>> the market wanted 50 and got 50. the p's can yield stabilize. >> the economy does not seem like it will get impacted by swings and rates. >> the fed does not know were neutral is. >> the idea that the fed brought down inflation is nonsense. >> i think we are headed for a soft landing. >> this is "bloomberg

surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: let's get your trading week started. good morning, good morning. bloomberg surveillance starts right now. equity futures on the s&p 500 slightly positive, up .2% following closing just below all-time highs on friday last week. still closing out the week for second week of gains. on the nasdaq up one third of 1%. this week is dominated by fed speak. three names today. it is busy. bostick, goolsby, neel kashkari today. lisa: i wonder how much we will hear jay powell on thursday is the main course. we will hear from kugler as well as williams at a number of other speakers. these are preprepared remarks at a treasury conference. much will he tell us about the main question which is how they

go to 50 after signaling 25 for so many weeks? jonathan: governor waller said he was surprised by how low inflation came in and i was like inflation came in low? lisa: all i can say is over the weekend a whole host of research notes came out and highlighted the anger a lot of people felt. piper sandler talking about how nobody in the fomc press conference said thank you, mr. powell, why did you do this question did you or someone else plan any story and would such a communication strategy enhance -- or would it damage fed credibility? a feeling of anger people are looking for explanations. can you give us a sense how much we have to watch some of these wall street journal and financial times articles to get a sense of what the actual policy is. jonathan: thank you for starting monday morning with strength and fire. i wish someone would pass a direct question like that.

i have my doubts about whether they would been invited to the following news comp. -- the following news conference. lisa: this is a key question and on a peripheral point. we have a guess that will talk about the same thing. how expensive was in this insurance policy? the question of expense came in fed transmission mechanism and whether certain articles are a big piece of it. you heard that percolate out under the surface. it is coming to the fore as people realize something's different. annmarie: when it muddies the water because the fed says they are to data dependent. now you have to be dependent across all news sources and deciding is this potentially a leak from jay powell trying to push the market towards what he was expecting. poul donovan puts it like this. markets want to hear the fed is scrambling to catch up with bolling inflation, not that there anything wrong with the economy. the other issue was not is this

an insurance cut but the politics behind desk? is this something -- the politics behind this. is there something the fed knows that we do not know? jonathan: later on today global pmi's. those already came out in europe and they were not good. euro-dollar -.5%. a brief blake -- services in france after the olympics -- let's say we are playing catch down in france and the rest of europe. lisa: i thought france was the most interesting because we are talking about germany as the sick child of europe and france was supposed to get this big boost from the olympics and it faded so quickly they are now talking about taxing wealthy individuals and businesses to try to raise enough revenues. this is the theme you are hearing around europe as people grapple with the fact they have to pay for something to stimulate the economy and it is not coming from nowhere because it is not coming from the debt market jonathan:. jonathan:the two-year-old -- the

curve just inverting for the first time since 2022. there is a recession knocking on the door the ecb and the ecb is saying come right in. lisa: this is the key question. why is the ecb not cutting much more aggressively? they only have to get inflation down. inflation has been following and they are looking at an economy that is falling more rapidly. manufacturing fell to the lowest since december 2023 and a recessionary type of level in europe. how much do they respond to that? can they justify it by saying inflation is coming down well enough? annmarie: even though the ecb is the single mandate bank, had they seen this data do you think they would've opened the door to a cut down the line? jonathan: i think this news is a continuation of the trend in europe. the data has been bad for a while. i'm not sure how much it would

change things on the governing council which seem to be constrained by a single mandate but things are different across the continent and seem to be better in places like italy compared to germany. lisa: even though we think of germany being the strong member of europe, maybe it is italy that is holding down the fort, saying we can support you but you up to support us the next time around. jonathan: germany is the problem child. i want to talk about intel and qualcomm. intel opened the premarket close to 3%. do they have a dance partner in qualcomm or will they get a dance partner in the likes of apollo and a big cash injection? lisa: this idea of a $5 billion cash injection, maybe that comes with qualcomm. we do not know the details in terms of what this looks like, what the ownership structure would be. apollo had talked about the need to support this. which would regulators like better? we saw qualcomm try to have

mergers in the past that did not work out. a question about whether this would be more acceptable if apollo came in as the white knight. jonathan: qualcomm down .2%. intel up close to 3%. equities positive .2% on the s&p. a big rally in europe. does not spillover to the u.s.. 10-year unchanged. coming up, we'll catch up with dan morris on why tech will continue to lead stocks higher. will venlo of energy investments of the presidential election and naylor richardson -- and nela richardson's. dan morris writing "if growth is positive while policy rates have dropped 50 basis points than the outlook for risk assets has improved. we are modestly overweight equities. we believe the superior earnings growth generated by tech companies will lead to sustained

outperformance." let's talk about that. why are you in the camp that tech continues to outperform relative to calls elsewhere about small caps doing nicely, financials, etc.? dan: it is at least as much a valuation argument and in favor of tech as opposed to small-cap value. earnings expectations are positive that is true for value and small-cap and tech. the advantage is valuations on a relative basis are lower for tech than they are for u.s. small tech and value. if you look at forward pima multiples are relatively high, where they are above average for tech but not excessively. jonathan: can we talk about the areas of the market that have done well? utilities have done nicely. morgan stanley's mike wilson turning neutral on defensive sources cyclical. what you make of the move in places like utilities would

japan a great run year to date. daniel: if you look at it from a perspective where we are starting a cutting cycle, how have defensive encyclicals done in the past, and not surprisingly defensive have tended to outperform cyclicals and that is because fundamentally when you have cutting cycles, you know you tend to get a hard landing in on a soft landing. we have accepted we will have a soft landing this time but no recession. even if you look at the one time in the 1980's when you had a cutting cycle without a recession, defensive still outperform cyclicals. if we get to an environment where growth is slowing, and we are not there yet. gdp for the third quarter still looks high. in that environment it would be surprising for defensive's to start to turn around. lisa: you talk about a relative basis. some people are getting worried about how expensive things are.

one statistic model that looks at the s&p 500 earnings yield and the 10 year treasury yields shows cross asset pricing is higher than all previous 14 fed cycles associated with recession. does that concern you? daniel: if you're looking at asset allocation from fixed income versus equities that is a valid point. nobody is arguing equities are cheap. if we have earnings expectations relatively high at unless we see a bigger slowdown in u.s. growth those expectations are likely to come down. it is a much more balanced call that it has been in the past. lisa: at what point do you keep leaning into your overweight stocks even though there is a valuation argument that is challenging? daniel: i think the valuations only come into play when they are at extremes and then you need some type of catalyst to increase or decrease those valuations.

we probably would've set the same thing at the beginning of july. catalysts can come quite quickly. we do see momentum in terms of growth, in terms of the earnings expectations. that will sustain the higher valuations even if over a medium-term horizon you might be a bit more circumspect. annmarie: when you say the one cycle where there was no recession in the 1980's may be a better reference. what did well in the late 1980's you are looking to now? daniel: to be honest, fixed income still outperformed, defensive still outperformed where you did see differences that typically growth outperforms when you get a recession. the defensiveness of growth when you're in a negative growth environment. in 1984, value outperformed. it is not to say this will predict what will happen this time. every time is different. it suggests we appreciate how this is an unusual scenario

where we do not get the recession and then to look at how -- what the implications are for asset allocation as opposed to what happened in the past when the fed cut rates. annmarie: what is the biggest risk to your soft landing analysis? daniel: we are focused primarily on the labor market. if we look at the gdp forecast it is nearly 3%. no slow down there. we all recall the last nonfarm payrolls data, unemployment in the u.s. increasing. relatively below average nonfarm payroll gains. it is in a negative trajectory. that is not a bad thing that has to happen. we need lower growth if we will get inflation back to target. there is always the lingering worry it goes too far and we get closer to zero growth. jonathan: speaking about data out of europe, nero is dropping back to about 1.11. how difficult is it to sell

european equities to clients on the continent? daniel: if you look at the difference in the growth trajectory between the u.s. and europe it does favor the u.s.. that is nothing new. u.s. equities have historically outperformed european equities. for a lot of investors it will be a question of balance. how much of your allocation you want to have and the nasdaq or u.s. equities? we appreciate how dominant u.s. equities are. you want to look for diversification and other potential sources of growth and opportunities within europe. even if we do not have as robust growth as you would like we think there are potential for gains. jonathan: dan morris of bnp paribas on the latehow close isg there is a press conference and maybe we announce something more overnight. how much are they holding back some of this for the election and what levers can they pull?

economists saying stimulate the housing market, put a floor under some of the declines you've seen. does that what they're looking for? jonathan: equity futures up .2%. with an update, here's your bloomberg brief. yahaira: at least six people are dead in japan after record meant of rain triggered flooding and landslides. evacuations were ordered for more than 100,000 people in the government issued some of the most severe emergency warnings for heavy rain. the country's weather agency says saturdays rainfall reach the highest daily tally for the area since the agency began recording data. meanwhile ukrainian president zelenskyy is in the united states. on sunday he kicked up his visit with a stop at a name edition plant in pennsylvania. later this week he is said to address the yuan general assembly in new york. he is also scheduled to meet with president joe biden to push the u.s. president to provide an

official invitation for ukraine to join nato. is also scheduled to meet with kamala harris and donald trump. bloomberg has learned apollo has offered to make a multibillion dollar investment in intel. sources say the firm has indicated his it is willing to make an investment of as much as $5 billion in the chipmaker. that develop it comes as qualcomm is said to be floating a friendly takeover of intel and what could be one of the biggest ever m&a deals. qualcomm has been speaking with u.s. regulators and believes in all-american company could allay any antitrust concerns. jonathan: thank you. up next. 43 days and counting. >> this election will be close. we have always known that. that is what happens in these elections. in a state like michigan or wisconsin we know this will be a close race. jonathan: david gura just around

the corner. live from new york city, good morning. ♪

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visit sandals.com or call 1-800-sandals jonathan: equities just a little bit firmer, up .1%. kicking off this monday morning of all-time highs in the s&p 500. mike wilson writing the jobs data will be the driver of stocks into your end. the drop in the unemployment rate is likely the most risk on signal for equities in q4. jobs two fridays away. lisa: this will make the difference between why the fed is cutting rates aggressively. if it is good -- if the data is good you get the euphoria with a soft landing finally realized? jonathan: and the bond market yields unchanged.

10-year 3.7375. 43 days and counting. >> this election will be close. we have always known that. that is what happens in presidential elections and in a state like michigan or pennsylvania or wisconsin we know this will be a close race. we are in it to earn the support of all americans and we will stay focused on an economy that creates opportunity for every person. jonathan: vice president kamala harris leading and two national polls from nbc and cbs but a new poll from the new york times giving donald trump a lead in swing states arizona, georgia, north carolina. both states in the campaign trail with harris in michigan and trump speaking in georgia tomorrow about his proposal to lower taxes for business owners. with this is david gura. how close is north carolina? david: incredibly close. there is been taught for many years about the purple of north carolina.

i grew up in chapel hill which is seen as a liberal oasis in a red state. there is hope and prayer other parts of the state will come in. charlotte had promised. we said the implosion of this lieutenant governor's campaign for governor is giving democrats a lot of good cheer going forward. annmarie: does that travel upstream to the top of the ticket? david: what is fintech -- what is fascinating is how the ticket has been split election cycle after election cycle. we have often had republican governors and democratic senators and vice versa. will it travel upstream? i am shocked by the way the democratic party has said mark robinson is the standard for the republican party. that is what they started to do before these recent allegations. they are trying to make it seem like it is the republican party in north carolina. annmarie: why do they split the ticket? david: we are talking about the republican party of old.

trump has made inroads. like massachusetts where you have this phenomenon, there is a sense there is merit to divided government in the state. that has been taken to the extreme and recent years, republican-controlled legislature made the job of governing hell for the democratic governors. for many years you have a democratic governor and republican legislature. in the past they've been able to work together. lisa: we know kamala harris has a fundraising advantage of late. we have seen she has raised $404 million versus $295 million for trump. how she deploying it in the swing states? how targeted is it? david: this is the largest ad spend we have seen in tv and digital advertising in any campaign ever. you bring up the piece we have this morning by bill allison looking at federal election data. it is a huge effort to outspend on advertising and the brown

game. you talk to republicans and democrats they say this will be won or lost based on the ground game. you look at the size of the ground game in north carolina or other places, they have an inch. you listen to folks who work for president trump, they are confident in terms of volunteering and print advertising in tv advertising but they are being outmatched by what the democrats are spending from the campaign and outside groups. lisa: there have not been as many public forums where they can give a discussion. we have seen trump give a number of interviews, kamala harris has not. there is talk of october 23 debate. harris has accepted it. trump says it is too late. why is it so difficult where they can be in a less scripted and more free-form forum? david: per campaign feels like what they are doing is working. they are hearing the criticism

she is not doing interviews. she is doing niche interviews, a lot of social media. there is a lot of criticism for not doing more. dear question about the debate, something could be scheduled. there was this delicious statement from kamala harris campaign chairman over the weekend saying we agreed to this, the rules are the same as the ones president trump agreed to before. he could do this if you wanted to. coming out of the debate in philadelphia there was a sense that went well, the polls met that out, people reacted favorably. they want to have it, do not think the trump campaign lawyer step. fundamentally yes, they could cash i do not think the trump campaign once to -- i do not think the trump campaign once to. annmarie: there is pressure from the voters to understand her campaign more. do you that -- david: looking at the debate

there was an unanswered question who is she and what to her policy stand for? at the debate she answered some of those questions but there is more she could do. this week both candidates will speak about the economy in a variety of settings. that is an effort to put more meat on the bones. i think there are still unanswered questions about who she is. to go a bit of the diversion, look at the nbc poll. the fact she is being billed as a change can it is extraordinary for me. that is something her campaign is likely to embrace. phenomenal that the vice president as the incumbent president is being seen as more of a change agent than donald trump itself. jonathan: i think we saw governor walz saying we cannot have four more years of this. they are talking about trump as the incumbent. annmarie: and she was able to paint him as such during the debate. voters want to know what her policy proposals are. jonathan: why is the sitting

vice president so comfortable with debates but uncomfortable with sit down interviews with journalists asking the same questions? can you make sense of that? david: my sense is she knows because she has done so few of them a reporter will be to get a gotcha moment. jonathan: someone who knows how to conduct an interview ask follow-up questions. david: a one-on-one interview, she has not done as well. she had an interview with dana bash but her running mate was with her. jonathan: you mentioned the nbc poll. it is working. the favorable rating has jumped 16 points, the largest increase for any politician in nbc news polling since george w. bush is standing surged after the 9/11 terrorist attacks. annmarie: the issue is she is still falling behind trump on issues like the economy and immigration. if you ask voters what are your top concerns, it is the economy

and immigration. that is why there is need to understand policies more because the top two issues she is still behind donald trump. david: if the trump cam is -- if the trump campaign is able to keep its focus, this is the issues it will be focused on. any bands going to michigan to talk about the economy. donald trump is supposed to be -- jd vance going to michigan to talk about the economy. donald trump is supposed to be as well. we will see if he does it going into the election. jonathan: coming up, the outlook for energy ahead of two possible in ministrations. from new york city, this is bloomberg. ♪

♪ jonathan: check out commerzbank over in germany. the stock was down 6%. unicredit raising its stake in the bank to around 21%. lisa: my favorite part about the store is a comes 15 minutes after germany said it will not sell any more shares in the bank to unicredit. germany has been against the possible takeover by unicredit and unicredit discloses they have increased their stake by

more than 11% to 21%, so you are dealing with this stuff takeover. i am not clear why germany opposes this. jonathan: the germans might prefer the consolidation being led the other way around if they were in the driving seat. just a theory out there >> at the moment. >>and is the theory that it has to do with a feeling of superiority or inferiority? jonathan: follow the commons from the labor representative of commerzbank -- comments from the labor representative of commerzbank. he came out and set it. lisa: are they going to let this go through? a lot of people have been saying to remain strong and be able to withstand downturn potentially led by manufacturing they will need to consolidate. jonathan: unicredit raising

their stake in commerzbank. the latest news stateside, equity futures on the s&p 500 are up .25% on the nasdaq. a second week of gains on the s&p 500, closing just south of all time on friday. if you turn to the bond market, let's look at the yield curve. the two year 3.5655. the 10 year, completely flat. lisa: buy the rumor and not even sell the news. have we baked in the full ramifications of the 50 basis point rate cut? we will talk about that through the day. what do the fed earned by making this move? it did surprise the market in terms of how opaque communication was. jonathan: we want to talk about

the euro, a series of downside surprises. we settled down at about 1.1113. lisa: if you do not get deeper cuts, you'll get ongoing euro -- do you get ongoing euro weakness? how much does this have to do with rate differentials and whether we can price them out? jonathan: the two year in germany down seven basis points, big rally in the german bond market. authorities in china announced plans for a briefing on the economy, boosting hopes for added stimulus after the central bank cut one of its short-term policy rates. china's now facing his longest streak of deflation since 1999. lisa: housing prices have gone down and it was a store of wealth.

where are they going to get the confidence to keep spending? this is why you have seen deflation. people speculate chinese authorities will have to support housing prices because this gets them back to the same cycle they have to avoid. annmarie: this comes down to the fiscal firehose. potentially you have beijing waiting on the sidelines until november 5. they want to see who wins the election to decide whether they will use that fiscal power because they might have to use more if there is one candidate, the former president. jonathan: let's turn to the latest of the middle east, israel ramping up attacks against hezbollah and urging civilians to move out of the area. it is fueling concerns of all out war after a series of pager and walkie-talkie explosions across lebanon. lisa: this already is all out war. there are incredible numbers of missiles.

in might be unconventional warfare and people will study it and figure out what modern warfare will be with supply chains and the like. what does escalation look like? how entrenched are the different sides in what they would like? it does not sound like there is an easy coming together momentum. annmarie: how do you put the genie back in the bottle? this already feels like an all-out war as they deal with what is going on in gaza. president biden telling reporters we will do whatever we can to keep a wider war from breaking out. we heard from admiral kirby over the weekend. he is basically saying the cease-fire in gaza is at a standstill even though there are efforts there. all these efforts and phone calls but still tension continues to ratchet higher. jonathan: let's turn to the lives out of congress. congressional leaders unveiling a stopgap funding bill in a bid to delay a government shutdown. it would keep existing funding

levels while boosting money to the secret service. the house is expected to vote on the measure as soon as wednesday. annmarie: we heard from speaker johnson it is the most prudent path forward under the present circumstances. all these individuals want to get back to their states because they have an election to win, so they are basically saying we will keep the government open until december 20 and do this all over again before christmas. lisa: we do not have to talk about it until december, so let's move on. jonathan: we all hope we can move on from this. donald trump and kamala looking to push their visions of the economy. quantum capital group joins us now, and active private equity firm in the energy space. good to see you.

i want to understand your reaction when you hear these candidates say we have to boost energy output and prices will come down. how do you react to that? >> i think oil and gas prices are set as a function of supply and demand, so when you talk about halving prices you would have to massively increase production. i do nothing the u.s. can do that. jonathan: is that because breakeven prices are so high and the discipline of producers because investors have them on a short leash over the last few years? >> is a little of everything. investors have put gas companies on a short leash and required cash flow every year to get return to shareholders, so that alone will be a dampening on increase production. but the other issue is the u.s. shale revolution has run its course and we have tripled oil

production in the last 15 years. we have doubled natural gas production. we are now the largest gas producer in the world. so there's not a lot of gas left in the tank. annmarie: the former president talks about how he wants to drill. what is the breakeven point? if you are going to open the taps, even though this is a free market so we do not have a state oil come a that can do that, what is the breakeven point for shale to remain profitable? >> it is different. every basin has a different brink -- breakeven point. we would say for something below $60 we do not have a long runway of inventory left. annmarie: this is why the former president had to come out and call putin so he could get

prices higher, something presidents do not normally do. how difficult has it been with the biden administration in terms of lng permitting? >> the biden administration did put a halt on lng permits. that was a big mistake because many countries around the world are starting to rely on u.s. natural gas for energy, especially after what happened with russia two years ago. it is a big issue. these are all multibillion-dollar projects. it is hard for investors to plan ahead with that kind of political uncertainty and commit to projects that are $20 million projects. it has put a big challenge on the u.s. lng sector. qatar is getting a lot of the benefit of that and other countries around the world are getting the benefit of this. lisa: you are an investor with a lot of money to put to work. how are you handling that, the

idea that permitting is put off given the opportunity for the u.s. to take up some market share there? have you held off on specific investments? >> we do oil and gas. we have an lng project the west coast of mexico that has gotten held up because of this. for us, it is -- when things like that happen we shift capital around but we are always investing. there are lots of parts of the value chain that is not affected. lisa: i'm curious about specific aspects of the energy fields. you talk about renewables and we keep talking about supply chain disruptions and security. we talk about the fact that especially when you have imported goods from overseas it could be tampered with. how much is that in the forefront for the united states

given how much of the renewable energy comes from china? >> energy security came in focus for everybody two years ago. when you look at china and how much of the energy supply chain they control, it starts with minerals, so you have to mine all these minerals. china controls commit to penny on the mineral, 5% to -- controls, depending on the mineral, 5% or more. china 20 years ago started building out mass amounts of processing and refining capacity for minerals so they control 40% to 80% of processing. when it comes to many fracturing , china makes 60% of wind turbines and 85% of lithium-ion batteries. when you think about china's control over the renewable

energy value chain, it is greater that opec's ever was over oil and it is one country, not 12 or 13 countries. that should concern everybody. jonathan: sober we have -- so we have replaced reliance on opec with reliance on china. >> the u.s. today is energy independent. the shale revolution did that. today we are one of the largest exporters of energy and fully self-sufficient. as we move to green energy, we cannot make all this stuff in united states. the west cannot make all this stuff. jonathan: is it difficult to get visibility on a full supply chain to have an understanding of where there was forced labor and where there was not? >> very tough. we had a number of projects in the u.s. stop in their tracks because we could not get -- >> you're talking about the

absolute control they have a domination when it comes to raw materials and processing. do they want to be the detroit of the world in the yesteryears? >> they have four or five massive national initiatives and that is one of them, dominating energy transition value chain, because they do not have much oil. all they have is: that is one reason you see china electrifying everything. it is not because they are trying to do good for the environment but they have a lot of coal so they are going to continue to try to dominate the space. lisa: as an investor, are the specific -- are there specific areas you could invest in that could offset this reliance? >> it is challenging. u.s. investors can invest in china to get exposed to it, but many are state owned enterprises. there are companies in the europe -- in europe and the u.s. that you could invest in. lisa: how difficult is it given

foreign policy sometimes gets in the way? there debate over congo and issues about the humanitarian issues about the u.s. going in. are you involved with those discussions? >> i think yesterday has driven this push into the energy transition, but i think people are blind of the fact that where most of these materials come from, the social and governance issues are bad. and the money itself is really bad for the environment, so are trade-offs to everything and there is no free lunch. i think people -- as more people become aware of that, it will be more challenging, especially for u.s. companies to go into these countries where the minerals exist because we have laws that prevent us from doing business in ways other countries are not prevented from doing business.

jonathan: do you think we have seen the peak of esg virtue signaling? >> we raised most of our capital from large institutions across the globe. i would say outside of europe -- investors and met the u.s. and other parts of the world have become more pragmatic about esg. there is still a strong push with climate to meaningfully green our energy supply. i think it will continue to go forward but people will start looking at all aspects and realize green energy is not so green. jonathan: come back soon because we need to talk about energy demand for data centers as well. let's give an update on stories elsewhere this morning. here is your bloomberg brief. >> the house unveiled a short-term stopgap funding bill

to avert a partial government shutdown. house speaker mike johnson laid out the plan in a letter to colleagues eight days before funding runs out on september 30. it would direct more money to the secret service after a second assassination attempt on former donald trump. lawmakers aim to vote on the measure by wednesday. elon musk's social media platform x has agreed to comply with court orders in brazil. the filing shows that x has appointed a legal representative as required. sources say it has blocked accounts accused of disseminating hate speech and fake news. it could end a clash that resulted in fines and a ban on the platform. donald trump delivered a campaign speech in north carolina where he attacked kamala harris and detailed campaign pledges. what he did not do was mention mark robinson, who he previously endorsed.

>> we are a very purple state. we are always going to be close. donald trump has to win north carolina to be president. if kamala harris can win this race here, and we believe she can, she is the next president of the united states. >> cooper mentioned trump has not said anything negative about robinson. jonathan: fantastic work. annmarie: north carolina is getting more interesting when it comes to the tenant governor. donald trump did not mention him saturday even though in the past he talked about him. now there is a lot of distance there. jonathan: next, sizing up the u.s. consumer. >> we think the consumer is well set up here. they have household balance sheets in good shape. we think inflation is settling down at a range that seems ok

but that is a no landing. jonathan: up next. ♪

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jonathan: we are just about positive this morning. in the bond market, yields going nowhere. under surveillance this morning, sizing up the u.s. consumer. >> we think the consumer as well set up here. have household balance sheets in good shape. we think inflation is settling in for 3% range. the fed seems ok with that, but that is a no landing outlook.

the economy is performing like it does not get impacted by the swings. jonathan: markets awaiting fresh data, inc. -- including consumer confidence. nela richardson of adp says friday's inflation print will be the most important, writing pce for august will validate or not he fed's outsized rate cut. do you think it will validate that? nela: i think so. it looks like inflation is coming down. what will not likely validate the 50 basis point cut will be how good the consumer continues to do, so the consumer is in great shape. as long as inflation is going down the fed can be aggressive on the rate. if either of these things change, we have to rethink the strategy. lisa: does this go back to the question of how effective were fed rate hikes to bring down

inflation and how effective will they be to stimulate borrowing? rowing is already high among the average consumer. nela: borrowing relative to debt and disposable income is low. so this is a different situation than what we saw coming out of the great recession where financing costs relative to income were high, above historical norms. now we are below historical norms, so the boost in getting more debt and more borrowing by bringing interest rates down is not going to translate in the same way with the same impact in today's economy. lisa: there is fear of the jobs report coming in weaker than expected. is there anything you are seeing? adp has been almost more prescient than other indicators with respect to the jobs market over the past couple cycles. is there anything you are seeing the edifies these concerns? nela: no.

when you look at the jobs market broadly, you still see hiring at it is healthy hiring because it is not just replacing workers who are leaving. turnover is low, so when you see hiring it is because companies are trying to grow their headcount and not replace workers. there are pockets of weakness especially when you look at manufacturing. here is where rates might make a difference. manufacturing is a cyclical sector or so and interest rate cut might boost investment but this will play out over a long time. you will not see it right away. the first place you will see it is probably in the borrowing rates of small businesses. it will not translate into the overall labor picture until later in the cycle. annmarie: many young workers would rather be unemployed and unhappy -- then unhappy. what is going on with gen z? nela: first they are young so they have the ability to make

that choice. when we survey workers we asked them would you rather be unemployed or unhappy. gen z is more likely to say they would rather be unemployed than unhappy. happiness is important to this generation. they spent two years of what should have been a happy period bolted out -- down by a pandemic so i'm not want to judge them too much. annmarie: i'm not going to profess that money means happiness but you have to have money to sustain a life. will they quit their jobs if they are seriously unhappy? nela: they will just complain. you are laughing, but it is true. >> the idea here is that gen z -- many of them are coming into a workplace that is very different than the ones we entered. there is not mentor ship. there is not engagement. people are working remotely. sometimes their bosses are in another metro area. that is more common than when

millenials actually went into the workforce, so that leads to some dissatisfaction in terms of their work as well. lisa: this conversation makes me feel old, like kids these days do not have any work ethic, which is what happens to every generation. they do not know what real work is. nela: the difference is we can measure it, so we know. but it really does present an opportunity. if you know young people are making this choice, that they would rather be happy and unemployed then unhappy and employed, then it does give you an opportunity to reach out and engage and make sure they are been productive. what you do not want them to do -- them leaving is not the worst that can happen. them staying and not being productive is bad for your business.

so how do you engage young people in the workplace? jonathan: we all agree on that last point. nela richardson of adp. i know you have a lot of thoughts on this story. lisa: i have heard a lot of people saying they work ethic of this generation leaves summing to be desired. i have a pet theory that the smartphone has been so distracting -- jonathan: are you blaming the iphone? lisa: and the immediate self-referential stimulation changes the scene but then i feel old quite like those kids. annmarie: this is why state legislatures are banning them in high school, because kids do not pay attention. jonathan: the difference is corporate america panders to it now. lisa: you are saying you need to tighten up kids? jonathan: no, i think those days are over.

coming up , erik nelson of wells fargo. this is bloomberg. ♪ (♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course!

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>> for equity markets, this is seasonally weak. >> the last couple months has begun to cede some of his strength. >> we should expect more surprises. >> hopefully we are in a period where ok news is good for the markets. >> this reporting will be pivotal to where the market

goes. >> this is bloomberg surveillance with jonathan ferro and annmarie hordern. >> live from new york city, good morning. the second hour of bloomberg surveillance begins now with equity futures up .1% on the nasdaq 100. the rustle up .3%. the week ahead, a ton of fed speak. it kicks off a little later. lisa: thursday, we get powell and williams coming out at the -- as the key speaker will be in prerecorded comments. at the same time, there's a question about whether we get more insight in how contentious the decision was that led the fed to cut rates after a cut by economists looking at the data. jonathan: the focus has shifted

in a big way. some headlines on him at the moment saying federal reserve policy is still tight after a cut but still space to cut even more. >> he has said the risks now tilt to a weakening labor market. how much that is really going to inform and how much further the fed can cut -- is he in the mainstream or on the fringes at a time where maybe she will give insight into how vulnerable she sees the economy to be in on inflation -- being on inflation? annmarie: it is going to be interesting what these fed speakers have to say. he said risk gets rolled forward another month. how important is that payroll data going to be? jonathan: the only important thing this week is the traffic in new york city. midterm traffic is a mess at this time of year.

annmarie: -- lisa: traffic data shows the average motor speeds in midtown are the slowest of the year. jonathan: are we talking for miles per hour? lisa: three miles per hour on average. there were days it dropped. >> take the metro. jonathan: move the u.n. to queens. annmarie: when was the last time you went to queens? jonathan: to get to the airport. i go to queens all the time. it would not be me in the traffic. it would be heads of state getting stuck in the traffic in queens. lisa: we welcome all of the leaders. jonathan: do we? i do not know anyone who lives in new york who is like, we

welcome all the leaders to new york city. lisa: i welcome an interview with sam schwartz. jonathan: three miles per hour average speed -- that is brutal. equity futures on the s&p 500 shaping up as follows slightly positive through this morning. we are up by .10%. yields are little higher by a single basis point on the 10 year. coming up, we will catch up with why the fed is risking his credibility and to speak to jason furman on why he thinks harris is the safer economic choice and eric nelson of wells fargo on his dollar call, which becomes more interesting given the debt we saw out of europe this morning. lisa: everything else is so weak. we have been talking about the idea the fed could still cut and you still get a stronger dollar

because what is going on over in europe? all of a sudden, manufacturing goes the lowest point back to december 2020 three. even if the ac -- tcb ecb cuts or growth falls it is not positive for the euro. jonathan: we began with stocks mixed as markets await a slew of fed speak. research suggests the move was not needed. the fed is starting a new easing cycle to avoid a recession we do not see coming. the is risking credibility as both presidential candidate policies would raise the federal deficit in a one-party sweep, and inflationary prospect. before we get into the election, if they have cut interest rates by 50 basis points when we do not need it, isn't that bullish on the equity market? >> i raise the odds of something we had in the 1990's.

i have been talking about a 20% probability and i'm raising that to 30% and i still have 50% and what i call the roaring 20 20's, so 80% in a bull market. the 20% i leave for a 1970's scenario as a result of geopolitical risk. lisa: are you saying that is going up in terms of potential for inflation to roar back as a result of the fed move? ed: i went from 20% to 30% and lowered the 20 20's, which was also bullish, from 60% to 15%, so it still adds up to 80% that we are in a bull market. by cutting rates by 50 basis points and indicating they want to do more based on recent comments, they are risking overheating the economy. the economy is doing well.

we have seen unemployment claims coming down. i think we will have a strong personal income number and consumption number, so i think real gdp will be probably 3% in the third quarter, so if they overheat the economy and create a bubble in the stock market they are creating issues, but as you got me in my quote i am concerned they are just ignoring what is right ahead of us here, which is a presidential election and either candidate has policies likely to be inflationary and bloating the deficit. lisa: you think that is one of the biggest risks to valuations. to give this a historical standard, back in 1995, the last time we got this kind of soft landing, the forward pe was about 13.5 percent.

currently, it is about 22 times, so we are starting from a high valuation. so getting to that potential election risk -- can you play out what that looks like? >> we are not in 1995, more like 1999. we have a ratio which is the total market cap to gdp at basically a record high. we have the forward pe around 22. in the tech bubble, we got up to 25, so we are already in that 1999 kind of territory and here comes an election where fiscal policy could once again turn out to be inflationary and blow to the deficit and monetary policy -- the fed is acting as though monetary policy is the only thing that matters. annmarie: you said you think we

are going to reach new all-time highs because there will be gridlock in washington, but what if there is not? which party sweep hurts the s&p 500 more? >> i have been indicating the election matters a great deal. if gridlock does not win, i will have to reassess my view on where we go from there. i think the markets are betting that gridlock will win and the senate will go republican. the latest polls are showing harris is moving ahead of trump, but who knows? we will see how it plays out, but i may have to change my views depending on how the election plays out. >> how do you foresee markets reacting to a blue sweep versus a red sweep? ed: i do not know that it is

going to make that much difference. our constitutional system was designed by lawyers so often it would not work, the idea being gridlock being checks and balances. it has worked well over the years. if we got a total sweep by democrats or republicans, both of them are promoting pretty radical fiscal policies that would not be good for the market because it would probably be inflationary. lisa: i am curious about going forward what you are buying giving these -- given these concerns. ed: i think ahead here if we get a sweep of one or the other the deficits will bloat. we already have interest expense at an all-time record high and that is not going to come down. that will continue to go up. you could argue one of the reasons for lower interest rates on the part of the fed is to take pressure off on net

interest expense, but why enable fiscal policy and continued to run excessively hot? that is where we have to look at fiscal and monetary policy where fed officials are just focusing on what their policy is going to do to the economy without putting it in the context of the overall economy and policymaking. jonathan: is there a real risk of an interest rate hike in 2025? ed: ask me again after the elections. i am still in the roaring 20 20's camp, still optimistic that productivity is the key variable that will continue to work. labor costs in the second quarter fell to 0.3%. productivity is the hero here and why inflation has come down. the fed is top -- is trying to take credit when they lowered the fed funds rate, but the key

to inflation coming down has been productivity and that will continue to be the case. throughout the is if the fed is overdoing it we will get stronger growth. if productivity can accommodate that, inflation will stay down and the stock market remains in a bull market, which is the base case. jonathan: the scariest part is we are halfway through the decade. >> we are going to have to wait until 2029 to recognize the roaring 20's. i do not feel like we are there. jonathan: i remember when ed made that call and now we are halfway through the decade. >> first we start saying the kids and now we are halfway through the decade. jonathan: the peterson institute is talking about the prospect of hikes in 2025, highly dependent of the -- on the outcome of what

happens. >> it seems to be ignoring the idea of the sweep and talking gridlock into reality, but the issue is the fed right now is not taking potential fiscal policy of 2025 into account. if they were and if there are tariffs, does that mean they would have to hike because those are inflationary? lisa: we have no idea what anyone's policies are going to be. donald trump has done a lot of interviews and promised a lot of things. people cherry pick the ones they like. we have no clue. once they get to office, let's wait until the congressional makeup and figure out what gets done. lisa: on saturday, he was taking a beat from bernie sanders, talking about how he wants a cap on interest rates on credit cards. bernie sanders has been calling for that for a while at 15% and the former president said it should be 10%.

they are throwing spaghetti at the walls to get out the vote in swing states. jonathan: by the end of the month, there will be no taxes in the united states. lisa: do we say none of it is going to get past? it is this tricky thing i see in analysts reports. you can make the argument kamala harris has not done any interviews, but we have gotten a lot of information and none of it really. what information are we actually getting on either side that is going to stick with any kind of promise? jonathan: let's get you an update on stories elsewhere this morning. here is your bloomberg brief. >> samsung has discussed building new factories in the uae to satisfy demand for ai computing. the wall street journal reports

executives have visited the uae to discuss major new operations. the middle eastern nation is aiming to become a regional hub and testing ground for ai. and bloomberg is reporting unicredit raised its stake in commerzbank days after the german government indicated it opposes a takeover of the lender. unicredit entered into financial instruments and 11 point 5% stake in commerzbank. and vice president kamala harris outraised donald trump in august, according to new filings from the federal election committee. the harris campaign raised more than $189 million in august, more than quadruple the 40 $4 million the trump campaign brought in. the harris campaign far outspent trump in august. the vice president into the

month with $404 million in cash on hand to trump's $295 million. jonathan: next on the program, competing visions for the u.s. economy. >> i had the greatest economy in the history of our country, i think in the history of the world. there has never been such production as we had and i will be able to do it again very quickly. jonathan: jason furman 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: live from new york city, your equity market up .1%. in the bond market, yields are higher by almost a basis point. under surveillance this morning cannot competing visions for the u.s. economy. >> i had the greatest economy in

the history of our country, i think in the history of the world. there has never been such production and i will be able to do it again. we were energy independent. we will be energy dominant again. we will pay off debt and pay down debt. we are going to do things nobody thought possible. jonathan: donald trump and kamala harris planning dueling economic addresses, trump offering his plan to lower taxes for business owners and harris saying she will deliver a speech outlining her economic vision. we are joined by the professor and former chair of the council of economic advisers under president barack obama. welcome back to the program. it has been too long. let's talk about the state of the economy. a lot people are still talking about whether we can achieve a soft landing. do you think it has been achieved already? >> i think we are close but the next core pce rating will be

probably 2.7%, so inflation is not all the way there. labor markets are loose enough inflation is coming down but there is still peril on either side of her inflation and recession but a broad path to a soft landing. lisa: politics is one of the big risks. you wrote this terrific op-ed. i want to start with the lead sentence. the first modern presidential race between two candidates without graduate degrees in economics has not thrilled economists. why not? >> campaigns are never the place where you're going to thrill economists, but a lot of the voters want to hear simple solutions to things. price gouging, stop japanese investment in u.s. steel mills, new areas that are not taxed like tips and none of these are

ones that economists would recommend, but just quite a lot of pandering. >> some people would say we always get this to some degree. we get pandering and promises that do not get fulfilled. how different is this time? >> there are things i like in these campaigns too. so i do not want to say it is all negative. it feels like more because there are more things for limiting trade and controlling prices, a certain type of government intervention as opposed to the standard pmising lots of tax cuts and spending increases. this feels more interventionist right after markets have been successful. >> kamala harris at talking about price gouging on the federal level and donald trump is talking about capping credit card interest rates.

are both proposals price controls in the u.s. economy? >> donald trump does not seem to be the type of person that understands free-market competition and things that go into it. he believes in a strong government. when he was president, he tried to direct investment this way and that, so i do not think he is a free-market guy. >> if he is not a free-market guy, who is kamala harris? jason: i am looking forward to that speech this week. i think we will hear more about how she defines herself economically. you can expect a continuation of the types of policies we saw in the biden administration but in a different context. i thought the initial stimulus was too large, but that is not going to repeat itself. we are not going to have another massive global pandemic that

will create the conditions for something like that. there have been some whispers about being more pro-business. she has spent more time with ceos and then president biden did. pro-business has pros and cons, but on balance i think it would not be a bad direction to move right now. lisa: how different would we see kamala harris as a president if we get a sweep versus gridlock in washington? >> i am not sure about the theory that gridlock is the most fiscally responsible outcome here. with gridlock, you will be able to extend a lot of tax cuts. it will make it hard to enact deficit reduction and you have seen parties make deals where one party its extra defense spending in exchange for the other getting nondefense spending. the gridlock is good for the deficit thesis -- i'm not sure i believe.

there are taxes you could raise that you could not raise that might result in a lower deficit then you would otherwise have. >> you began by saying economists do not like the tariffs that either side are proposing and the limits to trade we are seeing proposed, yet we have seen increasing threats to the supply chain and questions about national security issues raised by certain features. if we get some of these tariffs, which both sides are proposing, does that increase the risk of inflation and reignition of inflation next year? >> on tariffs, it is a massive difference between these candidates. donald trump's conference 10% to 20% tariffs on everything coming into the united states, stuff coming from countries that are close allies like australia.

there is no coherent theory around that. it dwarfs anything that we have seen done in the biden administration or would be done in the harris administration. so you will get a burst of inflation and a real quandary for the fed and raise inflation at the same time. jonathan: we will continue that conversation on the fed and rethinking rate cuts in 2025. should we talk about tariffs? i remember hearing the same thing about the trump tariffs going into the 2016 election, the same criticism. i have no idea if it will be too different this time around. it is a different policy, but will they keep them if trump gets another term and does what he says he is going to do? annmarie: both these individuals

like the idea of tariffs. trump likes the more. is this a blanket day one or is it 2.5 percent on china for 24 months? is this a negotiating tactic or is it going to be full throttle tariffs within 24 hours of getting the white house? >> i think it is what is the least worst outcome for the deficit because there is no appetite to deal with that. >> we have notes on wednesday and thursday. jonathan: from new york city, this is bloomberg. ♪

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jonathan: this just published in the last 24 hours from stewart kaiser, "did not offer clarity, the bell of the ball, payroll two fridays away, with equity futures up .5%, the rustle up by a third. in the bond market, two-year up by a basis point from last week. going into a sprinkle a day to a ton of fed speak with a few

options. lisa: i don't know how many other people are watching the options, but i'm curious about it at a time when we don't have a sense of the bigger risk, this idea of market deterioration in the economy or historic leveling out of inflation right here. i will say that a big question for the market, our stocks less interest rate sensitive than in the past? are bonds moving to their own tune, their own music? jonathan: the 10 year is moving to its fifth consecutive day. the most positive in early june of 2022. lisa: is that good or bad, right? a lot of people saying that when it does inverts after inversion, it typically signals recession and people saying that this time is different and then they huddle in a closet feeling anxious because you never want to see those words. jonathan: in a closet with tin

hats. lisa: that was good. jonathan: thanks. the single currency, getting beat up a little bit, recovering somewhat following weaker than expected bmi data lisa:. the september manufacturing euro area bmi fell. september manufacturing data in germany fell to about 40 as the full contraction kinds of levels that went to the lowest we've seen going back to the end of last year. how does the ecb continue to hold the line that they won't cut more steeply than the federal reserve facing an economic environment like that? jonathan: down .4% on the currency pair. israel stepping up air strikes, idf forces striking multiple targets as civilians are urged to move out of the area. annmarie: i think lisa hit the nail on the head, it feels like

all out war, just not in name only. they were telling the israelis that there were better ways to ensure that israeli citizens could evacuate the homes in the north, rather than opening up a second front. the escalation is already at their doorstep. lisa: look, there were something like 8800 missiles launched at israel since october 8. ongoing strikes by israel on hezbollah, not to mention the walkie-talkies, the beepers, some of the other explosions we have seen. what does escalation look like? we are not asking the right question. it's how far jonathan: will he go. jonathan:we keep asking -- when will the war start? but what do you call this right now? lisa: the tit for tat with buildings explosion -- exploding, is this the modern warfare? how much are people taking cues from supply chain disruptions and certain types of a strategic type of blowing up of arsenals.

this is modern warfare and very much a war. jonathan: the ukrainian president, volodymyr zelenskyy, kicking off his weeklong visit to pennsylvania, stopping at an ammunition plant. he will be meeting with biden, harris, and trump this week. annmarie: he can't afford to play favorites, he will be meeting with individuals on both sides of the aisle. i sat down with zelinski over the summer and it was clear to me that he really wanted to get in the room with the former president, who wanted to see his plan. he's coming with a victory plan that is going to show both sides, striking me as the first stop. pennsylvania, 160,000 ukrainians. it's the swinging swing states. jonathan: how controversial would it for those missiles to be approved in the election ahead of all of the others in november annmarie:?

potentially controversial. they've been dragging their feet and saying that they can't allow ukraine to be able to have the ability to hit something like the kremlin, but the ukrainians come back and say we are not trying to hit the kremlin. we are trying to hit russian bases with jets that they are about to launch at ukrainian hit strikes like they recently did in the summer at that children's hospital in kyiv. so, this is a big debate that will potentially get more clarity at the general assembly. jonathan: squeezing this story and, apollo global management looking to make a multibillion dollar investment in intel after qualcomm floated a friendly takeover of the chipmaker. intel up this morning by close to 4%. lisa: a lot of postmortems as how intel lost the mantle of being the u.s. darling.

we have been talking a lot about whether regulators will be amenable to this, to creating a sort of offset in terms of chip suppliers in the u.s. domestically and whether or not they prefer a qualcomm takeover even though they rejected the broadcom tie up, or if they for apollo investment. either way, seems like there are things to be had. jonathan: seems like we just need success in the u.s.. lisa: especially given the concerns around the strategic challenges that could arrive. jonathan: look out for that. the latest in the banking world, some news for you as people do their banking online. bank of america has plans to open financial centers in 2026. joining us now, aaron levine. welcome to the program.

i know that this effort started a decade ago. can we start there? how does this move align with behavior in the last decade? aron: you are right, 10 years ago we started to expand and the key thing to think about is what is a financial center used for now as opposed to historically. historically they were used for transactions, depositing checks, moving money, paying bills, transactional elements that have moved on to digital platforms, using a tms. 10 years ago the key for us was how to provide advice and guidance. how does a financial center become a place where they come to talk about their life priorities and goals. we have 26 thousand professionals, banking professionals and financial advisors, lending specialists,

small business specialists sitting in working with clients. we keep expanding and growing that footprint from a transactional type of model to a relationship model and it has been incredibly successful for us. jonathan: you told me that a decade ago, 2000 play 4, 95 percent of client interactions took place, i would assume that your physical would get smaller, but are you saying that ultimately it won't reduce? aron: great point. the fact is, it has reduced. with those transactions moving to digital, we have reduced a footprint. we had 651 around the country, we now have 3800. a pretty big reduction that has at the same time transformed with 10 million appointments being made this year alone for people to come in and talk about advice and guidance. the idea now is financial centers for us have hit a

equilibrium where there is opportunity for expansion and we keep optimizing the footprint. it's the whole purpose of why people come in. they come in and open up accounts and are talking about how to make their financial lives better versus how to do a transaction. that's the real shift that we lead starting about 10 years ago. lisa: financial therapy, you could plan things online in terms of asset allocation, but now it seems it needs to be done in person, is that right? aron: 80% of all new checking accounts are opened and a financial center and if you talk to students around the country, we have a big practice of working with hop college and high school students, many say they might not even visit, but they want to know that it's there, that there is someone to talk to in person if there's an issue. that's an important component but really what people are coming in for is they say

they've got different priorities like saving for retirement, saving for health care, saving for education, those are the kinds of questions they want to talk to someone in person, as opposed to online research. lisa: how much of this is direct competition with local banks? aron: aron: we've had this look at it for over a decade, high-risk, high touch, things like merrill edge, these big digital investments, but simultaneously feeling that it was critical to keep the in person component and transform the centers into a place for advice and guidance. it's been our strategy, we have executed the strategy. the growth, most importantly it's about the client experience. that's what this is all about,

giving the clients a great experience. annmarie: how much do those clients enjoy the robo advisors you have done a lot of work with? aron: we are really proud and it's been a fast-growing comportment of our business. we had that ability for someone to talk to financial solution advisors in financial centers to use that technology to identify the risk and the timeframe. to think about how they want to invest across a set of diverse portfolios created by our chief investment office. it's a lower costs that leverages digital with an in person component. it's been one of the fastest growing components over the last five years. jonathan: do you have a breakdown across income cohorts? age groups? aron: interactions? it's been made available for anyone at any income level.

minimum to start with a merrill guided account at $1000. we have investment clients who are the entire gamut. for someone just starting to invest and save money for their education all the way up to people with hundreds of millions of dollars using our self-directed platform. we have close relationships with the private bank. for the clients that might use the portfolio on a self-directed basis and want true advice, merrill and the private bank you can do that with what the clients mead through a robust full-service model. jonathan: come back soon, aron levine, thank you, sir, on that latest push. if you had said this to us 10 to 20 years ago, i think we would be talking about a much smaller physical presence. to his point, it has gotten smaller, but the emphasis has shifted. the way that you use a physical platform is different than how

it was used 20 years back. lisa: is financial therapy and you can laugh, but people have an emotional response when it comes to money and where they put it, especially the financial crisis, after that. think about the people who grew up putting their savings in the stock market and they lost half of it in 2008, it changes this perception of how to pry the cash out of their hands. jonathan: you provide to therapy this morning. annmarie: with traffic options. [laughter] jonathan: isn't it usually fear that you sell? lisa: well, you start with fear and you recognize it. [laughter] jonathan: if it's bank of america? lisa: take your cash and put it into assets. jonathan: let's get your bloomberg breve. >> citigroup has plans to expand in china, hitting a roadblock after the federal reserve put a penalty on the bank for data management risk controls

according to those familiar. now they face delays that chinese authorities required a clearance letter from the fed. sources tell bloomberg that citigroup is continuing discussions with chinese securities regulators to set up the business and have no plans to pull applications. at the vox office, "beetlejuice betelgeuse" beat "transformers one," taking the top spot for the last three weekends according to variety. "the substance," taking sixth place, earning the actress positive reviews and oscar buzz. "the white sox," making baseball history this weekend, but not in a good way. the team lost to the padres to tie the record of 120 losses set by the 1962 expansion mats. as for the present day mets, they are looking to lock in a place in the postseason with a

major series against the braves starting tuesday. that is your bloomberg brief. jonathan: just a bit of a check on the market for you. equity futures are further by a 10th of 1%. data out of europe is not great. we will talk about the other side of the trade, coming up next with eric nelson at wells fargo. (♪♪)

♪ 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 ♪ 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: stocks up just .1% on the s&p 500 and if you check out the fx market, the euro got weaker. the dollar facing an uncertain future ahead of the presidential election. eric nelson at wells fargo said that under the harris wind we have divided control of congress

with tightening fiscal policy increasing the room for a fed rate cut, implying early shift to a weaker dollar. eric nelson joins us for more. welcome back to new york city, good to see you. when can we start trading on politics? another month? eric: as soon as there is a sign of a candidate breaking away. it's neck and neck. it's a matter of will the postdebate momentum start to show up for harris? we haven't seen that yet. until then, we are trading on micro. in the mean -- jonathan: in the meantime, looks like the fed reserve rate cycle is of quite well priced. the focus seems to be shifting to the european economic data, where the data has been dreadful, yet the euro over the last two months in the face of that that data has been quite resilient and it's time for a catch down on the economic reality. erik: we think so.

in the october meeting we looked at 10, 11 basis points. there's still room to move, but on the curve the market is pricing and the ecb going back to neutral for the fed. economic data out of europe, that's the type -- detail for the pmi and that was terrible. lisa: a little bit weaker? seems like it's a lot weaker. how much of a catch down are we talking about, considering the fact that people are trading on interest rate differentials when the growth seems to only be widening. it's erik: what is challenging here is that germany is the real weak point. the rest of the euro is softening but not nearly as weak as germany. france, there's some olympics noise, but germany is a full point. when will the german hawks start to adjust? i'm not sure when the breaking point will be, but it could be october. we have some data, bank lending survey the next few weeks.

until then it's hard for the markets to price in much easing until the tone shifts. lisa: what is normal -- neutral for the ecb has a to the fed? is it lower than in the u.s.? erik: absolutely. lisa: lisa: why wouldn't the euro trade to that? if that's the destination why wouldn't you assume that you would have a lower rate at the end of the cycle, whenever it might be? erik: markets are pricing in a decent rate, terminal, 80 to 100 at the gap. i think that, you know, look at that longer-term chart of euro-dollar where we came up from 95 and are still pretty low . i can attest, as a european traveler, it's still pretty cheap to go there. right? lisa: where do you recommend? erik: where to start. [laughter] the roast differentials, when there are stark differences, two

thousand 15, 2016, there was the catch down on china with a balance on 2017, those were big differentials but people haven't really been able to make up a clear decision on whether it's a recession. it's an inflexible market. takes time for that to show up. jonathan: right now china is exporting disinflation and the more relevant conversation like you alluded to, which central bank is more likely to need to go into accommodative territory, at the moment you have to make the argument that it's europe and not the united states. that doesn't feel priced at all. erik: it's always the question for the ecb about what they should they do as opposed to what will they do. it's a trap they could definitely fall into. the ecb feels different, especially compared to 2008, 2011. it gives me some comfort that they will be more proactive.

should enable, to me she's the one to listen to. they have been more dovish. there is a realization that demand is becoming a problem. service inflation, that will come later in the year. annmarie: you asked whether the hawks are going to adjust on the ecb, but are the germans hurting themselves with a vicious cycle? erik: fiscal is where they are having that trouble. coalition government without a ton of support. they are kind of fractured, not a real clear message. they are facing a difficult decision from the constitutional court. they can't do a lot on the fiscal side, they are tightening because they have to. not only is monetary too tight, but fiscal is getting tighter. annmarie: how much more difficult will it be for germany if there's a former donald trump in the white house? erik: very.

it's not like as soon as there is a threat to the european region there will be a massive breakthrough on the fiscal side, right? germany, like i mentioned, the politics are challenging their. maybe there is hope for centrists with stronger urges to come in, but he will have a difficult time putting together a coalition government to do the spending. there are a lot of hurdles. jonathan: is trump dollar positive? erik: at least initially. one thing that he's been consistent on for decades, it's trade and tariffs. he is the architect of all of this. that probably comes through with policy around weakening the dollar. we heard this noise in 2017 and 2018, right? headlines about the mar-a-lago accord, i'm not sure that this will be something that will be policy. i'm not sure how they would

achieve a weaker dollar. jonathan: what kinds of levels are you thinking about now? erik: if mr. trump comes back in and the european economy continues to fall over, 106 to 107 is in play. parity is out of reach, but barring the worst case scenario for anything, if harris wins, things stabilize closer to 108 and you start to see a turn higher just from the u.s. fiscal consolidation in the lack of trade tariffs coming through. annmarie: trump, stronger dollar, harris, weaker dollar. what's gridlock? erik: dollar-yen is where it really shows up. the baseline without congressional action, that's fiscal tightening. we are not going back to that deficit. that is a meaningful swing. i think that you see a dollar-yen participating in the next move lower as rates move

who lower. fiscal concerns abate. lisa: you're here from london. will there be another liz truss moment somewhere else? everyone talks about the deficit and when it could affect the u.s. in some sort of dramatic event. do you foresee that? do you talk to clients about that, do they ask you that? erik: france in the last couple of days, we've seen it. it's important to separate -- we all kind of want to think about the benchmark of the recent events and it was much more about financial linkages in lpi issues as much as it was the fiscal spark, with kindling that was already there. with something like france or even the u.s., without the ldi component it's hard to see that sudden turn in yields. fiscal concerns are real, we talk about that all the time. it's not going away, even in the u.s., i don't think we are going back to that balanced budget era

any. i think it will be a concern for a while. two years since trust. jonathan: where have the years gone? annmarie: the anniversary of lisa's favorite moment in the market. [laughter] lisa: look at you, halfway through, let it go. it's a theme this morning. [laughter] yes, it does feel like it was just yesterday in part because it was the first time we have ever seen fiscal matter in such a dramatic action -- fashion. jonathan: like yesterday, i'm not sure how misplaced that is. save that opinion for another day. coming up, so high, mizuho, bob elliott, that's all in just a moment. equity futures on the s&p 500 positive by .1%. the bond yup -- bond market, 10 year yields are climbing and up a single basis point.

>> market wanted 5050.

she is can deal stabilize? >> over on the economy is performing like it doesn't react from the swing the last couple of years. >> the fed wants to get to neutral but they don't know where neutral is. >> i do think that we are headed for a soft landing. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: one of the very best. good morning. the third hour of "bloomberg surveillance" starts right now. on the s&p 500, equity futures pushing higher by the basis point. on the nasdaq right now, up .2%. russell small caps up .4%. up for a fifth consecutive session on the 10-year yield. that curve is a little bit steeper in america. lisa: introducing a little bit

of fear that maybe inflation is not as dead as many proclaimed it. the levere is the operative word. key question is given the data is very much the driving seat, where the point to a greater risk of a downturn, point to a soft landing that is why they priced into markets, or does it point to the concern that some have been worried about, a tick up in inflation? jonathan: a lot of fed speak over the next week. you will hear from basically everyone including raphael bostic at the atlanta fed who is a 50 basis point cut does not lock in the cadence of future moves, echoing what we heard from chairman powell. others suggesting they are ready to go another 50. lisa: kashkari sees another case to be made for an additional hat percent rate cut this year, talking about how the balance of risk has shifted away from

inflation and toward a further weakening of the labor market. this underscores the concern we hear on the fed that seems to out what we are here with economists who seem to say the u.s. is chugging along. annmarie: the question still remains, no question was answered. now if you'd like we are going into the next decision with the same question, 25 or 50? you mention paul donovan of ubs. he says the market is scrambling to catch up with following inflation now that there is anything wrong with the economy. jonathan: remember that mickey bowman descended last week. the committee's larger policy action could be interpreted as a premature declaration of victory on our price stability mandates. lisa: some would say it was a carefully orchestrated dissent in order to create this file that this was not necessarily going to support 50 basis points in consecutive meetings. pooja sriram talking about the

cost of this insurance policy. it's an important point, goes to communication. the idea that this was a tossup going into the meeting until a series of articles. it raises this question, is that the cost, that essentially people are going to be looking to communications to give you a sense of where the committee will go and that is prescriptive and determinative and not just a reporter writing? jonathan: are we data dependent or journalist dependent in the quiet period? lisa: that cost, fed credibility, it raises a real question that i think is an important one to discuss. jonathan: if you are a professional forecaster, the last month has made things difficult for you. a great example was andrew hallman horse at citi, had 50 baked in, went back to 25, and they went to 50 anyway.

forecasting the stuff is harder to do now. lisa: they say they are data dependent, but one thing they keep raising, data dependency has a different meaning when you can interpret the data any way you want to. if they came out and say we made a mistake, which is essentially what he said, we should have cut in july if we had the data in advance. it just raises the question about how predictable some of the future moves will be. jonathan: socgen talked about data dependence, never mind the dependence of the federal reserve, the dependence of the ecb. this data on the pmi is awful today. the euro is down by one third of 1%. this is the question you keep hearing from teams time and again, market participants, why aren't they cutting by more given the downturn we are seeing across the continent?

lisa: we can be critical of the fed in whichever we would like to but people should still be pointing the finger at the ecb. you are looking at an economy that is contracting and manufacturing, continuing to decline, and it is structural. if the u.s. federal reserve was going to do that, can you imagine? jonathan: we would be in a much bigger mess than we are. thank goodness that that is not doing with the ecb is doing on that particular issue. catching up with liz young thomas, vijay rakesh, as qualcomm explores an intel take over. and pooja sriram will be here. we begin this armor with investors awaiting a calendar packed with individuals. liz young thomas writing the tone of the game has changed from hot to cooling, from inflation to jobs.

that calls for a change in market tone as well. i would expect that trend to continue. liz joins us now for more. let's talk about that specific trade. those bound proxies, utilities, they have had quite a run year to date. do you think we need an extension of the bond market rallied to support those trades or is this enough? liz: i think the bond market rally and the equity market need to happen in tandem, need to make sense irrationally for what's going on in the economy. let's be specific on utilities. part of what's happened in utilities, the rally we have seen is because they started to be looked at as an adjacent trade to the ai theme. there has been some upside, perhaps multiple extension in utility names due to that. i say that as a morning. if the ai trade loses steam,

large-cap stocks give up against, you see a give up in the rally. the reason i am pointing out these defensive sectors, rate sensitive and expensive -- defensive, in this environment where you have a yield curve steepening, fed that started cutting, on the precipice of money market rates coming down for investors, the income that we are used to getting out of risk-free assets likely coming down, not dramatically but coming down, you will see those dividend players, and you should see those dividend players pick up, investors make rational decisions about where to find income outside of those really rate sensitive market cd's, maybe even treasuries. jonathan: as the curve starts to normalize and people look every month at the income they are receiving in the money market fund, it is time to do something, are they deploying

that cash along the curve and taking duration risk, or are they looking to the equity market? liz: both to be a good idea at this juncture. this is not something where we have decided that we have secured a soft landing. if you decide you have secured a soft landing, you deploy money in the equity market to more cyclical parts of the market. i don't think we have decided enough yet that should be the case. if you are going to deploy as is not because you are worried about rates coming down, you have a lot tied up in a money market, you are worried about the income going away, you can spread it among the shorter end of the. i would expect that to come down as the cutting cycle carries on. you can also put it into parts of the equity market that should do well at least in the beginning of the cutting cycle which continues to be things like financials, reits, utilities, health care -- be

careful in an election year -- but health care and medical devices should do well in this environment. also worth pointing out the 2's, 10's curve is positive by 17 basis points. that is the biggest positive spread we have had in a long time. that is the point i was making in last week's piece. this market environment has changed, and it requires investors to look at their portfolios and make sure they are positioned for what is now a different market environment. that doesn't necessarily mean a bad one but different from what we have experienced for the last two years. lisa: what would you have to see to get more excited about a soft landing, leveraging the wagers more on that? liz: the 50 basis point cut gave us a better chance for a soft landing. that did encourage me, i applaud the pad for going big especially on that first move. i would need to see for at least the next few months the data

cool but not stop. my concern is we have hit this point in the economy when we are very balanced, things look good, the consumer is still healthy, the labor market is balanced, inflation readings have come down. things feel good right now, we are not overheating. but my concern is we are making a pit stop in this balanced level on the way to weak. we don't want that to surprise markets and the fed. i don't want people to the clear premature victory, premature soft landing at this point. i think we still need to get quite a few more readings particularly on the labor market. the labor market holds the key for the rest of the year. lisa: if the risk is to the downside, why aren't you recommending people put their cash into the long end? liz: right now i think there is more volatility because of this large cut at the beginning and there is this cap between what

the market expects and what the fed says they will do. the market is pricing in three more 25 basis point cuts. the fed is ensuring that will be the case. if inflation starts to heat back up, and it sounds like they are fed officials with that concern now, or if we see a major resurgence in consumer spending, uptick in commodity prices, the long end of the curve will see more volatility. jonathan: the balance of risk around that story, equal amounts of risk to a re-acceleration to the economy as there is a downside? liz: i think there is more risk to the downside particularly in the labor market. because of how we got to balanced, how inflation has come down, first in the goods portion of the economy and then in the services, we still have shelter holding it up. there is not as much of a risk of overheating due to demand. i want to make that distinction

very specifically as well. consumers have pulled back enough that even aggressive rate cuts shouldn't fuel and overheating again in the economy that makes demand outstrip supply and some of those categories. where the risk is an inflation reheating, i believe, is in the commodity complex. if you see things like oil come back, metals go up dramatically, if there is a global shock, which there is always a risk of, the risk in inflation is about commodities. jonathan: wonderful to catch up as always, liz young thomas. lisa: i wonder how difficult it would be to get that resurgence in inflation coming from commodities unless china got some sort of stimulus package. this goes to the question of how much could shift after the election is over, as people make the move they have been holding off on. jonathan: every conversation seems to lead to china.

right now they are exporting disinflation. bobby elliott will be joining us. we will focus on that. let's focus on stories elsewhere this morning with yahaira jacquez. >> congressional leaders unveiled a stopgap funding bill yesterday to keep the government open through september 20. negotiators are working to avoid in october shut down and set the stage for a funding showdown shortly before christmas. lawmakers hope to vote on the measure by wednesday. boeing ousted is defense chief ted kolbert over the weekend, one of the first meter shakeups by the ceo. the defense division has been losing billions in cost overruns and son negative headlines after nasa said it was too risky to use their starliner space capital to bring two astronauts back from the international space station. the company is also dealing with its second week of a strike.

billionaire dan friedkin is nearing a takeover of everton fc. the deal would bring months of uncertainty to an end. he held exclusive talks before announcing in july that he would not be proceeding with a takeover. everton is moving to a new stadium next year which it hopes will boost revenue. that is your bloomberg green. -- brief. jonathan: thank you. next, the morning calls and vijay rakesh of mizuho as qualcomm floats a friendly takeover deal for intel. that conversation, 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: live from new york city, your equity market firm run by .1% on the s&p 500. in the bond market, 3.7565. we would look to be buyers on any significant move higher on rates and still expect the 10-year yield to finish the year at 3.50. lisa: at what point do people start buying the long end and if they don't how surprising is that given the long term predictions we are hearing from the fed? jonathan: if you believe there will be this slow down, but that is wrong with the dot plot, it is because they are too hot and not too low, isn't it a buy? lisa: that is why it is surprising we have not seen more buying action. $44 billion of seven-year notes, watch it. jonathan: watch that in the traffic update, which we are hearing from lisa this morning. the average traffic speed this

week, three handle. lisa: sometimes it does average zero. gridlock sam. sam schwartz, he tracks this from the department of transportation. annmarie: he doesn't drive, he takes the subway. jonathan: let's get some morning calls. da davidson cutting microsoft do neutral from buy, saying the company is a domination has diminished. sanford bernstein cutting gm to market perform. finally, city raising its price target on meta to 645. among their topics in the internet sector. intel in the spotlight. sources telling us that qualcomm has approached chipmaker about a potential takeover deal. now apollo global management

offering and equity like investment as much as $5 billion in intel. vijay rakesh joins us. some big news coming out of the weekend. these offers on the table, if they do materialize, which is more attractive to the firm? vijay: thanks for having me on. the qualcomm takeover of intel, it looks like that qualcomm is trying to do something good for them but the price tag may be too high to afford. if you look at intel, pc business, server, data center, almost $186 billion on a sale price tag at the least versus qualcomm's market cap of $188 billion. they have to look for some pretty big financing to make this acquisition. if you look at intel, they have debt, negative free cash flow, so there are some massive

challenges and looking at that acquisition. priority equity investment is more palatable. they had prior investments, so this could be manageable. jonathan: the regulators watching on, what do you think they prefer to see? vijay: i think it is a mixed bag. intel is definitely a national asset, they are the pillars of manufacturing in the u.s. definitely want to keep it in the u.s. for qualcomm to come in, it could invite fcc scrutiny in terms of having multiple technologies in-house. you could also see pushback from semiconductor peers, similar to what we had with the nvidia, arm acquisition. lastly, china, they may need

approval in china, in terms of exposure in china. there are some challenges on the regulatory side, as well. lisa: what is the benefit for intel? why do they need a white knight went not long ago they were the national champion? vijay: if you look at intel, they had been the technology leader, but over the last five years, i think they lost their way. the ceo, they have failed to take market leadership in pcs. they lost a share in pc and servers to amd. that has not translated to marketshare or profitability. free cash flow is -$20 million. on the foundry side, it's a long-term roadmap. even looking out to 2030, 50 billion revenue from that on the foundry side.

that is still pretty small compared to what to see him is doing. they have a long way to go, there are some challenges there. they lost their way on the market and technology side and the manufacturing side. annmarie: when it comes to the regulators, are you saying it is murder dependent on what they will allow through? vijay: if you look at qualcomm itself, they might not be as excited on the foundry side because they have a pretty good relationship with tsm. if they were to look at the other segments, data center, etc., how much concentration do they allow qualcomm to have on the pc side or on the server side? that would be where the challenges for qualcomm from a

u.s. ftc regulatory standpoint. they can be under global challenges as well, of their peers wanted to step in to take those assets. lisa: what would you put your money on in terms of apollo versus the potential for a qualcomm takeover? vijay: apollo is a much more manageable one. i think qualcomm, a lot of hoops that they need to jump. i think that is more of a challenge. the apollo one seems a much easier one for apollo to do. annmarie: how long would it take for a u.s. national championship to compete with tsmc? vijay: very good question. i think it would take a long time, probably five to 10 years at the least. intel first has to be its technology leadership, and then they have to prove that

technology leadership. that is leadership that is earned, not something that is given. there are some challenges there. they definitely have to get ahead of tsm but also be price competitive. there are challenges. tsm is based in asia, have access to much cheaper labor, more qualified and labor in many cases as well, versus much higher costs in the u.s. there are some challenges there. we think it could take a little bit of time. jonathan: i understand this may put you in a compromising situation, but are you surprised there has not been a management change at intel? vijay: the ceo has his challenges. he has been there three years plus, so there is some investor concern around. the board has definitely stood by him.

the continuing challenges definitely pose some concerns for management. i think investors are definitely in that docket, as well. jonathan: we appreciate as always, vijay rakesh of zoo, the difficulties and opportunities that face intel this morning. lisa: you asked a really good question, how have got here without some wholesale changes given the fallbacks in the strategies? jonathan: difficulties with this company all the time. lisa: the hopes and dreams for this to become a real competitor with tsmc. jonathan: that conversation just around the corner. ♪

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jonathan: hsbc, take a listen to this. there could be an nondeductible risk of the growth up thick in the disinflationary forecast in the coming quarters. this leaves short-term inflation expectations too low relative to economist forecasts. lisa: this is the risk in case you are feeling take up in gold. you start to hear it around the edges, the economy is as good as it looks right now, what is on the other side? jonathan: equities positive by

.2%. nothing to see here. gold close to all-time highs. one hour away from the cash open. let's go to manus cranny. >> very bullish on u.s. equities. this is how we start the day on intel. i want to put this to you which is, one is a potential bid from qualcomm. by taking this asset apart, it is a sum of the parts friendly bid. $5 billion into this company from apollo. a company that they know well. they did an $11 billion deal just a few months ago. one is about taking the company apart. the other is a vote of confidence. we will see how it plays out. let's have a look at gm. bernstein have downgraded the stock this morning to market --

from outperform. they have said not only are they downgrading the earnings. there is an inventory built in the u.s., remaining capital in the autumn. mary barra step back from that big banner of a million electric vehicles by 2025. let's close it with technology. one of the biggest nuclear players in the u.s. they will revive a plant in pennsylvania, $1.5 billion. they are going to sell the power to microsoft on a long-term deal. this is the very personification of hyper scalars and when they need from the energy industry. jonathan: timely. energy demand sky high on this front. lisa: how much do you end up having private adjustments made with specific tech companies trying to contract for their own energy uses to offset that?

we have seen that over the past few days. jonathan: talking about off-grid solutions. the demands on the grid will be absolutely humongous over the next several years. lisa: how do cloud providers ensure no breakdowns occur for their clients, unless they get some of their off-grid solutions like we have heard about recently? jonathan: equity futures up a quarter percent on the nasdaq 100. looking ahead to a busy week. pooja sriram saying even the 50 basis point cut appears to be a close call. there is the distinct imprints of a compromise with hawks treating the 50 basis point cut in favor of hawkins messaging at a relatively high bar for the unemployment rate to warrant another aggressive cut. i want to get to your growth outlook. did you raise your gdp outlook after getting that surprise move from the fed last week? pooja: we did.

good morning. we did raise it by .5 percentage points. we are still penciling into percent growth for the fourth quarter of this year. we have a similar pace of growth in fact through the end of next year. some of that is the easing of financial conditions we have seen over the past couple of weeks. we track the fed's measure which translates financial conditions into the impulse for growth. it does suggest growth could look better. to your question, yes, we have raised gdp forecasts modestly in the near horizon. jonathan: how does not line up with your views on the fed's and 2025? pooja: our own baseline is for two 25 basis point cuts this year, broadly in line with the median projection for 2024.

2025, we have three 25 basis point cuts, total of 75, as opposed to the 100 that the fomc median has. that is predicated on the view that the economy will look ready decent. we don't have the unemployment rate staying at 4.4% which is what the fomc has. we do think they can afford to slow the pace of rate cuts going into 2025. lisa: you wrote something recently that i thought was fascinating. whatever was gained by the fed's 50 basis point cut may have come at a cost. you say it is likely that similar articles akin to what we saw with this rate cut, during that blackout period, it will be interpreted as legitimate signals leading to unnecessary noise. this cost may exceed whatever benefit the fed frontloaded with

one cut. elaborate on how much this as too potential uncertainty for you. pooja: great point. just to recap what happened, before the fed went into the blackout period, we had a bunch of data in hand. the last print we had was the nonfarm payroll. we heard from fomc officials waller, williams. the markets were content to price in a 25 basis point rate cut. that was our baseline as well. everything looked good. then as you mentioned, we got these articles and suddenly raised the question come up the possibility that the fed could perhaps go more aggressive, go 50 basis points. then the pricing moved. surprisingly, the fed ratified

that move with market pricing. we found that quite surprising to be honest because it did not come on the back of data, in fact, came on the back of a bunch of articles. if there is a precedent for this now, it is possible and there will be a lot of noise and volatility around the blackout period if we get more news information this way. in terms of the fact that the fed didn't gain much, i markets are still pricing in about the same amount on rate cuts as they were before the news articles came out. it is not clear to us with the fed achieved by ratifying market expectations going this route. lisa: this might sound like a dumb question, but what is the actual economic cost of a little more volatility around the blackout period? pooja: it can get markets to run away with expectations.

you would think that the data, hard data on economic activity, when you are officially hearing from the fomc guides market expectations. but if you have something like this that can lead to a lot of volatility, market pricing going in different ways, then the fed outcome looks different to how the markets have moved, it can create market volatility. that is the point that we were trying to make. it creates unnecessary noise. especially after an era where fed communication has been on point, has made an effort to do this so well. annmarie: do you think the fed now has a credibility problem? pooja: it doesn't seem like it. when you think of monetary policy credibility, we look at inflation expectations. the credibility comes from the fact of how committed are they toward the dual mandate? right now there is no question they are very committed. it does seem like the focus is a

little more on the labor markets than it is on inflation, as it should be, given the inflation outcomes are pretty good. it is too early to start questioning any of that but it does create a bit of a kink in the communication policy. jonathan: i appreciate it, pooja sriram. we will continue the conversation with bob elliott of unlimited. what did we achieve with a 50 basis point rate cut last week at the federal reserve? bob: they were trying to paint the picture of a strong economy, so they can deliver big cuts relatively quickly into that scenario. you can argue whether or not you believe that is true but the path they are laying out, they believe it is data-driven. they believe the inflation numbers will get back to their 2% mandate. that is interesting for markets. it might be too easy into a hot economy that has a lot of second

and third order effects. jonathan: are you a believer -- bob: in disinflation? inflation is still above the fed is mandate, remember that. easing into that environment when you have a hot economy means that we are probably more likely to good acceleration rather than deceleration. the thing that is interesting about that, the fed will not see that data come out until they have cut a few hundred basis points. only then will they be held accountable for the fact that the disinflation may have reversed. it is a tricky period over the next 18 months when the fed isn't going to give the feedback loop that the policy is too easy. lisa: are you saying right now the risk of a re-inflationary moment is less priced into a market and more real than a downdraft in growth? bob: certainly less priced into

markets when you look at long-term expectations. expectation is for inflation to be at or below 2% essentially forever. given the geopolitical dynamics, the fed's easing into a relatively strong economy, the fact that you still see sticky dynamics in inflation, particularly into wages, which are showing signs of accelerating, that picture doesn't align with the probability of a certainty around 2% inflation. much more likely that we have higher inflation at hand rather than lower. lisa: if you believe in this sort of strong economy that could foster reignition of inflation, that would be positive for equity valuations. but you wrote the stock market is price to perfection. this quarter is providing plenty of data points that the perfection is not likely to be achieved in reality. why? bob: you have to trade against the price expectations. we are at pes that are almost as

high as the tech boom. that is a pretty strong scenario already priced into the markets. the fed is helping that along, probably a positive, but the story is much more around being long stocks relative to bonds. that is the scenario of the growth reacceleration that probably isn't fully priced into the markets. jonathan: let's introduce china into the conversation, now exporting disinflation, deflation. how does that factor into your worldview now? bob: china is experiencing debt deleveraging akin to japan. classic balance sheet session. the policy makers are may be driven by motivation that are not related to macro economic policy, more like political motivations. for whatever reason, they are choosing not to respond to the situation. china is probably in this malaise for the foreseeable future.

the effects on the west are actually relatively limited. the reason why, china's deflationary impulse was have been the same the last couple years, accelerating in terms of getting a worse rate of deflation. if anything, we have seen it took up. it is probably not the main story going on. when you look at western inflation in general, what matters is the labor markets. it is all about the wage data. we are one to two points above the covid. on this you believe productivity has matched that increase, that is an underlying inflationary pressure that remains in the economy. annmarie: isn't that pressure coming from china having to do with the commodities market? bob: certainly is an effect on the commodities market. if you are treating copper or other direct commodities that china has a meaningful share of

that will be a meaningful influence on that supply demand. the flow-through of that to the u.s. inflation picture is pretty tiny compared to rent, labor, the other imported goods costs. new cars, used cars. all of those represent a much bigger impact on u.s. inflation, u.s. policy. annmarie: liz young thomas was talking about one risk would be reacceleration of commodity prices. do you see that with where china is right now? bob: commodity and oil prices have been treating in a tight range over the last couple years after the move down 18 months ago. i don't see meaningful pressures on the upside or downside. on the downside, you have a natural cap in terms of suppliers taking barrels off the market, if prices start to fall too much. on the upside, still a lot of

incremental production. u.s. production is near all-time highs. it is much more about the sticky inflationary pressures in the economy on a forward-looking basis. lisa: much would longer-term yields have devised to make you a buyer? bob: you have to see inflation expectations move up considerably here. easily into the mid--fours before you have a real conversation that that is an attractive bid particularly relative to stocks and a stronger growth environment. jonathan: when you say inflation expectations, market-based, or the like that we see from umich? bob: it is all about price to breakeven inflation. the market is price to be at 2% or below essentially forever. that is what you are treating.

those are the areas of the market that look particularly underpriced. if you are going to get exposure to duration right now, by the tips. you are seeing real yields that are still pretty good on any long-term perspective around 1.5, 2%. that is a pretty good real yield if you can lock it in for 30 years without risk. jonathan: thank you, sir. bob elliott of unlimited. lisa: if you believe this economy is strong, wouldn't you go into stocks and avoid longer-term bonds? you get a flavor of that. even people like liz young thomas, who are worried about the downside risk, have a hesitation buying the long and. this raises a question to me about what kind of drama you could see around the election with respect to the long- end. jonathan: no drama right now.

equities positive by .1% on the s&p 500. yields a little bit higher on the 10-year. 3.76. for an update on stories, here is your bloomberg brief with yahaira jacquez. yahaira: the u.s. commerce department is getting ready to propose rules that would ban chinese and russian-made hardware and software for connected vehicles. the announcement could come as early as today. congress has been meeting with industry experts, looking to address security concerns raised by a new generation of so-called smart cars. the new york times is reporting that more than 700 current and former national security officials are backing vice president harris. a letter signed by former secretaries of state and defense endorsed harris and sent president trump poses a threat to our democratic system. among the most prominent names, chuck hagel and william

cowan, a republican who served under clinton. the wnba plans are underway with the connecticut son defeating the indiana fever 93-69. thomas posted her fourth career triple-double in the playoffs and 15th overall to spoil clerk's postseason debut. india and will look to even the series on wednesday. the result include wins by the new york liberty, minnesota links, and las vegas aces. jonathan: thank you. up next on the program, setting you up for the week ahead, the day ahead, and we are catching up with mandeep singh on the prospect for a big deal in the chip space. ♪

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jonathan: we are 40 minutes away from the opening bell. equity futures up .1%. the calendar for the week ahead, s&p global manufacturing pmi coming up at 9:45 eastern. later today, more fed speak. tuesday, the u.n. general assembly kicking off. wednesday, micron reporting earnings. thursday, another round of jobless claims. friday, pce and umich sentiment. intel shares rising in the premarket following reporting that qualcomm may be interested in an acquisition. apollo now offering to make a multibillion dollar investment in the company. that stock is up by .8%. we talk about this and a whole lot more in tech, mandeep singh on bloomberg intelligence. i want to start with this. this paragraph going into the

weekend. the owner of the shuttered three mile island plant will invest $1.6 billion to revive it, agreeing to sell the output to microsoft as they see carbon free electricity for data centers to power the artificial intelligence boom. is this the beginning of something much bigger in this country? mandeep: i think so. there is a clear demand for building data centers that can train these large language models at the scale that currently we are not at. what they are trying to do is focus on renewable energy. all of these large hyper scalers have goals around using more renewable energy. that is why they are going down this stack in terms of doing it themselves. they know exactly the configuration for these data centers they need, power requirements they have. to me, this is a classic case of vertical integration. microsoft owning the stack into

and -- end-to-end. jonathan: and we had a big enough conversation about the power that will be demanded? mandeep: power is still a regulated entity. they have much bigger power requirements than five or 10 years back, but in the end, the government is overseeing that. they will get that support. the government wants microsoft to build large data centers here because they want to own the data, they want everything to be done on shore. i wouldn't worry too much about the power costs. it is more the chip costs they have to deal with. that is why they will go with their own chips at some point. lisa: i understand the regulated entities, but if they are going off the grid to provide their own electricity, at what point do we have to look at the fixed costs that are increasing, that are having to be provided privately by these tech companies, in order to provide a reliable service they are

promising? mandeep: no doubt their cost of goods will go up, but it has already gone up. a big bet is that ai will drive productivity. you can say that we are not seeing that productivity now, but if they can offer a copilot that can help you become 30% more productive, companies or consumer don't mind paying for that. the big bed with this ai wave, it will drive productivity. you will see that down the line. otherwise you will see some cancellations in terms of what they intend to do in the long run. annmarie: aren't new data centers on hold because they cannot connect to the grid, are too powerful? much is this going to be the source of new deals? you have to get your own mini grid to operate? mandeep: yes, they need the power, large data centers set up, big ai clusters.

as long as the large language models keep growing in size, the next gpt version or model is bigger, you need more power. that is where they will work with all the entities in the chain, energy companies, private equity guys. jonathan: you said something about microsoft. developing their own chip. is that where you think this is going? why wouldn't they just buy intel and do it through intel? mandeep: the turnaround of intel is not very easy. we have seen in the past few years, nobody is betting on that turnaround. the question is, does intel have certain pockets that fit strategically with some other company? the pc business is still attractive, generates six to $10 billion in free cash flow. the data center is losing business to nvidia.

the foundry business keeps losing money. maybe intel is better off being split in a way that makes sense. the foundry business could be useful down the line, but the problem is it is losing $20 billion in capex, requires a lot of upfront investment. nobody has the patience to do that with intel. jonathan: qualcomm, apollo circling for a cash ingestion -- injection. mandeep: it has to be a consortium. i cannot imagine qualcomm buying everything. if they are, they will sell some assets to begin with. that is how you could conceive a deal where qualcomm would want to own certain parts of intel. jonathan: i appreciate your time. mandeep singh on bloomberg intelligence. intel the one to want to watch going into the cash open.

welcome in the studio if they can make it through midtown manhattan. from new york, have a fantastic week. bloomberg surveillance ." ♪

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>> we are back. the whole team here. 30 minutes into the start of trading. >> "bloomberg open interest" starts right now. sonali: coming up, markets are waiting for signs of what's next from the fed after the last big rate cut. we will get pmi data at 9:45. matt: stimulus hopes rise as

china has a