>> there is a sense that something fundamental is going on. >> we think it is a buying opportunity. >> people are making more money. they are feeling depressed about inflation, but they are still spending. >> there are issues that are somewhat inflationary. >> volatility will continue until we have a clear direction in the real economy. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. lisa: this really may be the most important week of the year. this is "bloomberg surveillance

." tom keene, jonathan ferro, lisa abramowicz. tom and jon still on their cruise. i bribed some of our favorites to be back to be with us. we are lucky to have you here to share your insights. i want to start just by what we are expect to be the most important on a week where we get apple earnings, the treasury refinancing agreement, and central banks galore. gina: there are too many things, but apple earnings are the most important for the extent to which tech stocks can continue to carry the index. we have seen earnings generally beat expectations, but some uncertainty with respect to the dollar, the 10 year, seems to be weighing on stocks, so apple could still help to keep some stability in stocks.

lisa: i imagine you are watching things outside of apple. >> do you think the quarterly announcement could be more important than the fed? but i am an emerging markets guy -- it is important stuff, because we will see how they respond to some of their recent weakness in their economies. are they going to continue to try and cut rates? i am not sure they can. lisa: i am glad you mentioned this, because it is not just the big majors we get central bank decisions from, it is all around the world, and it is coming out a time of incredible uncertainty. we saw this expansion of the ground operation in israel heading into gaza. why do you think the markets are so sanguine about it? damian: you are right. oil and gold are coming off of it. i the guy has to do with the uncertainty of the central banks. we have apple earnings, but we are pretty much through a lot of

the earnings cycle. now that we have seen the nasdaq and s&p crashed through there to hundred day moving averages, or at least, below it, i do not know if it is time to buy it, but people are sitting on their hands. gina: small caps are below their 2022 lows, which is pretty consequential for risk tolerance. if you think small caps are generally the leaders of risk tolerance, looking at the s&p 500 rate down does not tell you the whole story. stocks are completely breaking down in the midst of all this. lisa: let's get to stocks. you are seeing a buy the dip moment. s&p futures up 0.7%, although poised for the third straight monthly decline, which is unusual. the euro gaining just a touch, inflicting upwards but still well below the 5% mark. crude off -- again, this goes to

the haven bit, why are people relatively sanguine about the idea of escalation where there kind of have been escalatory moves and words. the bank of japan rate decision tuesday, will they drop yield curve control? the fed on wednesday does not even matter based on the treasury finance agreement. and -- throughout the week, on the economic data front, u.s. job openings tuesday -- all leading up to the big event, the u.s. employment report friday. does it matter? gina: it does matter. ultimately, what we are looking at is stability in the economy. that is at least half of the equation for what drives stocks. i realize come over the last six

weeks, we have been captivated by the macro, and it is all about rates and what central banks are doing, all -- but ultimately it is about long-term earnings growth. if you have a stable economy, some of the recession worries get put to bed. lisa: i like will have balance sheet discussions about apple and other companies. wednesday, we get the treasury funding announcement. a lot of people are saying it does take precedence over almost everything else. to me, it will be most interesting to understand how bonds and stocks respond to some of these particular economic and other data points. damian: and the dollar. how is the dollar going to respond? the dollar and its sensitivity to the long end of the yield curve, so i am definitely looking at you are a -- at the qra. that is where the rubber meets the road. lisa: let's get right to it,

because this is a question of is the headline figure masking the underlying pain, that stocks are not really holding up. lori, stena -- lori calvestina joins us. when you look under the hood, are you we seeing massive downs -- write-downs? -- breakdowns? lori: gina hit the nail on the head about small caps. small caps tell you a lot about what is going on in the broader market. they are taking the brunt of the pain as regards to the big increase in 10 year yields we are seeing. of course the tech stocks and the big caps -- it does not matter how many charts archewell people suggesting the balance sheets are not that bad, people simply do not want to hear it. there is a view small caps will not be able to weather the storm created by the surge in interest

rates. i have so many charts that i've been showing people for the last six months, saying small caps have been doing a good job of shifting towards long-term debt, weighted average maturities are really not that bad -- people simply do not want to hear it. there has been a long adage that small caps do not whether higher interest rates well, that is one of the big reasons they are getting punished right now. gina: i do think the sectors are telling an interesting tale in small caps that maybe we are not picking up in large-cap's. lori: think about it from a valuation perspective. most sectors looked cheap, but where it gets interesting is the cyclical site errors. it is -- healthy sectors, like industrials come also look cheaper relative to large-cap and the small-cap space.

if you look at valuations at consumer discretionary, they were deep, around recession type lows, last summer. we are seeing that pain very widespread. gina: given we are in the midst of earnings season, is there anything you're getting out of earnings that is maybe not getting picked up by the markets, considering the markets are so captivated by what is happening in these macro indicators? lori: i think people are misunderstanding what is going on with inflation moderating and what that does to companies. when we compare our numbers versus the street consensus -- we use the bloomberg data to monitor the street consensus, and it does a good job of articulating how margin expansion will do to sectors next year. we do not do margin expansion, and one of the reasons why is we do not give -- we have not seen justification

to do that in our back tests. the pricing discussion has simply gotten much squishy or -- squishier. there are a couple out there saying they will raise prices to infinity and beyond -- that is not really the norm here. we are seeing companies acknowledge they will not have an excuse to push these prices throughout the cost environment moderates, so we are not going to necessarily see this big boom . that's what's embedded in a lot of street assumptions next year. damian: to build on sectors, sector dispersion among large-cap names. sector dispersion has been very high since the pandemic started. i wonder what you take from that. we looked at some of the interest rate sectors and how they underperformed. is that going to continue? lori: what i feel like i've

noticed in sector data over the last couple months, looking at the s&p 500 specifically, anytime there is a part of market i get a little bit of a ship, it cannot sustain in that long. i describe it as a sniper that goes out, and anything good we have gets taken away. utilities, for example, was having a really nice moment late in the summer, then all, the bottom fell out. we have seen energy lose that luster. the problem is the market is losing confidence in any one narrative. on the one hand, tech stocks look expensive, crowded. their earnings dominance is starting to fade. but anything the market wants to rotate into cannot seem to maintain its footing for all that long from a fundamental perspective either. so it is a struggle to generate excitement in the market and

allow that rotation to play out. damian: i am happy you mentioned utilities, because it has been utilities and consumer staples that have underperformed. how do you addition defensively in today's market? lori: it is very tough. i am underweight on consumer staples, neutral on utilities, overweight on health care. to me, it has got the nicest combination of decent valuations. it had strong earnings provision trends. we have seen med tech take a bit of a hit. -- if you look in other areas, like pharma-bio tech, and providers and suppliers space, you have a ramp up looks like it has room to run. it is not a perfect story, but other than the weight loss drugs, it looks like it has less macros here.

with staples, my analysts are starting to feel better there, based on the fact we had this big selloff from the weight loss drugs. valuations are pretty compelling, but i continue to worry about that sector from a pricing perspective. it is at the center of the storm in terms of not being able to pass through higher prices for longer. we have seen those companies talk about how consumers are pushing back. lisa: what does it tell you that you can have the right idea in terms of the solid nest of a corporate balance sheet, the right idea about historical valuation, and investors just won't bite, that it will not work in trading practice? lori: it tells you that, whether it is the middle east, whether interest rates, we are in a sediment-driven market at this time. confidence is very fragile. one of the things we have talked about a lot this year is how 2022, 2023 felt a lot like 2010,

2011. i lived through both of those as a strategist, and confidence was very fragile. there was a constant fear of the next skeleton coming out of the closet and blowing things up, constant fear of dipping into another economic downturn. i think that is the environment we have been in recently. anytime we have issues, up, there's not a lot of confidence that companies or management teams or the market as a whole will be able to weather the storm. that felt like it was easing over the summer, but i think we are getting sucked back into that low confidence period. lisa: thank you. would you agree with that, that that seems to be the sentiment, -- gina: yeah, i think that is consistent with what we see after recession experiences, with the one exception that

inflation has been so profound in this cycle. we did not have to worry about inflation's impact on earnings in either of the post recession recoveries of the last two cycles. that has characteristically been important, and that is what is driving the sector dispersion. this inflation story is creating really different sector are level outcomes, creating different outcomes for the market at large. damian: i think it is the leverage factor. the reason those sectors are performing so badly is because they have high leverage. gina: it makes a huge difference with rates as high as they are, and rates are moving because of inflation. lisa: it is complicated. coming up to parse through those, barry bannister. ♪

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>> it is really defense forces speak to their plan. war is highly unpredictable. we will continue to talk to our israeli counterparts, continue to ask hard questions about how they are thinking this through, xavier becerra proceeding, but ultimately, these are their decisions. if american troops are attacked by iran and their proxies, we will respond. we did respond. if attacks continue, we will respond. lisa: that was jake sullivan

speaking on abc, flooding the networks over the weekend. i am just as confused as i was before. very unclear what is going on in the middle east. let's get straight to it. ollie crook took a plane back to tel aviv. we know the ground operation has been extended. it is not considered the same kind of scale that people expected. what we know about what is going on? oliver: that is right. we are now in the fourth week of this war, and a new chapter, or a new stage, as benjamin netanyahu called it over the weekend. what is it defined by? ground troops in gaza. we saw the greatest effort on their part so far. there have been puncture wounds in and out, but with tanks in there and the offensive expanding. there have been more and more troops that have entered. they are going through this gradually as they have been

trying to destroy the idea that it would be a full land invasion, which this is not quite yet to the question is why are they going about this -- it this way? there are still 200 hostages, but there have been questions about escalation. what we will be keeping an eye on in terms of looking at the risks of escalation is more and more clashes in the west bank. and also, we understand from lebanese television we will be hearing from hezbollah friday, the leader speaking for the first time publicly since the war began. lisa: we will catch up with you more in the next hour. bloomberg's oliver crook. i want to pick up on the point with spec to hezbollah, why they have not gotten more involved, when they might get more involved. joining us is a former advisor

-- is it unexcited that hezbollah has not gotten more aggressive when it seems like israel is tiptoeing into the ground invasion they have been talking about? >> good morning. i do not think it is a surprise that hezbollah has not responded more aggressively. they are still fighting a conflict in syria. lebanon is in political -- in line to enter the conflict, they would need some sort of cavity pool of events or actions -- gravity pull of events or actions, especially because israel is alert and is looking in their direction. for hezbollah, this would be a daunting and risky operation for unclear strategic goals.

damian: israel's relationship with the middle east -- but -- is israel losing the foreign policy battle? norman: it is certainly losing the public diplomacy aspect, not surprising giving the international sympathy for the plight of the palestinians. but i would be careful in saying this would have long-term impact on its trade and diplomatic relations outside the region. damian: prior to the attack by hamas, israeli politics had been very divisive. what are your thoughts on their ability to remain in power? norman: in 1973, the conflict helped propel the prime minister out of office, in the

investigative commission at that time didn't really do much to help her stay in poiw -- power. the investigation after this will be worse. he is only popular because he stated they would prevent an attack. for this, many israelis put up with the divisiveness. i think his political survival is very much in doubt. gina: could we talk about the u.s. response, in particular new sanctions put in place friday? how are these sanctions potentially impactful? norman: i think the u.s. response has been measured. there is a deep sense in washington we do not want to be pulled into this conflict, to have our reputation, our equities in the region pulled into this anger against israel paid i would be careful at looking at sanctions as having too much of an impact on the various adversaries at this

time. have to ask yourself, when you look at a specific sanction, does this touch the decision-maker at the top of the pyramid of an adversary? these sections have been put in place against hamas recently are important but really do not meet that measure. lisa: there is a real question about how much qatar, saudi arabia are playing roles behind the scenes we do not know about. we know saudi arabia's defense minister is coming to the united states to meet with the white house this week. what you make of that? norman: saudi arabia, the united arab emirates, and qatar have played a large role in recent weeks. they have done what they can to tamp down anger in the region. the united arab emirates have made statements in sympathy of israel for the attacks on october 7. the saudi defense minister's

visit is probably related to several things. he will ask for a sense of where washington sees the conflict going, how does washington plan for the day after, the diplomacy for tuesday's solution, and the capability for saudi to push back on houthi, perhaps, border incursions on saudi arabia. lisa: are you more or less optimistic about the potential for a neater resolution in the near term then you were last week, when we talked about the same issue? norman: i see no changes. the resolution for this conflict and the arab-israeli rapprochement are unclear. the gulf states have communicated quietly they remain interested in a refreshment -- in a rapprochement with israel. but no one really talks about when that diplomacy. can be

restored lisa: we look forward to speaking with you again. norman roule of the csis. gina, i think your question about the u.s. response is a really important one, especially because biden has gotten a lot of pushback. gina: there is so much question two what the u.s. commitment is globally, considering our budget deficit situation, which ties back to financial markets, the budget deficit being an important consideration, will we be able to commit to defense spending for peace around the world, or will we have to become more insular? that seems to be the trend over time. damian: i am curious about the view on the war. if you are an average republican in the united states, what is your position on the two state solution? same for democrats.

i think our political leaders do not know how to support their constituency on it. lisa: that was doing a lot of heavy lifting, how to support their constituency. we saw from new house speaker mike johnson over the weekend, when he went on fox news, it was something of a neo-composition. it was more traditional, we need to back israel, but we also need to do budget cuts. we have to take it out from somewhere. gina: and on top of ukraine-russia, also a highly controversial topic. ian bremmer also putting out on x, formerly known as twitter, that no one is asking about ukraine. coming up, the latest on the economy. frances donald of manulife, that's next. ♪ ind your personal style. endless hardie® siding colors. textures and styles. it's possible.

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lisa: a little after we saw corrections last week on the nasdaq and the s&p 500, we see a takeback. this is bloomberg surveillance and john and tom are still on the cruise. they are enjoying drinks on the deck, even though they are not, but it will be great to have them back next week. but we have gina and damian sassower joining me today. what you see on the screen is no

indication of what will happen in re-hours. -- three hours. damian: that's right we get an update from china. it is historically weak and i'm curious to see what the pmi's shows us. if you look at the holiday earlier in the month it may way on things but china is a problem spot -- it may weigh on things, but china is a problem spot. nobody is talking about it. lisa: they are not. there is an overhang and is the fog that is difficult to get out from under. and leaders are calling the second phase against the war against hamas with president biden speaking with the prime minister of israel over the weekend telling him to prioritize the protection of civilians. there's concern rising over the skill in the humanitarian crisis in gaza.

aid trucks crossed the border on sunday, the most since this began. it is hard to get a handle on where to look next and how far this is dividing people and how much it will affect the budget and the lyrical landscape when we are not sure which party is which. gina: it is incredibly confusing. it's one of many factors affecting the market. it's easy to get captivated by this issue considering human consequences and the potential international concert it's is of the war. at the same time, it's clear to me that equities is the only market paying attention. long-term treasury bond stopped rising mid-october. an equity is melting down. that tells you a lot about risk tolerance. equities are paying attention to the global market despite the fact that earnings are beating expectations. even though the u.s. economy is stable recession risks are

limited relative to expectations, the global considerations are elevated risk premiums. damian: and it is also private spreads as well. it is not investment grade at high yield spread. gapping larger. if you want to look for some sense of where investor sentiment is look no further than equities and spreads. lisa: it raises the angst underpinning the bond market that the -- is our treasuries are treasuries still a safe haven? and then we have individuals walking off of the job hours after stellantis reached a deal. gm agreed to a wage increase with a cost-of-living allowance as well. this is the bogeyman in the room of of all -- all the impression

area -- inflationary pressure. damian: i thought everything was fine friday. everyone agreed to a deal and then this morning there's another wall out for gm. and it is just gm -- another walk out for gm. it is just gm, not stellantis. lisa: and if they resolve this, take this as no one is listening but you can go ahead. gina: we have a uaw specific issue. chw is a small portion of overall labor force. they are not manufacturing anymore. now that we have electric vehicle production as a component of auto manufacturing the competitive landscape is more important than anything else for gm, ford, and

independent auto manufacturers. i'm not awake, but nonetheless we are working on this. lisa: [laughter] you're doing great. the bank of japan decision out tomorrow. there is a real question about whether barclays -- thursday we hear from the bank of england and we get apple earnings and that we have friday with the u.s. jobs report. if i go to damian he will say do not forget about rates decisions in the market. gina: [laughter] she has you pegged. damian: i think of all the major market central banks the one with the potential surprise is boj. what is interesting we had a lot of hot print out of japan and

they will increase their inflation plan. out of wonder if it moves them closer to the 1% mark. gina: and it has come alive over the last year or so. japan has been a haven and source of trading in equity markets. most of us forgot about japan until this year and so what rates are feeding through? part of it is the tech story but now it is a big part of the market -- equity market that we are paying attention to after being dormant for years. damian: and the training effects coming out of japan, everyone is trading fx in japan. the yields are so low of course she would put your money abroad. it is at an all-time record. lisa: and that may be the reason why they are struggling to keep it avail -- keep it elevated -- below $150 -- one dollar 50.

150. chief economist at manual life investment management, frances donald, joining us. how much does that give you angst? francis: a lot. there are bigger issues at play. we have a ton of central banks with emerging markets, the fed, brazil, the list goes on and on, the thing that q's me up at night most of all is not economic models are broken, we know they need to change, but is the decision making function in an area we need to do adjust.

the market is moving by factors with more desk -- debt issuance. is this the same as what we seen the last 10 years because we see several fed officials tell us the strong economic data points are not consistent with what we are seeing on the ground. those signs that we see the fed is taking data with a grain of salt is what keeps me up at night because i can run a model to tell me what the data will do but i have to develop a model that tells me how people and their biases interpreted. that is interesting. gina: yeah can you talk about your interpretation of the ecb last week. is there anything in the ecb that would indicate central banking is shifting. can we look to guidance -- look to the ecb for guidance this week? frances: a lot of pushback on if we were -- we are not going to

cut rates. and i thought i remember in june where we were thinking about raising rates. that's what powell told us at the time. of course the central bank will push back on the idea of rate cut expectations. but look at the projection that come into the fed summary of economic projections. they tell us even with inflation above 2% they have the expectation to cut rates. that's a little strange. that's not what we thought from the central banks. we have to value the relationship between interest rates and nation. if your long-term investor, most people are. institutional investors have a longer timeframe the next week. we have to have a deep conversation of whether interest rate and inflation will be stable over time. my thought is that it will disconnect and that will impact capital markets and where we are five years from now. damian: credit card delinquencies are above

pre-pandemic levels, the risk of recession has declined and other thing is, i'm curious of your thoughts of if they can achieve a soft landing or not. frances: i think that the risk has increased in this environment. i looked at all the statistics and added on with the government spending all that they could in good times with gdp at 4% -- and central bank said even if we cut we will cut less than we did historically, would you be bullish? that would be hard to do. even if you have the corporate recession too early, when you look at the economic data it is consistent with the downturn. i will pushback a little bit where we have a recession in the model, but there is emphasis on recession or no recession, it is via neri and that is not how markets -- it is binary

and that is not how markets work. recession analysts are focused on the growth in will. going forward it will be more challenging. is it one quarter of negative growth or two? i don't think it matters as much, but yes, if i woke up today and look to the economic data i'd be hard-pressed to say it is a soft landing. everything is great. lisa: haven't we already price at end based on small caps and big tech? frances: yeah it depends on who you are. if you're a small cap investor do not need to have a risk of equity ahead. but if you invest in other areas you need to have concern. -- the traditional asset allocation has not been consistent with recession ahead so it depends on who you are.

some portfolio managers are on the small caps space and they do not need to explain how small -- how bad the data is. but if you're at the top looking down, i'm not sure it is clear. macro is an imprecise investment. it does not necessarily take into condition sentiment, positioning underwriting valuations. macro is just one part of the toolkit. it pains me to say it, but we have to say it because that is part of the story. lisa: if you could get advanced information of the events we laid out this week which would it? frances: i might go a little bit niche with this one say employment costs. what is happening with u.s. wages. and i give honorable mention to the bank of japan because i'm looking at how is what we look -- used for the last 10-15 years changing.

is the bank of japan actually relaxing yield control? that is in example of how they may be shifting their thinking and we have to adjust the model. lisa: thank you so much. ansys donald. laying everything out for us -- francis donald. laying everything out for us with such clarity. and we see how much they can pass along cost to consumers because employment costs are still going up. gina: they are but the bulk of inflation distress is because inflation is going up. -- the downdraft and input cost or the relief in in but cost pressure has provided -- in input cost pressure has grown. the input cost exhilaration is

wharton. they can pass a degree onto the consumer and as long as they have wages the input cost will be the more important factor. lisa: give tom here he would put up a banner that says cpi, pci, pce but it is the cost of what you've got to pay versus how much cheaper things are coming in. damian: and i like frances because she agrees with me i think the boj meeting will be a good one. lisa: [laughter] thanks for that. we can talk about china coming up which is important with the geopolitical sphere and the economic of the moment. in the markets a reprieve and buying the dip continues into at least another day. ♪

at ameriprise financial, our advice is personalized, based on your goals, whatever they may be. all that planning has paid off. looks like you can make this work. we can make this work. and the feeling of confidence that comes from our advice? i can make this work. that seems to be universal. i can make this work. i can make this work. no wonder more than 9 out of 10 clients are likely to recommend us. because advice worth listening to is advice worth talking about. ameriprise financial. >> the real estate market in

china -- we are at the bottom of the market. and it will take a while for the market to recover and regain momentum. i am not expecting a massive reversal in that sector in the next 12 months or so. but i do expect it to be a gradual improvement from where we are. lisa: the ceo talking about the mystery behind the market in china. welcome back to bloomberg surveillance. were not talking about that much but maybe we should. you were talking about how it and it is to highlight the economic teacher geopolitically. damian: it is never a good thing. and we have canned kicking exercise over the weekend. there is potentially of windup of liquidation but it did not seem to be the case. in on the economy standpoint --

we've been on the ground with data points of trying to understand what the state of play is. cofounder and ceo of china page book -- beige book, one of my favorite people to talk to. is there back channel negotiations, with russia, iran, the u.s., are they shoring up their economy in a meaningful way? >> they haven't taken advantage of anything geopolitically yet. as the united states gets more bogged down, this will make an appetizing opener for china to do something on taiwan. is that likely? surely not. but this is the type of evolving situation that we have to see play out. we do not know how any of these theaters will develop over time or eisenhower's chinese economy will get over time. the president of china has a lot

-- his hands full with problems at home. it's a different situation than what we've seen in the last five years. lisa: you were saying people were underestimating the momentum in china. not long-term but short-term. how have you adjusted your view based on the recent stimulus that has come out of the region? leland: there's no reason to reevaluate because the stimulus has not hit. it is important to understand we have gigantic stimulus headlines. they assume we write a stimulus headline which means it must immediately hit the economy but local governments are issuing a lot of bonds. we may see a lot of activity later in the year but we see corporate bond at some of the lowest levels we've ever seen area corporate's are looking at the economic environment. they do not like it they are not hiring, not investing, not darling. things are -- borrowing.

things are better than last year, but it is still not an ideal situation. the idea that things will get better, that is not realistic or what is happening right now. damian: last week i was at the forum, and extreme pessimism surrounded china. i'm curious to hear your thoughts, as a u.s. investor how should i roach china? leland: it is not that china is an investable, but you cannot invest in china like you did 10 or five years ago. the risks are more dramatic. they are geopolitical, sanction related, trade, they are related to the domestic economy in china. a different scenario. and in the shares, the market is not a real market. is not correlated to the real economy. a lot of large asset managers were used to, they invested in their big tech companies they

love alibaba and tencent, they are used to collecting dividends on a regular basis. and watching stuff go up. that area is over and china is completely on investable. it takes a level of sophistication the on what you would invest. damian: i know you have a better read of what is going on on the ground in china. what are your thoughts going into tonight? leland: october is weaker in our data for september. september is weaker from august. it's funny we are calling the right now, here full's because we think china is not collapsing not because we think it is doing well. it is a sign of the times. if the economy is not doing well now, you see stimulus headline but not anything on the physical activity, our physical index activity for october was lower than many months. nothing is happening there.

everything is better than last year but are pretty is add, can emerge spending is tapering off, there are not many bright spots. gina: let's talk about expectations. in the global equity markets chinese correlations relative to the other emerging markets have been low over the last year given expectations coming into 2023. are we had a stage where expectations are so low that your probability of improvement in china going forward is high? leland: i think we were there a few months ago. we -- all summer long we said china will not collapse you are to pessimistic. but keep in mind people have been to bearish cyclically. i think they are to bullish structurally. yes, we will see in provement and economic growth with china being better than last year. they will probably hit the gdp market -- target this year but that does not mean the stock

market will go up. it depends on what you're talking about. if you think things are collapsing you are to bearish, if you think things will bottom out and get good next year you are probably to austin -- optimistic. gina: when you look globally tech sops have -- stocks have participated. there's a lot of optimism that was removed from markets in recent months, but this is a global shade -- trade with participating, china, u.s., european tech stocks participating but china was left behind. what is happening in china tech? leland: when the regulatory crackdowns we had in 2021 were said to be easing, people got excited early this year that the tech sector was coming back in china. the caution was corporate governance in china it is not

improving it is getting worse. when you look at the tech companies and the largest companies in china, you have the party getting more involved at a strategic level. you can talk about how the tech sector is not being oppressed in the same way it was a couple years ago, but right now these companies are being led in large part by strategic national purposes and not for innovation. their not being reading for shareholders. do you really want to invest in a company that has no ammunition? damian: and the possibility of a biden xi meeting is unlikely. what is the significance of that meeting? does it have the potential to impact asset valuations in china? leland: we shouldn't care except the relationship has been bad over the last several years it is never a bad thing to get leaders in the same room talking

with open lines of communication particularly of what is going on around the world. but now that there is something related to policy, the change of the u.s. china relationship that will not happen. were going into a difficult year next year with the taiwan residential election at the beginning and the u.s. presidential election at the end. this is to make sure the bottom does not fall out of that relationship. lisa: thank you so much. and i am restraining myself, the rather catastrophic side of me keeps saying what will happen? all these people have no clue. the risks are mounting. gina: it's interesting with the reed sent campaign but -- recent campaign between vita -- biden and others. i'm not surprised that we are focused on china given what is happening. that is the next area of geopolitical risk. improving that relationship is

key to presenting -- preventing the next level of trouble. lisa: everybody is talking about the summit between xi and president biden. why should we care? leland: they have to fund oil of the bonds and they have to cut the rrr rate in the future to cut -- to fund that. i think that is what economists are calling for another 25 bps cut. lisa: how much are you watching whether they liquidate their treasury portfolio? damian: they already are. i don't know they can entirely because they have a lot of dollar exposure so i do not think they are killing their entire position but they have shaved it meaningfully. lisa: this is on the backdrop of technical concern for the treasury market with people wondering will supply dictate everything this week when we get

the financing agreement from the treasury department wednesday. coming up very venice or of stifle joining us to discuss corporate earnings and more -- barry bannister of stifle joining us to discuss corporate earnings and more. ♪ ♪ is it possible to fall in love with your home... ...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines.

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>> it is our sense that something fundamental is going on. >> people are making more money. they feel different about inflation but they are still spending. >> there are issues that are inflationary. >> this will continue until we have a clear inflection in a direction of the economy.

>> this is bloomberg surveillance with tom keene, jonathan ferro and asa marrano its. lisa: welcome back. tom and john are still on their cruise. the thought of alaska was so great that they were going to check it out in room together. and i bribed others to stay with her so much longer which is beautiful for all of us damian sassower or an gina martin adams ahead of the busy week. all i can think about is we don't know how the market will respond to data point. we have no sense of what will happen. this will drive the narrative by the end of today. gina: the market is nervous about what is going on in the bond market that all these central-bank occurrences this week will be paramount in terms of importance. but under that surface you have earnings announcements coming, apple inc. one of the biggest stocks in the world, and it is

important to consider. it's earnings is at 2% much them -- much better been asked -- than anticipated decline. there are things that could drive a degree of optimism after a rough three months for stocks. damian: we talked a lot about fundamentals, technicals lie, and all that stuff, what -- one thing we have not been talking about is seasonals. we've come out of it seasonally weak september october period and we get risk back on. and now is his -- historically the time to buy the dip. lisa: and one said if they close below 88, on ftx, that would be the lowest decline. the lowest decline was 2011, but it has not been down this many

days since september. and it applies because this year feels different. gina: every year feels like it is different. every year there is a new challenge. i remember 2018 with a massive tech meltdown into october. we had a nice bounce and then we had the christmas surprise. central banks came back to bite us and we saw a huge dip. seasonals can help, but only so much in an environment where the outlook is still uncertain and macro is uncertain and central banks are positioning overall. damian: positioning is everything in the market. positioning is heavy and a lot of places. the investor needs to be mindful of that and you do not want to walk into a freight train as it were. lisa: that's how it feels this week will be tremendous. with what we expect the inc. of japan decision is -- bank of japan decision is wednesday, and

they we have other announcements in the week as well. that will be important with all eyes on the bank of japan and. . -- u.s. employment cost index coming out. on wednesday u.s. initial jobless claims will be coming out. u.s. employment report friday. how much will people understand what to do with employment cost index going up? will that be one of the key points? gina: i think this narrative of wages accelerating will be in the market for a long time. you have to have a big shock on the number to move the market in a big way in my opinion. considering everything else that is going on. perhaps that is suggestive for the broader economy, but is unimportant for the equity market? i think equities will a attention to jobs in general.

some sign of continued ability and a sign we are not in a recession. it is not an overwhelming concern for the equity market. lisa: and the balance sheet of apple. we have the treasury announcement. and then thursday the balance sheet of the rest of the u.s. which is apple. and then i want to go to you, the respect of funding. how low the bar is for a significant surprise of the u.s. announces it will increase the size of each of their coupon offerings on the 10 year, 30 year, five year in a time where we are not sure where the bps will come from. damian: we have one $6 billion proposal -- $1.6 billion proposal from the president and it is kind of for me can the economy afford that? in stay as an orton day, believe the price is -- the pause is

priced in but i'm curious. gina: the equity market may take solace in yields that they may have peaked in the middle of the month. if they prove to be the longer-term that could add support to the equity market we have not had for three months. i think what happens with long in the yield is important this week. lisa: that will be something up because. barry banister chief equity advisor at stifle. el. is that a big deal? barry: if you look at the price of oil, where it is on the three-month futures, it lines up closely with what we call breakeven inflation, tenure minus the tip real yield. that is about 2.5. if you look at what the fed has done on the rate futures, they've driven the 10 year tip

yield up to 2.5% so 2.5% plus 2.5% is why we have a five cent handle on the 10 year yield. lisa: basically one of the questions is everything is priced in. if we can have a band that goes from 5% to 4.8 five cent. this sounds technical but we basically do not break far out of the level on the 10 year yield, can you get enthusiastic about buying stocks? particularly small caps? barry: small caps, international, and value relative to growth are one big trade. they do well in a stronger economic growth environment. what we then emphasizing is what is called cyclical value. things like capital goods, financials, transportation, materials, energy. on the short side or the opposite side, your media,

entertainment, internet, semiconductors, check hardware like apple, autos, tesla, 85% of autos is tesla. these would be the shorts. yeah, i agree with you earlier when you talk about the seasonality. november 1 through april 30 cyclical value tends to be cyclical growth. we are on that trade. for the index level not much more than 4400. gina: when you talk about that value, what you think is the catalyst to get that moving? eon seasonality, is it earnings, yield, what will drive capital in risk trade? barry: when you look at all the economic data that is available to us and you say -- settle the ones that are more statistically usefully we find the pmi index is is full. our target by april 2024 is 53

over 50 it is growing. it has bottomed out recently at 46. it is headed toward 50. if that happens, that is associated with 53 manufacturing with stabilizing rages -- wages. with wages and salaries stabilizing. we will need productivity to avoid a high or inflation read if that occurs. and higher commodities. they swing from being down 25% on the bloomberg commodity index to being up 10 next year. that is all positive and that is what drives the cyclical value trade relative to the classic cyclical growth trade that is big tech. damian: dollar strength has been a feature of the report five month selloff in risky assets. i'm curious -- 3.5 month selloff. what are your thoughts on the

dollar going forward? barry: the dollar is one factor in earnings. the other is what happened. we talk about what happens to margins, margins were prolonged i think by the cost-cutting in tech. they have 12 years to build up a layer of fat and all they did was lose that. they were able to preserve margins. the dollar is stronger and has been because of the rate differential. real and nominal rates in the u.s. it is ahead of central banks. the fed is closer to having finished the rate cycle, we can focus on global economic growth. in the year-to-year change has begun to got. that's why we preferred the cyclical value of the -- over the cyclical growth trade. lisa: thank you for being with us ahead of a important week. that is the conundrum. that is the theme this morning you can get the concept right but getting other people to come along as a different story.

basically i feel like the template or this morning is me saying is this normal? and you say, yes, this happens every year. but is this normal? gina: [laughter] it is different every year. it's been an abnormal experience because of the inflation dynamic. barry mentioned i talk about margins all the time and i am known as the mortgage and -- the margin person because it is so important to driving overall equity. it is consequential still. this is a big adjustment process for us because we did not have to deal with consequential inflation for most of our career. it is different and certainly this environment of war breaking out all over the world. this is also very different this year relative to recent and past years. there are certain differences and the move of yield has been so painful. damian: let me build on your

comment about margins and talk about net interest margins. we have a steep curve. banks can start thinking about making money again in this environment. i wonder how that changes the dynamic and how people will look at the financials and banks, i do not think earnings will be great but i'm curious how they wind up. lisa: and this is as we see regional banks struggle. we talk about the potential pain point, you can see that and when you talk about the yield space, with what we see in yields they are climbing today but honestly i cannot stress enough anything can happen is the day goes on because the volatility has been tremendous right now. yield at 4.8%. 4.89% climbing as we speak. the volatility has been tremendous. s&p 500 futures up 4163 up .6%. i want to go to the question of the perspective of banks.

when to make a bid and when have they fallen enough? gina: when we see loan growth accelerate probably. you talk about the interest margin, the potential is there but the problem is nobody wants loans. financials cannot make money at the top end even if it is widening. with the whole curve higher, there is not a lot of demand for loans. and that is keeping financials tighter. this is in an environment where they are risk intolerant and nonfinancial, nonpublic financial companies can be more risk tolerant which creates a lot of competitive dynamics that will keep the financial sector suppressed in the near term. lisa: i keep thinking about what this means for liquidity. every time we talk about strange moves. damian: the 10 year real yield, think about what we witnessed over the last few weeks. this move was not driven by real

yield pulled it is about breaking those. and the idea that the fed will pause. it's an interesting dynamic are removed from real yield expansion. an inflation expectation is kind of dynamic. lisa: and the survey that came out friday, no one seemed to care because it is surprising how much it highlighted inflation expectation in the near t it goes to the question if we will see a really -- re-acceleration. we will talk about that with going a investment management, barbara reinhard who has been bullish. we will see if she is change her perspective at this time ♪ . ♪ like that- i need a breakthrough card. like ours! with 2.5% cash back on purchases of $5,000 or more.

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>> we will move a standalone israel funding bill this week in the house. our republican colleagues in the senate have a similar measure areas we believe it is a need. there's a lot of things going on around the world that we have to address, we will, but right now what is happening in the israel area takes immediate attention and we have to separate that and get it through. lisa: hearing from the new house speaker, mike johnson talking about a standalone bill rather than uniting the ukraine israel conflicts together.

and the question is how will the house passed anything at a time of division? it is in the u.s. and around the world. and joining us for team coverage is bloomberg all over kirk and amory horner. -- anne-marie horner. and the prime minister of israel came under criticism for the intelligence failures and did not except responsibility. how much is he losing the ability to lead a -- in a fraught time? oliver: the context where this is happening, when the war broke out three weeks ago, before that it was about the rift in society which is not been healed. it was put to side -- to the side. the hundreds of thousands that protested against him rally

behind the war effort. and so for him to go out on social media and divert the attack saying it was a failure on his intelligence and defense side rather than his own responsibility was taken orally particularly when it was given after a joint press conference which is within opposition leader. for him to go out and do that, he deleted it and then apologized but it speaks to the issue with the pressure. and too early for this conversation, but long-term what will be the government after the war cabinet because this will be fundamental in shaping the future of israel and its relationship with palestinians. lisa: not just isolated to israel over the weekend a series of articles about have president biden is losing his constituents including swing states like michigan. those advising biden think it is

never been worse politically for him. how does this play out long-term and short-term in your view? annmarie: domestically the president has growing concern including the policy in the middle east. one of the biggest concerns is to contain it. and when the defense minister will come to washington dc today my the administration wants to contain what is going on in the middle east but what we see in a state like michigan which is a key swing state hillary clinton lost them by over 10,000 votes. if the third already candidate was not there she probably would have won she can. it's critical for the democratic already. ayden has two issues in michigan. the large population of the palestinian diaspora. there's been a lot of her

wording with nbc having a story out talking to people saying we will stay at home and we will not vote for joe biden. we feel like he let is down and there's uaw work or's in those households. when we looked at the swing state is showed former president donald trump is making headway in the uaw households. that's why michigan is an interesting state. gina: flash one year. we are a year out from the 2024 alexion how nickel is this specifically in that election landscape relative to everything out? annmarie: there's too many questions that remain to understand how important this will be on americans minds when they vote over a years time. but if this becomes a wider regional conflict, this can have a tremendous impact on the

election. not just now with the palestinians are asked for a -- palestinian group that will not vote for the president this year but what does it mean if oil is higher, or american are killed in the line of combat? we see an increase and uptick of missiles that are hitting u.s. bases in syria and it talk -- iraq, if this metastasizes it can make it difficult for them going into the election next november. damian: where do you think the majority of republicans and democrats it with israel and palestine? do they support a two state solution? are your thoughts for the

average republican and democrat? annmarie: there's a lot of bipartisan support to make sure that israel has the funds that they need to defend themselves. that's what we heard from the new speaker mike johnson. he was to pass a to israel and have bipartisan were in the house. the issue he has is coming against traditional republicans that want to see the big package. mitch mcconnell said the previous weekend the bigger power -- there are bigger power struggles with the china's -- with china and russia. and the u.s. needs to address all the national security concerns in the world. there's a lot of support from -- for israel, a number of senators in congress men and women flying to israel to make sure they stand shoulder to shoulder. but at the same time you hear politicians talk about what president biden has talked about, they want to make sure

israel is doing the ground invasion by making sure they protect civilians and pushing more humanitarian aid in gaza. this weekend it was difficult. lisa: from your perspective, in israel how much unity is there is this more rides on. we talk about keeping this -- grinds on. we talk about keeping this in the u.s., but what are your thoughts? oliver: i think there is still some support. there is discussion and disagreement about the emphasis put on hostages. there's many people who have family and those that they know that are being held by hamas. there's concern around the idea that the military objectives may take precedence. the number keeps shifting but to 39 hostages held in -- 230

nine hostages held in gaza. this is one of the main issues but it will be interesting to see how it develops with benjamin netanyahu -- and the comments he made over the weekend. and the alternative is that this will be in place until they reach their objective but the question is how long it will be. lisa: thank you so much about the view forgiving clarity to a highly opaque time. i'm continually struck by how not clear some of the social media has been. people get their views from social media and they've gotten distorted views. it seems like a different front with wartime information. damian: myself included by way of example. there was a protest in grand central this weekend. it was in some of the cease-fire. that's why i asked the questions, do they want to cease-fire or do they want more? what do people want and stand for?

it's hard for me to cut through the ambiguity. gina: and it is also based on what you have historically consumed so you're not getting a full unbiased picture with your media. how true is the view? it is largely opinion based in a lot of ways and targeted to you, how much credence can you give it? and this is where people get their news. lisa: and that is a great point. that's why you see the polls on either side get more extreme and less inclined to a talk. that seems to be the case. coming up andrew sheetz of morgan stanley will join us as we move through the geopolitics as we try to understand how much the nuts and bolt matter. ♪

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a big week. tom and jon still on a cruise. they will be back later this week. futures up about .6%. but the s&p has been down 10% since the end of july, the nasdaq 12%, the russell 2017%. alongside of me is damien sasse our and gina martin hours.

the question of whether we can buy the dip goes back to what is the compass of the moment? gina: big sign of how much risk tolerance in general is breaking down. that is intriguing. risk tolerance is breaking down at a time when earnings are showing a degree of resilience and better than expected results during earnings season. nonetheless, markets are telling you nobody has any tolerance for risk. difficult to see where the catalyst comes from. damien: four to one is the ratio of downgraded stockthat speaks e fundamental outlook on a forward basis. seven of the major 14 sectors that i cover in em credit expected to have a major -- a negative outlook next year. lisa: to a get to that question in another minute. this morning, israel expanding

ground operations in gaza. over 600 militant targets in gaza have been targeted, including retaliatory strengths in syria. netanyahu under pressure to resign after a now deleted social media post blames security officials for the october 7 attacks. netanyahu has apologized. it has not quelled te ire -- the ire. gina, you said you spent significant part of your time trying to strip out the noise. how much can you tell what is noise and what is real? gina: the signal for the equity market is what is happening with oil prices and yields. if oil prices are not moving at the middle east, that is a signal for what to expect or stocks and general sector strategy, particularly the

energy sector. where you run into a lot of problems is trying to assess risk premium and impact on sentiment. clearly risk premiums are widening in an environment where geopolitical concerns are so paramount, but if you can guide yourself based upon with the real data is doing, you can find opportunities in and out of the equity markets. damien: the highest issue right now is pemex. in 2025, pemex will pay more in interest then debt in what it is producing. that will never change. l i imagine you are not positive on that name? israel's new offensive in gaza -- responding to the lack of significant response from iran, easing fears that supplies will be interrupted. over the weekend, u.s. and iran

traded warnings, including jake sullivan, who said there is still a risk of spill over. i look at oil prices every 10 minutes. damien, do you feel like the headlines correlate to the price of oil? does it make sense to you that prices have been coming down? damien: no. it is different is commodity correlations. nor just bank this week, columbia, a lot of currencies in years past have correlated well with commodity prices and oil but we are not being that this time around. i do not necessarily believe you are seeing a fundamental link between prices of oil and valuations. gina: you wonder how much of it is the demand side? is oil behaving because the expectation is yields will keep -- to the world into deeper recession?

maybe oil is telling you that supply is constrained based on what is happening in the middle east, but if oil is not going up, it might be because demand is deteriorating. lisa: interesting. otherwise he would see a pop but there is not that kind of economic activity. major week for global central banks and less major ones. right decisions from the bank of japan tomorrow. bank of england and federal reserve all do. we look into the quarterly funding announcement wednesday. that will set the stage for how much the u.s. has to bile and whether we can absorb it. then we get the u.s. labor market structure on friday. andrew sheets is going to be parsing through all of this. what is most important for you this week? andrew: several things.

confirming that the fed's passing. we think they will not raise rates and that will further enforce the idea that the ardennes, which we think is important for stabilizing bonds. and the earnings season remains important. so far, the underlying reported earnings are decent but the guidance has been disappointed in the markets reaction to that. we see quite a bit of idiosyncratic risk coming out of earnings, single stock risk. damien: you also mentioned that fiscal policy is key, across the u.s., europe, china. it is playing an elevated role in market dynamics this year. tell us about that. andrew: i think the fiscal story is interesting. it affects the u.s., europe, china. we focus upon it in a couple of

ways. we might call our head of asia economics, there are great charts that show just how much two policy and china has reserved. china has been painting fiscal policy while the u.s. has been loosening it. to get more bullish on china, we need a larger physical response than we have seen. in the u.s., how much can states pick up the slack? we have unusually large deficits in the u.s. relative to the strength of the economy, but state and municipality spending actually holds up pretty well over the next 12 months. that may keep the economy out of recession. but that is also really important and important to of how you can get a soft l even with the schools from the government. damien: how does this fiscal

landscape impact your corporate strategy? we are engaged in this conversation. there is a concern in the equity universe that some crowding out occur as a result of these extraordinary deficits and high yields. is the fiscal landscape affecting corporate strategy at this point? andrew: so far, what has been happening on the physical side has been helping credit. -- fiscal side has been helping credit. i think it is reducing the on of a recession in support of the economy. that will be helpful for credit, but something that has been weighing on treasury markets has been the income, the carry is low. the curve is inverted. you get paid more for t-bills. supply has been heavy. expectations of supply are high. we look at the corporate credit

market. it is the other way around. carrie and corporate credit is positive. issuance has been undershooting expectations. companies have more flexibility than the federal government to issue or not. they are saying this is expensive borrowing. we will try not to do it. you have seen less supply in the corporate markets, which we think is a relatively positive technical. gina: if you go back to june or july, you would be hard pressed to find one fixed income asset class down on the year, but now it is the complete opposite. the one asset class that is still up on the year is u.s. high-yield. what is giving it up? can it sustain its current performance? andrew: u.s. high-yield has been remarkable in terms of how well it has held up on a relative absolute basis, but with hindsight, it has been helped by

the fact that those have been rising and investors generally look to high-yield is a better performing sector, shorter duration. then you have seen relatively little supply out of that market, especially because it has been so expensive. but going forward -- and i think this has been key -- you look at what is happening with brett in the equity market and the underperformance of small caps relative to large caps. that is a troubling signal for the future performance of high-yield. if the equity market is saying we are getting more cautious on cyclical stocks, as long as that is happening, it is harder to see the catalyst to drive more compression on spreads. we think spreads decompress from here. we think there is a lot in the price of high-yield relative performance, even if we avoid the recession in the u.s.

lisa: how concerned are you that japanese buyers, big corporate debt buyers in the u.s. are going to pull back, especially with adjustments from the bank of japan? andrew: we this risk so far is moderate turn on the hedge japanese investor on u.s. corporate it is not good. we need to see still if the flow continues. our base case is that they do, but that is subject to what we might see this week. lisa: thank you. that is one of the questions underpinning spreads. one of the biggest investment grade buyers has come from japan. gina: i love it would -- damien: tight love it when you talk about crowding out. the effect is real. not enough paper in credit. all find and good but eventually you will realize -- the crowding out impact, it is going to

overwhelm a lot of fixed income investors. we are starting to see that here. gina: if it is all about supply, aren't the people actually looking to the market going to be the high-yield borrowers? if it is about supply and issuance trends driving corporate credit arc is this time, then you've got to think, longer-term, how sustainable is this? these are the weak players in the market. lisa: which is why everybody is talking about immaturity law, what these companies are currently doing to extend that profile. i keep hearing about the deals in private markets. it is all about private credit, but all of that is predicated on the idea that venture -- benchmark yields will go down in the next three or four years. curious how that will evolve. right now, you're seeing. full put dry powder in the markets. .7% gain on the s&p.

even more when it comes to the nasdaq. i am curious. you talk about dispersion, small caps. is it correlated still? who is right? everybody talks about bond traders being the smart guys in the room in terms of analyzing. would you beg to differ? gina: sometimes it is not apples to apples. you look at the constituents and small-cap equity, it is a lot of health and a lotta financials. that is not necessarily the same story that you have in high yields. historically, the weakest players have been energies and telecoms. we are in a bizarre universe where energy stocks have not borrowed too much money, or energy companies have not. that partly explains what is happening in high yields but in equities it is about health. everybody thinks health care is this defensive sector but our

view is health care developed a bubble in the pandemic. the are seeing it deflate rapidly. it is part of the reason why small caps underperformed. the pandemic seems to have gone away. we seem to have resolved our crisis. the overbuilt this idea that health care would be this huge portion of growth. it is not. lisa: but ozempic. gina: weight loss drugs are not replacing the pandemic story. lisa: depending on who you talk to, it will bring down the cost of airplane tickets, make people stop eating fast food. coming up, elliott ackerman parses through the machinations in the middle east. what do you see on the horizon? uncertainty? or opportunity. whatever you see, at pgim we can help you rise to the challenges of today,

when active investing and disciplined risk management are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today. is it possible to fall in love with your home... ...before you even step inside? ♪ discover the magnolia home james hardie collection. available now in siding colors, styles and textures. curated by joanna gaines. >> i think the u.s. response has

been measured. there is a deep sense in washington that we do not want to be pulled into this conflict.

i would be careful at looking at sanctions as having too much of an impact. you have to ask about a specific sanction as it touched the decision-maker at the top of a pyramid? sanctions against hamas are important but do not meet that measured. lisa: norman roles speaking. talking earlier about how the u.s. gets involved from a financial perspective. tom and jon off today. damien and gina alongside me as we parse through what is noise, what is real, what is an escalation? trying to get our hands around the concept that has been so divisive and horrific. s&p up.

crude down 1.25%, partly because there has not been the hardline -- some people were expecting with ground invasion. joining us is elliott ackerman, u.s. marine corps veteran, former white house official. author of a novel about the next world war. home we are not entering into one. what do you make of the that we have not seen a greater escalation? elliot: i think we have seen is very deliberate military movements on the part of the israelis. we have not seen them rush headlong into gaza. we have also seen the u.s. take measures by moving battle groups and other forces into the mediterranean to dissuade the iranians or hezbollah from

coming into lebanon from the north of israel. this counteroffensive is playing out in a deliberative manner. i think so far we are seeing that that is stopping this war from turning regional. gina: it does seem that most of the rhetoric or statements out of the region are about the war canoeing or at least getting started. the ground troops getting the now, which would suggest not a lot of endgame site. the assumption is this will take some time to lay out. is there any resolution in your mind in the near term? or is this another war we will contend with for an extended period, similar to ukraine? elliot: there is a tendency when you look at wars to focus on the movements of ground troops and

the specifics. that is important but it is also important to hold in your mind the same time that wars politics and other means. what are the politics of this situation? this attack on october 7 was launched as a counter to the saudis and the israelis signing a peace deal that would disempower hamas and put iran in a difficult position. by forcing an atrocity on the israelis, hamas forced an israeli response caused the peace deal to collapse. is what we are seeing right now. this poses an obvious question -- who is the party that has the leverage at this point? israel does not. they have to respond. hamas is waiting for the response. the people who have the most leverage our the saudis. his the saudis were to turn around and start renegotiating

this peace deal, it takes away all of the leverage that hamas and iran have created. as there is a lot of discussion about the fatigue that the world is going to have when we start seeing the israeli military operating in gaza and the civilian death toll, there is also fatigued of the arab world probably has with the palestinian question. could we see possibly a piece -- peace resumed out of the arab world? damien: your former marine, five tours of duty in iraq enough to stand -- and afghanistan. how do you infiltrate these tunnels underneath gaza? any president for that? elliot: there is historical precedents for that, but i cannot emphasize enough how challenging that firemen's. a major urban center is the

worst place you want to be fighting. the closest analogy i can come up with is it is like being in a knife fight in a phone with kurt everything -- in a phone booth. everything happens in both -- close quarters and quickly. high temperature weapons becomes less effective because of the close quarters. these tunnels make it extremely complicated for the israelis. they have to go in, now known tunnels, figure where they are. at the tactical level, you could not have posed a more challenging problem to the israeli military. i do not believe it is insurmountable, but it will make it slow going and forces them to act deliberately. lisa: you said it is not insurmountable. i want to develop that point. there are a lot saying what does it eat hamas? can israel win this work? what does winning way -- what

does winning look like? elliot: winning, as the israelis have to find it, is the destruction of hamas and some normalization insecurity in the region so israelis can continue to live, in southern israel in particular. when it comes to destroying hamas, that will take some work that is technically viable. the question is what are you doing gaza? do you face uncertainty in gaza? when it comes to the city of normalizing relations in the region, we get to questions of diplomacy. can israel and our partners negotiate with whatever the inheritors are of hamas, whatever the palestinian authority is, to create stability in the region? not there yet but we should not underestimate that fatigue

exists in the arab world with this conflict. it seems this war was predicated on hamas blowing up the best chance for peace ever. lisa: you talked about saudi arabia arguably having the most leverage. saudi official coming to washington this week, axios was reporting. i am wondering what the goal is among some arab nations who have the power? i'm king of cutter in the united arab emirates. what do they want? elliot: i think they want to live in a region that is not plagued by systemic work in israel. to allow peace to finally break out in the middle east and live in a region where we do not immediately think of conflict. that may the middle east can start to look like western europe. that is probably what they want,

when everybody wants. we should not underestimate the fatigue on all sides. lisa: do you think that their goal is for israel to survive or not? elliot: i think their goal is for israel to survive. it is difficult for them to say that, but yes. lisa: elliott ackerman, thank you so much. damien, you were talking about the experience come in the boots on the ground and seeing how challenging this ground operation can be for everybody. damien: the american war machine is up and running. defense spending in the u.s. up. it is not as if people are not throwing money at the issue, but i cannot imagine, what elliot is talking about, the closed order fighting that will take nice and the deaths and casualties will be unlike anything i have experienced. gina: the visual of the knife

fight in a phone booth will spin with me. he makes an point about the nature of the operations in the underground tunnels. how are we going to respond? how does it resolve itself when wartime operations are mostly above ground-centric? this is a new battleground underneath. lisa: which raises a question about the budget that president biden just put out. damien: the decision tree, these tunnels take electricity to ventilate. israel has cut off electricity to gaza for obvious reasons. it is amazing. at what point does the rubber beat the road -- does the rubber meet the road> ? lisa: and civilians are caught in the middle. humanitarian disaster. anybody who wants the war to stop the question is how?

coming up, barbara reinhardt. this is bloomberg. ♪

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the peak continuing yields. >> soft landing more likely.

>> higher interest rates have increased the chance of a recession. >> we are probably within 50 basis points of a peak in rates. >> this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. lisa: bonds and stocks sending slightly different messages. tom and jon off today. i am lucky that damien and gina are still with us. seems like a tumultuous week. i started by saying bonds and stocks are sending a slightly different message seems like bonds or saying strength and resilience, stocks not so much. gina: for stocks are just reacting to bond market yields. difficult to say.

does not look like there has been a massive shift in the economic outlook to stimulate decline but sentiment was irrational in the middle of the year. we have seen major pullback as yields have accelerated our could be that this new correlation between equities and bonds is playing out in a negative fashion. damien: sentiment has just been one part of the equation. we have a lot of data this week, payroll, the fed. it will be interesting to me to see how well sentiment will hold up. lisa: let's parse through the acronyms. we are talking about employment data, potential for how much debt the u.s. will add to the current debt pile without the fed necessarily buying but also the fundamentals of the economy and how central banks view that. what is most important? everyone says all of it by the end of the week, everybody says it was the eci did everything,

the university of michigan survey. what could change the dial? gina: i did not know that is one but you did not talk about apple earnings ultimately, stocks are the future of earnings strength. what companies do with their earnings will matter to equities. apple being one of the biggest stocks in the world is very important and consequential. we need to continue to see relative stability to see stocks hold up. lisa: let apple and stocks are not the economy. the stock market is basically, apple, microsoft, google, amazon, doing fantastically. how do you expect to see that play out another areas? damian: interesting. it is not just about tech but eps is a good indicator of economic sentiment. there is a lot to take away from earnings, but tech, that is the

leader here. what will happen with this thursday with apple will definitely be in market. damian: gina: this is something investors can clearly forget half the time. the economy and the market are not the same thing. earnings are not necessarily directly related to the economic data. you have to parse through that for what is meaningful. if you get caught up in the 250 economic indicators you are expected to follow, you will miss opportunities in the equity market what is meaningful is an important conversation point. lisa: what is meaningful now as markets are up despite uncertainties spread that goes to the point you're making. s&p futures up 7%, 4165. euro gaming slightly, a bit of a bounce back after some losses versus the dollar last week. 10 year yield climbing. this will be interesting. we get some guidance from

treasury. refinancing will be key. 4.89%. crude off just a touch with his feeling that we are not getting the same escalation that people had expected with what is going on in the middle east when our bonds going to act as havens again? we talk about headwinds. stockmarkets are not the economy but the economy is seeing headwinds. that is what people are focused on with the middle east and the conflict. joining us is barbara reinhardt. our treasury still haven? barbara: we think they are. we think bonds are sharing their best value in the better part of the past if teen years. right now on index securities, you can get a 2.5 percent will yield inflation if you hold bonds to maturity. we think because will yields are now positive, they are acting like a ballast against equity market portfolios.

we think the correlation of returns between stocks and bonds starts to return to some level of normalcy. this is the first time since the global financial crisis that he can say bonds are material value for all types of investors. lisa: how do you make that determination if it is not just about the fundamentals but how much do u.s. cells, where buyers will come from if the bank of japan manages yield curve control? how do you parse out the technicals versus the fundamentals? barbara: it is difficult to call the top in any market. ask the most astute of investors. but we take a look at long-term fundamentals and have good models that tell us about the trend of underlying economic growth and where that should be relative to bonds. we think inflation is likely to continue to fall. we think the fed is close to

finished. even if they raise interest rates one more time, you are likely in the part of the cycle where the fed is finished raising rates. we have studied this many times. almost all rates, within 12 months, you have had a significant rally in bonds. lastly, you are at a good point on the duration curve. if you were to own a 30 year treasury and if yields were to go up by 50 basis points, night you would only lose 3%. if yields were to decline by 50 basis points, you have the gain. there is a magic to duration at this point in investors favor. gina: in an environment where bonds potentially rally, yields are also positively correlated with stock prices. can you make a case of bonds and stocks both rally in 2024? barbara: teasley. he saw that in september.

bond yields were starting to come down and stocks were rallying hard. i would say you are probably at the point of the cycle or stocks are in a bit more of a wait-and-see mode. right now, you have sentiment that is not necessarily in your favor. -- not necessarily in your favor to own stocks. the other issue is breath and technicals in the s&p 500 not looking great. a number of stocks below their 10 day moving average. you need to see stocks in a better favor to get that relationship where yields come down and stocks go up. damian: thoughts are back. they once again provide a ballast for diversified investors on equity and fixed income sites. with bonds are back, where do i want to park my assets? barbara: we are buying longer duration treasuries, where the most value is, but there is the

case to be made also that there are some good yields to be had in the high-yield market right now, yielding over 9%. that is a significant potential for total return and interest rates and carry for investors. what we are doing in our portfolios, and we are managing for retirements, 40 year horizon, we are adding longer duration treasuries to our portfolios because we think the yields to be had after inflation are attractive and can act as a diversifier against equities. damian: curious about your thoughts on mortgages. i am playing on what you said 12 months after the fed stops, typically you see cuts. barbara: not cuts, declines in yields. damian: ok. that kind of scenario you would think would benefit the mortgage market. what are your thoughts on mortgages at current levels, given the underlying fundamentals? barbara: the housing market will

be slower to react. even if bond yields start to decline, it will take time for us to lower mortgage rates. we think the housing market is beholden to a couple of angst. a lot -- of things. a lot of people who own mortgages have them at low rates . 3.5% is the average. it is going to take yields to drop dramatically to unleash some of these transactions in the housing market. i would say mortgages are a goodbye but you have to have a bit more of a long-term horizon. gina: i want to go back to the correlation between stocks and bonds. this could be consequential for outside allocation at large. how are you advising clients to create a mix of asset allocation in an environment where stock and bond yields are positively correlated? has it changed your outlook for

a mix between stocks and bonds? barbara: we are investing for retirement, long horizon. i mixes are set by strategic asset allocation. the one thing we are doing is our 10 year outlook. our forecast for both stocks and bonds, surprising how well we expect arms to do over the next decade. the return for stocks are relatively low. expectation has already been built into markets over the past decade, with the return for bonds is north of work .5%, which tells us it is a big competition for equities at this. -- point. that means likely that you will see more flows into equities. you have had big flows into long dated treasury etf's, which is just a sign investors are perking up to these yields. lisa: barbara reinhardt, thank

you. magic to duration. i can just imagine the meme. this is what people have been trying to hook into for so long but it has not worked. this is been the conundrum. when you get in there? gina: a lot of people were saying five but i have started to hear six. it was interesting, four, it will be five. now hear six. damian: barber makes a great point. asymmetry. yields can go up but you stand to make a heck of a lot less if yields come down. a long-term investor cannot ignore that. lisa: you see a bit of a lift to yields. not enough to suppress things. 4.89% on the 10 year. this is a question mark.

is it enough time that even if there is going to be something that happens, whether it is a demand-side or inflation rates are waiting, people still have the confidence to go in? this week is the tipping point. maybe i am just making drama but you get the refinancing agreement and see the market reaction, is that telling? damian: the u.s. government could still shut down in a few months. i think there is no denying the fact that fixed income has its mark in this environment. in an environment where you are lacking in safe haven options, fixed income can imbalance your portfolio. it is a necessity to have a proper fixed income allocation. lisa: he is saying, no kidding. gina: i was saying, exactly. what is happening in the equity market over the course of this

year, it has been all about the safe havens that have performed really well. only about them. in this environment, bond yields have been moving higher but what sparked that whole story was inflation and the central banks response trip -- response. we are starting to get that narrative shift from the central banks. will we see the follow-up with the bank of england, the fed? damian: safe havens are apple, microsoft. lisa: coming up, we will speak with tiffany wild thing -- wilding of pimco. how much does it come down to how much inflation comes down versus the potential for acceleration? ♪

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defense forces speak to their plan. war is highly unpredictable. we will continue to talk to our israeli counterparts, ask hard questions about how we are thinking this through, proceeding. but ultimately these are their decisions. if american troops are attacked by iran and its proxies, we will respond. we did respond. lisa: jake sullivan on abc. all of the different politicians

took to the airwaves. probably the one i found most interesting was the new house speaker who came out on fox and discussed the idea of splitting the two israel and ukraine, cutting the budget to offset those expenses, as well as what this means for president biden's popularity at a time when his own party is getting splintered. joining us is terry haynes. i want to start with what we heard out of mike johnson over the weekend. how surprised were you to hear some of his points that sound like they come from a playbook from another time? >> i have been writing for weeks that the strategy that would get pursued is breaking all these pieces apart instead of biden's idea that they should be rolled up together. what i noticed is what jensen does not say. what johnson does not say is he

is against ukraine a ukraine ancient not happen, but that it will not happen, none of those things. we have gotten what i was always fearful about is that this is going to become a fight about how these things get done, these things being israeli and ukraine a border security enhancements. that will take up most of the rest of the year but they get done in the end. gina: they get done. we continue to support these two wars. where do we cut spending in order to accommodate? terry: we do not. the good news and the bad news is that on book spending has been consistent for the last decade plus. off book spending and commitments, housing, a variety

of other things, continue to believe in -- to balloon. there is a problem. the markets for the first time in 40 years are concerned about rising debt, rising deficit, rising u.s. fiscal spending. there is not a politician other than biden himself who has ever heard markets be concerned. i am is not in a position to do anything about it. he is beholden to his left wing who think and the spending is the right thing. gina: we keep spending. what about china? and what is happening with china. so much is happening but china and taiwan are angering in the background. is there meaning behind the meetings this week? terry: every time the markets hear anything from a u.s.-china perspective -- the current one

is the prospect that biden and xi jinping might meet on the sidelines of the aipac meeting next month -- markets think this is a good thing, but in reality, china has been very blunt that through the national security law, kicking western accountants out, now through the conference this week, more evidence of state control is a variety of areas in financial services is a world that, where china looks increasingly fun and fast -- univestable, the cat is out of the bag. markets are figuring out there will not be long-term rapprochement between the u.s. and china. the best we will get is a situation where the competitors in the classrooms understand

each other well enough not to take the next step into a rising geopolitical risk. damian: mike pence pulled out of the election this weekend. donald trump leads pulling in early states. it is still early but do you believe we are past peak trump? can anyone else in the gop make a run at him? terry: i will stick to my earlier views that we are past from. what you've got early primary states is a situation where polls are 50% in favor of trump, which means 50% are against him. you probe into trump support more and you have more people who could be convinced otherwise. and it is early. we have tuna half months before the first primary. my advice to markets is twofold.

one, stay cool on this until after the first of the year when you have some idea what is going on. number two, what you do see is a continued winnowing out of the competitors. we are already down to nikki haley, ron desantis, and tim scott as leading challengers. mike pence understood he was not part of that. he is bowing out early. but what you will get is a consolidation that happens earlier and provides a much more unexpected from markets respected -- perspective challenged to trump. damian: mike johnson, is he the leading voice for house republicans? you've got steve scalise, tom emmer, jordan. terry: people tended to view new people based on those who are already there. markets are used to that. this is super majority leader

position, whether it be nancy pelosi, or the, john boehner but in reality we you get with johnson is a situation where party regulars are more empowered than before. they are going to be leading the party more than johnson. that said, one of the things johnson also said on the sunday shows is that they are looking more seriously at extending government funding beyond november 17 that they would have been a month ago. i put my own on spec down to 40%, but i think the political situation is volatile. i will be ready to put them back up if and when the republicans fall apart. lisa: we are talking about the republican side and nominees for

the election, but why was gavin newsom in china? terry: ostensibly to talk about economic times. really, he is trying to burnish his foreign policy chops. there is a lot of sharks in the water. it would not surprise me if biden is feeling it should they falter. cubesat evidence of that even with vice president harris -- you saw evidence of that even with vice president harris on 60 minutes. new start wants to put himself out there is the alternative. republicans would love that. newsom would not get a boat outside solidly states. lisa: visit video -- those video images were something. damian: he is no jayland brunson , but what i really wanted to ask terry was with all this

geopolitical risk out there, what is the real pain train for investors? is it something blows up in the middle east? i am curious, what is the pain trade for investors? gina: something positive. yours was potential conflict, negativity. i think the pain trade is all of a sudden, we get some resolution. that is not in any consensus view. i am an internal optimist. there is a reason i work in equity markets. lisa: and there is a reason why i focus on bonds. coming up, tiffany wilding. he challenges of today, when active investing and disciplined risk management are needed most. drawing on deep expertise

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opening bell. a bit of a buy the dip continues, led by the nasdaq off earlier highs s&p futures up .6%, hovering around these levels all morning. bit of a soft extending in the 10 year yield. 4.9%. it had been 4.86 earlier this morning. crude off just a touch given the fact that israel did not have as aggressive of a land operation

in gaza. home and jo -- tom and jon off today. damien and gina with me as we parse through this slow week. michael mckee is with us. this is a huge week, really pivotal to understand the inflection point of the economy, whether it has to do with the jobs or central bankers. what is the biggest prize that you think is likely based on what you are hearing? michael: most of the economic data will probably come in as people anticipate. the big question is bond yields. where do they go? so many things could influence them. people are forgetting the bank of japan is meeting tomorrow. there is a 50% chance that they wind up the band for yield curve control. as the 10 year yield continues

to rise in japan, that takes money away from the u.s. at a time when the treasury is going to talk about what it needs to borrow. we could see yields rising. that has the follow-on effect in the economy that everybody is talking about. interest rates are doing their job for them. gina: fed meeting this week as well. no shortage along the central-bank meetings. how much is this yield rise going to be part of the discussion? how much is the bond market doing the work of central banks? michael: that is the way they are thinking about it. they may have decided they have done enough. there are lagged effects we are starting to see impact more the economy but with market rates rising, they are doing some of the fence work. their question will be how high do market rates go, but we know

the fed will probably not do anything, less than a 2% chance they change rates. that will be what jay powell says, this he suggested they are done and will not markets do their thing? for this heat suggested they will keep your options open and leave us more confused? damian: you are focused on the u.s. economy, but there is a lot of central banks as well. brazil and convio expected to cut. you care? from an extension of that, norway has proven that they are targeting currency levels. talk to me about that. michael: there are a few countries, norway, may denmark, targeting currency levels. but the rest of the banks do not do that. you cannot guarantee that what

you want you will get from your. the rest of the world, it is not matter to the fed, but the fed matters to the rest of the world. all these banks are reacting to what the fed is doing. interest rates are setting the pace for the rest of the world. one interesting thing will be a week from tomorrow, when the bank of australia meets. they are expected to possibly raise rates. they may be the only non- creative thank doing that. that is something to keep an on. lisa: i am sitting here smiling. damien will double down. gina: he will shoehorn emerging markets. amazing. [laughter] michael: norway -- damian: norway has proven. it is in their calculus.

they are targeting parentheses. and a lot of central banks, whether they admit it or not, are targeting currency valuations relative to the dollar. they could write it off as if they are targeting growth they have no financial system if there currency falls. lisa: there is a real question about how you target that itty time whether it is unclear whether it is rate differentials are economic growth. nice to be in the peanut gallery. michael mckee, thank you for joining us. joining us now is tiffany wilding of pimco. earlier, gina made this point about how she thinks the pain trade is to the upside in equity markets, earning stronger-than-expected. is it the same with economic projections, that the economy, if it reacts otherwise, is

almost the pain train to where people are situated? tiffany: some of that has been priced into the economics communities forecast. you saw many economists penciling in a recession earlier in the year. if you look at consensus numbers, those have come up. that can continue, but it has been a risk he had been highlighting, in particular the consumer, it is possible the consumer remains strong. the consumer did reaccelerate purchases on the back half of this year. it is a question of how interest rate sensitive the consumer is. lisa: which raises the question also what is the connection between growth and inflation? is there a sense that if growth accelerates, we can still see disinflation? tiffany: this has been a point we have been trying to hammer home, which is that there will

be some continued disinflation as a result of the fact that you are still getting the product market site of the economy. beside that was impacted by some supply-chain snakes, you're still getting some normalization , but labor markets are tight. you are seeing a decent amount of nominal income growth as a result of that improvement. we think you probably still need labor market softening in order to get inflation truly back down to target. if you have an economy that is we accelerating and a labor market that is strong, not the services and shelter metrics that the fed is looking at, those probably will reaccelerate. gina: what is the most important economic indicator you are watching this week? the jobs number will be important. there will be some noise around that. there was some strike activity, but everybody is trying to figure out with the underlying

trend in the labor market is. the federal reserve needs to target growth that is under potential. 1% is what the fed is hoping to target to pull the labor market. growth is well above that, which suggests the labor market will remain strong. we will be looking at that, the wage number within the labor market report will be important as well. but overall, we have said that if the data flow continues to be as strong as it was in september, the fed is probably going to want to keep his options open to hike more. the sep could maybe even take out cuts for 20 pretty for to keep financial conditions tight. gina: what is the impact on financial prices been? you've got the fed likely to pause, data still coming in reasonably strong. what are financial markets to do

with this kind of data? tiffany: good news should be bad news in some sense. the federal reserve is trying to pull off the economy. ultimately, the way they do that is through tighter financial conditions. within that is higher interest rates, a decline in equities, wider credit spreads, that is how you pull the economy. if the economy remains strong, you need more pressing like that to cool things off. damian: there has been a lot of focusing on the quarterly refinancing announcement. is the supply story in u.s. treasuries already reflected in the price? tiffany: this is a key question. it is broader. clearly, treasury has had a bigger funding. they have been trying to increase coupons as a result of the fact that they have this bigger need and are ramping up loans, now coupons. the bigger issue is that better growth expectations is

increasing people's expectations for supply. that is counterintuitive, relative to the usual experience. you usually have higher tax revenues and that reduced financing need, but right now, you have central banks that can continue to reduce balance sheets for longer or the bank of japan, which pulls away from buying jgb's, that results in more citations for supply globally and increases term premiums. that will continue. damian: you're right in the wheelhouse. for and buying of treasuries. the fed is no longer backstopping things. top was about demand for u.s. treasuries. who is that marginal buyer and risk taker? tiffany: that is what everybody is trying to figure out. one of the issues is that, you go back to 2014 through 2016,

where you had a good amount of bond yields that were negative. the u.s. was the only game in town. now, with interest rates across the world higher, it is possible to get positive yielding assets outside of the u.s. diversification of portfolios as a result of that is reasonable. it is a question of who is the marginal buyer and what price are they willing to pay? what you'll do they need to get to come back into the bond market? lisa: thank you. damien, great question. it is priced in? where will buyers come from? do we understand the technicals? we do not know. we have not seen bonds performing in the way they usually do. damian: just how high can the 10 year ago? i heard we would never see 2% but here we are at 2.4%, mindnumbing.

100 basis point move since mid july. lisa: gina, how many stock investors are saying should i buy bonds? gina: a lot. at 4%, they were saying we have got to start nibbling in, then 5%, maybe 6%. it is a big part of the conversation. this is what i call tara instead of tina. the old moniker, there is no alternative to stocks, is completely gone. there are reasonable alternatives. the allocation story comes up a lot. it is a big reason why investors are concentrated in the biggest stocks in the world. what is happening in bond yields has changed the game. lisa: right now in bond yields, we see a bit of a lift. if you are just dreading, four .9% on the 10 year yield, s&p futures up at 4162.

damian: the earnings yield on equities is relative to the nominal yield for treasuries and everybody is saying, wow, you can get a higher yield on treasuries. interesting to hear that the people you're speaking to to are focused on that area gina: it is, also interesting that companies have not recognized they could easily deploy capital to increase that dividend yield and improve their relative appeal. i find this fascinating in the equity market. we are still sitting at a 2% yield on stocks, not interesting. to the degree that you can get yields for more distressed entities are more rate sensitive entities, investors who are interested in playing the yield story are forced into the bond market. there is not a yield opportunity in equities unless you go to repurchase yield, shareholder yield, where they have found some degree an opportunity.

it is frustrating that corporate's have not migrated relatively quickly. there is a lot of cash that could be deployed on s&p 500 balance sheets. lisa: feels like the market has been holding their breath. when can we write the book on this chapter and go back to normal? suddenly, that is changed. people are saying, what if this is the new normal? that becomes dividends and maturities. that is where you have real discussions of what does this world look like in terms of investing in orbit finance. coming up, how oil plays into this space. amrita sen joining us.

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to offset the depletion that has been happening. with respect to the middle east, it is still an important region in the world. today, the tragic events are not manifesting an impact. that is something we are keeping an eye on. lisa: darren woods speaking without steel and guy johnson last week after coming out with earnings. real question mark around consolidation in that space. we will get into that in a minute. tom and jon both off today. gina and damien joined me this morning. a couple of names stood up to me as we went through the morning. meta today is hopping the touch after reporting that they are planning on offering people in the eu as well as switzerland the opportunity to pay for a monthly subscription using

facebook and instagram without ads. it was up 2%. now it is up .8%. it goes to monetizing and the idea that people hate ads. how do you get around that? do they profit on that? sophia is interesting, said their online lender increased its revenue forecast for 2023 and more than tripled the number of depositors. shares up more than 10%. you are seeing some competitive edge for platforms that pay interest in a way that the banks are not. gina: it is interesting, especially because this is a smaller entity. nobody takes more risk in a follow-up -- more banking than the s&p 500. it could be a sign that maybe things are not as bad as anticipated. you still are getting deposit growth. there is lingering concern about what that means ultimately for the balance she and how much unrealized losses those deposits create over time, but it could

be a sign that maybe we have gotten to a point where we were too pessimistic about finance. lisa: meanwhile, at mcdonald's, they came out, beat sales and profits on both numbers, because sales are increasing as they raise prices. this is been the story across the board. we've seen this with coca-cola as well. how long can we keep seeing that pricing power? damian: i wonder if that is indicative of the fact that people are not going to restaurants as much, stepping down to mcdonald's in order to eat. but the margin story is not going the way just listen to gina martin adams. gina: true. i own it. damian: look. margins are important in this environment. it is going to be interesting to see how some of these other

consumer oriented companies report on earnings. lisa: input costs are a will question. one is energy, at a time where there are doing points. i will take your point, gina, about rb seeing -- are we seeing a lack of response to geopolitics because demand is not there? are we seeing a muted response in crude to the geopolitics of the moment simply because demand is also falling in pandemic? -- in tandem. amrita: there are no direct risks to supplies. that has made it hard to rally. the region is home to production of oil. if there are no direct threats, how do we priced that in? is why we have seen more

activity in the options market. people cannot control this market, but the macro picture has deteriorated significantly in the last couple of weeks. we have been seeing some of this coming, sometimes a lot of these factors all come together. uap european and u.s. demand definitely weaker. -- european and u.s. demand definitely weaker. they remain range bound for now, not much premium in the price. gina: talk a bit about some of the other energy products. natural gas is heading into a seasonably favorable time of year. fundamentals improving materially. where are you seeing natural gas prices headed going forward? amrita: depends on the region. think about european natural gas prices. they have gone up quite a bit. the middle eastern conflict has led to supply losses through israel and egypt area but the

market remains well supplied. unless we get a really cold winter, we are not expecting a huge increase. prices are trading significantly higher than the 10 year average. that was to be expected. storage is higher. industrial demand in europe has not just been temporarily removed because of high gas prices but probably permanently reduced, combination of high energy prices, lower economic growth but also the inflation reduction act in the u.s. that is taken industry away from europe to the u.s. in the u.s., gas prices are slowly picking up, but industrial activity is not blazing just because of the economic backdrop. damian: put your options hat back on.

if you look at fx rates, equities, it has been well behaved over the last few months. talk about brent crude paula tilly the -- volatility. what do you think about volatility in the crude market? amrita: to your point, it had been well behaved, but over the last couple of weeks, we have had bond and oil pickup. we are coming to the year end for a lot of trading companies. it is between a cobra and december. if you have had a good year, why which you put up a position and risk losing some of that you have to pose your books? -- close your books? that is a challenge with volatility and why we are seeing more options pricing. most want exposure but not necessarily to traded futures.

the futures market has shrunk in the last couple of weeks. lisa: tomorrow is halloween. you talked about $100 a barrel oil by halloween. do you still think we could get there? why haven't we got there despite expectations? amrita: we were almost there, $97 on branch. what has happened with the middle east crisis is it has taken risk out of the market. it has been deteriorating. that has not necessarily been a significant change, but if you take away the unity from the market, you need by astute push those prices up. we need to get both liquidity coming back and a bit more. one of the big concerns we are seeing on the demand side is both europe and u.s. demand

starting to come off more aggressively than in the first half of the year, perhaps just because savings are running out or we are seeing seasonal factors come through as well, but that is one thing we are monitoring. lisa: thank you. exactly to the point you were making, maybe this is a demand story more than anything. gina: you have to wonder. we have seen pmi's in europe decelerating pretty rapidly. most of the developed world is having pmi's crash. emerging markets still a bit next -- mixed. we were maybe coming out of our lows but the rest of the world seems to be capitulating to weakness. damian: i agree but one point, j.p. morgan, upstream oil and gas spending on track to reach $45 billion. as much as demand is part of the story, there may be a supply component as well.

lisa: interesting, especially when there is consolidation. coming up, shortage, sarao, and franklin. and do not miss an important conversation from the national economic council director. it is always a long week, this week especially. you both took the time. i am sure you enjoy kicking off your week this way. damian: just got some expensive coffee. [laughter] lisa: it will be interesting. we should reconvene after this weekend say what was the most important thing? it will be some small indicator, a meeting that someone had. they will come out and it will change the whole paradigm of the new narrative. in markets, a bit of a by the dip moment but range bound

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>> from new york city from -- for our viewers worldwide, i am lisa abramowicz. the can down 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. lisa: coming up, futures rebounding after falling into correction, israel slowly widening its round invasion in gaza,