>> the open market committee decided to reduce the degree of policy restrained by lowering our interest rate i have a percentage point. >> this is not just a 50 basis point cut. this is a dovish cut. >> how do you do 50 without scaring people that you know something bad about the economy? >> this was not signaling that we are ready to cut, cut, cut. this is the window of opportunity to cut now. >> think when you go forward it

is a soft landing, baseline. announcer: this is "bloomberg surveillance." jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: it is a market rally on delay. what is this about? from new york city this morning, good morning, good morning. "bloomberg surveillance" starts now, with equities up 1.5% on the s&p as chairman powell takes center stage. chair powell: we now see the risks to achieving our employment and inflation goals as roughly in balance. we are not on any preset course. we will continue to make our decisions meeting by meeting. i do not think anyone should look at this and say this is the new pace. we know it is time to recalibrate our policy, recalibration of our policy we are recalibrating our policy. we made a strong start to this, and that is, frankly, a sign of our confidence. jonathan: one word on repeat for

the best part of 60 minutes. recalibrate, recalibrate, recalibrate. lisa: we have moved the debate too, was it a dovish or hock as -- more hawkish 50 basis points? the fed's eventual decision to cut 50 basis points landed in markets with about the same splash as an olympic diver. jonathan: hawkish 50, how many times do we see that? there are disadvantages to putting the lawyer in charge of a central bank, but one advantage is the ability to make a 50 basis point cut sound like a hawkish move lisa: for one asset class? yesterday this is what the asset were struggling with. is it hawkish for stocks? is it hawkish for the dollar? basically this was a fed chair that owned a market into

complying with its view that this is an ok soft landing still. they are not going to get away from and keep trying to be proactively ahead of in order to ensure that there is no deterioration. jonathan: politicians in this country have drafts published, and that is what we saw from senator warren. senator warren with her view that former president donald trump with his own. annmarie: there is bipartisan support in washington about using the fed as a support in going after them no matter what they were going to do. donald trump came out, the former president, obviously, i guess it shows the economy is very bad to cut it by that much. assuming they are not just playing politics. republicans are saying, you are either playing politics or you know something we don't know. then senator warren, who has been begging chair powell to cut the entire year said, it goes to show an acknowledgment that powell waited too long to reduce rates. jonathan: the price action was a

total snooze. on the s&p 500 we just about snapped a seven-day winning streak. this morning we are off to the races. equity futures up 1.5% on the s&p 500. the small caps up by 2.8%. lisa: this is a fed that wanted to confirm there was not weakness at the same time they are going to cut, potentially aggressively, potentially 100 basis points by the end of this year. i was surprised the move did not stick yesterday to the upside. i did not see anything the fed said that would undermine the idea that they had this market's back. they project out an even steeper path rate cuts. you can call this a hawkish cut, and you heard that from person after person, except for mohamed el-erian, who pointed out this was a fed where the median dock was 3.4% by the end of next year. that is below where the market was pricing in. jonathan: how likely is it that 50 is the first of many?

you yelled at the front end of the curve still around 3.60. we will catch up with peter tchir following the fed's big rate cut. speak to norman roule on another round of explosions in the middle east. and jonathan pingle looking for 225 basis points rate cuts over the rest of next year -- rest of the ship. stocks rallying as peter tchir writing, all in all, i think this is as close to a hawkish 50 as we could get. because to a neutral 50, but i give powell credit for not turning too dovish during the press conference. if it speakers in the coming days theater toward neutral, we can rally across the board. first impression of the news conference yesterday? peter: i think they were trying to be a hawkish 50 and i think the market is looking at the things, you had a dissent, that is hawkish. it definitely pulled in rate cuts by the end of this year. -- by the end of next year. now it is down to seven.

on the other hand, they actually went 50. people were talking about not going 50. most economists had 25. i think the market is going to lean toward this is neutral. they did cut 50, so they set all of this other stuff, but they did 50. jonathan: you are one of the first to publish and i wrote down your quote. you said for now 50 basis points more this year seems like a certainty and it is probably harder to only get 25 rather than 75. what is the balance of risks for markets into 2-year and -- year end -- into year end? peter: the hawkish interpretation was there, but also positioning got ahead of itself. we can openly stop talking about the fed and argue, is the economy, what is going to happen with the election? that is kind of my hope, that the fed is on the steady course. they are not going to drive the

market that much higher themselves. they're certainly not going to be the thing that slows it down. where do we stand on ai? i love that the small caps are trying to rally. we need to see that stick for a few days, but i'm optimistic now that they might near the end of this big rotation. the old rotation, starting a new one. lisa: you can say what you want about political ramifications after these decisions. basically, people trying to get attention, etc. senator warren had a point when they said maybe they made a mistake in not going in july and this was a concession they were too late. his response, we had gotten the jobs report we might have. is this then playing catch-up? peter: they certainly should have gone in july. that is why so many economists got stuck saying 25. it was good evidence for them to go 25 in july, and they didn't. they don't know anything about the economy we don't. they should have known the jobs

number at the time. there were so many things pointing out two-week jobs reports leading up to that. lisa: what are you looking for to understand whether the enthusiasm you are seeing in small caps and other sectors of the rate-sensitive markets are getting ahead of themselves? peter: i think we need to see how some of the data plays out. we need to see a couple more days of this. yesterday there was some pretty good volatility. we were up, down, all around. i need to see this go through a few days where, where the economy, but the earnings look like? i think we are going to see support for the economy and i think that is what is going to have to drive this. hopefully we are in a brief period where ok news is good for the markets. annmarie: you think we should focus on other things. politics one of them. what is your base case now?

peter: i think our base case is gridlock. it feels like, to me, there is going to be enough people voting against someone rather than for someone, and that often leads to splitting the ticket. maybe you don't want that power to be so much. it does seem like harris is in the lead. on the senate side of things it looks like republicans will retain that. annmarie: if there is gridlock how do you want to effectuate that in the market? peter: i think yields go higher. at the long end we saw that yesterday. we are seeing that today with the 10 year. i think we push back toward 4% on tens. partly because i think there will be no fiscal control in d.c. regardless. no one is going to get too much done, but we are going to get back to that path. the fed made it clear they are not in a hurry to get to the 2.75% rate. i think they are going to be

slow on this. we are going to get these 25's and we will start getting more and more policy information. i think we have global friction going on. maybe you see some tensions ease. there is so much going on in russia-ukraine, to be there is room for that to de-escalate. jonathan: let's park the geopolitics. i want your thoughts on the bond market. are you saying the bond market is a self depending -- regardless of who wins in november? peter: i think the bond market is a sell as we start going through this. we are going to start talking about more debt ceiling talk. all of that usual noise. people are going to get nervous and i think no matter who is in charge we are going to see fiscal spending. we are not going to see the income. i look for yields to drift higher at the long end. i think the front and is decently-priced. maybe it just so little higher. it's going to be the 10 year and thirty-year year that we lose a

little. jonathan: now we can talk about exploding walkie-talkies. what is going on? what are the generals at your firm telling you? what is going on in lebanon? peter: this was a very clear statement that israel is redirecting away from hamas. now they are going after hezbollah. if you go back in time, iran attacked israel with 1000 drones, missiles, and there was some discussion, maybe they were not really trying hard. one belief was that they were trying. you don't send a thousand projectiles at a country and hope that they all get shot down. that may have been iran's best effort. this attack is a reminder, you have been impotent. for two months we have been talking about another attack. maybe this starts bringing everyone to the table, and israel flexed its muscle and said, not only do we have the power of traditional military, look what we did. maybe this is the first stage toward a de-escalation. deterrence is often the best policy. if you are iran hezbollah just

got attacked viciously, you say let's take a break on this. annmarie: i was asking yesterday, is this escalation to escalate or deescalate? your generals are telling you this is a sign that we could see de-escalation in the region? peter: we talked about this all the time. deterrence is such a difficult thing. it has to come down to, not only do you have the weapon, but you have the willingness to use it. now you just saw this. what else have the implanted? what else do they have out there that you don't know about if you are hezbollah, hamas? this was a real smack, a real flex, and that is the thing that can cause deterrence. it is an escalate to de-escalate. especially if iran did use a lot of their weaponry with that first attack -- gosh, how many months ago now? if they don't have anything effective maybe this is a good time for iran to say, let's see what we can pause. lisa: is this the reason markets have not been paying attention

to this? peter: i think we have hit the status quo or what we were worried about was the floor of oil, right? cash flow of oil, right? with the u.s. sanction iran? would oil stop flowing due to hezbollah? there wasn't that much of a slowdown, and that continues to be the case. in russia and ukraine, same thing. there are some attacks, but everyone has been hands-off in terms of oil. that is what is going to feed through to the global economy and that is why markets are not paying attention. you get this initial fear and it feels like everyone is playing the game of, we can fight each other, but let's keep oil ok. annmarie: you mentioned deterrence. we are seeing this from -- although they are not saying this out loud -- we are seeing this from the israeli side. do you think the u.s. has set any deterrence in the region? peter: our presence. i think we backed off some of the negative messaging toward israel.

obviously blinking is still there trying to push for peace, but it doesn't feel like we are admonishing israel for their attacks. one thing i will go off script here, but one of our generals talks about the frustration with 2000 pound bombs. we didn't want to give israel 2000 pompoms. he was like, that was counterproductive because a 2000 pound bomb is designed to go through the ground and explode below the surface. most civilians are on the surface. if you don't get 2000-pound bombs you drop smaller bombs. the smaller ones actually do more surface damage, so we are interfering with a lot of things when israel is making real effort -- they have one of the lowest civilian kaz oakley rates versus combatant casualty rates any recorded attacking. they have been doing this job that -- so, i think we have stepped back from telling them no everyday. that has let them proceed and i think that was a big step to helping them in the deterrence. jonathan: is it the europeans playing around?

did the americans sell this? peter: i think we faded a little bit. what i would like to see is a 1% if we get a 3% or 4% close -- which could happen because everything is so volatile -- i think you want to fade that. i think you are looking for something that settles in around 1% and then by that good. jonathan: equity futures up 1.5% on the s&p. lisa: could you imagine if i said that. jonathan: i just offended the whole of london. lisa: is this your playing around? jonathan: it feels odd that we did nothing yesterday in the afternoon and then we come in this morning and we are up 1.5% on the s&p and up 3% on the russell lisa: maybe they are the adults. maybe they are saying, all roads and up with risk assets higher. maybe we are the children. all i know, wall street is sick of talking about the fed. jonathan: now we get to talk about your favorite thing, the election. let's get your update with your broom berg -- bloomberg brief.

dani: the eu is warning apple to open up its operating system. watchdogs are expected to announce that the company must step into line with strict new rules from its digital markets act and make its operating system fully functional with other technologies. if apple does not comply the eu could launch a formal probe, which could lead to fines. ampyra computing is exploring a potential sale. this semi conductor startup, backed by oracle, has been working with a financial advisor to field takeover interest. it does suggest that ampyra does not see an easy path to an ipo. it filed for one in 2022 and was valued at $8 billion. the u.s. is suing the owner of the ship that hit the francis scott key bridge. operations were brought to a standstill at the port of baltimore. the civil lawsuit alleges that an ill-prepared crew on an

unseaworthiness of was sent to navigate the u.s. waterways. that is your bloomberg brief. jonathan: more in about 30 minutes. up next, donald trump's taxcutting spree. >> i will cut taxes for families, small businesses, and workers, including the salt deduction, saving thousands of dollars for residents of new york, pennsylvania, new jersey, and other high cost states. jonathan: now you can have it back. that conversation from new york. morning. ♪

jonathan: you went to sleep last night we had snapped a seven-day owning streak, and you wake up to this -- losing streak, and you wake up to this. equities advancing here. not a major move in the bond

market. peter tchir, when he left the room moments ago, said, look at dollar-yen. the fact that dollar-yen was stable overnight maybe the green light to buy risk here. lisa: maybe this is not quite as negative as people not it would be, though i have to say the idea you are seeing a strong dollar defies a lot of the risk assets move we are seeing, because on one hand is this a hawkish 50 basis point cut? do we want to have this conversation? i think we don't. my head is going to spend. jonathan: under surveillance this morning, donald trump's taxcutting spree. >> i will cut taxes for families, small businesses, and workers, inc. hooting restoring the salt deduction, saving thousands of dollars for residents of new york, pennsylvania, new jersey, and other high-cost states. i will deliver the greatest economy in the history of the world to our country, and one of

the greatest economies in the history of new york state. jonathan: he was the latest. donald trump looking to court new yorkers with a pledge to restore the salt deduction. it is the latest in a series of tax breaks he is pushing. david gura, good morning to you, sir. how expensive are these rallies getting for donald trump? david: it is a thing to behold and a lot of magic is happening at them. it is fascinating to watch somebody who did away with that deduction just a few years ago talking about this, but we know from independent analysis that if it were to be restored we are talking about $1 trillion worth of costs. he is good at tailoring to these audiences. he was on longline the last night, but he is not going to be meeting with how you are going to pay for it. annmarie: do we expect kamala harris to talk more about salt? it is something democratic senators from these high-tax states talk about, but will

harris start talking about salt? norman: i don't know. i'm waiting to see how she responds to this, but of course it is important. what struck me last night was listening to donald trump talk about how he thinks new york is winnable, and i will buy everyone here a drink if the republicans take new york. what we saw last night was a not so shameless attempt to bolster the candace he of candidates in congress. you might talk about something all the way down ballot to the top. doubt that happens, but as he sees it, a shrewd political move. annmarie: they are trying to shore up seats in long island. he also talked about this yesterday. similar in the economy. he says as president he would implement a temporary 10% cap on credit card interest rates, saying we cannot let them go to 25% and 30%. is he starting to sound like senator bernie sanders, who is asking for a 15% cap? norman: i think david: we are

seeing this new reinvention of a populism he espoused the last time he was running. the strange thing about all of this is what he would be able to do or not be able to do if he is elected. you are talking with peter about the gridlock you can expect after the selection. for any of these proposals to become law you need the support of congress. it seems unlikely that he is going to have an easy way of doing that. lisa: that is not necessarily true with the salt deductions. you have a number of democratic senators who are very much for reducing the cap on the state and local tax deductions. you have a number of republicans, particularly from new york and others, who would pass it. why wouldn't this be feasible? david: it could be. what we are seeing is it is inchoate tax policy on the campaign trail. how much policy do these candidates need to put on paper? how much do they really care about this? you are right. if not broad support there is bipartisan support for some of

these changes. i'm skeptical that 47 days after the election we are going to get or detail, but we will see if that happens. lisa: let's talk about the policy that matters, who endorses these candidates. we are wondering about donald trump, but with kamala harris she did not get the endorsement of the teamsters for the first time in a long time. they had previously endorsed joe biden, and since he has withdrawn from the race there is a great deal of support for donald trump within the ranks. what do you make of that? how much does that dent her support? david: the teamsters did support a republican in 1988, but it has been democrats since then. we have been recalibrating since this campaign was upended a couple of months ago. i think it is a big deal. 23 million people in the u.s. are strong union members, and she would have loved to have them. we saw her campaign noting that there were branches of this union that did support behind her. some of them did that for donald

trump as well him and he falsely claimed last night he did have the support of the teamsters during that speech. she wants to be seen as the candidate for labor. it was an easier sell for president biden. he has an easier way with unions than she does. it is notable, the fact that this giant union did not throw its support behind a candidate. annmarie: do you think this is a crisis of their own making? i was there when sean o'brien was at the rnc giving a speech. he got an absolute snob to attend the dnc. david: i do think it was a crisis of their own making. it shows this lack of he's has with unions that president biden did have. will it make a difference? nose? other unions have supported her from all branches of work in this country. but i think it was a clumsy thing on democrats' part. jonathan: if he wins new york we want more than a drink, right? we want to force him to bring back beef. that is a very new york joke.

[laughter] lisa: all i can say -- and you are footing the bill, because you just offered it. david: i will try vegan. jonathan: i meant it. we are forcing them to bring back me. lisa: no mas. jonathan: david gura of bloomberg. coming up, first they came for the pagers, and then they came for the walkie-talkies. next, norman roule, a former senior u.s. intelligence official joins us on the others. your equity market on the s&p 500 advancing this morning by more than 1% on the s&p 500 and a whole lot more on the russell. the rally resumes. from new york, this is bloomberg. ♪ i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question.

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jonathan: check out these gains on the s&p 500. up five more than 1.6%. the nasdaq up more than two full percentage points. we squeezed out just about a 60 day of gains on the russell. then this morning, pop. up almost 3% on the session. lisa: jay powell confirmed there was strength in the economy and that he was cutting by 50 basis points. a real question as people parse through, was it a hawkish rate cut? what this means is, risk assets

are flying. you have the dollar somehow stronger and basically just some nons in the bond market. jonathan: i'm pleased mentioned the bond market. if you compare what happened to equities versus what is not happening in the bond market, the comparison is stark. the bond market, really needed price action. we have a 2-year yield down by three basis points. this quote, we fear the feds 50 is more about holding steady in july. echoing what you said about 30 minutes ago. lisa: this is basically what jay powell said himself. it was fantastic. this is why it is good to have the lawyer as the central banker. there is an advantage, but what it -- one advantage is the ability to make a 50 basis point

can't make -- sound like a hawkish move catering to everyone at a time when there was almost a concession by jay powell that this was catch up from july. jonathan: so what is going on? peter tchir was in the room about 50 minutes ago, and as he headed to the exit he said, look at dollar-yen. he said maybe people were waiting to see how dollar-yen took things overnight in asian trading. and if you got some stability then may be risk can start to make a run. dollar-yen is at 143. lisa: basically argues for the hawkish 50 basis point cut. this is the reason why. if he believed this was the fed that was going to ease more significantly you would expect that the vergence to widen. if the bank of japan were to hike on friday that would only widen the gap further at a time when you are seeing other central banks move away from the fed. the fact that that is not

happening, that people do not believe this is anything like it of its cut and underscores the strength a lot of people are betting on. jonathan: two more right decisions later to come. the bank of england this morning, and then you have the boj to kick things off on friday going into the weekend. under surveillance this morning, the teamsters declined to endorse a presidential candidate for the first time in nearly three decades. the teamsters' general president sang, neither major candidate was able to make serious commitments to our union. annmarie: unofficially they are not coming out with this endorsement, but you can see both camps are trying to spin this snob. notably, donald trump. he said it is a rate honor they are not going to endorse the democrats. i would look under the surface. trump is saying this because when you look at the surveys internally by the teamsters majorities say they support the former president. what stands out to me is, this is a union that endorsed joe biden in 2020.

kamala harris has a lot to do to go down to the rank-and-file and meet these individuals are on issues they care about. lisa: no one is listening, right? the way i gauge a lot of these stories is, how do i put this in perspective to see whether it matters? i go to predictive.org and see which candidate has a better chance of winning, and it has remained unchanged for the past week or two. basically, ignore. isn't that what people are doing? annmarie: yes, but it is tea leaves into where the work needs to be done and in which states. the new york times has harassed up in pennsylvania. marist has harris and trump tied in pennsylvania. the margins are slim. to understand where each candidate is able to make any inroad is important, because this race will be won or lost in a few states. jonathan: it is a tight race across the swing states. stunning numbers out of germany. early bad numbers out of germany.

stunningly bad numbers out of germany. i don't think you can overstate this. look at the numbers coming out of the ev sales. we hot the -- deliveries fell 69% during august, leading to a 36% drop across the whole of the region. the group is urging the european commission to take relief measures, and this coming at a time when we heard from volkswagen suggesting they might close plants in the country for the first time in its 87-year history. lisa: europe has a problem. this is the major economy during -- economy. if you want to know why the dollar is not weakening even more on the fact that they cut by 50 basis points, take a look over at the german manufacturing sector. ultimately that is why the reason it is not necessarily the alternative. annmarie: stunning but not shocking. chairman said electric mobility is the future of individual mobility, but politicians have

given the industry targets without the necessary infrastructure to get there. also, the people willing to get there and wanting to line up to buy these cars. jonathan: either you were going to see a massive cut to jobs and capacity in the european automobile industry or the politicians have to get their act together and you are going to see a relief package. i don't see how this continues. lisa: you either have to have massive subsidies, as what is going on in china, which is overcapacity. but you have to imagine that comes with ratcheting up tensions with china, which is a big buyer of a lot of german automakers' products. it is a difficult moment, and you hear that and you talk to the ceos of a lot of these automakers. jonathan: peers the latest out of the middle east. walkie-talkies exploding in lebanon at day after pages exploded across the country. of a blaming israel.

the israeli defense minister calling this a new phase in the war, saying troops will be diverted to the lebanese border. you know this country better than most in our organization. how tense are things on the ground in lebanon right now? >> very tense. this is the second day you have seen these telecommunication devices used by hezbollah explode all simultaneously. yesterday we these walkie-talkies used by has fully group members exploding once again. similar to the pager exposures. the health ministry in the number of casualties at four 50 yesterday's explosion. 12 deaths. that is in addition to the deaths the day before, as well as 2000 people on tuesday. the country is in a high state of alert. there is a lot of concern about what this means. not least because at number one the telecommunication system has

been compromised. this is the biggest security breach that hezbollah, they themselves, admittedly have ever seen. and number two, because there is suspicion this could be a precursor to a larger military operation from israel into the country. his real have not commented directly on the incidents, but we did get a short televised comment from the israeli prime minister yesterday, saying, i said we would return the residents of the north safely to their homes, and that is exactly what we will do. in addition to that, we also had comments from the israeli defense minister, saying that this is a new phase of the war. a sense of gravity has shifted to the north and that they are going to start deploying troops in the north. annmarie: what are we hearing from hassan's rolla -- hassan nasrallah? joumanna: we will be hearing from the man himself. this is the first time he will be speaking publicly. he typically gives these

televised addresses. one thing i do want to note is the explosives that one off yesterday, the walkie-talkie explosions, some of them actually detonated during the funerals of some of the people who had fallen victim the day before. so, really striking right at the heart of hezbollah territory. and of course they are on the defensive here, and they have instructed all of their operatives to cease using any of their mobile phones. even other countries around the middle east, the likes of syria, iran also getting very concerned about the state of their own telecommunications. but i would also say that one thing to bear in mind is that the iranian ambassador was injured on the first day of these explosions. we also had comments from the iranian envoy to the united nations. they sent a letter that said iran reserves its rights under international law to take

measures deemed necessary to respond to such a crime. this is not just a lebanon situation. he could be a broader regional problem as well. jonathan: a crazy couple of ways -- of days. a key. norman roule joins us now for more. norman, i want to take a question that annmarie asked at the start of this program. is this an escalation that leads to escalation or a step that leads to de-escalation? which one do you think it is? norman: good morning. it will depend entirely upon hezbollah's decision-making. israel's goals are simple. cease the attacks, return its people to the north. it is not looking to enter lebanon. the problem is hezbollah has suffered such a crevice traffic -- such a catastrophic low that its own decision-making is going to become located and slow. i do expect some symbolic counterattacks, but hezbollah has to decide where it wants to go. and the u.s. diplomacy would be looking to exploit this dramatic

moment to see if you can convince hezbollah to withdraw. lisa: what do you make of peter tchir's idea that the salvo that a wrong launch that israel was actually all that it had. the thousands of missiles, and essentially israel is calling their bluff with this attack and others dicing, we can provoke you because you don't have anything left. do you believe that is the case? norman: no. iran fired hundreds of rockets, missiles, and drones, but it retains a large missile program. it is the largest in the middle east. much larger than israel. most countries combined. it has the capability to launch further missile strikes against israel. the challenge is, it would have to get through the defensive ring the u.s. has provided with its aircraft carrier task force. lisa: you have a sense of what could be potentially in the pipeline from israel?

has been on the minds of the leadership, but is there any since we half of whether this is the opening salvo for israel are essentially a plan in the making for a long time that has been launched? norman: there is no question that israel's political leadership is under significant pressure to return its population to the north. they have engaged in 11 months of diplomacy, and 60,000 of its people are not able to return to their homes. they have moved elements of the experienced 98th infantry division from gaza to the northern border. there they have joined the very experienced 36th infantry division, which has been training for a lebanese war for some time, for many years. they are prepared to launch actions. i don't think israel is looking for a long-term ground war, because of the cost to its economy. but we could see airstrikes, cyberattacks, special forces operations command other

operations, such as we have seen with the explosive telecommunications devices. annmarie: someone quipped me this week that bad things happen when you buy predictability in bulk. what else may be predictable that the israelis can infiltrate? norman: anything with supply chain is in -- vulnerable to manipulation. this is an old technique as far back as the american civil war coal was used the mask explosive, successively, by the confederates. and during the second world war the nazis attempted to infiltrate a chocolate bar to reach winston churchill. perhaps a variation on the phrase "bangers and mash" from the menu. anything in the supply chain that is close to hezbollah leadership or operatives is something that will be open to interdiction and manipulation, and -- manipulation. annmarie: we hear a lot from this administration that they don't want to see an expansion

of this conflict. do you consider this already a war? and given the fact that there is u.s. military personnel in this region, do you disagree with what kamala harris on the debate stage, that there is no u.s. soldiers fighting in active war zones anywhere in the world? norman: first, israel has thousands of rockets from lebanon, and lebanese hezbollah. that is a war-like situation. they have conducted airstrikes against lebanon. they be there is not a declaration of war, but this is a war-like environment. for u.s. personnel in syria, iraq, the naval personnel who have been on the receiving side of hundreds of who seek missiles and drones, this is certainly a -- houthi missiles and drones, this is certainly a hostile environment. they could get combat badges. therefore think the vice

president at the very least misspoke. jonathan: norman roule of csis. a lot of interest in this story. any more details, we will bring them to you. let's get an update on stories elsewhere. here is dani burger. dani: president biden will speak at the economic club of washington about the state of the economy. he is expected to celebrate the fomc's outsized move, pulling it a validation of his economic policies in the beginning of a policy shift bolstering the labor market. white house chief of staff jeff zients telling reporters "this is not meant to be a declaration of victory. it is meant to be a declaration of progress." kamala harris plans to meet with volodymyr zelenskyy next week. the ukrainian president will be in washington. sources say he is expected to push his country's bid to join nato and the eu. he is also expected to ask for a continued supply of more advanced weapons. the linsky will present his plan to president biden later this month.

coco gauff is looking for a new head coach. the 20-year-old tennis star has officially cut ties with brad gilbert after only 10 months of working with him. coco gauff had a disappointing run at this year's u.s. open, where she was knocked out by emma navarro. dilbert shared the news on social media and wished coco gauff well in the future. that is your brief. jonathan: the bank of england decision is about 15 minutes away. here is a take for you. on twitter, ask, whatever you want to call it. here is the take. what was the narrative today with equities at all-time highs? rate cut, bullish, governor bailey shuffles papers, bullish. that's what it feels like. lisa: people are trying to find a narrative, and they fit the narrative into whatever the events are that transpired. jonathan: up next, the cut heard around the world. >> we are moving at the pace we

think is appropriate. you can take this as a sign of our commitment. jonathan: more on that big decision up next. this is bloomberg. ♪

jonathan: stocks up on the s&p 500. and the small caps too. everything rallying. up to 1.6% on the s&p 500. under surveillance this morning, the cut heard around the world. chair powell: i don't think anyone should look at this and say, this is the new pace. you have to think about it in terms of the base case. of course, what happens will happen. we are recalibrating policy down overtime to a more neutral level. and we are moving at the pace that we think is appropriate. you can take this as a sign of

our commitment not to get behind. jonathan: here the latest. jay powell announcing a half-point rate cut doing so without panicking global markets. fomc officials remaining split on the outlook for additional cuts through the end of this year. jonathan pingle writing, the 50 basis point rate cut largely met market expectations and exceeded hours. he also expected chair powell to lean into rate cuts, but stopped short of saying another 50 is on the way. jonathan, it is good to see you. is this catch up with what did not happen in july or does this set the tone for the cycle in the months ahead? jonathan: i think both, right? it clearly was catch up. you could say it is catch up from june. after the june meeting they sent a policy report to congress. although one of their rules and rates should have been lower after that decision. it is coming to terms with the fact that monetary policy is restrictive. throwing this r* narrative out

the window. bar for moving rates lower is not that high. if they saw a 100 14,000 increase in nonfarm payroll employment and really thought that was the signal to become a little bit more urgent and getting out of restrictiveness i think that frames the risks going forward. jonathan: let's talk about that word, signal. and where to look for signal in the weeks to come and where not to look. we said this meant market expectations. it largely did. overwhelmingly economists on wall street were looking for 25. we talked about that repeatedly yesterday. something didn't happen here. had a speech from john williams at the new york fed. no conversation about 50. we had a speech from governor waller into the quiet period. no lien into 50 whatsoever. i'm wondering now whether i just ignore all of the fed speeches and listen to the 13th individual on the fomc.

what you want to follow now as a professional economist? what will you look for? jonathan: the message is clear. unfortunately for you while it was print media instead of television. [laughter] jonathan: unnamed sources don't work on tv. you can't blur out their face and muffle voice, but carry on. jonathan: as a professional economist and someone who is at the fed, you know, overlapped with john williams in the system, right? i went into the friday of the employment report inking -- and we were writing, ok, should we change the call to 50? well, see with the employment report says and see what guidance we get from williams and waller. they were the last speakers before the quiet period. typically that has been a time when the fomc has rolled out speakers to frame the decision. to me they clearly sounded like we were headed for a 25 basis point rate hike and then all of the data since then surprised to the upside.

there was no shocker that should have undone that in the economic data in between those remarks and the meeting. making the news reports that repriced market expectations, seemingly, very important. lisa: you have been at the fed. how unusual is it to have a fed chair that has this clutch over the decision and decision-making? that would be the implication here from some of the news reports. jonathan: that is a great point. if i went back to the greenspan days, you know, chairman greenspan, if you watched him at the board table there was a reason he could control the board. he won the arguments at the table. chair powell seems to be using a combination of persuasion, political skill, and armed with the staff research to help him sort of make the case. in this case it looked like there was a fair amount of division over the decision, and maybe chair powell was that he

was getting his way, but just barely, maybe. jonathan: also armed with the tool to manipulate the market, right? if the market is saying 50 it is easier to jawbone everyone else into that view. jonathan: that came up in the press conference yesterday, right? if the market had not been pricing a 50 basis point rate would they have opened the door? that probably did play a role, but this easily could be -- i don't want to -- this could be what is happening behind the scenes. annmarie: it is getting politicized already, given it is an election year. when will it impact the real economy? jonathan: this rate cut may or may not impact the real economy. the markets largely, if you look at the forwards, the market was largely anticipating a series of cuts. the 2-year yield hasn't moved a whole. you were talking about the dollar earlier, right?

the 2-year is actually up over the last two days, which is something that is going to influence things like color pricing. the long ends come in a little bit, that is where we would look for, sort of, the instant reaction in housing, etc. a lot of this was already priced and you are starting to see a little bit. jonathan: housing. let's talk about it. prices going up or down? feels like we have unlocked market. looking at the mortgage application numbers. jonathan: you are getting a pullback in mortgage rates. i think it is going to support residential investments, single family. there is a lot of heterogeneity in this market, but i think it is difficult to argue that lower mortgage rates are not going to support the housing market. jonathan: we talk about cash on the sidelines. i want to talk about people on the sidelines. annmarie: he's talking about us. [laughter] jonathan: waiting to get into this housing market, waiting for some inventory to be unlocked.

people sitting on mortgages with rates too low that never should have gotten them. [laughter] lisa: shots fired. they just did really well in terms of their trade. the flipside is, maybe they got in too high of a price valuation. you know what? some people just lucked out. jonathan: you time to the market perfectly. but i think it raised an important question. our prices going up or down as we unlock inventory off of the back up a few rate cuts and a rally in the bond market? lisa: it is a huge debate. it is the pace of supply and demand coming onto the market, and then it is an affordability question. if you have a 6% mortgage it is different than having a 3% mortgage in terms of your monthly payment. it changes the calculus in terms of what you can afford. jonathan: the three-handle on your mortgage is like the new lamborghini on the drive. it really is. [laughter] we've got to leave it there. good to see you.

jonathan pingle of ubs. up next, a bank of england decision. from new york, this is bloomberg. ♪ (♪♪) ♪ well i was raised by careful hands ♪ ♪ yeah, they made me who i am ♪ ♪ so i'm off to see... ♪ we invent them. we design them. we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪

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>> the federal open market committee decided to reduce the degree of policy restraint by lowering our policy interest rate by a half percentage point. >> this is not just a 50 basis point cut this is a dovish 50 basis points. >> how you get that without scaring people innocently bad about the economy and he did that very well. >> this was not signaling we

were ready to cut. this is a window of opportunity to cut now. >> i think when you go forward it is the soft landing ace line. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: live from new york city this morning, good morning for audience worldwide the second hour of bloomberg surveillance starts now. coming up, a bank of england rate decision. henrietta as donald trump and kamala harris pitch further tax cuts and we will speak to the transportation secretary pete w measure. we need to talk about a rate decision, rates unchanged. lisa: it's really interesting at a time when they are also downgrading their growth expectation maintaining the interest rate at 5% that was the estimate going into this.

bank of england andrew bailey said we should be able to cut rates gradually over time. the dissent not that notable for the bank of england it is normal talking about cutting guilt purchase stock at 100 billion pounds over the next 12 months but this is really what i thought was interesting. but they see the third-quarter growth of 0.3% down from 0.4% in august. this highlights how the bank of england is not the federal reserve, but they are downgrading growth forecasts while keeping rates unchanged because they do not have the privilege of acting on this in any capacity. >> the pounds a little bit stronger off the back of this. just short of 133. positive by 0.6%, rates unchanged from the city of london. what's your take, largely in line with expectations. >> absolutely john. a cautious hold exactly what we expected. we can get to that, the reason

is we have the services inflation yesterday. and we didn't think about maybe the impacts of the fed transferring across the pond. the bank of ringwood wants to show it has its own mind and to be fair powell has done a bit of the work for andrew bailey yesterday. there is also the big question of the budget and october the 30th. how much will there be fiscal tightening for the new chancellor rachel reeves. how much will that slow down the economy. perhaps the banking that wants to wait until november to see that factor in. just in terms of vote split, one thing we know is the big dove on liquidity looking at how alan taylor would vote on the committee as expected he's gone with the majority. the guidance no press conference this time, no forecasts that they downgrade on growth, this is a bit like the ecb for example but we weren't expecting

major changes here and it is that cautious note daily sound of the jackson hole. he said it's important not to cut too fast or by too much so the expectation heading into this was you would have cuts in november and december, four or five cuts next year. interesting to see how the pricing reacts and qt held 100 billion pounds a year the same pace as before. jonathan: help us understand the differences on either side of the atlantic. we saw 50 basis point we are holding rates steady. what's different in american was taking place in the u.k. and across europe. >> look at where inflation is, to bring 2.2% holding there. and then look at the growth picture. question marks around what budget will do. we have the first labour

government in over a decade and so we have those questions on growth as well. hence the caution from andrew bailey wanting to prove that he is his own man. jay powell really coming out saying they are going to have that soft landing so the confidence perhaps transmitting somewhat to the u.k. story. >> it also highlights how unique the federal reserve is in terms of their privilege to ease at a time when there isn't necessarily obvious weakness that they can .2. the fact that they downgraded growth in the third quarter the same time they lower their expectation for inflation by year end of the same time there holding it steady really highlights that. how much do you think this will become an increasing burden on them especially given the political considerations. lizzy: remember that growth is the number one priority of this government so it is bad news for keir starmer that growth has been downgraded.

as we look ahead to that budget on october the 30th there is this tension between the idea and it's not confirmed we won't know until we get there but there could be an austerity budget. how was that can grow the u.k. economy so in the four months we've seen out of three of them no growth in the u.k. this is not a good look politically but it has worried the boe -- hasn't worried the boe yet enough to go for this. >> fantastic coverage as always. outside the bank of england with the pound, the pound against the u.s. dollar. the highest, of the strongest we've seen the pound against the u.s. dollar. lisa: can you imagine if jay powell had come out and done exactly this. how much the market would absolutely flipped out if they hold rates where they were. putting aside services in the

latest in the u.k.. honestly to me the fact that they're highlighting the political scene or the lizzy burden was highlighting that shows how difficult conversation is. then it is in the united states. >> a self-imposed outbreak that seem to be taking control of the u.k. story on the fiscal side. a month away there was one similarity pray the political uncertainty, of the fiscal uncertainty on both sides of the atlantic right now monetary policy official trying to set monetary policy for 2025 and beyond the limited term outlook, how much things can change in the next few months for both central banks. >> especially at a time talking about potential tariffs in the united states. what the reaction function is of the central bank is interesting. in england maybe the incredible emphasis is on protecting the pound after what happened with liz truss. in the u.s. it's the same calculus or does it save the economy at all costs. protect the labor market maybe depending on the income. but also just in general is that also this general feeling at the

u.s. central bank. >> rates unchanged at the bank of england at 5%. in line with expectations joining us to discuss is a senior research economist at aberdeen. would love your first reaction to this decision paid what you make of it? >> this is very much in mind with the markets had expected. expecting a cut today and expecting anything under than 100 billion in terms of qt at that pace we already had a participant survey and that was quite unanimous in terms of the pace going forward. also in line with what the bank of england had already suggested in terms of a gradual pace that is predictable as well. gradually predictable. i think it's interesting comparing cross statement banks. the bank of england has a slightly different position that will mandate that they have.

the second thing would be growth in the first half of this year. there slowing the projections, the projections across the street and our projection is for growth to slow over the course of the second half of the year. in europe at least it's -- there's no need to panic in terms of the pace and perhaps the next cut in november and very much slower pace so a quarterly pace from there on its all been the most likely outcome for the bank of england would very much in line with where inflation is. slyly more resilient growth picture than for now. >> have ever seen such a divergence of those that have the dual mandate and those that do not. sree: i'm trying to think in terms of the history here but

the u.k. has definitely been less influenced by the fed and i was not expecting this this week. i do think the bank of japan will be watching the fed closely but also reported market reaction the 50 basis point cut. so i think they there is some difference -- interesting divergence. i think also just very quickly on japan it is interesting that the yen is been quite resilient considering a 50 basis point cut from the fed. interest rate differential for the yen and the carry trade and the markets ability. in a very different environment today. we were in august. but in terms of the u.k. i think historically the u.k. has been more mastic focused. yes the global picture does influence it but i think the global factor for any country would be what's happening with

u.s. growth. what does that mean for domestic trade and what does the future tariff outlook mean for to mastic trade, those are be the questions again three to mastic focused. but again i think bank of england much more independent from the fed position, bank of japan i think will hinge on the outlook from here. so that rate differential. >> does the u.s. have the unique privilege of the dual mandate because of its being the reserve currency of the world? >> i think that there is some advantage there, definitely. and i think this is i think built into the framework regardless if there is a policy position as well i think what we are seeing is a tendency to not necessarily call victory an outright victory on inflation but i think in a lot of countries inflation is on the right trend. so for the case of the u.s. you

can shift that focus more towards what's happening as we heard earlier from analysts, the u.s. wasn't particularly bad. data released recently has actually been quite on the upside and really it's that focus on resilience of the labor market and some of the volatility in payrolls recently all of these things are just providing some cause for concern. in fact the psalm rule has breached this special trigger there were all these concerning for the markets and so saw that 50-50 pricing yesterday, there was a lot priced in for a 50 basis point cut today so really the backdrop was quite primed for the fed to go and frontload and just get ahead of the situation and any accusations of them being behind the curve are

probably knocked out by now. i think they go on that 25 basis point pace the next two meetings. and even if they then shift to every other meeting for next year it's still on track providing that buffer that the economy and the labor market. they probably made a good decision given what was priced in with some of the narrative in the market. jonathan: thank you. the bank of england leaving rates unchanged. the pound stronger against the dollar. levels we haven't seen since spring of 2022. i'm pleased she brought up the currency growth but we talked about this yesterday on the program. in the news conference chairman powell sounded really confident, most poignant, jubilant about what's happening in the u.s. economy. at the same time cutting interest rates by 50 basis points.

market conditions are close to maximum employment. retail sales, gdp rowing at a solid pace with rising layoffs or hearing it from companies. it certainly felt like mission accomplished. >> he is recalibrating. this is a recalibration. >> it's good to be a recalibration going forward bring this is the sign of the commitment to make sure the are not behind the curve. this doesn't guarantee the pace going forward will be 50 basis points but it does guarantee their commitment to avoiding something that looks like a hard landing. it sounds a hard landing, anything even close to it it's not mission accomplished. >> a decent piece of acting wooden to say. the 50 basis point cut. >> basically that was his job. and he did the job. >> done. equities right now the s&p up by one point 6% on the s&p 500. dobb done for now. tech stories elsewhere with your bloomberg green fears dani burger. >> the bundesbank said germany's

economy may already be in a recession after the contraction last quarter by the central bank said gdp could stagnate or decline slightly in the third quarter. in other bad news for the region ev sales came in showing a 69% plunge in germany last month. boeing is requiring to take unpaid leave for cash. the playmaker is digging in for the contrast talks within the largest union. u.s. workers will see one week of unpaid leave per month as the strike continues. the company's initial offer of 25% pay increase over four years was were soundly defeated by workers seeking higher raises in a pensions rate stated. oprah winfrey is joining, harris on the campaign trail. oprah will join the vice president in a livestream town hall in the detroit metro area today. roughly 400 harris supporters are expected to attend. the tune out live events with thousands more expected on social media paid michigan is

one of the three critical blue wall states critical to harris's victory. jonathan: more from danny in about 30 minutes time. tax cuts for everyone. >> trump is like you get a car, you get a tax cut, you get a tax cut. harris is less so. in's meaningful difference. annmarie: everyone gets a cut. jonathan: got to cite things. an academic. that's conversation just around the corner bread from new york this is bloomberg green ♪ -- this is bloomberg. ♪

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has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: the rally resumes up by 1.6% on the s&p 500 higher on the s&p and the nasdaq and the russell, muted price action once again.

the 10 371 30. under surveillance, tax cuts for everyone. >> trump is like the old opera joke. you get a car, you get a carpet you get a tax cut. harris is less so and it is a meaningful difference. but the key question is as reagan said, is it spending to increase applied, is it investment or is it spending just for spending. so tax cuts, is it tax cuts to increase investment or is it just tax cuts. >> both donald trump and, prayer --, harris promising to cut prices as the deficit continues to soar. last year remained absent from the campaign trail. saying the next president is guaranteed to increase the deficit, the only question is by how much and with how many votes. henrietta joins us for more. i just want to talk about numbers. you've heard the promises, what numbers are we talking about now. >> on the trump campaign side

they have far exceeded the scope of the extension of just the 2017 tax bill was on its own is 4.6 trillion. each one of the items trump is talked about in last week's weather it's the salt cap or imposing a no more taxes on tips or the social security change your payroll tax change, you're now up to a least 8.5, $9 trillion and rising so this sort of the latest area with a former president the republic and orthodoxy. going from free-trade terror strategy now it's a lot of tax cuts. >> how are they going to pay for the smorgasbord of tax cuts, they'll just say terrace but no one has been able to give us real granular details on how those tariffs would pay for all these cuts. >> right because they wouldn't. for a couple of different reasons. i don't be harsh here but that's the reality procedurally and

functionally. the soft cap as the number one revenue raiser in the 2017 bill and that's what trump gave away earlier this week before the rally in nassau. that's $1.2 trillion revenue to cap salt at 10k and that was the principal driver imposing some sort of fiscal on the rest of the tax cuts being extended on the visual -- on that side. on the tariff side the problem is this good to be an executive action so even if it did start generating revenue if customs and border patrols collecting revenue at the border which then is ultimate passed on to consumers, the problem is in the tax bill at no point will they be voting for these tariffs. so when jct goes to score the tax bill that they are writing it will not include a line item that says upsetting the cost of these expenditures so procedurally and functionally it's a real problem to say that they will pay for this bill. >> i disagree with adam that

she's not throwing out tax cuts. she took the tax on tips from donald trump, she's talking about subsidy if we $5,000 buying a new home and a lot of spending. they do have some revenue increases. how do you square that camp? >> it's exactly the same. the main restriction will come from the united states senate so there we have 90% odds the senate will go red. which will be a bipartisan leash on any of campaign strategies. what that actually does is diminish which he can bring in will also the amount of revenue she can send out so the child tax credit is extremely expensive, $1.2 trillion. that would go to an theory 23, 24, 25%. that's really hard to pull off. what you're talking about is good to be a harrison administration with republicans in the senate is very likely to be a repeat of 2010 and we just

kick out an extension of everything that's on the books and have a broader conversation about fiscal sanity in the two years between 2026 and 2028 when that bill would expire. something along those lines. >> we heard that from jd vance as well he wants to expand this. kailey leinz brought up a good point this venn diagram of how in the middle there's a ton of cuts or programs that both campaigns want. you think even if there is gridlock in washington given the fact that both campaigning in a number of these things some of them can get over the finish line. >> i think there's a growing possibility the next year even if trump is elected republicans might prefer to see democratic support for a tax bill to go along with reconciliation. but the deal is the republican majority would be so small in the senate and also in the house and you think about the conflicts we already brought up. $1 trillion to the child tax credit no longer having a $1.2 trillion revenue for the salt

cap and all these other tax expenditure problems -- promises. the republic in appetite for one-time hidden deficit height, $8 trillion is always the more than two. so where you can find the revenue to offset these costs. you can have the tax cuts that last going into three or five years which is given the bond market to react to this time. or alternatively you get 60 votes, you pull in nine or 10 democrats to support the bill and you no longer have that optics problem. >> given the legislative strategy question i know your base case is the senate flips to read. what about the house in the white house, what space case in november. >> 37% of americans can name their congressman. i expectation is the house goes the direction of the white house if harris wins i expected to be a blue house, if trump wins i expected to be republican house. there are a lot of at risk

districts in non-swing states however that could make democrats prospects under trump just a little bit larger than what they had been the last couple of months and this is what kamala harris is fundraising juggernaut has created. effectively she has the ability to go into all of these districts in iowa and michigan and elsewhere and really hold republicans feet to the fire and make them campaign and spend money in those district bring >> these numbers are big. appreciate it. these numbers are big as well this morning. let me share some of this, the harris-walz campaign on pace to do fewer press conferences than any major parties president are paring in modern u.s. history. it's worth pointing out just a small piece of the wide. harris has been a candidate for 59 days. let's go with that time period. during those 59 days, republicans donald trump and jd

vance have participated in more than 17 interviews and press conferences, harrison walls have taken part in seven. jd vance alone has participated in more than seven times more interviews and press conferences in harrison walls combined during that. >> you see jd vance on the sunday shows on most every week and they're out there doing interviews not just the set pieces which clearly the democrats prefer. they want her at a rally or tim walz but not across from journalists. jonathan: it doesn't feel like this is can a change anytime soon. this is the strategy. up next on the program. saying it's time to get out of cash parade we will talk about that up next. ♪

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jonathan: financial markets and make a fool even the smartest people on the planet. the close snap to seven-day winning streak on the s&p. hawkish 50, waking up this morning, 3% on small caps. the s&p 500 up by 1.6%. on the nasdaq 100 up by two full percentage points. the rally resumes. >> hawkish compared to what? it's essential would markets are taking their signal from.

i know you can he get to that but there is this feeling that this is a central bank committed to withholding risk assets and you could argue this but no one's talking about financial conditions. can financial conditions of actually only eased overnight at a time when they are already quite easy. jonathan: let's turn the page and get to that story. muted price action there. even as equities continue. we are down to basis points on the two-year. is the easing cycle already priced in, markets reacted as fed basis point rate cut balance and our base case is the further cuts won't move the needle too much either. that's what we are seeing right now. lisa: maybe that's the olympic dive, the entrance into the water. you see a little bit of a bubble. so that's maybe with the fed just executed. it sort of has us designated on

certain outlooks. jonathan: people diving? lisa: i really enjoy them. a lot of focused coverage. anyway, moving on i will say this is a question of whether they've telegraphed their path and that's what the markets are telling us. jonathan: two decisions today and tomorrow. with bank of single rates unchanged. cable right now is positive by 0.6% so that's a stronger hand in the u.s. dollar. and then it's on to the bank of japan at the moment the yen a bit weaker. dollar-yen will they or won't they hug interest rates in tokyo. >> how much will that send the yen significant higher or significant he weaker. some people argue the stability peter is talking about is notable highlighting how the positioning has gotten them to a balance. there was this really short position against the yen which caused that complete unwind of the carry trade. now there's a pretty sick of it

long position in the yen has it evened out enough that it's not really the story anymore. we don't keep saying good morning tokyo, good afternoon tokyo. dollar-yen. actually find this really interesting because to me the story of this year has been the divergence between central banks that have a dual mandate. and think at that point it's only can he continue to get focused because it's one of the privileges that were not hearing from the central banks. >> this want to watch in the next when he four hours. under surveillance thousands of electronic devices include in pages and walkie-talkies exploding in lebanon of the last two days. hezbollah accusing the israeli government of or and the attacks and i imagine the whole country on edge try to work out what comes next. annmarie: the israeli defense minister saying this is a new phase in the war. very vulnerable right now. waiting to see what the leader of hezbollah comes out to say today. and it really could potentially

change how they are dealing with israel and israel's northern border. they are so vulnerable, these obsolete gadgets, walkie-talkies, pagers, that's where they are now. the former intel chief said is this happening when you buy pretty debility in bulk. what else could israeli infiltrate when it comes to hezbollah and their operations. lisa: there was one article that framed this is israel's trojan horse. but essentially crated a shell company that they then sold to these obsolete instruments into the hezbollah operatives. to create an attack and this is what they've been planning for years paid it raises the questions are there other trojan horses. what's the barrier to entry for trojan horses akin to that from other groups as well. it raises questions for supply chains that i'm curious about. jonathan: also for us and for the west, the united states. >> is this an israel specific thing or is the barrier to entry

low for other actors. it something a thing a lot of companies will have. jonathan: you ask the right question earlier i think you framed it perfectly. is this an escalation that leads to escalation or an escalation that leads to de-escalation. >> we have to wait to see how hezbollah responds pride the issue they would have right now is they are very vulnerable. what israel was able to do is take out some leaders, individuals and operatives in the group. they all now need to recalibrate. not only that this absolute to creation in their trust. how do they know they can communicate with one another. it is very tense times right now but at the moment when you see the united states coming out saying we want to -- would not want a wider spread of war. this is a warlike conflict whether or not its name only, it is a warlike conflict. jonathan: i think it's difficult to disagree with that take. boeing following tens of

thousands of its staff to preserve cash as its largest union continues to strike. they will work a rolling schedule of three weeks on the job in one week without work or pay. >> it just gets worse and worse for boeing. how are the going to move forward at a time when they need an infusion of cash they are having a lot of this around their space aircraft proposal. they are dealing with an aging workforce this disgruntled and they have a new ceo that's walking into this mess who has to fix it. it's difficult to see how this moves forward at a time when they have to raise money and it's getting more expensive to do so. >> the credit rating companies hanging over them as well. not a great position. >> you have to mention the borrowing costs go up more, does that do more to stop them already being beaten up so far this year. they're kind of in a difficult situation to put it mildly. >> up in the premarket by little bit more than 1%.

let's talk about the latest in washington. the u.s. house rejecting the funding bill with less than two weeks until the government shutdown deadline. 14 house republicans joining a chorus of democrats voting against the bill. >> the question now remains in washington what is speaker johnson's plan. greg out with a note today saying he will consult with his rebellious house members, but time is running out and that's the issue, the markets of the moment not paying attention to this. at the end the day everyone think they will get through this. they have to go home and campaign. >> this isn't a great thing to campaign on as we've seen of the last few years. >> speaker johnson was trying to get consensus and bring the republican party together while selling dissent among democrats. >> top story in the last one he four hours markets digesting the feds 50 basis point cut, blackrock writing this, volatility aside this will crate a fabulous opportunity for investors to move cash and belly

of the curve. eventually a rate cutting cycle tends to bode well for stocks. good morning. i've seen in cash and where they're going again and what do i do. >> you step out of cash. i think the signs that this fed meeting showed us beyond the 2550 debate hawkish were not hawkish. once we go past all of it. this is a fed that's going to surprise to market. there's been a do what it needs to do to make sure the labor market and the broader economy remain strong. and they will cut 50 basis points and may another 50 more or perhaps even more than that if they need to while growth remain solid. while growth means a 2% and that is an amazing opportunity for risk assets so all risk assets

in the fixed income markets, all risk assets in the equity markets, i think seasonality will be a little bit tough but this is a great time to step out of cash. >> in fixed income when you say take risk and fixed income in bonds what you mean? gargi: making sure you are very precise about where you want to target your interest rate sensitivity and duration risk, that's really important. we've been here before and talked about open -- owning this. really you can get the three to seven part of the curve. not just owning treasuries but only high yield, owning assets, owning income really taking this opportunity of still locking in yields especially when cash yields are dropping fast. and owning income in the fixed income markets and their products that allow you to do that in an active matter and the index matter put the time is here and it has been here. >> a lot of people are feeling

like they lost it and a lot of people feel like they are watching as valuations get that much more expensive in stocks and bonds. robert spreads tighten even more on the heels of this decision. how do you convince people after so many discussions the things have gotten so frothy and so expensive that now as things are even more expensive it's the right time to buy. >> separating bonds and stocks again i think for equity markets this is a seasonally weak. we will have a couple of risk events and we are obvious and we are obvious in going to have the option in six weeks or so but before that we are going to have earnings season. and i think it could maybe make sense for equities to claw back just a little bit. i think you're supposed to add downside protection to buffet strategies. or move a little bit further up. we told investors to stay away from the small-cap trade, obviously that's doing very well.

it's hard to imagine that does well sustainably for the next eight to 12 weeks. having said that in the fixed income market, i hear you, spreads are very tight but i think what investors have moved towards is it is around yields that are available so when we compare the yields today to what we were getting 10 years ago yes it's come down but it is still very positive and a thing investors do want to lock that in especially if we slow down even slightly from here. lisa: you talk to risk events including the politics. there is this issue that every candidate is get a promise more and more to increase the deficit more and more, does this create something of a risk event that's longer-term particularly for the long end? gargi: you've hit the nail on the head. that's why we are precise about where you want to go, duration is important. regardless of what happens in

november or who is president in january, i think one thing we can be sure of is deficits are coming down in a rapid manner. in one of the ways in which that can play out in our markets is really in the long. i was saying earlier to john about owning duration and that three to seven your part you want to stay away from that for now. stick in the belly and harvest some of the income you're getting and that's where investors are moving to as well. we have conversations, people want to hear about that, they want to hear about bank and quality equities, that's what we are telling them to do because that's the regime for this. >> henriette it was talking about investors in the fixed income space are interested to see what happens in washington based on the timeline. you get some of these tax cuts three or four years out were for go for 10 years. do you think it makes a

difference? >> for bond markets ethic it all makes a difference. we are in this for the next six to eight weeks where we just won't know too much and obviously won't know the outcome. i think markets like subtlety the most. -- certainty the most. which is why feel the next couple of weeks a pullback despite this 50 basis point cut could come and i think that's fine, you're supposed to protect her downside. but i think of course it matters. in the long term will it matter whether we get something on the three years or 10 years, absolutely. having the market can only -- markets pay attention to one thing at a time. right now we are paying attention to the amazing opportunities that the fed cut has brought. annmarie: but next we will be focused on the election and fiscal sustainability. also the fact we may see another commission. does the market care about that

or is that all noise and talk. gargi: for now i don't think the market will focus too much on that. we will focus a little bit more on what is the data telling us, to the policies we will get? what are the ways in which the earnings season will play out. i think that will be something we are not talking about yet. we did see earnings ok and we did see companies weren't doing as well revenues. we see the company scans still find ways to put expenses. for the near term, it's good to be much more than if we get a commission. 12 weeks or 20 weeks down. lisa: can we say for now wall street is sick of talking about the fed. gargi: i think soper they are now focused on what is really important. which is the opportunities that exist in the markets for investors to be invested with the financial outcome.

>> there's a line use a long time ago, of the market can only focus on the shark closest to the boat. isn't that the truth. >> 25 or 50 was that shark for a long time. people are excited for that shark jonathan: now it's november 5. lisa: she said no it's actually not. jonathan: good to see you. thank you as always. here's your bloomberg brief with dani burger. dani: jp morgan is for the banker in charge of junior bankers well-being and success. citing a memo from j.p. morgan it appears to be response in concerns about overwork young employees on wall street. jp morgan capping the week to 80 hours. bloomberg reported at the time that the limit is for those working on livedeal's. the international brotherhood of teamsters will not endorse,

harris nor donald trump. teamsters president sean o'brien saying based -- had commitments not interfere and to honor members rights to strike but were unable to secure those commitments. donald trump made a pit stop at a bitcoin themed bar on the way to a rally. spending nine or $98 and $.70 on a few dozen burgers for supporters. he paid for the food with bitcoin parade in july trump gave the keynote speech at a crypto conference promising to create a national strategic stockpile at the white house. jonathan: more and about 30 minutes. checking the price action. one point 7% of the s&p 500. small caps absolutely ruined this morning. on the rustle this morning up by close to three or four percentage points. ♪

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jonathan: given how muted the price action was yesterday in response to the 50 basis point cut of the fed and the news conference it's a surprise to see this rally. on the russell to small caps up by 2.9%. on the nasdaq we are up by two full percentage points. in the bond market yields look this way, the two-year at the moment down for basis points. the 10 year just about unchanged , there is a bit of stability in the bond market. it's not surprising given what we heard on the commentary around the fed yesterday. what's his prizes to see the

grip in the equity market so far. lisa: priced into the bond market but maybe not the stop mark -- stock market. even at a time when they reconfirm basically their belief and their commitment to achieving a soft landing. jonathan: shares of alaska airlines gaining from the premarket this morning. transportation given a $1.9 billion with hawaiian airlines. must protect the value of loyalty programs. it's the first on the dot is required airlines to agree to bind enforceable protections before improving a merger. it's a transportation circuitry -- secretary pete buttigieg. i want to start with this deal and talk about some of the work you've been doing on it and whether you think it could serve as a model for future integration in the industry. >> thank you, we believe it

really does represent a new chapter with dot approaching consumer protection and competition. fire department has a lot of authorities and responsibilities when it comes to competition. the department of justice's role as well, the permanent transportation's role, partly the department has not been very proactive over the last 30 years or so as mergers of come along. we are concerned with competition and we are concerned with consumer protection. and so when this deal came before us we saw the department of justice did not intervene. we still wanted to make sure there were protections in place which really come into two categories. in places like service in hawaii but secondly consumer

protections for broadly for airline passengers. this family seating available, hawaiian had not. and so they've committed to that. and probably the most new and one the most important things the rewards program and making sure provisions related to that point and mile system is breaking new ground for us but is increasingly very important part of the customer experience and its looming larger and larger financially. annmarie: could the dot have done anything different when it came to jetblue and spirit given your likely to be using this blueprint? sec. buttigieg: of course every proposed merger is different, it is evaluated on its merits and the impact it could have to competition. in that case the doj took action

based on a real concern that would happen on many routes and fire department took the step, something they hadn't typically done in the past of aligning ourselves with that and supporting that action but i do think there are cases where if it's not something just out right must be prevented about the analysis on the competition law. you need to make sure it goes forward on terms of -- that are consistent with responsibilities and those public interest determinations, a lot of market analysis a lot of legal analysis. but the sum total of it would be a better passenger experience, some assurances this would mean a level up to the best wen yu of multiple airlines coming in. annmarie: hawaiian area really needed this cash infusion the same way spirit air desperately needs a cash infusion so why is the administration willing to

let one airline get the boost they need and not the other? sec. buttigieg: well again there's a lot that goes into the competition analysis. a lot of it has to do with the loss of competition on key routes informing doj in a somewhat overlapping announcement with consumers face. part of this is a concern because of what happened over the years. during the period when america went through deregulation which led to our modern airline system a lot of people involved in that policy were confidently predicting that in the future there would be about 100 airlines in the united states. instead we seen merger after merger, lots of consolidation. it's very important to take a very hard look at the proposal to go for more airlines to fewer airlines in a country that already has so few. >> we are talking about fewer

airlines. we have a question about fewer planes bomb, what's the threshold for the united states government to subsidize bowing a time when their real questions about its ability to invest and workers are striking? sec. buttigieg: boeing has historically been an aerospace leader. right now encountering a number of issues related to quality and safety that the faa has required them to demonstrate how they're going to address and labor issues as well. if you look at how boeing competed so well in the past, it had to do with the focus on quality and safety. and i believe that's absolutely compatible with doing right by workers. and with boeing's place in america's economy. the most important thing certainly for the department of transportation perspective is that the safety and quality are there because everything else sort of gets multiplied by zero

if you have those kind of problems. i'm sure they could shake -- shape the market the important thing is the market. >> hopefully we can have a longer conversation. sector a pete buttigieg on the latest on the airline industry and a little bit at the end there on boeing. lisa: at a time when they see there are problems. at the same time very unclear with the threshold would be for them to truly step in and help out. annmarie: and how important they are to the industrial base. biden loves to tout that he is the most prolabor union president will he go potentially to the boeing factory floor. jonathan: coming up the third hour of surveillance. looking for that. and we speak to subadra of socgen after the 50 basis point

cut by the federal reserve. ♪

>> we know it is time to recalibrate our policy to something that is more appropriate. this is the beginning of that process. >> the press conference challenge was give 50 without spooking the market and if they navigated that pretty well. >> i don't think it is this clear cut as the market would make it seem. >> there started to get towards neutral, all is well. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: all is well, a soft landing kind of story. good morning, good morning to you all. the third hour of bloomberg surveillance starts now. this stock market is ripping. check out the russell, the small caps up by him was 3% on the session. on the nasdaq up to full percentage points. on the s&p up by 1.65, all is well. lisa: back up the truck because

let's go. that's we are hearing from an image every investor and they say high risk because this is the central bank limit to supporting the soft landing. over the rbc did a great job saying this was one of the most debated and discussed fed meetings in recent memory. but the fed's eventual decision to cut 50 basis points landed in markets with about the same splash. >> yesterday after jay powell spoke you had mohamed el-erian on and he would go far saying declaring victory but jason put it well this is the closest thing you can do to say mission accomplished. >> it sounded like it didn't it. an analysis of where the economy is at decent price growth is solid. less hiring than before but still pretty decent. things are ok and we are cutting interest rates. >> basically there was and concession here that they missed the boat in july.

he said if we had gotten the july jobs report before the meeting would we have cut, we might well have. in other forwards we are behind the curve, we realized it so we caught up in here we are, let's go. >> this is will be heard from ubs that may be that should be seeing as a catch up 25 25 altogether and not something that sets the tone for the rate cutting cycle. i think he went out of his way in the news conference yesterday to say this is a recalibration on repeat about 10 times. and doesn't set the pace for the rate cut story cut. lisa: recalibrating policy in the market is not recalibrating because they've already moved ahead of the federal reserve and that's why you've really pointed out is the market moved to note which is bond market is stagnant. they priced this in. the stock market understands this doesn't move for any weakness. i successfully delivered the message that they are not seeing anything we are not seeing.

jonathan: i don't know if they are focused on this much. the revisions yes. he also said the beige book. the philly fed talked about their more layoffs and we would cut rates. jonathan: in the bond market yields are higher by him was to basis point. in the equity market there's your move up by 1.6% on the s&p 500 joining us is phil of jp morgan as markets digest the 50 basis point rate cut. socgen on why it's harder to argue for lower yields from here. we begin with our top story a muted bond market response to a 50 basis point rate cut is the fed chair jay powell says that should not be seen as the new pace. saying these are calibration cuts burn economy that does not need as restrictive as policy rate. we are only signing 20% chance

of recession the next 12 months i believe growth will normalize with inflation around 2.5% by year-end. in other words that is a soft landing. phil, good morning to you. last time we spoke you happy and confident long bonds and equities. are you more on one than the other this morning? >> big risk in the portfolio with equities. yesterday's name was a throwback. we are talking about greenspan days we check out the size of his briefcase to see how much they are moving and that was the first meeting in our opinion since 07 that there's not much uncertainty that they're going. in january of 2012 they came out with her forward guidance and these fed meetings have been snoozer's with the exception of inter-meeting move sprayed or dot plots, but yesterday was a throwback and but i was on the program a couple weeks ago my

big takeaway was it's time for the policy to adjust. the real headline that gave the 50 basis points away was we have no tolerance for further cooling in the labor market. that got them to move 50 yesterday and than the 4.4% they think at the end of this year which is to more additional 25 basis point cuts. and i've been telling the story since money market fund assets were 5 trillion per day or 6.3 now. the real story that we are telling folks is the balance portfolio, you've talked in the prior session about highs and stuff like that and were stocks have gotten to. it is the 483 but we are really focused on. outside the big mega pack -- mega cap. all these valuations are two handles on pe below were the main ones are. so there is still room in some

part, the shallow end of the pool is s&p. the middle of the pool is mid-cap. the deepening is small-cap so there is room still left in their if we are getting this new signal that we will have the fed funds rate most likely 100 basis points lower than where we were before 2:00 yesterday and continue to move into next year the unappointed rate, let's go. >> not sure what's in the water jp morgan the last one he four hours but everyone stared down the camera and said we told you so, we sought from bob michele yesterday. mike was looking for 50 and goes 50. lisa: you get the sense under the hood there is this frustration with the amount of cash that has not left those money market funds. jonathan: there are some funds to sell. phil: the opportunity cost now it's reinvestment. . jonathan: is there such thing as

too much of a good thing? phil: the most bearish thing you could say is we are bullish right now so i think there is kind of too much of a good thing and in our opinion the one thing we are looking at comes out in 23 minutes which is initial jobless claims per those are probably the biggest things we are looking at. right now we don't see any reason to believe that this will lead to layoffs, labor demand side rather than labor supply. but that would be the biggest risk to us at the labor market. inflation the nails in the coffin. nails in the coffin on transitory. jonathan: i just want to be super clear no one on the program assange mission accomplished. >> does a moment a lot of people were focused on yesterday's meeting was inflation is transitory. lisa: terrific 2000.

boring bonds and potentially not necessarily great bonds. how much is the risk in the bond market. you can potentially get a further rally in treasuries at a time where we've questioned a lot of cuts and potentially are looking at inflation going to be stickier on the heels of some strength we are seeing with risk. phil: i think it's a good point that there is still remains two-way risk, but i'm a multi-asset investor so for me i could say i think will have a soft landing and want to avoid equity. we have 6% avoiding equity in the 60/40 portfolio. but here's the key on bonds. it's because what we've witnessed is inflation above three, getting to three and staying below three is important. that provides the defense. from that respect them multi-asset perspective. we are not expecting that. if were at 350, 3 and a quarter,

3% we are in recession for that's not priced in and that's not our view but they will provide balance for us on the growth or labor forecast. >> you sound like you're pretty bold. >> we are not full bowl on this. this year so we have equities as high as 10%. so what were saying there is over the near-term let's just take into account the election we had ahead of us. we wanted -- we believe as long as it's not a contest election. after that data. that's in a set us up based on the signal at fed gave us. and what we believe as i said 2% growth rate at 2.5%. that's 4.5 nominal growth.

that's a really nice story. jonathan: a contest election or better off is that how you see things. >> as long as we get an outcome 50% of the country may not like it but it is an outcome. but we talked to. is starting to get things going. obviously the founding fathers were brilliant so we have the house and senate also. annmarie: it sounds like you think it won't be a contest election. why do you think that? phil: that is rare. annmarie: is it? phil: i think it is paid i don't want to be a political strategist but at the end of the day it's very rare to have a contest election and that's not what we are priced for or predicting we think the election will come and go in one of the parties will win and that's with the december rally will come from. and that's what we saw in 2016. >> can we talk about the rest of

the world just briefly. to the fed open the deal for the rest of the world. thinking of the euro. >> mentioning in the press conference yesterday and i think the 50 yesterday was kind of a mulligan from the july meeting and other central banks hurried we are neutral that part of the world. if you look at the morgan stanley world index excluding the u.s. that discount is like 37% in the u.s.. it can be cheap for a reason. we don't want to be too underweight that part of the world for that's a 6% allocation and non-assets of a 17% allocation see put those together we still have 23% of 60/40 in non-us. we don't want to be overweight the u.s.. jonathan: thank you sir. of jp morgan and the equity market and the bond market. lisa: interesting it's not as

overweight as it was earlier this year. what is the closest shark to the boat right now. the initial jobless claims and then its earnings and then it's the election and that shark is kind of moving up so we'll have to talk about that shark until people get that out of their system. jonathan: we are always focused on the shore closest to the boat and i would have to say what about the storm on the horizon. you would be focused on the storm on the horizon. lisa: the horizon is very long for me. jonathan: tornadoes and lightning coming our way. lisa: but there is this issue where you do that and lose and you miss out and it's all the frustration people have of seeing all those storm clouds and being paralyzed in cash. jonathan: jp morgan says get out of cash we told you so. we seen this a few times already. let's give an update to stories elsewhere.

here's dani burger. dani: it was a volatile premarket session. the released earnings and shares sank by 4% turning around 8.4% higher now. the owner of all of garden posting comparison sales but missed estimates. softness in july that then proved afterwards. announcing a partnership for food delivery. apple is facing an ee warning that will force it open up its iphone operating system. sources say eu watchdogs are excited to announce the company must step into line with new strict rules of its digital markets act and make its operating system fully functional with other technologies paid if they do not comply the eu will launch a formal probe which could lead to hefty fines. the 76ers are poised to remain in philadelphia after the city's mayor announced a deal for a new arena promising --

after governor phil murphy offered steep tax incentives to develop their. instead the arena will be built in center city and is backed by over a billion dollars in private investments. it still needs final approval from the city council and that is your brief. jonathan: it's a piece of american sports that i don't fully appreciate. i just do not get. why do you move all the time? lisa: logistics, it is all about logistics. you think about it, new york city football teams all play in new jersey. so for the world -- annmarie: the world cup fifa was touting it -- new york would host the final. jonathan: up next on the program the morning calls plus john previewing earnings as he expects increased broader demand, that conversation up next. ♪

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

jonathan: upper upper west side. to remember in london there trying to sell in south chelsea. >> i went to look at an apartment and said this is in chelsea. they got me. jonathan: manus you to set -- used to say south of the river dreams don't swim. it's a very london joke. lisa: a new york times article about the sixth borough, philadelphia a while back and it was quickly lambasted. jonathan: the people of philadelphia or the people of new york? jonathan: equities right now s&p 500 firmer -- further 1.6%. we are up by close to three through most of this session. first up btig upgrading door just to abide paid your second

call from jp morgan downgrading five below to underweight pointing softening sales. finally bankamerica raising its price target of toll brothers to 165 exciting shares to benefit from the fed's rate cut. now reporting earnings after the closing bell ubs reiterating it's by recommendation ahead of the results expect in positive commentary on current demand trends and optimism given the operation in mortgage rates. the analyst by mccall joins us now. what does that rate cut do for this market? john: rates are down 90 basis points from when lennar last reported earnings. we know demand is picked up. toll brothers reported in august july was the strongest month with strength continuing to august. our private builder channel checks have been very bullish, demand is better than seasonal

averages at this point. consumer moving in the right direction so i think that coupled with new home sales in july month over month 739,000 paid single family starts yesterday 992 thousand. activity is picking up and that's a good thing. so think demand is moving in the right direction. jonathan: can we talk abut who this really helps, which builders does this really help? john: 3% of their buyers pay and all-cash so you can already have a little bit less stimulus there. the lower end probably benefits the most d.l. horton, lennar, pete -- companies that are focused on that. at entry-level first time. those buyers will have more dollars in their pocket. demand has been pretty good for them all throughout this kind of interest rate volatility. lisa: that's where i wanted to go i don't get this market.

you have high rates and that's good for home because nobody can move, no one wants to sell so if anyone ask lee wants to buy a home you have to build it from scratch. lower rates help them because people can borrow money. which is it and it what point is it the price goes up periods >> i think that's kind of where we sit. your point is well taken. the locking effect that's kept people from moving in reduced existing home turnover has helped no question about it. but keep in mind 80% of mortgages are below 5%, 60% or below 4%. >> there's a question of lower rates unlock a supply from potentially homebuilders, one that cause price to go down especially if mortgage rates are still well above the average people are paying right now their homes. john: i think it would take an

economic shock. sort of orderly if you will just giving that effect i talked about. with inventory that also opens the pool of potential buyers. so we think supply demand from that story still remain strong enough where prices are not backing up dramatically. >> what you make of all this being discussed on the campaign trail potentially supply, and because of policy in washington. it's interesting question. >> i think the harris campaign's head is in the right spot. they'll need more supply and housing. the actual execution of that is very challenging. it can be done at the federal level. it's really the minister: state and local kind of supply constraints in terms of land development, entitlement, zoning limited things of that nature. it can be controlled of the federal level. that's where the real problem is. so while it's a good idea, very

hard to execute. jonathan: you believe some of these lead to higher prices? john: putting more money in people's pockets will help demand, put that pushing up prices a bit perhaps i just don't see anything on the surprise -- supply side. lisa: what you looking for in terms of taxes as well. we talk of the salt tax, that does to property buying and places in the northeast. soppy believe the northeast in response to that. do you get a sense that if that tax cap was removed the you actually get more buying in those regions. john: i think that would certainly help, that said the offset is there's a migration trend in the u.s. that's clear because that's where job growth is happening. that's where employment growth is, the weather is a little bit better. i think yes it would certainly help but i think the trend is

still well in hand. there's great markets in florida, the carolinas, most parts of texas are very good so very traditional kind of golden horseshoe states are still positive. ease market by market within each of those states by would say generally speaking that has not changed. that's where they are. jonathan: looking at the mortgage right now, a 30 year fixed at 6%, effective mortgage rates are the average rate on the mortgages out there right now is to short of 4%. still quite a big spread of about 200 basis points. how much of a difference to six make to the unlocking the lock in effect we've seen with this housing market of the last few years. john: i don't think it moves the needle all that much. i think with the builders have talked about was 5, 5 .5% in the sweet spot of buying rates down to.

i think that's probably a fairly good indication of where you have to be. jonathan: when you say buying rates down, what you mean. >> the public builders are going out into the mortgage markets securing commitments to buy down mortgages below mortgage average rates which is allowing buyers to step in to homes at much more affordable levels. jonathan: they've been working on this for the last couple of years. john, thank you sir. john there of ubs with the housing market sprayed still a mystery. going back up and down off the back of some of these moves. lisa: everyone agrees he won't see a dramatic price decline. probably you're knocking to get a much better entry point unless mortgage rate significant fall and i would say my empirical evidence shows 6% is not unlocked. she's rubbing it in now. jonathan: this is increasingly

personal this conversation. isn't it always. lisa: some look what's in the water jp morgan. getting out of cash. jonathan: should've listened. lisa: i'm ok with other people not having the spread jonathan: up next on the program, i have to admit i totally forgotten about this taking place dropping in about four minutes time we will get a view with mark and subadra. one hour five minute away from the opening bell in new york city, equity futures up 1.6% on the s&p, the outperformance on the russell the small caps are absolutely ripping going into the cash open from new york this is bloomberg. ♪

jonathan: we all have favorites and this is one of mine. the fed's first hike was march 14, 2022 and the first cut was yesterday. over that period, the s&p 500 up 35%. equity futures up by 1.6%. on the russell small caps are up 2.6. the jobs claims data is seven minutes away. .230 is the number.

mike: 290 8000 so jay powell is right, we do not have a jobs problem. 219,000 compared with one -- 1000 up revision higher from last week. a big drop and continuing claims, 108 -- so, big news. the philadelphia fed business outlook index comes in at 1.7 after -7.0. the employment index, 10.7 compared with -5.7. so the jobs numbers are coming into good in about everything. prices paid goes up from 34 to 24 so if you want to wander -- wonder if they went up too fast you might have an idea about that. jonathan: this economy is ok,

and if you thought that was a gift yesterday you think it is one this morning. lisa: i went right to gold because mike said worry on the margins about inflationary pressure and gold has set a new record high as it climbs on the day. this is sunshine and rainbows and everything you want. things turning around and jobless claims going down. how high is the bar for the fed to move again? citigroup saying we expect another 50 basis point cut by the end of the year. how high is the bar? jonathan: we are getting the view on the labor market but i would like this from you as well on whether the jobless claims are a decent guy. they have been ok and they went through 250 before the july jobs report and they have come down to 230 down to 219. are they being led by what is happening because it does not

feel like it? mike: we were talking about the beige book and joel powell citing it yesterday. companies are not laying off people holding onto people not hiring additional staff. the question is at what point is the economy stimulated enough that you feel like you need to have more people in order to expand. at this point everybody is happy with the status quo. i assume that we are not going to see movement until after the election. lisa: what i find compelling is that the fed chair said this is not the pace of cuts coming forward although bank of america and citigroup said that they expect a 50 basis point cut before the end of the year. basically a showing that any further increase to the unemployment rate even for demographic reasons will not be treated with welcome and any downside revisions also. is that the feeling you are getting are hearing from fed officials or what mood was in

the room yesterday? mike: you asked where the bar is. it is at 4.4%. if we get to that level they will think about it. if they go above and see a 50 basis point cut. remember that now we have gotten past this part the fed is ringing inflation back into it. they will be watching because inflation did go up for all of the indicators and we will see what happens with pce. if inflation starts to tick up, it would take at least 25 out of that 50 calculation. jonathan: this is what the bulls have been screaming about, the economy is decent and the economy will cut rates. the information is pointing in that direction. the s&p 500 price target, 5600. lisa: this is what eddie said would happen. you could see a lot of the gains

brought forward and why not? if you have a fed supporting the view of markets while also seeing ongoing strength, that is the reason why back the truck is the mood. jonathan: jobless claims at to 19. the median estimate, 230. joining us is mark sandy. looking forward to get into this with you. how strong is the job market still, even with the rate cut? was it needed? mark: it was needed. the job market is good, creating a lot of jobs and employment was low. all of the trendlines were showing softness. how are -- hiring is off, jobs worked are down. the only thing that has kept it together are the low layoffs. and that is good news. the trendlines are still did -- still a bit disconcerting. it makes every sense in the world for the fed to cut interest rates.

more fundamentally, the fed did what it needed to do, it got us back to full employment with inflation effectively at target. they hit their mandate but then why i 5.5% fundraising target. a lot of reasonable debate about the so-called neutral rate where policies restrain or support growth. it is not 5.5% but trying to get that normalized as fast as possible. to keep it there, something could break and when it breaks it is difficult to get that back together. lisa: this is the reason why recalibrating and recalibrated were words of the day. the real question when you say concerning trendlines. do they fly in the face of some of the enthusiasm that you see in circuit risk -- in certain risk markets as people project the strength into the future regardless of some of the clouds that the fed is responding to?

mark: the market investors are doing what they do. they are forecasting and saying look, before the fed started cutting rates and before the jackson hole speech and jay powell telling us that he will cut rates, it felt disconcerting and the forecast was not as good as it is today. today the forecast is better. we have a 50 basis point rate cut behind us and a string of rate cuts ahead of us and when you do the forecast it feels like a soft landing. therefore i will buy strikes -- stocks and bonds. it is a rational response. at the end of the day think about this. the economy is fundamentally in a good spot. therefore, the stock market is in a good spot. it is not surprising that it is a record high. i think that they are consistent. >> the one big note of concern

is the idea that maybe we are under pricing or under considering inflation. look at gold prices hovering near all-time highs and the long end of the yield curve increasing in the 30 year sector. this idea that maybe we will see some uptake in inflation -- uptick. are there signs, and i am looking house -- looking at housing, where you see the inflation tick up. mark: no. gold, really? that is what you are pointing to? no. inflation is in the bottle. i think most important to look at, inflation expectations and there are a lot of different ways to look at that, the bond market and what expectations are. the survey is being done by the new york fed conference board. inflation expectations are all the way back. as long as that remains the case and i do not see how that will change.

i am not worried about inflation and housing, absolutely not. if anything in the next 12 to 18 months we should see further deceleration in the growth of services because there is such a long lag between what is going on in the rental markets and when that shows up in inflation measures. so for the next six to 18 months we will see further deceleration. and in terms of setting monetary policy and interest rates you need to be focused on owner's equivalent rent and lots of come -- of research coming out saying that that is not something to focus on when you are trying to set policy. set that aside and you know what inflation is? cpi, pce and consumer spending inflation? well below two. it is 1.5 to 1.6 or 1.7%. that feels like the more salient

measure. and that says not only are we at a target but we could be beyond target. i am not worried about inflation. >> mission accomplished basically is what jerome powell said. the president will speak tonight at the economic club in washington, d.c.. he cannot say that. in the real economy people are not feeling the inflation you are talking about. mark: absolutely. people still remember, this is the run-up in price back in the second half of 2021 into 2023, particularly for staples and groceries, for rent, for gasoline prices. and it is very hard to get by that psychologically. in fact it is very interesting you talk to folks and say how do you feel about the economy and they say not so good? and they say why?

and everybody has this food item that is the litmus test for everything. i was talking to my niece the other day and she has not feeling good about the economy? why? she is paying more for kumbatcha tea. >> it is kam-boo-cha. mark: obviously i do not drink it. we were talking to this young man and he is saying robin new prices. everyone -- ramen noodle prices. you have to be sensitive to that and you cannot deny that. the way to respond is to say i hear you and these are the things we are doing to trying get the cost-of-living down and that is what the president has to do and the candidates have to do. jonathan: thank you with an all-time clip that i will be repeatedly playing. lisa, gold?

really. i appreciate it. let us get to the price action. equity futures 500 and elevated. they are up by 1.5%. we have looked a lot at the russell and small caps backing away from session highs. we are up 2.5%. it is the best of all worlds. the fed is pulling back interest rates and we have said it repeatedly. when the fed cut interest rates are they doing it for the right reasons or the wrong reasons, because the economy is starting to crack. this in the last 24 hours deals like the right reasons. i feel like a lot of questions that people have, and it get better than it is? is this a soft landing or a moment in time? lisa: let us find out from fedex after the battle and some of the other earnings. it puts more of a focus or spotlight on earnings and how

much countries are gaining efficiencies. remember the ai story from a couple of months ago, does not get dragged out to send the indexes higher? these are real questions and it seems like the enthusiasm is defining people who talk about valuations talking about what about the 493. jonathan: that is the stock market and this is a bond market. 10-year yields are higher and you see a breakout in stocks but not bonds. if you are looking at rate cut nirvana that is not what you got. it is not what you are getting this morning. the tenure year -- the 10 year is up by five basis points. the following coat -- quote made me think about the next guest. "is the easing cycle already priced in, markets barely reacted to the base cut. further cuts will not meet -- will not move the needle too much either." she joins us now.

good morning to you. has this bond market gone too far and do you want to chase this. is the chunk of the move behind us? >> the front end seems that way because the market is pricing in early. we are looking at at least another 75 race ash basis points by the end of this year. it is very efficiency -- efficiently price. if you have data that is as strong as it has been, it will be hard for the fed to justify a very aggressive rate cutting cycle from here on. they will be cautious. to us, another may be 25 in the meeting type path, very much aligned with the summary of economic projections makes sense. but a very aggressive policy product -- path is what the market is pricing in. that puts a floor on how much

the front end can rally. if you are going to get the effective rate cuts, you will see them play out in the long end by the way of high yields. jonathan: are you expecting high yields and steeper curves? subadra: that is what we are expecting. the front and had -- end had any good news with the claims will play out on higher yields. the steepening trade is here to stay. so, it is going to be a question of how much more that is going to be the trade led by the very front end rallying. and that is what i think it is difficult. unless you see a meaningful deterioration where the fed has to deliver what is priced in it will be hard to rally from here. lisa: i am looking at the yield curve and you can see it is the highest level going back to when it was last positive in the summer of 2022.

i wonder what this means for credit, how you get a boost in equities because of the soft landing, nerve on i can continue. do you lean in given how tight the spreads already are? subadra: it makes it difficult to over allocate the credit because spends are tied. you have to pick your spots in credit as well as some of the risky assets given how much the markets have performed. broadly speaking the fed is ready to cut rates and ease policy and that is policy for some of these assets. if you look at yields and returns we are getting decent yield in return for the risky assets. lisa: phil came on and said i told you to get out of cash, buy some income and if you missed it it sucks for you. do you feel the same sentiment for your clients and albeit a

less attractive valuation, do you feel like it is an ok time to lock in some of the yields that we are seeing? subadra: i do not. i feel like the front end will offer value for investors to park the cash because the yields are quite attractive and the front end is going to be more reactive to policy and said rate cuts. you are getting a decent yield by having your money in the very front end. and then when you have this dynamic of the long end yields starting to rise as the fed cuts rates or eases policy you are going to have time later for you to enter into the very long end. to me, i think money market funds look attractive. you might have to pick your spots in the risky -- risky aspect spectrum. jonathan: sticky, that is what i

hear. lisa: which is why it has gone to 5 trillion to $6.3 trillion and may be why that cash is not headed out quickly. jonathan: you alluded to this but can you breathe life into 2025. you said two 25 basis cuts. how big is the gap between you and market pricing? how much daylight is there? subadra: we believe the market is still pricing cuts for next year. jonathan: 50 basis points? subadra: 50 to 75. i think the fed will be cautious. at least my read on the conference was that powell kind of thought that the dots might be the floor for where they are thinking that policy can go. if you take that sort of you then you will be very cautious and not cut too fast and too soon. they came into the meeting

thinking we want to move away from restrictive policy. and, to frontload some of those cuts. from here on, they will be deliberate and data-dependent. and the data will really need to justify the cuts. lisa: data-dependent for 20 when he five or policy dependent? subadra: data dependent and by policy dependent? >> we do not know what will happen in washington. subadra: fiscal policy is something they will be paying attention to. if you see the projection start to rise because of policies from either candidates. first of all we do not have much clarity on how things will play out because these policies are being sort of discussed as we go along, even this -- so definitely festive -- fiscal, fiscal policy will be driving along. there are implications for inflation.

that is something that the fed will be paying attention to while we are thinking about easing policy. jonathan: no's -- november 7 will be different. we will have a much better pitch. or at least we hope we will. >> the fed has to respond to it. now they can punt and they can say we will do what we do. it will be different when we have more certainty on november 7. jonathan: good to see you. original views on what will happen with that cash on the sidelines. you always hear about the cash on the sidelines. lisa: is it really on the sidelines? i want to bring this to you. today is set to be the biggest gap for the atf since october 30 20 -- 2008 after bernanke cut after the -- in the midst of a financial crisis. that gives you the sense of a scope of absolute celebration. jonathan: are you trying to make

us nervous? lisa: no. i think that is interesting. draw your own conclusions, i am watching gold. jonathan: equities up by 1.6%. really, gold? let us get an update on stories elsewhere. dani: the airline said they started to track the eras toward to make sure that they have enough seats. the chief officer spoke saying that "our demand booms wherever she goes." they have seen a 25% increase in demand on flights during her weekend concerts. the international brotherhood of teamsters will endorse neither harris nor trump. they said we saw commitments not to interfere in critical union campaigns and to honor the right to strike but we were unable to secure those pledges. the new york yankees are gearing

up for the playoffs. they clinched their postseason spot beating the mariners to-one. they are recovering from a rough 2023 season, the worst since 1992. they hold the best record and it has been 15 years since the yankees appeared in the world series. jonathan: thank you and appreciate it. we will set you up for the rest of today and the week as well. equity futures are positive by 1.5%. ♪

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j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management. jonathan: the stocks are doing up -- we nicely up by 1.5%. the yields higher. 3.7585. jobless claims, in as expected.

your trading diary and week ahead looks like this. president biden speaking at 115 eastern. fedex earnings after the closing bell. tomorrow, the old-age decision and then tomorrow fed speak with harker. we will get consumer confidence numbers on tuesday and rounding out the week, gdp plus another round of jobless claims. another word on the data. mike: we have crossed into a new paradigm and regime. we are going to think differently about the data coming in and trade differently on it. not only that but we start to price in the political aspects. even before we know who will be president, we will be worried about whether or not they shut down the government. and then going into the year we have the debt ceiling coming in.

we have a lot of things that will come in now that the fed has moved in the markets will expect it to keep moving and they have a timetable on whether they can stick to it or not, they can think about other things. lisa: i hear thank god it is over and we can stop talking about it which is what we are hearing from other people. jonathan: we will be doing that on november 7. michael mckee, thank you. this has been exhausting, the few days and weeks. lisa: this is the theme that i hear. we are done. it is great and whatever and it was the biggest yon after so much -- yawn after summit -- so much buildup. jonathan: you are not done? lisa: i will be interviewing a jetblue ceo about spirit and the jetblue deal that that -- that did not go through and consumers are they flying where and how? jonathan: we will find that out.

do not miss that. coming up, paul donovan of ubs, and veronica clark of citi. good morning, this was bloomberg surveillance. ♪

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where do i begin with our young character? the one thing she was sure of was that she wanted to be a writer but she had no idea how. is there anything new in that notebook? actually, i have been working on a little something and i'd love for you to read it. thanks for being in my life because you've been more than just a mentor. you've been a source of inspiration in my journey to becoming a writer.

matt: looking at big moves posted fed cut. 30 minutes from the start of trading. sonali: when interest starts right now. matt: the peds power move -- power move ripples through.