we cannot ignore the release -- have a serious problem with hostagetaking and we cannot ignore the release of viktor bout. lisa: how much are we worried about that he is still a dangerous person wanted by russia. how concerned are people who spent years trying to prosecute him? annmarie: a number of them who look at this and saying he is a headache for putin now that he is back in russia because they will not have him go around the world trying to conduct arms sales. it was embarrassing when he was arrested, he made the put to the wayside in russia and that will be it and he will be living out his life and i don't see him traveling around the world.

do the russians even want him back at this point, some are questioning. jonathan: clearly they do other prisoner swap wouldn't have happened? annmarie: at the same point, the united states is making tons of noise for brittney griner for the russians and some are even saying that was a headache. they also have other things, they want to get their fertilizer out into the market. jonathan: overwhelmingly, people are happy that this person has been returned back to america. there was the feeling this exchange is very lopsided. isn't that ultimately the criticism coming from all corners? annmarie: it is coming from republicans and democrats and they feel it is lopsided. the united states traded an athlete for an arms dealer and that is how it is being viewed in washington and many are saying we were going to give back viktor bout who is this incredibly dangerous individual

serving a 25 year sentence in the united states, selling arms to terrorist groups who had targets on american backs, why did we also not get paul whelan? then there is a ton of pressure in the administration to bring back paul whelan, even more so now and who is going to be that trade. lisa: as we talk about the prisoner swap that is controversial, we talk about increase in national defense spending getting past. annmarie: $25 billion more than the president wanted. lisa: what does this tell us about where the tensions are, not just russia but also china and how the u.s. is arming up? annmarie: this to us you it is a democrat-controlled at the moment senate, house and white house and a massive defense spending bill, it hundred million dollars is going to ukraine and more going to taiwan and this has to come down to competing and defending with china.

also interesting is that the u.s. military and anything part of national security companies that use semiconductor chips cannot get those from china. it is not just about 11 naval ships instead of nine but there is also technological provisions in this. jonathan: are you sticking around for world cup coverage? annmarie: yes and we are going to your house. jonathan: there is a viewing party and tk is upset he didn't get the invite. lisa: he is celebrate his birthday so we will tell him that. jonathan: we will do they wishes next. annmarie: i hope he is in paris. jonathan: i continue he is not. good to catch up. going into a defining week next week, the federal reserve decision around the corner. yields unchanged on a 10 year.

euro-dollar 1.0552. up on the session and down on the week. crude up and down on the year, this is ridiculous, 71.89, positive .6%. a monster gap opened up between what the commodity is doing, oil, and what the equities are doing. energy names flying and one from j.p. morgan saying it is a short-term sell and he is selling energy. lisa: i wonder if the u.s. government will be buying. i don't know. jonathan: freya beamish is up next. ♪

jonathan: that woody market on the s&p 500 heading for its biggest week going back to the start of november. equities positive, a .3%. the nasdaq 100 up .5%. twos, tense, 30's, two-year down a couple of basis points, 3.4851. getting to the euro, the ecb next week, euro-dollar 1.0558.

also unchanged. do you want to hear what consensus looks like, it looks like what we heard from david balin at city. david: it is going to be a tale of two halves. markets lead the economy and they are telling us the first half of next year will be a different guilt period -- difficult period. the second part will be the markets looking at 2024, a recovery from whatever recession. jonathan: only times have we heard that? -- how many times have we heard that? lisa: this is the consensus. the problem we have been talking about is that ysl if you think everything is going to rally after a brief pause? how much does that support the market. and jose rasco said, the bigger risk is that we don't get a

recession in his view, at least not now, because that means it will be a harder landing when it comes. jonathan: the biggest risk is not owning going into 2023 it was said if we don't get the recession. lisa: does that mean you don't get a recession or it is a tactical feel for the beginning of next year? this is what we have been hearing from different individuals saying they think they are bullish on stocks in the beginning of the year but that is a bad thing for later on in terms of returns. jonathan: here is a quote, the us recession is a popular forecast because it is hard to vote against the fed. freya beamish joins us. what is that? freya: i think that might have been my colleague just to give

due credit. but it is something we use quite a lot because there is a lot of it out there. it is when you want to have your cake and eat it essentially. the fed doesn't want to tighten financial conditions to the extent would be necessary to really guarantee the recession coming through. they don't say they want a recession they need to get that and there paradigm of things. it speaks to the two scenarios you can see for next year that hinge on what the fed is going to do. you can get for some of the dynamic from 20 carries over into 2023 -- from 2020 carries over into 2023 or some of the dynamics that prevailed in the pre-world coming back and giving us this period and we will get a

phase two of what we saw in 2022 , which is essentially a rebalancing of financial wealth into line with the real economy. no matter what scenario happens in 2023 kind of what we think the investor should be using it to position for the bigger picture coming after that, which is one of higher inflation, talking not getting back to the 2%, maybe 3% or higher and higher growth and higher yields, especially when you add in the greater uncertainty we are facing in the deteriorated geopolitical and natural environment that is the reality of today . that means higher yields and lower valuations where we will end up in the rest of the 20 20's. in 2023, there is this liberal era where it is not clear what is going to happen and there is

a consensus there will just be a concession and then you buy and every thing will be ok because it will not be that much of a deep recession . it is easy to buy into that. there is nothing to say it there will be a persistent recession in the u.s. because the liability doesn't give any reason for persistence of the weakness in the economy. the parliamentary argument is more that the fed goes 50 this month and that means this is it for financial conditions. and then you get inflation coming back down, a three-month annualized rate and core inflation could get down to 4% by q2 of next year and then the fed looks quite tight if they get to the 5% by some people's standards. it is about the speed of the adjustment they have made rather than the level of rates they have reached for taking this for

a long-term perspective. if you are waiting for the cumulative effect coming through to slow the economy down, then they probably do come through, but that is a symptom of how rapidly things have turned around rather than anything that sort of persists. you get this period where everyone thinks it is ok and it looks and feels like a soft landing because the fed looks tight and inflation is coming back down and the economy is slowing. underneath it, are a barrage of disinflation because growth will pick back up if that happens and inflation will rebound and it won't look as happy by the end of the year. lisa: the boomerang inflation i was thinking about. for all the people who think i am gloomy, what you put out highlights the concern of a lost decade or stagflationary decade in the united states. is that what you are talking

about with meandering returns and bonds? freya: is going to be very difficult environment. we are going from a low returns economy to a high returns economy but the process of getting there is really unpleasant and there are all of these different major global political economy secular forces pointing towards probably higher inflation. part of that being cost push inflation and deterioration of the geopolitical and natural environment. so supply shocks by inflation and also the china slowdowns and all the economies exposed to that area, ems, commodities. they have this drag to contend with that china is slowing and the growth model is broken, but we do see more positive aspects in the sense that potentially if

you get this transition of wage growth back to the markets because we think china is no longer a constraint on wage growth in developed markets and you have the potential for credit wrote to pick up again, then you have demand drivers coming back. when that happens, productivity growth happens and wage driven income and the debt fueling income as well. that sounds like you she get higher real growth as well as high inflation and -- that sounds like you should get higher real growth as well as high inflation. what that means is you will go to higher yields. if you decompose that into what it means for yields, bond investors are never fully compensated for real growth, say 2% growth. it is a long-term forecast, so who knows. say half of that is compensation

for bond investors and 3% inflation plus you have to open up because of the uncertainty and you are reasonably at 5% for the 10 year for the u.s. over the 20 20's. that is a massive hill for them to climb which makes sense in the geopolitical environment we are going into. getting into that environment is very difficult. you want to get exposure to the real economy and for tangibles and suppliers of capital goods as the supply and demand mismatch is brought back into time slowly and painfully. it is good for asset prices but the good thing for the real economy. lisa: from which pushback do you get from this scenario? freya: quite a lot because it is very gloomy and people want to know. so that's what i say we try to get the exposure in the shorter

term, so there is pushback but there is a cozy consensus over the course of the year that you are trying to find these different scenarios that pushback against the pushback. jonathan: freya beamish, great to have you on the show. estimates, ppi later this morning and then tuesday, cpi, looking for month over month headline inflation to come down to 0.3% from 0.4%, core, stripping out food and energy, in-line with the previous month, 0.3%. we are looking for year-over-year to drop from 7.7% to 7.3% and core going into next week, the survey indicating we drop from 6.3% to 6.1%. lisa: how you trade this? if it comes in as is, how do you trade it?

is it driven by goods disinflation? do we see that component picking back up. the nuances at this point matter under the surface for people in the markets. jonathan: one at stanley -- morgan stanley says decelerated shouts for inflation should see the october signal of a turn in inflation data. will we get a nuanced chair powell? jackson hole was blunt and brookings was on one hand there and nuanced there and very academic. maybe that was just the forum of brookings last week. lisa: the amount of pushback he is getting on both sides of the aisle by using a blunt instrument to deal with inflation that is multifaceted is vast. there are a lot of people who are saying that disinflation is here and we will see a rapid

decline in inflation and we could end up with a lower inflation rate in the future. a lot of people disagree. boomerang that freya beamish was talking about is on the others. he is trying to play both sides. jonathan: "cakism." kathy jones of charles schwab later. equity futures up .3%. we are down on the week. from new york, this is bloomberg. ♪ lisa: with the first word, i'm lisa mateo. arizona senator kyrsten sinema tells politico and cnn saying

she is changing from democrat to independent. that will make the democrats' majority obligated. she indicates she will continue to vote the way she has done her first four years. an indication on whether the fed will be able to ratchet down the wage hike campaign. the numbers come out this morning and it is the policy -- final piece of data that the fed will see before their next week's meeting. another 275 million dollars in military a going to ukraine, including ammunition for the rocket system and high-tech systems that can detect and counter drones. the amount is smaller than recent packages the u.s. has sent. military officials redacting slowdown in fighting between ukraine and russia over the winter. china's president said aging is willing to expand oil cells to

saudi arabia. they also agreed it to hold summits every two years. microsoft will address concerns that u.s. regulators have about the $69 billion takeover of activision lizard. the ftc is looking to block the deal. they say the tile would hurt competition. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪

from one company committed to building a world that works, to three that will focus on a future that does too. this is ge healthcare, creating a world where healthcare has no limits. this is ge vernova, helping generate and move the energy that our world needs. this is ge aerospace, advancing flight for future generations. this is the next generation of ge.

>> you are starting to see a bit of a demand issue in china.

i still view it more near term, not a long-term systemic issue, we will get through -- cinderella story that they are hitting hurdles. in 2023 in terms of 2 million units globally stands. jonathan: latest reporting that tesla will suspend output in his stages at the shanghai electric car factory from the end of -- in stages at the shanghai electric car factory from the end of the year. let's get into this. what's are you learning from what is going on in shanghai? >> a staged production into the end of the year and also in 2023 with the chinese new year and protection going down on that --

production going down on that. we spent time this week with bentley and the u.k. talking about around the world a strong order flow with the stark exception being china and the effect the lockdowns are having. this is hitting the industry broadly and it is showing up in the data reported this past week that the month of november was a bit weak. there is a cloud hanging over for 2023 in the sense that there is government incentives that will fall by the wayside unless there is a policy change and that is another factor to consider when you look at tesla. lisa: are auto manufacturers rethinking how much traction they can actually get in china due to the competition and preference of national models? >> it is sort of an underappreciated story, just the amount of success the domestic

players are having in china. our dominating the electric vehicle space and you are seeing headlines with success that one is having an challenging tesla for the lead for her electric sales and turning their sites for exports. this is increasingly going to be -- for the lead of electric sales and turning their sites for exports. this is increasingly going to be more global where we will see companies like byd flex their muscles. lisa: there is a story of on ensuring going on -- on shoring going on and said it is specific to tesla or you are saying it is broad. how much are the car manufacturers bringing production back to the nation

where they are headquartered or nearby? craig: i think we are going to see a huge flow of investment in the u.s. as a part of the inflation reduction act. there is the question of whether electric vehicles will be eligible for incentives and whether it is $7,500 or what guests missed is the amount of support within the bill for battery assembly and the real effort being put forth to pull some of the battery supply chain from china and localize it in the u.s. you have seen negative headlines of whether it is south korea, japan, europe being concerned about what the u.s. is doing and that is a reflection of just how good the incentives are and how much we are going to see battery investment shift, even from places here in europe where uptake has been faster and the

u.s. is getting aggressive in trying to attract investment and we are going to see companies march investment dollars to the u.s. to answer the call. jonathan: which companies do you think, because bmw has a massive presence in the united states. craig: one company that will be really interesting is backed by bmw and volkswagen and had a plan for germany that just in the last you weeks they talked about, maybe we need to put this plant on ice and put it aside and turn our attention over to the u.s. that is the result of the fact that the incentives for investment in manufacturing in the u.s. is potentially going to make the u.s. the most profitable place to make batteries in the world, according to an in-depth report. jonathan: do they have a plan to counter that? craig: that was something that

came out of the meeting with macron and biden that on the part of the french want to get this addressed and the retort on the part of washington is the belief that you will have to do this as well and support battery investment. we have seen efforts by the eu to generate investment in the battery supply chain, but that has been uncut by the price of energy. this is very energy intensive and we have heard them site that investing in germany right now perhaps doesn't make as much sense as it did six month or a year ago. jonathan: we will catch up with the mercedes chief in an hour. what do you want to hear russian mark -- here? craig: how they are going to

succeed with their electric vehicles paired they have some exciting product -- vehicles. they have some exciting products. we have seen good reviews and feedback in terms of the initial efforts to put their full foot forward in terms of early products. when other going to get to the point -- mercedes will not play down in the $30,000 $40,000 range, even $50,000, $60,000 and get challenging companies like tesla from that perspective. jonathan: wonderful to catch up. tesla lowering down put until the end of the month. production line upgrades are slowing -- are slowing -- and slowing consumer man. lisa: a recent producer we saw

with apple that it was the demand side that a lot of suppliers are worrying about in china, not just being able to create the iphone. people aren't buying things because they aren't getting money and not moving around and have been locked down. jonathan: we have talked about tensions and there is tension over the auto production and the inflation reduction act and subsidies. the big manufacturers are probably going to invest more in america. lisa: it isit costs more to make industrial goods in europe right now and in germany. what does this mean for industry in german if they are getting slammed with u.s. competition and you are hearing about idling production lines to reduce

energy bills because they cannot cope. it doesn't seem like that is going to go away. jonathan: winter has arrived in europe and the conversation we had in the summer about rolling black downs and industry shutdowns in and spreading across europe started to fade when we got the milder weather. it is going to be interesting to see what the restating chief says about it in an hour. lisa: how do you determine when to shut it down and how quickly can you bring it back and keep a toehold on an increasingly competitive industry. jonathan: if you get to this winter, can you repeat it? lisa: european equities have gotten beaten up and some are

saying it is time for them to do better. you see people going to the euro instead of the dollar. jonathan: china's reopening story is a factor in that. lisa: china reopening will increase demand for liquefied gas a complicated picture. jonathan: we are all hoping that they can get a better european economy. lisa: let's all get to the other side of this, whatever it is. jonathan: geoffrey yu will be joining us shortly. from new york, this is bloomberg. ♪

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>> we've never seen a recession so anticipated. >> the first half of the year we see all sons of recession and the second half of 2023 we the markets looking at 2024. >> moving to a tighter place will dominate and push the dollar stronger again. >> the trade-off that the fed has to deal with will settle for a higher rate of inflation. >> the fed story is about over. they are getting increasingly out of bounds.

>> live from new york city, for our audience worldwide, good morning, good morning. this is "bloomberg surveillance, live on tv and radio. alongside this of roma with, -- with lisa abramowicz, i'm jonathan ferro. the drumbeat grows louder into next week. lisa: the drumbeat to cbi and fed. jonathan: going back to london just to get home. lisa: are you really talking about the drumbeat to ppi, but to cbi. this is been a truly exhausting year -- but to cpi. this is been a truly exhausting year. jonathan: say a big dip and then we rip. lisa: do you buy it? jonathan: is not for me to buy

but a lot of people are selling it. kailey: -- lisa: you can understand that people think we are going to get the earnings and then the fed will stop hiking and everything will go back to normal. i think transitory never died and we are going back to an inflationary feel. jonathan: if inflation goes down and leadership back to tack. lisa: freya beamish was saying the same thing and i said how much pressure do you get being gloomy. jonathan: decade of qe and low interest rates and all we get is a 20% and we move on with life. you blow up a massive chapter of economic history and the price of that is 20% on the s&p. is that what we have been told? lisa: jeremy stein who was

formerly on the board at the fed he came out and said it is so amazing that the fed was able to disinflation an asset bubble without causing a financial crisis and the response is, now look at what you are going to do. jonathan: let's have some humility and i have no idea needed to see. lisa: a lot of people saying we are humble and we don't know but we will bet from what we know and the recent fast -- past. we are going to go backs what we know because we haven't aged population. the pushback without ensuring and labor shortages and transformation in the economy with the real world causing materials to go up creates a little more of a difficult logical scenario. jonathan: i am with tk, june 1.

first half dip and second-half rip. that is what i have been told. lisa: what denomination will that be in? jonathan: u.s. dollars. we pool our assets. yields essentially unchanged on a ten-year. euro-dollar 1.0559. lisa: how much do the prices decelerate? we saw a large deceleration in the previous read. i'm looking out core, stripping out energy and food, much are you seeing the goods disinflation decelerate? is this a head fake because when things are cheaper people buy more and then you have more money in the system, etc. i know i am pay do that in a negative way. xi jinping will have a conference today and curious to

hear what we hear about the reopening, because the market is buying in. hang seng index had its biggest going back to 2003. market is moving as if it will reopen and how much does xi jinping lay the groundwork for that? u.s. michigan consumer sentiment comes out. i did look at some of the dynamics. jonathan: what did you learn? lisa: 600 respondents, 420 asking things of how you are feeling. jonathan: that is great. geoffrey yu joins us now. one of my favorite guests. it is great to see you. lisa: pleasure --geoffrey: pleasure to be here. jonathan: are we stepping back from the brink? geoffrey: it is amazing we are

not falling given the amount of tightening that has gone through. heading into next year, the general view is every reason to be slightly hopeful. jonathan: 500 basis points of tightening the year, that hasn't hit yet. what we have to play -- pay for that? geoffrey: it is how much in terms of shadow leveraging and where was the financial system in 2008, 2000 nine and where was regulation and where should it -- 2009 and where was regulation and where should it be? you could say it inhibited any rallies. jonathan: you think the price we pay is 20%, live had 500 basis points and qt on top of that and walk away? geoffrey: the price we way will be a sustained, structural

inflation and those easy money and low risk premiums and great moderation which enabled all of that we have had in 20 years is not coming back anytime soon. lisa: what does it mean to step back from the brink? geoffrey: if you look at where we are for the u.s. economy, the euro zone economy, is there sti a chance of recession? absolutely, perhaps mild in the u.s. and eurozone and that ends at how the work develops and in china there will be a growth push that combats the inflation view. the stagflation problems are not going away anytime soon. lisa: this is a really interesting question because people talk about recession as though it is a negative case for the economy, how much is that the best case scenario if we get a recession sooner that actually accelerates the process of

disinflation and gets us to the end quicker? geoffrey: the four banks, the ecb is a good example, present a headline baseline scenario depending on the war and they look at an alternative scenario where in june and march and they are looking at growth contraction of 2%. it is very stagflationary. you have to calibrate this carefully here they want moderation. the situation with the housing market and the like. the thought it was necessary but not too much. a delicate range. jonathan: so next week the ppi and cpi.

sam bankman-fried willing to testify. he said there will be a limit to what i will be able to say and what we as hopeful as i live but if the committee feels it is useful i am willing to testify. he says i will try to be helpful and shed light on what i can on the following -- the solvency and american customers, pathways that could return value to users internationally, what i think led to the crash, and my own failings. he says, i have thought of myself as a model ceo wouldn't become lazy or disconnected which made it that much more destructive when i did. i am sorry. hopefully people can learn from the difference between who i was and who i could have been. looking ahead to next week. lisa: this is my layman's interpretation, trying to paint this as incompetence or a incompetence or a failure in terms of what he came through on rather than some malfeasance. i am curious as to what legal

input he has gotten cynthia's talking or than they would like. jonathan: sonali basak will be joining us and so will amory -- annmarie to talk more about this. is there leverage we can't see in the way we can in public markets and corporate balance sheets? geoffrey: and also private markets as well. i think about the asset allocation views. with the maturity premium and when you block things in for 10 to 13 years and clip that longevity coupon when rates are low. they are talking about shadow lending. lisa: fx strategy talking about the housing market as

underpinning the calls which are most vulnerable? geoffrey: the nordics and if you look at australia, new zealand. new zealand is saying we have a housing market issue but the labor market is so tight and growth is strong they are not worried about it. they may be wrong given the china situation. wage growth can't offset high mortgage rates. the u.k. is a well-known story. sweden will be interesting as there is an overlap with him leaving with greenspan. the new governor knows where the issues are in the housing market. the risks and also reform is needed. jonathan: where does canada fit in? geoffrey: when you see the mortgage rates go up, you are

seeing a shift to the softer side. we saw initially canada being proxy to the u.s. now we are cleary seeing a divergence. jonathan: this was great. great to have you with us. geoffrey yu, just to confirm sam beckman said he is willing -- sam bankman-fried said he is willing to testify. lisa: i suspect he is not coming to the u.s. jonathan: does he come to america, we will see. coming up, the head of global asset allocation strategy at wells fargo. lisa: a surprise from capitol hill today, arizona cinema

kyrsten sinema changing her affiliation from democratic to independent and that will make the democrats' majority more obligated. she said she will not caucus with republicans and indicates she will vote the way she has done her first four years in the senate. investors watching the release of the price index for clues on what the federal reserve will do next. the numbers come out at 8:30 new york time. tesla said the fed policy -- bloomberg has learned the u.s. is preparing more sanctions on russia and china for what it calls human rights abuses. the sanctions against russia are expected to focus on its efforts to get weapons from companies such as iran, especially drones. the sanctions will focus on the fishing industry. a daunting task for china after

giving up on covid zero. the number of infections expected to soar and deaths expected over 2 million. the u.s. and europe had an ebb and flow but china is expected to have a wave hit the country all at once. predicting double-digit stock gains in 2023 which would bring relief after global deputies -- equities had their biggest losses. the survey expects stocks to rise and the average gain was a 10% return. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm lisa mateo. this is bloomberg. ♪ at does too. this is ge healthcare, creating a world where healthcare has no limits. this is ge vernova, helping generate and move the energy

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>> i don't want to lose sight of the big picture. we do believe that bonds are back in for the first time in a decade, you are getting income and diversification from the fixed income portfolio. jonathan: bonds are back. i have heard that so many times. bonds are backed going into 2023 we are told. on the s&p 500, positive by .3%. yields higher by almost a basis point.

the fx market euro-dollar not doing much, 1.0559. 72 on wpi. the headline for the last from sam bankman-fried saying, i am willing to testify on the 13th. sonali basak is joining us. walk us through what we have learned. sonali: he said he would be willing to testify. he said he will try to be helpful during the hearing and is trying to shed light. he wants to communicate the u.s. business solvency in ways they could return money to users and what he thinks led to the crash. he has a different interviews

with media outlets including to outlets and mainstream media, and he did agree and is willing to testify said he was sorry and that he is going to look at his own failings. this comes as the collapse is being probed to new york times -- being probed. the new york times reports he is facing investigation on whether orchestrated trades led to the collapses. the question for me becomes, how long will it go on. lisa: be here. is he coming to the united states or are we expecting him to stay in the bahamas and do the interviews via zoom?

sonali: one thing he just said on twitter is that he doesn't have access to much of his data, personal or professional. the question i have is why not? where is it? is it not with you in the bahamas and do you need to come back here to get it? your impression is right. he has not been clear whether he is comfortable coming back to the united states. in an interview he did days ago he was asked specifically whether criminal liability was whether he was not coming back and he did not answer if that was the case. multiple investigations going on at the same time. unclear whether he is willing to come back here. typically, people come in person for these hearings.

the expectation is he would be in person. jonathan: what have you made by how he has been treated over the next month or so, both by politicians and the media more broadly? sonali: there are a lot of frustrations, particularly of people by people who have followed him closely and i have heard him speak over the last few years. my own sources say even the own employees were frustrated not just more recently but over the last couple of years, because he was so public in ways not necessary for business at all times. his personal affairs are wide both politically and professionally and personally. a lot of his employees didn't agree with the business he was doing. there is a big discrepancy between people not deeply ingrained in the situation and have lost money and the people who have come in more recently a

lot of folks feel he has been given a large platform to speak when really the whole story has not come out and a lot of people may be involved in the probes and may be trying to comply with investigations have not been able to speak themselves. one of those people indicated is he has given a lot of responsibility to alameda. we have not heard from the leader of that at all. he has had this large platform but a lot of other people involved in the story. a lot of folks have been trying to speak for him and are not necessarily speaking for the millions who have lost money. jonathan: thank you so much. some of the criticism has been leveled at maxine waters, the

chair of the house committee on financial services. what have you made of that in washington? annmarie: there was a report that they didn't want to subpoena him and she said it is not true. if it comes to it and he doesn't cooperate, there is a subpoena. a lot of people in washington have cozied up to the crypto leaders. for lobbying in washington, d.c., there are a ton of crypto lobbyists. there is a question of the media and how congress really grills him about what happened and where are there money -- where is your money? lisa: have they moved away from the regulation of crypto space and is that what people are blaming on the unraveling? annmarie: potentially it could

be levied at the democrats but this is so new for them. you heard secretary ellen speak about crypto -- yellen speak about crypto and she wants more regulation. jonathan: the approach feels very different. annmarie: oil executives are asked to come in and five from houston all of the time -- come in and fly from houston all of the time. jonathan: there was an invite for a man facing allegations of fraud. annmarie: most invites are polite. jonathan: but over twitter? annmarie: they are getting pushback on why it has been gloves on with sam bankman-fried the same way. jonathan: what is it about this

individual that he is being treated primarily as a guy who used to be a billionaire as now a failed ceo and not a man facing allegations of fraud? why are we focused so much on the former and not the latter? we talked about this obsession with wealth in the media that he was a billionaire and we seem to be more fascinated with him that he's once really rich and now he is not anymore instead of what he is being accused of. lisa: there is a larger fascination with the boom and bust story, someone who rose up and fell from the stage. and whether there are allegations and prosecutors are looking into it but there is a fascination because it seems like a person who is a mess. he is coming out all over and lawyers are telling him to stop talking and it is a train wreck and people are fascinated. jonathan: i just don't care about the theater. lisa: a lot of people do.

annmarie: the more criticize -- criticism you throw at him and those backing him and you are in that camp. jonathan: they are embarrassed by it. annmarie: also look at his lawyer and the previous representation. jonathan: are you saying they are barest by the way they covered him? lisa: they have been very vocal that they got caught up into it. jonathan: are they still caught up into it? lisa: i will leave that there. jonathan: from new york city, this is bloomberg. ♪

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jonathan: two hours away from the opening bell. equities positive point 5% on the s&p. on the nasdaq, positive by 72 points, up by .6%. next up, ppi. next week, cpi. tuesday, the federal reserve decision. thursday, the ecb and bank of england. tuesday 10 sand 30's look like this. we have had the debate whole week about where treasuries are going. somewhere in between right now, your 10 year is 3.4815.

lisa: the narrative on wall street has been towards that we have a better sense of where yields and rates are going to go. do we, though? that is my question. jonathan: to talk about the difference in the sequencing between europe and the united states. i keep going back to -- he said in the united states, we get this story of inflation rolling over before growth collapses. in europe, it is the other way around. but this story of growth hitting hard, potentially in the months to come, depending on what happens with the energy story before inflation receipts. that difference between europe and the united states speaks volumes about the position the ecb is, rather than the federal reserve going into next year. lisa: it raises questions about whether europe can perform better next year. some people saying it can outperform. i want to bring attention to a number of names people are buying -- lululemon, shares

falling ahead of the open about 7% after reporting lower than expected profitability. it results yesterday, as well as an increase in inventory. this has been a big issue playing into the goods this inflation we have been seeing. doc you sign, the online care contract mechanism is surging more than 11% after reporting better than expected earnings. activision blizzard, i am interested in this. the federal trade commission is looking into potentially blocking microsoft's purchase of activision blizzard because they do not want microsoft to get too big in the gaming sphere. it is probably the first time i have seen a major push from the antitrust wing to this degree in a while, especially considering microsoft could become number three in the gaming world if they were to make this acquisition. jonathan: some people thought microsoft, ironically where they were 20 years ago, our immune to this stuff, opposed to the rest

of the tech world. lisa: they are pointed as police lease defender, compared to google, who has rolled up a lot of smaller competitors as well as amazon. it is interesting to see what they are going after. is this a first shot for a more protracted kind of effort? jonathan: when it comes to mark zuckerberg --we have thrown it at meta. i remember the mornings he made some of those acquisitions. i remember sitting there and thinking, what is this price? it seems absolutely critical is. i think we all thought the same thing, he was overpaying for the stuff he was buying. it transpired over the years subsequently those assets were worth multiples of what he paid for them. looking back in hindsight -- with hindsight and saying acquisitions meta maid, instagram, whatsapp, i remember

the people thought at the time he was overpaying for those that said -- those assets. here we are, 10 years later and everyone is saying it should not have been allowed, blah, blah, blah. lisa: there is a difference in understanding the popularity factor in social media. you see apple or google sucking up a bunch of these smaller competitors at prices that perhaps people think is expensive, but are they getting ahead on some of this technology that will become the hot thing later on? jonathan: shouldn't aco -- a cob rewarded for making a good judgment about the future and buying things ahead of time for that reason? lisa: some people would claim the antitrust unit turned a blind eye early on and was not aggressive raising these questions at that point. price is one thing. sucking up a number of competitors is another. jonathan: i am not here to lobby for met up. lisa: [laughter] i was about to say, who are you?

jonathan: let's be clear about that. next week, kathy jones, fixed income strategist. let's start with the federal reserve. at the moment, we are focused on the way chairman frames risk management whether there is a focus on over tightening or under tightening in 2023. what do you think the biggest risk is for this federal reserve? >> i think the biggest risk is if they under titan. i sense a strong message about to get inflation down. that is the number one priority. anything they have to continue to send that message. the risk is, they were probably over tighten. and then break down to write i do not think they can afford to continue to send that message. lisa: how does that inform your view of whether to go along with some of these longer duration bonds versus perhaps pair back, especially after the enthusiasm

we have seen of late? kathy: we were pretty enthusiastic a while back about where the 10 year yields hit 4% plus, plus the spending duration. we like extending duration on valleys -- on rallies. increases in yield, i think we will have a rough ride. so much -- has been priced into the market. our long-term view is 10 year yields can fall as far as 8% this coming year. we will use those moves up in yields to extend. lisa: you said the biggest risk is under tightening, not over tightening. how much do you get pushback? this is basically not the consensus before -- anymore as people believe in the its inflationary story that will pick up steam in 2023. kathy: we are in the disinflation camp. because of the lags that are involved, it will take time to make its way through.

they market, when i look at the shorter end of the market, it is discounted at the new rate of what the fed will do. given the financial conditions have not tightened as much and have loosened the last couple of months, i think the risk is that the fed has to pushback against that and if they do not over tighten, we are going to see inflation bounce back again. jonathan: can we put some numbers on this? the federal reserve and their last projections in the september half pce, core pce at 3.1% at the end of 2023. where are you for 2023? kathy: i think we can get close to the throughput 5% area. -- 3.5% area. it depends on wage growth and how quickly that starts to decline. we have started to seek hence it has started to decline, but not as much as anticipated.

we will have to say three .5% at the end of next year. jonathan: does that include a recession to get there? kathy: probably, yeah. we think risk of recession is very high. the indicators from the inverted yield curve to the leading indicators, a long list of things rolling over. housing, etc. we do think a recession is high-risk. jonathan: i'm interested in how you interpret that reaction function. if they are gliding back to 3.1 and you think three point five, you've got a recession in the mix, are they cutting in 2023 in that world? kathy: i think they could at the in the next year. i think it is reasonable if they are in a distinctly clear recession and inflation ends close to 3.5 core pce, it will be next to. i think the playbook is the --

powell does not want to be -- she wants to be the boebert of his generation. i think they will try to manage it to avoid a deep recession, but i think the choice is recession versus inflation, the choice will be a recession. lisa: when history books look back, do you think they will agree with harvard university professor jeremy stein, who says it is astonishing we have not seen a financial system blowup? if you had said a couple of years ago, we would have had consecutive 75 basis points, we would have been in financial armageddon. can we say that already? kathy: it may be too soon to say we will not have blowup somewhere, but i think the strength of the banking sector is what has helped us out this time.

where we look for potential problems in the private markets, we have talked about this for months now because of the buildup of debt in the private credit area, that is where more problems would go because there is lack of liquidity. that is where the deterioration -- standards come into play. jonathan: kathy jones, great to catch up. looking ahead to next week on the federal reserve, seemingly the rate cut conversation is in the mix the way the fed does not want us to have this conversation. yesterday, we were discussing what is more important the next 100 basis points of hikes or the cuts everyone is pricing in afterwards. lisa: most people would say the cuts. expectations in fed funds futures, you get to a peak of around 5% in may. by the end of the year, you are back to 4.3 percent. that is cuts being baked into market excitations, the reason it will be a blissful second half of people piling to head

back to the same old, same old. again, this idea we are in a rapid disinflationary period. jonathan: the fact we avoided a financial crisis and that stuff. i am not saying we are going to get one, i am saying it has been nine months of timing. it has been nine months of timing. lisa: every single fx strategist who has come on has mentioned the housing market. we are not going to see another 2008 style crash, there isn't the same type of leverage. the expectation of declines we could see range up to 20% to 25%, akin to the 2008 to 2012 period. how does it affect people's sentiment, their mobility, the ability to go find a job at a time where people are going back to a office? these are considerations that make it hard to fit into a tidy narrative we keep hearing about next her. jonathan: why have we always benchmarked 2008?

why is that the appropriate -? ; i remember when tech stocks were valued at 99 -- 1999, 2000. ok. lisa: if very extreme point of dislocation. it might be something desired right now to clear out everything and get back to what we were before, where central banks come back to the rescue. the fear we heard was that we will not get that and it is going to be a difficult road. jonathan: the fed is talking about long and variable lags, right? we will wait and see what the damage is on the back of this. it has been nine months of timing, they talk about doing qt into 2023. equities up from new york, this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world with the first word. ftx founder sam bankman-fried says he is willing to testify on

capitol hill next week about his failed crypto exchange. in a tweet today, he said he does not have access to much of his data so there is a limit as to what he will be able to say. the house financial services committee had asked him to testify next tuesday. traders waiting inflation figures that may give them an idea on whether the fed be able to ratchet down its rate hike campaign. u.s. producer price index comes out at 8:30 new york time, one of the final pieces of data that policymakers will see before their meeting next week. u.s. is sending another $275 million in military aid to ukraine. it includes ammunition from a rocket system known as high mars, along with high-tech systems that can detect encounter drones. the amount is smaller than recent packages. military officials are predicting a slowdown in fighting between ukraine and russia over the winter. more costs overlapped on the fighter jet. the pentagon's most expensive

weapon system, and will cost another $236 million to upgrade planes cockpit computer. that'll most nobles the size of the original contract. it is a small overrun compared to the overall cost of the f-35 program. it edge and a blaster from $398 million to $412 million. blurred has learned tesla will suspend output stages at its shanghai factory later this month. the suspension will last until early january. tesla is upgrading its production lines and faces slowing consumer demand. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

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economic elation ship with china and that is the message here. jonathan: ellen wald, brilliant from the atlantic council senior fellow over there. moments ago, some really interesting quotes. the question is whether it is 1881, or relative to -- those are inflation recessions. 90 1010 weight with credit crunches. lisa: it speaks to what you were talking about. we benchmark it to 2008, a credit crisis that's -- that was quick and short how people could feel it with monetary financing. at the same time, a 1970's feel is real economy. a slower burn, a harder thing to get through. that is what we heard from freya. jonathan: how much does it stick? that is the question for next year. lisa: i'm going to get accused of being gloomy. i think everything will resolve itself. jonathan: that is what you believe?

lisa: no, but i would like to believe it. [laughter] i am honestly, freya was saying people pushback against loom. no one wants to have that feeling, there is good under the hood. it is not going back to what we have known. jonathan: what did she say, chairman powell is cake-ism? lisa: you can have your cake and eat this to. they will navigate this perfectly and markets are along for the ride. jonathan: markets up 4.5%. soon, we will get ppi, the appetizer before cpi next week. crude wti $72 a barrel, positive .8%. we are up on the day. lisa, we are down on the year. lisa: i cannot get over this story. we have been talking about one hundred dollar crude being in the near future. china reopening, what are we doing? why is oil so low, people are saying it is a lack of demand.

are people driving and flying less? is that what we are seeing? jonathan: let's have that conversation with regina. why is crude down year to date? >> in contrast to your gloomy sense, lisa -- lisa: [laughter] >> supply is building. over the last quarter, we have had one million barrels a day of supply exceeding demand. even though we are getting into the cold months of winter, i am in london and it is freezing. the gas stock piles were rebuilt. week have less demand and we still have supply. china not coming out of covid the way it was predicted since september, that will be a slower ramp up. we will have more supply to deal with. i think it is a more balanced, goldilocks situation in the crude markets. not too hot, not too cold, just right for now. lisa: it is a supply issue, not a demand issue. is that what you are saying? regina: we have been able to

rebuild supply. we were worried about supply because we cut production during 2020 during the pandemic. we had thought we had seen peak demand, if you are member that phrase during 2019 and it came roaring back as the world started moving. demand outpaced supply substantially, that drove up triple digit prices. now that markets are equaling up, we have been able to increase reduction. we've got opec back to close to where they were. the u.s. is coming online, venezuela is turning on, more sources of supply are coming into the market and it is offsetting demand. we haven't seen demand growth expected with china coming back. i predict we will stand in q1 and q2 of next year. then, i think the supply situations and short ball situations will have eased out. jonathan: goldman came out with a note that said do not expect a full reopening of china's economy soon. growth in china could remain for the next six once. a quote from them, the

fundamental challenge faced by the policymakers is the rising economic costs of maintaining their zero covid policy while vaccinations for elderly citizens is still role -- still low. that last point raises questions about how clean, how smooth this reopening process will be in china and whether they face the stop, start, stop, start in the west when we tried to do the same thing. what do think the path looks like for china reopening and what it means for crude and commodities? regina: i think it is right, it will be stop, start, stop, stop --stop, start. i think it is going to be hard to get the whole economy moving again in china. people may be reluctant. some people will want to start flying as soon as they possibly can, others will be more cautious because of aging societies and challenges they have within their own demographic. i am not expecting a tsunami return. i think it will be stop, start.

i agree that it could be week to the next six months. jonathan: the school from -- this quote from goldman, this combination of loosening policies, the upcoming flu season, makes it difficult to predict how cases, covid restrictions and ability may evolve in the coming months. these are the questions with got to ask going into 2023. lisa: people suggesting china's economy could slow further as they try to reopen. how much are you counting on that, especially as it comes to european natural gas prices given stockpiles have been rebuilt now, but can they be sustained given there is not a solid source for that natural gas and china be a massive competitor? regina: what i find interesting is how quickly the european continent has pivoted to u.s. natural gas and other sources of supply outside of russia. two thirds of the u.s. energy exports are now going to go to

europe. we are seeing a lot less russian gas come through the pipelines. norway is providing more of that gas. i think six months ago, i would not have been able to predict how quickly things have turned and how quickly the europeans have built infrastructure. there is that story about how quickly germans built lng import terminal to get access to other sources of supply. lisa: have we seen pete prices? will we just keep seeing ranges between 70 and 80 and these prices will stay where they are longer? regina: i would never say this is it. i do think this is a nice, sweet spot. because we are going into the cold winter months, i hope it lasts. you can never predict, there could be hiccups somewhere in the world and we could be right to where the spikes are. i believe this is where the prices were meant to be. i have been calling 70's for brent and wti, i never

understood why it got as close to triple digits as it did. i think the rational has come out of the market. jonathan: was opec right to do what it did a couple of months ago? regina: they are saying they called it right. the opec thing was more symbolic. let's be real. they were already producing under their quotas. i saying they would cut by 2 million barrels a day, they were already down 50% of that number. i saw it as more of a symbolic move. jonathan: regina, always wonderful to hear from you on the energy market. looking for 70's, got the 70's. one of the handful of people that were looking for that. many others were looking for triple digit crude. lisa: what happened to the structural underinvestment in also fuels? jonathan: i know. energy stocks are still ripping out. lisa: people are saying they will invest in the real economy. you are seeing chevron invest in capital development, possibly drilling more and possibly

getting more oil. i am trying to understand, especially given china is going to be -- going to reopen, it will eventually lead to a greater amount of demand unless there is a recession. i guess that is what people are pushing back -- pushing back against. jonathan: i mentioned mario earlier, he said compare crude. crews lower on the year. marco says, recently in an norma's gap has opened up between energy stocks in the price of energy commodities with oil being close to flat for the year and the energy segment up around 60%. we believe there is a tactical trade to sell energy stocks. lisa: what if this cap makes sense? what people have been underinvested in energy stocks for a decade and suddenly the asg considerations are changing in light of changing facts and people are going back into

energy and they are saying this is the area that will do better in an inflationary environment. even if oil prices go down, they are still going to need exposure to some of the second ease. that is the story that could explain the gap that could be more persistent. jonathan: there is a windfall tax element in the european economy. it is part of the esg element, they are poignant to what you're talking about -- pointing to what you are talking about. lisa: that is why investors are saying, let's go to europe and by oil majors. i wonder how this will play into the inflation story, it is a lot cheaper to fill up your car and people can take that money and use it in the economy. jonathan: mission accomplished. lisa: let's see if they back that up for buying for the strategic petroleum reserve. ongoing releases from the strategic petroleum sir. jonathan: equities up .5%.

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>> the lows are in. i think we are starting a new bull market. >> the slow down could have

cannot only so looking through it. >> longer-term inflation will be above 2% fed is targeting. >> i think that policy will dominate. >> they need to sound hawkish. they do not want to scare the markets but lift rates more than 5%. >> this is "bloomberg surveillance." jonathan: the lows are in. i listen to that yesterday afternoon, unreal. everyone is talking about the recession. he thinks it is the start of a bull market again. lisa: to 5000 within 12 months, a 20% rally by year end of next year. let's get going. jonathan: i will go over that transcript again as we go ahead to next week. good morning. equities right now trying to finish the week on a high. futures up .6%. lisa: do you get anything from the weise trading activity? what is been the biggest story for you? jonathan: ism, upside surprise.

lisa: messy data and china possibly reopening. it will be massive -- messy to confirm your bias, that is the reason why nuance is a hard thing for jay powell to show because people will read it however they want to. that has been my take away this week. jonathan: doubling down on consensus. jim polson took one side, dip and rip during the first half of 2023. the federal reserve will pause and you -- lisa: did you come up with that? i like that. that will be the 2023 mantra. jonathan: rip and dip. lisa: rip and dip and cake will transpire into the perfect scenario. this is going to be the most -- one of the most interesting years. if we do not get recession, that might be the most difficult thing for risk assets to deal with next year. jonathan: futures positive.

in 20 minutes, ppi in united states the america. ppi this morning, then cpi next week. a federal reserve decision, the be away -- d.o.e., next week. in the fx market, euro-dollar unchanged. 1.0554. i am itching to call it year over, which is why i keep calling it year is over. we will all go and watch the world cup semifinal, jay powell is programming the world cup which i am not happy with. we got the central bank decision to come on thursday, the day after. lisa: do you think it matters how the ecb deals with this, come up with your own projections? jonathan: on wall street, there was their own bias. focus on the fed, move on with life.

europe is in a tough spot that goes beyond 12 months. i think that is something america does not in the same way. we are talking about an economy in america that has to adjust to 500 basis points of tightening. will we get a recession, how deep libby? europe is facing potentially a multi-winter crisis around energy. that is a big effort for the next year. we had a mild winter so far. the cold snap is kicking in. ultimately, winter is here. can we repeat the active storage as we did -- we keep going over the same ground, but it is an important question next year. lisa: can germany remain an industrial powerhouse that fuels the entire european economy if there isn't a more reliable source of energy they can actually --in the manufacturing costs they are facing now, how

much does that shift the overall outlook in the euro zone? jonathan: mercedes ceo coming up in about 10 minutes. joining us now is tracie mcmillion. wonderful to hear from you. bonds are back, i've got that on echo rattling in my brain. do you agree, bonds are back for 2023? >> we think that because we have seen two years of negative bond returns and we have not seen that since 1958, 1959, we have never seen three years of negative bond returns so we think that sets us up nicely for 2023 for bonds. we are suggesting investors invest in the short end for optionality. if we do move lower in the equity markets, those shorter and bonds can provide cash to invest in other asset classes and also for income investors in

particular, lacking in some higher yields out further on the curve. lisa: do you believe in the jon ferro and scenario for next year? tracie: [laughter] we do. it is dip and then rep, i believe is the way we have it raised there. yes, we think next year what we are going to see is a fed continuing to tighten. that will eventually push us into a recession. then, once we get through the tightening cycle and we move into a recession, we think the fed will eventually have to start cutting by the end of next year. markets will anticipate that and they should move higher by the end of next year. lisa: dip and rip, that is the sequence. jonathan: just to be clear, that is not my call. that is how i am framing everyone -- do not involve me in this. no, no.

i want nothing to do with that. lisa: aside from jon ferro backpedaling away from the phrase he coined and a scenario a lot of people agree with may happen next year, how much is this predicated on the idea we will head back to a low-inflation environment, back to where we came from, not necessarily a newly inflationary environment? tracie: that is key, lisa. the inflationary environment this year has driven markets and driven them lower this year because the inflationary environment has impacted monetary policy so much. going into next year, we think we are going to continue to see housing week. we are going to see goods week. we are going to see services and labor also continuing to weaken, eventually tipping lesson to recession, bringing inflation lower. that is when we think the fed

can start to cut rates. we see inflation in probably 2.5% to 3% next year. jonathan: when it comes to equity risk, do you have a geographic bias going into next year? tracie: we do. we have had it all year, it is u.s. over international. we continue to think u.s. companies are going to relatively have an easier time generating better earnings, we think that within the international space, what we are seeing their -- as you mentioned, developing markets are having a difficult time, particularly europe, with the war in europe. not only the energy crisis, but in emerging markets, we have not seen a u.s. recession without pain being felt in the emerging economies. we continue to favor u.s. for those reasons.

jonathan: wonderful to hear from you. tracie mcmillion of wells fargo investment institute. the biases towards the united states, i have heard if you talk to people like invesco who joined us earlier this week, he says this is a recovery trade. overweight equities more so than he was easily going into next your. he likes it brought. i hear or about e.m.. perhaps on the back of what we are seeing in china, this seems to be more hunger, appetite, broad based on the better news we have seen so far. lisa: do we see that continue and can it be sustained at a time when, how much will it be for natural gas, for copper, what does it do to markets that are more fragile. there are a lot of people saying we are not out of the woods. damian sassower talks about the incredible amount to debt to gdp still there. it is too soon to say, ok, i'll clear. the bias right now is toward risk and areas that have not

been inflated as much as wet we are seeing in the u.s. jonathan: to go back to the damien conversation, we asked him delicately -- there is a difference here. a one way road towards reopening in china, or a little shift to the protests that took place a couple of weekends ago. which is it? when you ask people in e.m., i think they are not in camp one yet. even if you are in the first camp and on the second one and you believe this is a one-way road to reopening, maybe that is the intention. that might be the objective. is it achievable, given the experience we have had in the west when we tried to reopen? yes, we have seen these restrictions get adjusted. but if you get a surge of infections and it starts to become more problematic, do you start to see things shut down again? in the west, i remember it was not just restrictions. people are choosing to stay away

from certain situations. remember last christmas, omicron, all of this stuff sounds so foreign. we had all the cancellations and restaurants in places like london. before restrictions even kicked in. lisa: now, people think, if i get it, whatever. i had a good time with my friends and family and i wonder how long it will take to get to that point. i take your point, this is a rocky road for china. you cannot be a little open. you have to be either none or all. if you are all, people have to be getting infected at a time where there is not that herd immunity and it is leading to concerns. jonathan: when is the last time you said omicron? that came out of my mouth and i thought, that was years ago. lisa: i did get omicron then, i remember i was happy. not that i was happy, but i was happy to get it over with. there was this feeling of inevitability everybody was going to get it.

did you see that saturday night live sketch? jonathan: about getting covid? i did, and then i got it. i was like, eh. i do not know how it was for you, but you got it and you were happy. lisa: [laughter] getting it over with, it was a slow time of year. you know you are going to have it. when you are reopening, you have to assume it is infectious. jonathan: you are clearly happy about everything. you get covid and you are happy. lisa: [laughter] i wasn't happy to get covid. i was happy to get it over with. jonathan: can i just do the news briefly? tesla will suspend output in stages at its shanghai electric car factory according to our reporting. we want to find out what is going on over there. we do that with the mercedes ceo in a moment. from new york, this is bloomberg. ♪ lisa: keeping you up-to-date with news from around the world with first word i am lisa mateo. ftx founder sam baker and friede

says he is willing to testify on capitol hill next week about his failed crypto exchange. in a tweet today, bankman-fried says he does not have access to much of his data so there is a limit as to what he will be able to say. the house financial services committee had asked him to testify next tuesday. a surprise from the senate today. arizona senator kyrsten sinema is changing for affiliation from democratic to independent. that will make the democrats narrow majority more complicated. cinnamon told politico she will not caucus with republicans and says she will keep voting the way she has done her first four years in the senate. investors will be watching the release of the u.s. producer price index for clues on what the federal reserve may do next. numbers come out in less than 20 minutes from now. the forecast for november says inflation at the factory level fell from 8% to 7.2% over the previous 12 months. that policymakers will meet on interest rates next week. bloomberg has learned the u.s.

is preparing more sanctions on russia and china are what it calls human rights abuses. the sanctions against russia are expected to focus on its efforts to get weapons from countries such as iran, especially drones. penalties against china will center on its fishing industry. microsoft says it will address concerns the u.s. regulators have about its $69 billion takeover of activision blizzard. the federal trade commission is seeking to block the deal. it says the tie up between the xbox maker and the videogame publisher would hurt optician. -- would hurt competition. global news 24 hours a day, on air and on "bloomberg quicktake." i am lisa mateo. this is bloomberg. ♪

>> what we hear from the federal serve, it is the very resolve to resolute to make sure inflation comes down. even though we are seeing disinflationary forces coming to play, it is not enough yet to get us back towards 2% target level with confidence. i think that is what the federal reserve is saying. we want to be confident for back to 2%. jonathan: weighing in on the situation in america ahead of the fed decision next week. ppi data and about 13 minutes going into treasuries, unchanged on the tenure. 3.477.

equities elevated .5%. matt miller joins us in studio. we need to work out what on earth is going on in germany. we need to work out what is going on in china the latest news out of the shanghai factory and tesla. >> i think it is interesting to look at the tug-of-war to the possibility of china reopening, driving up demand globally and higher rates around the world causing a recession that drives it down. we have seen that play in oil. we have the honor of welcoming a la linea's in the studio, the ceo of mercedes-benz. i want you to weigh in on this. if they reopen, more drivers are on the roads in china and it is a big growth area for your business. is that good and is that good for 2020 34 sadie's, or are you more concerned about rates rising around the world, causing recessions? >> you said it, china is the

biggest car market in the world. if you look at the size of the chinese market, it is bigger than if you put the united states and eu together. what happens in china for the oil industry and mercedes-benz, we have now come through a period in the fourth quarter where we have had some lockdowns in some places, extensive lockdowns. we have shut down dealers and if you are at home, you are not going to go to a dealer and buy a car. at the same time, the central government is clearly communicated that they want ease up a situation. what is going to happen, are we going to see a stop and go or a gradual easing? it is difficult to say. how that plays out will definitely find what -- defined with the biggest market for us is going to do. hiding beneath that has been generally a little weaker chinese economy and we have been used to the past years or decades. i can see the central government

is trying to put some stimulus into that and see if they can restart the economy together with opening up. glass half-full. 2020 three could get better. matt: the other thing about your company, you are working on a strategy to go back to a mercedes benz of the past. where you make the luxury car everybody once and you are focused on higher-margin products, rather than trying to be everything to everyone. that coincides with pricing power that is tremendous and a lack of inventory around the world. the supply side has been tighter because the supply chains. can you keep that pricing power if we go into a recession when the chips come flooding back onto the market and everybody can sell as many cars as they want can you keep from going back to the rebates and the full loss we used to see? ola: mercedes benz has a ways been a culmination of technology and luxury. when you get a mercedes, it is

like you reward yourself. before we got into this situation with chip shortages, artificially keeping supply down, we had already pivoted our strategy towards being more thoughtful. looking at building stronger contribution margins, watching pricing powers, do not fleet deals that do not make sense. that something we had started before this chip crisis. now it goes without saying if you have higher demand as it has been the past couple of years and were held back by supply, that provides for strong pricing. if we get into a situation next year where the economy cools down and we get back into echo labor, demand controls the sales volume as opposed to the chip supply, yes, we have got to stay disciplined. we have done a lot of work on our breakeven point to make sure we can lower their be -- lower the breakeven point so we are

not forced to keep the plant running at a certain number. we will see what happens. in general, it is our target to stay disciplined. matt: you mentioned your plants. we have been hearing, winter has come in germany. the gas issue is a difficult one for factories. you cannot run a paint shop without gas, you cannot run your line without gas. what will you do if it comes down to rationing? ola: after an unusually warm fall, it is getting colder. the task force to deal with this started on february 25 in germany. we had a scenario at sadie's benz, what if we get cut off? we had been working on optionality and resilience. if we look at before the war started, if our gas usage was index hundred, we could go now to a index 50. a reduction of 50% while maintaining production for mercedes benz.

efficiency is part of the equation. yes, the government has suggested in all buildings, temperatures are lowered. he do that, as well. wear a sweater. efficiency has been one part of the answer. switching to electricity, away from gas that in some cases switching from gas to oil when oil is available. there has been quite significant zillions packaged in our company. in germany in general, i think we are quite strong compared to where we were nine or 10 months ago to go through this winter. we are not out of the woods. people have to work on efficiency. not just companies, private citizens, as well. jonathan: we are in america, let's talk about the inflation reduction act that has been criticized by europeans. do you criticize it? is it a good thing or a bad thing or mercedes? ola: the underlying idea to support or accelerate

decarbonization, i am all for it. it is mercedes strategy to go all for electric. we are going to put our company by the end of the decade in a position to serve the electric market. in -- any policy to support that is a good thing. there is another side of the coin, we should not that while at the same time upend free trade. one has to be mindful over the last 30 years of globalization, why we have been able to grow economies as strongly as we have has been wto driven trade. if we take a step back on that and create barriers again, that would be a bad thing. in that case, i am hopeful between the eu and united states, ways can be found to uphold free-trade and at the same time, accelerate towards a carbon -- jonathan: that is the hope. are you going to put more money

in america and produce more here because of this? ola: before the replaced -- before the inflation reduction act, we had done that. our three biggest economic markets are the three biggest economic regions, europe, united states and china. our vehicle production in general, but the battery supply chain that we put $1 billion into our plant in alabama, built a brand new battery factory that i open myself earlier this year. we had started that already. jonathan: can we expect more? ola: that is happening. what you cannot do especially if you are a premium luxury manufacturer, you cannot fight it into three pieces and make it into every region. it economically doesn't make sense. we lie on the ability to export and we will see how that plays out. jonathan: one thing americans have invented, formula one. you must be happy about that. how cool is that, formula one

has broken this country. ola: formula one has grown tremendously over the last year. liberty owns formula one management, has done a tremendous job. we have helped them by inviting an exciting show. matt: is mercedes good at formula one? jonathan: are you trolling our guest? [laughter] are we going to have a better car next year? ola: as in always, that is our job. we are working on it. jonathan: thanks for being with us. life from new york city -- live from new york city, this is bloomberg. ♪ to three that will focus on a future that does too. this is ge healthcare, creating a world where healthcare has no limits. this is ge vernova, helping generate and move the energy

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lisa: this is "bloomberg surveillance" on radio and television. yesterday, we broke the five-day losing streak for the s&p and nasdaq. today, looking to build on those gains but it is a quiet market as we await one of the key data points ahead of next week's fed meeting. we are waiting for the ppi, we are seeing a little of. s&p futures up .5%. here to break on the data that gives a sense of how much inflation is getting down is michael mckee. michael: we are getting the numbers in. ppi unfortunately goes up on a month over month basis.

point re-percent was the forecast, it was a .2% increase. core rate for ppi up .4%, that was double the forecast of a .2% change. year-over-year goes up to 7.4%. actually, down 7.4% from 8%. the core is at 6.2% from six point 7%. we are in the land of basic facts, inflation was i a year ago. even though inflation on a month over month basis is a little higher, we are seeing inflation come down on a year-over-year basis, which should make people happy. i guess if we do not understand all of it. index for final demand, goods was up .1%. for services, i am looking for the services number. energy was down 3.3%. not seeing services -- services, .4%. what we are seeing, services is

driving the inflation picture and ppi, as well as in cpi and pce, the area of concern for the fed. that is what we will have to work on. lisa: upside surprise is a good thing -- bad thing. bad news is good news. two-year yields moving higher, seeing them hit 4.3%. nasdaq took a dive, down more than .6%. you see the same move in the s&p futures, this is not surprising you are seeing dollar strength. yields higher across through the curve, this is what we would expect. how indicative is ppi? how important is this metric to give a sense of the direction cpi and other metrics the fed looks at? michael: not as important as it used to be. it was thought to be as a precursor, but they go in parallel now. it is not a major clue, it does give you some idea of where we are going.

but, it is not going to change a lot of people's thinking about what cpi will be next week. one number i want to mention is within services, services is the big problem. trade services up point seven percent, that is basically retailers and wholesalers. a measure that by looking at margins. it tells you the inflation problem at this point is in retail and wholesale more than anything else in the services category, but that margins are holding up for retailers and wholesalers. lisa: which is exactly what people think will not happen at the beginning of next year. michael mckee, stick around as you parse through this data and get interesting nuggets, keep us posted. this is more interesting to me from a underlying component perspective, perhaps the headline perspective, to understand are the inflation is coming and how strong the services side of things is. joining us now is chief u.s.

economist, michelle meyer joining us in studio. fabulous to have you. what is your take on these numbers? >> i think it is, clearly, there are price inflation pleasure -- pressures. you are seeing it different by category. there is some relief in terms of commodity price pressure. that was a big part of the story earlier in the year. there is lingering pressure happening more on the services side, that is clear on the consumer side, too. we will presumably see that to some extent in cpi next week, the differential between core goods inflation which is coming down in part because producer prices are also coming down. services inflation, which remains stickier. lisa: does this data point to a recession in the u.s. in the first half of next year? michelle: i do not think so. one of the things we have been clear on, we do not think a recession is inevitable by any means. looking at the data we are

examining on a regular basis, the consumer has purchasing power. they have had purchasing power throughout the year. i think people underestimated their resolve of the u.s. consumer to spend. the desire to spend and the ability to spend. that is still here. lisa: you moved to the suburbs. you understand, everybody drives around. when you fill up your car and have a lower price, you generally have more in your account. how much is the decline in gasoline prices going to perversely fuel inflation? michelle: i may not be the best person to answer that. we moved to electric. [laughter] in general, that is right. it is something that is tangible and not just gasoline, it is food. that is a big part of the story. you walk into a grocery store and buy the same items every week and you see those price differentials. there are still those dynamics, these crosscurrents on the one hand. a nice relief from higher gas prices.

food price inflation remains high and problematic. michael: interestingly enough, we have a number. gasoline price index fell 6% in the ppi in november. a significant decline, which the biden administration has been waving like a flag recently. final demand goods, 38.1% in the index for fresh and dried vegetables. food prices are still going up. lisa: people can feel that at the grocery store, it is impeding pricing power there. all of this is confusing. that is the reason why people believe in this recession. it doesn't seem to be feeding into this data. do you buy into this massive disinflationary feel that people are pricing into the dip and rip scenario jon was talking about? michelle: one thing we have seen in our data, in this holiday shopping season, consumers are more promotional based then we have seen the last two holiday

seasons. when we look at daily data, we have seen a bit of softening at the end of october, early november and a big surge of activity in the black friday period, particularly in apparel. i think consumers are being targeted, being cognizant of how they are spending, what they are spending on. relative inflation is playing a role. elective interest rates are playing a role. there is -- the consumer is aware of the headwinds they happen facing throughout the year and are navigating it. i think they have navigated it a lot better than people have given them credit for. lisa: right now, we are looking at the potential for the fed getting a soft landing like they said. what does that mean in terms of how high rates should go? michelle: it seems clear they are not done hiking. in the upcoming meeting next week, the expectation is for another 50 basis points of hikes. that is a slowdown in the cadence of hikes. they are starting to see some signs there monetary policy hikes transmitting into the

economy is making a difference in the housing market and some of the goods sectors. you are seeing ramifications. i think the next step after this will be the fed continues to move up, but they do so slower. they are trying to monitor how the economy is reacting to hikes and seeing dynamics in the inflation data that is presumably encouraging. the fact core goods is coming down. we will see what oer does next week, that will be important. lisa: people are still pressing in rate cuts. michael: some people in the markets are. bloomberg did a survey on economists, the majority of economists fink the fed will go to 5%. they also think the fed will keep it at 5% for the entire year, which is different than what you are getting in the futures market. we will see if those two converge. lisa: a lot of people think whatever the fed does is going to be enough to bring us back down to where we were before. do you buy that? michelle: one of the things we

just published, our economic when he 23 piece this week. one of the themes is this idea of a normalization. part of what is happening in the economy next year, which the fed is trying to engineer, is a normalization of parts of the economy that are in excess. think about labor market. should you have these job openings relative to the number of unemployed? no, they want to cool it down and normalize it. some parts of the economy they have to do more than normalizing, such as housing. they want to create a bigger shock into the future. this -- i think it is a rebalancing that has been desired throughout 2022, which is what the fed was trying to achieve with higher interest rates. 2023 is going to be a story of those outcomes in our view. lisa: what is the outcome and housing? do you think we are in for a protracted and deep down term -- downturn in terms of prices?

michelle: i think housing is in for challenges ahead. when you think about how affordability has changed, it has been a big shock. home prices ran above income for a period of time, facilitated by low rates for the extended period, presumably too long. that created a big imbalance. we are seeing home sales sharply fall. in areas like san francisco, it is fast. i think there is more to come. lisa: do you think it will be comparable to 2008 in the scope of the declines? michelle: i do not think it will. lisa: thank you for being with us. have a wonderful holiday season. michelle meyer of the mastercard economics institute, great to get that insight. mike, final thoughts when you look at underlying data. another upside surprise at the wrong time. michael: it is, although a lot of it is in the food category

and services categories that we knew were going to be printing higher. it will be interesting to see what translates into cpi, whether services margins are still rising there. food is not something the fed can do something about. it has that externality. we are also in base effect territory, seeing the year-over-year go down and that is what is going to matter to a lot of people. that is what would shape inflation expectations. lisa: thank you. i want to bring you this. vladimir putin has been holding a news conference after a meeting with the supreme -- economic council and leaders with belarus. armenia, kazakhstan and kyrgyzstan. he talked about how russia may cut its output as part of the oil cap response. this is a possible response saying we will supply less if you are going to pay us less purity you are seeing oil prices poppy little bit, further on the

heels. we are listening west axis intermediate 72 82 as it does digest some of what we are seeing. we will see how this plays out with the oil cap in effect. we will get a sense of how we get the ramifications of the latest ppi data playing out in markets that have moved back from some of the deeper losses. how much does this give a sense of inflation continuing to surprise the upside if you get 5% bed funds rate for a year? s&p futures down .4%. $3950. euro-dollar, 1.0553 versus the dollar. this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first word i am lisa mateo. a series of tweets today, ftx founder sam bring -- sam said he is willing to testify on

tuesday, in reference to appear before a house panel to be question about the failure of his crypto exchange. he said he would be limited in what he could say because he does not have access to much of his data. democratic led senate has gotten a jolt. arizona senator kyrsten sinema registered as an independent today. that comes days after democrats have gained a clean majority in the chamber. her move will not affect the overall control of the senate next her, but it could complicate the party's agenda. she says she will not caucus with republicans. the u.s. sending another $275 million in military aid to ukraine. it includes ammunition for the rocket system known as high mars along with high-tech systems that can detect encounter drones. the amount smaller than the recent package the u.s. has sent. military officials are predicting a slowdown in fighting between ukraine and russia over the winter. india's prime minister will not be holding an annual in person summit with vladimir putin.

bloomberg has learned it is because of russian president threaten to use nuclear weapons in the war in ukraine. senior official says the relationship between india and russia remains strong at highlighting the friendship may not be helpful for cody. some of the world's top investors are pricking double digit stock tank in 2023 that would bring relief after global equities suffered their worst loss since 2008. 70 1% responding to a bloomberg news expect stocks to rise. for those same gains, the average response was a 10% return. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more than 120 countries. i am lisa mateo. this is bloomberg. ♪

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>> i think the lows are in.

i think we are starting a new bull market. if we avoid recession, which i think the odds favor maybe 60-40 that we do, or we have a modest recession, that the stock market is into a new bull market. lisa: a new bull market that may look like 5000 by year end. that was jim paulson speaking to us yesterday. a call that caught a lot of attention because of how dissident it was because of the flat calls across wall street. among this question is how much inflation will roll, how much the fed will respond by dropping rates as soon as next year. ira jersey has been pushing back against that for the better part of 2022. he joins us now. given the data we just got, given ppi came in hotter than expected, given this is stemming from services, how much conviction do you have any fed runs rate of 5% to 5.5% next year?

ira: very high. i think five and a quarter of the top and fed's target range is likely, our economics team here at bloomberg economics has been calling the -- calling for that for some time. in particular because we thought the clyde path of inflation would be somewhat slower then what both he market and economic consensus had been considering. i think today's data confirms that you will for us. yes, inflation will come down but it will come down more slowly than people had hoped. when you have 3.3% ppi final demand, that means if companies can, they will probably continue to increase prices for the consumer and that will maintain inflation higher than what the fed once. lisa: one consensus going into next year, the long end 10 year treasuries to 30 year treasuries

will be a valuable place to hold out. do you think that has been overbought at this point, based on what you are talking about, a stickier inflation that is resilient? ira: i think they got oversold. people were over short. it is start -- it is hard to stay short in bonds because the carry ends up being negative and you have to pay the coupon. as yields get higher, it becomes more costly to be short the market. i think we have seen a short covering rally. what tends to happen in the rates market and i think we are in the process of doing this, we are going to find a bottom and wind up staying in a range for a long period of time. 2, 3, four months. as the federal reserve gets toward the end of their hiking cycle, the market will reevaluate what the next move is. i think the longer end maybe, i wouldn't say it is a screaming buy at this point, but at the same time, i do not think we are going back to 4.5% anytime soon

in the long end. it is the front in that is interesting. you have seen since the ppi number came out, the market was full steam and. the 2-year note was rallying a lot, that is completely unwound and now you are seeing the yield curve rather flat on the day, whereas it had been three or four basis points steeper in terms of the two year or 10-year yield. lisa: we are heading into an important week with the last fed meeting of 2022. what are you expecting in terms of the signaling and whether the balance of risks is perhaps more to the over tightening than the under tightening? ira: excellent question. what jay powell had said november 30 when he was at the brookings institution, confused the market. the tone was dovish and the market took it that way. i suspect jay powell will push back on that.

maybe talk more about what you have a mentioning, what we mentioned earlier, that they intend on keeping interest rates at whatever the peak is, for the whole year. even amid a little economic slowdown. the reaction function i think he has to take back a little control of that. the market certainly seems to think there is a fed put. if you start to see job losses, if we have a mild recession like we expect in the second half of next year, the fed will start cutting early. i think he will keep on say, we do not want to cut too soon. we do not to make the 1970's mistake of easing into a still reasonably inflationary environment. lisa: thank you as always. to bring you this, vladimir putin continues to speak. we will bring you more context as we know what it means. he says he has no plans for further mobilization in russia. we will bring to you any kind of

concept, context as we get it. as we break down the inflation data in the u.s., there is a question of how quickly we get back down to 2% and what that means for margin compression in the u.s. i am happy to say gina martin adams is joining us on the equity side with more on that front. margin seem to have built in better than expected. cannot continue heading into next year -- can it continue heading into next year? >> we have detected margins have held up because energy argent are holding it up. when you look at the overall s&p 500 margins, operating margins and income margins have been calling for much of this year relative to their peaks made at the tail end of last year. analysts are expecting that to slow down consistent with the idea that inflation in the form of ppi, as well as cpi finally over the summer and is likely to continue to slow. as it is slowing fast enough and critically, is that comparison between ppi and cpi going to

flip into positive territory? that is the critical question going forward. we need to see ppi decelerate faster relative to cpi as an indication that finally, margins can hit their low when we exclude that critical energy sector from the s&p. lisa: do you believe in the rib and dip that jon ferro coined? gina: our view is similar to what you talk about with jim paulson, it does look like sentiment washout occurred in the fall of this year. we talked about this a lot in sentiment in october and late september, really reaching trough levels. our own proprietary target pulse index indicated to us we had a complete washout. the question remains, after the dip, do you get that spark? our annual outlook commentary would suggest we probably will not. the title of our outlook for 2023, no spark, no fire for the

s&p 500 what happens to create that major up leg and the s&p and source of optimism is the fed was bursal -- that reversal. we are not likely to get a massive federal bursal in 2023. if you do not have a fed reversal, it is hard to argue you get a big spark that lights the equity market in the tail end of next year. lisa: we were talking about how vladimir putin might cut oil output in response to oil caps. do you think that gap needs to come closer, that either oil prices have to rise and they are rising at session highs right now following those comments, or that energy stocks need to fall? gina: energy equities, especially in the s&p 500, are still trading at low relative valuations compared to other sectors. even though prices have recovered, price recovery has not touched earnings recovery in the energy space. we would argue the stocks

generally did not price oil prices when they were close to $100. there is a tremendous amount of skepticism embedded in the overall evaluations of the energy sector. this is one of the reasons why energy continues to lead our broader sector scorecards, it has been top three a month sectors -- among all sectors all year. it is still sitting in a leader position in our view partially because valuations are not inflecting the reality that supply remains constrained for a extended period of time. demand should hold in generally well amid good supply constraints. lisa: gina martin adams, thanks for being with us. to bring you more details on this, vladimir putin president of russia said it may cut oil production in response to the g7 oil cap on the price of its crude. says the decision will be made in the next couple of days, $60 a barrel threshold on which western nations would insure the

barrels being transported from russia and floated around the world. the question is, currently, that is the market price for russian oil. it is a question of whether that would affect their particular budget, but they are talking about possible retaliation. they are saying russia will not sell its barrels to any country that sticks to its stiction's. it raises a question of stranded oil, which has been a big issue for russia at a time when western nations are trying to tighten the screws in response to the conflict in ukraine. we are digesting the latest inflation data with ppi coming in hotter than expected. although, decelerating as much as people had anticipated. services are still bright, food driving some of the increase which is considered a temporary phenomenon. you are seeing losses being paired back in s&p futures, down .3%. dollar strength continues. 1.0542 on euro.

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jonathan: live from new york city, good morning. equities phased on the s&p five -- equities fade on the s&p 500 on the back of a hotter than expected ppp irate. -- ppi rate. the countdown to the open starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. jonathan: we begin with the big issue. looking ahead to a defining week. economists looking for inflation to fade. chair powell to sign off on a smaller rate