'Bloomberg Surveillance Simulcast' Full Show 11/07/2022
The economy is not responding to the Fed's tightening. And so they've got a lot more work to do. Signals that we would expect to see after this much of tightening from the Fed. They're just not there right now. You could get to a terminal rate that's even close to 6 percent. If inflation does not obey, the Fed is setting itself up to reverse some of this policy. I think we haven't seen the Fed raise rates so rapidly before. We haven't had grown a virus economy and
we haven't had inflation like this for 40 years. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz life from New York City for our audience worldwide. Good morning. Good morning. This is Bloomberg Surveillance on vacation, right? Andrew, good luck, sides. What's going Lisa Abramowicz?
Jonathan Ferro. Amazing that election central is actually here in New York over the weekend. Tom Achuthan speaks volumes. The fact that we've got the president campaigning in New York. Yes.
Say that he won by more than 20 points in 2020. It's just absolutely fascinating to see not only President Biden with President Trump out there, with President Obama is well, in all of the tensions of this election are what we cover every day. And I'm going to go right to Joe Biden's worst nightmare, too. You see one hundred dollar Brent crude
in the vicinity of tomorrow or Wednesday. We're not there yet. Did he say no more drilling yesterday evening? I missed that. Isn't that what he said? No more drilling. No more drilling. So on the one hand, he wants to tell progressives no more drilling. And on the other hand, he also wants to
tout them. The oil and gas prices are where they are because the oil companies won't drill. He did not make make that happen for me. Just help me understand, there have been story after story about how Joe Biden's gaffes have really directed where he is and the spots he inadvertently created with, for example, Joe Manchin about coal production. I mean, there are so many different aspects of this because it is a conflicted moment at a time when natural gas and crude products are also very much the focus, despite the call for longer term neutrality. You know, Betty, talking about this week, what cup in each it? Isn't that a change from twelve months ago? They don't want to talk about that in the campaign trail this week, do you? It's messy right now.
How do you connect the idea of needing fossil fuels now with the idea of removing some of the fossil fuel emissions later on? It is impossible to square that with any kind of blunt message. And right now, again, we know nuanced speeches right now take up about half of 1 per cent big money to close out the week last week off the back of pay rolls. But still a week he lost can be bear market rally. Right. Continue. Mike Wilson of Moby Stand. He's got a ton to say about that. Someone I'll catch up with him a little
bit later. We've got to go right to CPI here in the course today of off of Michael Barr earlier. J.P. Morgan, are we looking at rents sticky? Are we looking at a reaffirmation of oil up again? I'm on the Brent. One hundred dollar watch. I mean, it's not that rent, but that's a gallon of gas. If I had to put you on the spot, do you want the results from the election or CPI upfront? If I could give you right now, would you take. I would take the CPI statistic upfront,
but it's going to be an eventful election. And based on the punditry I see in many of these, good guests will join us in Washington tomorrow and Wednesday morning as well. And John, to me, the basic ideas, the how much of how much oddness of this, how much goodness, how much and how much goodness. That's four years. International Relations, University of mostly Iowa, the homogeneous. Are you still upset by a game over to be
upset? I'm not upset in hockey, folks. There's people that go directly to the net. I was not one of those. They have a gift to go.
His first goal was textbook, etcetera. What do you think? Beastie ISE? Just an awesome football player. Brahma is safe. Cain is very upset about a sportswriter
over how much oddness of your brief. I just before we get into that, how much of this, I want to make a comment about Mike Wilson and cut ties to the election that we're actually seeing because of the CPI, because of inflation, because of where yields are. The idea of less fiscal spending being positive for stocks, just what that's set in. Right. People are expecting a rally because of the prospect of less fiscal spending and perhaps more gridlock.
At 9 a.m., we'll get the European view of this exact issue. How do you spend into an inflationary outlook? EU finance ministers are meeting in Brussels to talk about the energy crisis and to talk about a deteriorating economy and what they can do or not to support that. This CPI over in the eurozone climbs to ten point seven percent. We're going to get further reeds around the country, around the world later this week in terms of CPI and perhaps that will shape this entire debate in terms of how far these central banks have to go and how little fiscal spending can really be put into place.
Today, we have a slow first week. Boston Fed President Susan Collins in Cleveland, Fed President Laura M.. Going to join each other at 340 p.m. at a panel discussion, at a moderated discussion in Richmond, Fed president is playing the sex of CPI at 6 p.m.. Tom Barker, what can they say at a time where they're not making any progress? Bill Dudley was speaking at a panel overnight in Singapore and he was talking about. They really haven't made any progress whatsoever on the employment front.
How do they talk about that? Well, it's a really uneven transmission mechanism in aftermarket. We're talking about earnings. We get lift earnings, the latest of a slew of tech companies that have announced layoffs. And I really am curious about how this plays out, whether this is just a tech story, as we were talking about last week, or whether this is a broader kind of cutback. We've got left cutting jobs matter overnight, saying that they were going to cut thousands of jobs John. Is this just a specific area that really
built up over the pandemic, having to now reset expectations? Lisa, thank you. That's where the access was and that's where we need to unwind some of the excess. Apparently, Apple down about eight tenths of 1 percent in the premarket sum. So Apple came out yesterday.
The lockdowns in China continue. Ultimately, that's going to affect supply. We came out with an additional story here at Bloomberg as well, saying that these cuts aren't just about available production. This is about demand, too.
That's the interesting element that we've put out there in the last 24 months. What do I notice in full disclosure, folks, I bought two of these bees here in the last 5, 10 days and one of them on a huge waitlist. I might point out. What I would point out, John, is a polarity between their fancy expensive phones. The one Mark Gurman is sure and the other ones are cheaper. Phones aren't moving. Why did you buy the more expensive? I bought a purple fancy more expensive one. The one just you know that Bill got the
promo DAX offer. You got the pro and ISE. Full disclosure, I was thunderstruck at the quality of the photos. I had no idea. Is the camera almost as good as the Samsung camera now? I don't know. I don't know. My Android users, though, the Samsung camera is really, really good. I just trying to trigger people as much
or get them an apple. I think John's point is, is is germane. This ecosystem they have is built up as DNA ISE, I believe refereeing the Anna Edwards here this morning to get his opinion on this. But the bottom line is you've got to wait weeks, months to get the fancy iPhone. Dan Dennis, a fifteen Eastern Time. Looking forward to that. Ben Nadler joins us now, global market strategist to E! Toro.
Ben, we're trying to work out where the next catalyst is for this equity market. Let's call it a bear market rally. Ben, I don't know if you agree with that terminology, but what's the next catalyst come from? Yeah. By my count, this is all sort of fit by market rally. You can stay up to sort of 10 before we have that sort of finally have that breakout.
So this sort of next bull market. What kicks off the next bull market? I think fundamentally it's the Fed starting to cut. Interest rates were obviously quite a long way from that right now. But I think this process is sort of forgotten right now. Earnings have been less bad, but continue to hang on in there.
You know, the necessary first step to the Fed cutting earnings is stopping the hike earning ISE. We're getting closer to that right now. Valuations below average sentiments, very depressed. You know, when we into to the best seasonality of the year. And, you know, there's a bunch of big wildcards out there. I think the risk is on the upside. And China China's the obvious one on it. Put all that together. And I think there's absolutely enough to
say that we sort of building a bottom here. This is a very investable market and the next big move is off. I just think we're probably gonna bounce around for a little bit before we have some sort of definitive sustainable beginning in the next bull market. Then there's a certain game out there. There's certain volatility, there's certain acceleration. But looking into 2023, using the Greek letters alpha in beta, is this going to be an alpha ad market? Is this going to be an individual stock picking market or is it in the index fund market? Dubbing is Alphabet for the first half and beat up on the second half, I think growth is absolutely going to slow.
We're going to be talking more about recession earnings then and come down. But the closer we get to the top of the cycle, the more we start looking forward to right spring. I think that takes the pressure off valuations. I think it's very much going to be the opposite of this year, right, where earnings held up and valuations were absolutely crushed. I think you're gonna see some valuation
relief. I think earnings are going to start to sort of stay under some pressure. I think we're going to see the benefits of diversification a lot more. We're not going to see bonds and equities. I think both get crushed together, which
is the sort of historical anomaly we've seen this year. So I think it's all change again. Right. This year was very different than last year. And next year, I think it's going to be very different again. So I think investors got to stay on their feet.
I think it's all about stock picking in the first half and maybe more beta and second half. But just to wrap it up, are you basically saying that the next year or so we go back to what we knew over the past decade or so, a low inflation rate cutting environment, that's a tailwind for all assets. Yes. Well, I sort of. I mean, I think the last decade is extreme both in terms of a level of growing importance of the level of inflation, the lower interest rate. I think they're going to ease in that direction. But I don't think what potentially ever going back to, you know, the degrees we saw all those things over the last decade or so. So I think that's going to be I think
growth is going to get a big tax going to go to bed. But I think certainly for the first half, it remains very much about value and defensive defensive assets, certainly for the first bit more risk of backing off a band. Wonderful to hear from you, sir. Ben, later that of a taro T.K. margins under pressure.
Do you see that commentary from BlackRock? You see it from Goldman. You've said a million times. Is your phrase company to tap? Let's talk about how they're adapting. Mark Gurman cutting costs, cutting, Justin Trudeau cutting. That's the first path always. And I think we're going to see much more here. We're advantaged by Bloomberg
Intelligence. Gina Martin Adams is heated. You're going to see it at the operating income line. Every CFO is going to lean over to the CEO and say, here's the shortest path to stability. You know, Mr. Mason, if you look across the tech sector, I actually think it's the chip industry. Think about how quickly that story's moved in 12, 13 months. It's flipped from we can't get enough of this stuff to we need to start cutting. That's quite a change in, I think, for a
lot of people looking in this market. They look at the economy. They think about how much quickly, how much more quickly, perhaps can inflation come down. I'd look at that industry and say things can flip pretty quickly. And it's not just chaps, right? It's also the retail sector more broadly when they produced a lot of clothes that they didn't perhaps need now, but they need to die about a year ago. It's the same kind of story with cutting some of the costs. At what point, though, do you still see services continue to accelerate, people still paying more for that? And this sort of bifurcating market where you see pockets of inflation still accelerating is really what's got people concerned. Seven handle is what we're looking for
from CPI November 2010, the numbers. Yeah, but honestly, is that a good thing? I mean, if we end the year at seven point eight percent, is that really going to be such a victory considering where we thought it would be by. I wrote a banner and I didn't use it. We're seven point nine percent is way different than eight point one percent. It's a long shot for Raleigh. Was brilliant this week. J.P. Morgan always says they're looking at like, you know what? Inflation is coming down.
You know what? Don't tell rents. Michael Scharf, that's awesome. We're gonna catch up with the man from market Ford Asset Management in the seven o'clock cap at 50 minutes from now. Looking forward to that. Equity futures this morning, big week ahead. CPI and midterms in America. Futures higher by six tenths of one per cent. This is pulling back.
Keeping you up to date with news from around the world with the first word. I'm Lisa Matteo. The U.S. and Russia reportedly have held private talks on ways to avoid escalating the war in Ukraine, according to The Wall Street Journal. A peace settlement wasn't a goal of the discussions. The Biden administration was said to have warned the Kremlin against using nuclear weapons in Egypt. United Nations climate change talks got
under way with a deal on discussing reparations. The idea is that rich nations can help pay for damages caused by global warming. Elsewhere, industrialized nations have repeatedly blocked attempts to add that to the agenda. In China, exports and imports unexpectedly fell for the first time in more than two years. Overseas, consumers bought less. While demand in China was hurt by Kobe, zero controls and a housing slump, Brazilian exports had been a major support to China's recovery in the past two years. Twitter is asking dozens of employees it laid off last week to please come back. Haidi Lun must cut close to thirty seven
hundred employees last week to slash costs. Bloomberg's learned that some were laid off by mistake and others were let go before management realized they may be needed to build new features that Musk wants. And Bloomberg has learned that Apple expects to make at least three million fewer iPhone 14 handsets than originally planned for this year. Now the cutback is due primarily to
softer demand for the iPhone 14 and 14 plus. Apple and its suppliers now aim to make 87 million of the devices or fewer global news 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Lisa Mateo. This is Bloomberg. Democracy is literally on the ballot. I've been making this case since I ran. You know, there are more than 300 Republican candidates for state, local and federal office for election deniers. These deniers not only try to deny your
right to vote. They're trying to deny your right to have your vote counted. The president of the United States, a busy weekend campaigning for him. Live from New York City this morning.
Good morning to you. Well, it's the price action to kick off ABC trading week. Equity futures look like this upper half of 1 percent. Adding to the gains of Friday, yields
low at just a basis point on a 10 year, 414 40. Any affects market Eurostar strong, a bit of strength just south, apparently 99 81 with positive two tenths of one per cent and crude Covid. No web at some back in the 90s. Jonathan Ferro 92 64. Yeah. Brent IBEX six dollars up. Ninety eight dollars 67 cents. It's not through the highs of Friday,
but is there one of them I think gets you to one hundred dollars a barrel, which for a President Biden is four dollar a gallon and up gas and out in California, of course, a lot more than that. We will go to the person we will lean on here to morrow in Washington. And Wednesday morning as we pick up the debris.
And that is Annmarie Horden Bloomberg, Washington correspondent, steel to join the surveillance entourage. Tomorrow morning, I look Anne Marie at my reading over the weekend in the thundering silence I noted was not distrust in the polls, but just what is the value of the polls? You talk to all the experts, both sides of the aisle. Do the polls speak the truth? Well, they're a bit confusing, right? Because when you look at the polls in terms of issues, top of the issues, inflation and the economy, and that's what people are going out to vote on. And at the same time, when you ask them who do you trust, the economy and things like crime more in the hands of its Republicans. But then over the weekend, there's an ABC Washington Post poll that says from people's districts, it's pretty much neck and neck for Republicans and Democrats who they're going to vote for. And then also an NBC poll says that Democrats are now catching up to Republicans in terms of enthusiasm of voters wanted to go out. But if voters are focusing on the
economy and inflation, other polls show they should be leaning Republican. So they are quite confusing at the moment. I think by and large, everyone is expecting obviously a red either ripple wave or some NAMI for the house. And it's really just going to come down
to the Senate to see how this shakes up for next year. How do we determine turnout election day or do we just have to wait till Wednesday morning? Well, we already know what some of the turnout is. So more than 40 million people already voted in Georgia. You're seeing record early voter turnout. I was looking at data this morning from a Democratic data analytic company looking at Pennsylvania already beat the midterm, the last midterms, 2018 for ages 18 to 29.
This is a key group. The Democrats are true, clearly trying to harness to make sure these individuals, which a lot of them are young, likely lean, progressive. Look at the president last night and Sarah Lawrence College in Bronxville, New York. But in Pennsylvania, these individuals already going out in voting.
When you talk about New York and we were talking about that earlier, John brought up how what does it say when Joe Biden is campaigning in New York, when you do have such an overwhelming Democratic feel in this state? How much is this a single issue election in New York, perhaps crime in other areas, perhaps economy and in other areas? I'm thinking Georgia and Missouri, perhaps abortion. How much is it sort of select numbers of individual issues that are driving people to the polls? I really you have to look at locally what is driving people out. You know, all politics is local, as they say in New York. It has been crime.
And it's not just president. Bite it. You had the former president, Bill Clinton. You had Kamala Harris, the vice president, which really hasn't done a lot of campaigning with individuals. Also out on the stage with Governor Hochul, I think this speaks volumes that as the Sunday evening before the midterm elections, the prison, United States is in Bronxville. He's in Bronxville, New York, trying to make sure that they can hold onto the governorship in New York. And this obviously is not going to
change the calculus of this administration in Washington, D.C., in Congress. But what kind of tone does this set for the Democratic Party going into 2024? I'm looking also at the mayor race in Los Angeles and the fact that the Republican, this real estate developer, Mr. Caruso, actually is gaining a little bit of advantage. What kind of tone is that setting?
And I think that's what people are most interested in at the moment. It is kind of amazing, Emery, that we're actually not talking about the midterms at all. We're talking about the warm up to whatever happens in 2024. Former President Trump saying that he's going to probably announce in the next week or so after the election.
People wondering what will Joe Biden do? What is your sense on that? Yeah. And the president, former President Donald Trump, actually said at a rally this weekend. Stay tuned for his rally this evening in Ohio.
So maybe he'll even hint more at his 2024 bed. You know, right now, what would the Biden camp, they say they are running. Obviously, this is something that is a two year long race.
The president there's lots of questions about whether or not he will actually end up doing the next four years. But many maintain that if President Biden will run, if the former President Trump ends up being the nominee. But a lot can happen in the next two years. I mean, look at the political report this morning.
Look at all of some of the big Wall Street money is going and that's going to Ron DeSantis. You had Ken Griffin pouring money into that campaign and he said he would if he runs for 2024. MH, thank you. Emory down in D.C.. Looking forward to the coverage. Nice to have a nice couple of days, Lisa. For a lot of people, it comes down to whether we have an outcome that loosens or tightens the purse strings down in Washington. And what's interesting about that is
that in the near term, if you get one that tightens the purse strings, I think people see that as somewhat bullish. Is that going to be bearish in twelve months from now if inflation is low and the economy is rolling, go for in the fiscal support can't be provided. I do wonder that's a question I'm asking myself this morning. I mean, it also gives you a sense of just how much full circle we've come. Right.
That less fiscal support is bullish for markets, even though in the past more fiscal support was bullish for markets. This question of is this just purely an inflation game to get inflation under control? Bond yields are to control, and that's going to really dictate gains. And to your point, for how long and when does the game plan change? John, the breaking news of about two minutes ago is, am I kidding? When talking to talking to Trevor, you can fly. You guys lead. Draw is out. Oh, this is fun. The knockout stage is in the middle of February because the World Cup is disrupting the whole thing.
AC Milan, my club against Toms Tots in the middle of February. We going to go to France just as it France since 2 in 12 years. First time they played here, it's been a while. Explain to our American audience, this is not Premier League. This is the all euro, the best of the best in Europe.
And the answer is AC Milan is really on their game this year. They're better than they were maybe five years ago. And this should be interesting. This is going to be in Milan.
We can get the first likes in Milan and the second leg is in London. So can you walk? We got an intern over here I've got to talk to. Can you go be sure we can get the American Airlines team alone on if we can't, that we'll go to London if we have to. He's going to be eating the pie with a fork and knife. I don't think that.
Not too in pies. In Milan. Not in Milan. OK. OK. No, I know. Maybe not. Villa. What do you get to London? What do they do to improve the Campari like this happen? From New York. This is blowing back.
Let's get a trading week started, equity futures up by six tenths of 1 percent on the S&P, on the Nasdaq up by six tenths of 1 percent. Also, the small caps, the Russell positive by seven tenths of one percent. The bond market shaping up as follows. The range on a two year.
Last week, the high was close to for 80. The low was close to 440. That's a 40 basis point range last week on a two year. Right now, somewhere in between 468, 18 on a two year year.
It's higher on the session by a couple of basis points. Any affects market. Take a quick look at the euro and foreign exchange. Even with that move higher in the week
and a two year DAX, why the dollar index doesn't give me much last week at all. Tom Keene Jonathan Ferro dollar back to 1994. I think it's an important insight and what's amazing there is how yen has strengthened 146 64 and I do agree with the U.S.
yield shift up. We didn't see it in further dollar's strength. A lot of weakness out on Friday. Some post payrolls. I think we're all still trying to work out what that post payrolls move Tom was all about. It is a time of change. And as we readjust to the end of the
year and maybe readjust after the election. Joining us now, someone with a terrific perspective on this, Alan Ruskin, chief international strategist at Deutsche Bank, is as well. Alan, I want to go to the path from ultra accommodative Stanley Fischer to accommodative to an unmeasurable neutrality into a dominant constant over Mizuho calls super restrictive, which is basically disinflation, even with oil, even with rents. How close are we to restrictive?
How close are we to super restrictive? Great question, Tom, because I think you can't just look at this in terms of monetary policy, you have to look at it in terms of fiscal policy as well. And I think the most underrated element in terms of the policy stance is that fiscal policy from 2021 was really the most stimulus we've ever had by cantons. Yeah, I think that it said 10 percent of GDP stimulus at that point for over those two years, about five times what a large stimulus is. That's still reverberating.
That's still showing up in excess savings, that's still buffering the consumer. And to me, that is creating the underlying resilience. That means that interest rates can be much higher than they would otherwise. Right. Interest rates look like they are much tighter than they are.
An arched theme of your colleague, David Focus. Linda, who's been there will be fiscal stimulus clearly in Europe to rebuild Europe after an horrific or is. Well, do you see fiscal levelling, fiscal stimulus or maybe even some form of drop down in fiscal spending in America? I think a lot is going to hinge on Tuesday and the events thereof. I think the anticipation is that fiscal policy is going to be a lot tighter going forward. I think the question there again is what are we going to see in terms of front loading from the lame duck session? The session in terms of the debt ceiling, how much constraint is that going to impose? But I think the anticipation will be that we will see tightening. But I again want to emphasize the fact that the lagged fiscal stimulus from 2020 and 2021 is still going to act as a buffer for 2023 and 2024.
So it's still got to be substantive. And I'm not that worried about the tightening on the fiscal side. Okay. But there's a very strange confluence of bad news is good news for markets right now. And we could put fiscal spending in there. It's good if we get bad data because that means yields will go down. It's good when we get less fiscal
spending because it means bond yields will go down and perhaps they'll cap inflation. At what point does that run out and people start to think, OK, wait a second. This isn't going to support the economy and that is negative broadly for the dollar and for risk assets. You know, listen, I think if you look at past patterns whereby we've had a Democrat president with a divided Congress, you've seen, as you might expect, that fiscal deficits tend to come down. You see bond yields well supported, but you also see equities tend to underperform and you see the underlying economy. The GDP numbers tend to be weaker. So I think you ask the right question there that it does tend to add to underlying weakness and that good news for the bond market is only going to filter through to some extent as far as the economy is concerned.
I don't think it's going to be sufficient, for example, to stop a recession, say, by the time the end of 2023 into 2024. We had been littler honor earlier in the show, earlier in this hour. And he was saying that he thinks that there is going to be a very big move up in risk assets because that there will be cutting of interest rates by the Federal Reserve and we'll go back not to the same extent, but a similar playbook as the one that we've come accustomed to. Do you think that that is likely? Is that something that people can count on in the next 12 months or perhaps even 18 months, even if it doesn't seem like it's on horizon now? I think that's a very optimistic view. I think, you know, we're trying to establish all the things that Powell highlighted, which is where's the peak and what is the shape of the rate cycle at the peak. And increasingly, that peak just seems to drift up. You know, we're now at a five per cent
handle. It's possible. And I think the skew is still to the top side of that. We're thinking in terms of the shape and people felt, the higher we got, the quicker rates would actually come down, in fact. Now, increasingly, there's a feeling that rates won't come down quickly, that it's more like an inverted L at the top of the cycle. So to me, none of that is that optimistic from a, you know, NSC, from a growth cycle standpoint, if we dash to a 100 dollar brand, again, is the hundred dollar a barrel brand. If we see it now at ninety eight dollars, is it the same as 100 dollars the last time around? I think your voice got to, you know, just assess what the overall backdrop know macro backdrop. I mean, I think it would be upsetting
from a sort of a stagflation standpoint if we start to see oil prices move, you know, in the so-called so wrong direction from a stagflation standpoint. I think falling on a weakening economy. One would argue that perhaps you'd have even more negative effect than it would have had in prior quarters. Now, a general question here, let's call it Econ 1 to one this morning. I believe there are 14 core CPI measurements in each country. Is there a value to looking at headline
inflation now or do each of us have to find a core series we're comfortable with? And I think Core was seen as helpful in terms of telling you what the underlying picture was and where the natural gravitation would be over, say, a 12 month period when food and energy prices, erratic food and energy prices worked their way out. But I think if you're asking questions about, you know, what is inflation doing for the average man in the street, then skipped the core. I mean, you've really got to focus on the total inflation. And, you know, it would be a travesty ready to start removing food and energy from those kind of measures. But I think core for the economists trying to look, say, 12 months out is is still reasonable.
And you've got his search country by country, I'm afraid. Tom Keene. When you look country to country, I just want to wrap it up with this question about Europe. And we've been talking a lot about the U.S. and the fiscal spending in the U.S. and how we're going to see the dollar
progress. But at what point does Europe become attractive again, considering how much it sold off, but also considering that it faces a much bleaker picture in many ways than the United States? Yeah, I mean, obviously, a light turns on the politics. So you had somewhat optimistic mentions of the US touching base with the Russians, which is, you know, I think going to egg people to think in terms of some sort of Ukraine peace deal eventually.
That's an obviously an optimistic view of things. So that's going to be crucial, I think, in terms of how you think about Europe going forward. That being said, I think there is some built in resilience that we start to see from the economies.
You are seeing an ability to navigate some of the energy shocks. So I don't think it's all pessimism, really, in a way. But I think you're still going to have to just wait for that political signal before it's a real buying opportunity. Alan, thank you as always, buddy.
Appreciate your time. And I'm Ruskin of Deutsche Bank. And a week ahead on the year ahead, a missing part of this conversation is China and China reopening. We had a week of rumors last week that health officials out of the country reaffirming their commitment to Covid zero. But a scenario analysis came from
Goldman over the weekend as well. Tom, if you drop Covid 0 and deliver a full reopening, they're looking for a move, a 20 percent on Chinese equities, 20 percent John Micklethwait. Yeah, I guess that doesn't surprise me in the sense that I look at the GDP statistic, which is the gloom of under 3 percent 3 4 5 0 DARE 6 is non-linear in every single point of GDP they get up.
That's what makes that equity pop as well. The commodity market pop as well. I think we're all looking forward. Brahma, you and I have had a conversation.
What are you looking for? I'm looking for flows to malign. Okay. You keep looking and you let me know. I'll let you go. Well, who cares? Riddle for you at the front of the plane and the back, as always. Thank you. No doubt about it. At least we're trying to work out whether it is bullish.
China reopening is bullish or not based on just a simple equation. If it reopens the supply side of things, great. But if injects massive demand back into the economy at a time where things are still somewhat constricted, particularly when it comes to energy. Where does that leave? And especially the Apple story kind of highlights this Bloomberg Daybreak way. There is not really certainty about why
they are reducing production. They are saying it is because of some of the Covid restrictions. They are saying in a statement that they are concerned and feeling that there are some sort of fissures just in terms of their employment picture. Other people are reporting, including Bloomberg, that the demand side is cooling.
So at what point is the supply side response going to come too late to be disinflationary? We already have demand cooling off. That's negative for the global economy, trying to work that out. The other issue is, one, the police were talking about this out of the midterms. There is this kind of universal consensus view in markets right now that if we get divided government, it's good because it restricts our ability to deliver a big fiscal package to help an economy that's in a downturn. Now, maybe that's true in the short term.
I just don't know about the longer term. If you end up in a situation where we don't have that countercyclical fiscal buffer at a time when the economy's rolling over and the Fed is still committed to keeping interest rates at, say, 4 5 percent. Who knows what next year will we still view it in quite the same way? Alan Ruskin pointing to the even greater issue that the lag effects are great for fiscal stimulus as well. And we will still see the boost from the fiscal stimulus of the past few years for 2023 2024. It's after that that the real entrenched pain happens and you won't be having that fiscal support.
Back to the important question. Did you get prices to go on like hotcakes? Olivier Schroeders, really something. The shift toward, you know, the Reeves ISE over the weekend. So we've got a yellow card. You only scored late in the game.
He took his shirt up. So when you take a jersey off time, you get another yellow card. I did that. So he got himself sent off. People believe he deliberately got himself sent off so he could be fresh for the World Cup to geniuses.
Is that a genius move? That's fun, though. I mean, he's like the real deal. He's like, I don't think he's trying to distract myself from what you said moments ago. This is please. Keeping you up to date with news from
around the world with the first word. I'm Lisa Matteo. Ukraine's president Vladimir Zelinsky wants Iran to be punished for helping Russia. The Lenski said if it wasn't for Iran supplying weapons to Russia, quote, we would be closer to peace. Now, both Ukraine and the U.S. say that Russia is using Iranian drones in the war. The head of the International Monetary
Fund says global inflation may be close to its high point for Selena. Your gave us spoke to Bloomberg at the U.N. Climate Exchange summit in Egypt. It is very possible that we are thinking we are we now see central banks very united on fighting. Inflation is top priority. And.
So if we don't succeed, it would be unfair. And then the foundation for growth, which is price stability, is that your neighbor also said it would be a struggle to bring consumer price gains down to more palatable pace. Philip Morris International will go ahead with the 16 billion dollar takeover of nicotine pouch maker Swedish match. The maker of Marble Rose received support from enough shareholders, including the company's largest one, Elliott Management. Swedish match in its U.S.
distribution network would give Philip Morris a foothold in the biggest market for alternative smoking products. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than seven hundred journalists and analysts and more than 120 countries. I'm Lisa Matteo. This is Bloomberg. It's going to be a wakeup call to President Biden, and I hope he answers it because what's happened over the last two years has really caused a lot of problems in America. Help the President Biden sees what
Americans are going to are going to say to him on Tuesday, which is we're not happy. And we need a different agenda. Governor Glenn Duncan there in Virginia speaking on ABC over the weekend. Life in New York City this morning. Good morning. Futures up six tenths of one per cent on the S&P 500 after a week of losses down on the weekly, the S&P last week by a little more than 3 per cent.
Yuletide through last week, lower this morning, down three basis points on a 10 year to 413 40. Any affects market rates on a ninety nine eighty one positive two tenths of one percent. Question many people asking over the weekend, Thomas, how long? We'll have to wait to get all the results, particularly we get a runoff.
Yeah. Georgia Kailey Leinz may extend our trip down to Washington. We'll be there Tuesday and Wednesday and will cause we will be there through the month if we have many, many different long races, which I think is just one, two weeks. It's just another one or two races this year. It's five, six, seven. Really such.
It depends how much it's going to matter. Ultimately, it looks like it's going to get runoff regardless XY or so the smart article did end gerrymandering. I love their phrase colored. I believe they call it dumb mandarin where some of it hasn't worked out right now. And this is a joy. We truly begin our coverage with Wendy Schiller, director of the Tom Keene Center for American Politics and Policy at Brown University. With Greg Valliere, just a foundation of what surveillance does on politics.
Professor Shiller, I want you to address is in your memo. The midterm messaging that has led us in the last 48 hours to indeterminate polling. Give us the messaging dynamic, red and blue versus the polling shock that we're going nowhere in the last two days. Well, essentially, it's a very late shift by the Democrats.
We've talked about this before to the economy and also attacking Republicans on Social Security, Medicare. The problem with that started the Democrats, as many people who are over the age of 65 already voted. That's the biggest bulk of people who vote by mail and also people between the ages of 41 to 65. A lot of that early voting is coming
from them. They care about the economy. It is a little bit too late, I think. And, you know, they misplayed the abortion issue by overemphasizing it nationally and not being strategic about that. They get some redistricting decisions that we could talk about. We don't have time in 2020. We have that case in Rhode Island where they over a district, in other words, put too many Democrats in one district and left the other district vulnerable. So now we've got a potential for Republican to be elected in Rhode Island for the Congress. That hasn't happened a long time.
So I think, on the other hand, the Democrats had a lot of losses in 2020 in the House. So, you know, the damage actually might be mitigated now. WATKINS And pick up a lot of seats and win control. But it won't necessarily look like through eleven or 20 or 1995. Where are we on the tipping point where the mail and voting, the pre voting becomes more important than the Tuesday voting? That's a really great question.
Places like Pennsylvania, for example, were all watching that state Senate race in particular. They start counting Tuesday morning. So you may not have that kind of blue wave, red wave kind of thing going on. It may take them a long time. It's about, I think, 550000 or 600000 early votes by mail. But they start counting at least on
Tuesday. It's some other states like Ohio. They accept mail in ballots for another 10 days. So, you know, if it's really tight in some of these states, it could be awhile before we know the answers. But midterm elections are about a referendum on the party in power in the White House. Most of the time that party loses seats. You know, when you have such division, you're going to switch control. The chamber is a lot more frequently,
you know, 20, 30 years ago, we didn't have as much division. And so, you know, it's harder to flip control. But it is typical for the party in the White House to lose seats in a midterm election. Wendy, is this a referendum on this administration or is it a larger referendum? There is a story in DAX basically talking about how leading democratic voices are saying the party is seen as too extreme and that this basically is a big clarion call for a rethink in some of the messaging more broadly.
Do you agree that that is the conclusion if the Democrats do face some pretty severe losses this particular week? Lisa, I think it's just so much more complicated than I would be cautious of over interpreting the results of this particular election. People are concerned about inflation. It's still hard to get a new car that ridiculous inflation, markups on new cars, for example. I mean, people's people feel it. They feel it every day. This could just be a big example of bad campaigning by the Democratic Party in terms of messaging.
They tons of money. And did they not emphasize what they should have emphasized, sort of average campaign, one on one in terms of democracy? If we have turnout, you know, we already have more early voting than we had in 2018. You know, by about a million votes already. And we don't even know the full extent, the Berlin voting. So if we have really big turnout and you
say democracy is dying, that's a conflicting message again. So the Democrats have to be cautious. Everybody has to be cautious about interpreting the results of this particular election, but it is true that the Democrats did a lot. They say they did for a lot of the people who are not voting for the Democrat Party in November. And whereas that mismatch most acute. And how do they have to localize their messaging as they move forward? Well, especially when it comes to crime.
And I say this, living in New York City and living in New York and we have seen this become a huge campaign issue that actually makes us highly blue state suddenly on the ballot when it comes to the governor race. What's your interpretation of that? I understand that there are single idiosyncratic messages, but this is just a messaging issue or is this a policy issue? Well, I mean, you know, in terms of crime, you know, the irony for the Democrats, the frustration of the Democrats is that part of the violent nature of crime is that more people have guns and it's just easier to get a gun and many more people have guns. That's do it. Basically, Republicans slash NRA
opposition to gun safety legislation. But the Democrats have lost that message entirely. And it's true. People want to be safe when they go into a supermarket or a movie theater or the subway, wherever they are, they want to be safe.
And it's been typical that the Republicans have taken advantage of that in electoral terms. And there is also sort of a racial coded message in criminal sort of focusing on crime in some areas as well. So the pushback by the Democrats against that messaging hasn't been exactly the right mix of messaging about security versus being, you know, cautious on on using racist or stereotypical tropes on crime. So I think the Democrats have some work to do on messaging. They also have to figure out who's going to run their party. They have people who are no plans, people in their 70s and 80s, you know, all good. But they have a fairly old bench and the
Republicans have a fairly younger bench, with the exception of Donald Trump, who who still has a lot of vitality. But nonetheless, you had the governor of Virginia, you know, relatively young guy, probably has a future in national politics. The Democrats have been a. Who is there? Who are their spokespeople and what age group are they? Are they picking from? And that's that's a big rethink for them. And they better do it fast. Wendy, thank you. Wendy Shellharbour of Brown University. I think you missed that. The answer perhaps for the best. Wendy, thank you very much.
We'll talk about consequences. We're thinking about the fiscal policy consequences. Let's talk about foreign policy. The one area of agreement down in D.C., if you can pick one China story just out
from The Wall Street Journal, the Xi Jinping. According to people familiar with preparations for a trip, is planning to visit Saudi Arabia before the end of the year. Tom, what you make of that? Just out from The Wall Street Journal, Manus Cranny, I think as an activist, not only the Chinese leader, but all leaders, Mr. Putin is a little distracted with the war, but it's not a United States in the vacuum and often with our different definitions of isolationism. We want to work in a vacuum. We don't have that luxury. You mentioned the war. Lisa, we got to think about whether support will be to support Ukraine.
Yeah, particularly you get divided a divided government. RTS, you have an increasing push to remove some of the support because why are we helping when we need to have help at home given some of the price rises and especially if you do see a softening economy. Complicated picture, especially China's heading to Saudi Arabia.
Yeah, that is interesting. It's an especially as how much is that ahead of opening up from Covid 0 and all sorts of things to. I guess the rumor mill going, doesn't it? Well, actually over the last. I know. And now suddenly, where's he going? Fascinating futures up six tenths of one percent on the S&P life from New York.
Big week ahead. Say that every Monday. Big week ahead. It is. This is pulling back. The economy is not responding to the Fed's tightening.
And so they've got a lot more work to do than signals that we would expect to see after this much of tightening from the Fed. They're just not there right now. You could get to a terminal rate that's even close to 6 percent. If inflation does not abate, the Fed is setting itself up to reverse some of this policy tightening.
We haven't seen the Fed raise rates so rapidly before. We haven't had grown a drivers economy and we haven't had inflation like this for 40 years. This is Bloomberg Surveillance with Tom Keene, Jonathan Ferro and Lisa Abramowicz. Live from New York City for our audience worldwide. Good morning. Good morning.
This is Bloomberg Surveillance TV and Radio alongside Tom Keene and Lisa Abramowicz. Some Jonathan Ferro features right now on the S&P positive a half of 1 percent. T.K. Later this week, America decides and its CPI just around a corner.
Michael Barr America decides CPI. And I agree with you, it's equally as strong as this election that we're going to see in the next two days. And as you mentioned, John, we're going to have results coming out after Tuesday as well. The market today shows that indecision, if you will, a decision 2022 is it's a churn year. I'm watching oil more than any question of the week.
And I asked that if you an hour ago, Rameau, it's your turn. If you can have the result of one thing right now, would it be the midterms or would it be inflation in America? It would be inflation. America be CPI for the next two, three months. It would be the outcome of the election for the next two, three years.
And I think that that is the distinction because the near-term rally is really being driven by the CPI. The longer term fiscal and just political backdrop will drive again from the previous year. The distill it here is gridlock, less fiscal stimulus. I think that's sort of the summative in the near term. And I think we are asking the right question here. Is that positive in the longer term? If you can't deliver a countercyclical fiscal buffer when you need one. Is that positive next year?
Now, that's going to hinge on where inflation is and where bond yields are. And if inflation is rolling over and bond yields have reset lower, then maybe that's the kind of thing that you might want in the environment. Police. That's a lot of questions that I am. I've got a clue and I don't know the answers to Joel Weber. Nobody has the answers to any of the S, which is the reason why you get a church and people saying that it's a technical bear market rally that's going to have legs because why not? And the people trying to come up with an explanation for this type of price action.
Good luck. Have a good time, because honestly, it's not particularly lucid in terms of the narrative that's consistent. Thank you, Lisa Emily Chang and features right now send.
Let's went through that price action. Bremmer is going to run you through the day ahead and maybe even a week ahead. He ought to look like this on a 10 year down, a couple of basis points to 413 56 yield to last week, higher, much higher, particularly on a two year. Talk about the range on a two year, though, 40 basis point range on a two year term last week, very close to 480 Fridays pay rolls and now back down to about 4 Sonali Basak down. But I'm going to suggest all of the fixed income data we have is still elevated, has come back a little bit from Wednesday, Thursday, Friday, but nevertheless hasn't given back all that much over the real yield. Same idea to Lisa's point. It all comes down to CPI a little bit
later this week. Euro dollar is coming into it, Lisa. Ninety nine eighty positive two tenths of one per cent Joel Weber. Yeah. And here's the issue is that, yes, the
US is facing a pretty serious inflationary wave, but so is Europe. So is the rest of the world. And this really is the reason why it's so hard to game out what the implications will be in terms of a market narrative. Following a CPI report one way or
another, 9 a.m., we have European finance ministers meeting in Brussels. This is really the front and center for what they're talking about to a ten point seven percent CPI rate for the eurozone. Where is that headed? What can the ECB do? What can they do if the fiscal policy response is broken essentially? You can't flood this market with money and solve the problem simply because money is the problem when it comes to how quickly inflation has been accelerating. So we get a host of Fed speak. How do they really message on this? Paulson Fed President Susan Collins and Cleveland Fed President Loretta Master will have a discussion around 340 p.m. Richmond Fed President Tom Barkan speaking at around 6 p.m..
How do they talk about the conflicting dynamic between employment and fighting inflation? We've been talking about how this isn't really a big issue right now. When will it become an issue? At what point will inflation have slowed enough for them to start thinking about a dual mandate rather than a singular mandate? And after market, the earnings are sort of trickling to a close with w our reporting earnings left last week talked about cutting jobs. We keep hearing this from the big tech companies matter, saying that they are cutting thousands of jobs. Twitter its own beast.
Obviously because of the whole Elon Musk excitement over there. But cutting half the jobs. They need to read about this, John, that he now is asking some people to come back, but say they were fired in error and he needs to get some of them back in. That's what happens when you make cuts quickly. Right. Workout.
Maybe you need to make some changes. Brammer, thank you. Massey Tom NIKKEI exactly right here. And I don't I don't have any punditry to add to it other than messy described. I wonder how messy the Fed speaks going to be. I got this message on Twitter from a gentleman called Nick in the last hour or so.
I fear the Fed speakers in the next week are going to sound as unified as members of the contestants choosing a restaurant, some that could be messy, too. Later this week, Fed speak in America. You know the Kardashians are. You do not know. Of course you do. What's the illusion that choosing a restaurant is gonna be difficult to choose a restaurant? Really? They're not gonna be on the same page home. They might be argument. This is getting Paul Allen from melting credentials of just one.
Michael Shore joins us now, CEO of Market Food Asset Management. Michael Barr. I'll skip that one indeed. Thank you. You know what's coming next? If you could have the result of one right now, would it be CPI or the midterms? I think the midterms. I was thinking back to 2010 where we had a one two van as well, which was the midterms took place and QE 2 took place within 24 hours. And the market rally we had was was everybody sort of pointed to QE 2 and said this is really what got the market going.
But I always felt the midterms is what got the market going. I think markets prefer gridlock generally to one party having control of all the levers of power, particularly when that party has an aggressive agenda, whether it was Trump as he was in 2017 18 or the Biden administration today. And so, you know, if the news of the midterms really gave you a sense that the Democratic agenda was going to be put on hold for a couple of years, I get your point about no countercyclical fiscal policy. But I think the market would be happy, right. To, you know, put put out to one side
doubt on new legislation if you got a trope idea of the election. Does it change Fed policy, which tempers the market towards a bull market because Fed policy adapts to a new world? I mean, perhaps. I mean, there's no doubt the fiscal cliff did have an impact on an anchor.
And in 2013, I think right now in the current environment, you know, the third is very sort of one minded. It feels it needs to deal with inflation. I'm sure it understands. But it made a big mistake 18 months, two years ago in not understanding where inflation was going. And, you know, I don't think it affects
policy in early 2023, but I think there would be a point that, yes, for third may be left as the only level of loosening, if we ever get to the point of the economic cycle of that's required seems quite distant today. So every week we say this is a big week and every week feels like a big week. We've got a data point. We get something that helps shape a narrative for us in terms of where we are in inflation and where we are in the Fed fight. How has your belief in terms of what's going to outperform how you should basically invest? How has it evolved as we've gotten a labor market that remains hot? We got a Fed that's willing to go further than people ever thought was possible and only seem to be increasing their longer term forecasts.
I mean, these things don't happen that often, but there's still looks very normal. This looks like a cycle that the Fed let get out of control in the same way as we saw in the 1970s, and that requires an awful lot of catch up and eventually leads to overshoot. I mean, to me, the big story behind the third of 2022 is four sectors which have done better in the sectors which have done worse.
And it really does look as if technology leadership is over. I say that because it went down a lot and it hasn't bounced a lot. And I think that really, really matters because you now have a sector that dominates market cap in the S&P 500. It absolutely dominates active funds. And coming into the last sort of 10 weeks of a year, you know, which is the point at which everybody kind of sits down and decides what they want to do. I don't think we've got 10 weeks left off.
I really think about it. I think the temptation to rotate out attack is going to be powerful. No, it's not great news for the S&P 500 at the index level, because technology, as I say, dominates that index.
But it might be pretty good news for the sectors that get some of the money that comes out of tech without tech leadership, though. Do we see gains rate unabridged index lower? I know you probably I mean, you certainly can have a range bound market in which certain sectors do really well and in which certain global markets do. Okay. It's very difficult for the S&P 5