♪ ♪ >> good morning and welcome to "bloomberg daybreak: europe." i am kriti gupta in london. all eyes on the u.s. treasurie''

quarterly refunding announcement with issuance in focus ahead of the key fomc rate decision later today. japan ramping up yen intervention. there warning after the boj fueled selloff weekend of the yen to its lowest level of the. china manufacturing activity unexpectedly shrink in. in israel, a strike at a gaza refugee camp stokes concerns about the mounting toll from weeks of fighting. hamas says it will release foreign captives. u.s. secretary of state set to return to israel. a lot of crosscurrents, geopolitics, a lot of earnings. it is that rate decision that will be moving markets today. that's where i want to go with our traditional market check. you are seeing a mixed picture, regional divergence, a key regional divergence. we are going back to this idea where you are basically selling off u.s. assets right now between asian and european trade. i think that's what shows you, s&p down -- futures down, nasdaq

futures down. that is pretty traditional ahead of the fomc decision. it's kind of an idea if you sell the markets ahead of the rate decision, you canbuy whether or not the rate decision comes in handy. on the other hand, green on the screen for the european equity market. i think that has a lot to do with the earnings picture. we've seen a few earnings beats. ftse 100 higher by 0.2%. currency is going to be a big part of the equation as well. as you see weakness in the euro and the cable rate, you are than incentivized to hop into the equity market. does that actually stick? is something that relates to be seen. the bond market is going to be key. all eyes on that fed rate decision today. that has everything to do as well by the quarterly refunding announcement. this to stents curve at about -17 basis points, 5's, 30's at about three. that's crucial as we talk about whether or not that puts the

focus on the short end of the curve or the long end of the curve. the short end ensuring unease of digestion into the bond market. how does that affect the fomc rate decision? plus, taking with it the fx market, euro-dollar at 1.5, virtually unchanged brent --1.05, virtually unchanged. for now, i want to see how those asian markets are faring as well. avril hong standing by in singapore. avril? >>avril: we see asia stocks running higher today, tracking wall street' performances. the nikkei is outperforming, climbing well over 2%, helped along in large part by the gains in toyota. it was already revving up before the earnings release. it popped as much as 6.2% after those record quarterly revenues from the automaker. it has also boosted its guidance for the fiscal year. it announced a share buyback.

we are seeing some paring of the gains now as traders digest the earnings. it has been a lot to do with the global supply chain's recovery, as well as robust vehicle demand, and depreciation. i think the signals from the boj were clearly that any normalization of policy will be gradual. that's not good for the japanese currency. 151.7 against the greenback. that drew verbal intervention from the currency chief. let's also talk about how the boj came in withir unscheduled operation to kind of curb the surge in the yields. but you know, this is coming just a day after it said that it will take a more flexible approach to controlling rates. where does that bring us? let's take a look at the chinese currency because it has been hovering around the 7.33 level.

there has been signals of the china's economic recovery being very choppy this week from the manufacturing activity data, the tyson numbers, the private survey today reinforcing those views. we saw the pboc withdrawing liquidity via open market operations, signaling perhaps the recent surge in borrowing costs on the short-term end of things, it sees that perhaps as just a very mild affect at the end of the month due to tax payments. overall, we see the chinese stocks also in positive territory, focusing on the good news, right, at the end of a two -day. policy conference at least chinese authorities vowing to clean up local debt. it looks like it is not a bad day in the markets today. kriti: of course, let's see if that holds. avril hong joining us in singapore. thank you for that market update. the asian markets will be just as kind of vulnerable to what happens between the federal

reserve and treasury today as well. i think there's a lot of interesting crosscurrents and we really need a real analyst. let's go to paul dobson, who joins me this morning, to walk us through this. a lot of interesting dynamics. we know the fed is expected to hold rates, a hawkish pause is i think what we are due for. a feels like the treasury refunding announcement is far more important. how do people trade ahead of mixed messages when it comes to issuance? paul: yeah, good morning, kriti, thank you for having me. i think that the people that are trying to separate these two elements just a little bit in their minds may be thinking about the outlook for the u.s. economy and for where the fed is going from here. they would really like you to believe that they still may continue to hike but the market seems to be increasingly concluding that they are done. the way that people are playing this is either leaning in now to short-term interest rates.

we heard from stanley druckenmiller, for example, over the past 24 hours talking about how he was getting long the u.s. two-year, betting that the economy is going to start rolling over, the fed is done, and the interest rates will be falling before too long. that's one element from the fed perspective. in the fx markets, people are looking at, what does that mean for the dollar? is the dollar finally peeking? we had this really uncomfortable rebound in the strength of the u.s. currency, hand-in-hand with the rise in u.s. treasury yields over the past several months. quite unexpected, quite painful for a lot of the rest of the world. if that is finally done and people are starting to see that, maybe there is room for overall dollar weakness. may be on a basket is the way to think about it. refunding announcement pretty exciting as well.

the consensus is for something art 114 billion spread across, which would be a record amount, up from only 103 billion last time around. so on awful lot of supply for the markets to be taken down. there is this sense may be that they are still going to weigh on the back end of the treasury yield curve. so pushing up those longer-term interest rates, putting more pressure on the fed by tightening policy which makes you think in terms of what the fed is actually going to do with its monetary policy. may be it is getting to the point where it is already done. kriti: i cannot believe you called the quarterly refunding announcement exciting. that's how you know you're a sure macro kind of get. let's talk about -- that's how you know you are a macro kind of guy. -- or the fiscal deficit that keeps rearing its ugly head? paul: yeah. i don't think the fed would probably like to talk

exclusively about the fiscal deficit, but that's causing a lot of these problems, the amount the u.s. is spending to keep the economy afloat and keep everything looking so rosy at the moment is causing inflation to be sticky, it is causing problems for the fed. it is helping those financial conditions to be tight. looking across the economic data, there are signs of weakness, signs of strength as well. the labor market ok, starting to come down, but still from a position of good strength there. you know, so i think the fed will be watching the very carefully. inflation, of course, the number one concern. and kind of this incessant demand for pay rises to match the inflation. there is a great deal of the u.s. workforce on strike at the moment, still some of those getting resolved, and giving a little more help to the rest of the economy. but only real wage increases, this kind of reinforces the need for the fed to at least give off a signal it is staying higher for longer, even if the market may suspect it's getting to the

end of that mantra now. kriti: which is ironically what we said yesterday for the boj. now it is the fed's turn to weigh in on that. part dobson, thank you for your analysis. that decision coming in about 6:00 p.m. u.k. time, alongside a slew of other things. we have u.s. ism manufacturing data coming out as well. that is going to do at about 2:00 p.m. u.k. time. where is the construction at the manufacturing part of the economy? the u.s. is more of a services-based economy. to get a check on that is very important, especially when we talk about the industrial complex within the united states. how does that feature in the fomc's decision? that comes out at 2:00 p.m. u.k. time. right here in the u.k., we have the ai summit as well. we have reporting on the ground from that today. a lot how the u.k. really approaches building out the tech complex in the u.k. we know it's been a significant touch point. they have lost major names to other parts of the world. i am thinking nvidia.

how do you keep the ai story right here in the u.k. when, of course you are dealing with brexit, other crosscurrents as well? there's is a slew of attendees, a slew of interviews. tom mackenzie and lizzy burden attending that summit. get a roundup of the stories you need to know to get your day going in today's he edition of deibert. all you have to do is type in dayb go on the bloomberg terminal. you will get your latest update on israel as well. that's where i want to go next. u.s. secretary of state antony blinken is set to head back to israel this coming after dozens were reported killed and wounded at a gaza refugee camp, stoking concerns about the mounting tour as weeks of fighting go on. let's get more from our reporter lived on the scene oliver, crook joins us from tel aviv. there's a lot of crosscurrents, the refugees in the cap, hostages. where is the attention this morning? what do we need to know?

oliver: the attention is squarely on the jabalya refugee camp where the number of casualties is not confirmed but this is one of the largest refugee camps in one of the most densely populated part of gaza , north of gaza city in the northern part of gaza. there's been a strike by the idf that has caused, either directly from the strike or tunnels beneath it, several buildings to collapse and the casualties will certainly be elevated. the gazan authorities have said it could number within the hundreds. the idf's mission was to kill a high-level hamas operative who was apparently involved in the planning of the attack and a number of the associates there, all of whom they apparently killed. this will renew the calls for a cease-fire. it will draw combination. the saudi's have called for a cease-fire, the u.n. as well. the position on a cease-fire was reiterated by benjamin not.

the position from the -- benjamin netanyahu. the position from the united states, we heard it reality radio yesterday. -- we heard it sec. blinken: reiterated yesterday. sec. blinken: when it comes to a ceasefire, in this moment, you are exactly right, that would simply consolidate what hamas has been able to do and allow it to remain where it is, and potentially repeat what it did another day. and that's not tolerable. oliver: we should say that in that testimony itself, it was disrupted a number of times by protesters in the back objecting to israel and calling for a cease-fire and also holding up hands, hands were painted red, which are supposed to indicate the united states', in their mind, being complicit with them. the question is, if the cease-fire is off the table from the israeli and u.s. perspective, perhaps these humanitarian causes we keep hearing more about, we heard the pentagon spokesman say that's potentially an option to help get some more aid in through rafah and into the gaza people. kriti: the fact we are talking

about a commander turned cease-fire, even in the united states, is coming with other bit of pushback. hillary clinton actually said that the issue within the humanitarian cease-fire is it creates opening for hamas that they actually don't want. talk to us about how the aid picture fits into the threats that you are seeing in the pushback you are seeing for a humanitarian cease-fire. oliver: when we look at the things that we have to pay attention to today, one of the focal points will be the rafah crossing once again, which was, of course, a huge focus for us a couple of weeks ago before aid was going in. that is the southern point of gaza on the egyptian border. the question is whether there is going to be some of the wounded that will be able to move from gaza into egypt to be treated by egyptian hospitals. this is apparently on the table. there is also the question of foreigners with foreign passports that are still stuck in gaza that cannot get through. . maybe there will be some motion on that today. the ultimate question of refugees, getting refugees from

gaza into egypt, which is something that there has been some discussion about, the egyptians have been absently categorical about, so to the rest of the arab world, that will simply not happen. on the question of aid, there were about 60 or so trucks that passed yesterday. that was a higher number than we've seen on other days but still falls radically short of the hundred or so that we are seeing being called for by aid organizations to really make a difference in what is a very devolving situation in gaza. kriti: not to mention the slew of journalists who are trapped in the region. oliver crook, thank you so much for that report. coming up, we dive into the markets a little bit more. does the federal reserve ultimately hike in the face of the geopolitical risks? jackie bowie from chatham financial joins us next. this is bloomberg. ♪

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kriti: a lot on today's docket. fed decision coming up, the bank of england in action tomorrow as well. all of the attention seems to be on the u.s. treasury's quarterly refunding announcement that we will get later today. i want to bring in nature expert. jackie bowie joins the program. she's the managing partner and head of emea at chatham. it feels like we've talked about this fiscal deficit in the united states time and time again but has not really carried into something you price into the bond market. the idea simply being that investors brush it off, the politicians will get it together. to be fair, they have. why do we care so much about this refunding announcement now? jackie: i think it is just more of the same really from the fed and this story has been around for quite a long time and people

have been brushing it off. if you combine that with all of the other headwinds that the economy is facing, particularly whatever comes out of the fed decision in terms of interest rates and all the issues, the geopolitical risks at the moment, which are impacting other commodity markets, etc. also, i think this time, it just feels there's a lot of extra negative news impacting sentiment, so people are really paying attention. kriti: speaking a paying attention, i have to talk about issuance and how much of the selloff that we have seen has done the work for the federal reserve? that's been a comment we have heard time and time again, even from chairman powell and some of his peers over at the fomc. if you are looking at potentially less issuance coming down the road from the treasury, the expectation is that is going to mean lower bond yields, a bigger demand for the bond market. how much of that reverses the potential rate hike affect that the selloff put in the first place? jackie: while, i think first of

all, you got to look at how much the bond yields have moved. that has actually done a lot of the tightening for the fed. how much it will happen in reverse to then impact it the other way seems pretty unlikely. you can look at what has happened to the 10 year yield over the last six months, it's been a pretty aggressive move. that's what people are now focused on in thinking about what the fed's message will be on the rate decision. because the feeling is that these bond yields have moved up so much that it is creating the tightening in the market on behalf of the fed, so they won't need to raise rates again. kriti: what then does a hawkish cause actually look like? it feels like the expectation is let's just hold, let's see what happens with the bond market. how long is that hold in play? jackie: and i don't think it is just looking at the bond market. i think the key data points that

they have emphasized in the past of say the labor market position being one of the most important. whilst the pause is, that's what the market is expecting, they are also expecting the commentary to come that the fed will leave a bit of optionality on the table. they have been fighting inflation but they have not beat inflation and they will leave the door open for potential future rate hikes. i think the of their underlying message is that these rates will be higher for longer. that's really been the message for the last few months where the market has now started to reduce the expectation that rate cuts welcome next year -- rate cuts will come early next year. kriti: i have to ask about the resilience of the economy. it does feel like we are building in this expectation, by we, i mean the financial community, building in this expectation that ultimately, the recessionary call that i feel

like were supposed to hit the markets in 2022, something that was certainly priced into the equity market last year, is being pushed back all the way to 2025. this re-acceleration of the economy, of the inflation dynamic, how much of that is a threat to? what the fomc is thinking? jackie: when we say that the the -- of the economy. it is clearly not in recessionary territory at all. if you look at what's happening with consumer spinning, obviously the big one people focus on, still remain very strong. that's related to the fact that the labor market continues to be quite strong. if you look across global economies and the imf report that came out just a few weeks ago emphasized this, economies are kind of limping along. whilst they are not in recessionary territory, it is not robust growth by any means. it does not really take much change for that to switch into more of a downturn in the economy. i think some of the other key

things to look at, of course, business sentiment, investment, etc. you look at headline gdp numbers but you really need to look at what is underlying in the real economy. there is a general feeling that there is more of a -- inclined. kriti: i am putting you on the spot, 30 seconds here. you talk about a slowdown that may be coming. how much of that slow down is going to be pressured by the housing market specifically, which seems to be ripping and running at the moment? how quickly does that disintegrate? jackie: i think, again, it is different in different markets. we cover all of the global markets and the impact that the increase in interest rates has on, well, the mortgage market, and ultimately, the housing market. it feels like it's going to defy gravity at the moment in the u.s., certainly here in the u.k., you are seeing much more strains in the housing market, particularly if you look at some of the new built properties and

the residential work that have happened. i think there's more pain to come is what i'm thinking further rest -- thinking for the rest of this year into next year. kriti: do we potentially see some sort of 2006 repeat? and how much of the prolonging really creates that pain? jackie bowie, managing partner and head of emea at chatham financial. we are taking you to south africa next. stick with us. this is bloomberg. ♪

♪ kriti: south africa's finance minister is due to deliver the nation's budget later today. he's in a tricky position with lower-than-expected tax revenues and pressure from the ruling party to spend more on government services ahead of next year's elections. let's get more from our correspondent in johannesburg.

walk us through what we can expect here? jennifer: good morning. this is a significant position that the foreign ministry is in today. as you mentioned, this is the medium-term budget. there are a lot of eyes on what exactly is going to do. he is not just facing, the country is not just raising a budget deficit, also does lower-than-expected tax revenues are weighing down on the economy. some estimates suggesting 2.8 billion dollars lower than anticipated, largely due to commodity declines and also issues around the rail transport and logistics line. what we are going to need to hear from the finance minister is what he plans to do about it and really right the ship that has really been off course for quite a while here. there's some suggestions that he could potentially cut spending, he could also raise borrowing costs. he is facing opposition really from all corners,, the anc, ahead of elections next year,

but also workers here who are already struggling with an economy that faces upwards of 40% an apartment. -- 40% unemployment. we are going to be paying close attention about the messaging and what he's going to say about improving his economy. kriti: certainly something we will keep an eye on. thank you for so much. we are seeing weakness in the south african rand against the dollar and the euro. join us on friday for the launch of our brand-new show, bloomberg "africa amplified." stick with us. this is bloomberg. ♪

♪ kriti: good morning and welcome back to "bloomberg daybreak: europe." i am kriti gupta in london. let's get to the top stories

that set your agenda. all eyes on the u.s. treasurie'' quarterly refunding announcement, with issuance in focus ahead of the key fomc rate decision later today. meanwhile, japan ramping up yen intervention. their warning after the boj fueled selloff weakened the yen to its lowest level of the year. over in china, manufacturing activity unexpectedly shrinking. and a strike at a gaza refugee camp stokes concerns about the mounting toll from weeks of fighting. meanwhile, hamas says it will release foreign captives. u.s. secretary of state set to return to israel. let's get a quick check on these markets. a lot of crosscurrents, from the geopolitics to the monetary policy, even the currency picture. you are seeing a pullback in s&p futures and nasdaq 100 futures. this is pretty normal not only ahead of a fomc decision, but also going back to what we saw before the war in israel actually broke out, which is that in the european and asian trading sessions, you saw a pullout from equity market.

how much exposure do you really want to the u.s. right now? you are seeing a bid into the european markets. euro stoxx 50 futures higher, the ftse 100 higher by 0.3% as well. that feels more like a function of the currency market simply because you see weakness, which really incentivizes the bid to hop into those equity markets, which brings me to the cross asset picture. when you look at the idea of not only the fomc rate decision, but also how the treasury is planning to fund the fiscal deficit, this is where the curve inversions really matter. we are looking at 2's, 10's curve, un-inversion of just 17 basis points. i am old enough to remember when we had over 100 just a couple months ago. that is all going to change as we get an idea of whether or not the treasury refunding is happening on the long end of the curve, which really helps find the fiscal deficit, or on the short end of the curve which, ensures an ease of digestion on

the supply front. a big variation. that's going to have repercussions for the fx market, which is mostly at the whim of the euro. euro dollar at 1.-5, virtually unchanged. the biggest contributor to the bloomberg dollar index rang up. right now, you see brent crude at $85, higher by only 0.3%. anything can change when we get that information out of washington, d.c., which brings me to the analysis we really need. i want to bring in bloomberg's paul dobson. what matters more when it comes to the market trade, the treasury refunding or the language that chair powell uses if we indeed get a hawkish pause? paul: you are giving me a ribbing 30 minutes ago for being excited about the quarterly refunding announcement so maybe we can talk about that a little bit more and why that does matter for the market. you know, it is a big jump in

the issuance that we are expecting for the 3's, 10's and 30's. how that is split will matter a lot for how the market trades it. but it is just the sheer weight of supply that everybody is getting anxious about now. on top of that record issuance in the u.s., we have corporates still coming to market looking to raise money, move got record issuance going on in china. all around the world, plenty more need to raise money by the debt markets. and the pressure is building. that's why we are seeing that big ramp-up in longer-term yields, which is pulling the yield curve back towards an equilibrium maybe. what that means it it is tightening financial conditions right across the world, not just for the u.s., but most importantly for the u.s. in this case, where we obviously know the mortgage. rates are exceptionally high now. we are seeing lending rates in general, corporates having to

shoulder more of that burden. it is starting to split the weakest links in the corporate bond market from those that are safer as well. those pressures are starting to build which is why the focused -- the market is so focused on, will treasury continue to push aggressively in terms of raising cash? or will it have a look at what's happened in the bond market and seeing how much yields have come already and relent a little bit, concentrate on the short term, we won't go too hard this quarter, may be things will settle down and we will be able to do it in the start of next year? kriti: what a great response to the ribbing i gave you at the top of the show. for our global audience, paul used to be my boss one day a very long time ago so i am allowed to give him ribbing's on international television. let's go to what the trade is ahead of the not only the treasury funding announcement but ahead of the fomc rate decision as well. how do you play it in the markets? giorgio: you were talking -- and

like >> you were talking about the steepener. it feels a large element of the market is focused on the, or focused on the idea that short-term interest rates are headed lower. the fed wants to project decided that it is still hawkish, it may still hike interest rates, but the market is having its doubts, starting to look at the economy, the future path, starting to look at inflation and think we are probably done here at some point soon. interest rates are coming lower in the front end of the yield curve as the fed will be cutting. that's what we heard from stanley druckenmiller in the past 24 hours talking about loading up on those shorter-term bonds and betting, you know, kind of that we will see some kind of equalization. likewise in the fx market, more and more people seem to be talking about the idea that the dollar is running out of steam. you were talking about from the euro perspective. do you like the euro more than the dollar? that is kinda to be seen. the dollar has come so far and

caused so much discomfort that a lot of people are thinking into year end, which seasonally tends to have a weaker period in any case, there's going to be some lightening up. not easy to tell whereabouts but over the broader spectrum, the weaker dollar trade in line with the idea that we will see lower shorter-term yields is something investors are starting to favor. kriti: shirley something we we keeping an eye on very closely. paul dobson joining me this morning. thank you so much. paul was just talking about the trades that are in play. let's bring in kit juckes another expert kit juckes,, chief fx strategist over at societe generale, joining me on set. a pleasure to have you on the program. paul was talking about the steepeners that are at play. yet, when we got the borrowing estimates coming out of the treasury that were lower-than-expected, you sob or flatten or zap like. that's a lot of jargon for saying there's -- you sob all -- you saw bull flatteners.

kit: i started win 10 year note yields are heading to 14% my first week. i did not meet a lot of experts who guessed where the peak would be. the dollar was even hotter at that point. the big joke with the quarterly refunding's is we are getting them every month now. these are not quarterly. that's the scale of the problem. with that much supply coming and that much price discovery to do, i think sticking my stake in the ground and send this is the peak in 10's feels like a gas and a wish, even if they are going to be lower in two years. if you want to make the bet, you have to make it further down the curve and say i think i am going to suffer less pain for being wrong as well. even so whatever it is,, three days away from another number that could just as easily as all the others surprise on the upside at this point. and then, the fed wins the battle. i would almost be inclined to turn around and say, why don't i

bet on two year germany and say european economy, which the market knows is underperforming, they are going to talk higher for longer for as long as they want but they are going to have to cut rates next year? that seems like a sure bet to me than preempting today when the fed is going to turn when we've spent all your thinking americans have not run out of this money that is pent up, these savings. they are still outspending money, there is still a very tight labor market, the economy is still growing spectacularly compared to the rest of us. you will make money in twos, you might not sleep a few nights. kriti: speaking of sleeping, let's go back to the long end of the curve, because it makes sense the idea that you could bet on europe and that is saying quite a bit, that betting on europe is a more sure thing than betting on the u.s. right now. talk to us about the long end. if you are talking to us about these refund announcements, does it make more sense to have more issuance on the long end than

the short end? what matters more, the ease of digestion or the fiscal deficit? kit: in the end, they have to issue everywhere. it is sort of a managing whether there is appetite at any moment in time. you can cause more damage to the economy if you ramp up 10 year, 30 year yield sharply by selling too much at a time when the market,, frankly, has not got the appetite today. it is a posh problem. i would love to be the american treasury with this problem. it's the number one asset in the world, the u.s. treasury note, so they get first dibs at getting money out of the world series. the poor people in the world -- the world savers. the poor people in the world -- you have to manage where you are issuing because it's possible to find there isn't appetite. the u.s., in the end, although it's pretty volatile the moment, a few more basis points and you get a lot more buyers coming out

of the woodwork. that's the luxury. you start to manage it because they are more volatile now than i can remember for a while. kriti: let's talk about the risk, the doomsday scenario. when you talk about the long end of the curve, specifically when we saw the selloff and you sob this massive move and a lot of shock to a lot of bond traders, on trading desks as well, i think there was concern baked in about how much of that 30 year move would be reflected in mortgage rates, and by extension, the housing market, which is still ripping and roaring and a lot of the u.s. how much of this economy in the u.s., specifically in the housing market, reeks of 2006? kit: yes, although, 2006, you just need to go look at the big short, we have not got a lot of empty houses in the suburbs or in florida. it's very different. we have not engaged in the financial engineering we did then, so it is cleaner, it is a more sort of normal housing market history.

. i think that's one of the reasons i sort of think yes, something breaks when the bond market does this. it is not usually what broke in the last crisis, if that. makes sense this feels like it is going to be may be less sort of violent because we have not done as many stupid things. we have made the financial system safer. we even saw that with silicon valley bank, there's less contagion. we are just going to bash the economy until it slows down quite a lot and some bits will suffer. kriti: isn't that more dangerous for the federal reserve, the reacceleration, the resilience turning into a re-acceleration two, three years down the road? kit: i think for the fed, they have to just keep on keeping policy tight until this cycle sorta plays itself out. to be nice to every central bank, we have not had, you know, a pandemic, a major global war, a crisis in the middle east, and an oil crisis all kind of washed in. this is just not easy.

the biggest surprise was that, in a sense, the legs of, with hindsight, easy to see, but these accumulated savings that has been fueling the u.s. economy. and a how accommodative fiscal policy managed to get in self into the upswing of the economy after covid. you look at it and say wow, ok, you can see the mistakes, and there are, but what it has given us is a unique boost to incoming. . if you are a central bank, all you can do is tighten monetary policy and explain to your fiscal authorities that they need to be sensible. kriti: you mentioned the geopolitical risks. to what extent can the federal reserve hike in the face of joe political risk? joanna: i think -- kit: i think they have to right now. not necessarily right now. they have to continue with tight monetary policy, which is where we are at now. . i think if you had jay powell,

if someone asked jay powell this afternoon, i have one job, i have to hit an inflation target, i have to keep the price of money in this country in the. right place i cannot be expected to solve 10 problems with one tool. i should stick with what i am supposed to do. kriti: the man is not paid enough to solve 10 problems with one tool. kit juckes, i'm so sorry, we have to leave it there. chief affects strategist at societe generale, we thank you so much for joining us. stick with us. more ahead. this is bloomberg. ♪ heorate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it.

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i'm sam morrison. my brother max recommended you. so my best friend sophie says you've been a huge help. at ameriprise financial, more than 9 out of 10 of our clients are likely to recommend us. our neighbors, the garcias, love working with you. because the advice we give is personalized, hey, john reese, jr. how's your father doing? to help reach your goals with confidence. my sister has told me so much about you. that's why it's more than advice worth listening to. it's advice worth talking about. ameriprise financial. ♪ kriti: u.s. secretary of state antony blinken is set to go back to israel after dozens were reported killed and wounded at a gaza refugee camp, stoking further concerns about the

mounting toll from weeks of fighting. joining me now, matthew martin joining me from riyadh. talk us there what the future of gaza looks like. what is the timing of israel's operation ending? and really what the standpoint, what the take is from where you are located? matthew: good morning. i think what we have seen and what we have from the story out based on sources in washington last night is that the u.s. is increasingly thinking about what is going to be next now that this ground operation within gaza has started. how is the situation going to evolve? was going to happen once israel gets to the point where it feels like hamas is defeated, what happens in gaza next? the biden administration has been lobbing israelis to think more about this question to avoid some of the pitfalls that the u.s. fell into post 9/11. there was invasions, there was

less thinking about what happens after you have completed military operations. they are trying to focus their minds on one of three options. perhaps something that involves either united nations involvement, something that involves the oversight from some of the gulf arab states, or may be something that involves another sort of multilateral force similar to what polices the egypt and israeli peace agreement. from sitting here in riyadh and saudi arabia, i think the feeling here, and this is probably going to be similar for a lot of these bodies that are looking at may be getting involved, is what legitimacy are they going to have on the ground were they to start taking a position in oversight of gaza? i think everybody agrees that they don't want hamas in charge. even the palestinian authority don't feel like they necessarily want to come in and have to take control of governance of the gaza strip. i don't think the goal states really feel like that is going to be their role, or where their expertise is.

there is potential for the gulf arab states to provide money and aid into this situation to find rebuilding and redevelopment. in terms of governance, that's going to be the real tricky question as to how they can get in and around the gaza strip. this is going to be a really big key question that israel and the u.s. will face as they try and manage through this process and look to what comes at the end of this military operation. kriti: certainly something that is not only tragic from a humanitarian standpoint but also extremely divisive in the united states, which is supposed to be israel's biggest ally, now to your point creating quite the strife between the u.s. and its arab allies. thank you so much for your porting. a lot on the docket. we are going to keep you apprised of all the headlines we get, plus the monetary policy.

first, we go to the u.k., hosting its first global artificial intelligence safety summit. we will bring you live reporting from there, next. this is bloomberg. ♪

♪ kriti: the u.k. is hosting the first global artificial intelligence safety summit today at one of the birthplaces of computer science. world leaders expected to intend include the italian prime minister as well as u.s. vice president, alaris. atomic -- buys president kamala harris. tom mackenzie joins us. walk us through what we can expect from day one. tom: it is a global first. it is the first time that global leaders and the executives and the heads of some of these ai

companies have come together to discuss and try to put together a consensus, bring together a consensus on the risks and steps to mitigate some of those risks. we are outside the home of those world war ii code crackers. the history is here as well. on the executive front, it is worth noting that the u.k. government has managed to pull in some big names. elon musk is expected to be here over the next couple of days. we are expecting the head of openai, google, alphabet, meta. on the political front, you mentioned the vice president of the u.s. but also ursula von der leyen from the european commission, the eu at the head, the prime minister of south korea will be here. some of the political heft the u.k. was hoping to draw into the summit is lacking, part of that down to the geopolitics and the understandable focus on what is evolving between israel and

hamas. the u.k. government says they are well-positioned to come out with a communiqué at the end of this summit signed, they hope, by 28 global leaders that does bring that consensus to get. the other part of the u.k. is trying to position itself as a global leader in the ai. is the u.k. really realistically well-positioned on that front? i put that question to the ceo of a company called cohere. it is challenging the likes of openai, providing enterprise, business ai solutions. aidan gomez is the person i spoke to, the ceo of the company, and i asked him about whether the u.k. can in fact take that leading role? >> the talent here is unmatched. i think majority of our machine learning expertise at the research level is based out of london. this ecosystem is so strong. i think the opportunity for

britain is huge. they are taking a very active leading role. i do not think it is -- i do not think it is just talk or public framing. i think there really is so much talent here and a real opportunity to lead. tom: aidan gomez talking to me about the talent in the u.k. when it comes to ai. the question, of course, comes down to as well regulation, the correct legislative measures and legal measures to try to put some ring fencing around a technology that, of course, is advancing very rapidly indeed. the tension is around or to do that whilst not stifling innovation. that is a debate amongst people like aidan gomez but also amongst global leaders. the challenge for prime minister rishi sunak is corralled these leaders at bletchley park to find that balance between

wanting to continue to innovate, and he says there are opportunities, whilst mitigating risk. the prime minister talked about risks around biological and chemical weapons being produced by some of these frontier ai models, some of the most advanced ai models that may come to market in the next 12 months or so. balancing that tension will be a key part of the debate at bletchley park. governments globally have had a pretty patchy record in terms of being able to regulate evolving technologies. this technology is particularly complex and particularly consequential. that's why the u.k. says it needs to take the lead and have this summit here at bletchley park. we will see what comes out at the end of the two days. kriti: tom mackenzie reporting from that u.k. ai summit. later today, we are going to get several interviews out of there. u.k. deputy prime minister joins lizzy burden on location at 9:15 a.m. london time. of course, at 11:45 a.m. london time, tom mackenzie speaks to

the deepmind ceo live from the u.k.'s ai safety summit. you don't want to miss those interviews. top of mind for a lot of the markets is going to be simply the idea of that treasury refunding announcement. already, you see a massive move in the 2's, 10's curve, the idea that the inversion is un-inverting. we are at the least inverted we have been in over a year and that's going to be really important when we talk about the 5's, 30's as well as what the actual maturity hooksett. you are seeing that get higher and higher. mor next. stick with us.

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