♪ >> our base case is that they will be a 25 basis point in december. >> they don't have to go too much further to be at the right rate for this level of inflation. >> we are priced for strong growth and additional term premiums. >> the economy is in a really good space. announcer: this is "bloomberg serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: from new york city, good morning. for the audience worldwide, "bloomberg serveillance" starts now. snapping a two-day losing streak

on the s&p 500 and a five-day slide on the nasdaq. equities resume the decline. we are down on the s&p. the nasdaq down by 2/10. small caps getting hammered, negative by 1.1. in the bond market there is a bid on a two-year, 10 year, and 30 year. likewise on a 10 year. on this headline out of europe, lisa, ukraine striking inside russia using u.s. weapons. lisa: and this fear that you have russia coming out and saying that they are amending their doctrine, the nuclear doctrine to basically say that they will retaliate with nuclear weapons it a nonnuclear state has a conventional weapon attack on their land while being backed by a nuclear state. it is a very specific protocol but the question is what does this tell us about the nature -- the knee-jerk reaction, oil prices up, treasuries down, and the path of travel and how rocky it could be. annmarie: even more interesting

because we have donald trump on the campaign trail vowing to end this war and right now you can see rhetoric and movement intentionally both sides wanting to make sure that they have the most leverage going into what would end a war, this certainly is an escalation. ukraine was given the green light to go ahead, and they did so. jonathan: what it tells us this morning is when things go wrong, people buy u.s. treasuries and bonds. that is what it tells us. lisa: that's my biggest take away. we can discuss whether it is signal, noise, but from the market perspective, bonds are still big when there is geopolitical trouble. when there is some sort of selloff because of a catalyst in equity markets, bonds get stronger. to me, does this sort of rebuke some of the runaway yields the new regime is talking about? jonathan: writing to the curve. elsewhere looking to foreign exchange. the euro shaping up as follows after a really strong brand of dollar strength.

lisa, slightly weaker euro this morning. lisa: this really goes to dollar strength across the board although you start to wonder what kind of impetus there is going to be for some sort of string in europe. you do see the dollar bid, you do see some marginal strength in the yen. what a haven currencies? i don't want to get too carried away calling the swiss franc a currency. jonathan: hasn't been much of a haven this past year. blackrock as stocks fallen geopolitical risk. we will speak on the race to be the next treasury secretary and catch up on how much further the trump trade can go. we begin the hour with stocks edging lower as traders weigh potential trump policies and concerns grow over the ukraine conflict. long equities while we think the margate we need to digest the postelection rally, we expect stocks to win the year higher. good morning to you, sir. we need to start with bad news

and the capacity to absorb bad news in this equity market. how great is that capacity this morning? >> look, we've not had any geopolitical disruptions for some time, and the reality is the market has looked past a lot of the geopolitical risk, whether that was the conflict in ukraine, the conflict in the middle east. there's not a lot of risk premium baked into markets. that said, as of now the reaction from markets is fairly modest. the s&p down less than half of 1%. i do think markets are still focused on the fundamentals. unless we see more meaningful escalation or more meaningful moves in energy prices which as we all know have been remarkably contained given all the potential for risk. jonathan: the same cannot be said for the europeans. which leads me to your outlook for 2025. significantly overweight, the

united states. are you just doubling down on u.s. exceptionalism? >> we are going with where we see the best companies i think if the short answer. there are definitely differences between the u.s. and europe and japan. a much stronger economy, you are less exposed to some geopolitical risks out there given the huge size of the domestic market. but you come to the same conclusion even when you look at the market from a completely bottom up basis and we focus on the basics. looking at cash flow, profitability, earnings growth. it is stronger in the u.s. we talk about the reaction in europe, absolutely part of that is the proximity to the conflict in ukraine. but part of this is the u.s. has just been a stronger market with better earnings and better cash flow. annmarie: there is this question whether people are overweighting this idea of a soft landing or re-exhilaration with american exceptionalism given that pretty much every outlook so far talks

about 10% or more gains in the s&p 500 next year as well as the u.s. outperforming. at what point do you think this is all baked in when some of the forward looks we are hearing from companies are not outperforming to the degree that many people were expecting? >> there's no doubt the u.s. is the most expensive market. even when you adjust for that, the u.s. is more expensive. i think it is more expensive for a reason, but here is the challenge. generally when you think about other non-us developed markets outperforming, whether it is japan or europe, they generally outperform when you're expecting your we accelerate in global growth. that is not the base case. we do think the u.s. is going to continue to grow at or above trend, but you look at europe, japan, china, you don't come to the same conclusion. while i do think the u.s. is more expensive, it is just not

clear you are going to get conditions that would lead you to overweight japan or overweight european equities given what we expect of the global economy. lisa: given all of that, you are not that positive when it comes to the u.s. government debt market which i find really interesting on a day like today where you do see that haven bid into bonds. that is boosting the stock performance. there basically is a breakdown in some of the traditional relationship between bonds and stocks that we've seen in the past. i'm just wondering, do you not see bonds as beings haven bid that they have been in the past to the same degree, even if the knee-jerk reaction if the same? the people are not necessarily going to continue to feel that way? >> you think about building a multi-asset portfolio. how do you mitigate risk? first of all, there are a lot of parts of the bond market we like right now. we like the yield we are getting on those assets.

we like the belly of the curve in the u.s. market. we are more cautious on the long end because of supply, but here's the thing. i do think you are exactly right in the lead up to the show. there are conditions where u.s. treasuries still work as a hedge. they work when geopolitical risk is the catalyst for selloff. the problem is when you think about economic risks. for 10, 20 years, treasuries worked so well because the economic risk was almost always concerns about a recession, turns about the growth now we've got a two-sided economy. many concerns are "with inflation be too sticky, will agree accelerate?" -- well it we accelerate? i don't think treasury is the best way to mitigate risk in a portfolio. when you think about "are treasuries going to work or not," it comes down to what you are most afraid of. it is geopolitical risk, treasuries do work in the short term. annmarie: it is geopolitical

risk today and we are going to have a change in administration with two hot wars currently taking place. what would you advise to clients? >> part of that is how much of a risk you think you're going to have from europe and the middle east? one of the more important things other than a real escalation is prices which has so far remained contained. we do think that you still focus on quality companies. part of hedging that portfolio is only companies that are going to hold up better during disruptions. and the other asset we've been looking at which i think also works with the geopolitical sort of risk off is gold. gold has the benefit of scarcity. it has been an asset that has worked under geopolitical risk situations for a long, long time. and part of what you are concerned about his long-term u.s. debt. this is an asset that you can't print more of so that is another place people position in the portfolio. annmarie: you've noted it is a

valuable diversifier. is this the kind of day you say actually, i wish i had more? >> whenever you have a movement you always wish you had more. i think there is a certain portion of gold you want in your portfolio. probably in the low to mid single digits, but yes, i do think if part of what you are worried about is that they're hard to quantify geopolitical risk, it is still out there. it is still lingering, particularly with a change of administration. and i do think gold is one of things you own in the portfolio to help smooth the ride. jonathan: i want your opinion on the race to be the next treasury secretary. we had a series of guest saying maybe it's already happening in market impact. do you share that view, is it starting to have a market impact? >> i'm not sure. there are a lot of things to disentangle. the treasury market, one o

things more disruptive is the fed, is it going to cut as much as the market expects in 2025 and is inflation going to continue to drive lower? right now i think that is probably a bigger move of what we are seeing over the last few weeks. jonathan: appreciate the update, thank you. deutsche bank this morning saying the same thing. lisa: there's probably some sort of readthrough. it's hard to draw a line specifically for a certain person or a certain news story among the multitude of new stories that have come out i could have led to a selloff, but there's a feeling that maybe this sequencing isn't going to be the same as many people thought, and that, i think, is getting people a little bit concerned. jonathan: with your bloomberg brief, here's dani burger. dani: according to media reports, ukraine is conducting its first strike using u.s. long-range weaponry within russian territory. moments before that, russian

president vladimir putin pushed ahead with a pledge to update russia's nuclear doctrine. this allows russia to respond with nuclear weapons to conventional attacks. the kremlin said it with you aggression against itself or its allies by a nonnuclear state backed by a nuclear power as a joint attack. boeing planes to lay off more than 2500 workers across the country according to federal filings and a union official. nearly all of the impacted workers will cut on monday in washington and south carolina. overall, the plane maker plans to cut 10% of its growing workforce in the upcoming months. president elect donald trump's transition team is considering former fed official kevin warsh as treasury secretary, and hedge fund manager scott bessette as the head of the economic council. he was expected to make the decision on the treasury job last week, but in fighting reportedly irritated the incoming president and delayed his decision. according to people familiar, lutnick is no longer seen as a

contender for the role. jonathan: more from dani in about 30 minutes. up next, it is the trump test for treasury. >> trump wants someone who is going to continue to move stocks higher. yes, he wants someone to focus on the worrying trends in the bond market. who we put in as treasury secretary is going to be vital to the stock markets, the bond markets and our prosperity. jonathan: the race for treasury secretary continues. we will get the view of john lieber of eurasia group in a few minutes. from new york city this morning, good morning. ♪ to me, harlem is home. but home is also your body. i asked myself, why doesn't pilates exist in harlem? so i started my own studio. getting a brick and mortar in new york is not easy.

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♪♪ ♪♪ the black friday sale is now on. visit sandals.com or call 1-800-sandals ♪ jonathan: live from new york city this morning, good morning. just a touch of risk aversion across the screen today. equities down by one third of 1%. the news out of europe, ukraine

striking inside russia, using u.s. weapons. the first thing that lisa said when she came into the studio this morning, check out the move in bonds. lisa: do we learn anything from the idea that you are seeing that bid on the heels of some geopolitical risk? i guess the counterpoint to this, if i were having an argument with myself which i do every day, is the goal reaction outsized relative to the bond reaction as sort of a haven function? these are the questions i'm asking simply because have we really changed and entered some sort of new regime? jonathan: this always a risk of overthinking it on a morning like this. gold is up, treasury yields are down. under surveillance this morning, trump's test for treasury. >> to grow our economy and also to protect our economy from state actors that have maligned intentions. yes, trump wants someone who is going to continue to move stocks higher. yes, trump wants someone to

focus on the worrying trends in the bond market. who we put in as treasury secretary is going to be vital to the stock markets, the bond markets and our prosperity. jonathan: here's the latest. donald trump transition team nearing a decision for treasury secretary, reportedly leaning toward former fed governor kevin warsh. investor scott bessent now in talks as a separate position for the director of the national economic council. jon lieber writing that cooler minds are not prevailing. despite are appointed as chief of staff, susie wiles does not appear to be exerting orderly influence on the operation. jon, welcome to the program. i just want you to breathe some life into that quote that we just shared with our audience. do you think this is susie wiles' fault, or is it just howard let nick -- lutnick inserting his own name into the process that has will he come look at things? jon: i think it is donald trump's decision-making that is

the challenge here. lutnick was the cochair of the transition process, and in a normal world, that puts you in the pole position to choose what job you want. and trump for whatever reason, or his allies don't seem to like him all that much. there seems to be concern among a lot of people in the trump camp that all of the treasury people who are being considered who have wall street ties are just not maga enough and don't seem to have enough support for tariff policies which is of course reasonable if your concern is overall u.s. economic growth. and that i think is what is delaying here. it's hard to blame it on anybody except for trump himself. this seems to be have a guy makes decisions. annmarie: according to my reporting, howard lutnick is no longer in the running so they are going to have to find a home for him somewhere else but he has been irritating a lot of people within this transition. you say some of this comes down to tariffs. don't they need someone at treasury who could be a regulating force to say, robert

lighthizer, who they are going to put somewhere? jon: that is certainly my perspective and i'm sure it is the perspective of a lot of viewers watching the show, but i think our perspectives are important here, it is donald trump's perspective that matters. he got elected with a mandate to increase tariffs, to do more to bring production back to the u.s., even if that means raising cost for american businesses and consumers. lighthizer's one of the four people who survived a four-year term and remains influential in his policymaking and thinking. i think tariffs are incredibly important policy initiative for his transition team, and they are looking for somebody who's going to push back. they want somebody is going to implement this agenda. annmarie: if they want someone to implement that agenda, how do you see kevin warsh being the answer, because he has been a supporter of free trade. you can see over the last 24 hours, every op-ed this man has

written that has been an individual that has been anti-protectionism. jon: sorry, when i say "they" i mean the lighthizer people who are close to trump, the ones driving all the challenge is finding the treasury secretary. i don't know that the warsh pick fits here. his name coming out at the last minute indicates that there are a more wall street aligned type person. warsh has been doing all the right things get ingrained with trump's family and has been doing the right things to get his name in front of trump for a while now. i don't know if he solves your howard let a problem. annmarie: now we have scott bessent, kevin warsh will be meeting with the president-elect this week, and then of course

there is this dark horse of senator haggerty who the president has a very good relationship with. out of all these people, who would both be acceptable to maga but also seen as welcoming by wall street? jon: one thing you got to think about here from trump's perspective is who is the central casting? warsh certainly check that box. haggerty does a little bit, too. he's got foreign policy experience, a great business background. so when i heard that name, that made a little bit more sense than some of these other names. i think he is also proven his ability to navigate the trump world and he has done that by hiring a bunch of people who are in line with trump. he did serve in the first trump administration. he was a contender for state department. he obviously was passed over for that, so putting him in treasury adds a potential helpful compromise between the varying wings of the trump camps that

are fighting over this right now. annmarie: as we watch the chess pieces being moved on the board, there's this real question about whether the priority here will be to shake things up or to prioritize markets, whether to prioritize a response that is positive with respect to stock markets and maybe even, to some extent, bond markets. are we getting any signal about that, especially when axios is reporting overnight that matt gaetz, who was being nominated for attorney general and had a lot of pushback from people within the republican camp, met trump was personally trying to make sure that he got through? jon: yeah. you look at some of these other picks, they don't look like they are being done mindfully anyway that is trying to send a signal to markets. they look like he is trolling, there is no other way to explain the matt gaetz pick. kelsey -- tulsi gabbard is not somebody would put in charge of america's intelligence apparatus. gaetz has been on the wrong side of law enforcement in the past, not somebody would pick to be

your top officer. i just don't see this as being an orderly process that is dictated by policy outcomes. i see it as trump making up his mind at the last second and doing things that are going to be continually unpredictable and this is just the world we have to live with for the next four years. annmarie: that brings us back to the treasury secretary. is that the reason there is so much emphasis being placed on the ski economic role? that if you have, whatever you want to call it, trolling of the american people, some of these other picks that are causing some dissent even within republicans, that if you have a treasury secretary heralded by wall street, that that gets out of abdicate some of the other signals? just that your read on the signal? --is that your read on the signal? jon: it could abdicate those other signals but the larger signals at play are going to be what policy decision they choose. when the tariff announcement comes next year, which will happen, there will probably be higher tariffs on other countries and potentially the

whole world as well. those are going to send a much larger signal to wall street about what his intentions are than who he ends up picking us treasury secretary and those are the more worrisome signals the markets are going to have to think about. those are the things that will affect economic growth. jonathan: i totally agree with you. can we finish there? the primary objective in tariffs, in trump's first term he talked of reciprocity. in biden's term we talked about things like national security objectives, protecting the mystic labor and industry, all of those things. it feels like this time the primary objectives is just to raise revenue to offset tax cuts. how different is this approach going to be? jon: i think you heard the president talk about this at the economic club in detroit where he talked about the fact that the tariffs are effectively bringing business back to the united states. i think that is really what this is about. the revenue is kind of a secondary benefit, but they do

see potential to replace some of the income tax with the revenue from the tariffs. that is potentially an offset for extending trump tax cuts. i think the tariffs have a momentum of their own. even if they end up raising very little revenue, they probably do it anyway. and the goal here is to move production back to the u.s. i think fairness is part of that, but i also think that they think the u.s. is getting a raw deal. now i think in this administration you're going to see less pushback against that, no matter who they install at treasury. jonathan: he's been consistent on that matter for several decades. john liebert of eurasia group. i think we can all make a case for senator haggerty, scott bessent. kevin warsh. what is interesting to me is how the market is going to interpret that selection. you can go back over history and select certain quotes from kevin warsh who say he is against tariffs.

neil dutch joins us later, very different take. because he wants the job as fed, i think that will make him more prone to reinforce trump's worst impulses on tariffs. that is a different take. lisa: especially at a time where neil is also talking about how he tended to be hawkish when he was on the federal reserve and more inclined to actually combat inflation by raising rates. mixed messages. you raise a good question, how does the market respond? jonathan: coming up on the program, the latest from europe as ukraine launches its first strike in russian territory with western-supplied missiles. that conversation, up next. ♪

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♪ jonathan: goldman sachs at with a new outlook, the art of the deal. 6500 on the s&p 500, the year-end target for 2025, implying that double-dip upside on the s&p 500. equities pulling back by half of 1%. on the russell we are negative by 1.2. a risk aversion coming out of europe this morning. in the bond market you will see it plain and clear. the two year yield is down by six, the 10-year down by five. the news out of europe, ultimately the first strike we've seen inside russian territory by ukraine using russian missiles.

lisa: this actually has yielded some response from russia with them changing the nuclear doctrine to say that they would retaliate against a major conventional weapon attack on their soil by a nonnuclear state if that state was backed by a nuclear state. the question here, either way, you are seeing that haven bid at a time where some people have questioned whether bonds still would respond in this kind of way. jonathan: the yen outperforming against the stronger dollar. the euro, a touch weaker. negative five 4/10 of 1%. under surveillance this morning, sources telling bloomberg of donald trump is leaning toward former fed governor kevin warsh as treasury secretary. scott bessent now in touch -- in talks for a separate position. based on your reporting, what have you learned in the last 24 hours? annmarie: we still need to see how kevin warsh does when he

goes down to mar-a-lago and has an interview. course they know each other but this is for a different job. scott bessent is also still seen as a candidate for treasury so there are still four candidates in the race. of course, dark or senator haggerty. what is interesting here is that howard lutnick is now out of the race completely. because a lot of tension as the cochair of the transition but he is now out of the race. you guys are talking about him, he said this to me yesterday. he said honestly it takes a special person to be able to navigate the personalities of donald trump and george soros. lisa: this is basically where we are at. when you were saying the purpose of tariffs this time around, is it going to be a negotiating tactic, is it going to be to try to retaliate or make sure that there isn't necessarily the same kind of unfair playing ground, or is it different?

is it about potentially bringing business home, and ultimately the person who chooses among these options will underscore that and to me, that is going to be the market implication at a time where a lot of people think this is just going to be a tit-for-tat negotiation and a lot of businesses are paralyzed right now waiting to understand exactly what kind of regime they are going to be walking into. jonathan: are they handing out roses at mar-a-lago? that is all i want to know. lisa: they haven't yet, they are being brought back. jonathan: is that how this works? lisa: i think so. jonathan: if you don't watch, don't worry, we will move on very quickly. that's talk about how this might be received. november 19, the election was two weeks ago. this has moved very quickly and i understand a lot of people are taking a step back and saying what is the rush? this became slightly messy. i want to be precise with what we are talking here. it's unusual to see someone like elon musk who has been very

close to donald trump over the last several months go out on twitter, on x over the weekend and be quite forceful about who he would like to see at the treasury secretary. the way this played out publicly i would say has gotten a little bit messy over the past few days. annmarie: and why did elon musk do that, was he pressured by someone else? it doesn't seem to me that this was a directive from president-elect trump, which is why it seems like it has gotten messy. because you have the cohead of the transition that should be vetting everyone trying to also vy for the job. this is one of the highest positions you can have in u.s. government. jonathan: and these are high-caliber candidates. these are like, tiktok high-caliber candidates. lisa: you raise a good question in terms of why has it gotten so messy at least in public perception and public dissent? to me, that actually raises a bigger question, which is where is the central force in the

white house to make a decision? these were all qualified candidates but there are nuances that have a pretty big policy application around the edges in terms of how tariffs are going to be used and how they view growth vs. inflation. jonathan: there is a short and simple answer to that. the oval office and it is going to be clear for us all to see over the next four years. the doj forcing a sale of google chrome browser. the department is asking a judge to impose ai and data licensing requirements on the company. google saying the proposals would harm consumers and developers. their stock is down 6/10 of 1%. annmarie: it was filed first under the trump administration, then the biden administration took it over and this is one of the most aggressive remedies we could see since two decades ago when it came to microsoft. so potentially if they are able to do this, this would be really a warning shot across the tech space. jonathan: how consistent the you think this is going to be across ministrations? -- administrations? annmarie: ftc, doj, who is going

to be overseeing this? we could actually see some of these other jobs filter out. i think you have to remember, trump wants deregulation but at the same time he certainly wants competition in big tech. he made that very clear to her colleagues over the summer when he flip-flopped on his stance on tiktok. he doesn't seem to like tiktok for national security reasons, but he understands the point of it because he said if you don't have tiktok, it is all mark zuckerberg. and you have to remember those comments from jd vance. he says that lina khan is one of these few individuals doing good work and has to do other work with big tech. lisa: it's only been two weeks. jonathan: kid feels a lot longer than two weeks. lisa: it feels like there's been a lot longer. but if you are a ceo or cfo of a big tech company or something meant depends on big tech companies, how do you make

longer-term decisions with the specter of some of these regulatory overhang and potential antitrust activity? annmarie: before the election, any moment you see that might be viable for your company to have a conversation with the president-elect who within a candidate, you make that call. google making that call. your mcdonald's stunt was a huge hit on our chrome website. jonathan: a lot of people may that call over the last few months. alphabet is down 6/10 of 1%. elsewhere the main event developing about two hours ago, ukraine media reporting the country carried out its first long-range missile strike on a border region in russia using western supplied missiles. this coming as vladimir putin approved and updated nuclear doctrine expanding the conditions for using atomic weapons. real escalation in the past few hours. lisa: physically from the ukrainian side in terms of using these missiles, the united states given the green light and they did so. and the rhetoric coming out of

moscow is also interesting. putin said in september he was going to do that. but since we seen this escalation potentially that they view from the west, he came out and changed this decree. in september he set aggression against russia by any nonnuclear state with the participation or support of a nuclear state -- read between the lines -- is proposed as a joint attack on a russian federation. you just see the escalation, and this comes at a time before potentially your president-elect wants to force these two sides to a negotiating table. jonathan: we seen two issues while you been covering the story. the use of north korean military personnel in this war, and escalation. this, another one in the past few days. how do you think president joe biden is going to justify this at a time when the american people have voted for a leader who has basically said he wants to end the war? annmarie: he dragged his feet when it came to this decision by allowing ukraine to you these

weapons. this with the top question we were asking over the summer at the nato conference. he's going to justify this by saying this is not aggression, this is ukraine's ability to defend themselves. jonathan: joining us now i'm pleased to say is -- from warsaw. do you see this as a new phase in this war? >> it definitely is. what we are seeing is a follow-up to what joe biden did when finally he gave permission to ukraine to use those weapons which obviously allowed ukraine to strike inside russia. it was only in the cursed region where ukraine forces have taken part of it, but in response to the fact that russia is sending north korean forces as well, joe biden allowed ukraine to use those weapons finally, and we didn't wait very long. overnight apparently according to a report from a ukraine media

outlet, that attack happened. we have no confirmation from ukraine, although what we are hearing from ukrainian journalists is that there was an ammunition warehouse that was hit in a city about 70 miles inside russia, but they wouldn't say what sort of weapon was used. there's definitely that. and yeah, it is also quite symbolic because what we are seeing is that it is happening on the 1000th day since the invasion started. what we are seeing is escalation on both sides. both sides are trying to gain some kind of upperhand before the trump administration takes over. annmarie: ukraine has been firing homemade drones deep into russia for months. what makes this different? >> in a way, it is something that ukraine has been saying for months right now.

it in a way is something that obviously biden has shown as a bit of a redline. in this way, if we read it in the context of the fact that this revised nuclear doctrine was just signed by putin, it's sort of pulls the west deeper into this conflict. that is why the context of signing this doctrine makes it so significant at this point. annmarie: we've seen ukraine really beg for disability from the west, from president biden this entire year. why did biden decide to do this now, given the green light? piotr: it's a good question obviously to joe biden himself. it seems like he is basically at this point free to do that, given that into the new administration that will come in. obviously the official reason, or what we've been hearing is that it is the involvement of north korea that changes the

calculus in the situation. today, when president zelenskyy was in european parliament addressing european lawmakers, he said at this point what we are seeing is about 11,000 north korean soldiers ready to go into kursk to support russian forces. but this number could move up to 100,000 at some point. and kursk is important. it's important for russia, it is sort of a bargaining chip if at some point it comes to some kind of peace talks. in a something that zelenskyy could use when they step up to the table and start talking about a cease-fire. lisa: so is this the way to look at it, that essentially this is trying to grab back enough land to basically lose less when there is some sort of cease-fire, and negotiation early next year? piotr: indeed, yes. the fact that they have now more force to bear and to protect

themselves, it sort of secures their position slightly. although at the same time what are also seeing is on the front itself, russia has been making a lot of incremental gains across the whole front line. at the same time it is happening at a huge cost. reportedly russia is now losing more than 1000 people a day, which is just an incredible number of resources being thrown at this war. at some point you can imagine we get to the point were both sides are just exhausted and they have to sit down and talk. jonathan: thank you, sir. happy to lead some of the coverage out of the region this morning. the equity market is negative off the back of some of these headlines. that bid into the bond market you see pretty clearly. yields are lower across the board. here is your bloomberg brief with dani burger. dani: president-elect donald trump has chosen former

congressman sean duffy to lead the department of transportation. duffy represented wisconsin's seventh district in congress for eight years after gaining fame on the reality television show "the real world." the department is expected to shift its focus away from bike lanes and mass transit and toward highway windings and building new airports. some earnings for you this morning, lowe's lower despite a third quarter that topped estimates and a forecast bump. however, comparable sales did fall 1.1 percent with softness in diy and big-ticket demand. that was partially offset by storm related sales. home depot also last week said that hurricanes and warm weather help to drive demand. spacex is expected to launch its starship rocket into space this afternoon. it follows a successful launch last month that saw the rocket boosters caught in the air by giant metal arms. if all goes according to plan, the launch will also demonstrate a catch landing.

there will also be new maneuvers before/down in the indian ocean. president-elect donald trump is expected to attend the launch in texas. that is your brief. jonathan: when we first started covering these things i was like, i just don't get it. it is pretty cool. lisa: it's like the ultimate baseball mitt. these iron claws coming down to catch the rocket. i think it is pretty awesome. annmarie: i'm just happy donald trump will be there because it means the treasury story i think takes a breather. if he is out of mar-a-lago, he goes to texas. jonathan: what if they announce at their? the rocket is taking off, haggerty. warsh/ up next, the strength of the trump trade. >> what we did need to price was a progrowth environment where you are going to see that expanding it, the regulation. some offsets from tariffs, but how far can that really go?

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♪ jonathan: live from new york city, welcome to the program. here's a snapshot of things right now. a headline across the bloomberg terminal, about two hours 20 minutes ago saying that ukraine has made its first attack inside russia using western supplied missiles. and this is the market reaction. yields are down five basis points. equities a little bit softer, down for tens of 1%. under surveillance this morning, the strength of the trump trade. >> still digesting the possibilities of outcomes could defray trump administration and there are wide-ranging expectations.

so much is in the details. so much uncertainty. what we did need to price was a progrowth environment where you're going to see deficit spending, deregulation, some offsets from tariffs, but how far can that really go becomes the question. it looks like a progrowth environment. jonathan: some of those trump trade losing steam as opposed rally stalls. it is impossible to say that the trump trade is now fully priced in, but we must be getting close. still can't see much reason to take the other side of the trade before the end of the year. helpful as always, welcome to the program. let's build on some of that. as we look at the market over the last several months, at the end of summer we had this big dollar long that we started to eat into, things started to get short. and then we started to pile up all over again. can we just start positioning in foreign exchange, what does it look like now? kit: it's not as big as it was,

although we must've built up more since last week. yeah, the market is long, people have got u.s. exceptionalism trades back on in a general sense. you can see a bunch of pairs, although ads are completely different, but let's go with the market. it isn't necessarily as long as it was at its peak, but it is getting there. lisa: you said there's not really a reason to fight it and yet you do think that people are actually underestimating the number of fed cuts and maybe overestimating the number of ecb cuts. at what point will you get conviction to basically overrate the euro at a time where pretty much everybody has left for dead -- left it for dead? kit: in a big way, would i, as my bosses were trying to bring together the money to pay bonuses out next year, when i be

taking a big counter market bet just before thanksgiving? i think if it went wrong i would be in deep trouble with everybody i knew. it's also worth saying that the data of the dollar and 2016 was christmas day, not thanksgiving, so it kept on going all the way to the end of the year and then unwound in january, february, march. with a market that got itself excited about an ecb that never happened on medication. so no, i can see a strong enough reason to fight it, but you can't keep on casting in the same thing over and over. there has to be a limit somewhere. lisa: you think there is going to be this grind stronger in the dollar. is there a threshold at which people might say i understand, i want my bonus, and yet i can't really stomach any longer getting long. kit: the trader is probably not

the person driving it but we still see signs of the dollar-yen, for example, picking up. there are still people seeking yield out there who look at the level of yields on treasuries and ink i will have some of that. there are still people who are thinking yeah, i will have a bit more exposure or a bit more u.s. equity exposure because it is outperforming. we haven't stopped the sticky, long-term flows. that maybe be what is driving is higher. surely it has got to be pre-slow moving from here. annmarie: which currency pairs do you think best exemplify the trump trade? kit: so many of them. but the currencies from where you are sitting, the canadian dollar is perhaps the trump trade exemplified because it catches exposure to the far east, the canadian dollar correlates with the chinese yuan which is clearly in the headlights of the trump trade,

and obviously the growth comparison between the united states and canada is a pretty big deal as well. maybe that one. we are up in territory, haven't been much higher than this since 2001, give or take. maybe that is the one that is the easiest way of seeing how much. annmarie: and also the fact that the u.s. mca has to be renegotiated. when you look at potentially the treasury options to lead the treasury department under president-elect, trump, do any of them signified to you with the direction of travel might be for the dollar? kit: not necessarily. sort of the least positive person you can appoint would be the most -- jay powell, a republican who would be offered that job. but someone who is an ex-fed per son, someone who has not got an axe to grind.

but at the end of the day, the u.s. dollar has really done well over the last few years because the u.s. has adopted much more accommodative fiscal policy than most of the world and on the other cited that has adopted a tighter monetary policy. i can't see a candidate for treasury secretary who would tighten fiscal policy anywhere. jonathan: certainly didn't hear any of that on the campaign trail. thank you, sir. that dollar long back in the summer. it all changed very quickly for about two months and then we seemed to be back where we were all over again. lisa: all of a sudden we are rethinking that rate cuts, america first, and the strength of the u.s. economy. put all that together and you get that trader who is heading into thanksgiving wondering does he really want to go against everything and say to his boss i think now is the time to be the outlier? jonathan: i already said this a

few times. people, policy. but i think we can all make one big assumption. annmarie: you really can't be we were trying to push through your principal economic agenda. when it comes to tariffs, and this is an interesting point you were discussing, the fact of the matter is it can be a carrot and stick approach. we want to bring production back to the united states and if you do, only then are we going to try to push those as 50% corporate tax rate. jonathan: that conversation will continue in the next hour. citi will be joining us around the table. we will get the perspective of neal dutta and joe feldman. can we will speak to ed al-huss ainy of columbia threadneedle. when bad things happen, you are still buying treasuries.

this is blumer. -- bloomberg. ♪

it's our son, he is always up in our business. it's the verizon 5g home internet i got us. oh... he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kevin's plans for the fall? he's going to college. out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation. heard my name! i swear to god, kevin! -we told you to wait in the car. everyone in my old squad has xfinity. less lag, better gaming! i'm gonna need to charge you for three people.

♪ >> the election is not what is going to drive markets in the long run. >> the stock market has a real leash on the president. i don't think that is true. >> there might be more policy uncertainty but i don't think trump who campaigned on the federal economy wants to see the economy go into recession. >> we still see investors trying to rotate rather than full sale coming out of equities. >> i think the market will be ok as long as there is a growth story.

announcer: this is "bloomberg serveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the risk aversion and the reason behind it. numbers from walmart about the drop this hour. let's start with the price action. equities and then onto bonds. equities negative across the board, down by 4/10 of 1% on the s&p. in the bond market, a little bit of a bid across the curve. yields are down by three basis points. that headline across the bloomberg, about three hours ago around 4:20 eastern time speaking to a strike by ukraine inside of russia using u.s. weapons. an escalation in the last 24 hours. annmarie: it has given ukraine the green light to do this. this was on the border of ukraine and russia. we are hearing from the russian defense ministry coming out and saying that their wealth this

attack and five of those missiles were shot down, but this is an escalation at a time where you have an outgoing u.s. president who gave us green light and an incoming u.s. president who campaigned on the fact that he wants to end the war. how much does this -- of this is intimidation, how much of this is potentially to get them to a better negotiating stance at the table? jonathan: that is the first story, here's the second. walmart numbers just dropping and that looks like a beat on the top and bottom line. lisa: raising their earnings, they previously saw a range of 2.35-2.43. gas up vs. the estimate of 3.8%. there were some signs that maybe this isn't some sort of gangbusters excitement around holiday shopping. full year net sales. so yes, climbing.

maybe not necessarily going gangbusters but if you want to read on the u.s. consumer, the early look from walmart is it looks pretty good. jonathan: where is the growth coming from? a lot of growth was driven by upper income households making $100,000 a year or more. we do this every time walmart numbers come out. if walmart is doing well, how is the country doing? lisa: i think that walmart is getting to be a fuzzier read. it is not just higher income individuals going down the ladder and trying to get a deal. walmart is also catering more to higher income individuals by selling items that are higher end items. number two, walmart is also gaining on the likes of amazon with their online platform. they also are creating their own shopping network. so what is walmart? is it the same company that it was five years ago? i think that is important to understand whether this truly is a read to other retailers.

jonathan: target reporting a little bit later in the week. walmart up by 3.7%. coming up, we will catch up with drew of citi, neil dutta of ren mac. we begin this hour after a tech turnaround helped snap a two day losing streak. market action last week reflects how its participants feel, exhausted. earnings have been solid. we got the beat and hold we expected. the mag seven continue to provide cover for earnings deterioration in the other 493. >> thanks for having me back. jonathan: more numbers on the board. year-end price target on the s&p for 2025. what are earnings doing? drew: can't comment on the

specifics this morning, but it is a good example of we are getting deeds -- beats and even though we are getting cuts for full year, you are starting to see people move past some of the malays, thinking about maybe next year. there are some really good earnings revision stories that are hidden underneath the index level. honestly, a lot of it has to do with some types of secular trends like e-commerce and operating efficiency, but overall we really do like the earnings picture. jonathan: what is driving that earnings picture? drew: defending margins, but how is for the interesting. the s&p 500 has a lot more operating leverage them you realize. there are so many companies that are growing, that is not necessarily as buyback-driven as it used to be. but you are seeing sales increase at a faster pace than employee count and that gets really, really obvious in some

of the winners within the a lot of sectors and some of the sector leaders as well. lisa: people are becoming more efficient and you are using technology to make people more valuable per unit at the end of selling. but there is a real question of whether we are hitting a limit here, something that you kind of feel why people i'm going to 7000 next year. there's this feeling that maybe we are not going to get the upside provisions that could really beat that much more. are you sympathetic with that? drew: it's a little bit tough to extrapolate this on the revision side because there's always this bias for downward revision in the united states. the analysts here are optimistic. the trend is always start really high, let's work our way down. the difference is we are starting high and not really working estimates down as far as we normally do. so i think on the operational efficiency side, we talk a lot about leveraging people, but

there's a lot of low hanging fruit that we think still could get picked. so right now we are talking about ai and all these big stories, but designing a product that fits in a smaller box that requires less shelf space that you fit more in a container, these are all pennies in really good operators finding these pennies. so the mag seven, the information tech get that leverage. but even something like financials have had a lot of operating leverage in the past year as well. lisa: so are there sectors that you don't think are benefiting from the same deficiencies in the same kind of way? drew: those are the sectors we like the best. our whole thesis this year has been operating leverage. you came off a year where you started the season tailwind after working through 2020 issues, and this year is about operating leverage. and i think the winners have

shown that. jonathan: five minute conversation without a single mention of policy from the donald trump ministration. how important is it to you of ceci over the future of the treasury department? those that matter to you? drew: it does to some extent on what it is going to signal but i'm going to push back on something i heard earlier in the show. i don't think ceo's necessarily just sit there and say we're just going to have to wear this, we can do business. they are investing in secular trends. i see you laughing. lisa: i'm saying there is a paralysis in terms of how much to expand in certain places because of a lack of certainty on national security and a question about how things will be dealt with on an antitrust level. that said, people are still operating their business. do you disagree with that? drew: partially. if you are doing a big investment, and here is the weave, if you are doing

something that is something big and transformational, you are probably going to pause before you get a little bit more policy clearing. but there are secular trends that politics, they might change that sloped very marginally, but they are probably not upending it. so that is the type of investment you can keep doing, and that comes back to tie this all together. if i have operational efficiencies i can gain, i'm going to push on that lever. annmarie: we are two weeks out from the election and you've already said market participants are exhausted. we saw rfk announced for department of hss and pharmaceutical companies sold off. how much is what happens in washington or right now, mar-a-lago, going to be impacting specific industries? drew: that is where we get back to the weave and the other side of this. pharmaceuticals are going to have issues they are going to have to think about, how they

can actually get growth and change the sentiment. when we talk about exhaustion we are talking about really high sentiment, pricing and all of this good news. tax breaks, deregulation. you're starting to run out of good things to find. and now the news cycle is getting a little tricky because we've moved from the u.s. election to is the fed going to cut? i said we were exhausted last week. i don't think it is going to get much better this week. annmarie: i guess they are doing it today, but at what point does the market starts some of the other provisions that a trump administration wants to go after? when does the market actually start to price that in? drew: when we finally get a little bit of policy clarity. tariffs are a little bit messy because it is tough for equity markets to price that in before we figure out what fx markets are going to do. if you had a 10% tariff but then you whack the currency down 10%,

does that really have an impact on gross margins? and on the others, 90% of exemptions on tariffs were granted to u.s. companies. so lisa: when you put the weave together, it sounds like you're incredibly bullish and not really seeing the uncertainty that a lot of people are seeing. i know they haven't necessarily come out with their next year forecast but could you give us a sense of what the number might rhyme with? drew: fundamentally bullish. i think a lot of secular trends are very interesting. a little concerned on how much growth we are pricing in. a little the cautious on valuation. how we handle that is we like the growth side of the market, especially communication

services. the price action today is your macro hedge. that is doing better than russell 2000, we like pairing that with cyclicals as your valuation. so we like that pair. jonathan: smells like 6400. drew: maybe. jonathan: maybe. possibly. that is just me saying it. wait for the big unveil. let's get you an update on stories elsewhere this morning. let's get your bloomberg brief with dani burger. dani: russian media confirming reports that ukraine conducted its first strike using u.s. long-range weaponry within russian territory. russia says their defenses respond to the missiles. the move comes as russian president putin pushed ahead with a pledge to update russia's nuclear doctrine, allowing russia to respond with nuclear weapons to conventional attacks. the kremlin said it will view aggression against itself or its allies by a nonnuclear state backed by nuclear power as a

joint attack. a check on walmart shares higher by 4%. it posted a beat on the top and bottom lines. walmart setting strong demand from u.s. customers across the income spectrum seeking value. households making 100,000 dollars a year or more drove a significant portion of the company's growth with customers buying more at each visit. walmart also saw strong growth in e-commerce. online sales now total about 8% of the total business. according to people familiar, apple has increased its offer to invest in indonesia by almost tenfold. the hope, persuade the government to lift its sales ban on the iphone 16. the tech giant will invest almost $100 million in the country over two years. indonesia's ministry hasn't made a final decision on the newest proposal. jonathan: more from dani in about 30 minutes. just wanted triple confirm that outlook from citi is not out yet. lisa: yeah, but blink twice if

it is 6400. jonathan: up next, trump's latest treasury contender. >> there seems to be concern among a lot of people in the trump camp that all of the treasury people who are being referred with wall street ties are just not maga enough and don't seem to have enough support for the tariff policies. jonathan: the view from neil dutter of renmac up next. ♪

♪ jonathan: equity futures recovering. check out shares of walmart. walmart up by close to 4%. lisa, it is a beat and a raise. lisa: but when you start digging into the internals, hard to see whether this assumption of macro story vs. a walmart story.

yes, they are seeing sales sizes get bigger. they are seeing more people with $100,000 spending more money. these are the items that are selling well. airpods, televisions and tires. put together a macro narrative for that one. go for it. jonathan: airpods would be absolutely humongous as its own company. lisa: especially for the people who lose them after one year and all of a sudden you need to upgrade. i had three pairs. jonathan: i've had five pairs. sounds like a complaint for another day given the threat of nuclear war that is taking place right now. lisa: way to put me in my place. thanks. jonathan: let's turn to the bond market. yields are lower today. you see this on the 10 year piece. there is some risk aversion out there, and real escalation over in ukraine as ukraine strikes inside russia using u.s. weapons. more on that story later in the program.

trump's latest treasury contender. >> there seems to be concern among a lot of people in the trump camp that all of the treasury people being considered who have wall street ties are just not maga enough and don't seem to have enough support for the tariff policies, which is of course reasonable if you're concerned his overall economic growth, and that i think is what is delaying here. it is hard to blame it on anybody except for maybe trump himself. jonathan: president-elect donald trump's transition team reportedly considering needing former federal reserve governor kevin warsh as treasury and hedge fund manager scott bessent as director of the white house national economic council. neil daughter writing i have reservations about this. warsh's endgame has always been fed, not treasury secretary. more importantly because he wants the job instead share i think that will make him more prone to reinforce trump's worst impulses on tariffs. neil joins us now for more. how much weight are you putting

on this decision? how important is this one decision to you and the team to really get a deeper understanding of where the emphasis of this trump administration will be? >> i do think it is more important than last time and if you recall, last time trump was president, the framing as i recall it was the republicans in congress will sign -- send him bills and then he will sign them into law. but this time, there's a lot more momentum behind trump himself, right? he is the one that is elected, had coattails and so forth. the policy i think it's coming more from the white house. as a result, i think this being one of his first major economic decisions, i think it will set the tone for kind of the economic management of the country and the policy for the next several years. so i do think that the stakes

are somewhat higher now than before. annmarie: you think that warsh would not be able to reinforce trump's worst impulses on tariffs. who do you think could do that? this about four names floating now according to sources familiar to me and my colleagues. one of them we just discussed, but of course there is still scott bessent for treasury, mark robin and then maybe senator haggerty. >> i do think it's going to be difficult for anyone to get in front of the trump train with respect to tariffs. if i were talking to president trump i would say would you want someone who is hawkish when the economy is weak and when the economy is strong? is that wiki would really want as treasury secretary? i think someone like howard lutnick would frankly be someone that would reinforce the worst impulses on tariffs. i say that because one of these

candidates actually rallied with president trump at msg, and that was lutnick. look, i thikn there are problems with all of these candidates. we've said publicly that if we had to pick, we think scott bessent would probably be the best choice of the names reported. but the treasury job is a job that requires a lot of knowledge around macro, markets, finance, and you need to be able to navigate personalities. and i do think that mr. bessent is someone who has navigated personalities as wide-ranging of george soros and donald trump. annmarie: today there's is also a personality issue. if it was to be bessent or if he was to go into the nec, what do you think his view is on tariffs? we've gotten almost two different versions of whether or not he is for blanket tariffs or he thinks they need to be used as a negotiating tool. >> i think he would be a

reliable advocate for the president's policies to use tariffs as a way to level the trading relationships between us and our major trading partners. he said as much in a recent op-ed. look, you are not going to find many people out there who are willing to put the sort of tariffs in place that president trump ran on during the election. that is just a reality. and if you find some of those people, they may not even know the ins and outs of some of the financial markets that they would be overseeing. it is a matter of expertise in some of these issues. that is a stretch. but i do think that he would be someone who would carry out the spirit of the president's plans. lisa: there is this question

about taking donald trump seriously but not literally and that is what markets have been doing, trying to take the progrowth impulses and say that, out of the other stuff was negotiating tactics. from your perspective, if donald trump does choose somebody who is viewed as more hawkish when it comes to tariffs, would that change your view materially for the u.s. economy and u.s. markets? >> know, i think the hawkish tariff stuff is already in the price. it's also important to remember that we are talking about relative price changes. if you look at what happened last time, prices rose to the things upon which tariffs were put on, and prices generally fell for other things. and we are in any situation now where trump inherits an economy where nominal growth is generally slowing down. so if tariffs are put on imported goods, i'm not sure which goods those would be.

the prices for those goods would rise but the prices for other goods would be coming down because nominal growth wouldn't be accelerating. at least not immediately. lisa: but given that, do you really think the market is actually responding to this pick? according to what you just said, if it is not going to have that material impact on your economic outlook for the united states or the market outlook, why are people making such a big deal about it? >> remember, lisa, the market did rise very sharply following the election of trump, right? and i think part of that is about confidence. it is a confidence game. trump himself has said that -- or at least, according to press reporting, that the way the markets react to the announcement of his treasury secretary is an important signal. they have said that.

i think there is potential for confidence to not be reinforced with this potential pick. jonathan: we appreciate your time and your thoughts. just to echo, because i think they are really important, this is a really different moment this country. we are going to see some massive policy shifts with global consequences that could feedback negatively into u.s. markets and you need someone in the treasury seat who is a market specialist now more than ever just to echo where neil was going with this. if we just take a big step back and acknowledge once more, 32 weeks since the election. these are really, really high-caliber individuals. from kevin warsh, scott bessent, senator haggerty. but i think this is probably a where you want a market specialist. annmarie: not just in terms of

the united states, a global market specialist. if you are going to be the individual who is going to oversee not just the sanctions and the debt, but also have these tariffs are going to be used, and what happens if there is a reciprocity on the others and some of those other countries start to put up their walls? jonathan: managing the profile of treasuries over the last year has been a big deal in fixed income markets. lisa: there's been an accusation that the focus on the short end in terms of issuance has been to avoid disrupting the long e nd. the importance is nuance and sensitivity. jonathan: not much of that at the moment. lisa: [laughter] jonathan: from new york, the latest on retail up next. ♪ asking smart questions about opportunities like clean water. and what promising new treatment advances can make a new tomorrow possible. better questions. better outcomes.

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jonathan: ajonathan: check on equities right now, we are obsession lows on the s&p 500 and down about .1% on the nasdaq. the russell, looking at recovery, down by more than 1% earlier in the session. let's cross over to manus cranny with your morning movers. manus: what you had this morning was a crash course in knee-jerk reaction headline trading. take a look at this, lockheed martin, up .6%, ratcheting higher this morning.

defense stocks bidding on the headlines like ukraine heading deeper into russia with putin heading -- setting off on a nuclear response. jamie dimon with us this morning, saying be wary of the knee-jerk trades this morning. rolling it over to have a look at the macro personification of the u.s., if you are making more than 100,000 dollars per year, you are coming in in size. i like what lisa just said. airports, televisions, tires. i don't know where the tires fit in, but to be fair, by raising the guidance for the year families are seeking value, the holiday with online business up 20% and percent. just 20% of the overall business. i leave you with a pretty stunning performance on microcomputer. how do you say on nasdaq? you say to the board that we give you filings, we will be clear and give you clarity.

bdo. this stock is the darling of the data centers. 87% in 2000 22. 246 percent return in 2023 and it's all about transparency. can they do that with a new auditor in bdo? good morning, i'm off to buy a few tires. jonathan: manus cranny, can you see him buying tires? lisa: i'm looking at the tires, they are all on sale. that's probably why. especially ahead of wintertime, all weather tires, you have to change them every six months, a lot of people are trying to upgrade. jonathan: we will come back to that story a bit later. under surveillance this morning, the trump treasury pic is still in flux in the present -- president elect is considering kevin walsh for the role with scott besson as the nec director. worth pointing out that things are still pretty fluid.

annmarie: we need to see what kevin warsh does in terms of sitting down for this job. he interviewed with trump but that was for a fed chair job and that does seem to be the job that he may be once. we should note that howard let nick is out of the race. this is not where his star is going to land. maybe they will find another home for him but it will not be a treasury. that's three top with one dark course. mark roman will also be going down for an interview. senator hagerty could be an individual that is interesting. it won't go away because he is viewed by the business community as a very good pick. viewed by diplomats as a very steady hand, he was of course the ambassador to japan in the first trump administration and he will get the applause of senators on both sides of the aisle.

jonathan: where can we schedule that conversation for later in the week? maybe in the news. who knows? russia conducting its first u.s. long-range strike in russian territory and the defense responded to the missiles, shooting down five, damaging another. that's the two-part story to the session so far. 420, a negative headline sign of escalation with reports that the damage was limited on the others just a few hours later with equities rising just a bit. lisa: there is the feeling that this is a tit-for-tat and suddenly people get worried about nuclear war and they pile into treasuries. number one, treasuries are still a haven when all is said and done. prices go up and people are not that worried that this will escalate because it doesn't feel, as much as the rhetoric is

existential and as much as we can maybe not joke about certain things because of the existential risk, there isn't a real fear. annmarie: the other tea leaves, to your point, this might be negotiating to get to the table and make sure that you have the best hand that you can play. trump says he wants to end the war. what else did we see? the chancellor of germany, coming from a position of weakness with the political crisis in germany, calling zelensky saying that maybe you should be open to negotiation. the fact of the matter is there is escalation today. there was a green light from the united states used in russian territory on the border with the rhetoric, heated in russia in the sense of a decree when it comes to nuclear. lisa: does this help or hurt trump? annmarie: it helps him in the sense that you see rhetoric rising. you could potentially see why.

you are going to see both sides wanting to do this, they want the best hand that they can play if they are forced to the negotiating table. jonathan: walmart delivering better-than-expected third-quarter results, boosting their outlook for the year on strong demand for consumers searching for value. results from target tomorrow morning. that stock at the moment is up by 3%. lisa: i keep wondering -- what is walmart? is it a retail company? advertising company? marketplace? some sort of media company? they are expanding in these different ways to take on amazon and i wonder how much that narrative shift is really affecting the way people treat this as not so much a macro story as much as what we were just hearing about, the efficiencies of scale, technology, and of being the biggest in the pool. jonathan: joe, welcome to the

show. following those numbers from walmart, i'm stealing lisa's question. what is walmart these days and how much as the company changed? joe: a terrific retailer growing its ecosystem and it is much more than a retailer these days. they have become more similar to an amazon in terms of offering a market place and effectively selling across, online and in stores. they have grown their whole ecosystem as a result and have been able to capture a more affluent consumer, satisfying the lower income consumer that needs those low prices on a day to day basis, serving the american customer broadly. this quarter was very strong. lisa: their online sales represent 18 percent of the company business with coupons for members to put -- places

like burger king. joe, i'm wondering if there is still a read through on those results to the rest of retailers. do we get a sense of the consumer? joe: there is still a good read through. they are still the largest retailer in the world, especially in america, capturing customers day to day. two thirds of their business is groceries. their grocery business was in the mid single digits in the u.s. operations. their customer is still coming in on a regular basis. they are seeing value with private brands doing well. they have captured a more affluent consumer. it is still a good read on the broader consumer but what is interesting here is they do so much more now than just sell stuff out of the store. that is what has gotten investors are very excited. you can see the strength in their market share gains from what they put out this morning. lisa: is there again taking away

from amazon or just target and all of the other retailers who are a bit smaller and less advantaged? joe: i think the big guys go to battle with one another but the share gains are coming from those smaller, regional and local players. amazon is operating quite well. they have very good earnings recently and are expected to have another good fourth quarter. target has been operating well. we will see more tomorrow, for sure, but i'm expecting similar directional trends like we got out of walmart today. but the dollar stores, you know they have been under a lot of pressure this year. a lot of people believe that walmart is taking share from the dollar stores and i think that is somewhat true. a more affluent consumer, that's coming from somewhere. the prices are so good at walmart, so sharp.

what's amazing is they are driving the business with increased traffic and unit sales. those are the things you want to see. tickets are part of it but it is also because they are getting more people in more frequently. lisa: is the new strategy to start christmas shopping in october of next year? is that what we will be talking about? 4 everyone in -- joe: everyone tried to capture that week. we have been seeing black friday ads for a while and it started to kick in even more yesterday with the emails pushing that. the holiday season has definitely gotten stretched out. this year is unique, there are fewer days between thanksgiving and christmas, compressing the season a little bit and i think a lot of retailers try to take advantage of it by elongating the front-end.

to us it seems like you are going to see this continue and mid to late october is when things start for the holiday season. jonathan: we are all living it, we are all hearing the music. a theme we have been discussing for a while now, how battle hardened and tested have these companies been over the last eight years? there was the pandemic in the first term of trump, they could face the same again. tariffs and pandemic. when they manage inventory, joe, how have things changed over the last several years for these retailers given their unique tests over the last decade? joe: one of the biggest things is the supply chain normalized and as a result, retailers have been able to get back to that just in time ordering and we have seen the inventories be very lean. really for the past year, year and a half for many of the retailers.

they don't need to necessarily order early. when events happen, like the east coast port strikes that happened -- and by the way, we haven't resolved that. the next round is january. retailers brought inventory ahead of it. there is concern if and when the new tariffs get put in place by the new president. i think there is some concern that we might see some of the inventories getting accelerated prior to the tariffs. retailers have definitely gotten smarter about how they are ordering, where they are ordering from. they have shifted distribution and supply chain be on china, they are much stronger than in other parts of southeast asia at this point so there is less reliance this time, but it is still going to be a big pressure that will likely pass to the consumer and we see it as something of a tax on the consumer, quite honestly, it is

likely to raise prices, retailers telling us they have to raise prices at the end of the day. maybe not for the full amount, but for a portion of it, and we see that as an inflationary impact as well. lisa: building on that, every time we see a tariff announcement, it's viewed as a sort of ground zero when it comes to potential companies most exposed to tariffs. are you saying that that is maybe already baked into some degree and people are prepared for it with retailers that already have plans in place to offset it? joe: i think the better retailers have definitely been planning for it. the day after the election with the trump trade and everything going up, the retailers that have more exposure to china were down that day in a pretty big way. you saw the initial reaction and i think the market is already

starting to think that way about who has more exposure and where they have to lighten up. we cover quite a few companies, there's one example i have where several years ago 50% of their product was coming out of china. today, it's 20, close to 20. you have seen the retailers move and reposition over the last couple of years and i think we will see more of that accelerating over the last six months. -- next six months. jonathan: that last point on the retailers, we talked about it on this program after the election, the market was up 5%, dollar general absolutely punished. where you source your goods from, how you manage your inventory will be massive over the next several months. lisa: you can tell that analysts are pouring over their lists and

it highlights, your question is a great one, how much people have already prepared for this. do they already have a preview of it? maybe it won't have the same disruptive character that it did say eight years ago. jonathan: walmart is up by a few percentage points this morning. here's dani burger with your bloomberg brief. dani burger: reuters reporting a cease-fire with israel between israel and lebanon. they said the deal would call for no hezbollah forces between the border of israel and the river with southern lebanon. a u.s. official cautioned that the negotiations were ongoing with amos hoff steen arriving there early this morning to continue discussions. the biden administration seeking 98.6 billion dollars in emergency disaster relief aid from congress to address the devastation from the back to back hurricanes, milton and helene. they warned agencies on the

ground are running low on funds and that the damage from milton alone could costs $50 million. the doj is seeking to force a sale of group -- google chrome browser, asking a judge to impose ai and data licensing requirements on the company, a historic crackdown for the tech company. in august it was ruled they illegally monopolized the search market and google said that this would harm consumers and developers. that is your bloomberg brief. jonathan: up next on the program, looking for safe havens. >> investors often overstate the tactical importance of geopolitics. often the way to do that is to fade the risk. jonathan: that conversation, up next. ♪

jonathan: bonds bid yield to lower this morning. the end is stronger, gold is rallying under surveillance this morning, looking for safe havens. >> i don't think that vladimir putin has a reason to overreact. that would be self-defeating. often investors overstate the tactical importance of geopolitics. i think it is struck -- far more important for your strategic allocations. often the way that we do it is to fade the risk. jonathan: global bonds are climbing over worries with escalation between russia and ukraine, rattled as russia -- the u.s. carries out its first strike in russia. add to, good morning.

lisa set it straight away this morning walking into the studio, this was an important test. something bad happened and we bought treasuries. what does it tell you about them more attractive. it is one days worth of price action. if there is a more significant drawdown, can we hold on to those gains? lisa: with geopolitics, you buy bonds. inflation risk? absolutely not. growth risk? yes. is it a catalyst just to take in the excuse of -- just to just as an excuse of where yields are? >> possibly. rates have been selling off for a number of months now and positioning is really on the light side. on the duration side there is a lot of room to fail and that's what we are seeing today. lisa: on the broader level how

much are you fading on that neutral rate with a fed looking to cut into the next month and then pause? how much do you lean into that versus push back and say that if you like it at 4%, hey, you can get it now 4.5%, so why not go for it? >> it's a bit of the latter. the conversation changes too frequently for most investors. it's secular and determined by trends that don't move around much. the fact that treasury yields on an inflation-adjusted basis or yielding 2% at a time when a credit and equities arkwright -- quite rich, that's a good set up. jonathan: deficit of 7% at the moment. africa, unemployment at 4%. does that undermine the

mitigation characteristics of treasuries? >> will the fiscal situation devolve? that's the toxic mix. we had these risks on the table in 2018 as well. the fed has done a lot of work to take the risk off the table by being very aggressive, learning from their 2000 22 experience and front loading the response to inflation. the odds of that happening next year are lower. jonathan: the supply side was constrained after pandemic and then we injected these steroids. how much have things changed on the supply side now that would make it more difficult to generate inflation through deficit spending? >> ultimately, inflation will be mixed between fiscal and monetary policy. supply side is temporary. tariffs could be a shock that passes through. we need fiscal response in terms

of stimulus next year opening the door to inflation with the fed taking a step back to be behind the curve. the odds of that are quite low. annmarie: if there is too much fiscal spending, do you think the bond market will hit back? >> that's of the job of the bond market, and that has been their job the last decade. lisa: we have been playing bachelor, treasury version, and the type of issuance they do to fill that gap and how they have handled it recently and now they will going forward -- if they increase longer duration bond sales, do you expect the reaction to be swift and notable? >> it all depends on the underlying economy. if it gets weaker and the duration goes into the system it's no problem. if it is still strong, risk assets are doing well and you

can use the duration that we had at the end of last year and that's a painful combination. jonathan: does the treasury secretary pick a matter to you? how influential is it? >> very limited, really on the margin. i think that he or she will influence the supply story -- annmarie: i don't think there are any women nominated. annmarie: i can say lisa: that officially. lisa:i'm not getting a rose. carry on. [laughter] >> i think it will influence the supply story, for sure. they will have a voice in negotiating tax policy changes and a voice on terror policy. but on many of those issues, the course will be set by the president and it won't make that much of a difference. jonathan: something we said at the top of the program, a lot of the policy will come from the top down.

annmarie: coming from president-elect trump and those individuals will be there to shepherd the policies that he ran on and feels he has a mandate to implement. jonathan: in his first term looking at a second term, the senate was a body sending the bill to the president to be signed, now we are looking for the president to send ideas down to get pushed through and that's a big change. lisa: people are still struggling to understand which policies and how directly they will be implemented. there have been a lot of stories around the pixie has already had and how they wouldn't necessarily get confirmed and he basically came out through different channels to say -- yes, they are, and making sure of it. there's a lot of uncertainty around what the agenda will be in the implementation by the president-elect. jonathan: your northstar is both serious and literal, based on what we have seen so far. thank you, sir.

in the next hour, john hancock, stephanie roth, and our guest from morgan stanley. ♪

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>> our base case is there will be a cut in december, 25 basis point cut.

>> the fed is cutting to 3.5. >> they do not need to go much further for the right rate for this level of inflation. >> we priced for strong growth. >> the economy is in a really good space. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: two part story this morning. the first part, a headline crossing the bloomberg terminal that ukraine struck inside russia using western souls. that sent equities lower. we are recovering at the moment. down one quarter 1% on the s&p 500. the nasdaq down only 0.1%. in the bond market, yields lower by only five basis points. the two-year, 10 year, 30 year shaping up as follows. 10 down about five basis points, still at 4.3628 as reports come out of russia that maybe the damage was limited. annmarie: but the knee-jerk reaction was immediate.

the knee-jerk reaction we could potential ec again if we see another iteration of tit for tat , whether going to the border of russia and ukraine, and that rhetoric coming out of moscow, the edit of the degree when it comes to nuclear posture. escalation is back. but the market may be coming back and looking at the saying, is that escalation? because potentially these parties know they may be forced to the negotiating table one president-elect trump gets in the white house. jonathan: over the next few days, attention will shift to earnings. we will hear from target tomorrow, nvidia as round. early this morning, we heard from walmart. walmart looking decent. lisa: increasing their expectation for full-year earnings as well as sales. you see them gaining share from the likes of amazon, but also other retailers. we have been talking all morning, is this a walmart story or a broader consumer story? those shares up 3.6%. putting these stories together,

the target, the walmart, and nvidia, there is a real question mark. are we going to see the proof in the pudding of ai in technological advancements? llama is getting because of their advertising, online advertising that shopping aspects, tech aspects. jonathan: that is the story for tomorrow afternoon. equities now in the s&p down 0.2% and recovering. coming up, emily roland of john hancock. we catch up with bloomberg's craig trudell as tesla moves on news trump will prioritize autonomous driving. stephanie roth of wolfe research on the long-term impact of tariffs. we begin with equities lower as ukraine carries out strikes in russia using u.s. weapons. joining us is emily roland of john hancock. i want to turn to a quote from lori calvasina of rbc. she said this about valuations and positioning, that the u.s. equity market seems to have

little capacity to absorb bad news. what have we learned this morning on that front? emily: we have seen a modest bid for some of the geopolitical hedges out there. you see the dollar strengthened, gold catch a bit here. notably, prices still looking below $70 a barrel on wti. again, a modest bid for treasuries. i think the treasury bond market has been focused on nothing but the potential for -- you are seeing a bit of a shift, but nothing overly notable, given that the prospects for heightened geo-clinical risk. jonathan: when you look at all these issues on the table, it feels like it may be u.s. driven . but it is europe's problem. likewise with tariffs. tariffs ultimately europe's problem. does this the view of u.s.

exceptionalism into next year? emily: certainly that is what markets are telling us. massive outperformance from u.s. assets, the dollar strengthening trade. we have seen this almost secular frenzy across risk assets in the united states, from cryptocurrency, crypto-related assets, lower what he growth stocks. one of the things you need to think about is the consensus around the u.s. is overwhelmingly positive. when the consensus moves to one side of the boat, sometimes it can flip. you want to think about potentially fading some of the move we have seen in more secular to assets and redeploying assets in higher quality, more defensive options, given the massive run we have seen in more secular of assets. annmarie: so -- lisa: so sell tesla by 10-year treasury yield? emily: you have to own some of that stuff. we look at the big event with invidious earnings. nvidia is a number one high-quality stock.

we want to continue to embrace quality. that is according to quality indices we look at. we want great balance sheets, great return on equity, great ability to maintain margins. the name of the game is quality at a reasonable price. how can we think about embracing those quality companies but not overpaying for them? so we are following the earnings. going to be interesting if nvidia can deliver tomorrow. lisa: are we underestimating how much a macro story nvidia could be, that this could be the main event of the week in a significant way, the sand markets in a direction about if they can raise and beat in the same kind of way? emily: i think just because of the sheer size of the stock, it has got to be critical. i've been spending a lot of time with investors over the last few weeks, contending with issues are around emerging-market equities and what to do with those positions.

i've gotten a lot of questions about india, for example. nvidia is 20 times the size of some of these markets, so that is why it is so critical to portfolios. again, we want to be there because earnings delivered and it is high quality. we have got to think about diversifying those areas of the market. lisa: in your -- annmarie: in your note, you push back against this idea about higher inflation, higher growth narrative. then what you look at when you think about these policies that potentially we are going to see next year, which many say they could be inflationary? emily: well potentially is the right word, and i think all of us have been paying the word potentially over the last couple weeks. we look back at the last trump administration, and yes, there were different dynamics from a macro perspective, but core pce, the fed's preferred measure of

inflation, averaged 1.7% in the last trump administration. if these tariffs are more targeted, you may see the impact of inflation much more muted, may be 0.1%, per a lot of the economists we talked about this issue, the impact of these potential immigration issues, possibly will weigh on growth. we are looking at things the bond market is not sniffing out right now. job quit rates are down, which should put downward pressure on wage growth and profits. household supply is increasing significantly, which would cause that tricky shelter component which would moderate in our view. than the commodity story, if you are expecting some 1970's boom in inflation, that has to come alongside higher commodity prices, and we simply are not seeing it now, especially given more muted demand out of china. we think every backup and bond

yields represent a nice opportunity to lead in the income available, now close to 5% on the aggregate bond index. annmarie: two policy proposals i want to get your idea on, the idea we get tax cuts next year and also this is a president who wants to see deregulation throughout the washington complex. emily: the deregulation story you are seeing the outperformance of financials. regional banks are on an absolute tear. same thing happened post 4016 election, that trade lasted a couple months after the election and basically moved sideways. not to say there was not value there, but the bulk of the outperformance came on the news. we are also looking at corporate tax cuts, potentially, and -- you saw a spike in 2017 once those tax cuts went through. i think investors are betting on that.

the challenges a lot of these great news, whether it is continue stock prices running, the economy going well, a lot of that is on the price, the equity side, with s&p 500 trading at about 22 times forward order -- earnings, which is the expensive -- the third most expensive in history. can we get much more multiple expansion? we have seen a massive bull market driven by multiple expansion earnings have gone pretty much nowhere over the last couple years. that's the reason we are thinking about bonds. we do not think they are priced appropriate for what comes next. lisa: what i am hearing from a lot of different investors is a desire to try to get out from under the headlines of the treasury secretary race and whether we get tariffs and how much or how not, and all these kind of things, and figure out what you can lean into that is just sort of a constant.

is that what you guys have been doing? how do we strip out the signal from the noise and figure out our strategy independent of what some of these policies may be? emily: you're right, it is tough, it might be a little boring to people, to try to stay away from some of the conjecture and think about what really drives markets over time. you look at some of the relative performance of the last two administrations, and it is actually exactly the opposite of what you may have guessed. in the biden administration, the best-performing asset class by far has been energy. probably not what you would have thought, given the green energy policies put in place. under the first trump, one of the best performing asset classes you could have owned was chinese stocks. it was because we were in a period of global growth. that macro was far more important than policy. if you can cancel at some of the noise, focus on earnings trends, focus on the economic

standpoint, that will lead you to a better path forward. lisa: we just got walmart earnings, we get target tomorrow, nvidia. other than nvidia, is there an earnings story think is a north star of some sort of signal versus simply noise? emily: i think it is about the broader story. analysts are penciling in 15% earnings growth in 2025, and we think that is an awfully high bar, given the fact we are seeing decelerating growth trends. it does not mean there are not pockets of the market that can achieve that, but you have got to be really mindful in terms of reaching too far or risk and embracing the higher quality more defensive options. we like areas like utility companies, we continue to like technology companies at a reasonable price. it is about that internal market rotation and finding an active manager that can edify those stories.

-- identify those stories. jonathan: emily roland of john hancock, starting that on america first, literally, u.s. exceptionalism. there -- united airlines in almost a 10% holiday travel surge to europe year-over-year, a 30% boom versus 2019. european vacations searching on euro-dollar at 1.05. lisa: first of all, tipping isn't as high as in the united, although if you do -- annmarie: there's no tipping -- lisa: right, but if you are someone who wants to appreciate the good service anyway. i just want to note, who isn't thinking about going back to europe? you are basically talking parity and basically a 10% scan on your entire vacation. annmarie: what investor told me europe is an open-air prison

with fantastic food and art. jonathan: that's brutal. an open-air prison. you are allowed out. i'm here. this came from united airlines. let's get you an update on stories elsewhere. with your bloomberg brief, here is dani burger. dani: sources tell us president-elect trump's treasures and is considering kevin warsh as treasury secretary and scott bessent as the director of the national economic council. infighting between bessent and howard let nick reportedly delayed the decision. nestlé shares are selling off in the european trade, down 2%. it lowered its profit outlook and announced a cost-cutting drive. the new ceo announced his plan to turn around the world's biggest food company, including separating its bottled water brands into a standalone

business. nestlé has been struggling to build back sales volume growth. u.s. tech curves are preventing hallway from creating more powerful chips. the current processors and as i news the same architecture that has been around for years. people say wally -- huawei will be stuck with aging technology until 2026. that's your brief. jonathan: more from dani in about 30 minutes. up next, the morning calls, plus bloomberg's craig trudell as tesla gets a big boost on a report trump will prioritize full self-driving. from new york, this is bloomberg . ♪

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jonathan: the opening bell one hour 30 minutes away. equities negative one third of 1%. morning calls. first up, kraft heinz downgraded to neutral. that stock down 0.4%. tb: -- td cowan raising its price on united airlines. finally, truist raising its price target on nvidia to 167, expecting that chip giant to deliver better than expected earnings. sources tell bloomberg president trump's transition team is looking to ease the framework or self driving vehicles, which would directly benefit tesla. the stock is up almost a 5%. joining us now, craig trudell of

bloomberg out of london. i have real frustration with the story in the rally back -- on the back of it. is it really rig latoya authorities, or is it just coming up with a product that actually works -- is it really regulatory authorities, or is it just coming up with a product that actually works? craig: elon musk would want people to believe getting to this hurdle is a big pediment. tesla's technology is not to the point where that hurdle is even relevant. trying to spell that out to everybody makes for difficult work, when you have a company that markets its technology has full -- as full self-driving, despite it not being full self-driving or otherwise. you have a company that has overpromise and under delivered but have managed to bluff their way to a really rich valuation

on the basis of -- let's be fair to the company, they do have quite competitive driver assistance technology. that is important to acknowledge while also acknowledging that they do not have driverless cars to be approved at the moment. lisa: there is this theory that if some of the trials were allowed, if there were some areas that could be test zones for fully self driving vehicles, that you could get to a technological advancement level that would allow this to actually be a reality. my question is, is tesla the best position for that, or are other car manufacturers in the u.s., gm or ford, basically at the same place? craig: there is really intense debate in the industry on how to go about bringing this technology to market. you have companies like waymo or cruize, the gm unit, that tried to kit out vehicles with really

excessive hardware, equipped them with really intensive ability to process the data that comes in from those cameras and sensors, radar sensors are quite expensive. to deploy those vehicles inset areas with defined limits in terms of where they can go and can't go. that has proved effective that at least getting these vehicles onto the road and getting them to the point where they are able to start charging fares for ride s. they've clearly had a head start on tesla in respect to commercializing in that regard. what musk is trying to prove is that, no, no, no, you don't need all these expensive pieces of hardware, we just need to, over time, improve my driver assistance software to the point where people don't have to pay attention, and eventually, we

will be able to take the driver out. he's pretty out there in terms of being of the view that that can be accomplished, at least among folks who have been in this field a long time. they're quite skeptical of the possibility you could sort of take shortcuts with respect to how intensive the compute you need is. also, the sensors. whether or not tesla can rely just on cameras and safely deploy this technology i think very much remains to be seen. lisa: what is the model? is it for car manufacturers to sell the self driving vehicles to a car renting company to manage the platform? or will they ultimately become direct competitors the likes of uber and sickly operate an entire system of self driving vehicles people could subscribe to? craig: this is another aspect of this story that is interesting,

this intense debate of will they or won't they, "they" being tesla, need to turn to uber or lyft eventually? musk as -- has alluded to this idea he will launch a competitor to uber and have a half-uber, half-airbnb model, where in the same way you use airbnb to loan out your home, you can loan out your car to a tesla ride-hailing app and make money off your car when you're not using it. we've seen, however, that waymo and cruze, they've recently done deals with uber to deploy onto that app, because of the expertise and cap abilities uber can bring to the table with matching ride demand -- with cars on the road. this is something not so simple. it sounds like something a waymo or cruze would be able to build

up that capability, but they learned through exchange it would work in their best interest to leverage what uber can bring to the table. if you talk with dara cautious ashi -- dara khrosrowshahi, they are confident this is not as easy as elon musk is leading everyone to believe. annmarie: even if there is appetite from president-elect trump, because of elon musk, to have this federal framework, it would have to go through competitor -- congressional approval. is the market just liking the idea that this man, elon musk, the ceo of the company, has proximity to power? craig: what this speaks to for the market is, just a few weeks ago, elon said he wanted this. a few weeks later, the election goes his way, and we are learning that this is a priority for the department of transportation. that speaks to the idea that,

absolutely, he has trump's ear. we do not even have to rely on reporting to know that. we see him next to trump on a daily basis. we see him at, you know, ringside at a ufc fight, at mar-a-lago on a daily basis, on his plane. i think the market is betting that, surely, this will pay off for musk in the long-term. of course, we also need to temper our enthusiasm for that, based on the way in which people have gotten close to trump have managed to find themselves on his bad side sort of at a moment's notice. jonathan: appreciate your time. craig trudell of bloomberg. that stock down 0.7%. this close to this relationship that there president has with elon musk has been big fuel for this stock over the last two weeks, few days. lisa: and the proposal highlighted by bloomberg about

the idea of a debtor regulatory remark to get autonomous driving vehicles on the road really turbocharging that. there are a lot of potential hurdles, and you wonder, if it has to have electric goals, it would probably help other auto manufacturers as well, unless there is a special app for tesla. annmarie: one hurdle would be, if this is federally regulated, has to go to congress in a bigger way. jonathan: up next, breaking housing data. the also catch up with stephanie roth of wolfe research and jitania kandhari of morgan stanley. this is bloomberg. ♪ lieve you corporate types are still calling each other rock stars. you're a rock star. we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working.

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jonathan: equity futures on the s&p negative by 4/10 of 1%. on the rustle down by more than 1%. off by 0.7. bond market going into a sprinkle of economic data. 10 year yields are down by six basis points. as we await numbers for housing starts and building permits, mike mckee is with us in the studio. he has that data. michael: this stuff was infected by the hurricanes but we do see a slight decrease, not a huge

decrease but one million 311,000 is the rate at which we are building housing or at least new starts, building permits are 1,000,416. this is a 3.1 percent decline for housing starts and 6/10 of a percent decline for building permits and what we are looking at here is the hurricane effects you can build when everything is torn up. however we are going to see a rebound from that in the future so you can expect some good news and the big question is this is not the housing data that will really matter because of the hurricanes and the rebuilding. whether real estate, the fed cuts rates and mortgage rates don't go down they go up. we see a slight increase in homebuilder confidence yesterday but everyone's wondering what is it can it take to get the real estate industry going.

jonathan: at the front end as well down five basis points on the 10-year. doesn't really matter what we think is driving that. it does matter what market participants and fed officials believe is happening. why do fed officials think yields are up, the mortgage rates are high even though they've been cutting interest rates? michael: they do not want to give a specific reason in public because of the political aspects of it but basically they think markets are reacting to what we will see in the new administration, we are getting some inflation priced in whether or not it happens. getting the uncertainty premium and inflation priced into this numbers. the fed admits housing mortgage rates got so low when the fed was holding rates at zero that it is really hard to dig out of that because people don't want

to change and the cost of changing and moving to a higher mortgage normally the people retiring getting out of their houses and every buddy can move up but people do not want to do that because even if they buy a condo that is cheaper they are still paying a higher mortgage rate. lisa: housing has been a quagmire in terms of the driving forces why prices haven't come down, just the street inflation numbers are interesting. this came out of the same time and it's catching peoples attention the canadian inflation accelerated 2% year-over-year and an estimate of 1.9%. i know there is very much a housing focus but i wonder how much are people looking elsewhere outside of the u.s. to understand the global dynamic or is a completely inward looking in it comes to the fed and economic data. michael: you look at what's happening in europe. this morning when you look at inflation rising a little bit and yet everybody is still

predicting the ecb will not only cut rates but accelerate the cuts because of the impact on the trump administration. so what the u.s. is doing is driving the european housing market. rates there are going to go down much more easily. because of the structures of mortgages and in europe you're looking at two or three years at a time. so right now when rates were going up that was a bad time in the u.k. or europe and now going down things would be better for them than for us. >> i asked someone to people care about the payroll and stte someone just said no. lisa: i care about canada, speaking to the canadians. i think canada is important. i respect it as a country and i think the inflation numbers are important as well because they

came in at 2% versus 1.9% which highlights the global trend isn't as clear as people previously thought. canadians i've got you. >> i love canada i'm just talking about the economic data. >> one funny number here week spect decline in the south for housing starts. single-family starts in the northeast where we are about 28 points. and we didn't have -- we haven't had rain for months. >> yields are down on the long end by three basis points. 435. 43492. stephanie, good morning. reaction to this status so far? >> it is an interesting one. the weakness came from the northeast which is interesting. it became weak after a strong month of september, there is just a lot of noise going on in the data. i think what we will see is the housing market will have trouble bouncing back with mortgage

rates have increased after the fed has been cutting. jonathan: why do you think it's been going up. >> it's all about the market certainly market trades trump yield curve, we have seen that to some extent. there are concerns about the deficit. i think it's the markets getting excited about a better growth outlook and for 2020 think that is fair. for 2026 i'm worried about the tariff impact. >> i'm trying to understand this. if yields go up it make mortgage more expensive, it makes it more difficult for people to afford homes because prices aren't necessarily coming down. at the same time we saw confidence among homebuilders rise to the highest level going back seven months and this idea is because of the election regulations will get stripped back and the economy will be doing better than it otherwise had been. so which is it? >> i think there is an element of the animal spirits coming back. for nhp it driven by

expectations. we saw the three standard deviation move there is probably an element people are feeling better right or wrong but that has an important impact for the economy and will be driving it above trend growth next year. probably not worried until the end of the year. >> what he think the worry comes at the end of the year when that's the one thing we know donald trump can do unilaterally? >> our base case is he probably wants to play this game with a number of different countries like last time having meetings, we also think you will want to attach to some sort of investigation. and it makes sense for them to tie it to extending tcja. whether there's a handshake deal about let's include the revenue savings for this bill it make sense for them to do it around the same time. >> what is the true objective of these tariffs? >> i guess it depends who you're

asking. from trump's perspective there's two benefits. i think they're pretty risky but from his perspective there's two benefits. he can stick it to china and raise trillions of dollars on these tariffs at least the way it used to with static estimates here. >> you see the good things in the bad things the market has to digest when it comes to trump policy being connected in terms of he wants to extend and have more tax cuts and his an essay i will pay for this with tariffs so they all get rolled out of the same time so the sequencing is in parallel. >> kind of. for now it's a better growth outlook for 2025, better confidence and then we start getting into the 2026 tax cuts and then it's a negative for the market because at that point it's tariffs and the tax cuts aren't really that large. they are expensive. it's really just extending policy. the tax cuts we are projecting is something like $500 million which isn't that big. it's things like no tax on tips or very narrow corporate tax

rate cut for drastic manufacturers. the rest is a very expensive bill to extend tcja. lisa: before we get there, i'm still try to wrap my head around you've got the tariffs and how this affects inflation. i'm trying to get back to does this cause revival in the housing market at a time where everything you just painted does not suggest interest rates going down that much. can you see or -- a revival in housing is the basic staples that people have been basically complaining about that they don't have access to. could you see a revival if you have mortgage rates that stay at these levels. >> it's a tough one. part of the economy that will do better on the capex investment side so less about housing and mortgage rates will still be a bit of a headwind. could see a bit of improvement. the builders are excited for the regulatory front and that is fair. the bigger stimulus for the economy will be on the corporate

investment side because that's where the deregulation will be important in the sentiment is critical. >> december, pause or cut. stephanie: base cases they will cut but i think it's fair for the market to price 50-50. we will get a hint of the payrolls today. jonathan: jonathan: payrolls coming out a little bit later in the next few weeks and then december 11 cpi. stephanie, good to see you. stephanie roth of wolf research. let's check out the price action. story of two headlines. futures are down by 0.5% on the s&p 500 likewise on the nasdaq. we jumped big-time on the russell 2000. we were down by more than one percentage point earlier this morning. initial headline that dropped at about 4:20 eastern time indicating ukraine had struck inside russia for the first time using u.s. missiles. then a report out of russia that

the damage was contained. >> more discussion around how it's russia going to go after with nuclear weapons go after ukraine and i guess some of that has faded. what's interesting is it's faded when it comes to the selloff in equities. it has not faded and the bond market in terms of bonds. is this just basically an excuse can we make anything of this or tie ourselves in knots. >>, getting hate mail from canadians because of you. lisa: i'm getting love because of my recognition of canada and the importance of canadian economic data. i just want to say thank you and appreciate your existence. jonathan: joining us now. good morning to you. we believe the canadian story right there. yields are lower. down six basis points across the curve. the equity market rally has stopped more recently is the election set up to be a solid news event. >> i think it is too early there

is a lot of the trump trade that's already been discounted. i think focusing on fundamentals is key and for me when the 10 year yield reaches a real rate of 2% that is financial conditions just given to year on year old rates will be very heavy for the heavily indebted u.s. economy. at 4.5% plus in the 10-year. >> are you buying 10-year or selling stocks? >> i think we are really fundamentally driven so we do like stocks at this point. clearly because again if you think about what's happening on the tariff side, i think there's too much lenient thinking in the market. the trump equals inflation, equals tariffs, all the issues

market pricing. and i think you need to be discerning. we definitely like certain structural markets -- structural pockets whether it's financials, industrials or the industrial recovery. in different segments like defense and electrification, and also within technology there are changing trends between the semi's and software side. we like the 60/40 allocation even at this stage of alternatives which give you good geopolitical hedges be it gold or even energy which can >> be a hedge in the portfolio. we can get to the whole 60/40 and the ideal by they are still offered but before you get there we are talking about sectors and being strategic and looking at fundamentals. this year the fundamentals were glp-1 for a hot second. without those can fundamentally transform the world. and then there was this idea of

ai in the overlay. what are the narratives that will drive some of the investing in 2025. >> i think it's firstly we need to understand the i.t. space. the technology space. the team has been semiconductor equipment because they are the picks and shovels and they lay the infrastructure for this new technology revolution. also understand these are some of the stocks that have come under the tariff war. it's part of the defensive parts of technology which is software. the value creation happened with all the infrastructure laid down by the semiconductors. whether it's cybersecurity or industrial software or enterprise software. we are beginning to pivot towards some of the software aims -- names. the industrial policy in the world has secular -- circular legs. whether it's industrial defense

which is a nice hedge, electrification which is a power deficit world everywhere you go there is a power deficit whether you want to build sam a is or the data centers, you want industrial automation. we can clearly be invested in secular power electrification. >> you see opportunities besides u.s. exceptionalism. jitania: yes, even within the u.s. there are opportunities outside the leaders of the last decade whether it's financials even within the overall software space. annmarie: where around the world? jitania: let's think about where does u.s. have trade deficits with. china, mexico, e.u.. these areas will be volatile, actual volatility gives opportunities. where does the u.s. have

surpluses with countries. it's the u.k., australia and singapore. in many other countries. some of these spots look pretty ok and not volatile. the u.k. is a market we are beginning to like and we talked about last time as well. given wanted to deal with u.k., the u.s. has a unilateral deal with the u.k.. they will do all they can on the sports side, they can't do much on the fiscal side. and generally a lot of the negatives are behind them. emerging markets, they are benefiting from the china u.s. trade war and some domestic demand economies that are not really geared to export in global trade side of the world be it india or be at pockets of indonesia, a lot of interesting opportunities and as i said in europe it really plugs in to all

of these global secular trends that have legs. >> good to see you to catch up. some relative outperformance in the u.k. as we mentioned the ftse 100 only down for tense of 1%. it's down about one point 3% with an updated stories elsewhere with your bloomberg reflex crossover to dani burger. >> wal-mart shares are up 3% premarket. it boosted its outlook for the year. citing u.s. consumers across the income spectrum seeking value. household making $100,000 year or more drove a significant portion of the company's growth. customers bought more at each visit. the company saw strong growth in e-commerce. sales totaling 18% of walmart's total business. blackstone has agreed to by the sandwich chain jersey mike's confirming early reporting. people familiar said the value stands at about $8 billion including debt. the company said jersey mike's

founder and ceo will maintain a significant state and the deal is excited to close early next year. supermicro shares at 23.5% premarket the software maker has hired a new auditor and filed a plan to come into compliance with nasdaq listing requirements. if the plan is accepted by the exchange it's new deadline for the document will be pushed to february and will be able to stay list on the nasdaq until a final decision about its compliance is made. that's your brief. >> some headlines crossing the bloomberg terminal from the russian foreign minister sergei lavrov speaking from rio saying the strike earlier on this morning was a signal of escalation. going on to say i hope the west will study -- study the russian nuclear doctorate. bond yields near session lows. more on that story in just a moment when we catch up with all of her crook live from europe. from new york this is bloomberg.

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jonathan: the opening bell 38 minutes away your trading diary shaping up as follows. fed speak tomorrow, more remarks from cook and bauman plus earnings from target on the big one nvidia on thursday we get another round of jobless claims and more comments from goolsby on friday s&p global pmi's and consumer sentiment as we count onto the opening bell equity futures near session lows with seven or eight basis points as we keep an eye on the latest out of ukraine as they carry out strikes in russia using u.s. weapons. all of her crook joins us for more. what's the latest from the region? oliver: this is the first attack we've gotten since biden gave

that consent for ukrainians to use those american-made deep range attack weapons in russia but the question is is this was basically permitted to strike. the real ambiguity around this was not within the kursk region. this raised a few eyebrows and gone further into the ukrainian -- into the russian field this is something that's concerning a lot of people potentially when you have sergei lavrov the foreign minister of russia speaking right now at the g20 summit saying the use of the signals of escalation he hopes the west will be studying the russian nuclear doctrine and the reason he mentions this is because within minutes of these reports we also got an update from the nuclear draw -- doctrine signed into law saying creating russia which allows them to fire nuclear weapons in response to a large conventional attack on his soil sink remnant will view aggression by nonnuclear state backed as a nuclear power and joint attack not really drawing the distinction between the two things so if it is just a

ukrainian striking with american forces this is something putin will consider potentially under this new doctrine. annmarie: we also have sergei lavrov saying olaf scholz position on tourist missiles is responsible. how divided as the german and u.s. stance right now? oliver: what's interesting is the stance has been followed the united states from the very beginning first the germans did not want to deliver tanks the second biden said ok we will deliver tanks that's basically been the pattern through this conflict. that has changed over the last few days were biden has allowed these attackers to be deployed by -- within russian territory. olaf scholz was asked repeatedly over the last few days and says no this is where we draw the line. i spoke to a german lawmaker earlier today saying he basically completely disagrees with the position and that's not the position held by the cdu in opposition who is likely to

become the next chancellor of germany who said from the beginning these deliveries need to be made. over all of this with policymakers. is the trump presidency. potentially this resolution at a time where you have the sort of german government incomplete upheaval and real disagreement on how to move forward and potentially this could move to deliver those missiles even in -- lisa: what is the level of fear among german lawmakers and europeans you are speaking to about the use of nuclear weapons. oliver: it depends on the parties. you have the majority of the mainstream parties with the exception of olaf scholz who are saying we need to be strong in the face of this sort of attacks of the russians. you need to make these deliveries, there are on the fringes the far right and far left and these are two groups

within the german political system that really gained. they do not want to see more involvement, they want to see a step back and see the german government get basically disentangled and they will be increasingly part of the conversation domestic politics in germany. >> appreciate the update out of berlin this morning. stocks near session lows. down on the s&p 500 coming up tomorrow your lineup looks like this. we catch up with julian emanuel of evercore we will speak to david malpass about the race for u.s. treasury secretary, looking ahead to nvidia earnings after the bell tomorrow and we will speak to matthew luzzetti as the market receives a large risk off bid. from new york, this was bloomberg surveillance. ♪

>> futures down one full percent on concern of ukrainian invasion into russian territory trade vladimir putin's threat of nuclear expansion after 30 minutes of the start of the catch trade. >> bloomberg open interest starts right now. >> coming up, ukraine reported the carried out its first strike in russia using american-made missiles. vladimir putin fires a