>> one thing is clear, this is a fed willing to surprise the market. >> it's disconcerting, it makes sense for the fed to start cutting interest rates. >> the other take away is that the bar lower is not that high. >> now on, deliberate and data-dependent. >> what do earnings look like, that's the narrative and i think that will be ok. >> this is "bloomberg

surveillance." jonathan: let's get you to the weekend. live from new york city, good morning, good morning. coming into friday at all-time highs in the s&p 500, following the best day so far this month. equity futures on the s&p negative by .2 5%. on the russell, the small caps, down just a bit. lisa: this is the sugar high after the party that the fed delivered on in a big way. i love how bank of america put it, recalibration was the message, the most demanded fed rate cut since the 1980's with yields moving and the fed giving them what they wanted. felt like a fed craving to be on the right side of the market. jonathan: fed speak starts a bit later. how many of those people were on

board with conviction to go 50 at the meeting this week? lisa: that's one of the key questions people have been asking given that it looked like there was more support before the articles came out in the journal, indicating that maybe it wasn't the case. [laughter] nonetheless, one of the key questions, if this fed doesn't want to be on the wrong side of the market, does that mean they are going to front load rate cuts and leads significant cuts this weekend to add to what they have done? that's the tone supportive of risk assets. jonathan: we have heard from the federal reserve and the bank of england yesterday. overnight we heard from the boj. dollar-yen breaking out. on the screen right now you can see a weaker japanese yen. no indication from the governor that they will be hiking interest rates anytime soon. lisa: this is what i found fascinating about the parallels and the differences, there is an

almost outward discussion of the politics of this boj meeting where the political calendar and new prime minister has created an environment where they don't want to get on the bad side, so they are waiting until december to potentially hike rates again, even though the economic data coming out has only been supportive of another hike given the fact that inflation readings came out hotter, that the economy is more resilient and a lot of the inflation has been supply related. the underlying scene has been more inflationary. these are some of the reasons people find it fascinating. jonathan: all bases covered, almost. we need to talk a the ecb. shares are down by almost seven percentage points in european trading. coming out yesterday afternoon and cutting the outlook. one word, one country, china. not good for china, not good for the automakers. lisa: the shocking part of this

is that we have known this, we have known that china has been a problem and that demand has been flagging, but the deepening slowdown was more significant than expected. they announced adjusted returns between 7.5% at eight point 5%. this, to me, the fact that they are talking about earnings significantly below where they were highlights all the problems that people see right now in the manufacturing industry getting even worse. jonathan: have we seen the worst of it? buddhist bank has already come out and said they should be in recession in terms of acknowledging how bad things are. we had one ecb official waking up to reality saying that given the position we are in today in the monetary policy cycle, we have to realize the risk of undershooting inflation targets, because that is the main risk right now. jonathan: a lot of it -- lisa: a

lot of it goes back to the question about the ecb not cutting as aggressively as the federal reserve. what's the flip side if you see the downside surprise potential for growth and inflation? and how does the central bank play into decisions that are ultimately very political? this is the quagmire from the ecb, boj, and federal reserve. it's increasingly preeminent as people look at the interplay between fiscal and monetary. jonathan: a bit of a mistake from biden about whether or not he has met with the chairman of the fed. we will clear that up later. s&p 500 right now, negative by .25%, pulling back from all-time highs. the euro, lisa, still snoozing, 1.1162. lisa: why would anyone get bullish on the euro, given what we are seeing with auto

manufacturers injure -- manufacturers? jonathan: coming up, coming off of all-time highs, we've got chris, mark on the yen dropping, and paul donovan on the fed to cut. s&p 500 coming off of its 39th record high this year. chris verrone a writing that the s&p is looking to push things higher and we are interested in whether the new data can respond as robustly as it has for the last 24 months. chris is with us with more. good morning, sir. proxies, utility staples, all from yesterday. chris: if you look at staples and rates, embracing one and pushing one aside, staples have been weak all year. even with a defensive rotation over the last 3, 4, five months,

staples or to part of that to any great degree. they are overbought in the near term and i wouldn't be shocked if it was more compact over the next 24 hours. if you look at the utility versus energy spread, it got very extreme. it makes sense on leadership in the market. is it sufficient -- jonathan: is it sufficient just to say that you don't think bond yields will rise much from here? chris: both, and initial balance and then the trend lower. we saw that in 95. resuming a slide lower is the base case. unequivocally, we have talked about this before on the show, the trend in yields is down. call it 4%, that's a big

resistance if you got it up there. lisa: this goes to paul donovan's point, the emergency rate cut without the emergency. it doesn't get much better than that for risks as investors chase the rally and you worry about the bubbles. any feeling that you have that this is unsustainable with the pressure along the yield curve to highlight the inflation coming back? chris: what i thought was unsustainable was the fed fund at 550. that's one of the largest caps on record. in our work we always say that the only fed speaker that we care about is the two-year yield, every day telling you exactly where the market rate is versus policy rate. the market wanted 50, it got 50. the key now is can yields stabilize? ultimately, they continue to work lower. if you want to take comfort that

the fed was proactive in getting policy back where it needs to be, you want to see rates stabilizing. we talked about it off air, i'm shocked that the boe didn't cut this week. there is an example of wanting to seek rates going lower because of it. lisa: which raises the question on the dollar. if the fed was aggressive, you should expect to see the dollar weakening considerably. what's the alternative? and if you don't get a rate cut with real economic weakness, what's the incentive to go purchase those currencies? chris: i find it curious that a lot of people think that fed rate cuts are dollar bearish. it's usually the exact opposite. the dollar starts to rally during a rate cutting cycle. we will see if that is or isn't the case. i'm a chart reader. i know that that is where we are.

breaking a major trend line over the last couple of months, that's the history around what the dollar tends to do. jonathan: bad things happening, is that the big difference this time around? lisa: it's funny, we spend a lot of time debating but the irony is you really don't know. what i find particularly interesting, the 95 cuts were viewed as non-recessionary, you only know that with the leadership coming out of those 95 cuts and intuitively you expected to recapitalize cyclicality, but that's not what happened. staples outperformed, health care outperformed, tech suffered. it underperformed the s&p by 20%. i find that interesting here as tech over the last couple of months in our work has begun to

cede a strangle on the leadership. jonathan: talking about the leadership, large caps versus small caps, how are you thinking about this? chris: ultimately, for small to take the flag of leadership, you have to separate the cycles. i am not sure we have that yet, but either way capital makes sense to me. think about the last couple of days. equal weight s&p is at a high. meda is the only one that set a high. not google, amazon, or microsoft . that is a change in character. equal weight at a high, triple q is not. there is a change in character that speaks to the evolution of leadership we have seen and i want to lean in that direction. jonathan: lisa: what is it -- lisa: what -- lisa: what is it telling you, and i know you are a chart reader, fedex is usually a macroeconomic bellwether, but

others are saying that this is something they have seen in the transportation sector for a while, underlying in the way that people shift, is that consistent with what the challenges are? chris: first, on the evolution of tech leadership, frankly, i wonder if, when bonds could not be owned, rising, you couldn't own them and a lot of these big tech companies had bond-like characteristics. now is bonds are own a bowl if it makes tech less attractive on a relative basis. i'm curious if that plays into the seating of leadership. on economic cyclicals, the transports have not been very good here. they have been absent from the playing field from a leadership perspective. i would watch the rails perking up. i can't explain it, but i'm always intrigued by something behaving differently.

i wouldn't expect them to turn at this point in the cycle. you are beginning to see that. jonathan: fedex is down in the premarket. you talk a lot about boj, but in europe, how bad our things and how much worse could they get? chris: mobileye, i think they're bad. we always look at the measures of cyclicals versus counter cyclicals. the luxury stocks are a part of that. what we have seen historically, you are kind of in the zip code or the ballpark of the recession. bonds, yields are lower. jonathan: tricky question, where does it leave the periphery? chris: ironically, the periphery might be in better shape here. i know i will always cede to the market over my own opinion. italian stocks better than german stocks. that's a change.

from what we witnessed. lisa: you are being played by him. he was leading you that -- there. correct? jonathan: that's lisa: the chance i want. lisa:clearly. [laughter] jonathan: things have changed in europe. the problem child of the continent isn't germany. not the periphery like it was a decade ago. lisa: which is why it's compelling to see where the economic strength will come from and the political cloud of the european union as the tide shifts considerably. jonathan: equity futures are down, good morning and welcome to the program. let's get an update on stories elsewhere. here's dani burger. dani: mercedes-benz cutting a forecast on the year with rapidly worsening chinese business. mercedes added they didn't expect chinese demand for higher

priced vehicles to recover this year. the german economy minister this morning floated the idea that initial aid could be needed to the country plus carmakers. ousting their ceo, john donna vo, bringing in longtime executive elliot hill out of retirement to return the struggling company to its glory days. he joined nike in 1988 and served as president of the consumer marketplace before retiring in 2020, slashing against competitors. bloomberg has learned that johnson & johnson is boosting the offer to settle baby powder lawsuits with payments getting a bigger payout at $650 million in legal fees covered, putting the settlement at $8.2 million up from its earlier offer. they maintain that they have --

that the powders never cause cancer. jonathan: coming up, the politics around a 50 basis point move. >> i have never once spoken to the chairman of the fed since i became president. it will do damage to the economy if that independence is ever lost. jonathan: not quite true. that conversation, up next. ♪

jonathan: equity futures pulling back .2% on the s&p, that's the equity picture. in the bond market, just a little drift higher in yields with sleep occurring in the last few sessions. lisa: on margin the bigger risk is growth on the upside, maybe.

that said, seems the federal reserve is back with the bond market to ask questions later. jonathan: is gold at a record high? that was the conversation mark from yesterday. lisa: i got feedback on that. jonathan: i'm sure you did. gold, steeper curve of the lisa: last few days. i'm not alone. people are looking at it as a proxy. michael hartman at bank of america mentioning gold in the as a way to hedge inflation risks. it's a thing. jonathan: it's a clean move, breaking 1%. under surveillance, the politics of a 50 basis point move. >> i expect independence in the fed as they pursue their mandate . the independent has served the country well. by the way, i have never once spoken to the chairman of the fed since i became president.

that would also do enormous damage to the economy if that was ever loss. jonathan: biden saying that it is an important signal that inflation has eased before mistakenly claiming that he has never spoken to the fed chair, which was easy to clean up given that has happened a few times. lisa: on camera. it's not something subtle. may of 2022, there was a meeting. then a third in person session with jay powell. since then, maybe, but yes it is verifiable. jonathan: we will park that story, donald trump making claims that it's a political move to try to keep somebody in office, but it won't work, because the inflation story has been so bad. joe mathieu joins us with more. welcome, good morning, sir. walk us through how the politics of played out in the last few days. joe: it's pretty interesting to

hear that donald trump said more than just that, something that joe biden wouldn't say in that interview that he conducted, talking about the fed and interest rates, criticizing that they are too late, saying that inflation is already done. i thought that that was important. just a few hours before joe biden refused to take that victory lap. he said it isn't a moment to declare victory, but to declare progress. when we have such little time, i'm surprised there wasn't more of this celebration of this moment. look, not everyone is dialed in to the markets on undecided voters. if you don't remember where you were 2022 may 31 in the oval office, we may need to talk. lisa: there is a question aside from that [laughter] -- i clearly verifiable mistake that joe biden was talking about. a bigger question about the ramifications for the fed making

a big move ahead of an election at a time when they are already being highly politicized. are you expecting this to be a point of campaigning for trump going forward? or is this something that has passed and everyone can move on? lisa: i think it's -- joe: i think it's a conversation for the market more than anything else. when you talk about the impact on the consumer, the psychological effect of seeing interest rates come down, it's probably not considered a bad thing, which is maybe why donald trump doesn't love the look. the fact is that harris is talking about housing. she got together with oprah to talk about the issues that are important to a lot of the voters out here and it's right down the middle. mortgage rates are coming down, she's promising incentives in the housing market, coalescing into a pretty decent message for the candidate. whether fed independence is a kitchen table issue in this

country, i kind of doubt it. donald trump use to tweet at jay powell all the time, i don't think it would be any different now. if that is something at the kitchen table that is being discussed, i tend to doubt it. lisa: it is it mine, i just want to point that out, we have robust fed policy debates. there is a question going forward about how the candidates may potentially support down ballot, particularly in the house. usually the way the president goes, so does the house. at this point, what has that effort looked like for trump and harris? joe: it's interesting, we are in the middle of a funding debate and many are worried that this could be a bad look and i will remind everyone that we are 11 days away from a potential government shutdown with no deal in sight. the speaker says to look for a clean cr on the floor, but there is the risk of sleepwalking into

a shutdown that doesn't look great for the party in the majority. we have to remind ourselves how thin the majority is an trump is not making the speaker's job a lot better, but the fact is fundraising has been a big move, d triple c with a big record over the last 24 hours. that wasn't happening when joe biden was at the top of the ticket. looking good for democrats right now. the problem really is the senate, democrats stand to lose the majority in the senate based on the analysis we are looking at. considering montana, ohio, maryland, that's all raising a lot of questions. jonathan: we have got annmarie in north carolina who will be talking about this with you in the next hour. can you walk us through the scandal involving there? joe: look, this is salacious stuff, a lot that i cannot say that was apparently written on social media by the republican

candidate here, mark robinson, for governor in north carolina. this was one of the most closely watched and expensive races in the country here. apparently, he was spending a lot of time on social media sites -- this is not necessarily verified by bloomberg -- in which he referred to himself as a perv and black nazi, but he has denied all of this saying that he is not dropping out of the race and the next 24 hours ought to be interesting. i will be interested in hearing what the governor has to say. jonathan: joe mathieu, thank you. you can find joe with kailey leinz every day at 1 p.m. and 5 p.m. on "balance of power." lisa: we are always following the down ballot races, trump has campaigned with that lieutenant governor who is clear -- currently being accused of those salacious comments. how much do they continue this

defiance, or if there is some kind of distancing and how it works, everyone has issues but it can come to the for more than others. jonathan: very diplomatic there. lisa: what am i supposed to say? [laughter] jonathan: i don't think either of us want to talk about this in detail. [laughter] a big move in the dollar yen, moving stronger on the currency bear. catching up with mark mccormick as the boj says there is no rush to hike the conversation. this is bloomberg. ♪

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jonathan: the equity market just a bit softer on the s&p, down .20%. mastec 100, big day of gains yesterday. russell small caps up by .30%, as all. after closing at all-time highs on the s&p since july, little fall this morning. lisa: there is a question of can you see the leadership in small caps? given the fed support of this market in the sense of a soft landing. the answer seems like yes.

i thought it was notable that close in to u.s. equity funds were the third-biggest going back to 2022 the past week. the message was clear and received by investors. jonathan: the most important question on the bond market speaks to the one in the equity market, leadership. it's interesting that bond proxies yesterday underperformed, the likes of utilities at the same time, curves deeper, yields higher, is that continuation of things to come? if i knew that, i would not be here. soft dismay can argument that it is difficult to see bonds rally much more from here. four high yields, if they are right, that trade for the bond proxies has worked so well, and it gets a little more challenging. lisa: you would still be here. jonathan: for 60 minutes, i don't think i'd be here for the first day. lisa: your point. it is this sort of question of is this a pause or the beginning of a change in yields across the curve kind of trend?

i guess truly we cannot answer because we are here for all three hours from beginning at 6:00 a.m. jonathan: staying at three, if you are rich enough to wake up at 3:00 in the morning, then i guess you are not waking up at 3:00 in the morning. you are waking up at 5:00 because you love it so much. lisa: this is the key question of whether you can see the continuation of the rally and bonds or whether we can actually potentially see a shift. jonathan: yield stats are climbing on treasuries. let's push that through the fx market. dollar-yen at 144. we are down with the dollar side of the trade but let's deal with the inside. the boj not exactly endorsing a rate hike if you listened to the governor overnight. lisa: i knew saw economics push back their forecast for when they will next hike rates in december versus october. this comes even though we got data overnight that really showed inflation is picking back up, but it does not look like

they are going to see inflation fall back down to that 2% target in the near future. a key question that i keep going back to, the political aspect of this, the fact that there is some disagreement in the province about how to treat the bank of japan and what they should do is a reason why oxford economics and others have raised this as the prospect for why they will wait until december. it sort of remains out of the crosshairs of the political discussions. you are hearing this more. this to me is what happens when you have a can use in between the interplay between fiscal and monetary. how could they not deal with the politics of the moment and not recognize what it means to be independent at a time where increasingly that was called into question? jonathan: we are on track for the worst week for the japanese yen going back to april. some tough stories under surveillance, israel carried out extensive airstrikes against southern lebanon, saying it hit 100 sites were has liquid launch attacks in the immediate

future. the series of attacks is a different character so far. lisa: a lot of questions about how much this escalates or potentially d escalates potentially the situation, how much this calls into question the strength of hezbollah, one of the most powerful proxies of the iranian backed axis. if israel can do this, china can do this, too. one opening -- long opaque supply chains could leave gaps and we need to close them in collaboration with allies. how much do we have renewed focus on tracking things more closely? that arguably timmy is the most interesting aspect to come out of this -- arguably is the most interesting aspect to come out of this. jonathan: i think it's really important, given our experience with the likes of tiktok, we don't have the greatest track record of dealing with this quickly and efficiently. lisa: and if you don't, how much does this leave you open for trojan horses to describe the

attack that israel had on hezbollah and lebanon? how much does this leave you vulnerable? that is the reason why looking at some of the blockchain solutions to supply chains, to policies and how you track things, otherwise, how do you ensure? jonathan: given the stomach we have had around the world, there are shocking pictures coming out of that part of the world over the past week. lisa: shocking that you could simultaneously have 2700 pagers exploding across the country, targeting specific members of hezbollah, which is recognized as a terrorist organization by the u.s., and then the next day, walkie-talkies? it is really unheard of. you have to imagine the behind-the-scenes planning for years that actually went into this happening. jonathan: still trying to figure out if this leads to further escalation or de-escalation. i would like to talk about two big stock stories in this country. the first is fedex.

slumping after reporting worse than expected quarterly profit, down 14%. the company expects business to slow in the year ahead after the ceo called it a challenging quarter with customers trading down for cheaper shipping options. we've seen this across a few companies. lisa: this used to be a macroeconomic signal, where fedex went, so, too, did the economy. seems like there are more questions this time, especially because there's more competition -- amazon -- but you also have a situation where we have seen a boost from all the shipping. there is a transformation to the broader picture. jonathan: this talk climbing this morning is at nike, bring a longtime executive hill, who said to take over the role from the current ceo on october 14. the stock is up by more than 6%. when you see stories like this, i figure out, is the stock up

because the old guy left or the new one is coming in? lisa: right now, you can see that they lost a competitive edge. people talked about that extensively. i was excited about the trade into their field that was previously nike, how do they get their running prowess back in the crowd that they lost to new upstarts at a time when they are bringing back someone who was previously retired to run the ship? it really raises a question. we have seen this at a significant pace in terms of ceos that are being pushed out of companies in order to provide some of the past businesses. jonathan: to take the company back to the roots. you raise two important questions. finding out what on earth went wrong with running, how you can walk around and go around any open space in new york city, around manhattan, central park, and look at where the runners go through the middle on a saturday

or sunday morning, and look at the sneakers. it is not nike. how did they miss the explosion in running the past two years and how are they part of it not at all? lisa: i'm a runner, i have a lot of friends who belong to running clubs, and they say at some of the demos, you see on, hoka, not nike. that is a really big tell. if you are not targeting some of these clubs that are target demographic and you're going after a pop-culture audience, that is how you do it. jonathan: that is how you lose an audience quickly, and they will try to turn that around. nike is up this morning by five or six percentage points in early trading. as for where the yen is falling after the boj's decision to hold rates steady, the governor negated that the central bank is not in hurry to raise interest rates and says upside risk to inflation are easy. mark mccormick joins us for more of td securities. let's start to the decision overnight in your reaction. mark: it is pretty standard

boilerplate stuff from central bankers, trying to tell us that they will not move any soon. really, the key theme for every single central bank, particularly the fed, the boj, the ecb, everyone, they are data dependent. the data in japan is strong enough, so he stopped leaning into october. october to us is extremely live. we think they will hike again this year, most likely december. this is standard boilerplate, this is where we think things are at the moment we are not really telling you what's happening in the future. it relies heavily on data dependence. jonathan: how data dependent is the ecb? mark: i think extremely. last time we talked, one of the key things is probably at peak divergence between the fed and every other central bank. i would not say the ecb is behind the curve. the ecb has been dealing with stickier inflation on the surface side, but if you think about what will be a big driver for the ecb and the european

economy moving forward, it is links to china, china's deporting should -- exporting deflation, moving at a worse place from other countries, and that is strongly more connected to the euro zone economy and the u.s.. in terms of data independence, it matters on the next she drops, and we will see weaker european data that will kickstart potentially more activity from the ecb. lisa: we're are already seeing that with mercedes-benz and other auto manufacturers. that is data that the ecb can use in terms of where the forward look is in terms of demand from china and the readthrough economy. how much do you expect further weakening in the euro? i many of been aggressive, pushing back against the idea that the dollar euro will be weak. how much are you leaning into that seeing things like overnight with european auto manufacturers? mark: we are leaning into it now. there are considerations when you think about affects.

one thing people care about his positioning. our positioning models are telling us that the market is maxed short of a dollar across 90% of currencies retract. the euro is one of them. the other thing is this narrow focus on the u.s. link area the fed frontloaded, they went 50, but they argued for data dependence. they are talking about the neutral way to higher than the past. the next thing really is what happens outside the u.s.? pmi's are coming up, so when we look at what happens, the leading indicators retract that are data trends, data surprises, the little secret here is that the u.s. data has been stabilizing and european and chinese data is getting worse. and this interesting part is the macro story is not alive with what we are seeing happen in the price action, and then when we look at other indicators that are great for executing the idea, all those things are leaning in to say that we should

be failing the euro right now but what we should be doing is buying volatility, we should be defensive and expect more surprises rather than things going the way that they need to be perfectly done. lisa: this is fascinating because a positioning type of move, really a lot of people are saying with what was behind the carry trade unwind that we saw with the yen and how that trickle down into other asset classes, are you saying we could see something akin to that based not necessarily on japan but on europe and the pmi's and other microeconomic data coming in weaker than expected? mark: i think what it does is it creates a symmetric. that is what everyone looks for, and trading opportunity, you know, the market is no meaning in one direction. it is short the u.s. dollar, along u.s. rates, and it is basically all in on the slow down. again, there is definitely a disconnect. if you look at the credit market and the equity market, that is

telling us there is a soft landing. the bond market is pricing and 70%, 80% chance of recession. very high frequency data on bloomberg. the atlanta fed gdp now is at 3%, and the atlanta fed sticky court inflation numbers at 4.1%. -- core inflation numbers at 4.1 percent. the fed is trying to get to neutral but it does not know where neutral is. when we think about the catalyst, the market is like, the fed cut 50, we digested it, the election is still coming, but where is the next trade? this is what happens with positioning. this trait is kind of tired. the pendulum swung too much. once we get news and the other direction that does not come from a bias anymore, then the market swings in the opposite direction. i feel like that is when we see positioning this lopsided, we create the asymmetries you don't need a strong lose event but a series of light changes in the

market pushing everything in the other direction. jonathan: mark, you are in fx i, and you dabble in gold. how is gold in an all-time high the last few days and how does it line up with what you say? mark: i would not say gold is simple but there are flow dynamics that comes from gold, which happens behind the scenes. again, if you are essentially an emerging market trading with china and you are trying to find ways to move oil around the world, you can basically settle these traits of gold, which is there is a strong demand for gold. you could essentially argue that bitcoin is a similar concept. the bond market is pricing in an extreme move for the fed, so it is pricing in a low real interest rate. so from a flow perspective that old seems to be in demand across the board, and also from a macro perspective, the big moves we saw with the fed rising to boost the value of old. i think it is a simple thing.

gold tends to benefit from that. jonathan: all-time highs again this morning. mark mccormick of td. all-time highs on gold. lisa: he did not say inflation, which i thought was interesting. it was generalities. typically this is what happens because it is an inflation hedge. jonathan: i think the market has done a brilliant job the last month or so of highlighting how difficult it will be to close global growth before shorts, and a time when china is doing outperforming in the euro is struggling. lisa: this is a reason why it is not necessarily intuitive that the dollar will weaken completely in tandem with more aggressive because you look at that growth for rental -- with a more aggressive fed because you look at the growth of differential and it gets confusing that logic comes to die in the market and you could come up with a good narrative of how it will be different this time and it is not. jonathan: you said that a few times. in about 15 minutes time, let me give you a teaser or an appetizer, the fed's mood is likely to follow even after a diehard recession gives up a

point of view, forcing a boost in outlook from 2023 to 2027. lisa: jay, he might be insufferably happy today, but he is getting what he expected to happen. it is basically confirmed to go his way. jonathan: let's get you an update on stories elsewhere. here's your bloomberg brief with dani burger. dani: sketchers shares deliver at their worst daily performance since february. sales will be under pressure the year. the ceo says the back half of the year is going to be more disappointing than expected. concerns are growing among mobile retailers about the demand from chinese consumers weakening. berkshire hathaway resume selling shares of bank of america this week, unloading $900 million worth of shares. that means it's ownership is dropping closer to the 10% mark under which it or longer has to report holdings. warren buffett remaining state, $84 billion, is pure profit. apple's iphone 16 hit stores today.

the new phone is available in over 60 countries, including the u.s., china, india, australia, and south korea, but they don't come with apple intelligence installed. the highly anticipated ai software the company has touted since june will have to be downloaded over time as it becomes available in the coming weeks and months. the new low-end airpods and refresh apple watches will also be available today. that is your brief. jonathan: i was surprised to see that about at 4:00 a.m. this morning, a line starting to form outside of the fifth avenue store. i'm surprised people still do that. why? lisa: form a line? jonathan: to get the new iphone. lisa: it is exciting. jonathan: what is exciting about it? lisa: you can take a picture of yourself with the new phone. jonathan: you can just go to at&t. lisa: you can camp out. jonathan: i never understood it before and i really don't know. emergency cut for half the economy. >> the fed did what it needed to

do because with inflation effectively a target, not only are we a target that we could be beyond targets. i'm not worried about inflation. jonathan: that conversation around the corner. this is bloomberg. ♪ 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. (♪♪) ♪ 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 ♪ jonathan: equities closing out the week softer, moving by .20 5% on the s&p 500. under surveillance this morning, and emergency cut for a healthy economy. >> the fed and it needed to do. it got us back with inflation target. inflation expectations are all the way back in. as long as that remains the case, i don't see a reason why that will change. we could be beyond target, so,

no, i'm not worried about inflation. jonathan: investor confidence remaining high after the fed's half-point rate cut, the u.s. economy is bound for a soft landing. paul donovan of ubs calls it an emergency cut without an emergency. the u.s. has near full employment, steady consumption and rising real wages, this is not an economic emergency. it's not possible to claim jay powell know something economists do not. paul joins us now. welcome back. you are a wall street favorite and you did something this week i don't think not enough people to. that's what i believe. take a step back and ask a simple question, what did this tightening cycle over the last two years achieve? you asked that question. what did it achieve? paul: so the honest answer, i don't think it achieve that much. if you are raising rates, there are consequences to that. the idea that the fed simply with its actions brought on

inflation is nonsense. the trend between inflation of general goods back in 2021, that was over by 2022. we were in deflation and durable goods for increasing rates. the fed virtually had nothing to do with oil prices. i think possibly the fed did have something on the late stage profit line inflation that we had in early 2024, maybe a bit there, but this was a supply and demand imbalance, which tweaking the cost of credit would never resolve. it would be resolved if the money ran out and that is where we are now. jonathan: if rate hikes did not achieve much, what will rate cuts achieve? paul: i don't think they achieve a great deal because we did not get a huge conscription on demand coming through from the rate hike. the area where we have seen action with regards to the economy and rate moves have been

healthy markets. i think this is just the start of a process, and as the fed brings down rates, that should lead to some liberalization of the housing market. people will not remain locked and there will be more action in the secondary market, it is cheaper, people will take out a mortgage as a first-time buyer, that kind of thing. so the housing market is an area where we may see liberalization, and the fed arguably by cutting rates, we may have accelerated the climate in inflation because it will help reduce overtime. lisa: i love that you call oer that nonsense because a lot of people would be sympathetic with that. you say this is an emergency rate cut without an emergency. others might repeat over and over again that it was a recalibration of rates, considering how much inflation has come down. are you basically making the

argument that you can call it whatever you want, but you have to ultimately question on the way up and on the way down the relevance of these fed rates? is that your argument? paul: i think that is it. to be clear, i think the fed should have been cutting back in may. they are clearly late, so i don't have a problem with getting rates down a quarter have percent by the end of the year. that's fine. i think that they were worried this would have looked like a panicked response. now i do think the fed mitigated that by arranging for there to be a public dissent from a fed governor, first time in 19 years, and that mitigates the panic, and the fact that so many members of the fomc were clearly quite comfortable with going a half-point up. that has mitigated some of the signal. myself, if i was running things, i would have cut the full amount

less frequently, little by often rather than the drama. traditionally, a half-point rate cut does sign a crisis, but there is not a crisis at the moment in the u.s. economy. lisa: you said something about housing that you think on the margins liberalization of the mortgage market and the housing sphere would actually potentially lead to stabilization in prices. it is actually the opposite of what some would argue. can you walk us through that? do you think in some ways it will reduce inflation further if the fed normalizes rates at this point? paul: so, i think the mechanism here is via the nonsense of equivalent rent, which let us remember, the course of the consumer pricing calculation, and, of course, that is the source of the rental market, so if you have a situation where people are delaying buying house and are therefore are forced to rent a house, that increases

rental demand, market rents, and that magnifies through this man his see of owner equivalent -- this fantasy of owner equivalent rent. we know that it has been distorting headline cpi numbers. we know that it is due to a tight labor market. so the sympathy is with people actually renting, and the people who own their own home are not actually owning anything, so that is being created by policy, which has pushed people out of their own occupations and into renting. if we can reverse that, hopefully, that will calm the rental market down, and the effect of that will be magnified in cpi by reducing owner equivalent rent. jonathan: on behalf of everybody, we love your work. paul donovan of ubs and the latest with the fed. next time, we have to talk ecb. the fantasy of owners equivalent rent. lisa: i love everyone's private gripes. you get the fantasy of oer, and all the sort of passionate

feelings from economists. jonathan: speaking of passionate and bullish, we will speak to robert pelosky next in new york city. this is bloomberg. ♪

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>> i am optimistic now we might be near the end of this big rotation. >> it could maybe make sense for equities to pull back a little bit. >> i do not think the market is in trouble. we think the market is higher into the end of the year. >> the company is fundamentally in a pretty good spot. so the stock market should be in

a pretty good spot. >> the most bearish thing it says is everybody is bullish right now. >> this is "bloomberg surveillance." donath end i love -- jonathan: i love phil, and he asked the right question, do we get much better than this? equities soft. we closed the session at all-time highs on the s&p 500 yesterday. paul donovan with ubs saying we got an emergency cut without an emergency. inc. of america this morning saying wall street loves panic cuts when there's no panic. -- bank of america this morning saying wall street loves panic cuts when there's no panic. lisa: u.s. equity funds going back, third-biggest going back to 2022. will the economy cooperate? that is the key question. the fed seems to have the markets back. jonathan: what is the one-off calibration? does it set the tone.

chairman powell indicating it is the former. we will get the fed speak and what to watch. early on, it is one to watch. we will catch up with the philadelphia fed resident later this afternoon, a series of fed speakers over the next few days. lisa: doesn't matter who makes the decision? fed chair powell. people coalesce around that. team leads were looking for 25 two the meeting, and they went 50. jay powell seek to not talk about calibrated but moderated or gradual types of declines. there is an ultimate question of, if this market tells the fed, we want you to go big again, will they do it? is this a fed that is responsive to a market that has been bullying, leading the fed to make certain types of decisions? jonathan: economists are right,

and we have spoken to a few professionals and asked, what is going to guide the next call from the fed, economic data, speeches from fed speakers, or the data going into the meeting? if you were following the data, economists were looking at jobless claims with a four-week average of 230, an employment report for august better than the one for july, listening to john williams of the new york fed who indicated 25, listening to people like governor waller who indicated 25, and they went which one he five. so who do we listen to? what to look for? lisa: chris burroughs -- bank of america strategists overnight said this feels like a fed that craves to be on the right side of the market. economists expect frontloaded fed rate cuts, about 75 basis points for the remainder of this

year. this is what the market is kind of shifting toward. is in that kind of what happened? jonathan: good news is we can leave this conversation behind, we got 50. the next thing is not the election it, it is earnings season. kicking off in a few weeks. fedex after the close yesterday. down about 13% in the premarket, and when you see a move like that, you ask if it is them, execution, or broader economic story? lisa: if you listen to the rhetoric out of the c-suite, it was pretty negative in terms of customers choosing against necessarily paying more for getting packages. it was but well, the sense of urgency is not there to pay extra for ultrafast shipping, this usually happens when things are kind of tough and people are trying to save money. it should be a macroeconomic single, all things being equal. transport has had a hard time and are dealing with a

competitive scene when he comes to amazon another day of shipping options that are cheaper. this is -- is this competitive or is this something that can speak to lower income consumers facing headwinds? jonathan: later, christine weatherby of wells fargo -- christian wetherbee of wells fargo ward to join us. bond market over the last few days, yields have been higher. the curve steeper. continuing that a touch on the long end, up a single basis point, 3.72%. lisa: is at the beginning of something that is new or is it an ongoing increase or steepening of the yield curve on inflation concerns or is it just a blip as people recalibrate? we have no clue. but there is a feeling that on the margins, the greater risk is some sort of sticky inflation that some people are saying, at least publicly, is dead. jonathan: coming up, jay pelosky

of tpw. we will catch up with poonam goyal of bloomberg intelligence as nike is attempting to stage a comeback, and matt hornbach of morgan stanley. we begin with stocks coming off the 39th all-time high so for this year. jay pelosky riding the fence move is likely to force even the diehard to give up on the point of view, no sign a recession anywhere, no major imbalance in any part of the u.s. global economy. jay joins us now for more. welcome to the program. there is no sign of a major imbalance in any part of the u.s. global economy. jay, china, discuss. what is happening in the world's second-largest economy? >> growing at almost 5%, which is more than twice as much as the number one economy in the world, the u.s. all the doom and gloom in china,

look, as an investor, the question is, what is in the price? when you look at china equities, look at the valuation, my point is the one example is alibaba, the big tech stock, and we are believers in china ruling off its debt and the u.s. rolling off its debt, and china says it has the leading open source large language model. it is buying back stock at record levels. trades at a fraction of the valuation of its u.s. peers. for us, it is in the price. of the 4.5 percent yesterday, broke back above the 200 day moving average. it is emblematic of what we want to do here. you talked earlier in the lead up, i do not really care about a

lot of what you and lisa have been discussing, and that is not quite true. these two mostly. [laughs] jonathan: do you want to come back to this show again? [laughter] >> two points before we talk about the investment opportunities that we see at tpw advisory. we are the number 1 -- jonathan: let's just check with your use on china, then 'bramo wants to follow up. lisa: when it comes to china, i have one word or one company, mercedes-benz. how do you understand that, with all of this optimism that you just expressed? >> i expressed optimism about the tech stack and alibaba, said nothing about auto companies. we have a portfolio focused on future innovation and climate, so we are very focused on the chinese leadership in clean energy, renewables, and ev's.

the simple fact is that china is eating lunch of pretty much everyone but tesla in terms of ev production, activity, sales, innovation, etc. china is the world's innovator in green energy. and the european auto companies are watching their market share in china, a critical market for them, disappear. not even mercedes-benz, it is volkswagen, which is talking about laying off 30,000 employees in germany for the first time in its 90-year history. there is a reason why last week the european competitiveness report said europe needs to be more like what the u.s. has been doing, public-private partnership, venture capital, innovation. and the on the honor makers are certainly emblematic of that concern for europe. jonathan: so the multiyear view of the world, the way of expressing it is a commodity

market. we are off the highs of the year. look at of moves are you looking for in commodities? >> no surprise, you hit the nail on the head, that is where we are going to focus now. there is the global economy absorbing one of the most impressive rate hike cycles in modern history without a recession. that is something we need to pay attention to. likewise, in the equity markets, particularly the u.s., new all-time highs, 39 this year. check, leadership sector, the lead dog nvidia, down 20% for its high. we have to respect the fact that trends are powerful, and they are moving in the right direction, both in the global economy and the risk asset markets. what do we want to do? how do we invest? we want to sell the things that have done well on the idea that there is going to be a recession, because there is not.

so we do not like fixed income. we used to talk about 3.7% on the 10-year. unattractive if the neutral rate is 3%. we want to focus on the context of a long cycle, sustainable soft landing equals sustainable equals our global macro blue sky outlook. 2023 to 2027. we are now focusing on that, not the next quarter, not the next six months. the next several years we believe we are in a set up. and commodities look very attractive. bfa pointed out allocations to commodities are at a seven-year low. hedge funds are the most short commodities they have been in a decade. there is a real opportunity there, a real opportunity in buying the laggards, things like small-cap, non-us markets which are still 10% to 15% off their highs.

china is 40% off its high. we want to be buying the laggards if this is going to be a long cycle, a sustainable growth path, a fed cut through 2026. that is what investors need to be paying attention to. zoom out, not in. lisa: jay, all this leads me to question what your view was on utilities, one of the most loved areas. i know that sounds hyper specific with a lot of the calls you are making. but it seems like a 1-2 punch. they have done really well as a performance, but also, they would benefit as a bond proxy. for both reasons, how much do you think that that very loved trade is not going to do so well? >> utilities, in our view, have done well, in part because they are viewed as a recession hedge and in part because they are viewed as being one of the hot sectors which is power generation for the data centers

in the ai revolution, which we are believers in. we own an etf called erid, and it is at a new all-time high. that is the way we are playing it. we do not really like the utilities because they have been pretty well exposed, and we do not think rates are going lower and do not think there is going to be a recession, rates on the long end, not the short end, obviously. we like industrials. i think one of the surprises in the next couple months is that the -ism for manufacturing will break back up above 50. i make the points about markets at all-time highs while tech is still well off its all-time high, industrials, financials, real estate, there are multiple sectors that are breaking out. one of the things we like, in addition to industrials, we just added a position in consumer

discretionary. we talked about fedex. amazon is attractive, tesla is interesting here. they make up 40% of xly, the consumer discretionary etf. that is an example of where we are moving to, as opposed to where we have been. jonathan: jay pelosky's ted talk, brought to you by tpw. great to see you, you're welcome back anytime. pretty decent. lisa: i imagine him whipping out his pointer for the powerpoint presentation. this is the blue sky outlook. let me tell you. i am extra not a recessionista, but i try to understand other people's logic. might not be holding together. jonathan: not having this conversation again. let's get to your bloomberg brief. dani: the eu is planning a new 35 billion euro loan to support

ukraine. the european commission president announce the plans earlier this morning after meeting with ukrainian president volodymyr zelenskyy. under the arrangement, the loan be back by profits from frozen russian state assets. it is part of a g7 plan to raise $50 billion for ukraine, which is seen months of negotiations for the loan. speaking at an antisemitism summit yesterday, donald trump said jewish voters would have a lot to do with the loss in his presidential run. he repeated the claim that he had not been treated right by american jews after his support of israel. trump spent much of thursday on outreach campaign to jewish voters, speaking at the antisemitism form and an event hosted by the israeli american counsel. baseball history last night, the first major league player to hit at least 50 home runs in a season. he became the first big league

player to hit three homers and still two bases and again. that is your brief. jonathan: thank you. a videogame character, that is what he looks like every time i see him. lisa: lebron james said on x, this guy is unreal, wowsers. jonathan: tv ratings for this guy. lisa: my 12-year-old son last night, so excited. it is 50, the 50-50 split. and that he was like, it is 51! so excited think about the generations he is bringing it to the sport. jonathan: how about that last night? lisa: i was asleep. jonathan: next, a tight race in north carolina. >> interest, i believe, 44 days, we're going to turn north carolina red and turn -- and send kamala harris back to san

francisco. jonathan: that conversation and just a moment. ♪

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: looking to get you to the weekend with stocks just about -.53%. just about getting myself to the weekend, got an hour and 40 minutes left of this. lisa: you are speaking for both of us, a really long week. now we get to talk about cuts for december. jonathan: november 7, politics will be a big piece of that puzzle. a tight race in north carolina. >> it is great to be in raleigh.

we're in just, i believe, 44 days, going to turn north carolina red and send kamala harris back to san francisco where she belongs. let's talk a little bit about why we need to send kamala harris back, and kamala harris still refuses to really talk to the american media. it suggests maybe she has something to hide, and we know that what she is hiding from is that she is a danger san francisco liberal now pretending that she is a moderate. jonathan: trump and harrison can can north carolina. new polls showing 49% of the state supporting harris, 48% backing trump. anne-marie joins us from raleigh, north carolina. good. annmarie: this race just got a lot more tighter and a lot more complicated for the trump campaign, with this damaging report coming out of cnn about the gubernatorial candidate mark robinson on the republican side. this individual backed by the trump camp. the report shows salacious,

offensive, and controversial remarks that cnn was able to leak from mark robinson to this username. he has called this tabloid trash. at best, it is a distraction for the trump camp. at worst, it becomes a liability. last night, larry sabado came out after an emergency meeting and have moved another governors race in this state from lean democrat a likely democrat. and the question people and politics are asking now is whether or not this will tarnish former president donald trump's chances of winning the state, which jd vance, you just heard from, he was in north carolina a view days ago and said it will be very hard to win the white house without getting those 16 electoral votes. lisa: can you put into perspective how important each swing state is and why north carolina is really a linchpin in any potential strategy? annmarie: north carolina will be very challenging to lose for the republicans and not have a path forward.

this has been called loosey with the football, elusive for democrats. since the late 1970's, they have never won north carolina except for 2008, the first round for barack obama. polls right now are so tight, which is why any salacious story that comes out, anything that can move individuals come a you will see politicians harp on. i look to the carolina journal poll, has them both and cannot come up at 6%, they say, of north carolina voters are undecided today. will a story like this move them potentially into the harris camp? jonathan: senator vance is making the point that they have been hiding from the media. axios has made the same point, harris-walz media strategy, hide from the press. the harris-walz ticket is on pace to do fewer interviews and press conferences than any major party's presidential run in

modern u.s. history. regardless of what i think about whether they should or should not, they should be speaking to the media more, is that strategy working? annmarie: at the moment, they are not connect in key battleground states, so potentially it is not working. when you see a lot of times in the polling is that voters right now want to hear more about policy, and it is hard to talk about in-depth policy when you're just doing set pieces when it comes to, say, campaign rally's. we saw the address set piece last night, not exactly an interview given the fact that oprah winfrey spoke at the dnc and is supported kamala harris, but she did go out there in front of more friendly media, with voters who are already going to vote for her. i believe they are doing this to just play it safe. there's some 40 days left to november 5, and they want to make sure they do not do anything that potentially could hurt their chances. jonathan: looking forward to the coverage later. 3:30 eastern are her interview

with the north carolyn governor, roy cooper, a you do not want to miss -- north carolina governor roy cooper, you do not want to miss it. matt hornbach of morgan stanley joins us. harris has been a candidate for 59 days. during this 59 days, jd vance and donald trump have been in more than 70 interviews and press conferences with tv and print reporters, while harris and walz have taken part in seven. does the electric care about those numbers? >> i am not sure. i do not know she is returning your phone calls, but this is clearly a strategy to not say more than you need to. i do not know who is looking for all these interviews beyond myself, beyond you, be on the trump campaign, who's really trying to make some hay out of this. i do not know how many people are sitting around waiting for hard-hitting interviews. a lot of people watched the

oprah winfrey event last night. i would love the opportunity to ask hard questions of kamala harris. but look at the polling numbers. if you are a campaign operative and looking at the remarkable return kamala harris has brought to democrats at the top of the ticket since joe biden stepped out of the race, watching her catching up donald trump on the issue of the economy in a state like pennsylvania, why would you put your candidate out to have so-called hard-hitting interviews with interviewers who want to get you in a gotcha question. i am a member of the media and would ask the questions, so i would love to see it happen. if you put yourself in the shoes of the campaign, you have to ask why. lisa: but how much is this important, not necessarily for the rank-and-file, but for some of the business support number for people looking for more specifics of policy and do not have a good sense of it? >> this will be one issue for people to watch and listen to bloomberg, who are looking for answers on things like taxing

unrealized capital gains. we still do not know if kamala harris would pursue that biden -era initiative. when it comes to the corporate tax rates, like more broad strokes like stopping price gouging, for instance, or incentivizing housing. these questions need to be answered, and we may not get another debate for that to happen. we're 46 days out, some blanks need to be filled in, but we will see how we get to that point. jonathan: appreciate your time. joe mathieu out of the nation's capitol. up next, nike shares rising in the premarket, up by more than 6%, the company ousting its ceo. we will talk about that next on the program. ♪

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jonathan: down .3% on the s&p 500. opening bell is two hours away. leadership is truly came from big tech, unexpected. yesterday morning early on, we saw the rest of the small caps ripping, equity futures up by something like three percentage points. then bonds drifting lower, yields pushing higher, and bond proxies on the s&p 500 start to underperform. lisa: how much does the rumor

sell the news? or how much is trend where you see the bond yields creep upward on the long end? seems like today, the wild performance is probably from the russell 2000, and plenty of people seeing a lot to like. i think that is what the bond market is depending on. jonathan: let's bring up treasuries together. i want to separate the timing on the front end of the curve and what might happen at the longer end. front end of the curve anchored because we have this very well established reaction function at the federal reserve now. we won't respond to strong data, we will respond to weak data. so what if we get an upside surprise on something like jobless claims? that is wire some are looking for more flexibility -- that is why some are looking for more flexibility on the long end.

not just driven by the front end, but the longer end. lisa: money market funds can be a little stickier. people thing because that front end is still offering value relative to the uncertainty of the log end. key question, is there a feeling that inflation will take up? will it be physically driven, the uncertainty around fiscal policy? and how much more volatility does this uncertainty about where we are ending, the so-called elusive neutral rate, how much does that get accelerated heading into the election. some say, what about the election? and this is actually one of the key points of the people looking out for volatility. jonathan: it is difficult going into this election. the campaign promises are huge. every time there is a rally, the number goes up a trillion dollars. you look at the campaign promises and the prospect of

them becoming legislative reality, and it is difficult to work out how much space there is between the two. lisa: and then, what is the alternative? people who would not necessarily going to bonds because they're concerned about the fiscal picture going into, what, stocks, gold? what is the offset to it? your opinion -- european auto manufacturers? it is difficult to trade, but there is a question of where the overweight goes. you are seeing money into bonds and stocks, and a minor one -- and everyone calling it a day. jonathan: dollar-yen with a clear break of 1.44. up by 1.2% on the session. weaker japanese yen. 2.5% is the move on the week, there were three for the japanese yen going back to january of 2024. january of this year. this has been a painful week for japanese yen, and it has been volatile over the past few weeks. lisa: people did not expect them

to hike rates at the latest meeting.from the rhetoric, seems like people are pushing out their expectation for the next rate hike until the end of the year. how much does the bank of japan for like they had room to wait because of strength earlier in the year with the yen, the fact some of that witness had been pushed back? that is a question, how much of that data dependency they have, how strong or weak the yanis versus the dollar? jonathan: donald trump calling the fed's half-point rate cut a political move, saying a quarter-point cut would've been the right thing to do, this after president biden said the rate cut was a declaration of progress, not mission accomplished. lisa: what is the difference between declaration of progress and mission accomplished? isn't everything progress towards something else? it will be interesting to see at a time were increasingly it is

being politicized. we almost expected this. jonathan: of course. lisa: what do we make some of the political discussions around the fed, other than joe biden saying he has not met with jerome powell, even though he has? jonathan: the former president said the economy was really bad but they were doing it for politics. it is one or the other. lisa: i would say that that sounds about right. you saw that from other people who potentially might be treasury secretary's under donald trump say something similar. maybe the fed know something we do not, the economy is falling off a cliff, otherwise, why would they do this? i think it is politically savvy. how much it resonates with people is a big one, and he went on to say inflation is dead. some wins, some losses. jonathan: does not always seem to matter what we see on the campaign trail. lisa: i think we are all getting

ready for election season, putting it behind us. jonathan: it will be fascinating. out of china, regulators are considering removing some of the country's largest restrictions on homebuying, a new proposal that would ease restrictions for nonlocal buyers to buy in china's largest cities. they keep moving the needle. lisa: this isn't surprising to me, because they were trying to move away from something that people thought was a housing bubble. this was the one lever they were using as a stimulus again and again over the years and realize they needed to move away from it. the fact that they are going back to me smells of desperation. the fact they are not going toward direct subsidies, which they think are a cancer of capitalistic societies, and instead, they will go toward what they have done in the past that has led to cities that have been empty. it is a key question of how much they can generate the activity they are looking for.

jonathan: it feels like we're going to the lesser and not the former. lisa: feels like the easy path out versus harder paths that would go against some of the edicts we have heard from xi jinping. jonathan: it comes down to the election in 2025. several economists have made the connection. basically said they will hold off on fiscal. second reason is the election, if you have donald trump in the white house, the prospect of higher tariffs, you need ammunition ready to go to ease if you have to in 2025. lisa: on a broader level, i wonder how much we are seeing decisions delayed that are considerable until after the election and how much you will see a rush of activity one way or the other just with the certainty. even though we do not policy, there is a big divide on some key issues. lisa: shall we talk about your favorite issue, the airlines. jetblue ceo making a big push into premium offerings after --

they planning to build the first-ever airport lounges. >> we have had a number of challenging items over the last few years, failed two transactions. we are focused on getting back to the core. the billing through text -- transaction can take its toll, and we are focused on executing our jet forward plan and bringing jetblue back what it was when we were founded, run bringing humanity back to air travel. jonathan: this airline to me is a premium offering and a budget wrapper. i have wondered what they are going to do with the branding. will they do it now? lisa: not sure. they are trying to get back to the roots of value. if you look at where they're heading, it is often to vacation spots in their leader during -- and they are leaning to bigger

flyers. it is not business hubs they are flying. it is catering to someone who wants to upgrade their leisure experience, not necessarily compete with delta or united. but the reality of the travel industry is, some customers can pay and others cannot. margins are getting thinner, workers are getting more expensive, overhead costs more expensive. how do you turn a process of that -- how do you turn a profit for this company that has been elusive since 2020? we didn't -- it sort of highlights the inability and lack of certainty around transactions. she said it takes a toll on organizations, that they are trying to lean into their strengths and potentially expand and monetize some of those issues. credit cards, a key aspect of

that. and these lounges can be paid for individually, not just as part of some sort of loyalty program. jonathan: interesting. so might not be as busy as some other airport lounges. these two that was discussed. jonathan: a wonderful exchange on bloomberg.com and the bloomberg terminal. nike shares resting -- rising, and they ousted the ceo, bringing back a longtime executive to try and turnaround the struggling brent. he cut the revenue forecast, losing grant to competitors including eddie this. -- adidas. this is difficult because the other guy is gone or is it because of the new guy? >> this new guy has 32 years of experience at nike, clearly a veteran who knows the dna of nike. he can hopefully bring nike back to what it was, focusing on sports, performance, and on the

core, the product of nike, which makes nike what it is and differentiates it from competition. lisa: what have they done wrong that adidas and others have done right? >> it goes back to what he did as soon as he joined back in 2020, where he basically pulled out of wholesale. when you think about the american consumer and where they can get nike, it was because it was everywhere they went. footlocker, predominantly nike. now if you go to a footlocker, it is adidas, hoka, nike, they are balanced so the consumer has more choices. that was a big mistake. they have pulled back to come back into the wholesale channel, but others have to have a share. now they have to prove they can have innovation and can compete with these newer launches of other competition. lisa: i have been struck this year by how many executives have

been pushed out or forced to resign in some capacity, particularly in the retail sector. pretty much across the board, we have seen and quick -- we have seen an increased level of these at a time when companies are trying to go back to their roots what do you think of that? >> part of it is cost-cutting. since the pandemic, there has been a bigger focus on profitability. in the process, there has been more turnover and more executives have left. part of it is new management. new management, new styles of working. and when things do not connect, there will be a fallout. it is a combination of the two causing this. lisa: how much does it have to do with the fact that higher yields -- how much has to go to the fact that you have a borrowing cost? suddenly there is the sort of gut check on your ability to survive and you cannot borrow your way out. >> i would say that is the case for smaller companies that do not have a big cash balance. but for companies like nike and

amazon and others, that should not be a factor on how you make your decisions to invest into the future. i think healthy balance sheets is not a concern. jonathan: poonam goyal on nike. the hope is this is the beginning of a turnaround for nike after missing a massive growth area, which is something that should have dominated given the fabric of this company. lisa: the reason why people are celebrating this return, a comment from a viewer, first you show then and then you pronounce adidas like you are european. jonathan: i used the american pronunciation, and you and with the german. lisa: a sickly say, if you're going to do the american version, i will do the european version -- basically saying, if you do the american version, i do the european version. jonathan: aluminum, adidas.

ok your bloomberg brief. dani: israel. out extensive airstrikes across southern lebanon yesterday, calling it a new phase of its conflict with hezbollah. two deadly operations in the region in which pagers and communication devices were detonated. the hezbollah secretary-general is promising to tell you should against israel. perspective openai investors will find out today whether they will be part of the latest funding round, according to people familiar. one said the $6.5 billion rout is oversubscribed by billions. several strategic investors may get access to the biggest backer microsoft, along with nvidia and apple. openai declined to comment. the telegraph reporting about big changes to wimbledon. the all england club is set to get upriver -- approval to build 39 new grass courts, and it would bring an 8000 seat stadium

across from the existing site. $37 million of annual benefits. that is your brief. jonathan: thank you. more from her in 30 minutes. next, priced for perfection in the bond market. >> from here on, they will be very deal or britain data-dependent. jonathan: matt hornbach of morgan stanley 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: a member of j pin -- jp morgan was looking for 50, got 50, and he is looking for another 50 in early november he says it is contingent on further softening on the two drops reports between now and then purely lisa: that is sort of a splitting the wall street type of moment. you are seeing this among a number of banks, saying it does not take much to get this for to move more aggressively.

why have jp morgan and bank of america calling for 75 basis points more of cuts for the rest of the year. jonathan: welcome to the program. equity futures negative by .3% on the s&p. yields higher by two basis points on a 10-year, 3.7338. priced for perfection in the bond market. >> we still think the markets are pricing in cuts for the next year. we came into the meeting thinking they want to move away from restrictive policy and to frontload some of those cuts. from here on, they will be very deliberate and data dependent. the front end will continue to offer a lot of value for investors to put their cash in. jonathan: bond market, front end anchored come along bond yields backing up as markets begin to embrace a soft landing in a bigger way. matt hornbach writes, fomc commitment to being data

dependent and nimble, we see a string of 25 basis point cuts through mid-2025. the fed has not fundamentally changed its view on the economy, it remains healthy. matt hornbach, do you still believe this economy remains healthy? >> that is certainly our baseline view. and i would just say i am not sure that this was a frontloading of rate cuts. i think that the way that chair powell had to sell this to the committee is that they really should have cut rates in july by 25 basis points but opted not to do that. so this was really a catch-up cut, and that is what you see reflected in the dot plot, as well. probably the case that two of the 19 fomc participants did not want to cut 50 basis points at this meeting. you could also make the argument that an additional seven did not want to cut 50 basis points at this meeting.

so where they all had to buy into this is that, look, we probably should have cut rates by 25 basis points in july. the data we received subsequent to that meeting made the case that we should have done that. we didn't, but we are going to catch up now and deliver a 50 basis point rate cut. that is ultimately just two 25's six week apart. they will continue to focus on that type of pace, unless we are wrong on the health of the economy and the labor market deteriorates further. jonathan: we heard it a few times from chairman powell, words like recalibration, when he suggested that the 50 basis point move does not set the tone, will not be the pace of the rate cut cycle. a few bond investors have said maybe the bond market is now fully priced for rate cuts from here, that perhaps you cannot get much more of a rally, the bigger part of the move is

behind us.i would love your thoughts on where we are priced at the moment in terms of the dot plot and whether the fed's path would consider to be the ceiling for richard the floor. how do you think about that? >> the feds dot plot has an unfortunate history of not being right very often. i think investors are aware of this. so when we compare market price to the dot plot, we have to understand that the market price incorporates both expectations of investors, which tend to be determined by the dot plot or at least guided by it, but investors also would be the first to admit that those expectations change often. so we look at the market price relative to the dot plot as evidence of risk -- which direction they are going. most would tell you that if there expectations for string of

25 basis point read cuts do not play out, that it is likely to be that the fed move more aggressively back towards neutral. what is in the market price? to me, the market is pricing the average outcome of all possible scenarios, one in which the fed moves more quickly back to neutral, and in doing so helps the economy avoid a hard landing. lisa: does this make you less inclined to buy long bonds? all things equal, that would potentially keep inflation more significantly in the system of growth, more prevalent. >> i think it is probably going to take more than a string of 25 basis point rate cuts to change the economy in the near term. again, policy operates with the famously long and variable ends. in the performance of the economy over the past 12 months has shown that, in spades, the

fed began hiking rates in 2022 and did so aggressively, we really have not seen the economy slow to a notable degree until recently when labor market data has disappointed to the downside. so i think it will take some time for these rate cuts to impact economic activity. the fed may not be on a preset course, but neither is the economy. the economy is not on a preset course. we have to monitor the data frequently and carefully from month-to-month. lisa: one of the most confusing aspects of this narrative is what happens with the dollar. fx channel, you start to look at whether you see a correlation with for the rate cuts and dollar weakening. starts to break down when you look at growth differentials, at what is going on in europe and china, versus what is going on in the u.s. how do you understand that at a time when people are heavily positioned to dollar weakening

going into year end? >> this is where you have to keep an eye on not just rate differentials, which are famously known for working in some periods and not in others, you need to also look at what the story in the rate market is suggesting. how i interpret that story is, at the moment, the market is still pricing for a soft landing based on the idea that the fed moves a little bit more quickly back to neutral than perhaps they thought six month ago. but if that is not right, if we actually end up moving into a hard landing scenario where the fed almost certainly would have to take monetary policy into accommodative territory, that is a different environment then currency investors have been thinking about over recent months. so it would say that if the terminal rate pricing for the fed moves significantly below the two and three-quarter to 3%

range, than the dollar should behave much differently than it has up until this point. on the same token, if the terminal pricing for the fed moves back higher, where maybe the fed does not have to cut all the way back to 2.75 or even 3%, and i think the dollar will benefit of that environment. as interest rates move higher, we think the dollar would probably move higher again. we are right on that fence. as currency investors, we are advising them to be very careful about how they position in the dollar today. jonathan: 20 years ago, a young man called matt hornbach was trading jgb's on japan. let's talk dollar-yen, a big break out today. how do you think about that currency pair? >> aside from my standing recommendation for everybody that has not been to japan to go now while deanna still very cheap -- wealthy in is still very cheap, this is an

interesting moment for the bank of japan. they have had a long history of hiking rates into global slowdowns. therefore they have had to quickly stop hiking rates. they find themselves at a similar period of time. i think the governor made it clear in his press conference in march that he does have an eye on the u.s. economy. but if the u.s. economy does slow more quickly in dollar yen, likely continues to move lower, then maybe the bank does not have to continue to raise interest rates. so the movement we saw just overnight in dollar-yen was primarily elated to the idea that this was a bit of a surprise. i do not think many investors expected him to be quite as devilish as he sounded. jonathan: matt, appreciate your experience. matt hornbach of morgan stanley. , sam stovall of cfra, chris

wetherbee of wells fargo, veronica clark of citi, and tom becker of blackrock. that is just around the corner. ♪

the moment i met him i knew he was my soulmate. "soulmates." soulmate! [giggles] why do you need me? [laughs sarcastically] but then we switched to t-mobile 5g home internet. and now his attention is spent elsewhere. but i'm thinking of her the whole time. that's so much worse. why is that thing in bed with you? this is where it gets the best signal from the cell tower! i've tried everywhere else in the house! there's always a new excuse. well if we got xfinity you wouldn't have to mess around with the connection. therapy's tough, huh? -mmm. it's like a lot about me. [laughs]

a home router should never be a home wrecker. oo this is a good book title.

>> i think one thing is clear.

this is a fed that is willing to surprise the market. >> trendlines are still concerning. it makes every sense of the world for the fed to cut interest rates. >> the other take away is that the bar for moving rates lower is not that high. >> from here on, they will be deliberate and data-dependent. >> let's see people move away from the fed narrative to where is the economy and what do earnings look like? i think it's going to be ok. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: it is about the earnings going into the election in november and the fed meeting of november 7. good morning, good morning. the third hour of bloomberg surveillance starts now coming off of the back of all time highs on the s&p 500. equity futures pulling back attached. the russell, down between .2% and .3 percent. there is a debate on wall

street. are we fully priced in the bond market? do you look at the fed path implied by the. lots -- by the dot plot as a ceiling or floor? if they are wrong, which direction will they be wrong? lisa: they have a history of being wrong. when we start the next earnings season, that will be in focus. people want to hear what companies have said. you're talking about the knife's edge and a lack of clarity in the economic data. when you talk to executives, big companies, they have the same lack of clarity. the biggest question, which direction the consumer will fall in. you have mixed signals on both sides. jonathan: fedex, do you get anything definitive sing fedex down 13% in the premarket? lisa: a definitive mover fedex in terms of the implications. how much are they losing market share and frankly the ability to charge more for faster shipping to the likes of amazon and

others? how much of this secular economic story versus a specific competitive one?typically this has been a macroeconomic story. that people are shrugging this off may sets the tone, but for the most part people aren't considering it with the same kind of clout they had in the past. jonathan: on october 11. the big question after conference season is, will we talk about interest-rate risk that these banks and the other direction, or credit risks given what we've heard from ally financial at the barclays global financial services conference? lisa: which it is matters for the read through the markets. if it is interest-rate risk, ok, that interest income going down. it won't necessarily shake the needle when it comes to the larger market readthrough. credit is different. we saw that with ally financial, the fact that they came out and raised questions about rising delinquencies and health of credit and consumers, you hear more of that from the majors,

that could resound loudly across the market. jonathan: earnings, typically not interested in the palace intrigue of the white house or things like that. this week the federal reserve, what happened at the two-day meeting. did fed powell come in and bang the table say we are going up? if you get interviews with fed officials over the next few days, there are a lot of questions to ask beginning with the philadelphia fed president later on at about 2:00 p.m. eastern. lisa: in an ideal world it would be great if they can answer this question. how much did the committee feel bullied by the fact that the market had moved completely and priced in a 50 basis rate cut at this meeting, indicating they would be more consensus if they went with that position at the meeting this week? jonathan: how much of that came from articles that may or may not have been encouraged by jay powell? lisa: that is exactly where i was going in one key question we are never probably going to answer.

ultimately, the issue people are looking for, what do they look for in terms of tea leaves for november 7? it's anyone's guess at this point for a lot of reasons. do they look towards the two year yield? do they look towards rhetoric out of just jay powell? how about everybody's? do they look at articles released during the quiet period? jonathan: we cut interest rates by 50 basis points with jobless claims still in the low 200s. lisa: it was a recalibration. jonathan: i heard that on repeat. lisa: it was a recalibration. this was the most demanded fed cut since the early 1980's given how far the front end of the treasury yields have fallen this is a fed that craves to be on the right side of the market. how do you get the market to cooperate with our mixed signals? herein lies the question around some of the messaging. jonathan: equities at all-time highs. equity futures pulling back from those levels this morning.

down .2% on the s&p 500. yields higher by basis point or two. the 10 year, 3.7319. sam stovall of cfra as stocks come off record highs. christian weatherby of wells fargo on a gram 2025 outlook. and veronica clark of citi on why she disagrees with the fed on recession risk. stocks stalling at all-time highs as a fed rate cut euphoria begins to fade. sam stovall saying we remind investors that one thing has been more profitable than having. the average 12 months between the last rate hike and first rate cut since 1990 come the s&p 500 gained 17.7%. in the six months after, only an average of 2.2%. sam stovall, is this time different? sam: good morning, jonathan. when you have to look at the averages, like the leaves of an artichoke you have to peel to look at the heart of the matter. if you're dealing with a s&p

500, yes, you actually have several times at which the market did fairly well. at the same time, there is relatively equal number of bear markets that ensued. 1990, 2007, 2020. the question now, as lisa was raising, is, is this truly recalibration or are we simply improving the likelihood of avoiding a recession? jonathan: this is the answer from bmo, raised his price target. "we continue to believe a soft landing is the most likely economic scenario, which makes the current environment most comparable to the mid-1990's. a period when the index was able to sustain a greater than 20 times multiple for several years." can you tell me how you are thinking about multiples on this equity market and if we can sustain these levels? sam: well, i think we are headed for a soft landing.

our economists are projectin 2.7% real gdp growth this year, 2.2 next year, 2.0 for 2026. investors continue to believe that the u.s. is the best place to be investing at this point. i think, however, when you talk about valuations you have to tiptoe around that. right now the s&p is trading at a 33% premium to its 20 plus year average forward p/e ratio. tech is trading at a 55% premium. let's remember it is down from 78% premium in mid july. i think we will have to see some better-than-expected earnings reports ahead. also, a lot of tech analysts are justifying the shorter-term p/e ratios based on the fact that they are now beginning to look for 2026 earnings. jonathan: you pointed to that we

needed earnings outperformance. we didn't get that from fedex. a question for a company that has traditionally been an economic bellwether. why are people dismissing this as an idiot contrac -- as an idiosyncratic rather than a tell on the consumer? sam: they do harken back to the theory that you need the transport to be able to confirm whatever move is made in the industrials. that is a concern. i think when you look to q3 earnings estimates, on june 30 the street was looking for a little more than 8% growth. now it is 5.5% growth. granted, you had some forward earnings growth taken away with better-than-expected q2 results. when you look to the full year this year and next year, those numbers didn't move too much. i would tend to say that this q3 reporting period will be very

important and pivotal to where the market goes from here. lisa: you pointed to this statistic. typically stocks don't perform as well as they did in the prior 12 months. this is a key debate that we've heard from a lot of people who have come on the show. you go longer into stocks and bonds? two bonds hold more value in a cutting cycle -- dumont told more value in a cutting cycle when it comes with economic weakness? where do you fall on this? sam: the right answer to most financial questions is, that depends. it depends on if you believe that a recession is around the corner. if you do, which we don't, then you really want to be focusing more on bonds as a balance for your portfolio, as a way to maintain the value of your portfolio. we believe we are headed for a soft landing, so our belief is that you don't want to be adding too dramatically to the longer bond at this point. we expect it to average about

360 in 2025. not much lower than where we are now. our belief is, yes, you're probably going to be seeing some softness in the month ahead because of seasonal activity. september and october are the two negative months during election years. october traditionally has about 35% more volatility than the other 11 months of the year. we typically see end of election year euphoria once the uncertainty has risen. over the next month or so, some of the more conservative areas, like gold, which has traditionally done fairly well one month after the start of a new rate cutting cycle. lisa: you mentioned gold, so i can talk about it without being accused of being a perpetual gold bug, which i'm not. is it related to inflation? is any fiscal hedge?

what is the readthrough for you? sam: i would say primarily it is because of the lower interest rates. when you have gold, it pays no dividend, it costs money to store, and because of the last six rate cutting cycles since 1990 we had bear markets occur with four times in 12 months. it is a store of value and nervousness as well. companies like royal gold, like newmont mining we think should do well in the period ahead. typically in the short term they continue to advance as the uncertainty remains. jonathan: it is good to catch up. sam stovall with equity futures recovering down 1/10 of 1%. october 11 is when earnings from j.p. morgan come out. october 18 is when numbers come out from ally financial. the reason we talk about those two names is a week or so ago we

had the barclays global financial services conference and we heard from two speakers. jp morgan making the point that maybe analysts were too optimistic about earnings given the right path. ally financial warning about what was happening in the auto lending book of that company. we asked the same question. what will dominate earnings season for the financials in the next month or so? credit risk or interest-rate risk? lisa: the fear in markets is that it is credit rate risk? . jp morgan is the biggest arguably in the world when it comes to international payments. i real question about credit quality that you are seeing in the smaller players. the fact that ally, that was the real question, highlights that. jonathan: an update on stories elsewhere this morning, with your bloomberg brief, here is dani burger. dani: the infamous three mile island nuclear plant in pennsylvania will return to service in 2028 and sell its

output to microsoft. it has two closed units, one shut half a century ago after the worst u.s. nuclear accident in history. constellation energy will open the other reactor that was shot in 2019 because it cannot compete economically. microsoft agreed to purchase the energy for two decades to power the ai boom. it the latest media event. the vice president held the town hall in michigan hosted by oprah winfrey. celebrities like julia roberts and chris rock joined american sharing experience with gun violence and abortion restriction. harris says that she hopes to be a unifying president repeating promises to boost small businesses, signed an immigration bill, and signed federal abortion rights. china cracking down on illegal medicines similar to ozempic. it has been catering to growing demands during a global supply crunch. knockoffs of the popular medications have been sprouting

up around the world as these companies struggle to keep up with unprecedented demand. that is especially the case in china where novo nordisk said that they would limit sales. jonathan: we will catch you again in 30 minutes. you said something about supply chains in china. ozempic? scary stuff. lisa: does it make you grow another arm? given the side effects of the namebrand, can you imagine the side effects of the other? jonathan: not good. good news is they are trying to clamp down on it. the bad news is it has been a problem for a long time. lisa: that is why increasingly supply chain security will be a priority for companies. how do you get away from being the subject of counterfeit theft , people knocking off your product and giving it a bad name, and how do you make sure that all of your sourced materials are what they say they are? jonathan: the morning calls, plus we catch up with christian

weatherby of wells fargo as fedex falls on a week outlook. -- on a weak outlook. the s&p 500 coming into friday, all-time highs. the russell small caps on a seven-day winning streak, the longest going back to march 2021. from new york, this is bloomberg. ♪

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: we have one hour and 12 minutes until the opening bell. the cash open around the corner. equity futures pulling back a little. down just .1% on the s&p 500. morning calls, first up initiating coverage of snap with a neutral rating.

seeing advertising as an overhang on growth. the stock is down by .2%. our next up, baird raising the price target on nike from changes in the c-suite. finally, morgan stanley is downgrading fedex to underweight pointing to disappointing results and future headwinds. that name is down by more than 13% this morning. let's stick with fedex. christian weatherby of wells fargo maintaining his equal weight rating writing that expressed fundamentals are under pressure and we see risk for another guidance cut, which may overhang shares. christian, welcome to the program. are you suggesting that those cuts may be are not deep enough? christian: we are. the first quarter, they missed numbers and seasonality by more than a dollar per share on earnings and the company cut guidance midpoint by only 50%.

we know that their fiscal second quarter is going to be under pressure because of the u.s. postal service contract leaving and a calendar shift moving cyber week into their third quarter. they're putting a lot of emphasis on the back half of the year end looking for an improvement in the industrial economy to feel that. we are skeptical. jonathan: you mentioned the holiday shopping period is shorter. does that make a big difference with this company? christian: obviously, a shortened holiday season creates a more frenzy of activity. that can be expensive to manage. that being said, they have implemented the largest demand peak surcharges that we've seen over the last many years. that has the potential to offset. you could have a decent amount of revenue from those surcharges to try to offset the costs. lisa: how much is this a broader macro issue where consumers aren't willing to pay to get things more quickly?

how much have they gotten spoiled by amazon prime, walmart plus, and other subscription services that enable them to get some of those delivery perks without paying more? christian: it has been a long-term headwind that we would expect to see continued that consumers are not educated to pay for the premium shipping that they all come to expect. that is a longer-term headwind that we would continue to see. what we saw in the quarter was probably more focused on international shift where we are seeing more volume moving into the economy products which come at a lower revenue per unit. that is probably the bigger issue. volume overall didn't miss by that much. we had a mixed trade down that was probably a bigger piece of the overall problems in the quarter. little bit of the longer-term ecom issue and willingness to pay, but it is probably a makes an internationally focused. lisa: i would love you to explain the phrase educated to pay more. is that advertising, not targeted, not sold?

christian: what it means is the customer of fedex or ups is the retailer. those who consume e-commerce are customers of the retailer. there is a disconnect between what fedex and ups charge the retailers and what we see as consumers of the product. a lot of folks don't understand what it costs, ultimately, to move these goods as quickly as they've gotten accustomed to. that's one aspect. we have thought over the years that fedex and ups could do a better job getting connected with the consumer. there is an enormous amount of data that both companies have on what we consume on a regular basis. there could be better connections and education. the customer base is the retail player. it is less clear to us consumers where that shipping cost is being embedded. the price of the good? are we or are we not paying for shipping? that is the disconnect to some extent.

lisa: that is fascinating. this is typically a name with a macroeconomic read of what is going to happen with consumers and what the willingness is to spend more generally. is this time different based on the trends you were talking about? christian: it is and it isn't. you are right. this is a macro bellwether. it is quite volatile historically. when we see slowdowns in the industrial economy we tend to see earnings falter for this company. i think there is that. i don't want to understate that. the reality is, we have seen some overall weakness in industrial activity. that showed up more pronounced in the company's freight trucking business that ended up missing volume expectations by a decent amount. we are seeing in other parts of coverage where industrial shipping activity has been slower. i think there is a connection to some degree and we have to be careful.it is part of the risk that we see in the second-half guy the company has put out there. they are assuming an acceleration in macro activity.

while we are hopeful, it is hard to underweight at this point. jonathan: it is an equal weight, price target of 300. 300 is where the stock closed yesterday. if i am mark to market, now it is buy at 300, we talked about the negatives, what are the positives? christian: a couple of things. probably the biggest one is the potential spin of the freight trucking business i mentioned. if you look at some of the parts perspective, the free business would be more valuable from a multiple basis based on where their peers are trading now than the overall parcel piece of this business. i think as we get closer to a decision around the spin, the company said it would let us know by the end of the calendar year, and the weakness we are seeing in the other pieces of business and stock under pressure, we think that the likelihood of the spin is growing. that is why we maintain the 300 dollars price target. we are assuming more value

coming from that potential spin. we can keep the multiple higher anticipating that. we are watching closely to see where ultimately we shake out following what will be a turbulent start to the day today to get a sense of what the real value is. at the end of the day come the upside potential could come from a spin towards the end of the year. the freight business could be valued between 30 billion and 35 billion, obviously capturing a significant amount of the company's current equity. evaluation. jonathan: let's do it again soon. the latest with fedex, down something like 13%. close to 300 yesterday, down to 260. we heard the upside risk at the end of the conversation. the downside, the risk of another downgrade at some point for this company. lisa: very much so. from their own projections this is not necessarily the worst of it in terms of how much they could further cut their forecast this year. it has to do with structural issues as well as what we have heard from consumers at the

lower end of the income sphere. jonathan: you are citi, an economist, you think recession risk is high and the fed should go it 50. at one point you think it will. then the data comes in better than expected and the fed doesn't guide you towards 50. you cut your expectation to 25. then they go 50. how are you feeling? lisa: really angry, defiant, and frustrated that things are not the way they have been in the past. but i am not at citi. someone else is and we will talk to them. jonathan: an angry, defiant veronica clark in a second. veronica is not angry. looking forward to this from new york, this is bloomberg. ♪

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jonathan: 60 minutes away from the opening bell. on the nasdaq down .2. the russell and small caps on a seven day winning streak. as we count you down to the open , let us get some morning movers. manus: how to put the whoosh back in the swoosh. elliott heel -- he'll is coming

out of retirement, this one no sneakers to his soles. this is about bringing back a veteran that is about getting stock on the shelves and where customers can look at the product because that is -- go and read the big take. that is part of the mistake that was made. he went all about supply chain and consulting narrative and missed a beat in terms of what you have to do which let upstarts get onto the shelves. you spent time on fedex, the stock is down 13%. wells fargo is still honing the $300 call and this is on the spin out of the great business. the question you must ask yourself is the drop of business-to-business in the united states, the real issue, down by 3%, is that cost-cutting or a real canary in the coal mine. when it comes to builders it is a hot political issue. lennar is up 29% and strong

delivery and orders. the mortgage rates are at 6%. how much of the good news is in the price. the bottom line for this economy is housing affordability. i do not want to ask you whether you have your panda nikes. jonathan: i want to work out who wrote the ponds. are they original? manus: they are all original. jonathan: have a good weekend, thank you. lisa: putting the woosh band in the -- back in the swoosh. jonathan: just a poet. let us talk about rates. the rate cut euphoria is flaring and an emphasis on the low level on the unemployment rate and a confidence on the path ahead. we disagree with the view that

the recession risk is not elevated. the continued rise in unemployment will likely have them cutting faster. this is not going to be a therapy session and i will not make it about that. i will make it how you thought about this on wednesday. for our audience, you are out front on the 50 basis point call and said it was data dependent and the date it was not bad and you change the call. what were you thinking? veronica: it has been a crazy couple of weeks. we did turn back to a 25 basis point cuts when we saw a stronger shelter inflation. we were thinking that is the easier compromise for the hawks concerned about inflation. on wednesday when we got the 50 basis point cut it is justifiable based on the weakening of the labor market and we learned that fed officials are dismissive of stronger cpi. chair powell was very dismissive

expecting that will slow and it really is the labor market. jonathan: talk to us about what you will be looking at and what will guide the theme? veronica: two monthly employment reports. those are really the most important, watching all of the labor market data and weekly jobless claims. we think this is a weakening labor market and we have seen that more pronounced which got us to the 50 basis point cut. i think that trend will continue and we will see more weakness and it is another 50 in november. lisa: this is important that you think it will be just as aggressive going forward. there has been a question about how well this transmission mechanism of the fed policy can help support the economy. do you think that, given the reaction to this latest meeting that will help stave off the weakness that you are expected to see? veronica: a couple months ago

the narrative was that the economy was so strong in the fed does not have to cut and we are saying the economy is strong because the fed is cutting. what changed is that the later market data weakened. this is really hard to prevent. once you get rates lower back to neutral or maybe even a bit below i think that can re-stimulate, but we are still a long ways away. lisa: they do not know anything that you do not know. there is not like there is some kind of feeling underneath this fear of a recession on the committee. how much do you think that that is true? veronica: i think that powell is a bit more worried than he is letting on. we are looking at the same data and he is looking at falling hiring rates like we are. maybe some early signs that there is a pickoff and layoffs.

have increased, the highest since 2016. he is worried that if you do see clear signs of layoffs, that is when it is too late. jonathan: i will take it to the eeg every -- of ridiculous. there were times where it felt a little bit performative and forest, the confidence, things are great, ignore the size. this is a recalibration and things are good. feel the same thing? lisa: i did because in previous times news conference as he was less activist and fumbled more -- less practiced and fumbled more. he did not have the same polish. this is someone acting as a lawyer was why that comment was so interesting. this is someone making a case more than delivering a message that was his true message. jonathan: it felt like a performance. i wanted to get that out there. let us get back to the rates.

lisa and i were talking about how you view the rate cut past implied from here, whether that is a ceiling or a floor. matt framed it better than i could, if they are wrong, how are they? we should consider that a ceiling because they will get back to neutral quicker than you think. veronica: the last couple summaries have felt like a marking to the market and this is where the market already is and it is a marking to the market in terms of the unemployment rate. they had to raise that. we are first and foremost facing our view based on where the data is headed and we do not believe it will involve -- evolve in a way that is consistent. jim: how much -- lisa: how much do you think the reaction function is biased rather than they wanted to start they can move gradually? veronica: it is a low bar to get larger cuts. we are very far from neutral and

powell has set a number of times that there is ample room to be cutting if something goes wrong. you do want to quickly get back to neutral and not get back to neutral a year from now. jonathan: for this year and next year, the long. came up just a touch. how are you thinking about that? veronica: it is interesting and there is that subset that might be neutral and may be a bit higher. we would not disagree us -- disagree with that. 3.5% is fair. we have them getting back to that. 3% terminal rate. that is fair. even if that is a neutral rate, maybe they have to get a little bit below neutral. jonathan: ubs said what to the high rates achieve, not a whole lot? even if we go below neutral what are we stimulating? veronica: high rates achieved bringing inflation down in a sense, in that way. we saw housing showing --

slowing and shelter inflation will be slowing. demand is weaker. of course, that means that there is an increase in unemployment. you might expect lower rates to restimulate sectors like manufacturing and housing but it will take a couple quarters. jonathan: what did he call rents, the fantasy of what we are. jim: i like the small frustrations. jonathan: everyone who did not grow up in the 50's. can we finish on housing and price of shelter. we have 70 different views. if you unlock that inventory and supply, prices might go down. how are you thinking about the forces for interest rates to work on the housing market veronica: that is true eventually but it will take a while before a supply response. mortgage rates have come down and we are watching the weekly data on applications filed by --

filed for home purchases and that has not picked up. lower rates stimulate the demand for housing but we have the issue of a weakening consumer labor market and that might be the more overwhelming drivable. jonathan: next move? size? 25 or 50%? veronica: 50. jonathan: let us turn to the equity market and we are a little bit soft. i showed apologized about talking about the news performance. what was the performance in the news conference? lisa: you could apologize for me to but i will not let you. it does matter when you look at how he acted in previous conferences. i find it interesting when they read off of a sheet giving you sense of what they are prepared for. there is a very particular message and that tells you about what he is trying to project and

how deliberate that is. jonathan: it was very deliberate. equity futures a little softer and a little bit seven day with a streak and the small caps having their longest run spring 2021. let us see if we have that. and joining us now is tom becker of blackrock. i feel like this narrative have gone back and forth for the past two years. what is it now? tom: we have a different view than veronica. we are in the know landing camp. this economy has been a 5% to 6% nominal economy for two years now. so some quarters it looks like inflation is too hot and growth is a little bit hotter. you have been trading off with the economy operating in this notably higher nominal range that it was pre-pandemic and we

think that is set to continue. the economy has less interest rate sensitive than it was. people turned down their mortgages and a lot of the spending we are seeing in industrials is coming from a 2.0, fiscal policy re industrialization. that stuff is driving interest rate insensitive spending back into the economy. we think the consumer is well set up. they have household balance sheets in good shape in terms of wealth. they are earning stronger wage growth than they were pre-pandemic so 1990's wage growth. and so that sets them up well with interest income coming back into their flow. and we think inflation is settling at 2.5 3% range and the fed seems ok. that is a no landing outlook. jonathan: the interest rate sensitivity is that symmetrical

or asymmetrical. are we sensitive on the way up or down? tom: if you look at the time of people turning out corporate treasures and households. in all of 2020 and 2021, that is fixed rate. we do not think there is a lot of sensitivity for a lot of the spending and that is how the economy has behaved. so, we think that is set to continue. there are pockets of weakness and i think a 50 point basis cut will definitely bolster those parts of the economy that have been more but over well -- but overall it is performing like it does not get impacted by the swings we have gotten. lisa: i want to put that on a reel. jonathan: that is a summary of the last 18 months. lisa: it could brought backslashes. the idea of the no landing is a u.s. pacific story. i do not think germany is feeling that.

how do you play the idea that the u.s. has been the dominant overweight for so long, continues to look like it is the strongest economy on a relative basis, but still has high valuations? tom: i think you picked on the poster child of the week man of europe. if we look broadly -- broadly the periphery is booming. look at italy and spain they are doing great. canada, lagging a little bit. canada is more interest rate sensitive and germany has more russia and china sensitive. you have economies that are weaker but they are nominal growth is higher. there wage growth is higher. so, you have developed markets with all-time tight labor market and we think the u.s. labor market is tighter than the recent rise in unemployment begets. but you have japan kind of firing on all cylinders, strong

epi data overnight. in the totality europe looks pretty robust and evaluations and positioning our life. we are a macro tactical team and we look for opportunities where the narrative is negative and where people are focusing on jeremy -- on germany and missing that the periphery looks better. over the summer and recently we have been stepping into tactical longs. i agree with you completely. the u.s. does look well held and overbought. every time people step out, there is a french election or the kind of bungled press conference in the boj. and they are like let's go back to the u.s.. that creates opportunity and pockets of good pricing for us to step into these strong global companies and indices. lisa: you just look to go to places that you actually want to that is fun to go to. i have been to japan 10 times

and i have been degrees, check out their beaches and invested. is that what people are doing? tom: i think americans have been spending in those places. i just did a podcast about taylor swift effect in europe where they had all-time high month on month services inflation because she did three shows in stockholm. that is a lot of americans flying over. and there like it is cheaper to go to the netherlands. people are spending differently and people are not behaving like they think their jobs are in danger. and the income, the last labor market report you can see the job trend in the creation of jobs is a little bit lower and the hours are up and the wages are up. that is money and pockets that they are spending. in the foreign markets nominal incomes are higher. incomes are low and people are making more in the last decade.

people will start spending more and they can unlock a consumer they have not had for years. jonathan: i had a line that was do not invest in countries with green in the flag and italy was part of that story and the way people view europe was that germany is strong and italy is weak, and it is the complete opposite. when you look to take that exposure we have to talk about it through the currency. now the currency is held back by developments in china and germany. how do you take that exposure specifically? tom: you can buy the index. we buy the local index and get exposure to the broad set of italian companies. you have banks that are doing well. but you have a lot of services and companies tht exposed to russian gas or chinese exports. that is the way we do it there. since we are top-down macro investors we focus on the country dimension. we separate the currency from

the local equity market. and so we can be underweight dollars also long a foreign kind of local equity. jonathan: a question from a bloomberg subscriber and a lot of people have a similar -- a similar question. high prices have been a big factor. using that things can hold up what is your outlook for inflation. lisa has been talking about steeper curves. what is your outlook for inflation? tom: three is a new two. i think 2.5 to three because we have had a weakening, but we think services inflation will underpin higher inflation rates. you have consumers consuming in a service-based economy and you have a lot of structural changes and insurance markets are a multiyear year -- multi-year repricing and insurance rates in

california are going up 40% for households. and that feeds through into the economy. restaurants have to raise their prices so there are slower moving effects that people under appreciate. but, if you look at that slower moving dynamic of sticky services inflation it is not just the u.s. but across all of the developed markets and the tight labor markets and people spending more. and that is feeding through sticky service inflation so china can bring down goods inflation for a few orders and then you are like false dawn? we have landed. but then it bounces up if you get a surprise stimulus program, draghi and a call to arms for fiscal in europe. they always react too slow. in europe you should think that they are going forward and there might be another kind of upward surprise. jonathan: this is one of the sharpest conversations.

we appreciate the perspective. come back soon. let us take an opportunity to get you update on the stories elsewhere with the bloomberg brief. dani: bloomberg analysis found that the three biggest u.s. money managers slashed their support of esg proposals coming during continued republican led against sustainable investing. in the first half of the year state street supported 6% of environmental proposals. vanguard voted against every single one of the proposals. black rock for 4% for month ending in june. that is down 7%. today is the day for those upgrading their iphone. the iphone 16 is available at stores in almost 60 countries. it is coming in a series of new colors with larger screens and an upgraded camera but without apple intelligence. they will have to wait until it becomes available in the coming weeks and months.

bloomberg has learned that johnson & johnson is boosting its offer to settle baby powder lawsuits. claimants could get bigger payouts and $650 million in legal fees covered putting the settlement to more than $8.2 billion up from its earlier offer. j&j maintains that it has withdrawn talc-based powders that never count -- that never cause cancer. jonathan: up next we will bring you the day and week ahead and we will catch up with david westin on a brand-new wall street week 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: the opening bell is just around the corner, 37 minutes away.

equity futures pulling back a little bit. here is the trading diary. fed speak picking up at 2:00 p.m. eastern with patrick cosper -- patrick harper. we will get some data and s&p global pma dodd -- data onto -- on monday. thursday, jobless james -- claims. coming up later the premier of the new wall street week at 6:00 p.m. eastern. david westin's telling story of economics, business including ford's challenge to stay competitive in the ev space. >> i worked for toyota in a couple of decades and i have never seen competition like this. they have the full sponsorship of their government. the government found a -- tv before the rest of the world. and now they are the most important market. jonathan: with us is david westin. good morning. fantastic launch and congratulations.

while cost of the changes and what we can look forward to. david: we are turning it from a pure interview program until one telling stories and using the interviews to tell the stories and other narration. jim farley telling the story of the art -- of the auto industry. he sought in the 80's in toyota and now it is china which is a much bigger challenge. lisa: what is the biggest surprise you found out as he reported this? the question of how the narrative is not exactly the reality. david: the biggest challenges that the ev story is two different stories, consumer and commercial. consumers are getting skeptical of evs and why do i need to buy, not true on the commercial side. they have a big commercial side and we have interviewed those. they cannot keep up with it. if you own a fleet of vehicles you make money through having ev's. when you are a consumer you are

not making money. lisa: is it range anxiety versus business proposition? david: business proposition meaning that you will make money because you have all of these vehicles and monitor where they should be going and when they need maintenance. if you are a consumer then you are worried about if i drive across the country where my going to charge the estate -- this thing. it is a much more challenging proposition. jonathan: are you happy that you do not have to wake up at this time with me? 3:00 or 4:00 in the morning. this is a better gig, believe me. thank you and fantastic work. ou can watch the premiere tonight at 6:00 p.m. eastern time on bloomberg tv. also coming up anne-marie's interview with roy cooper, look out for that at 3:30 eastern time. coming up, dan morris coming up. liz young thomas of sophia and barclays.

it is the end of the week dominated by 25 and 50. feeling good? lisa: i am glad that it is friday. jonathan: i think we all are. have a wonderful weekend. this was bloomberg surveillance. ♪

the moment i met him i knew he was my soulmate. "soulmates." soulmate! [giggles] why do you need me? [laughs sarcastically] but then we switched to t-mobile 5g home internet. and now his attention is spent elsewhere. but i'm thinking of her the whole time. that's so much worse. why is that thing in bed with you? this is where it gets the best signal from the cell tower! i've tried everywhere else in the house! there's always a new excuse. well if we got xfinity you wouldn't have to mess around with the connection. therapy's tough, huh? -mmm. it's like a lot about me. [laughs] a home router should never be a home wrecker. oo this is a good book title.

>> 30 minutes away from the last trading day of the week. welcome to open interest. sonali: katie greifeld is off and bloomberg open interest starts right now. matt: we are focused on some big story is today. fedex cutting its outlook and disappointih