dani: cleveland fed president loretta mester on rate hikes for next year.f this continues the bullish message of 4%, it is the market the needs to readjust. also big readjustments from last month. manus: we talk about summer a lot, have a look at august. this was the worst cross asset drop since 1991. number one is began on all this. diana ross and lionel richie which fits. these are global equities. 4% and u.s. treasuries again. they were down over 2%. the least worse is high-yield. dani: are those also commodities? that does not look like enough. the phrase summer of discontent was fitting for you. it is so true. let's bring at -- bring that to our guests, you have loretta mester saying they will not correct. is there more adjustment to come. >> there is deafly more to come. there is a second shoe to drop period nowhere near the effect. it will take three or four more quarters to move through. manus: you are a guest after my own heart. something about the other issue dropping, let's talk about the size. a similar dollar shock that has yet to burst. your w

the fed's loretta mester says rates need to rise above 4% by early next year. plus, chengdu lockdown. the biggest city to shut since shanghai earlier this year. welcome to the program. 15 seconds until the start of the european equity trading. this is what we have got for you. the stoxx 50 futures and next features all in the red, down by 0.9%. let us get today's session underway. that's pull up the gmm and see where markets are opening on the ftse 100, the first to jump into the fray. flat to negative on the ftse 100. we are expecting them to move lower on the equity markets and a couple of art headline stories are having an impact. the fed conversation continues, how high it they get to. loretta mester has her view as she is talking about above 4% for the beginning of next year. we are also nervous about the growth outlook globally and given what is going on with china with the latest headline around chengdu locking down people there. all of that filtering through to europe. the cac, the spanish ibex, and the ftse 100 all showing some negativity at the start

. >>> don't miss the interview with loretta mester. >>> you can watch us live anytime on the cnbc appcoming right back. >> announcer: currency check is sponsored by interactive brokers. the professionals gateway to the world's markets. >>> porsche stock popping in the public debut in germany. up 2.8%. phil lebeau is joining us now. phil, we can talk about the demand there it is the same old story, for the cars, the cars themselves. how is the supply of the ones that people want is it loosening up? >> joe, the cfo of porsche had sobering comments about the chip supply which drives the overall ability of porsche and other automakers to build more vehicles we'll talk about that in a little bit let's first talk about shares of porsche as it began trading in frankfurt today. it was a successful debut. interesting to say it would be successful on a day when the overall market in europe was lower. ipo completed with the $72 billion valuation. global sales down 4% and coming in at 145,000 vehicles you might say in terms of german luxury automakers and market gaps, where does porsche figure wi

tom: the s&p 500 drops to a 22 month low as the fed's loretta mester says u.s. recession will not stop fed hikes. the u.k.'s labour party surges to the biggest polling in over two decades in the wake of liz truss' mini budget. eu energy ministers are set to have an emergency convention on gas caps. francine: we have made it to friday, which means a volatility and some of the wild swings we have seen. the pound now back to the levels pre-kwasi kwarteng budget on friday. ftse 100 features are flat. tom: james bullard also saying that the markets are getting it. not having higher rates without having more pain, but that was essentially the message from the fed officials. the ftse 100 currently down 0.1%. the estimates have been around 6.6% and that is slightly softer inflation out of spain, but the inflation print out of germany was distinct around 10%, the highest and nation out of germany. the cac currently getting 0.6%. we await more details on the energy plans from the banisters -- ministers in europe. tech once again in focus with apple fighting a rare downgra

we heard from loretta mester declaring an early victory of inflation.he fed vice chair of supervision michael barr also. take a listen. >> inflation in our country is far too high. we are not close to the federal reserve target for inflation. i am focused and the fed is focused on making sure we do steps necessary to bring inflation back down to its target. shery: this is a very important at a time when we are seeing relief by the fed. we were seeing signs perhaps prices were moderating. paul: yes. this is a lesson in what to expect when it comes to fighting the fed. the ecb, the bank of england, there is plenty of other central-bank action coming up this you -- this week. u.s. yields are easing. they came close to reaching 2016 lows we saw around the brexit debate. traders were not sure about the boe commitment to tightening and the plan to cap energy prices in britain. the bank of canada tightened as expected. the european central bank later on, 75 basis points are likely. conviction amongst traders suggests they are not completely sure about that eit

the vice chair making it very clear and tagging loretta mester in terms of the trajectory. we've got higr to go in more work to do. -- and more work to do. enda: very direct message. no ambiguity there. making the point that she wants to see rights -- rates go into restrictive territory. that's jargon for when interest rates fight economic activity around the u.s.. she did give a nod to two-sided risks in terms of what happens when you are raising borrowing costs. at some point, all of it will start to create pain in the economy. she doesn't seem to be there yet. she didn't give a nod to whether it is 75. that debate will continue. we will have u.s. inflation data . interestingly though, they increase their forecast this month. they are expecting 75 basis points hike. 50 in november when they were thinking about a 25 basis point move there. when you consider it altogether, it's a pretty hawkish outlook for the fed. interest rates going in one direction. dani: all right. thank you very much. of course, all of that impacting what the ecb does as well. it will be holding its f

you've got loretta mester saying she's not sure inflation has peaked.ow much of it is that part and how much of it is every thing else in the world is really tough particularly over in europe. the dollar is taking that safe haven at the same time. >> it's partly monetary policy convergence, the ecb has caught up and some members are very hawkish but it seems like the fed will have the most room to hike rates for the economy pushes into a recession. then i think it's about potential growth rates. the global growth outlook is pretty grim, but of all the major economies the u.s. looks the best of the bunch, there's a huge cash buffer among households and corporate in the u.s. that suggest they can continue hiking rates for a good while before we see a retrenchment before they go into recession where is europe is facing a cost-of-living crisis, high energy costs, much higher than the u.s.. i think that's the big driver of the stronger dollar as well. >> the deutsche's ceo saying it's inevitable germany goes into a recession. the new chancellor saying the ba

we had hawkish rhetoric from bullard and loretta mester, we all know interest rates are going up but they are saying they have got to get up to restrictive territory. and there was commentary around the market volatility out of the u.k. not being enough to slowdown the fed. they are watching how it will spill over globally, but it won't alarm them just yet. there was chatter about recession, but even though the fed continues to hope they will manage a soft landing, jobs are such a lagging indicator that nobody can be sure where all of this ends up. that is wiped the fed's conditioning markets, they are sticking to their message, borrowing costs, mortgage rates all have to go up. they will continue to push fire until inflation is under control. and then they will take a step back and see what is happening with underlying growth. but it is all about interest rates going one way, certainly no sign of a pivot despite everything in markets at the moment. dani: certainly true, and we are seeing markets realize that there won't be a pivot. enda, thanks so much as always. e.u. energy ministe

fed speech from tom barkin at 9:00 a.m loretta mester at 10:00 a.m.ainard at 12:35, apple expects to discuss its latest products including iphone 14 at 1:00 p.m. eastern. >>> to the market, the nasdaq is notching its longest losing streak since late 2016 for more let's brick in peter boockvar, chief investment officer. he's also a cnbc contributor peter, good morning to you why would you say tech is underperforming in recent weeks? >> good morning, seema i think it has to do with the reaction sell racing in interest rates, both the short end of the yield curve and the longer end we've seen a pretty tight relationship over the past couple of years, at least late beginning last year with the rising rates and the markets taking more of a finer tooth comb through tech because of the higher valuations, making it more sensitive. >> there seems to be this inverse relationship between growth stocks and yields is that the playbook going forward? if yields rise faster than expected, you have to be a bit more cautious about growing sectors like tech? >> i think

you heard from james bullard, loretta mester, and mary daly in the last few hours. here is more from mary daly. >> navigating the economy toward a more sustainable path necessitates higher interest rates in a downshift in the pace of economic activity and the labor market. but for now, inducing a deep recession, the kind we had back in the 1980's, or some would even think of the great recession, that is not warranted, nor is it necessary to achieve our goals. david: right. so i mean, there's the fed. very interesting the conversations we have had this week, and certainly today. i would recap two things from the last 60 minutes or so. we were talking to our guest from abrdn. they said the fed will not stop until the u.s. is already in recession. that is number one, which gives you a good indication as to whether or not global equities -- which by the way, trading at 13 times earnings, already below the median since the fed started qe1 in november 2008. are things cheap enough? maybe not yet. point number two is, when you look at how cross asset investors are getting

and loretta mester sitting down with our "squawk box" this morning.to miss it. >>> stocks and bonds suffering a rough september. leading some to question if investors is should rethink the portfolio strategy here is ken griffin from yesterday's delivering alpha >> the 60/40 portfolio looks better today than any point in recent time. >> why >> the 10-year bond at 4%. 10-year bond at 75 basis points or 1%, there is no upside to the bond in the moment of recession which is characterized with inflation. now 10-year at 4% in a down turn and inflation heads back to a one handle, the bonds are worth more than today. that is a win in the portfolio that's in the green. when the equity portfolio is likely to be in the red. >> for more on that and the trading day ahead, let's bring in degas wright. cio and cnbc contributor good morning, degas. >> good morning, frank. >> you heard ken griffin say that in person what is your take as the traditional 60/40 portfolio. is that what you are advising clients to adopt >> yes for clients to say let's consider municipal bo

taylor: finally as we bring a back to the u.s., we hear from loretta mester earlier, and nation still are too high in the u.s. area than of course to come out that, you are thinking about maybe higher terminal rates, higher restrictive territory, longer time of staying in that territory, what do you see as a terminal rate for the cycle? nick: we are pre-much in that camp as well. inflation is persistent. although not great, perhaps the economy is resilient terms of employment growth and in terms of some of the surveys. we are doing better than other parts of the world. we think those rate increases will continue. we see the one speaking around 4.75% to 5%. with the economy doing better and interest rates in the u.s. likely to go further, we probably will see the dollar stronger for another three to six months, maybe 5% gain from where we are currently as far as the dollar is concerned. taylor: really pushing your perspective. nick bennenbroek of wells fargo, really appreciate it. getting back to some big news of course we were hearing from president biden speaking at the fema headquar

maybe somebody should send loretta mester the carmax earnings report. did you see these numbers?hat this wasn't close to any analyst estimate it's half of what the expectations were. used car comp sales down 8.3%. it's very simple you want an equation we got higher rates, we got higher prices, and we got big affordability problems here's what carmax said. we believe a number of macroeconomic factors impacted our second quarter unit sales performance such as vehicle affordability challenges that stem from widespread inflationary pressures as well as climbing interest rates and low consumer confidence. send that to loretta mester because it looks like this move by the fed is definitely having some impact. look at this down 17% that's a new low, 52-week low for carmax investor confidence is also in terrible shape i follow these aaii numbers, american association of individual investors, look at this, 60% bearish. this is two weeks in a row, 60% bearish, twice the normal numbers. it's never been two weeks, 60% bearish in history this goes back to 1987, this survey bullish, only 20%.

loretta mester mentioned him yesterday, but he said because of congress back then, 1979, congress anytimeldn't, they were his boss. how easy for the current day fed to be aggressive once it starts to implied flowed? when the economy falls apart i think the powell blinks. bring in brian wesbury. as much as burns is vilified, kicked around the dustbin of history these days he says he may have wanted to hike rates but congress was like no way? >> charles, i have read the speech that everybody now is quoting from, arthur burns gave it after he was no longer fed chairman and yes, he blamed congress but he really blamed people because what they wanted was the federal reserve to monetize the debt and so then, let's transfer that to today. everybody is talking about jerome powell being paul volcker. well i actually think he may try to be paul volcker but he is also part arthur burns because he monetized the debt during the pandemic. the m2 measure of money grew 42% during the pandemic. that's why we have inflation today. and the reason all of this happened is because they accommodated the congres

you tell us about the four four four but when i listened to loretta mester today, very important fed member, i felt that a lot of the work we had done toward the slowing inflation didn't mean much to them that they're not happy at all, wages are too high, homes are too high, they're not happy with how they're cooling things >> well, listen, the fed's got a ways to go we might have another 75 -- again, a house call is 75 followed by 50 followed by 50. i felt for a long time the fed was very late. i said i'd be like a squirrel. i like putting peanuts away because you never know when you're going to need them. we didn't do that. covid obviously delayed that the ukrainian -- russian ukrainian war delayed that i understand it. i accept it. but now they've got to move aggressively so they're in my view going to be less concerned about whether we tip into a mild recession than they are about taming inflation, which if they don't creates all sorts of havoc >> what we'll do when we come back, we'll talk about your amazing wealth advisory business, what you're telling me and how you've reinven

inflation as we look toward into 2023 heard more and more members ofhe fed with hawkish tones loretta mesters to get above and beyond where inflation rate is. where do you stand whether or not there will be a fed pivot sometime next year? >> well, i think the best case early next year is fed pause, this idea just a couple weeks ago that fed was going to start cutting rates -- honestly think was absurd the markets realizing that now really, aggressive comments by fed chairmen powell, and, comments by other fed participants no way cutting soon could i see a paws january, february where allow the economy to kind of coast hopeful not push us into a deep recession. cheryl: dominic i want to talk to you about labor market, we've got august jobs' report coming out, tomorrow. we've got initial claims coming out about 16 minutes from now. you have weaker than expected adp report only 132,000 private sector jobs, we were looking for 288 that was rough, also, we are hearing more and more companies talk about cutting jobs. and i don't think that is getting enough attention because if all companies are c

the latest surge in the rate outlook comes after loretta mester yesterday says her outlook sees the fedhing rates up to above 4% next year and maintaining that level. >> it would be a mistake to declare victory over the inflation beats too soon doing so would put us back into a stop and go monetary policy world of the 1970s, very costly to households and businesses. >> rates are rising as some good job news comes in, that might be bad news for the fed jobless claims ticking down for the third straight week and the employment component of the ism manufacturers you've got at the top of this hour, rising to its highest level since january, all that setting us up for the jobs number to market, essentially looking for 318,000 jobs and the unemployment rate to remain unchanged at 3.5%. wages forecast to rise, 0.4%, pushing the annual to 5.3% after a period of seemingly willful deafness for the markets, it's not entirely clear the economy overall is hearing that message doesn't appear to be much softness developing. if that's the case the fed may have to be like that old avis commercial and tr

steve liesman is in washington, d.c., and he has some fresh comments from cleveland fed president loretta mestere, very much echoing comments she made to me in jackson hole late last month. she had the fund rate neither to be near 4% by early next year and does not anticipate pushing back some market pricing. among the issues that she warns against, markets could remain volatile, growth could slow down more than expected, unemployment could rise more than expected. too soon to conclude that inflation has peaked the recession risk has moved up to in the next two years. she expects -- before he headlines came out, markets were reacting to a "wall street journal" piece suggesting that powell is a -- is the april 2023 contract, that's the one we follow, now pricing the peak funds rate at 39 had it was at 340 in early august. also, a 90% chance of that 75 followed by 50 in november, so, you do the math, we're on track to be up near 4% by yearend. what's happening is powell and federal officials are leaning to the interpretationthat the fed may do less tightening instead, the message is full steam ahe

atlanta fed president at noon, dallas at 12:30, loretta mester at 4:00. how much of them start to talk about the concern a strong dollar will torpedo the global economy, if this will come back on the u.s.? we heard from raphael bostic who says he sees the possibility for a straw -- for a soft landing. that gets more obsolete. jonathan: can you imagine not even a week after chairman powell delivered the news conference they start back trapping -- they start backtracking because of moves in foreign-exchange? lisa: i cannot imagine they would because right now it is not hurting the united states and if they did that it would muddy the credibility of the fed more than help the backdrop from a foreign-exchange. tom: standard deviation analysis is in order. these are huge moves. jonathan: let's get to the portfolio manager for the blackrock global allocation fund. i'm trying to work out when rick and bob get on the phone on monday morning, the call goes out and they say back up the truck, let's buy these bonds. are we close to that moment? >> you're probably cl

the other two events are speaking engagements by cleveland fed president loretta m mester before the open on tuesday and close on thursday. mester is the primary inflation hawk on the open committee i call her the guardian of the galaxy, she's from cleveland where the guardians play and wants to protect the whole galaxy from high inflation even if that is raising interest rates into high inflation. she said that. i'm not putting words in her mouth. i don't think that's prudent but i understand what she's trying to do. raising rate ss into a recession is not prudent you can raise rates and see how they are doing, tightenings i agree with you have to understand now it's mester against your portfolio and she may not say she wants stocks to go lawyer but her hawkish statements say that. your portfolio goes down, spending goes down and wfh situation i said at the top of the piece improves because there is less demand for everything. it's a terrible way to have it happen the good news is mester won't have the payroll report to use against us i expect a red hot set of employment numbers and

jonathan: that was loretta mester but it could be anyone on the fit.ngside tom keene i'm jonathan ferro. bramo will be back on tuesday i am told. apparently it is long weekend stateside. anna edwards alongside us. on the nasdaq we are down a little more than 1%. the hits keep coming. we can talk about the chipmakers later. let's talk about the lockdown in a city in southwest china. 20.9 million residents. the hit the boards are taking every single morning. tom: right now in hong kong, they are even talking about blowing up what is an attempt of major meetings and their financial capital because of covid. jonathan: maybe they make a move there. i want to talk about sterling. a weaker pound sterling. here is the number. 1.1582. 1.15 after the weakest month for pound sterling going all the way back to 2016 in the weakest level going all the way back to spring 2020. tom: the heritage of bloomberg surveillance as we adapt when the news changes. overnight we put an fx push on. we are thrilled to bring you out of bank of america, global head of gf strategy. j

we also hear from loretta mester, lael brainard, the federal reserve vice chair. michael barr also speaking at the same time that we get the beige book. do we get any insight about some of the conflicting data we are getting about whether we are slowing down or speeding up with consumer spending picking back up on the heels of lower gasoline prices? today we have a barclays chief executive energy officer conference. alix steel is there, interviewing a number of executives, including the executives of conocophillips, chevron, and devon energy. gasoline prices have come down, but we have seen crude fall to some oats lowest levels in months, and this does not make sense if you look at some of the fun of mental issues with with spec to opec+ supply cut. get this really speaks to the deteriorating expectation for the global economy. jonathan: thank you. looking forward to the day ahead and looking forward to what vice chair brainard has to say on the economy specifically. i think it is the first time since jackson hole we have heard her address some big things. going u

potential for that here and roger altman said no, no, no, things are operating fine here and loretta mesteritish pound moving so drastically you have to wonder what else is potentially leveraged and if the thai baht can bring things down why couldn't some of those functions? >> when you get such a dramatic rise in interest rates in a very compressed period of time we're going to hear more stories like this, and doesn't necessarily have to be an exotic product just take a small business that borrowed floating rates. they certainly did not anticipate such a dramatic increase in their interest expense and now at the same time maybe the revenue growth is growing because the economy is no longer growing and they'll have a potential cash crunch and while that not necessarily make headlines that will be another collateral impact from this, what i call a rate shock in terms of the velocity of the increase >> peter, i heard from you earlier. i didn't know you were coming on, but you think liz truss -- i was trying to see exactly what you were talking about do you think liz truss is being unfairly bl